Chapter 3: Critical Sectors - Food, Energy, and Minerals
Executive Summary
On February 24, 2022, Russian tanks rolled into Ukraine, launching the largest European land war since 1945. Within days, Western nations responded with unprecedented economic sanctions: asset freezes, Society for Worldwide Interbank Financial Telecommunication (SWIFT) exclusions, export controls, and restrictions on Russian energy imports. Yet Europe faced a stark vulnerability: decades of policy had created profound dependence on Russian natural gas. Germany imported 55% of its gas from Russia, Italy 40%, and numerous Eastern European countries approached 100% (IEA 2022). Russia's Gazprom had become Europe's largest gas supplier, with pipelines threading across the continent and the new Nord Stream 2 pipeline ready to double capacity. This dependence meant that Europe's most powerful economic weapon—energy sanctions—would inflict severe pain on European consumers and industries while funding the very Russian war machine it opposed.
The Limits of "Wandel durch Handel" (Change Through Trade) For decades, Germany's strategic doctrine assumed that economic interdependence with Russia would constrain Moscow's behavior—binding Russia to Europe through gas pipelines would make aggression economically irrational. The 2022 invasion challenged this assumption. Economic interdependence did not prevent war; instead, energy ties created leverage that Russia could exploit against Europe. As scholars have noted, interdependence may fail to deter conflict when political or territorial objectives take precedence over economic considerations (Copeland 2015; Szabo 2022).
The crisis exposed a basic truth about contemporary geopolitics: control over critical resources—energy, food, water, strategic minerals—confers coercive leverage that rivals military power. Europe's gas dependence was not accidental but the product of deliberate choices: Russian gas was cheap, pipelines were efficient, and economic interdependence was assumed to promote peace. "Wandel durch Handel"—change through trade—was the German mantra. The theory was elegant: bind Russia to Europe economically, and Moscow would have too much to lose from aggression. The theory was also wrong. As winter 2022 approached and Russian gas supplies dwindled (whether from Russian restrictions or European substitution efforts), German factories faced production cuts, British households saw energy bills triple, and European governments scrambled to secure alternative supplies—liquefied natural gas from the United States and Qatar, coal from Australia, nuclear power restarts, and crash programs in renewables and efficiency.
Manufacturing supply chain vulnerabilities do not fully capture the stakes: food, energy, and water are existential. Societies cannot function without them. Unlike semiconductors, which can be stockpiled or substituted over months, energy shortages hit immediately. Heat goes off. Factories close. Governments fall.
Resource dependencies differ from manufacturing dependencies in one critical respect: speed. Semiconductor shortages unfold over quarters as inventory depletes. Energy and food shortages trigger crises—cold homes, dark streets, empty shelves—within days. This immediacy makes resource coercion devastatingly potent. The target cannot wait it out or slowly build alternatives. Voters understand energy prices and food availability viscerally in ways they never understand chip fabrication.
Geographic concentration makes it worse. Russia supplied 40% of European gas imports before the invasion (IEA 2022). The Strait of Hormuz handles 21% of global oil trade (U.S. EIA 2023). Ukraine and Russia together export 30% of global wheat (FAO 2022)—and many Middle Eastern and African nations depend entirely on Black Sea grain. Disrupt one country's exports or one transit route, and global prices spike overnight.
Resource nationalism is accelerating. Indonesia banned nickel exports in 2020 to force domestic smelting. The "lithium triangle" countries debate restrictions to capture battery value chains. Russia has wielded energy cutoffs against Ukraine and Belarus for years. China restricted rare earth exports in 2010 and critical minerals in 2023. Countries increasingly treat resources not as commodities but as weapons.
From British control over Indian cotton to Cold War competition over Middle Eastern oil to contemporary struggles over lithium—the tools change, but the game does not. The food and energy crises of 2022-2023 proved that resource security drives inflation, political instability, and geopolitical realignment. How states manage resource dependencies will shape the 21st-century order.
Food Security and Agricultural Dependencies
The Centrality of Food to National Security
Food as a Strategic Resource Food differs from other strategic resources in important ways: it cannot be substituted, stockpiled for extended periods, or rationed without immediate political consequences. Research on the 2007-2008 and 2010-2011 food price crises found strong correlations between grain price spikes and political instability in import-dependent countries (Bellemare 2015; Hendrix and Haggard 2015). This suggests that nations controlling major grain exports may hold significant influence over import-dependent states during periods of scarcity.
Food occupies a unique position in the hierarchy of strategic resources. Unlike semiconductors, rare earths, or even energy, food is a daily necessity without substitutes or alternatives. A country can survive semiconductor shortages, painful though they may be economically. It can ration energy, switching from gas to coal or implementing conservation. But it cannot substitute for food—people must eat, and societies facing acute food shortages historically experience significant instability (Brinkman and Hendrix 2011). This existential quality makes food security central to regime stability and creates potential leverage for major exporters during crises.
Historical examples demonstrate food's strategic power. Stalin's forced collectivization and grain requisitions in Ukraine during 1932-1933 (the Holodomor) killed millions and crushed Ukrainian resistance to Soviet rule—food as a weapon of internal control. Britain's World War I naval blockade starved Germany into submission, with German civilian deaths from malnutrition and disease exceeding combat casualties—food as a siege weapon. The 1970s U.S. grain embargo against the Soviet Union following Afghanistan's invasion aimed to economically pressure Moscow, though its effectiveness was limited by alternative suppliers and Soviet domestic production increases—food as a sanction tool. More recently, Saudi Arabia and UAE used food dependencies as leverage during the 2017-2021 Qatar crisis, and China informally restricted agricultural imports from Australia during 2020-2021 trade tensions.
Contemporary food systems have globalized dramatically since the 1970s, with international agricultural trade growing faster than agricultural production. This globalization reflects comparative advantage—Argentina grows soybeans efficiently, Thailand specializes in rice, United States and Brazil dominate corn and wheat, New Zealand exports dairy. The result is that roughly 20% of global food calories cross borders, and for specific commodities (wheat, soybeans, rice) trade shares reach 25-40%. Many countries, particularly in the Middle East, North Africa, and parts of Asia, have become structurally import-dependent—they cannot feed their populations from domestic production alone.
This import dependence creates strategic vulnerabilities when suppliers restrict exports, prices spike, or logistics disruptions constrain supply. The 2007-2008 global food crisis demonstrated these dynamics: rising grain prices triggered export restrictions by major suppliers (India, Vietnam, Russia, Argentina), exacerbating shortages and causing riots in Egypt, Haiti, and numerous other countries (Headey and Fan 2008). The Arab Spring uprisings of 2011 followed wheat price spikes partly attributable to Russian export bans after drought. The COVID-19 pandemic saw multiple countries impose agricultural export restrictions, raising fears of cascading protectionism. And Russia's 2022 invasion of Ukraine, both major wheat exporters, triggered global grain shortages that pushed Egypt, Lebanon, Tunisia, and other import-dependent nations toward economic crisis.
Grain Trade Chokepoints and Export Concentration
Global grain trade exhibits concentration that creates strategic chokepoints. Wheat, the most globally traded staple crop, comes overwhelmingly from a handful of exporters. Russia and Ukraine together account for approximately 30% of global wheat exports, supplying Egypt (the world's largest wheat importer, sourcing 80%+ from the Black Sea region) (World Bank 2022; FAO 2022), Turkey, Lebanon, Libya, Yemen, Bangladesh, and numerous others. The United States exports roughly 15% of global wheat, primarily to Japan, Philippines, Mexico, and Central American nations. Canada, France, Australia, and Argentina round out the top exporters—six countries control roughly 70-75% of global wheat trade.
Corn (maize) is even more concentrated. The United States produces approximately 35% of global corn and dominates exports with 30-35% market share, supplying Mexico, Japan, South Korea, and others (USDA). Brazil has emerged as the second-largest exporter (20-25% share), with Argentina third (15-20%). These three countries control 65-75% of global corn trade (FAO)—a concentration that reflects the crop's specific climatic requirements, the capital intensity of modern industrial corn farming, and economies of scale in logistics and processing.
Rice trade, while smaller in volume than wheat or corn, exhibits similar concentration. India and Thailand together account for 45-50% of global rice exports (FAO), with Vietnam, Pakistan, and the United States comprising the next tier. Several Southeast Asian nations depend on these exports for food security, and any disruption—such as India's periodic export bans to control domestic prices—creates immediate shortages for importers.
