Wargaming Strategic Solutions to China’s Dominance in Rare Earths and Critical Minerals (2026-2036)

Wargame Objective and Context

In September 2025, KSG brought together Western-oriented participants to expose them to potential challenging scenarios over the decade 2026–2036, associated with China’s dominance of rare earths and critical minerals. Participants were forced to find strategic solutions to protect their own interests over several wargame turns. KSG’s clients across the different sectors of participation agreed on the need to take a long-term approach to this challenge, concurring that in the West – ‘Government and private entities were not working hand in hand to achieve a mutually desired outcome’.

While a Chinese invasion of Taiwan and the AI race dominate public debate, far less attention is paid to the foundation that underpins them both: the supply of rare earths and critical minerals. China’s dominance in mining, refining, and processing these resources represents a structural lever of power unprecedented in modern history. For Western governments, this is an existential strategic threat. Without secure access, China will almost certainly decisively surpass the West in multiple domains of national power and competition – most notably acquiring a military advantage that cannot be challenged. For the finance community, it drastically reshapes long-term risk and investment calculus across an abundance of sectors, regions and asset classes. For extractive industries, it dictates the survival of entire supply chains. For the defence and technology sectors, the Chinese stranglehold threatens their ability to conduct basic operations.

As with all KSG wargames, it was not executed to try to predict the future, but instead to:

Gain a shared assessment of the severity of the perceived challenge.
Consider strategic co-operation options between government and private entities.
Consider innovative solutions and approaches to the challenges Beijing may plausibly force the West to deal with.
Alter existing strategies based on the risk and opportunities uncovered.

This wargame report is a condensed version of the original that was created for KSG clients. This version only touches on the most significant findings and events. KSG utilised a range of AI tools to design, execute and analyse the wargame.

Key Takeaways

Western leverage was limited – The U.S. and its allies could not realistically break China’s dominance over rare earths and critical minerals without military action. Beijing held decisive levers across mining, refining, and supply chains, giving it durable coercive power across the world. This coercive power was ever increasing by 2036.

Conflict risk was structural – As the U.S. saw its strategic advantage erode from supply chain vulnerabilities, the Thucydides Trap deepened. China’s edge in military technology and AI heightened Washington’s temptation to act militarily before a window of opportunity to prevent strategic subordination closed.

Drifts eastward – Despite Western courting, India tilted closer to Beijing over the decade. This reduced its appeal for Western finance.

Western extractives under siege – European and U.S. mining and processing firms faced chronic bottlenecks, political pressure, and erratic orders as governments scrambled for security of supply.

Western tech competitiveness eroded – China’s mineral stranglehold constrained Western ability to scale next-generation semiconductors, green energy, and advanced defence systems, creating widening performance gaps.

Markets repriced minerals as strategic assets – By 2030, rare earths and critical minerals carried a permanent geopolitical premium akin to oil in the 1970s

Participants

KSG brought together a diverse set of interests, focus areas and skill sets for the wargame. Participation was made up of former and present members of the:

Governmental strategy and policy community – national security, trade, and diplomacy officials.
Finance and investment world – hedge funds, asset managers, sovereign wealth funds, insurers and banks.
Extractive and mining sector – mining companies, refiners, and supply-chain managers.
Technology sector – semiconductor, telecom, and electronics leaders.
Manufacturing and industrial sector – automotive, EV, aerospace, defence, renewables, and consumer goods firms.

Entities Represented

Countries and regions represented in the wargame included:

United States
European Union
India
China
Russia
Australia
Japan
South Korea
Key African States – Namibia, Tanzania, Mozambique, the Democratic Republic of the Congo, and South Africa
Gulf States – Saudi Arabia, UAE and Qatar
South America – Brazil and Chile

As well as participants representing governments, others broadly represented the following sectors:

Finance
Extractive industries
Technology
Manufacturing

The structure of the wargame allowed both these governmental and private entities to work together to face dilemmas in the wargame. Rather than have independent participants represent China, KSG artificially controlled and injected Chinese actions. We chose to represent an aggressive Chinese policy on this theme, rather than a ‘most likely’ Chinese policy. Still, Chinese actions were bound in reality, as assessed by KSG intelligence collection.

Wargame Events

Turn 1 – 2026

Opening Chinese Actions

The wargame commenced in January 2026. Beijing announced a comprehensive control package covering rare earths, battery inputs, and semiconductor-adjacent chemicals. The package combined:

Quotas: strict annual export ceilings by material type.
Licensing: state approval required for all sales, with long lead times.
Non-tariff barriers: new ‘environmental certification’ and ‘national security end-use checks’ applied selectively to Western buyers.
Sanctions-lite tools: Western companies deemed ‘unreliable’ were denied licenses altogether.

