The International Energy Agency forecasts that demand for these minerals will more than quadruple by 2040 for use in clean-energy technologies alone. But, in their race to control these vital resources, China, Europe, and the United States risk causing serious harm to the countries that possess them.
As it stands, China is leading the pack, having gained ownership or control over an estimated 60-80% of the critical minerals that are needed for industry (such as for magnets) and the green transition. This control extends across the supply chain: China is heavily invested in mining across Africa, Central Asia, and Latin America, and has been building up its processing capabilities.
For Western powers, China’s quasi-monopoly over critical minerals looks like an economic and national-security threat. This fear is not unfounded. In December 2024, China restricted exports of critical minerals to the US in retaliation for US restrictions on exports of advanced microchips to China.
Since then, US President Donald Trump has forced Ukraine to relinquish a significant share of its critical minerals to the US in what he presents as repayment for American support in its fight against Russia. Trump also wants US sovereignty over mineral-rich Greenland, to the dismay of Denmark. And he has suggested that Canada, with all its natural resources, become America’s 51st state. The European Union, for its part, has sought its own mining contracts, such as in the Democratic Republic of the Congo (DRC), touted as the “Saudi Arabia of critical minerals.”
From the Scramble for Africa in the nineteenth century to Western attempts to claim Middle Eastern oil in the twentieth, such resource grabs are hardly new. They reflect a fundamental asymmetry: less industrialized developing economies tend to consume fewer resources than they produce, whereas the opposite is true for developed economies – and, nowadays, China.
In principle, this asymmetry creates ideal conditions for mutually beneficial agreements: industrialized economies get the resources they desire, and non-industrialized economies get a windfall, which they can use to bolster their own development. But, in reality, vast natural-resource endowments have proven to be more of a curse than a blessing, with resource-rich countries often developing more slowly than their resource-poor counterparts.
A key reason for this is that developed economies have more economic clout, advanced technology, and military might – all of which they bring to bear to acquire the resources they seek. For example, European imperial powers used steam-engine technology to help them explore and exploit Africa for resources like copper, tin, rubber, timber, diamonds, and gold in the nineteenth century. This, together with more advanced weaponry and other technologies, meant that, far from offering local communities fair compensation for their valuable resources, European powers could subjugate those communities and use their labor to extract and transport what they wanted.
But even countries that are exporting their resources for a profit have often struggled to make progress on development, not only because of imbalanced deals with more powerful resource importers, but also because their governments have often mismanaged the associated bonanzas. It does not help that resource-rich countries and regions often grapple with internal and external conflicts.
Consider the mineral-rich provinces of the DRC, such as Katanga and North Kivu, which have long suffered from violence and lawlessness, fueled by neighbors such as Rwanda and Uganda. Today, the advance of the Rwanda-backed M23 rebels is fueling bloodshed in eastern Congo – and creating an opportunity for outside powers to gain access to critical minerals. The DRC-Rwanda peace agreement brokered by the Trump administration promises precisely such access to the US, in exchange for security guarantees.
But the resource curse is not inescapable, especially for countries with strong outward-facing institutions to manage the economy’s external relations, including its resource sector’s ability to attract investment and generate revenues for the state, and inward-facing institutions to govern how those revenues are used. If a country is to translate its resource endowments into economic development and improvements in human well-being, both have a critical role to play.
Outward-facing institutions must negotiate fair and transparent mining contracts with multinational corporations and strengthen local governments’ ability to do the same. Such contracts should include local-content requirements, which keep more high-value-added processing activities at home, increase local employment, and strengthen the capacity of local suppliers and contractors. Since acquiring a 15% stake in De Beers, Botswana has sought to ensure that diamond cutting – not just mining – occurs domestically, which requires inward-facing institutions to deliver adequate investment in these capabilities.
Inward-facing institutions must also manage risks raised by resource extraction, from health and environmental damage (deforestation, biodiversity loss, pollution) to labor-rights violations (including child labor). Unfortunately, as it stands, many mineral-rich countries are falling far short, leading some to advocate boycotts of critical minerals coming from conflict zones or countries using forced labor. While such boycotts are unlikely to sway these governments, they could convince multinationals and foreign governments to demand better enforcement of environmental and social standards from countries with which they do business.
Ultimately, however, it is up to mineral-rich countries to defend their interests and make the most of their endowments. This starts with efforts to strengthen institutions.
