The United States’ recent diplomatic overtures toward Pakistan have caught many by surprise. At the end of July, Pakistan finalized an important trade deal with the U.S., which cut tariffs on Pakistani products from 29 percent to 19 percent. More broadly, a few days before the deal was struck, U.S. Secretary of State Marco Rubio met Pakistani Finance Minister Ishaq Dar and discussed enhanced collaboration in trade and investments, including in the critical minerals sector. The inclusion of critical minerals as an element in the bilateral relationship is no accident: it comes at a time when competition for critical resources is intensifying due to their indispensable role in powering the global clean energy transition.
A cornerstone of global energy security, critical minerals are necessary for the development of key technologies, such as electric vehicles, wind turbines, and batteries. The United Nations has designated copper, lithium, nickel, and cobalt as Critical Energy Transition Minerals, as their supply is key to meeting the goals of the Paris Agreement.
With the backdrop of shifting global trade dynamics between great and middle powers and vulnerable critical minerals supply chains, Pakistan has the potential to harness its mineral wealth resources to emerge as a key player in the global mining supply chain. However, it would have to invest in institutional and infrastructural capacity to extract and process these resources, as well as overcome internal challenges such as political instability, governance gaps, and regulatory uncertainty.
Global Scramble for Critical Minerals
The contest for critical minerals has increasingly become a source of geopolitical tension and a setting for direct great power competition. China already occupies a position of dominance in the global minerals supply chain, controlling the refining of most critical minerals and the mining and refining of most rare earth metals. In recent years, Chinese companies have also sought a greater share of the upstream supply of minerals globally, such as investing in Afghanistan’s critical mineral resources and copper and cobalt mining in Peru and the Democratic Republic of Congo.
Minerals have emerged as a pain point in the Sino-U.S. relationship: in response to the American ban on the export of advanced chips to China, Beijing paused the export of rare earth minerals used to make semiconductors. China has also leveraged its dominance in critical mineral production to curb the supply for defense uses.
To alleviate its dependency on China, the United States has accelerated efforts to secure critical minerals supply chains through strategic partnerships and significant investments. For example, the U.S. Department of Defense recently inked a massive agreement with a domestic rare earth metals company. U.S. President Donald Trump’s executive order “Unleashing American Energy,” which prioritizes U.S. mining and mineral processing, encourages the exploration of mining opportunities through the Quad, a grouping that also includes India, Japan, and Australia.
In this context, critical minerals have become a staple priority early in the second Trump administration. Despite the importance placed on high tariffs to promote domestic manufacturing, the U.S. administration agreed to lower the tariff rate on China in exchange for a deal on critical minerals. Trump also appeared to have a change of heart toward Ukraine following the signing of a minerals deal.
The global race to secure critical minerals is not limited only to the U.S. and China. The European Union (EU) has also sought to deepen its engagement in the critical minerals sector, with the EU Commissioner for Industrial Strategy pitching a minerals deal to Ukraine in February. Meanwhile, Gulf countries are expanding their hold in the minerals sector by pursuing a combination of international acquisitions, local development projects, and strategic alliances.
This global demand could be an opportunity for Pakistan. With its vast untapped deposits of copper, lithium, cobalt, and rare earth elements, Pakistan could position itself as a supplier and a future destination for diversified critical minerals investment from the West as well as regional partners.
Pakistan’s Mineral Opportunity
With significant lithium, copper, cobalt, nickel, chromite, zircon, and beryllium deposits, Pakistan’s untapped mineral wealth is estimated by some sources to be worth U.S. $6 trillion. The Reko Diq project in Balochistan holds one of the world’s largest gold and copper deposits, which could generate $2.8 billion in annual exports. Significant reserves of antimony — utilized in the production of military equipment, semiconductors, and batteries — are also found in Balochistan. Some geological studies have even indicated the presence of rare-earth elements in Pakistan. These resources, if efficiently tapped, could serve as a major driver of economic transformation for the country.
Accordingly, the Pakistani government has increasingly looked to its vast mineral resources to attract foreign investment and stimulate economic growth. In April, it organized the Pakistan Mineral Investment Forum to catalyze international attention in its resource potential and unveiled the National Mineral Harmonization Framework to ease the regulatory environment for both domestic and global players.
These efforts already seemed to have made headway. Critical minerals have become an important feature of the China-Pakistan Economic Corridor (CPEC), with joint projects like the Saindak Gold and Copper Mine in Balochistan. Similarly, investors from Saudi Arabia have attempted to engage with Pakistan on critical minerals, including through investment in the Reko Diq project.
