Quad Mineral Security Partnership

Context:

Critical minerals, often called the “new oil,” are pivotal to the ongoing high-tech industrial revolution. However, the concentration of the critical mineral supply chain in countries like China—presents security risks for other nations, especially members of the Quadrilateral Security Dialogue (Quad). 

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• In response, countries are developing policies and strategies to enhance the resilience of their supply chains. 
• The European Union (EU) and countries such as Canada, India, Australia, and South Korea have all recognised the importance of these minerals, releasing strategic frameworks or critical mineral lists to address this need.

China’s Domination of the Critical Mineral Supply Chain:

• China is a dominant force in the critical mineral supply chain, especially in rare-earth elements (REEs) like neodymium and dysprosium, where it accounts for approximately 60% of global production and nearly 90% of processing and refining capacity. 
• This dominance has been leveraged in foreign policy; in 2010, China restricted REE exports to Japan, and in 2023, it began restricting exports of minerals like germanium and gallium, emphasising its control over critical mineral resources. 

Quad and Critical Minerals:

Each Quad member brings distinct strengths to the critical mineral sector:

• Australia has vast reserves; the U.S. leads in mining technology; Japan brings capital and expertise in extraction and processing; and India possesses untapped mineral reserves and a growing market. 
• Together, these capabilities could strengthen the Indo-Pacific region’s critical mineral supply chain.

India: Emerging Manufacturing Hub:

• India views critical minerals as vital to its national security and development, especially since the COVID-19 pandemic highlighted vulnerabilities in global supply chains. 
• The government has since prioritised securing these resources to align with its Atmanirbhar Bharat self-reliance vision. 
• In 2023, India issued its first list of 30 critical minerals, underscoring their importance to sectors like defence, agriculture, and energy. 
• India’s approach includes simplifying the mining process and enhancing international cooperation with mineral-rich countries. 
• The government has also passed the Mines and Minerals (Development and Regulations) Amendment (MMDR) Bill, enabling private sector participation in mining and setting royalty rates for various critical minerals. 
• To support international efforts, India established Khanjij Bidesh Private Ltd. (KABIL) to acquire overseas mineral resources, securing agreements with Australia, Argentina, and potentially Chile and Sri Lanka.

Convergences and Divergences:

• The Quad countries have distinct yet overlapping strategies regarding critical minerals. 
• Each member has a unique definition of what constitutes a “critical mineral,” influenced by their specific national priorities. 
  • The United States and Australia, for instance, emphasise structural factors more heavily, while India’s focus includes poverty alleviation and development in alignment with its economic goals. 
• In terms of strategic approaches, the US has primarily pursued a decoupling approach, aiming to build a resilient supply chain independently of China. 
• Meanwhile, India, Japan, and Australia favour a de-risking approach, which emphasises reducing dependencies by diversifying their upstream supply chains rather than focusing solely on full-scale decoupling.

Quad Members’ Mineral Security Approaches:

• Australia: Australia’s critical mineral strategy aims for a “concerted, targeted, and proportionate approach” to strengthen its critical minerals sector as a means of bolstering national security.
• India: India’s strategy is largely aligned with its economic and security interests, reflected in its “Aatmanirbhar Bharat” vision to utilise critical minerals for growth, competitiveness, and sustainable development.
• Japan: Japan’s approach is three-pronged, focusing on offshore mining investments, strategic partnerships with other countries, and capacity-building initiatives in human resources and mining skills, all of which aim to mitigate Japan’s reliance on other countries and enhance its security.
• United States: The US has chosen a decoupling strategy to build an alternative, resilient, and liberal supply chain that ensures mineral security across its economy, protecting its strategic interests by focusing on every part of the supply chain.

Potential for Cooperation Among Quad Members:

• Since 2021, the Quad has taken steps to enhance collaboration on critical minerals. 
• A notable example is the Quad Investors Network (QUIN), which launched in 2022 to strengthen private-sector cooperation in key areas like clean energy and critical minerals. 
• Initiatives in the US, such as the proposed Quad Critical Minerals Partnership Act and the Critical Minerals Security Act of 2024, reflect efforts to secure an alternative mineral supply chain in coordination with Quad partners. 
• However, further steps are necessary to solidify these efforts into a cohesive framework. 
• Bilateral and multilateral agreements, such as the US-Japan agreement on critical minerals and a task force between the US and Australia, further underscore the need for collaboration. 
• India, which currently only has a critical minerals agreement with Australia, could benefit from further partnerships with other Quad members.

Challenges:

• Economic Realism: Quad members’ efforts to compete with China have faced limitations. 
  • Despite Australia’s efforts to diversify its market, China remains its largest consumer for minerals like rare earths, valued at around US$100 billion. 
• Supply Chain Expertise: The Quad lacks deep expertise in downstream segments like advanced battery materials and research into alternative technologies. 
  • China, meanwhile, has invested heavily in next-generation battery technologies, such as solid-state and sodium-ion batteries, which have the potential to lower production costs.
• Policy Uncertainty: Unlike China’s centralised approach, Quad members operate in decentralised political systems, limiting the ability to mandate investments aligned with geopolitical goals. 
  • Environmental, Social, and Governance (ESG) compliance also varies among members, with India’s ESG standards not yet aligned with Western expectations.
• Zero-Sum Game Risks: Collaborative efforts to reduce reliance on China have led Beijing to impose mineral restrictions, heightening the risk of supply chain fragmentation.

Recommendations for Quad Cooperation:

• Establishing a comprehensive agreement between Quad members based on shared principles, similar to the G7’s consensus on critical mineral security.
• Creating a common definition of critical minerals to streamline policies and link initiatives, facilitating a collaborative framework.
• Developing a trading system for critical minerals among Quad members that spans the entire supply chain, from upstream to downstream segments.
• Implementing an early-warning system to monitor potential supply chain disruptions, potentially focusing on essential minerals like lithium, nickel, and graphite for the electric vehicle (EV) industry.
• Initiating regular ministerial meetings among Quad members to coordinate initiatives and explore new areas of collaboration.
• Identifying co-investment opportunities in third countries, leveraging bilateral partnerships and multilateral efforts like the Indo-Pacific Economic Framework (IPEF).