The scramble for critical minerals: An old curse in a new world

Lithium, cobalt, nickel, copper, and rare earth elements are reshaping global trade and great-power politics in ways reminiscent of the earlier scramble for natural resources. This column argues that the familiar resource-curse mechanisms still bite, but do so in a rather difference context characterised by a supply chain that is bifurcated between scattered extraction and Chinese-concentrated refining, global demand that is exposed to rapid within-class technological substitution, and the absence of a multilateral architecture comparable to the one that disciplined the oil age. This creates genuine Knightian uncertainty and emphasises the importance of smart contract design, appropriate fiscal policy – particularly on taxation – and the governance of supply chains.

The world is in the midst of a new scramble for natural resources, this time not for fossil fuels but for the minerals that sit at the heart of the energy transition, the digital transition, and the rapidly transforming defence and aerospace industries. The International Energy Agency (IEA 2025) projects strong continued growth in demand for the minerals used in batteries, magnets, electricity networks, and semiconductors, even after the recent softening of the global climate consensus; the Agency’s earlier work (IEA 2021) suggested at least a fourfold rise in clean-energy mineral demand by 2040 under climate-policy scenarios. Production of critical minerals is scattered across a small number of developing economies – Chile, Indonesia, the Democratic Republic of Congo (DRC), parts of southern Africa, Kazakhstan – alongside Australia, while processing and refining are heavily concentrated in China, which accounts for between 60% and 80% of global processed supply across copper, nickel, cobalt, rare earths and lithium (Leruth et al. 2022). The DRC, sometimes called the Saudi Arabia of cobalt, holds roughly 70% of the world’s cobalt reserves and 60% of its lithium reserves but has no substantial (profitable) processing capacity. The combination of spatially dispersed extraction and concentrated refining sits at the heart of the geoeconomic tensions that critical minerals are now generating.

Critical minerals are more extensive and more disbursed than previously thought

An important finding from the recent special issue of the Oxford Review of Economic Policy (Adam et al. 2026) is that the empirical foundations of critical-minerals economics are weaker than economists and policymakers require. New techniques combining satellite imagery and machine learning that allow detection of operational mines suggest that a substantial share of global mining activity is undercounted in standard statistical sources, but that under-counting is not random with strategic non-disclosure, weak state capacity, corruption and disincentives to report illegal or environmentally damaging activity all contributing to the gap. Moreover, the geography of supply is set to change, potentially radically, over the coming decades as deep-sea mining and new sources of supply such as saline geofluids and engineered brines, which are more globally distributed than traditional orebodies, are developed (Barzin et al. 2026, Blundy 2026).

The geoeconomics of a bifurcated supply chain

The interaction of this dispersed primary production and concentrated refining generates two distinct axes of geopolitical tension: between the principal strategic powers (China, the US, and EU) and the Global South over upstream supply, and between China on one side and the US and EU on the other over downstream processed supply. China’s mineral governance in particular reflects an integrated architecture in which industrial upgrading, environmental regulation and financial innovation at home are tied to activist economic statecraft abroad, from which a more cooperative global mineral governance might emerge. 

Old resource curse challenges remain… but with a new twist

For all that is new, the macroeconomics of resource booms in developing countries is recognisably the same. The Dutch disease mechanism still operates: a windfall appreciates the real exchange rate and squeezes the non-resource tradable sector, and often this occurs in response to the news of new discoveries, in anticipation of, but well before the windfall arrives. 

Likewise, early empirical evidence suggests that the green transition may simply replace fossil-fuel-related conflicts with mineral-related ones, with the eastern DRC the archetypal case where violence is endemic in mineral-abundant provinces such as Katanga and North Kivu, fuelled by neighbours including Rwanda and Uganda (Couttenier and Rohner 2026), while ecological damages, particularly through increased deforestation and soil and water pollution around mines, remain a threat, especially when regulatory environments are weak and corruption is high, heightening the uncomfortable trade-off between local livelihoods and environmental damage. Arezki et al. (2026) argue that the new geopolitical environment may slow, or even reverse, democratisation in mineral-rich developing countries, with leaders’ international alignment with the superpowers scrambling for access reinforcing their hold on domestic politics.

What is genuinely new

Where the locus of leverage in the oil era was the wellhead and the chokepoint was the strait or the pipeline, the locus today is increasingly the refinery, and the chokepoint is downstream concentration.

The second is technological substitutability. Oil had no scalable substitute for almost a century; demand was inelastic and predictable. Critical minerals are different. Lithium-ion batteries face credible competition from sodium-ion and other chemistries (Vu 2025); permanent magnets can in principle be redesigned to economise on dysprosium and neodymium; copper substitution by aluminium in transmission has a long history. The risk facing producer countries is therefore not simply depletion of an irreplaceable asset, but technological stranding of investments whose dominant downstream use may migrate to another mineral altogether and exacerbate the green paradox identified by van der Ploeg and Withagen (2015) that the fear of future obsolescence can pull extraction forward, exacerbate price gluts, and accelerate the very environmental damage that the energy transition is meant to limit.

The third feature is institutional. The oil age operated inside a multilateral architecture that evolved over decades and has served as a shock absorber. Critical minerals have, at present, no functioning analogue: no consumer-country agency coordinating stockpiles, no producer cartel setting reference prices, no deep futures market for cobalt or neodymium, no Bretton Woods institution willing to intermediate between dominant refining capacity and major consumers. The shock-absorbing capacity of the global system is, by this measure, thinner now than it was when the hydrocarbons dominated the global economy and the resource curse was first being understood.

Policy options for advanced and developing economies

For advanced economies, the central question emerging from the configuration of the critical minerals landscape is supply-chain resilience, which in turn has powerful implications for policy including on procurement standards, recycling and demand management, strategic-reserve management, trusted-partner agreements, processing-capacity guarantees, offtake agreements, and tax and customs policies (Fetzer and Lambert 2026, Felbermayr 2026).

For developing-country exporters, the priorities are different and are primarily concerned with mapping and discovery, the security of property rights, beneficiation and taxation. In contrast to hydrocarbons, rents in the critical-minerals era are migrating downstream, from the mine to the plant and toward intangible assets such as proprietary technologies and integrated digital platforms, which places a premium on anchoring production pricing to transparent international benchmarks and revisiting the strict application of the VAT destination principle, especially for unprocessed exports (Collier 2026, Rota-Graziosi 2026).

Across both groups, contract design is central, and the elevated  technological and geopolitical uncertainty of the current times calls for greater reliance on longer-term and contingent-claim contracts between multinationals and host governments (Arezki et al. 2026). While longer-term contracts may blunt incentives to innovate in substitutes, which may be welfare-reducing, they help to avoid similarly welfare-reducing R&D races, while making such contracts state-contingent provides the risk-sharing that are absent in simple long-term commitments.

Concluding remarks

The new resource curse is harder to manage than the old one, not because producing countries are weaker than they were in say the 1970s or 1990s, but because the strategic, technological and institutional environment is more uncertain and the multilateral governance structures, that provides some support and protection to producers is more fragile. Some of the levers, however, are also more powerful than they used to be. Satellite imagery and machine-learning detection can discipline opaque contracts and document environmental damage in ways that were not technologically feasible a decade ago. Engineering-economics methods can quantify substitution thresholds that economists have historically had to assume. Modern contract theory has tools – contingent claims, real options – well suited to the technology-stranding problem. Whether this combination is enough to keep the new curse from becoming worse than the old one is the empirical question of the coming decade.

Source : VOXeu