The US Army wants to invest in mining companies in Canada, the Canadian press reported on Sunday. The Pentagon hopes to counter what it perceives as a Chinese attempt to seize Canada’s rare metal resources, such as lithium.
“There will be no new Cold War,” US President Joe Biden and his Chinese counterpart Xi Jinping promised on Monday, November 14. But as the two heads of state diplomatically shake hands ahead of the G20 opening in Bali, the US military is preparing to launch a new offensive to counter China: investing in Canadian mines.
The Pentagon wants to mobilize part of a new fund of several hundred million dollars to promote the exploitation “made in North America” of highly coveted rare metals, according to Canadian public information network CBC News reported on Sunday.
The initiative shows how the Canadian mining sector “is at the center of a gigantic geopolitical battle” between the United States and China for access to these strategic resources.
Canada, future leader in rare metals?
Before the Pentagon, Beijing was very interested in Canadian mines. “In the last ten years, China has participated in the acquisition and investment in 89 Canadian companies linked to the mining sector,” reported the US economic news channel Bloomberg in a research published on Friday. The latest example is Neo Lithium, a Canadian mining group, which was purchased last February for an estimated price of about $1 billion by Chinese rival Zijin Mining.
This acquisition was symbolically important because it was made at a time when trade tensions between Beijing and Washington, Canada’s main ally, were high. The purchase of Neo Lithium “may have given China the impression that Canada was very favorable to these investments” despite the context, says ‘The Diplomat’, a site specializing in geopolitical news in Asia.
For Beijing, this was very good news: a sign that not all of Washington’s allies had yet closed their doors to most Chinese investment. Even more so when Canada is called to appear on the world map of rare metals, such as lithium and cobalt.
For the moment, Canada remains a minor player compared to the most important producers of these resources, essential for the manufacture of batteries for electric cars, certain storage solutions for renewable energies and for a series of military equipment such as guidance systems. of missiles. These are all sectors in which China wants to play a leading role.
The rare metal mining heavyweights are “Russia, Australia and China,” says Zeno Leoni, a specialist in Sino-US relations at King’s College London. Even countries like Argentina, the Democratic Republic of the Congo and the Philippines produce more than Canada.
But Ottawa states that Canada’s underground reserves they could propel the country into the ranks of the world’s leading suppliers of lithium, cobalt, nickel and others. Some Canadian provinces, such as Ontario, have even published potential deposit maps that give the impression of being a rare earth El Dorado.
The war in Ukraine reveals the Chinese “threat”
China’s strategy has been to invest in anticipation of this competition for Canadian resources. Beijing’s plan has been “to use its financial muscle to create economic dependence, so that Canada is forced to turn to China and not to the United States when the exploitation of the deposits becomes a reality”, summarizes Zeno Leoni.
And Washington has been letting this happen for a long time. Even during the presidency of Donald Trump, when the US administration declared a “trade war” on China, Beijing was able to continue buying from Canada.
The war in Ukraine had to come for Washington to see reason. When Russian and Ukrainian exports of key semiconductor components – such as neon – dried up because of the conflict, the United States realized its dependence on certain resources controlled by sometimes hostile countries.
In the case of rare metals, China “already produces more than 70% of the world’s lithium batteries,” says Jean-François Dufour, an expert on the Chinese economy and co-founder of Sinopole, a resource center on China. Chinese investments in mines in Australia, the Democratic Republic of the Congo, Argentina and Canada “show that Beijing wants to control the chain from end to end,” says the specialist.
This is enough to send a chill through Washington, as Beijing “has already used the weapon of the rare earth embargo in the past to put pressure on another country”, recalls Jean-François Dufour. It was in 2010to make Japan buckle over a dispute over fishing rights in waters claimed by both countries.
Canada gets tough
Chinese investment in Canadian mines has thus become much more controversial. Ottawa was the first to get tough on Beijing. In October, the government of Justin Trudeau changed the law to prevent state-linked companies from investing in Canadian mining groups. It was a way of targeting China – most of whose companies or banks that invest abroad are state-linked – without saying so.
As if the message wasn’t clear enough, François-Philippe Champagne, Canadian Industry Minister, ordered in early November three Chinese groups to get out of the capital of Canadian mining companies.
The Pentagon’s interest in Canadian mines is, in this sense, “a preventive investment designed to close the door on Chinese ambitions for the North American subsoil,” says Jean-François Dufour.
To do this, the Army can draw on a $500 million fund established by the climate investment plan enacted by Joe Biden in August 2022. The plan was intended to boost a North American rare metals industry that is “essential for technologies at the heart of sustainable development”.
The White House invoked the Defense Production Act, a 1950 law that allows the US military to invest directly to increase production capacity, as if it were wartime. A text “that also worries Canada because it is part of the ‘US military industrial base for decades,” recalls CBC News.
For now, this is a defensive move to keep China out of possible future Canadian mines. But The Pentagon has also asked Congress that allows you to invest directly in rare metals operations in Australia and the United Kingdom.
The idea would then be “to create an international coalition to break the Chinese quasi-monopoly on these rare earths”, says Zeno Leoni. For this expert, if Washington is successful, “it will force Beijing to review its entire technological development strategy.”
*Article adapted from its original in French
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