The materials affected were:

Rare earth oxides and metals (neodymium, praseodymium, dysprosium, terbium, yttrium)
- Application: Used in high-performance magnets for EV motors, wind turbines, missile guidance, and consumer electronics.
- Significance: Without these elements, Western clean energy and defence industries face critical bottlenecks. Substitutes exist but are less efficient.
Permanent magnets and magnet blanks (NdFeB)
- Application: Core components in EV drivetrains, wind turbines, and precision military systems.
- Significance: China controls >80% of global magnet production. Blocking supply cripples green energy deployment timelines in the U.S. and EU.
Graphite (natural flake, spherical, synthetic)
- Application: Dominant material for lithium-ion battery anodes in EVs and consumer electronics.
- Significance: China refines >90% of global graphite. Restrictions threaten Western EV rollouts and battery supply chains.
Gallium and germanium compounds (GaN/GaAs)
- Application: Used in power electronics, 5G/6G telecom equipment, radar, infrared optics, and solar cells.
- Significance: They are irreplaceable in defence radars and advanced comms. Restrictions directly hit both military and telecom supply chains.
High-purity manganese
- Application: Essential for EV batteries, stainless steel, and high-strength alloys.
- Significance: Limits disrupt global EV and steel markets, with cascading price inflation across automotive and construction sectors.
Bismuth and antimony
- Application: Fire retardants, specialty alloys, and ammunition/defence applications.
- Significance: Loss of supply hampers both civilian safety systems (electronics, construction) and military ordnance production.
Fluorspar derivatives (high-purity HF)
- Application: Key etching and cleaning chemicals for semiconductor manufacturing.
- Significance: Restrictions choke wafer production in Japan, South Korea, Taiwan, and Europe.
Electronic-grade hydrogen peroxide and solvents
- Application: Ultra-pure cleaning chemicals for chip fabrication plants (fabs).
- Significance: Even minor shortages can halt fab operations. Western fabs are highly exposed to Chinese refining capacity.
Isostatic graphite and furnace components
- Application: Used in high-temperature furnaces for crystal growth and chipmaking.
- Significance: Disruption delays semiconductor wafer production and advanced material manufacturing worldwide.
Advanced separation and magnet-making machinery
- Application: Specialist equipment for rare-earth separation and magnet production.
- Significance: Restricting this machinery prevents Western firms from scaling their own refining and magnet plants, locking in China’s dominance.

The ‘targeting’ was grouped into three categories by Beijing:

Explicitly restricted (‘Track 2’): United States, European Union, United Kingdom, Japan, South Korea, Australia, Canada, and Taiwan. These countries face quotas, delayed licensing, and ‘national security use’ barriers.
Favoured (‘Track 1’): BRICS partners (Russia, Brazil, South Africa), most of ASEAN, African producers, Gulf states, and Latin America. They get fast-track licensing, cheaper pricing, and long-term contracts.
Swing states: India, Türkiye, Mexico. They are offered preferential terms, but with conditions not to re-export to embargoed Western buyers.

U.S. Response

Washington moved rapidly in response to Beijing’s restrictions.

1. The Defense Production Act (Title III) was invoked to further expand domestic and allied production of rare earths, graphite, and semiconductor chemicals.

2. Emergency subsidies and tax credits were announced for U.S. firms investing in alternative supply chains in Australia, Canada, and across Africa.

3. A new 45% tariff package was imposed on selected Chinese electronics and EV exports.

4. The U.S. announced preparations for a large security aid package for Taiwan, including advanced radar, anti-ship systems, and stockpiles of critical components. This was designed to signal U.S. resolve vis-à-vis this ‘Chinese aggression’.

5. The Treasury and Commerce Departments began coordinating (and pressuring) with allies to align countermeasures, and issued guidance threatening secondary sanctions on third parties that attempted to undermine the U.S. response.

EU Response

The EU response was cautious and conciliatory, despite heavy pressure from Washington. U.S. officials urged Brussels to retaliate aggressively and align tariffs, but the European Commission — under pressure from Germany and France — stood firm on its preference to de-escalate. The EU took the following actions:

1. Crisis mechanism under the Critical Raw Materials Act activated: joint procurement of rare earths and graphite for EU industries.

2. Dialogue overture: Brussels calls for urgent WTO and G20 consultations, stressing the need to avoid the ‘weaponization of minerals’.

3. Industry support package: Temporary state-aid rules expanded to buffer automakers, turbine producers, and chemical firms facing price surges.