More recently, critical minerals have emerged as a key pillar of the rapidly warming U.S.-Pakistan relationship. A senior U.S. State Department official led a notable delegation focused on critical minerals to the April investment forum, while Pakistan’s Finance Minister Muhammad Aurangzeb recently suggested that mineral resources could fix the trade imbalance with the U.S. during a roundtable in Washington.
Core Challenges Hindering Development
However, the path to realizing Pakistan’s mineral aspirations, particularly in Balochistan, is obstructed by serious political and structural barriers. The grievances of local communities over political marginalization, exclusion from decision-making, and the alleged exploitation of local resources have simmered over several decades. This resentment fuels mistrust between the province and the federation, which can manifest in real security threats, as evidenced by frequent attacks on personnel and infrastructure of various development projects.
Balochistan’s new provincial mining legislation, which was prepared under the closed supervision of the Special Investment Facilitation Council (SIFC) and passed by the provincial assembly in March, has only increased fears that the federal government may seek to exercise greater control over the province. The new law grants the federal government enormous influence over licensing and financial matters, reducing the autonomy of the province.
Pakistan also has a reputation for weak institutions, a lack of policy continuity, and conflicts between the civilian administration and the military, all of which foster uncertainty. While the SIFC may be able to expedite bureaucratic processes, critics argue that it acts as an extraconstitutional body with little transparency. Uneven mining legislation across provinces also generates confusion. While the Khyber Pakhtunkhwa mining bill leaves some provincial authority intact, the Balochistan version cedes much more power to the federal government. Such incoherence between the federation and the provincial governments hinders long-term planning and growth, as well as fuels resentment amongst federating units on account of unequal treatment.
In addition, Pakistan faces serious regulatory and infrastructural lapses. The poor legal framework for mining contracts—including a lack of disclosure, antiquated mining legislation, and poor institutional capacity—dampens public interest and investor confidence. In the case of the Reko Diq project, Pakistan failed to honor its international investment obligations under a bilateral treaty, leading to a $5.84 billion arbitration penalty after the Pakistani Supreme Court invalidated a legally binding mining agreement with Tethyan Copper Company. Moreover, the areas rich in mineral resources also lack basic infrastructure facilities.
Enabling Development
Pakistan should pursue a model of development that is not only economically viable but also morally defensible. This begins with centering local communities in the planning and execution of mining projects. The absence of community representation and the tokenism of corporate social responsibility have left affected populations disillusioned. Legal reforms should mandate the free and informed consent of communities before any large-scale mining begins. Benefit-sharing should be non-negotiable; royalties should be distributed on terms that are acceptable to the local and provincial governments; and 100 percent local employment in unskilled roles should be ensured, along with quotas for skilled positions.
Furthermore, community development funds should pool royalties, company profits, and state contributions to invest in essential services such as healthcare, education, and clean water. Balochistan is already considered the least developed province of Pakistan; hence, its people should not only witness development, they must also own it.
Unfortunately, the implementation of such reforms is likely to be challenging for Pakistan. The two most mineral-rich provinces, Khyber Pakhtunkhwa and Balochistan, are subject to frequent militant violence and state crackdowns. Deep-rooted tribalism and the divergent center-periphery interests complicate consensus-building and undermine the legitimacy of state-led development initiatives in these well-resourced but politically fragile regions. Institutionally, Pakistan would have to reconcile the push for investment with respect for its federal structure and democratic norms. Instead of bypassing provinces through bodies like the SIFC, a constitutionally grounded body could harmonize national policy while preserving provincial authority. Transparency should be prioritized at all costs to avoid public uprising, as seen in the past.
While China’s growing influence in Pakistan’s mineral wealth is evident from the country’s investments in CPEC-based exploration and infrastructure initiatives, the Trump administration is also conceivably interested in exploring collaboration on this count. Pakistan should balance both to avoid being framed as part of camp politics. Savvy trade diplomacy to integrate into global mineral supply chains could also position Pakistan as a major participant in the clean energy transition. However, this potential may not be realized unless development is established through local partnership, not federal imposition. Only then will the promise lurking deep below the soil in Pakistan support its people.
——————-
This piece originally appeared on South Asian Voices, the Stimson Center’s online policy platform, and has been republished with permission from the editors.