The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Dr. Jakob Kullik, scientific associate at Chemnitz University of Technology, is the 478th in “The Trans-Pacific View Insight Series.”
Explain the scope and scale of Germany’s defense industry dependence on China’s rare earths dominance.
First of all, there is a lack of studies on this subject because for a very long time Germany ignored the connection between supply security of critical minerals, supply chain dominance and national defense matters. There might be confidential studies, but all public studies deal with critical mineral dependencies of the U.S. military.
These studies clearly show the high relevance of critical minerals such as rare earths, cobalt, gallium, germanium, and many more for modern military systems, for example electro-optical systems, sensors, combat identification equipment and others. One can deduce from this that the German defense industry as part of the broader European defense ecosystem is highly dependent on China. And this is a dangerous structural dependence that overshadows Germany’s and Europe’s long-term defense plans.
Analyze the impact of China’s increasingly restrictive rare earth export control policy on Berlin’s efforts to expand Germany’s defense capabilities.
We have to differ between short- and long-term impacts and potential risks. Right now, we see that China uses its rare earth monopoly to enforce a strict documentation regime on German importers. In the course of this, German importers have to share many sensitive information and insights on the rare earth-based products they produce, process, trade, or stockpile. That is a smart approach of industrial espionage by the Chinese. It signals that Beijing could use the “big stick” of enforcing a total export stop of rare earth products to Germany and other “unfriendly countries.”
The current procedure has four advantages for China: (1) it can gather critical economic and technological information for free, (2) it maintains its structural monopoly via (still) working trade relationships, (3) it discourages alternative rare earth projects in Europe or elsewhere, and (4) it makes it more difficult to stockpile rare earths for security purposes.
If Germany and Europe do not find a way to escape this strangulation policy or at least mitigate the structural dependency from China in the next decade, Berlin and Brussels face a potentially very dangerous situation in which Beijing might dictate the use of its rare earths. That could ultimately lead to a weakening of the German and European defense industrial base. As a result of that, Western governments might shy away from a military confrontation with China when they realize their weak resource-based position.
This strategy reminds me of Sun Tzu’s famous book “The Art of War”: “The greatest achievement is to break the enemy’s resistance without a fight.”
Examine Germany’s domestic critical mineral processing capabilities.
There’s no rare earth mining and no relevant processing capabilities on an industrial scale at the moment. Potentially, Germany is active in geological exploration of its national mineral deposits, and we still have a strong scientific community working on reuse and recycling of rare earths. However, the rise and survival of a competitive rare earth industry can be better realized if European countries and companies work together. Germany alone will not be able to achieve much here.
Evaluate the strategic positioning of Germany and the EU in stockpiling rare earths.
Stockpiling of critical commodities, especially critical minerals, has been neglected for far too long. Europe always had to learn it the hard way after a crisis. After the oil crisis of 1973, Western European countries started to build up emergency reserves of crude oil, and only after Russia’s full-scale invasion of Ukraine in 2022, Germany started to realize that strategic gas reserves and the full control over your own gas storage facilities is an issue of national security. Before that, gas trade and the energy relationship with Russia was regarded as a purely economic matter. The security policy implications were completely ignored.
The case with trading and stockpiling rare earths and other critical minerals is similar. In July, the EU released its first stockpiling strategy to boost its material preparedness for crises including rare earths and permanent magnets. The strategy contains a number of interesting statements, for instance, that the overall objective is to “improve access to essential goods under all circumstances.” It remains unclear what “under all circumstances” means, but it implies a geopolitical preparedness level unseen before and fosters better coordination among EU member states and the private sector including civil-military cooperation.
The strategy outlines that emergency stockpiles for rare earths and other essential goods are a necessary tool to improve the EU’s “strategic autonomy.” And every kind of “strategic autonomy” has to consider raw material security and control over critical supply chains as high priority issues on the political agenda.
Assess the implications of Germany’s rare earths dependency for the country’s national security and consequences for European defense more broadly.
I would approach this issue from a politico-philosophical angle. Everything comes down to the way of political thinking about the functioning of markets and international affairs inside the government. The German way of considering resource issues is reflected in its foreign trade policy and its self-assigned role as a peaceful “Civilian Power” and trade nation within the European Union. Within this role the concept of globalization is perceived as a win-win- game without any “disturbing” geopolitics. The main responsibility of the state is to assure favorable conditions for its companies, and the main tools applied are financial means, diplomacy and rules.
This way of thinking perceives resources as an economic and regulatory issue and any political interference into the markets by the government leads to undesired distortions and a securitization of economic affairs. In a perfect world where all nations only focus on trade, this makes sense. But the reality is different and issues of power, national security, and dominance over markets and supply chains are no deviations of international trade relations, but the normal state of affairs. Raw materials are also geopolitical elements.
To link these theoretical considerations to critical minerals, we have to conclude that Germany, although highly dependent on open markets, is the least prepared industrialized country in the Western world when it comes to managing critical dependencies and preparing for future conflicts. This is the bad news. The good news is that there is increased activity at the EU level.
The EU plans to set up an EU Critical Raw Materials Center in 2026 that will be responsible for purchasing raw materials and potentially for supply chain monitoring and the coordination of strategic stockpiles. Since 2024, the EU has begun to implement its Critical Raw Materials Act that seeks to increase mining activities and the build-up of processing capabilities for critical and strategic minerals in the Union until 2030. Furthermore, the EU wants to increase the recycling level and the reduction of dependencies from foreign suppliers. So, all in all, the EU is very ambitious and demonstrates that industrial and technological competitiveness is closely interlinked with resource security and military readiness. However, we have to see whether and when these initiatives materialize as a necessary prerequisite for Europe`s “strategic autonomy.”