The New Politics of Oil: China’s Export Controls on Rare Earth Elements and the Restructuring of Global Supply Chains

The statement issued by the Chinese Ministry of Commerce from Beijing to the world on 20 May 2026, whilst maintaining an extremely measured tone in diplomatic language, harbours a profound geopolitical calculation: A ministry official stated that export controls on rare earth elements and critical minerals were being implemented in accordance with laws and regulations, and that licence applications for civilian use that complied with the rules were being considered, emphasising that they were prepared to support mutually beneficial cooperation between companies from both countries. Although these statements may appear at first glance to be a technical trade policy announcement, they constitute the latest chapter in the China-US rare earths war, which has been escalating since early 2025 and threatens the critical production infrastructure of the global economy. Indeed, this statement gains significance in light of data verified by Reuters on the same day: in April 2026, exports of yttrium oxide to the US amounted to just 10 metric tonnes; this figure was far below the 60 tonnes recorded in March 2026 and the average monthly figure of 30 tonnes during the 13-month period prior to the controls. Whilst a commitment was made to ‘consider’ civilian use, the fact that actual figures remain so low suggests that Beijing is deliberately creating a tension between rhetoric and practice.

From the Depths of History to the Present: The Origins of China’s Rare Earth Hegemony

Rare earth elements (REE) are a group comprising 17 chemical elements: the 15 elements in the lanthanide series of the periodic table, plus scandium and yttrium. These elements are termed ‘rare’ not because of their absolute abundance in the Earth’s crust, but because it is geologically difficult to find them in concentrations that are economically viable for extraction. Heavy rare earth elements such as neodymium, dysprosium, terbium and praseodymium are essential components across a wide range of technologies, from permanent magnets in electric vehicle motors to guidance systems in fighter aircraft, from wind turbine generators to vibration motors in smartphones, and from radar systems to MRI machines. As highlighted in the National Intelligence Academy’s 2025 analysis, an F-35 fighter jet contains approximately 410 kilograms, an Arleigh Burke-class destroyer 2.36 tonnes, and a Virginia-class submarine 4.17 tonnes of rare earth elements; this data strikingly demonstrates that RTE has now become not merely an economic but a military-strategic dependency issue.

China’s dominance in this field cannot be attributed to chance or mere geological fortune. According to USGS data, global rare earth reserves amount to 110 million tonnes, of which 44 million tonnes are located in China. However, the question of why these countries—Brazil with 21 million tonnes, Canada with 14 million tonnes, Russia with 10 million tonnes and India with 6.9 million tonnes—hold such a limited share of global production points to the heart of the matter. The answer lies in refining: whilst China accounts for 60–70 per cent of global NTE mining production, it holds more than 85–90 per cent of refining and processing capacity. In other words, NTE ore can be extracted all over the world; however, to be converted into a form usable by industry, it will most likely have to pass through Chinese refineries. This structure is the product of a decades-long, patient strategic planning process consciously built by the Chinese state since the 1980s, sustained by low-price policies, state subsidies, the strategic disregard of environmental regulations, and technological accumulation. The ‘Made in China 2025’ strategy has transformed this accumulation into a global power doctrine by integrating it with advanced technology sectors.

April 2025 to May 2026: A Chronology of Export Controls

China’s export restrictions on rare earth elements are part of a process with historical roots, yet one that reignited with full force at the start of 2025. The “Liberation Day” tariffs introduced by US President Trump in April 2025 — imposing customs duties of up to 145 per cent on certain Chinese products — added both speed and scope to the restrictive measures Beijing adopted in this regard. In April 2025, the Chinese Ministry of Commerce introduced an export licensing requirement covering seven heavy rare-earth elements and their derivative products; whilst officially justified as a measure to control “dual-use” goods, this step was in reality an asymmetric and highly calculated response to the US trade war. The impact of these restrictions is strikingly confirmed by publicly available data: Shipments of heavy rare earth elements such as yttrium, dysprosium and terbium fell by approximately 50 per cent compared to the 12-month period prior to the controls, whilst dysprosium and terbium prices rose four to five-fold, and yttrium prices surged by a staggering 14,000 per cent.