India’s Response

1. Launched a Strategic Minerals Mission, including subsidies and industrial zones for rare earth separation and magnet manufacturing.

2. Conducted intense diplomatic engagement with Beijing, with senior Indian trade and foreign ministry officials dispatched to negotiate even better conditions. Delhi secured multi-year access guarantees for restricted materials including neodymium, praseodymium, and battery-grade graphite. In return, India formally pledged that re-exports would be tightly controlled, with end-use monitoring mechanisms to prevent diverted shipments reaching the U.S. or EU. These arrangements allowed Indian firms to retain privileged access while signalling to Beijing that India would not be used as a Western backdoor.

3. EXIM Bank of India extended credit lines to rare earth projects in Namibia and Tanzania, tying future offtakes to Indian processing facilities. Delhi positioned these investments as independent supply chains under Indian control, separate from the Chinese-origin flows covered by its no re-export pledge.

Russian Response

1. Expanded exports of palladium, titanium, and uranium to China and BRICS partners.

2. Started working to guarantee defence allocations of rare earths and graphite for Russian military-industrial use through coordination with Chinese suppliers. Russian efforts proved successful.

3. Offered new trade finance instruments in Rubles and yuan for Indian and African buyers. There was little interest.

Australian Response

1. Introduced fast-track approvals for rare earth and graphite mining projects, supported by federal guarantees.

2.Expanded financing through the Export Finance Australia (EFA) and the National Reconstruction Fund for domestic critical minerals projects.

Key African Responses

1. Namibia, Tanzania, Mozambique: Formed a Critical Minerals Bloc with a binding charter committing members to set common royalty rates, harmonise export taxes, and negotiate as a single unit with foreign buyers. This was the first African regional cartel focused on rare earths and graphite, designed to capture higher rents and reduce buyer leverage.

2. DRC and Zambia: Announced the establishment of Africa’s first Pan-African State Refinery, jointly owned and managed by their governments with partial funding from Gulf sovereign wealth funds. Unlike earlier memorandums of understanding, this facility was mandated to process all cobalt and germanium mined in both countries before export, removing foreign refiners from the supply chain.

Key South American Responses

1. Brazil: Signalled support for China’s measures within BRICS, while offering expanded exports of niobium and bauxite to BRICS partners.

2. Chile: Announced new state-backed lithium refining initiatives, inviting investment from both China and Western partners while committing to a neutral stance on re-export controls.

Private-Sector Responses to all national actions

1. Finance and Investment

Hedge funds rapidly moved into long positions on graphite, neodymium, dysprosium, and gallium, driving further price volatility.
Asset managers rebalanced exposure, cutting allocations to Chinese-listed mining and processing firms while increasing stakes in Australian, Canadian, and African producers.
Sovereign wealth funds in the Gulf invested in African refining projects, positioning themselves as bridge financiers between China and Western demand.
Banks and insurers tightened trade finance for shipments routed through China, while offering premium terms for cargoes from Australia and Africa. Compliance costs surged as U.S. secondary sanctions risk grew.

2. Extractive and Mining

Australian miners accelerated expansion plans, reporting record forward contract demand from U.S., EU, and Japanese buyers.
African producers (Namibia, Mozambique, Tanzania) began renegotiating contracts, insisting on value-add processing or equity stakes in local ventures.
Russian suppliers sought to lock in long-term offtake deals with China and India, while turning away Western buyers.
Exploration firms in Canada and Greenland saw sharp increases in investor interest, though projects remained years away from production.

3. Technology and Semiconductors

Japanese and South Korean fabs reported immediate stress from shortages of high-purity HF and electronic-grade hydrogen peroxide, warning of production delays in wafer cleaning.
U.S. semiconductor firms shifted procurement to Canadian and European chemical producers, though capacity was limited.
European telecom companies slowed 5G/6G rollout plans due to uncertainty over gallium supplies, lobbying Brussels for emergency subsidies.

4. Manufacturing and Industrials

EV manufacturers in the U.S. and EU announced expected production cuts for late 2026, citing graphite and NdFeB magnet shortages.
Defence contractors in the U.S. and Poland accelerated lobbying for guaranteed mineral allocations from stockpiles. Governments argued that stockpiles had to be preserved for absolute emergencies, leaving defence firms to struggle with the same shortages as civilian industries. The result: production delays in missiles, drones, and radar systems — and growing frustration about dependency on Chinese-controlled minerals.
Indian automakers leveraged their preferential access to Chinese graphite and magnets to scale domestic EV output, gaining competitive advantage over Western rivals.
Consumer electronics producers in South Korea and Japan announced price increases, citing higher costs for gallium and rare earth inputs.

