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In October 1973, the world shuddered when the Arab members of the Organization of Petroleum Exporting Countries imposed an oil embargo on the United States and other nations that provided military aid to Israel in the Yom Kippur war. At the same time, they ramped up prices.
The United States realized it was dependent on imported oil — and much of that came from the Middle East, with Saudi Arabia the big swing producer. How had a few foreign powers put a noose around the neck of the world’s largest economy?
Well, it could happen again and very soon. The commodity that could bring us to our knees isn’t oil, but rather a group of elements known as rare earths, falling between 21 and 71 on the periodic table of elements. This time, just one country is holding the noose: China.
China controls the world’s production and distribution of rare earths. It produces more than 92 percent of them and holds the world in its hand when it comes to the future of almost anything in high technology.
Rare earths are great multipliers and the heaviest are the most valuable. They make the things we take for granted, from the small motors in automobiles to the wind turbines that are revolutionizing the production of electricity. For example, rare earths increase a conventional magnet’s power by at least fivefold. Strategically, they are the new oil.
Rare earths are also at work in smartphones and computers. Fighter jets and smart weapons, like cruise missiles, rely on them. In national defense, there is no substitute and no other supply source available.
Like so much else, the use of rare earths as an enhancer was a U.S. discovery — General Motors, in fact. In 1982, General Motors research scientist John Croat created the world’s strongest permanent magnet using rare earths. He formed a company, called Magnequench. In 1992, the company and Croat’s patents were sold to a Chinese company.
From that time on it became national policy for China to be not just the supplier of rare earths, but to control the whole supply chain. For example, it didn’t just want to supply the rare earths for wind turbines; it insisted that major suppliers, such as Siemens, move some of their manufacturing to China. Soon Chinese companies, fortified with international expertise, went into wind turbine manufacture themselves.
“Now China is the major manufacturer of wind turbines,” says Jim Kennedy, a St. Louis-based consultant who is devoted to raising the alarm over vulnerability in rare earths. A new and important book, “Sellout” by Victoria Bruce, details the way the world handed control of its technological future to China and Kennedy’s struggle to alert the United States.
At present, the rare-earths threat from China is serious but not critical. If President Donald Trump — apparently encouraged by his trade adviser Peter Navarro, and his policy adviser Steve Bannon — is contemplating a trade war with China, rare earths are China’s most potent weapon.
A trade war moves the rare-earths threat from existential to immediate.
In a strange regulatory twist the United States — and most of the world — won’t be able to open rare-earths mines without legislation and an international treaty modification. Rare earths are often found in conjunction with thorium, a mildly radioactive metal and a large regulatory problem.
The Nuclear Regulatory Commission and the International Atomic Energy Agency have defined thorium as a nuclear “source material” that requires special disposition. Until these classifications, thorium was disposed of along with other mine tailings. Now it has to be separated and collected. Essentially, until a new regime for thorium is found, including thorium-powered reactors, the mining of rare earths will be uneconomic in the United States and other nuclear non-proliferation treaty countries.
A thorium reactor was developed in the 1960s at the Oak Ridge National Laboratory in Tennessee. While it’s regarded by many nuclear scientists as a superior technology, only Canada and China are pursuing it at present.
Congress needs to look into this urgently, ideally before Trump’s trade war gets going.
Meanwhile, future disruptions from China won’t necessarily be in the markets; they could be in the obscure but vital commodities known as rare earths: China’s not-quite-secret weapon.
Llewellyn King is executive producer and host of “White House Chronicle” on PBS. He wrote this for InsideSources.com.
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