Why the US Is Losing to China in the Resource War

Countries around the world facing the climate change crisis are now directing their attention to securing two mineral resources: cobalt and lithium. As key components of electric vehicle batteries that do not emit carbon, they are considered essential materials. The global economy of the 21st century will be dominated by whoever first successfully transitions to energy sources that do not emit carbon. Consequently, the competition to secure these two mineral resources may be considered the heart of the resource war between the U.S. and China.

The Democratic Republic of the Congo accounts for two-thirds of the world’s cobalt production. Cobalt prices have more than doubled over the past year, reflecting the high demand for cobalt in the market. Some even report than people from all over the world are flocking to the luxury hotels in the country’s capital, Kinshasa, to trade cobalt. Currently, Chinese capital holds control over cobalt trade in the DRC.

Cobalt mines in the DRC were initially developed by U.S. capital in the 20th century. However, China’s persistent effort to expand its influence in Africa in the 21st century has allowed it to overpower the U.S. and gain control of the industry. A December 21 article* published by The New York Times reported how failures in resource diplomacy during the Barack Obama and Donald Trump administrations have permitted a Chinese company to take over the largest cobalt mining corporation in the DRC, which the U.S. had spent decades in nourishing and developing. The message was clear: The U.S. is losing ground in its competition with China. [Note: I couldn’t find a Dec. 21 article with such a topic from the NYT; I found a Nov. 21 article on the topic:

[ https://www.nytimes.com/2021/11/21/world/us-china-energy.html?searchResultPosition=26 ], but I will preserve the original text which stated the NYT published such an article in December.]

In the late 1990s, the mining company Freeport-McMoRan secured exclusive mining rights in the DRC’s Tenke Fungurume cobalt-copper mine by making heavy investments. However, Freeport-McMoRan made a critical mistake in the 2010s. [The original text says the 1910s; I believe this is a typo because the company was founded in 1912 and it secured rights to the mine in the 1990s.] It invested $20 billion in oil and gas development, which turned out to be a failure. To escape from the verge of bankruptcy, Freeport-McMoRan decided to put the mine up for sale in 2016. At that time, China was eager to secure resources in Africa.

Africa specialist diplomats and the Congolese manager of Freeport-McMoRan appealed to the U.S. ambassador to the DRC and the U.S. State Department to prevent the sale of the mine, but the U.S. government did not respond. The Obama administration was nearing its end at the time, and all attention was directed toward the presidential election. Taking advantage of the fortunate timing, China Molybdenum Co. rushed in to purchase shares of the mine.

This incident teaches the important lesson that the overconfidence of American mining companies, overconfidence in fossil fuels and the lack of discernment of American diplomats can lead to a bitter defeat in the resource war.

On Aug. 2, 1939, just before World War II broke out, U.S. President Franklin Roosevelt received a letter from Dr. Albert Einstein. The letter emphasized the enormous potential of harvesting energy from nuclear fission and suggested that the U.S. must secure and stockpile uranium resources in the Congo. The letter was signed and sent by Einstein at the advice of Hungarian-born physicist Leo Szilard, and became the foundation of a plan to manufacture atomic bombs — the Manhattan Project.

Knowing that Germany was also developing fission technology at the time, these scientists understood the strategic importance of securing uranium and proceeded to persuade President Roosevelt. The Congo was then a Belgian colony, so it was important to take control over uranium mines in the land before Germany could utilize them.

By President Roosevelt’s decision, the U.S. was able to secure the Congo’s uranium mines and maintain a position of superiority in the nuclear race before and after World War II. The Soviet Union, which entered the race slightly later than the U.S., sought control over uranium mines in the Congo. Africa became a stage of resource competition between the U.S. and the Soviet Union during the Cold War.

The DRC became independent from Belgium in 1960. Not too long after, its government was overturned in a military coup by Joseph Mobutu, who ruled the country under a dictatorship for nearly 38 years. Mobutu and other ruling parties leveraged the country’s abundant uranium and copper mines and engaged in subtle tightrope diplomacy with the U.S. and Russia. Having already recognized the importance of mining resources from Einstein’s and Szilard’s letter, the U.S. government mobilized the CIA to secure mineral resources in the DRC. In the 1970s in particular, President Richard Nixon and Secretary of State Henry Kissinger had to resort to all sorts of means to appease Mobutu despite his repeatedly committing disrespectful diplomatic actions.

Given these examples from history, it seems that the U.S. already knows the importance of resources firsthand. The question is then, why is the U.S. falling behind China in the resource war? I believe the cause lies in the difference in their government’s attitude. China, which has once been humiliated by Western technology, set up the Made in China 2025 Plan to secure new technology and resources using all means available to develop its foundation in new energy sources and electric vehicles. The U.S., meanwhile, has grown too comfortable with its superiority achieved in the age of fossil fuels and did not pay as much effort in preparing for the new wave.

The U.S.-China resource war shows how much the insight and judgmental capability of presidents; of those in key government posts, such as ministers; and corporate CEOs can impact a country’s future. It is a lesson to be learned not only by the U.S. and China but by South Korea as well.

*Editor’s note: The translation is accurate; however the actual date of The NYT publication was Nov. 21, 2021.