Soybeans, critical for animal feed and increasingly for human consumption, come primarily from the United States (35-40% of exports), Brazil (45-50%), and Argentina (5-10%). China imports approximately 60% of globally traded soybeans, making it uniquely dependent on Western Hemisphere production. This dependence factored significantly in U.S.-China trade negotiations, with Trump administration officials recognizing that threatening soybean sales could pressure Beijing—though China's ability to source from Brazil limited U.S. leverage and ultimately Argentina and Brazilian suppliers gained market share.
This export concentration creates several vulnerabilities. First, weather and crop failures in major exporters trigger global shortages. Russia's 2010 drought and subsequent export ban caused wheat prices to spike 50%, contributing to the Arab Spring unrest. U.S. droughts in 2012 pushed corn prices to record highs, straining livestock producers globally and increasing food costs for consumers. As climate change increases weather variability and extreme events become more frequent, these supply shocks will likely intensify.
Second, geopolitical crises disrupting major exporters cascade globally. Russia's invasion of Ukraine immediately threatened 30% of global wheat exports, with Black Sea ports blockaded, Ukrainian fields becoming battlegrounds, and Russian exports restricted by sanctions or deliberate cutoffs. Egypt, importing 80%+ of wheat from this region, faced immediate shortages and bread subsidy costs that strained government budgets. Lebanon, already in economic collapse, saw food prices surge. Tunisia, Morocco, and other North African nations scrambled for alternative supplies at higher prices. The crisis demonstrated how geopolitical conflicts in agricultural exporters translate directly into food security threats for importers thousands of miles away.
Third, export restrictions by major suppliers can weaponize dependencies. During shortages or crises, grain exporters frequently restrict exports to secure domestic supply and control prices—rational from the exporter's perspective but devastating for importers. The 2007-2008 food crisis saw 20+ countries impose agricultural export restrictions. Russia banned wheat exports in 2010-2011 following drought. India periodically restricts rice and wheat exports when domestic prices rise. These restrictions, often implemented suddenly and without warning, leave importers unable to secure supply at any price, triggering panic buying, hoarding, and political instability.
Food Import Dependencies: Middle East and North Africa
Egypt exemplifies structural import dependence. With limited arable land constrained by the Nile River and deserts, it imports approximately 60-70% of wheat consumption (FAO) and is the world's largest wheat importer by volume. Subsidized bread (baladi) is central to Egyptian social stability—previous attempts to reduce bread subsidies triggered riots, and the government spends $2-3 billion annually subsidizing bread (World Bank). During the 2007-2008 food crisis, wheat prices spiked, subsidy costs ballooned, and bread shortages sparked protests that foreshadowed the 2011 Arab Spring. The 2022 Ukraine crisis again threatened wheat supply, forcing Egypt to negotiate desperately for alternative sources from India, Australia, and others—at higher prices that strained foreign reserves and government budgets.
Saudi Arabia and United Arab Emirates, oil-rich but agriculturally constrained by desert climates, import 80-90% of food (FAO). Both countries attempted agricultural self-sufficiency in the 1980s-1990s, growing wheat in the desert through massive irrigation drawing down fossil aquifers. The policies proved economically and environmentally unsustainable (Saudi Arabia was depleting aquifers at rates that would exhaust them within decades), and both shifted strategies toward securing food through imports and foreign agricultural investments. Saudi Arabia and UAE now invest heavily in African and Asian agricultural land, ensuring access to foreign production—a modern form of resource imperialism that grants leverage without formal control.
Yemen, embroiled in civil war since 2015, imports approximately 90% of food. The Saudi-led coalition's blockade of Yemeni ports has created the world's worst humanitarian crisis, with 80% of the population requiring humanitarian aid and millions facing famine. Food access becomes a weapon in civil conflict—controlling ports and supply routes means controlling populations.
Algeria, Morocco, Tunisia, Libya, Jordan, and Lebanon similarly import 50-80% of grains. Libya's 2011 civil war disrupted food distribution systems despite the country's oil wealth. Tunisia's 2011 uprising partly reflected bread price increases. Jordan faces refugee influxes from Syria and Palestine that strain food systems. Lebanon's 2019-2021 economic collapse saw bread subsidies eliminated, triggering shortages and rationing.
This pervasive import dependence creates several dynamics. First, food price volatility translates directly into political instability. When bread prices double or triple, regimes lacking legitimacy face protests, riots, and potential overthrow. The correlation between wheat price spikes and Arab Spring uprisings is well documented—while not deterministic (many factors drove uprisings), food insecurity provided tinder for political fires.
Second, exporters can leverage food dependencies for political concessions or strategic alignment. Russia has explicitly used grain diplomacy, offering discounts or prioritizing supplies to friendly nations while restricting shipments to others. China has informally restricted agricultural imports from Australia (barley, wine, beef, lobster) as retaliation for Australian foreign policy positions, demonstrating willingness to weaponize market access. The United States historically used food aid and grain sales as foreign policy tools, with P.L. 480 food aid programs supporting aligned regimes during the Cold War.
Third, food import dependence constrains foreign policy autonomy. Countries dependent on food imports cannot easily antagonize major exporters, limiting diplomatic flexibility. This creates leverage for exporters: Russia's provision of wheat to Middle Eastern and African nations generates political goodwill and constrains criticism of Russian actions in Ukraine or elsewhere. China's growing role as agricultural exporter and investor gives Beijing influence in countries traditionally aligned with the West.
Fertilizers, Agricultural Inputs, and Supply Chain Dependencies
Food security depends not only on finished grain but also on agricultural inputs—fertilizers, pesticides, seeds, machinery—without which production collapses. These inputs exhibit their own concentration and dependencies that create supply chain vulnerabilities.
Fertilizers represent the most critical agricultural input. Modern high-yield agriculture depends on nitrogen, phosphate, and potassium (NPK) fertilizers that dramatically increase crop yields—removing fertilizers would reduce global agricultural production by an estimated 40-50%, causing mass famine. Yet fertilizer production and export are highly concentrated geographically.
Nitrogen fertilizers, primarily ammonia and urea, require natural gas as feedstock (the Haber-Bosch process converts atmospheric nitrogen into ammonia using hydrogen derived from methane). Russia, with abundant natural gas, produces roughly 15% of global nitrogen fertilizers and exports 20% of ammonia and 13% of urea (IFA 2022). China produces 28% of nitrogen fertilizers, primarily for domestic use. Europe, dependent on natural gas for fertilizer production, saw fertilizer plants shut down in 2022 when gas prices spiked following Russia's Ukraine invasion—reduced fertilizer production threatened European and global agricultural output.
Phosphate fertilizers depend on phosphate rock, mined in limited locations. Morocco controls approximately 70% of global phosphate rock reserves—though its current production share is lower (~15-20%), the reserves position gives it long-term strategic dominance (U.S. Geological Survey 2023). China produces 40% of phosphate fertilizers (mostly for domestic use), with United States, Morocco, and Russia as other major producers. This concentration means that disruptions to Chinese export policies or Moroccan production can create global fertilizer shortages.
Potassium (potash) fertilizers come overwhelmingly from Canada (30% of global production), Russia (20%), and Belarus (17%). Combined, these three countries control two-thirds of global potash supply. Russia's February 2022 invasion of Ukraine triggered Western sanctions that disrupted potash exports, contributing to fertilizer shortages and price spikes that threatened global agricultural production.
The 2021-2022 fertilizer crisis demonstrated these dependencies vividly. Natural gas price spikes (driven partly by reduced Russian supplies to Europe) made nitrogen fertilizer production uneconomical in Europe, forcing plant closures. Sanctions on Russian and Belarusian potash restricted supply. Phosphate prices surged due to increased demand and logistical constraints. The combined fertilizer shock pushed costs up 100-200%, threatening farmers' ability to afford inputs and raising prospects of reduced plantings and lower yields globally. Developing countries, where farmers have less capital to absorb price increases, faced particularly acute risks of food production declines.
Pesticides and herbicides similarly concentrate in a handful of companies—Bayer (post-Monsanto acquisition), Corteva, BASF, and Syngenta (Chinese-owned) control approximately 70% of the global agrochemical market. Most active ingredients are manufactured in China or India, with formulation and distribution by these major firms. Supply chain disruptions, regulatory restrictions, or deliberate export controls could constrain pesticide availability, threatening crop protection and yields.
