Mineral Security Partnership and Southeast Asia: Forcing Countries to Choose?

In 2022, the United States and its allies initiated the Mineral Security Partnership (MSP), a new international group to diversify the supply chains of critical minerals. The MSP is made up of Australia, Canada, Estonia, Finland, France, Germany, India, Italy, Japan, Norway, the Republic of Korea, Sweden, the United Kingdom, the US, and the European Union. The MSP aims to develop critical mineral supply chains through engagement among its 15 members, as well as “host” governments of countries that possess significant critical mineral reserves.

The rationale for the MSP is understandable. Geopolitical conflicts have led to increasing efforts to diversify global supply chains. One of the objectives of supply chain diversification is to reduce dependency on strategic rivals for key resources, such as “critical minerals” — copper, cobalt, nickel, lithium and rare earth elements (REE ) — and other elements that are necessary inputs to the production of clean technologies such as solar panels, electric vehicles and transmission grids. That said, the MSP is a two-edged sword for Southeast Asian countries.

The MSP is presented as a framework for developing sustainable supply chains of critical minerals, but recent studies highlight that it is an outcome of the broader “friend shoring” policy of the United States. Analysts argue that the implicit objective of the MSP is to reduce mineral dependencies on China and Russia, which have disproportionate control over supply chains. China has arguably the strongest grip on critical mineral supply chains – it extracts 65 per cent and processes 85 per cent of the world’s REE. China also dominates the processing of copper, nickel, lithium and cobalt. Russia is a significant producer of nickel, copper, and zinc, among other critical minerals.

To reach net-zero by 2050, the world will need to mine six times the current level of critical minerals by 2040, making supply constraints a key security issue. The politicisation of critical minerals and the dominance by Western countries and their allies in the MSP have led to the initiative being called the “NATO of Metals and Minerals”. Such overly geopolitical manoeuvring of critical mineral supply chains has multiple repercussions for Southeast Asia.

… the MSP also creates multiple challenges for Southeast Asian countries. The biggest drawback of the MSP is the entrenchment of the securitisation of renewable energy technologies by attaching political interests to the supply chain of critical minerals.

On paper, the MSP can potentially benefit Southeast Asia. The region has large deposits of critical minerals (Figure 1) and is a significant producer of mined resources (Table 1). It also has a growing solar panel and electric vehicles industry, and Indonesia and the Philippines have made concerted policy efforts to attract more investments in the lucrative downstream sector. However, the extraction of critical minerals has had significant negative impacts on the region’s communities and the environment, which in some cases led to political unrest. In addition, Indonesia’s efforts to enhance processing and refining activities by banning the export of ores are also seen as a short-term measure and not a replacement for long-term investment in technologies and human resources required for green industrialisation.

Figure 1: ASEAN’s Mineral Cache

Table 1: Significant Producer of Mined Resources

The main challenges for Southeast Asia in the context of critical minerals are sustainable extraction and development of downstream industries. On paper, the MSP can address both these issues. The MSP has developed a set of guidelines called “Principles for Responsible Critical Mineral Supply Chains” which can help address the social and environmental impacts of projects in host countries. If MSP engages with host countries in Southeast Asia, these guidelines can serve as an added layer of safeguards to minimise the negative externalities of mining. The MSP also explicitly aims to assist countries to move up the critical mineral supply chain and increase the recycling of critical minerals, which can drive Southeast Asia’s ambitions of becoming a hub for green technologies. Research indicates that the MSP can potentially enhance investment in the refining sectors of Indonesia, the Philippines and Vietnam.

However, the MSP also creates multiple challenges for Southeast Asian countries. The biggest drawback of the MSP is the entrenchment of the securitisation of renewable energy technologies by attaching political interests to the supply chain of critical minerals. Put differently, the MSP and its link to Washington’s policy of “friend shoring” will accentuate the impact of US-China rivalry in which countries in the region are forced to choose sides.

Addressing climate change is a global challenge, one that requires major emitters to work together to increase the deployment of renewable energy. Further bifurcation of supply chains can potentially delay climate efforts, which can have enormous impacts on Southeast Asia, ranging from more frequent and intense extreme weather events to inundation of major urban centres.

Another potential challenge is that the MSP may object to deep collaboration between host countries and the strategic rivals of its members, namely China and Russia. This will have huge repercussions for Southeast Asia, where China accounts for around US$10 billion of investments in the solar industry alone. If Southeast Asian countries were to persist in collaborating with China, they could lose out on MSP-related investments and technical collaboration.

The diversification of critical mineral supply chains can be beneficial if done in an inclusive and cooperative manner. Overly geopolitical initiatives such as the MSP as it stands today, are unlikely to facilitate mineral development in Southeast Asia significantly. However, the MSP does highlight the need for regional actors to exercise agency in regard to critical mineral development, lest they become caught up in geopolitical power plays. The 2024 State of Southeast Asia Report shows that 46.8 per cent of respondents believe that ASEAN should enhance its resilience and unity to fend off pressures from the US-China rivalry.

Given Southeast Asia’s critical mineral resources, it is likely that some regional countries will be asked to join the MSP. As a grouping, ASEAN can engage with the MSP as a means of enhancing technical capacity and sustainable mining practices, rather than subscribe to a broad commitment to geopolitically-driven supply chains. A regional perspective on the MSP can be informed by the ASEAN Mineral Cooperation Action Plan, which emphasises that dialogue and partnership with a broad range of stakeholders in Europe, the US and China is critical for sustainable mineral development.

According to the International Energy Agency, Southeast Asia can develop a market worth US$800 billion by 2050 if it can utilise its green industry potential and critical mineral resources. Yet, doing so will require some form of regional approach by ASEAN to address the increasingly complex and potentially disruptive impacts of geopolitical competition over critical minerals.

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