In October 2025, China expanded its export control regime to the most comprehensive version in history, aligning it with the US ‘Foreign Direct Product Rule’ (FDPR) model and establishing extraterritorial jurisdiction. This regulation included a provision on “extraterritorial jurisdiction”, which stipulated that Beijing could demand licensing authority even if rare earth materials of Chinese origin or produced using Chinese technology were reprocessed or exported anywhere in the world. However, in line with the agreement reached during the Trump-Xi meeting in Busan, South Korea, at the end of October 2025, these comprehensive restrictions were postponed for one year—until November 2026. This postponement was presented as a diplomatic softening; however, the most critical point was overlooked: the licensing requirement for seven heavy rare earth elements, which came into force in April 2025, and the general export control framework were excluded from the scope of the postponement and remained fully in force.

In the early months of 2026, China shifted its focus, applying the export control mechanism to military users in Japan and tightening controls on transfers via third countries. In March 2026, officials from China’s Ministry of Commerce and customs authorities held a special briefing for domestic metal firms on export controls; this step is a clear indication that the system has been institutionalised as a permanent state policy. The statement made following the China-US economic consultations in May 2026, which forms the starting point of this article, takes on its full meaning within this context: the phrase “applications for civilian use are being considered” is framed as a signal of compromise; however, actual export figures serve as evidence of just how selective this framing remains.

The ‘Dual-Use’ Doctrine: The Strategic Function of the Legal Framework

The core of China’s NTE export control architecture is based on the Export Control Law (ECL), which came into force in 2020. This law has established a framework granting China legal authority extending far beyond its own borders. The so-called ‘dual-use’ doctrine — that is, a control regime based on the assumption that a good can serve both civilian and military purposes — is an extremely functional tool for China; for the same rare earth element or magnet can be used in an electric vehicle motor as well as in a missile guidance system. In its May 2026 statement, Beijing legitimised this approach by emphasising that its export controls “align with international standards without distinguishing between civilian or military use”. Indeed, many countries, led by the US, impose export restrictions on the grounds of “dual-use”; China, too, derives legitimacy from this practice. However, the actual function of the control mechanism is not limited to merely preventing the risk of covert military transfers; the licensing regime provides Beijing with a tailor-made tool to selectively restrict supplies to US defence contractors and allied nations whilst maintaining the flow to actors with whom it wishes to sustain commercial relations.

In this context, to correctly interpret the diplomatic message of May 2026, it is necessary to distinguish between two layers. The first layer is the rhetorical layer, which emphasises that China is safeguarding its ‘legitimate civilian needs’, aligning with international practice, and is ready for bilateral cooperation. The second layer is the actual licensing practice: as Gabriel Wildau of the consultancy firm Teneo has aptly pointed out, China’s licensing regime has established a permanent control mechanism over rare earth exports, transforming this into an instrument of sovereignty that persists beyond political developments. Wildau noted that China will not approve exports in quantities sufficient for American customers to build up stockpiles, thereby ensuring that Beijing maintains its leverage on a permanent basis. It is understood that Beijing has not yet granted approval for specialised rare-earth magnets used in US fighter jets and missile systems; for applications related to military use, lengthy and uncertain review processes apply rather than a ‘fast-track’ procedure.

Disruption in Global Supply Chains: A Sector-by-Sector Impact Analysis

The impact of China’s export restrictions is not limited to a specific country or sector. German automotive supplier ZF Friedrichshafen AG has warned the public that it may have to halt production as soon as its current licences run out; this warning starkly highlights the vulnerability of European industry regarding NTE. It is known that the European Union sources 98 per cent of the rare-earth magnets required for car parts, fighter jets and medical imaging equipment from China. Japan and Germany are cited as being among the countries most affected by these restrictions. In this context, the NTE crisis—which coincides with the situation at the start of 2026, when the Strait of Hormuz crisis disrupted the global supply of fossil fuels—has tested the raw material security of the energy transition infrastructure for the second time in the same year; electric vehicles and renewable energy investments are, within this framework, being redefined as matters of national security rather than merely economic choices.

Data from the International Energy Agency suggests that the situation could worsen further in the coming years: demand for NTE elements such as neodymium, praseodymium, dysprosium and terbium, used in the production of permanent magnets, is expected to rise by more than thirty per cent by 2030. When considered alongside this projection, the current tensions over export controls are not merely a sign of an existing dispute, but a harbinger of a structural supply security crisis. Whilst the critical minerals market is projected to reach $325 billion by 2024 and rise to $770 billion by 2040, the market for NTE-based motors, turbines and electronic products is estimated to have already exceeded $1 trillion. In a market of this scale, a single actor’s 90 per cent dominance over refining equates to extraordinary pricing and leverage power.