Seeds for major crops are dominated by a few multinational firms. Bayer-Monsanto, Corteva, Syngenta, and BASF control roughly 60% of the global seed market. For genetically modified (GM) crops—common in soybeans, corn, and cotton—farmers depend on seeds from these companies, with intellectual property restrictions preventing seed saving and replanting. This creates dependence on seed suppliers' continued provision and raises food security concerns if geopolitical conflicts disrupt access.
Agricultural machinery—tractors, combines, irrigation equipment—comes primarily from companies in the United States (John Deere, CNH Industrial), Europe (AGCO), Japan (Kubota), and increasingly China. Modern precision agriculture depends on GPS guidance, automated systems, and digital farm management—technologies controlled by these manufacturers. Russia's ability to maintain agricultural machinery has been constrained by Western sanctions cutting off parts and expertise, illustrating how supply chain dependencies extend even to agricultural equipment.
The broader lesson is that food security depends on complex supply chains extending far beyond farmland and grain elevators. Disrupting fertilizers, pesticides, seeds, or machinery can reduce agricultural production as effectively as restricting grain exports directly. Countries pursuing food self-sufficiency must consider not just land and water but also inputs that often depend on foreign suppliers—a challenge that makes true food independence extraordinarily difficult for all but the most resource-rich nations.
Energy Security - Oil, Gas, and the Geopolitics of Transition
Energy as the Lifeblood of Modern Economies
If food keeps people alive, energy keeps economies alive. Modern economies run on energy the way bodies run on blood: cut the supply, and systems shut down within days. Electricity powers factories, data centers, hospitals, and homes; transportation depends on liquid fuels for cars, trucks, ships, and planes; heating and cooling require gas, electricity, or oil; and industrial processes from steel to chemicals to cement are energy-intensive. Unlike food, where substitution is impossible, energy offers some fuel-switching flexibility (coal to gas, oil to electricity, nuclear to renewables). But this flexibility is limited, expensive, and time-consuming—switching requires building new infrastructure, and some applications (aviation, heavy trucking, steel) currently lack economically viable alternatives to fossil fuels.
Energy dependence has shaped geopolitics for over a century. World War I and II both involved critical struggles for oil access—Japanese expansion into Southeast Asia targeted oil fields, German campaigns in North Africa and the Caucasus sought petroleum. The Cold War saw repeated Middle Eastern conflicts driven partly by oil: the 1956 Suez Crisis, 1973 Arab oil embargo, 1979 Iranian Revolution, and 1990 Gulf War all reflected oil's strategic significance. American foreign policy in the Middle East for decades centered on securing reliable oil flows to the West, protecting Saudi Arabia and Gulf states, and preventing hostile powers from controlling oil chokepoints.
The 1973 Oil Embargo: A Template for Resource Coercion When Arab OPEC members embargoed oil exports to the United States and Netherlands in 1973 (in response to support for Israel during the Yom Kippur War), oil prices quadrupled and Western economies entered recession. The crisis demonstrated that resource-rich nations could weaponize commodity exports for political objectives, transforming energy security into a central national security concern and spawning the Strategic Petroleum Reserve and International Energy Agency.
Today's energy geopolitics remains dominated by oil and gas but is complicated by two dynamics: the shale revolution that transformed the United States from major importer to net exporter, and the energy transition toward renewables that creates new dependencies while potentially reducing fossil fuel leverage. Understanding contemporary energy security requires examining both traditional fossil fuel dependencies and emerging vulnerabilities in the transition to low-carbon energy.
Oil: Declining but Still Dominant
Petroleum remains the world's largest energy source, accounting for roughly 30-32% of primary energy consumption and dominating transportation with 90%+ market share. Global oil production reaches approximately 100 million barrels per day (mb/d), with supply distributed across multiple regions but exhibiting significant concentration among major producers.
The United States, transformed by shale oil development, is now the world's largest producer at 18-20 mb/d, overtaking Saudi Arabia (11-12 mb/d) and Russia (10-11 mb/d). These three countries alone produce 40% of global oil. The next tier includes Canada (5-6 mb/d, primarily from oil sands), Iraq (4-5 mb/d), China (4 mb/d, though mostly consumed domestically), UAE (4 mb/d), Iran (3-4 mb/d when not sanctioned), Brazil, Kuwait, and others. Fifteen countries produce roughly 75-80% of global oil, indicating substantial but not extreme concentration.
What creates strategic leverage is not production per se but exportable surplus—production minus domestic consumption. Many large producers consume most output domestically (United States, China, Brazil) and thus export little. Net exporters control global supply. Saudi Arabia, Russia, Iraq, UAE, Kuwait, Canada, and Norway dominate oil exports. Saudi Arabia's position as swing producer—able to increase or decrease production by millions of barrels daily—grants unique influence over global prices. Russia's exports, particularly to Europe and China, represent 10-12% of global supply, giving Moscow geopolitical leverage.
Oil trade flows reveal critical dependencies. Europe imports approximately 90% of oil consumption, primarily from Russia (pre-2022: 25-30% of EU oil imports), Middle Eastern producers (40%), and Norway/North Africa (30%). Asia is the world's largest oil-consuming region, with China, Japan, South Korea, and India together importing 20-25 mb/d. China alone imports 10-11 mb/d (70% of consumption), sourced from the Middle East (50%), Russia (15%), Africa (12%), and Latin America. Japan and South Korea import 95%+ of oil needs. These dependencies create strategic vulnerabilities—any disruption to Middle Eastern supply or key shipping routes threatens energy security.
Maritime chokepoints amplify vulnerability. Most oil trade occurs via tanker through a handful of narrow straits that could be blockaded or disrupted.
Strait of Hormuz (between Persian Gulf and Gulf of Oman): Approximately 21% of global oil consumption transits this 21-mile-wide passage. Closure would immediately remove 21 million barrels per day from global markets, more than doubling oil prices and potentially triggering global recession. Iran has repeatedly threatened closure if attacked, demonstrating the strait's strategic leverage. U.S. military presence in the Gulf aims partly to secure this chokepoint against Iranian action.
Strait of Malacca (between Malaysia, Indonesia, and Singapore): Approximately 16 mb/d transits this strait, primarily supplying East Asian consumers (China, Japan, South Korea). While alternative routes exist (Sunda Strait, Lombok Strait), they add days to transit and lack the infrastructure and depth for largest tankers. China's growing navy and "String of Pearls" strategy of ports along the Indian Ocean reflect partly concern about dependence on this chokepoint—American or Indian naval power could potentially disrupt Chinese oil imports in conflict scenarios.
Bab el-Mandeb Strait (between Red Sea and Gulf of Aden): Roughly 6-7 mb/d transit this strait, primarily oil destined for Europe via Suez Canal. Yemen's civil war has seen Houthi attacks on shipping, and Iran's influence over Houthis creates potential leverage over this route. The strait is narrow enough that closure would force tankers around Africa's Cape of Good Hope, adding weeks and enormous costs.
Suez Canal: Approximately 5-6 mb/d pass through the canal, linking Middle Eastern and Russian oil to Europe. The 2021 Ever Given grounding, which blocked the canal for six days, demonstrated vulnerability—though the incident affected container shipping more than oil, it illustrated how single-vessel accidents can disrupt critical trade routes. Egypt's control of the canal grants leverage and generates $6-7 billion annually in transit fees that are critical to Egyptian finances.
These chokepoints create strategic leverage for countries that can threaten closure (Iran over Hormuz, Yemen/Houthis over Bab el-Mandeb) and for naval powers that can secure or blockade them (United States, potentially China or India). They also shape energy policy: Japan's almost total dependence on oil transiting Malacca drives Japanese interest in Middle Eastern stability and U.S.-Japan security cooperation. China's anxiety about "Malacca Dilemma" motivates land-based alternatives (pipelines from Russia and Central Asia), naval expansion to protect sea lanes, and strategic petroleum reserves to buffer disruptions.
Natural Gas: The Russia-Europe Entanglement
Natural gas differs from oil in ways that amplify dependencies and geopolitical leverage. Gas is more difficult to transport than oil: pipelines are capital-intensive infrastructure that lock in supplier-consumer relationships for decades, and liquefied natural gas (LNG)—the alternative to pipelines—requires expensive liquefaction facilities, specialized LNG tankers, and regasification terminals. These constraints mean gas markets are regionally segmented (Europe, Asia, North America operate as distinct markets with limited integration), and switching suppliers is far harder than for oil.
