In Geopolitics This Week
China Bans Exports of Rare Earth Extraction Technology, New Red Sea Coalition Reveals Cracks in Regional Stability, US Unleashes Sweeping Russia Sanctions Escalation, and other stories.
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China Bans Exports of Rare Earth Extraction Technology
China further consolidated global control over vital rare earth minerals this week by officially banning exports of 25 key production technologies spanning critical mineral extraction, processing, and manufacturing equipment. The announcement risks injecting further supply chain complications across defence systems, electronics, and the renewable energy transition. International competitors now face far higher costs as they work to establish fully independent sources of vital battery and magnet materials needed for cutting edge technologies.
Already dominating around 85% of the total rare earths supply chain, including an estimated 90% of processing capacity, this latest constraint on international access to extraction know-how will spur more calls for supply diversification. Yet with China holding over 70% of known reserves globally, and no operational rare earth refineries in other major economies until recently, such calls for substituting Chinese refiners proves enormously complex, costly, and time-intensive absent strategic government coordination.
For China, national control over upstream rare earths production reflects a security imperative. What appears clear through the export ban is that ensuring supply chain integrity on Chinese soil will remain firmly contingent on foreign stakeholder alignment with China’s broader technology, economic, and security agendas. Yet this risks charges of economic coercion by competitors who face enormous challenges rapidly reforming deeply entrenched supply chains to prevent perceived strategic vulnerabilities.
More broadly, the resource and manufacturing asymmetries are a sign of a systemic vulnerability for the United States and its allies. Procurement risks span from defence systems to EV batteries, as geopolitical divides mature into parallel ecosystems no longer easily bridged by commerce. Western economies once comfortably able to outsource mineral processing as a comparative advantage now witness early fissures allowing competitors to leverage that production dominance for potential coercive advantage elsewhere using market power.
New Red Sea Coalition Reveals Cracks in Regional Stability
The hastily assembled Red Sea naval coalition signifies urgent attempts to reconstitute fragile security for a globally vital trade artery now facing intensifying attacks. In recent weeks, major shipping giants from Maersk to SIPG have rerouted their vessels around the Cape of Good Hope to avoid missile and drone threats from the Houthis, accepting delays and exorbitant fuel costs. With traffic still down 15%, the United States and its allies, as well as some regional powers, are now directly involved in deterring Yemeni rebels.
The US is exercising some restraint in not conducting any retaliatory strikes. Washington appears to be ceding regional allies more space to lead responses while still providing material support. Signalling the limits of unconditional external commitment provides impetus for increased crisis accountability among US allies. This strategic distancing aligns with a broader US policy pivot towards great power competition priorities. The wider context is that a new war in the Middle East would, as things stand, tie down US forces across the region on a large scale. Such direct involvement would occur at a time when Washington actually wants to focus capacities on Europe and the Asia-Pacific.
No short-term fixes can fundamentally reshape the straining Red Sea regional security dynamics, with unchecked proxy attacks and risks of uncontrolled escalation persisting. Having nearly a fifth of coalition participants insist on anonymity signals enduring political hesitancy among the members of the coalition, as does the refusal of key NATO member states to subordinate their vessels under a centralized US command and control. Establishing coordinated operational doctrine across participants for kinetic response scenarios will therefore prove difficult, risking impressions of fragility that further embolden rivals seeking to probe potential weak points.
For now, a bolstered international naval fleet consisting of destroyers, frigates, and maritime patrol aircraft at least steers conditions back from outright collapse — but likely only temporarily. Momentary stabilization alone cannot resolve risks compounding around the choke point. With positions hardening, the window for de-escalation remain unclear, barring any unforeseen breakthroughs. It may require an external shock or further economic pain before structural issues receive due priority. Until then, all parties in the coalition uneasily hope deterrence holds.
US Unleashes Sweeping Russia Sanctions Escalation
US President Joe Biden has signed an executive order opening the door for secondary sanctions on any financial institution, domestic or foreign, that enables Russia to circumvent restrictions and procure critical wartime equipment. While most major Western banks have already shuttered their operations in Russia, the measures threaten repercussions for smaller regional banks and even unknowing intermediaries processing transactions with sanctioned entities.
The escalation represents Washington's latest economic offensive, trying to force an eventual Russian withdrawal from Ukraine by choking Russia's trade on a global level. The executive order permits penalizing any bank or company assisting sanctioned Russian entities, intending to tighten the financial noose on Moscow’s military supply chains. It expansively targets enablers ranging from defence firms to seafood shippers to any potential complicit intermediaries. With bans now reaching even indirect Russian origin goods, unwinding restrictions later risks being politically implausible.
In the short-term, practical impacts may still prove relatively modest. However, over time, a large scale decoupling risks upending commerce in the post-Soviet space as well as investments between Russia and continental powers. Procurement complications will likely plague Russia's defence and technology sectors for years to come without some form of sanctions relief. The degree of difficulty reconstituting those capabilities will depend on the level of engagement that Moscow can secure with alternate international partners.
For the US, secondary sanctions represent a way to hurt the Russian economy and demonstrate resolve to allies, as most impactful direct sanctions are already enacted. For EU member states, the new import bans raise difficult reckonings about trade relationships, with sanctions targeting Russian sectors that will pose economic harms westward as well. While for Russia, isolation from the West seems guaranteed without major concessions in Ukraine. Adaption can spur self-sufficiency across critical industries long-term, but scaled back procurement will be an inevitable cost of staying the course in the war.
Washington is deploying American financial supremacy in unprecedented ways with unpredictable consequences. While aiming to degrade Russia's military, weaponizing interconnectedness risks hardened divisions, accelerating the emergence of parallel financial ecosystems. Each time Washington leverages its dollar dominance for strategic goals, it risks further motivating efforts by other nations to move away from the dollar in international trade and finance. If viable alternates emerge, America's unique position will erode, along with any associated benefits.