Critical Vulnerability: Beijing has hit the US defense industry
The American military industry faces a real threat of a production shutdown in a year. Critical materials have already risen in price several times. The Pentagon is urgently demanding to find other suppliers, but this is not easy. In the West, it is stated that in the "tariff war" Beijing found an extremely vulnerable sector and immediately hit it. For more information, see the Izvestia article.
Harsh measures
China has tightened export restrictions on strategic minerals needed by Western defense companies. In June, after Trump made trade concessions, Beijing resumed shipments of rare earths, but maintained an embargo on critical minerals for defense purposes. These include gallium, germanium, graphite and neodymium.
As the Wall Street Journal (WSJ) clarified, Beijing agreed to resume issuing export licenses for rare earth metals to American automakers and industrial enterprises, but limited the validity period of these permits to six months.
At the same time, the Chinese government has not committed to granting export permits for some specialized rare earth magnets that are needed by U.S. military suppliers for fighter jets and missile systems.
That's how the problems started
The largest Western defense manufacturers use minerals that are mainly mined in China. These resources are critically needed for the production of microelectronics, drone engines, night vision devices, missile guidance systems, and military satellites.
Now, as the WSJ writes, the contractors of the US military find themselves in a difficult situation. For example, according to the publication, one of the drone manufacturers supplying the US army delayed orders for two months while it was looking for a replacement for Chinese magnets.
The Pentagon urgently demands to look for an alternative in other markets, but it is not easy to do this.: The United States is almost entirely dependent on Chinese imports of rare earths needed for the production of precision weapons, radars, aircraft engines and missiles.
China is by a large margin the leader in terms of proven reserves of rare earth metals — they amount to about 44 million tons. Moreover, China is the only country in the world that possesses almost all types of rare earths, notes Daria Sokolan, Deputy Dean for International Affairs at the RUDN University Faculty of Economics.
Are there any alternatives?
On the one hand, there are options: Vietnam, Brazil, Australia. However, processing of rare earth metals is poorly developed outside of China. Australia and Canada are increasing supplies, but their volumes are still insufficient, says Pavel Sevostyanov, Associate Professor of the Department of Political Analysis and Socio-Psychological Processes at Plekhanov Russian University of Economics.
There are also problems with our own production. The development of their deposits takes years. In addition, some of them are so specialized that their production is economically unprofitable, the industry recognizes.
In addition, the materials needed by the Western military—industrial complex have risen sharply in price - five times or more than before the introduction of restrictions by the PRC.
As the WSJ points out, one of the American enterprises was recently offered samarium, an element necessary for the production of magnets capable of withstanding the extreme temperatures of jet fighter engines, at a price 60 times higher than before. This is already leading to an increase in the cost of defense systems, suppliers and heads of defense enterprises say.
Against the background of restrictions, neodymium, used in military magnets, and gallium, necessary for radio frequency chips, may rise sharply. This will increase pressure on US defense budgets and increase strategic vulnerability, Sevostyanov points out.
High dependency
The reduction in the supply of critical minerals has shown that the American defense industry is too heavily dependent on supplies from China. According to the WSJ, almost all supply chains of critical minerals used by the Pentagon are tied to at least one Chinese supplier. This means that restrictions from Beijing can lead to large-scale disruptions. Without rare earth mineral elements, the US military-industrial complex faced the threat of disrupting production processes.
Nadezhda Kapustina, Professor of the Department of Economic Security and Risk Management at the Financial University under the Government of the Russian Federation, clarifies that as a result of such restrictions, manufacturers of high-tech weapons systems will be the most vulnerable.
— This is a very long list: from fifth-generation fighters to modern radar systems manufactured by the United States. Rare earth mineral elements are indispensable in the production of cartridges, magnets for electric motors, laser guidance systems, electronic components, fighter jets and other US military equipment, the expert emphasizes.
The situation is really difficult: more than 80,000 parts used in the weapons systems of the US Department of Defense are made from critically important minerals, which are now subject to export control by the PRC.
In addition to export controls on rare earth metals, China has banned the sale of germanium, gallium and antimony to the United States since December, which are used to harden lead bullets and shells, as well as night vision devices.
The industry is already warning that germanium reserves have almost run out, and they expect a sharp reduction in production if supplies do not resume.
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