Europe's dependence on Russian gas developed over decades and became a defining vulnerability. Russia supplied approximately 40% of European Union gas imports pre-2022, with shares varying dramatically by country: Germany 55%, Italy 40%, Austria 80%, Poland 40%, Hungary 85%, Czech Republic 85%, Bulgaria 90%, Finland 100%, and numerous Eastern European nations 100%. This dependence reflected geography (Russia's vast gas reserves conveniently located near European markets), economics (Russian pipeline gas was cheaper than LNG alternatives), and policy choices (Germany's Energiewende prioritized renewables while phasing out nuclear and coal, requiring gas as "bridge fuel").
Multiple pipelines carried Russian gas to Europe, forming an interconnected infrastructure network with distinct strategic implications. The Ukrainian transit routes were historically the largest, carrying 40-50% of Russian gas exports through Ukraine to Central and Western Europe. Ukraine earned $2-3 billion annually in transit fees from this arrangement, but Russia repeatedly cut gas during disputes with Ukraine in 2006, 2009, and 2014, affecting downstream European customers and demonstrating gas's utility as coercive leverage. To reduce dependence on Ukrainian transit, Russia pursued alternative routes. Nord Stream 1, completed in 2011, ran as a subsea pipeline through the Baltic Sea directly from Russia to Germany, bypassing Ukraine entirely with a capacity of 55 billion cubic meters per year (bcm/year). Its parallel successor, Nord Stream 2, was completed in 2021 but never became operational; the project faced intense U.S. opposition from both the Trump and Biden administrations as well as Ukrainian and Polish objections, and Germany's certification process was suspended days before Russia's 2022 Ukraine invasion, after which the pipelines were mysteriously sabotaged in September 2022. To the south, TurkStream, completed in 2020, carried gas through a subsea Black Sea pipeline to Turkey and onward to Southern Europe with a capacity of 31.5 bcm/year. The Yamal-Europe pipeline provided yet another route, running through Belarus and Poland to Germany, though Russia reduced flows through it in 2021-2022 as tensions escalated.
This infrastructure created what economists call asymmetric interdependence and what strategists call a trap. Europe depended on Russian gas for heating, power generation, and industrial processes (especially German chemical industry). Russia depended on European gas revenue, which accounted for $150-200 billion annually and funded roughly 30-40% of Russian federal budget. Conventional wisdom held that mutual dependence ensured supply stability—neither side could afford disruption. This was the comfortable logic of liberal internationalism: we are all so deeply invested in each other's prosperity that war becomes irrational. Russia's 2022 invasion of Ukraine shattered this assumption, revealing that regimes may value conquest more than commerce.
The 2022 European Gas Crisis: Weaponized Dependence
Russia's February 2022 invasion triggered European economic sanctions targeting Russian energy exports. Yet Europe's gas dependence complicated sanctions: immediate cutoff would inflict severe European economic pain (estimates suggested 5-10% GDP losses if gas disappeared suddenly), empowering Moscow rather than constraining it. European strategy thus involved phased reduction: immediate ban on Russian coal (easier to replace), six-month phase-in for oil embargoes, and continued but reduced gas imports while scrambling for alternatives.
Russia countered with its own gas weapon. Beginning in mid-2022, Gazprom progressively reduced deliveries through Nord Stream 1, claiming maintenance issues that most analysts viewed as political pressure. Flows dropped from 100% capacity to 40%, to 20%, and eventually zero by August 2022. Simultaneously, Gazprom redirected gas to China and reduced European spot market sales, prioritizing long-term contract buyers who faced higher prices. The message was clear: Russia could inflict pain through gas restrictions faster than Europe could through sanctions.
European response involved multiple desperate measures:
LNG imports surged: Europe bought liquefied natural gas from the United States (which became Europe's largest supplier), Qatar, and other sources. U.S. LNG exports to Europe increased from ~20 bcm/year pre-war to 60+ bcm by late 2022. New floating storage and regasification units (FSRUs) were rushed to European ports, bypassing the years normally required to build regasification terminals. Qatar negotiated long-term LNG contracts with Germany and others. Asian buyers (Japan, South Korea, China) reduced LNG purchases to free supply for Europe, accepting higher domestic prices as contribution to Western unity.
Demand reduction targeted 15% cuts through efficiency, industrial curtailment, and behavioral change. Germany, Netherlands, and others launched public campaigns encouraging lower heating temperatures, reduced industrial energy use, and conservation. Energy-intensive industries—aluminum smelting, chemical production, fertilizer manufacturing—faced production cuts or closures as gas became unavailable or unaffordable. German industry, heavily dependent on cheap Russian gas, saw competitiveness erode.
Alternative energy sources filled gaps: coal power generation increased (temporarily reversing climate goals), nuclear plant closures were delayed (Germany extended remaining plants despite decade-long phase-out plans), and renewable deployment accelerated.
Strategic reserves were drawn down: Europe depleted gas storage to buffer winter demand, falling to 20-30% of capacity by February 2023 before refilling in summer.
Rationing plans were prepared: Governments developed priority schemes ensuring households and hospitals received gas before industrial users, with industry facing potential forced curtailment.
The winter of 2022-2023 was Europe's moment of maximum vulnerability. Russian gas had dropped from 40% of imports to ~10%. Mild weather, aggressive LNG buying, and demand reduction allowed Europe to avoid catastrophic shortages. But costs were severe: European household energy bills tripled, governments spent hundreds of billions subsidizing energy costs to prevent political backlash, industrial production declined, and inflation surged. The crisis demonstrated both the potency of energy coercion and the resilience of societies willing to endure costs rather than capitulate.
Long-term restructuring followed. Germany announced 13+ new LNG terminals and diversification of supply. Eastern European nations accelerated connections to non-Russian sources. The European Union's REPowerEU plan targeted rapid renewable deployment, efficiency improvements, and hydrogen development to eliminate Russian fossil fuel imports by 2027. Whether Europe maintains political will to sustain these investments, and whether the transition proves economically sustainable, remains uncertain. But the crisis destroyed the assumption that economic interdependence prevents weaponization—Russia demonstrated willingness to sacrifice gas revenue for geopolitical gains, and Europe learned that energy dependencies constrain foreign policy autonomy.
Energy Transition: Trading Old Dependencies for New
The global energy transition away from fossil fuels toward renewable energy and electrification creates new resource dependencies that may prove as consequential as oil and gas. Solar panels, wind turbines, and batteries require minerals, manufacturing, and supply chains that exhibit their own chokepoints—many concentrated in China. Escaping dependence on Middle Eastern oil risks creating dependence on Chinese critical minerals processing and clean energy manufacturing.
China dominates renewable energy manufacturing across multiple domains. Solar panels: China produces approximately 80% of global supply, controlling polysilicon production (80%), wafers (95%), cells (85%), and module assembly (75%) (IEA 2023). This vertical integration reflects decades of industrial policy, government subsidies, and willingness to operate at losses to drive Western competitors out of business. European and American solar manufacturers largely collapsed in the 2010s, unable to compete with Chinese scale and pricing.
Wind turbines: China produces roughly 60% of global wind turbines (IEA 2023), with Goldwind, Envision, and Ming Yang among the world's largest manufacturers. While European (Vestas, Siemens Gamesa) and American (GE Renewable Energy) firms remain significant players, China's dominance is growing, particularly in offshore wind—a critical growth market.
Batteries: As detailed in Chapter 2, China controls 75% of lithium-ion battery manufacturing and dominates supply chains for anodes (85%), cathodes (70%), and battery cells (66%). CATL alone supplies batteries to Tesla, BMW, Volkswagen, and numerous others. The Inflation Reduction Act's battery manufacturing tax credits aim to build American capacity, but China's decade-long lead means U.S. production will remain a minority share for years.
This manufacturing concentration creates dependencies analogous to oil: disruptions to Chinese supply or deliberate Chinese export restrictions could constrain renewable energy deployment globally. European and American climate goals depend partly on Chinese solar panel and battery supply. If geopolitical tensions escalate and China restricts exports or prioritizes domestic supply, Western energy transitions face delays and higher costs.
