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 vowed on Monday, November 14. But as the two heads of state shake hands diplomatically ahead of the G20 opening in Bali, the US military is preparing to launch a new offensive to counter China: invest in Canadian mines.
The Pentagon wants to mobilize part of a new multi-hundred-million-dollar fund to promote “made in North America” mining 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 Friday. The latest example is Neo Lithium, a Canadian mining group, which was purchased last february for an estimated price of about 1,000 million dollars by its 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 secondary player compared to the largest producers of these resources, essential for the manufacture of batteries for electric cars, certain storage solutions for renewable energy 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 heavyweights in rare metal mining are “Russia, Australia and China,” says Zeno Leoni, a specialist in US-China 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 claims that Canada’s underground reserves they could propel the country into the ranks of the world’s top suppliers of lithium, cobalt, nickel and others. Some Canadian provinces, such as Ontario, have even published maps of potential deposits that give the impression of being a rare earth El Dorado.
War in Ukraine reveals Chinese “threat”
China’s strategy has been to invest in anticipation of this fight over Canadian resources. Beijing’s plan has been to “use its financial muscle to create economic dependency, so that Canada is forced to turn to China and not to the United States when the exploitation of the deposits is a reality,” sums up Zeno Leoni.
And Washington has been letting this happen for a long time. Even during the Donald Trump Presidency, 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 come to his senses. 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 China resource center. Chinese investments in mines in Australia, the Democratic Republic of 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 in Washington, since 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 bow down over a dispute over fishing rights in waters claimed by both countries.
Canada hardens
Chinese investment in Canadian mines has thus become much more controversial. Ottawa was the first to get tough with 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 linked to the state – without saying so.
As if the message wasn’t clear enough, François-Philippe Champagne, Canadian Minister of Industry, ordered three Chinese groups in early November to pull out of the capital of Canadian mining companies.
The Pentagon’s interest in Canadian mines is, in this sense, “a preventive investment aimed at closing the door on Chinese ambitions for the North American subsoil,” says Jean-François Dufour.
To do this, the Army can use a fund of 500 million dollars established by the investment plan in the climate promulgated by Joe Biden in August 2022. The plan was intended to promote a North American industry of rare metals that is “essential for technologies at the core of sustainable development”.
The White House invoked the Defense Production Act, a 1950 law that allows the US military to invest directly in increasing production capacity, just as if it were in wartime. A text “that also worries Canada because it is part of the ‘United States military industrial base for decades,” recalls CBC News.
For now, this is a defensive move to keep China out of potential future Canadian mines. But the Pentagon has also asked Congress that allows you to invest directly in rare metals operations in Australia and the UK.
The idea would then be to “create an international coalition to break the Chinese quasi-monopoly over 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
