The dichotomy between the peaceful salt flats glistening in the Andes and the data centers humming with servers that train artificial intelligence models is a cause for concern. As engineers meticulously care for the racks of advanced chips, the natural beauty of contemporary landscapes will soon be scraped away.
Chip dependency on minerals draws from landscapes not only in Chile but in other locations as well. Despite the vast distance between the Atacama Desert and Silicon Valley, the supply chains that tie them together are incredibly fragile and increasingly political. As of 2023, China accounts for roughly 60 percent of global rare earth mining and nearly 85 percent to 90 percent of rare earth processing capacity, while Chile and Australia produce over 70 percent of the world’s lithium, underscoring the geographic concentration that makes these supply chains uniquely vulnerable.
Due to the expansion of artificial intelligence and the green energy transition, there has been a growing need for a narrow set of minerals. Demand for lithium is projected to grow more than 40-fold by 2040 under net-zero scenarios, while copper demand from clean energy technologies alone is expected to double by 2035. These materials, encompassing lithium, cobalt, nickel, copper, and more, are the very backbone of semiconductors, batteries, electric vehicles, wind turbines, and solar panels. However, despite the parallel desire for these materials, global cooperation is thinning at unprecedented rates, sparking a resurgence of resource nationalism. Whether it is export restrictions, contract renegotiations, or nationalization efforts, governments are clashing over control of the minerals that power the 21st century.
The New Alternative for Oil
Geopolitically speaking, oil has historically stood as the cornerstone of energy. However, today, this dynamic is increasingly centered around critical minerals. Stemming from the imposition of export controls, supply concentration risks continue to intensify. Notably, China’s dominance in rare earth processing has become a keen exemplar of stringent approaches.
China has a virtual monopoly in the sector, dominating the entire supply chain from the extraction of rare earths to the processing and manufacturing of permanent magnets. | Image Source: Politico
In 2022, China refined approximately 87 percent of the world’s rare earth elements and produced over 90 percent of permanent magnets used in EV motors and wind turbines, granting Beijing outsized leverage over downstream technology manufacturers. Although there remain a plethora of countries where rare earths are mined, China has since advanced the processing responsible for the majority of the global supply. China’s concentration in Beijing establishes key leverage in the technology supply chain.
Adjacently, Indonesia, which is home to the largest nickel reserves in the world, has completely banned the export of raw nickel, forcing companies to establish domestic processing facilities. Simultaneously, Chile and Bolivia, which have large lithium reserves, are considering the integration of concession models to further state participation. Even the Democratic Republic of Congo, which produces the majority of the world’s cobalt, has debated stricter royalty regimes and contract revisions. The DRC accounts for approximately 70 percent of global cobalt mining output, and in 2018, it increased cobalt royalty rates from 2 percent to 10 percent under its revised mining code. Chile currently produces roughly 25 percent to 30 percent of global lithium supply, while Bolivia holds an estimated 20 percent to 25 percent of global lithium reserves but contributes less than 2 percent of global production, highlighting the disparity between resource endowment and scalable extraction. Regardless of geopolitical stance or geographic standing, each government is recalibrating its approach to the growing need for critical materials.
Inside Chile and Bolivia: Lithium and the Politics of Sovereignty
Lithium, a core component for the production, distribution, and maintenance of EV batteries and grid storage, is predominantly concentrated in South America’s “Lithium Triangle.” While Chile has historically embraced private investments and should be scaled to be one of the world’s top producers, Santiago has argued for the expansion of state oversight into these critical lithium projects, as the perspective that natural resources should yield broader public benefits remains prevalent.
Bolivia stands at the crux of profit and political instability. While it holds some of the largest lithium reserves in the world, they have failed to efficiently scale production due to their inherent political instability and state control. Bolivia’s Salar de Uyuni alone is estimated to contain over 21 million metric tons of lithium resources, yet annual production remains a fraction of Chile’s or Australia’s output due to political and infrastructural constraints. Thus, the fragile equilibrium between accruing wealth in the value chain and being forced into extractive roles has taken second and third-world countries at large.
Cobalt’s Double-Edged Sword in the Democratic Republic of Congo
Cobalt’s abundance in the DRC exists between poverty and instability. Historically, foreign mining firms have operated in the region, providing little to no benefit for constituents. Accordingly, the Congolese authorities have pushed for higher royalties and greater levels of oversight. The resource nationalism here is not only perpetuated by economic conditions but by the political legitimacy of leaders and their ability to demonstrate how mineral wealth benefits domestic populations.
An artisanal miner holds a cobalt stone at the Shabara artisanal mine near Kolwezi. | Image Source: The Conversation
The inherent instability within the DRC also poses a substantial risk to global battery supply chains because if the contemporary governance system breaks down, exports could be severed and EV manufacturers could face a supply shock. In 2022 alone, cobalt prices fluctuated by more than 100 percent amid geopolitical instability and export uncertainty, demonstrating how political risk directly translates into market volatility. While green transitions seem positive, the underlying costs and innate fragility derived from their reliance on politically volatile regions make the shift increasingly difficult.