The Green Transition Paradox: Trading Old Dependencies for New The irony of the energy transition is stark: escaping dependence on Middle Eastern oil may create even deeper dependence on Chinese-processed critical minerals. An electric vehicle requires six times more mineral inputs than a conventional car, and China controls 60-80% of processing for lithium, cobalt, and graphite. Western climate goals pursued rapidly require leveraging Chinese-dominated supply chains; pursuing supply chain security requires accepting slower transitions and higher costs.
The strategic implication is clear: energy transitions pursued to enhance security and reduce carbon emissions may create new dependencies on China—a potential strategic competitor. We may escape the petro-states only to find ourselves beholden to the battery-state. This recognition drives Western industrial policy attempting to reshore clean energy manufacturing. The U.S. Inflation Reduction Act, European Green Deal Industrial Plan, and similar policies provide subsidies for domestic solar, wind, and battery production. Success remains uncertain: Chinese manufacturing is often 30-50% cheaper due to scale, integrated supply chains, lower labor costs, and government support. Building competitive Western industries requires sustained subsidies, acceptance of higher consumer costs, and political commitment across election cycles—all uncertain.
Moreover, energy transitions depend on minerals examined in Chapter 2—lithium, cobalt, nickel, rare earths—where China's processing dominance creates additional chokepoints. The full supply chain from lithium mine to finished EV battery runs through Chinese processing and manufacturing at multiple stages. Achieving genuine supply chain independence for clean energy requires not just manufacturing but also mineral processing, materials production, and component manufacturing—an integrated ecosystem that will take decades to build even with aggressive policies.
The energy transition thus presents difficult tradeoffs. Pursuing climate goals rapidly requires leveraging existing (Chinese-dominated) supply chains, accepting dependencies as the price of speed. Pursuing supply chain security requires building Western capacity, accepting slower transitions and higher costs. Balancing these objectives—climate urgency and security concerns—defines energy policy debates in the United States and Europe.
Strategic Resources and Economic Leverage
Beyond food and energy, other resources are concentrated, essential, or scarce enough to create leverage for the nations that control them. Water, phosphates, and broader resource control all serve as tools of economic statecraft.
Water: The Ultimate Existential Resource
Water scarcity increasingly shapes geopolitics, particularly in arid regions where rivers cross borders and aquifers are shared. Unlike oil or rare earths, water has no substitutes and cannot be synthesized—societies require minimum quantities for drinking, agriculture, and industry. You can diversify your energy mix; you cannot diversify your thirst. This existentiality makes water conflicts especially intractable and water leverage extraordinarily potent.
The Middle East provides multiple examples of water's strategic significance. The Nile River, supplying 85-90% of Egypt's water, flows through Ethiopia, Sudan, and nine other upstream riparians before reaching Egypt. Ethiopia's Grand Ethiopian Renaissance Dam (GERD), completed in 2020 and Africa's largest hydroelectric project, gives Addis Ababa control over Nile flows. Egypt views this as an existential threat—any significant reduction in Nile water would devastate Egyptian agriculture and threaten 100+ million people dependent on the river. Egypt has historically threatened military action to protect Nile flows, and the GERD has triggered years of failed negotiations. Ethiopia asserts sovereign right to develop its water resources; Egypt invokes historical water rights and existential need. The conflict illustrates how water dependencies between upstream controllers and downstream dependents create zero-sum competition resistant to compromise.
The Jordan River system supplies Israel, Jordan, Syria, Lebanon, and Palestinian territories. Israeli control of water resources in the occupied West Bank and Golan Heights grants leverage over Palestinian and Syrian access. Jordan imports roughly 90% of energy and depends heavily on shared aquifers and the Jordan River. Water scarcity constrains economic development and agricultural production across the region, with climate change exacerbating shortages. Water access factored into Israeli-Jordanian peace agreements and remains a source of tension in Israeli-Palestinian relations.
The Tigris and Euphrates Rivers, originating in Turkey, flow through Syria and Iraq before reaching the Persian Gulf. Turkey's Southeastern Anatolia Project (GAP) includes 22 dams and 19 hydropower plants that regulate flows to downstream nations. Syria and Iraq have accused Turkey of weaponizing water by reducing flows during droughts, exacerbating agricultural crises. Turkey denies deliberate restrictions but asserts sovereign rights to develop water resources. No comprehensive water-sharing agreement exists, and Turkish control creates dependency that Damascus and Baghdad cannot easily escape.
Beyond the Middle East, India and Pakistan dispute Indus River waters, with the 1960 Indus Waters Treaty periodically threatened by tensions. India's upstream position allows potential water leverage, though actual restrictions have been limited. China's control of Tibetan Plateau headwaters for the Mekong, Brahmaputra, Indus, and other rivers flowing to India, Bangladesh, Southeast Asia grants Beijing theoretical leverage, though China has not yet weaponized these flows systematically.
Water scarcity will intensify with climate change. The Middle East and North Africa face declining precipitation, rising temperatures increasing evaporation, and growing populations. Competition for scarce water will likely increase, with upstream controllers holding leverage and downstream dependents facing security threats. Unlike energy, where alternatives and efficiency can reduce demand, water requirements are largely fixed—societies need minimum quantities regardless of price or availability. This makes water dependencies particularly dangerous and water conflicts particularly difficult to resolve peacefully.
Upstream Dam Leverage: The Ultimate Coercive Tool Countries controlling river headwaters possess perhaps the most potent form of resource leverage. Ethiopia's Grand Ethiopian Renaissance Dam gives Addis Ababa control over Nile flows that 100 million Egyptians depend upon for survival. Turkey's GAP project controls Tigris and Euphrates flows to Syria and Iraq. Unlike oil or minerals, water cannot be imported at scale or substituted. Upstream dam control creates existential leverage that has historically provoked military threats and could trigger future conflicts as climate change intensifies scarcity.
Phosphates and Fertilizer Geopolitics
Phosphorus, essential for plant growth and agricultural production, comes from phosphate rock—a finite, geographically concentrated resource without synthetic substitutes. Unlike nitrogen (abundant in the atmosphere and synthesized via Haber-Bosch process), phosphorus must be mined. Global phosphate rock reserves are highly concentrated: Morocco controls approximately 70% of known reserves (though its share of current production is much smaller, ~15-20%), with substantial deposits also in China, Algeria, Syria, Russia, and smaller amounts elsewhere.
Morocco's reserve dominance creates potential for long-term leverage. As easy-to-access phosphate deposits in China and the United States deplete over coming decades, global dependence on Moroccan phosphate will increase. Morocco's state-owned OCP Group is the world's largest phosphate producer and exporter, supplying phosphoric acid and fertilizers globally. While current markets remain competitive with multiple producers, Morocco's reserve advantage positions it for growing influence as 21st-century agriculture exhausts more accessible deposits elsewhere.
China's phosphate policy illustrates resource nationalism. Despite substantial reserves, China restricted phosphate exports in the 2000s-2010s to secure domestic supply and encourage domestic value-added processing (producing phosphoric acid and fertilizers rather than exporting raw rock). Phosphate export quotas and taxes reduced Chinese exports from 7-8 million tons annually in the mid-2000s to 1-2 million tons, contributing to global fertilizer price spikes. China's willingness to restrict phosphate despite economic costs demonstrates how resource nationalism can override market incentives when policymakers prioritize domestic supply security.
The broader pattern across fertilizers—nitrogen, phosphate, potash—is increasing resource nationalism and potential for weaponization. The 2021-2022 fertilizer crisis demonstrated how geopolitics (Russian/Belarusian potash sanctions), energy prices (natural gas for ammonia synthesis), and export restrictions (Chinese phosphate, Indian bans during domestic shortages) can combine to create global shortages. Countries dependent on fertilizer imports face agricultural production risks that threaten food security, economic stability, and political legitimacy.
Rare Earths Revisited: From Chokepoint to Weapon
Chapter 2 examined rare earth supply chains in detail, but rare earths deserve additional attention in the context of resource leverage and export restrictions. China's 85% share of rare earth processing creates a chokepoint, but the 2010 crisis demonstrated China's willingness to weaponize this position for political objectives (see Chapter 9 for detailed historical analysis of the China-Japan rare earth dispute alongside other coercion cases).
