Kvanefjeld – the West’s last line of defence against growing Chinese hegemony?
The financial crisis was an eye opener. It showed us the importance and weight of Chinese money in the global financial system. When the US was struggling to stem a systemic collapse, China chipped in with emergency financing to the tune of US$100 billion. Maybe, China’s decision to buy US subprime mortgages equivalent to 8% of its forex reserves should not be seen as a benevolent act, but its own desperate bid to maintain its atrociously undervalued currency peg vis-à-vis the US dollar. But, that argument, in no way can undermine China’s growing hegemony.
Whatever be the reason, this still is a story of co-operation. But, imagine a story of conflict – a war has broken out between the US and China, and the US is awaiting Chinese assistance to replenish its high-tech weapon inventories. Such a situation may sound funny today but not beyond the realm of possibility. The reason: in the past 15 years, the world’s only major source of rare earth elements (REEs) has been China, so much so that these metals have been nicknamed dragon metals. REEs constitute a group of minerals indispensable to the global high-tech weapon, auto and cleantech industries.
China currently accounts for 97% of global REE production. From hybrid car batteries to wind turbine motors and missile guidance systems, metals such as cerium, promethium and europium are essential to all modern electronic devices that use rechargeable batteries, electric motors, photo optics, solar cells and strong magnets. And that makes these metals all the more strategic and critical, just next to oil in terms of importance.
“The Mideast had oil, but China has Rare Earth Elements. As OPEC did with oil… China is about to tighten its hammerlock on the market for some of the world’s most valuable metals.”
– New York Times
China realised the potential of REEs way back in 1992, and since then, has left no stones unturned to tighten its grip on supply and eventually pricing. Political experts believe that China will only tighten its stranglehold further, forcing the West to toe its line – more often than ever. It’s a trend that’s been playing right into the hands of the Communist masters.
“China has relentlessly slashed its export quotas for rare earths every year since the start of the decade, much to the despair of Japan, which has plans to forge ahead in new markets, such as electric cars. Those restrictions have sent the likes of Toyota and Japan’s largest trading houses scrambling to secure more supply, with government sources in Tokyo describing a ’panic mentality’ among some large industrial groups.”
– The Times Online
That said, China’s intentions appear far more deep-rooted and dangerous. And at stake is the control of the US$1.4 trillion global high-tech weapons industry. Three of the major rare earth elements — neodynium, dysprosium and terbium – are critical high-tech military equipment, including communications systems, precision munitions, navigation and guidance systems, lasers and spy satellites.
“The United States imports 100 percent of the rare earths it needs…As the American military depends more and more on high-technology weapon systems, it becomes ever more dependent on rare earth minerals – and China. That is raising alarms inside the Pentagon.”
– Defense News
However, China’s ‘intentions’ could be in a for a downside surprise, if the claims of Greenland Minerals and Energy, the company which owns the rights to mine Kvanefjeld, are to be believed. The reason: locked within this precious piece of land are REEs, conservatively valued at US$273 billion and could account for 25% of global REE supply. Kvanefjeld is a barren, ice-laden 500 square miles of Arctic bedrock in Greenland, which was until recently under Denmark’s control. The only vegetation is moss, and the nearest town is more than 100 miles away. Uninviting, it may seem, but this inhabitable piece of land in the northern hemisphere could well be the key to future global development, and may well save the world from a financial equivalent of cold war. The West would definitely keep its fingers crossed.