Indonesia and the Rise of Processing Power
Indonesia’s nickel strategy represents perhaps the most successful case of resource nationalism in action. By banning raw ore exports and incentivizing domestic smelting, Jakarta, Indonesia’s capital, has effectively forced multinational firms to invest locally. Following the 2020 export ban, foreign direct investment into Indonesia’s nickel processing sector surged to over $8 billion annually, and the country now accounts for more than 50 percent of global nickel production. This value proposition has pushed Indonesia up the value chain, empowering it to become a hub for nickel processing tied to EV battery production.
Under the hypothetical that other countries aligned their internal and external values with Indonesia’s model, global supply chains could metamorphose into regional blocs, thus enabling countries to push for domestic industrialization and ubiquitous access rather than raw shipping to select corporate giants.
The Less Studied Frontiers of Greenland and Gabon
While incumbent producers are undergoing major shifts, emerging producers are even more susceptible to geopolitical sensitivity. Greenland, a region rich in rare earth deposits, has attracted the attention of major international powers seeking alternative supply routes to reduce China’s dependency. Following negotiation processes, environmental concerns and political debates over the territory have complicated former extraction plans. The Kvanefjeld project in southern Greenland is estimated to contain one of the largest undeveloped rare earth deposits outside China, with the potential to supply a meaningful share of Western demand if developed.
On the other hand, Gabon, which stands as a key manganese producer, operates at the juncture of African resource politics and global battery demand. Although less discussed as a critical mineral, manganese remains essential for specific battery chemistries. Gabon produces roughly 20 percent to 25 percent of the world’s high-grade manganese ore, a mineral critical for certain lithium-ion battery chemistries. With demand rising internationally, Gabon’s decisions on taxation, export restrictions, or state equity would indubitably resonate globally.
Within these less discussed regions is the global outlook on the sheer breadth of mineral geopolitics. Rather than silo debates exclusively to stable OECD countries, the global community has concentrated interest in areas where governance challenges and geopolitical rivalries intersect.
AI Infrastructure and Prolonged Demand
One question asked by economists and politicians has taken the world by storm: Is the mineral boom temporary? Following the growth trends of artificial intelligence, data centers, advanced chip production, energy infrastructure, and green shift commitments, the probable answer is no. Global data center electricity demand is projected to more than double by 2030, potentially exceeding 1,000 terawatt-hours annually and significantly increasing copper and rare earth demand for grid expansion and cooling infrastructure. Even under COP frameworks, the position shift toward electrification and renewable energy requires copper for grid expansion, lithium for batteries, and rare earths for wind turbines. The World Bank estimates that production of critical minerals such as graphite, lithium, and cobalt could increase by nearly 500 percent by 2050 to meet clean energy goals.
Constraints cited by survey respondents highlight seven key gaps in the build-out of data center infrastructure. | Image Source: Deloitte Insights
Compared to oil, where alternative options can act as a substitute for the good, rare earth elements typically lack scalable replacements in the short term. Typically, the innovation cycle of alternatives to energy takes five to 10 years to develop, with widely used products such as oil, never fully being sustainably replaced. While options for recycling and innovation in usage reduction could lessen intensity, the structural demand seems prolonged.
Agreements, Alliances, and Fragmentation
Consumer nations are already responding to rising demand. Both the United States and the European Union have introduced “friend-shoring” strategies, forming mineral partnerships with politically aligned countries. These multilateral initiatives aim to diversify supply away from dominant processors.
The U.S. Inflation Reduction Act requires that a growing percentage of EV battery minerals are sourced from free trade agreement partners to qualify for tax credits, while the EU’s Critical Raw Materials Act aims for 10 percent domestic extraction and 40 percent domestic processing by 2030. These efforts may simultaneously deepen the geopolitical blocs. Western nations prioritize alliances with select groups, and the excluded countries could pivot toward alternative regions, increasing global polarization. Now, more than ever before, resource nationalism has the ability to reshape alliances as profoundly as oil once did.
Inherently, there is a trade-off when countries renegotiate contracts or impose export controls, namely in the form of securing greater revenue or domestic industrialization against global decarbonization efforts. Since 2020, the number of worldwide mineral-related export restrictions has more than doubled. This plays into the dilemma of whether to maximize short-term gains or stabilize long-term demand relationships.
Future Directionality
The notion of control over critical minerals matters as much as control over oil once did. Because the very framework of EV, solar panel, and AI-driven consumer tech relies on mineral supplies, political misalignment between producer nations and consuming economies could derail climate goals, raise energy costs, and deepen geopolitical tensions.
Resource nationalism is now an indicator of shifting global power, where countries that harbor rich mineral resources recognize their leverage potential and seek a larger share of the value chain. Between 2017 and 2023, more than 100 new mining tax increases or state equity requirements were introduced globally, signaling that governments increasingly view mineral control as a strategic economic imperative. The diametrically opposed perspectives between equitable development and destabilizing fragmentation will shape both the global markets and the trajectory of the green transition.
Featured Image Source: The Conversation