The context: In September 2010, a Chinese fishing trawler collided with Japanese Coast Guard vessels near the Senkaku/Diaoyu Islands—disputed territory claimed by both China and Japan. Japan detained the Chinese captain, triggering a diplomatic crisis. China responded by informally restricting rare earth exports to Japan. While China denied official policy, rare earth shipments to Japan ceased at Chinese ports as customs "inspections" delayed clearances indefinitely. Japanese manufacturers dependent on Chinese rare earths for magnets, electronics, and other applications faced immediate supply disruptions.
The restrictions lasted weeks, ending only after Japan released the captain and backed down. But the damage was done: Japan learned that China would use rare earth leverage for political objectives. Japanese responses included diversifying suppliers (though China's dominance limited alternatives), stockpiling rare earths to buffer future disruptions, investing in recycling and substitution research, and supporting development of non-Chinese rare earth mines (Australia's Lynas, American projects). A decade later, China's share of Japanese rare earth imports had declined from 95%+ to 50-60%—still substantial but reduced from absolute dependence.
The 2010 crisis demonstrated several lessons. First, informal restrictions provide plausible deniability while achieving coercive objectives—China could deny policy responsibility while customs and regulations silently implemented restrictions. Second, rare earth leverage is real but finite—extreme use accelerates diversification that erodes future leverage. Third, resource dependencies enable coercion on non-resource issues—the Senkaku/Diaoyu dispute had nothing directly to do with rare earths, but China leveraged rare earth dependence to influence Japanese behavior. Fourth, targets can adapt but slowly and expensively—Japan's partial diversification took a decade and cost billions.
China's 2023 restrictions on gallium, germanium, and graphite exports (discussed in Chapter 2) reflect similar dynamics. Following U.S. semiconductor export controls, China restricted exports of minerals critical for semiconductors and defense applications. The restrictions serve multiple purposes: retaliation signaling Beijing's ability to counter U.S. actions, defense of Chinese strategic interests, and reminder of China's own chokepoint leverage. Whether China will escalate to comprehensive rare earth restrictions in future U.S.-China tensions remains uncertain, but the 2010 precedent demonstrates willingness to use resource leverage even at economic cost.
Resource Nationalism and Export Restrictions
The Rise of Resource Nationalism
Resource nationalism—policies prioritizing domestic control and use of natural resources over foreign access or market efficiency—is proliferating globally. Governments increasingly view resources as strategic assets to be leveraged for economic development, geopolitical influence, and national security rather than as commodities to be traded freely in global markets.
Several factors drive this trend. First, recognition of resource leverage following high-profile weaponization episodes—Russia's gas cutoffs, China's rare earth restrictions, fertilizer crises—has demonstrated that resource control confers geopolitical power. Countries possessing concentrated resources recognize they hold leverage and are less willing to subordinate strategic advantage to economic efficiency.
Second, desire to capture value-added processing domestically rather than exporting raw materials while importing manufactured products. Indonesia's nickel ore export ban exemplifies this logic: rather than exporting low-value ore while importing high-value stainless steel or batteries, Indonesia forces smelting and refining domestically, creating local jobs and capturing more economic value. Similar logic drives proposals for lithium processing in Chile and Argentina, phosphate processing requirements in Morocco, and rare earth downstream integration in China.
Third, lessons from historical resource exploitation where foreign firms or countries extracted resources with limited benefit to local populations. Post-colonial nations remember resource extraction during colonial periods that enriched imperial powers while leaving local populations impoverished. Contemporary resource nationalism partly reflects determination to avoid repeating these patterns—ensuring that resource wealth benefits domestic populations rather than foreign shareholders.
Fourth, competition for strategic resources needed for domestic energy transitions, technology industries, or food security. As countries pursue electric vehicle industries, renewable energy deployment, or high-tech manufacturing, they require access to critical materials. Resource-rich nations recognize that global demand for lithium, rare earths, and other inputs creates seller's leverage—why sell cheaply when buyers desperately need supply?
Fifth, geopolitical competition between the United States and China incentivizes leveraging any available source of influence. China's Belt and Road Initiative investments in African and Latin American mines partly aim to secure resource access. Western governments increasingly view resource dependencies on China as security threats requiring mitigation. This competition pushes resource-rich countries to bargain with both sides, extracting maximum benefits while maintaining flexibility.
Export Restrictions as Policy Tools
Resource-rich nations employ multiple mechanisms to restrict exports or capture leverage. Understanding these tools is essential for analyzing resource coercion.
Export bans prohibit exports of specified resources entirely. Indonesia's 2020 nickel ore export ban forced miners to sell domestically or exit, enabling Indonesia to build smelting capacity and move up the value chain. Russian grain export bans during 2010-2011 and 2022-2023 famines aimed to control domestic food prices despite global shortages. These bans maximize leverage but also alienate trading partners and incentivize alternative supply development.
Export quotas limit quantities that can be exported, often below market clearing levels. China employed rare earth export quotas from 2009-2015, restricting annual exports to levels below global demand and driving up prices. Quotas allow countries to balance domestic supply priorities with some continued export revenue and international market access.
Export licensing requirements create administrative barriers that delay or discourage exports. China's 2023 restrictions on gallium and germanium require exporters to apply for licenses, with approval processes slow and opaque. Even when licenses are eventually granted, uncertainty and delays disrupt supply chains and signal government willingness to restrict access.
Resource taxes and tariffs raise export costs, making domestic processing more attractive than raw material exports. China imposed rare earth export taxes and resource taxes in the 2000s, raising costs for foreign buyers while allowing domestic processors to access inputs cheaply. This tax differential encouraged foreign manufacturers to relocate to China to access cheaper inputs, advancing China's industrial policy objectives.
Nationalization or majority domestic ownership requirements place resource assets under government control, enabling direct management of production and exports. Many OPEC members fully or majority state-own oil production. Venezuela, Bolivia, and others have nationalized oil and gas assets previously held by foreign firms. While nationalization doesn't necessarily imply export restrictions, it provides governments tools to implement restrictions more easily than in private market systems.
Infrastructure bottlenecks can restrict exports indirectly. Controlling pipelines, ports, or railways needed to transport resources allows governments to slow exports without formal restrictions. Russia's control of pipelines carrying Central Asian gas enables Moscow to constrain exports from Kazakhstan, Turkmenistan, and others. China's dominance of rare earth processing creates bottlenecks even for non-Chinese rare earth mines that must ship ore to China for refining.
Informal pressure on companies allows governments to implement restrictions while denying official policy. China's 2010 rare earth restrictions to Japan operated partly through customs "inspections" and informal guidance to exporters rather than published regulations. This provides plausible deniability and flexibility while achieving coercive objectives.
Economic and Strategic Tradeoffs
Resource nationalism involves tradeoffs that limit its effectiveness and create vulnerabilities for practicing nations.
Revenue losses from export restrictions reduce foreign exchange earnings and government budgets. Russia's 2022 energy export reductions cost tens of billions in lost revenue. Chinese rare earth export restrictions in 2010-2012 raised prices but also reduced export volumes and revenues. For resource-dependent economies, restrictions that reduce revenue can backfire economically even when achieving strategic objectives.
Acceleration of substitution and diversification by target countries erodes long-term leverage. Japan's response to 2010 rare earth restrictions included investments in substitution that permanently reduced Japanese rare earth demand. European responses to Russian gas cutoffs include infrastructure (LNG terminals, interconnectors) that permanently reduces future Russian gas market share. Each use of resource leverage incentivizes targets to escape dependency, making future leverage harder to exercise.
Retaliation risks from target countries can escalate conflicts. U.S.-China technology restrictions partly reflect responses to Chinese economic coercion, including rare earth leverage. Russia's gas restrictions triggered European sanctions escalation and long-term shifts away from Russian energy. Resource coercion rarely occurs in isolation—targets often retaliate through other economic, diplomatic, or strategic channels.
Domestic economic costs from forcing inefficient resource use or processing can outweigh strategic benefits. Indonesia's nickel export ban forced domestic smelting but required massive subsidies and investment, with uncertain economic returns. Phosphate processing in resource-rich but capital-poor countries may produce lower-quality output at higher cost than established processors elsewhere.
Alienation of trading partners and reputational costs reduce willingness to depend on the restricting nation for any resources. China's rare earth restrictions damaged its reputation as reliable supplier, encouraging countries to diversify not just rare earths but other Chinese-supplied inputs. Russia's energy cutoffs destroyed decades of trust-building with Europe and ensured long-term loss of market share.