The US’s Counter-Strategy: The Long Road from Structural Dependence to Structural Alternatives

The US response to China’s dominance in NTE is multi-pronged; however, each prong carries significant limitations of its own. Firstly, regarding the strategy to bolster domestic production, it is noted that the US, having extracted approximately 45,000 tonnes of rare earth ore in 2024, has secured second place in global production; this figure accounts for less than two per cent of world production. Moreover, the US’s Mountain Pass mine can only produce light NTE; regarding heavy NTE, which is of critical importance in military systems, the country remains almost entirely dependent on China. Legal barriers to bringing new mines online further exacerbate the problem: according to Econofact data, it takes an average of 29 years to obtain a permit for a new mine in the US; this timeframe directly contradicts the sense of urgency created by the 2025–2026 crisis.

The second strategy focuses on establishing new supply partnerships with Australia, Canada and African countries. Australia and the US stand out as the two countries with the most advanced cooperation in this field; however, it is stated that bringing the processing capacity of both countries up to China’s level could take not years, but decades. Kazakhstan has emerged as a new player on the strategic radar with its reserves of approximately 20 million tonnes announced in 2025; however, the country’s lack of experience in chemical separation technology and the fact that its processing infrastructure is still in its early stages make short-term supply diversification difficult. Japan, meanwhile, whilst conducting negotiations with the US to reduce its dependence on NTE, faces the reality that even if the processing process can be accelerated and permits simplified, it will take years for a new mine to actually commence production. As a third strategy, it is known that the mineral agreement signed with Ukraine in April 2025 is also viewed as a geostrategic balancing factor against China; Ukraine’s rich mineral resources, demanded in return for support against Russia, highlight the intertwined nature of this strategic calculus between economics and foreign policy.

From the Greenland Issue to Turkey’s Potential: The Quest for Geographical Diversity

Greenland holds a special place in the alternative supply map the US is attempting to develop against China’s dominance in rare earth elements (REEs): the island’s ore deposits, rich in dysprosium and terbium, have gained strategic priority in order to close the US’s significant REE deficit and create an alternative to Chinese dominance. The Trump administration’s geopolitical pressure on Greenland demonstrates that this region holds not merely symbolic, but highly tangible material interests. Similarly, the G7 nations are attempting to establish a new supply security front under the name of the ‘Clean Supply Alliance’; the aim of this alliance is to structurally break China’s absolute dominance in the mineral supply chain. However, given that China holds a dominant position not only in production but also in refining, battery manufacturing and recycling technologies, the alliance faces an extremely asymmetrical landscape.

Within this landscape, Turkey emerges as a potential actor that has historically remained in the background in global NTE competition but has risen to a notable position in terms of reserve size. The 694 million tonnes of resources identified following drilling operations in the Beylikova district of Eskişehir place Turkey second in the world in terms of reserve size, after China’s Bayan Obo deposit; this deposit is estimated to contain 10 out of 17 NTE elements, with approximately 12.5 million tonnes of rare earth oxides present. The elements found in this field, particularly cerium, praseodymium and neodymium, are of critical importance for green transition technologies such as electric vehicle motors and wind turbines. The fact that an impurity level of 99.8 per cent—exceeding the 99.0 per cent purity standard—has been confirmed by independent laboratory results at the pilot plant established in Beylikova indicates that a promising threshold has been crossed in terms of processing quality. Turkey’s objective is to start with a pilot plant capable of processing 10,000 tonnes annually and eventually reach an annual refining capacity of 570,000 tonnes, thereby becoming a leading player in this sector, particularly in Europe.

However, a realistic assessment must highlight that this potential remains subject to significant constraints. As emphasised by Sait Uysal, Founder of the Turkey Critical Minerals Initiative, China maintains state control over know-how and technology transfer in this sector, and research institutes in China no longer provide services to foreigners in this regard without state authorisation. Consequently, developing Turkey’s processing capacity requires ‘win-win’ partnerships with Japan, South Korea, the US or European countries. Furthermore, the training of technical human resources at master’s and doctoral levels has become an issue closely intertwined with education policy for Turkey’s long-term success in this field.

The Limits of Geo-economic Armament: Structural Contradictions in China’s Strategy

China’s export control policy on rare earths serves as an extremely effective lever in the short term; however, in the long term, it harbours serious strategic contradictions within itself. First and foremost, Beijing’s restriction policy is creating supply shortages in sectors where it does not wish to fully alienate Western countries and their allies — such as renewable energy, electric vehicles and consumer electronics — thereby also negatively impacting the competitive position of Chinese companies in these markets. As global car manufacturers move to reduce their dependence on Chinese-sourced NTE, firms holding a significant share in China’s NTE processing sector will also be adversely affected by this shift. This paradox describes a dynamic where the use of ‘leverage’ simultaneously undermines the user’s own economic interests to some extent.

