If Europe wishes to secure its own critical mineral supplies, it must learn from its failures and rein in private sector mineral companies.

While the United States is pushing to reestablish a domestic supply chain for rare earth metals, the European Union (EU) has fallen behind in combating its own economic dependencies. Consider, for instance, that the EU relies on China for 100 percent of rare earth elements used in the manufacturing of magnets—a pivotal component of modern technology, from semiconductors to electric motors.

Yet while EU countries are aware of their mineral dependency problem, discussions over both how this dependency came about and how to tackle it are lacking. The European Commission itself argues that the continent’s mineral dependency problems are a consequence of over-sourcing from individual countries. However, this framing and other explanations consistently overlook a key factor — the significant role of private-sector companies in Europe, which often deviate from national economic interests in favor of corporate profits.

Ultimately, any realistic strategy for enhancing the EU’s critical mineral supply chain resilience will require greater state involvement in critical mineral investment projects. By conceding too much influence to private corporations, European countries have compromised their national interests in favor of the profit incentives and cost-cutting interests of the private sector.

The Consequences of “Profit Now, Pay Later” Thinking

More often than not, European mineral policy has been shaped in boardrooms rather than ministries, with governments de facto outsourcing the long-term stewardship of strategic resources to the private sector. By doing so, European capitals avoided the messy discussions over the financial and political burdens of high-cost exploration and processing projects, to say nothing of the environmental concerns.

This approach, however, has a naked problem: corporate priorities are completely different than those of states. Namely, companies in the neoliberal era—unbound by national priorities—optimize for cost efficiency and maximizing shareholder value, even if that means dismantling expensive domestic manufacturing capacity and deepening cheaper foreign supply dependencies. Nonetheless, European capitals broadly allowed this shift to occur because it was cheaper, politically easier, and in keeping with neoliberal orthodoxy, which regards resource security as a natural outcome of global trade rather than a deliberate objective of statecraft.

The consequences of this approach have been evident. In Germany, for instance, gallium production facilities were shuttered in 2015 to take advantage of cheaper Chinese alternatives. France followed a similar pattern. In 2012, the Minister for Industrial Recovery, Arnaud Montebourg, sought to revive mining in France and reduce foreign dependencies through a prospective state-owned enterprise, the Compagnie Nationale des Mines de France (CMF). Collaboration with private companies was not antithetical to this mission, as CMF was envisioned to include shareholders from major French mining companies. In 2013, the project issued licenses for mining exploration to private start-ups to begin resource surveying, with the intent that their rights would be resold to the CMF.

This was all for naught, as the whole thing collapsed in 2016. The project was permanently shelved on the grounds of financial cost, especially during a time when French multinational mining companies Areva and Eramet were already struggling due to falling commodity prices.

In both cases, the pursuit of immediate profit—or cost-saving—outweighed the longer-term need to safeguard resilience, leaving European economies vulnerable to external pressures they cannot control. The reality, despite what free market-oriented advocates claim, is that national interests and private sector influences do not necessarily align when it comes to mining.

This fact has come back to haunt policymakers, as the risks of mineral dependency have gone from a virtual to a very real risk.

For example, gallium, which is necessary for the manufacture of semiconductors, has been monopolized by China. In December 2024, this stranglehold was used as a political tool against the incoming Trump administration in response to its tariff policies. The incident highlights concerns surrounding Chinese control over supply chains, as it provides Beijing with the ability to cut off countries for political reasons.

China, however, is not the only country to hold disproportionate influence when it comes to key minerals. The European Union relies on Brazil for 92 percent of its niobium sourcing, which is essential to the manufacturing of superconductors, aircraft, and electronic parts. Turkey, meanwhile, comprises 99 percent of the European Union’s sourcing for boron, which is used in rocketry, fertilizer, and fiberglass production. The Democratic Republic of the Congo is the source of much of the world’s supply of cobalt. Indonesia handles many rare ores. And so forth. In each case, a single foreign supplier holds a level of influence that could be used for political or economic leverage at Europe’s expense.

Moreover, these vulnerabilities are compounded by internal pressures. Rising energy prices have eroded the competitiveness of heavy industry, which consequently is pushing German manufacturers to relocate to China in search of cheaper inputs and stable supply chains. A vicious and deepening dependency cycle ensues. The more conditions at home worsen, the more European industry seeks to move abroad, which only further weakens European economies and leaves the continent exposed to both foreign suppliers and the geopolitical ambitions of the very countries that are absorbing the fleeing industrial capacity.