Despite these costs, resource nationalism is proliferating because governments increasingly judge strategic benefits—leverage, value capture, industrial policy advancement—as outweighing economic costs. In an era of great power competition where economic interdependence is viewed as potential vulnerability rather than mutual benefit, resource-rich nations calculate that sacrificing some economic efficiency to capture leverage is worthwhile. This trend suggests that resource dependencies will become more, not less, weaponized over coming decades—making resource security an increasingly central national security challenge.
Perspective Box: Chinese Views on Resource Security
Strategic Vulnerability and Resource Security
Chinese strategic thinking about resources is shaped by a pragmatic assessment of vulnerability and a determination to secure the material basis for national rejuvenation. Where the United States has historically been resource-abundant, China faces per-capita scarcities in energy, arable land, and water that drive its foreign policy.
Strategic Drivers Beijing's resource strategy is driven by several core objectives:
Securing the "Nine-Dash Line": Control over the South China Sea is viewed not just as a territorial claim but as a critical resource zone for energy and fisheries, essential for feeding a growing population and fueling the economy.
Breaking the "Malacca Dilemma": China's heavy reliance on energy imports transiting the Strait of Malacca is seen as a strategic choke point vulnerable to U.S. naval blockade. The Belt and Road Initiative (BRI) aims to create overland alternatives.
Resource Diplomacy: Investments in Africa, Latin America, and Central Asia are designed to lock in long-term supply contracts for lithium, cobalt, and copper—essential for China's dominance in the green energy transition.
Historical Context While the Century of Humiliation provides a backdrop of historical grievance regarding foreign exploitation, the more pressing driver is the lesson of the Cold War and recent trade wars: relying on foreign adversaries for critical inputs is an unacceptable risk. The Soviet split in 1960 and current U.S. technology controls reinforce the imperative for self-reliance (自力更生, zìlì gēngshēng) and diversification.
Key Chinese Concepts: Resource Security and Strategic Autonomy
Contemporary Chinese discourse on resources employs specific concepts reflecting historical experiences and current strategic priorities.
Resource security (资源安全, zīyuán ānquán) has become a top-level national priority, frequently invoked by Xi Jinping and enshrined in policy documents. The concept encompasses multiple dimensions: sufficient quantity to meet development needs, stable access not subject to foreign disruption, reasonable prices that don't impose unsustainable costs, and diversified sources reducing dependence on any single supplier or route. Resource security is understood not as pure autarky but as strategic resilience—the ability to survive and prosper even if adversaries attempt resource denial.
Food self-sufficiency (粮食自给, liángshí zìjǐ) remains paramount despite China's integration into global agricultural markets. China maintains ~95% self-sufficiency in staple grains (rice, wheat, corn)—importing soybeans, dairy, meat, and specialty products but ensuring domestic production of core calories. This reflects traumatic memories of famine (the Great Leap Forward 1958-1962 killed 15-45 million from starvation) and determination never to depend on foreign food for survival. Chinese policy sacrifices agricultural efficiency (supporting uneconomic domestic grain production through subsidies and minimum prices) to maintain self-sufficiency targets. The logic is existential: food imports are acceptable for variety and efficiency, but core food security cannot depend on foreign suppliers who might weaponize access.
Energy independence (能源独立, néngyuán dúlì) guides Chinese energy strategy despite China's status as world's largest energy importer. The concept doesn't mean autarky but rather reducing vulnerabilities through diversification, stockpiling, and technological alternatives. China pursues multiple strategies: diversifying oil and gas suppliers (Middle East, Russia, Central Asia, Africa, Latin America), building strategic petroleum reserves (545 million barrels as of 2020, with plans for more), investing in renewable energy to reduce fossil fuel imports (China leads globally in solar, wind, and hydroelectric capacity), developing domestic coal (70% of primary energy, with substantial reserves), and researching advanced technologies (nuclear, hydrogen, synthetic fuels).
The Belt and Road Initiative (BRI) serves multiple resource security objectives. Overland routes from China through Central Asia to Europe (China-Pakistan Economic Corridor, China-Central Asia-West Asia Economic Corridor) provide alternatives to maritime transit through Malacca and U.S.-dominated sea lanes. Investments in port infrastructure across South Asia, Middle East, East Africa, and Mediterranean ("String of Pearls" strategy) aim to secure maritime routes and provide naval basing options. Investments in foreign mining (African copper and cobalt, Latin American lithium, Australian iron ore) ensure access even if geopolitical tensions rise. Agricultural investments (land purchases or long-term leases in Africa, Southeast Asia, Latin America) provide alternative food sources if traditional suppliers restrict access.
Official Policies and Strategic Responses
Chinese government responses to resource vulnerabilities span multiple domains, reflecting comprehensive state-led strategies.
Strategic reserves buffer supply disruptions and price volatility. Beyond petroleum reserves, China maintains stockpiles of rare earths (ironic given China's production dominance—reserves guard against future scarcity or domestic supply issues), copper, aluminum, soybeans, pork (frozen meat reserves to stabilize prices), and other commodities. These reserves are larger than Western counterparts relative to consumption, reflecting greater anxiety about supply security and willingness to bear storage costs for insurance.
Vertical integration aims to control entire supply chains. For critical minerals, China not only processes rare earths (85% global share) but also manufactures downstream products (magnets 90%, phosphors 80%). This integration means disruptions to foreign rare earth mines affect China less than competitors—China can substitute domestic mining or reduce export processing to prioritize domestic users. Similar integration occurs in solar panels (polysilicon through modules) and batteries (lithium processing through cell manufacturing).
Dual circulation strategy, introduced in Chapter 2's Chinese Perspective Box, applies to resources. Internal circulation involves building domestic capacity: expanding coal mining, developing domestic oil and gas (despite higher costs), investing in renewable energy, and pursuing food self-sufficiency. External circulation focuses on diversifying import sources: oil from Middle East, Russia, Africa, and Latin America rather than depending on any one supplier; iron ore from Australia and Brazil; soybeans from Brazil and United States (with capacity to shift entirely to Brazil if U.S. restricts supply).
Technology substitution pursues alternatives reducing resource dependencies. Electric vehicles reduce oil imports (though creating battery material dependencies). Nuclear and renewable energy displace coal and gas. Synthetic biology research aims to produce proteins and fats without agricultural land, potentially reducing soybean imports. Seawater desalination addresses water scarcity. Advanced materials research seeks alternatives to critical minerals (rare-earth-free motors, alternative battery chemistries). While many technologies remain aspirational, massive R&D investments reflect commitment to reducing dependencies through innovation.
Debates and Tensions
Despite official consensus on resource security, debates exist within Chinese policy and academic circles about costs, priorities, and tradeoffs.
Efficiency versus security tensions mirror Western debates. Economists argue that prioritizing self-sufficiency reduces growth—China would be richer importing food efficiently rather than subsidizing domestic grain production, and buying rather than building domestic semiconductor capacity. Growth-focused officials worry that excessive resource security spending diverts investment from productive uses. Security hawks counter that dependencies on potential adversaries create unacceptable vulnerabilities, and efficiency arguments ignore historical lessons about weaponized interdependence.
Leverage versus vulnerability dilemmas shape resource policy. China's rare earth dominance provides leverage—but using that leverage (2010 restrictions) accelerated diversification that eroded China's position. Similarly, threatening to restrict exports of gallium, germanium, or other minerals signals power but incentivizes substitution. Debates center on whether hoarding leverage (maintaining reliability to preserve market share) or using leverage (accepting market share loss to achieve strategic objectives) better serves Chinese interests.
Domestic costs versus strategic benefits create tensions. Food self-sufficiency requires subsidizing inefficient agriculture, environmental degradation from overproduction, and higher food prices for consumers. Energy independence through coal means continued air pollution and carbon emissions. Rare earth mining creates substantial environmental damage in Inner Mongolia. Officials must balance resource security against domestic welfare, environmental protection, and international climate commitments.
Implications for Global Resource Competition
Chinese resource strategies create several dynamics shaping global competition.
First, China will not voluntarily become dependent on Western-controlled supply chains for strategic resources. Post-2018 trade war and semiconductor sanctions reinforced determination to achieve substitutability in critical domains. Western hopes that economic integration would constrain Chinese foreign policy choices underestimate Chinese willingness to sacrifice efficiency for security.