Secondly, by causing price increases, the restrictions make investment decisions in alternative NTE sources economically attractive to the West. The realisation of these alternative investments—which experts describe as “impossible in the short term without China”—over a ten-year horizon is only possible if high NTE prices persist consistently. Consequently, Beijing’s restriction policy is creating both investment capital for long-term competitors and the necessary political will. Indeed, historical precedent supports this: China’s 2010 rare earth embargo against Japan triggered a comprehensive investment programme that Tokyo pursued for decades to reduce its NTE dependency. Thirdly, the extraterritorial jurisdiction provision creates tension with international trade law and carries the risk of litigation within the World Trade Organisation framework; this tension compels China to constantly defend its rhetoric of ‘enforcement within the legal framework’.

The ‘New Oil’ Metaphor and Its Political Consequences

The designation of rare earth elements as “new oil” offers more than just a metaphor; it provides an analytical framework. Just as oil and natural gas shaped states’ foreign policy decisions, alliance choices and war calculations in the energy geopolitics of the twentieth century, so too do REE and other critical minerals appear to occupy a similar position in the raw materials geopolitics of the twenty-first century. However, one must also be mindful of the metaphor’s limitations: whilst oil is a raw material consumed by being burned for energy production, NTE’s are transformed into materials and are theoretically recyclable; yet the current level of efficiency in recycling technologies has not yet reached a point where it can close the supply gap. On the other hand, the OPEC model in oil—where producers coordinate to determine prices—corresponds to a unipolar structure in NTE based on a single actor controlling both mining and refining as well as technological expertise; this situation points to a far more asymmetrical balance of power than that seen in OPEC.

In this context, China’s behaviour should be interpreted not as brute force or a mere reflex of retaliation, but as the diplomatic use of a strategic dominance established since the 1980s. Beijing has designed the licensing regime not as a binary choice between ‘open or closed’, but as a flexible system in which it retains the discretion to determine to whom, when, and to what extent permission is granted. This flexibility ensures the permanence of China’s leverage and allows it to maintain selective restrictions on the ground whilst creating the impression of having “opened up” following any diplomatic agreement. The May 2026 statement that “applications for civilian use are being considered” is a perfect illustration of this design: whilst signalling a willingness to cooperate, the final authority to decide which applications qualify as “genuinely civilian” remains with Beijing.

Assessment: What Is Needed for a Transition from Structural Dependence to Collective Resistance?

The debate over China’s export controls on rare earth elements presents a highly striking case study of how international relations theory manages the tension between “economic interdependence” and the “security dilemma”. Whilst traditional liberal international economic theory posits that interdependence fosters peaceful cooperation, the China-US NTE experience demonstrates that asymmetric interdependence generates leverage rather than mutual benefit. In this context, the choice facing the West is to manage the tension between seeking tactical de-escalation through short-term trade agreements and continuing to invest over a decade in structural supply diversification.

Given that the construction of alternative supply chains takes not years but decades, several conditions must be met simultaneously for this transformation to succeed: a radical shortening of mining permit processes, the promotion of state-backed refining investments, the facilitation of technology and know-how transfer through international alliances, and an increase in R&D investment in recycling technologies. None of these measures is sufficient on its own; unless they are implemented collectively and within the framework of a consistent state policy, Western countries and their allies will remain dependent on Beijing’s export licences at the critical junctures of the energy transition in the 2030s.

Consequently, the statement issued by the Chinese Ministry of Commerce on 20 May 2026 reflects, beneath its diplomatic restraint, the continuation of a consistent and long-term strategy. The phrase “civilian applications are being assessed” is not a sign of softening, but rather a signal of a selective opening of the door that will maintain controlled access. China’s dominance over rare earth elements — accounting for sixty to seventy per cent of global mining and eighty-five to ninety per cent of refining — is not the result of a geographical fluke, but the product of patient state strategy applied over decades. Strategies that fail to grasp this reality will be unable to move beyond temporary tactical compromises. To enter the arena of 21st-century raw materials geopolitics, it is essential to correctly interpret the rules of this new power game, where the ‘barrel’ has given way to the ‘kilogram’.