EU’s €800B Defense Push Hits a Snag: Overreliance on China’s Rare Earths
The European Union (EU) is enhancing its defense capabilities with a significant investment of 800 billion Euros, with Germany pledging an additional 500 billion over the next decade. However, the bloc's heavy reliance on China for rare earth elements (REEs), crucial for both civilian and defense industries, has raised concerns. The EU is now exploring strategies to secure a resilient REE supply chain.
The EU's ReArm Europe Plan/Readiness 2030 and Germany's defense spending increase aim to fortify the bloc's military power. Yet, the EU's near-total dependence on China for REEs, including the vital REE magnets used in European missiles, presents a substantial challenge. Germany, despite aspiring to have the strongest conventional army in Europe, currently imports 95% of its REEs from China.
To address this issue, the EU is contemplating several measures. It plans to update the Critical Raw Materials Act (CRMA) to include more REEs and provide public funding, which could help secure a resilient REE supply chain. Additionally, the EU and member states could mitigate commercial risks by including mandates in defense procurement contracts. Centralized coordination of CRMA projects could also relieve member states of difficult decisions about environmental, social, and governance standards. Openly discussing REEs and re-armament can foster political will for a robust REE strategy.
The EU's ambitious defense plans necessitate a secure and sustainable supply of rare earth elements. By updating the CRMA, coordinating efforts, and reducing commercial risks, the EU can work towards decreasing its dependence on China for REEs, ensuring a resilient REE supply chain for both civilian and defense industries.