Second, China's resource investments and BRI create alternative power structures. Countries dependent on Chinese investment, Chinese markets for resource exports, or Chinese technology (Huawei telecommunications, Alibaba cloud computing, TikTok platforms) gain options beyond Western-led institutions. This doesn't necessarily make them "pro-China" but increases their autonomy from Western pressure—creating a more multipolar resource order where neither U.S. nor China fully controls access.
Third, resource competition will intensify as clean energy transitions increase demand for critical minerals. China's head start in mineral processing, battery manufacturing, and solar production positions it to dominate clean energy supply chains as the world did with oil. Western energy transitions pursued to reduce fossil fuel dependencies may create deeper dependencies on Chinese-controlled supply chains—a paradox that shapes climate and security policy tensions.
Fourth, China's resource nationalism (export restrictions on rare earths, gallium, germanium) will escalate if U.S.-China tensions worsen. China holds substantial resource leverage and has demonstrated willingness to use it. If the United States expands technology restrictions or Taiwan tensions escalate, China might comprehensively weaponize critical mineral exports—inflicting substantial economic pain on the West while accelerating diversification efforts that reduce China's long-term leverage.
Finally, resource security competition creates opportunities for resource-rich developing nations to bargain with both great powers. Countries holding lithium (Chile, Argentina, Bolivia), cobalt (DRC, Zambia), rare earth deposits (Vietnam, Brazil, South Africa), or other critical resources can negotiate with United States, China, and others for favorable investment terms, technology transfers, and strategic relationships. This creates a more competitive—and potentially unstable—global resource environment where resource-rich nations hold greater leverage than during previous eras of resource competition.
The fundamental challenge is that both the United States and China view resource dependencies as security threats requiring mitigation, while simultaneously seeking to leverage their own resource advantages. This creates pressures toward resource nationalism, export restrictions, and competition for control over resource-producing regions. Managing this competition peacefully—ensuring resource flows continue despite geopolitical tensions—requires mechanisms and agreements that neither side has yet prioritized building.
Data Sources and Further Research
Food Security and Agriculture:
FAO (Food and Agriculture Organization): FAOSTAT database for production, trade, and consumption statistics
USDA Foreign Agricultural Service: Production, Supply, and Distribution (PS&D) database
World Food Programme: Hunger Map and food security assessments
International Food Policy Research Institute (IFPRI): Research on food security and agricultural policy
Energy:
International Energy Agency (IEA): World Energy Outlook, Oil Market Report, Gas Market Report
U.S. Energy Information Administration (EIA): International energy statistics and analysis
BP Statistical Review of World Energy: Annual comprehensive energy data
OPEC: Monthly Oil Market Report and production data
Eurostat: European energy statistics and trade data
Resource Trade and Dependencies:
UN Comtrade: Trade flows for specific commodities
USGS Mineral Commodity Summaries: Production and reserve data for minerals
Observatory of Economic Complexity (OEC): Visualization of trade flows
TeleGeography: Infrastructure maps (subsea cables, pipelines)
Chinese Policy and Perspectives:
Chinese government Five-Year Plans and policy documents
Ministry of Natural Resources: Resource management policies
National Energy Administration: Energy policies and statistics
Chinese academic journals: Resources Science (资源科学), China Mining Magazine (中国矿业)
Think Tanks and Analysis:
Council on Foreign Relations: Energy and resource security analysis
Center for Strategic and International Studies: Energy Security Program
Belfer Center: Geopolitics of Energy Project
Carnegie Endowment: Energy and Climate Program
Key Insights
Resource dependencies differ from manufacturing dependencies in speed of impact: Semiconductor shortages unfold over quarters as inventories deplete, but energy and food disruptions trigger crises within days -- cold homes, dark streets, empty shelves. This immediacy makes resource coercion devastatingly potent because targets cannot wait out disruptions or slowly build alternatives.
Europe's gas dependence on Russia disproved "Wandel durch Handel": Germany's doctrine that economic interdependence with Russia would constrain Moscow's behavior collapsed when Russia invaded Ukraine in 2022. Economic ties did not prevent aggression; instead, energy dependence created leverage Russia could exploit against Europe, demonstrating that interdependence fails to deter conflict when political or territorial objectives take precedence.
Food security is uniquely destabilizing because food cannot be substituted, stockpiled long-term, or rationed without immediate political consequences: The correlation between grain price spikes and political instability -- from the Arab Spring to the 2022 Ukraine crisis -- demonstrates that nations controlling major grain exports hold significant influence over import-dependent states, particularly in the Middle East and North Africa.
The energy transition risks trading old dependencies for new ones: Decarbonization through solar panels, wind turbines, and batteries requires critical minerals and manufacturing supply chains heavily concentrated in China. Escaping dependence on Middle Eastern oil may create dependence on Chinese lithium processing, battery production, and solar panel manufacturing.
Resource nationalism is accelerating as countries treat commodities as weapons: Indonesia's nickel export ban, China's rare earth and gallium restrictions, Russia's energy cutoffs, and "lithium triangle" coordination all reflect a growing trend of states leveraging resource positions for strategic advantage rather than treating commodities as neutral items of commerce.
Maritime chokepoints amplify energy vulnerability far beyond producing countries: The Strait of Hormuz (21% of global oil), Strait of Malacca (16 million barrels per day), and Suez Canal concentrate energy transit through narrow passages vulnerable to blockade, accident, or military action. Closure of any single chokepoint would trigger immediate global price shocks and potential recession.
Fertilizer dependencies create hidden food security vulnerabilities: Modern agriculture depends on nitrogen, phosphate, and potassium fertilizers that dramatically increase yields, and production is concentrated in Russia, Belarus, Morocco, and China. The 2021-2022 fertilizer crisis demonstrated that disrupting agricultural inputs can reduce food production as effectively as restricting grain exports.
Discussion Questions
Europe successfully survived the 2022-2023 winter despite losing most Russian gas supplies, through a combination of LNG imports, demand reduction, and mild weather. Does this outcome vindicate or undermine the theory that energy interdependence constrains foreign policy? What lessons should other regions draw about managing energy dependencies with strategic rivals?
The chapter argues that the energy transition may create new resource dependencies on China as severe as old dependencies on Middle Eastern oil. Is this concern overstated, given that minerals can be mined in multiple countries and battery chemistry is evolving? Or does China's midstream processing dominance make this comparison apt?
Food price spikes have been linked to political instability from the Arab Spring to the 2022 Ukraine crisis. Should major grain exporters like the United States and Russia be subject to international norms restricting export bans during crises, similar to arms control agreements? What enforcement mechanisms could make such norms effective?
Resource nationalism -- where countries restrict commodity exports to capture more value domestically -- often conflicts with the free trade principles that the international economic order is built upon. When is resource nationalism a legitimate development strategy, and when does it become economic coercion? How should the WTO and other institutions handle this distinction?
China controls approximately 85% of rare earth processing, 75% of lithium-ion battery manufacturing, and 80% of solar panel production. If you were advising a European government on reducing these dependencies, what sequencing of policies would you recommend, given constraints on budget, time, and environmental standards?
Tabletop Exercise: The tabletop exercise for this chapter — Critical Minerals Crisis and Supply Disruption — can be found in Appendix A: Tabletop Exercises.
References and Further Reading
Books
Klare, Michael T. Resource Wars: The New Landscape of Global Conflict. New York: Metropolitan Books, 2001.
Yergin, Daniel. The New Map: Energy, Climate, and the Clash of Nations. New York: Penguin Press, 2020.
Drezner, Daniel W. The Uses and Abuses of Weaponized Interdependence. Washington: Brookings Institution Press, 2021.
Blas, Javier, and Jack Farchy. The World for Sale: Money, Power, and the Traders Who Barter the Earth's Resources. New York: Oxford University Press, 2021.
Articles and Reports
International Energy Agency. The Role of Critical Minerals in Clean Energy Transitions. Paris: IEA, 2021.
Overland, Indra, et al. "The Geopolitics of Renewable Energy: Debunking Four Emerging Myths." Energy Research & Social Science 49 (2019): 36-40.
Bazilian, Morgan D. "The Mineral Foundation of the Energy Transition." The Extractive Industries and Society 5, no. 1 (2018): 93-97.
Escribano, Gonzalo, et al. "Energy Dependency, Geopolitics, and Foreign Policy: The EU-Russia Natural Gas Trade." Energy Research & Social Science 68 (2020): 101528.
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