European governments have acknowledged these problems, but their responses have been undermined by the same reliance on private actors that created these vulnerabilities in the first place. For instance, consider how France is handling its national minerals fund. The French government is set to raise a mere €500 million, with an additional €2 billion to be raised by the private equity firm InfraVia Capital Partners. Under this arrangement, the French government will acquire a minority stake in the company, leaving operations to industry management and holding joint control over the strategic vision of the program. In other words, operational authority is once again being outsourced to private actors whose profit motives are allowed to supersede the interests of the state.

There are other cases. In 2021, the German government awarded a €2.6 billion payout to domestic energy giant RWE for its closure of its unprofitable old lignite plants. This was despite evidence suggesting the company kept its old lignite plants operational far past the date of their economic viability so as to take advantage of government compensation amidst Germany’s transition to green energy. Meanwhile, in Italy in 2023, Rome approved the sale of its largest oil refinery, ISAB Priolo, to GOI Energy.

The deal was facilitated by Franco-Israeli billionaire Beny Steinmetz, who was known to have prior convictions for corruption in Switzerland and Romania. The Italian government fast-tracked the deal without disclosing the identity of the new investors, indicating awareness of the deal’s controversial nature. Since the sale, conflicts have emerged with regard to the economic viability of the refinery, as financial mismanagement by the private sector led to the refinery being treated as a financial asset rather than a strategic resource.

The European Union’s broader strategy also demonstrates the imprudence of trusting private corporate interests in this regard. Consider, for instance, the recent EU-Mercosur deal meant to grant Europe greater access to Latin American mineral supply chains—specifically in Argentina and Brazil. The issue is that this remains a commercial initiative, which relies on private intermediaries to handle extraction and delivery. Yes, there will be more tonnage on paper, but the fundamental misalignment between corporate priorities and European national security interests remains unaddressed.

In short, when presented with a choice, European governments seem to consistently prioritize corporate convenience and short-term stability over genuine control of strategic assets and long-term resilience.

Hope for Change?

Yet not every recent initiative has repeated this mistake, demonstrating that perhaps governments are beginning to learn their lessons.

In Italy, the government’s €1 billion “Made in Italy” fund has been launched with the explicit aim of creating a strategic national supply chain of raw minerals, ensuring that state interests remain the project’s priority. Unlike the French arrangement, Rome structured the fund as an equal partnership between the state and private investors, ensuring that state interests are embedded in any decision-making. The Meloni government has taken it a step further and identified opportunities to domestically source 16 of the European Union’s 34 critical raw materials, including lithium and bauxite, treating this as a key component of the country’s economic policy.

Likewise, Germany’s new mineral fund, through an investment of €1 billion managed by KfW Development Bank, is overseen by a government-led raw minerals committee whose approval and investigation are required before investments are made. The terms of this fund require participating companies to maintain offices in Germany proper and to allocate their output first to Germany or other EU markets, ensuring that, even when the state is a minority shareholder, the ultimate beneficiary is Europe.

Opportunities also exist beyond the current states of the EU. For instance, Serbia’s lithium deposits in the Jadar Valley could supply 90 percent of the EU’s lithium needs. Yet, despite the ripe opportunity presented by the scale of this find, the project has largely been left to the discretion of mining company Rio Tinto. Surely, Europe could do more to engage Serbia and secure this supply line instead of leaving it up to yet another multinational.

More broadly, if Europe is to escape this cycle of dependency, the continent’s governments must rebuild their mineral policies on the principle that national interests trump private convenience. This means going beyond rhetorical commitments of “resilience” and “diversification” and instead institutionalizing state authority over strategic projects. National projects must be structured to guarantee the state a controlling or veto share. Public-private partnerships must be calibrated so that a government’s input is decisive in all decision-making.

Raw materials extracted under European-backed initiatives should first be directed to European industry before being exposed to global markets. Processing should be tied to the EU economy instead of being outsourced abroad. And so on and so forth. If steps like these are not undertaken, then so-called national projects will remain little more than thinly disguised corporate extraction schemes.

The private sector isn’t going anywhere; collaboration with companies will always play a role in decision-making. But the balance of power must shift decisively in favor of states. Europe’s current mineral dependence is the result of policy choices, and only policy choices can reverse this trend.