5. Market-Wide Consequences

Prices for graphite and heavy rare earths surged 50–60% in the first quarter, with spot and futures diverging sharply.
Western corporates faced an immediate compliance burden, mapping exposure and re-certifying supply chains to secure state support.

Turn 2 – 2028
Chinese Emergency Suspension of Exports

Turn 2 commenced in July 2028. Following a near-collision between U.S. and Chinese naval vessels in the Taiwan Strait, Beijing announced a full suspension of exports of specific minerals and materials critical to AI chipmaking and datacentre infrastructure.

This represented an escalation from Beijing’s actions in turn 1 (January 2026). Whereas earlier measures relied on quotas and licensing delays, the 2028 package constituted a direct embargo on the West’s AI industry. The suspension covered:

Rare earths: neodymium, praseodymium, dysprosium, terbium
- Application: Permanent magnets for cooling systems, robotics, and precision sensors.
- Significance: Shortages disrupt GPU cooling, industrial robots, and advanced sensors.

Gallium and gallium nitride (GaN) compounds
- Application: Power electronics for AI servers, radar, and telecoms.
- Significance: Critical for hyperscale datacentre energy efficiency. Without GaN, scaling AI compute slows dramatically.

Germanium wafers and compounds
- Application: Photonics, infrared optics, high-speed semiconductors.
- Significance: Central to next-generation AI data transmission; shortages delay Western AI supercomputing.

Battery-grade graphite (spherical and synthetic)
- Application: Lithium-ion anodes for datacentre backup systems and robotics.
- Significance: China controls >90% of global processing. Restrictions raise costs for Western AI infrastructure.

Hydrogen fluoride (HF), high-purity
- Application: Etchant and cleaning agent in semiconductor wafer fabrication.
- Significance: Essential for producing advanced AI chips. Without it, fab yields plumet.

Electronic-grade hydrogen peroxide and solvents
- Application: Cleaning and preparation chemicals in chipmaking.
- Significance: Impurities reduce yields of high-end AI accelerators.

Isostatic graphite and furnace components
- Application: High-temperature furnaces for crystal growth in semiconductors.
- Significance: Restriction slows wafer output globally, constraining AI chip supply.

High-purity manganese and cobalt intermediates
- Application: Advanced batteries for datacentres and autonomous systems.
- Significance: Bottlenecks raise costs for backup power and robotics.

Advanced separation and magnet-making machinery
- Application: Equipment for rare-earth processing and magnet production outside China.
- Significance: Prevents the West from scaling independent supply chains to support AI industries.

The embargo applied to the United States, European Union, United Kingdom, Japan, South Korea, Australia, and Taiwan. BRICS members, Gulf states, and India were exempt, and offered preferential contracts at favourable prices.

U.S. Response

The U.S. National Security Council concluded that direct retaliation against Beijing would be counterproductive, as the U.S. urgently needed access to embargoed resources. The State Department was authorised to pursue a package of concessions aimed at persuading China to lift or ease restrictions, including:

Tariff rollbacks on selected Chinese electronics and EV exports introduced in 2026.
Targeted export control relief, offering limited licenses for U.S. firms to sell semiconductor manufacturing equipment and AI accelerators to Chinese buyers.
Market access guarantees allowing certain Chinese technology firms to continue operations inside the United States.
Support for a WTO working group on critical minerals, formally acknowledging Beijing’s central role in the system.
Military signalling restraint, with proposals to scale back freedom of navigation operations near Chinese waters.
Joint initiatives in recycling, circular economy projects, and African infrastructure, structured to give Beijing partial co-leadership.

Beijing responded negatively to the overtures.

EU Response

The European Council judged that escalation would worsen the embargo and instead offered accommodations with Beijing. The European Commission offered a package of measures designed to secure renewed access for EU industries, including:

Relaxation of restrictions on Chinese telecom equipment, with several member states agreeing to reconsider bans on Huawei participation in 5G/6G networks.
Tariff reductions on selected Chinese green technology exports, including batteries and solar panels.
Regulatory concessions, offering to delay implementation of the EU’s proposed Carbon Border Adjustment Mechanism (CBAM) on Chinese steel and aluminium.
Joint research initiatives in green energy and circular economy projects, extending invitations for Chinese firms to participate in EU-funded programmes.
Expanded market access for Chinese firms in European capital markets and investment vehicles, lowering scrutiny from the European Securities and Markets Authority.

Diplomats also opened quiet consultations with Beijing over long-term supply guarantees, proposing that the EU accept Chinese monitoring mechanisms in return for preferential access to critical minerals. Beijing rejected all overtures.

India’s Response

1. Publicly, India reiterated its neutral stance, calling for both sides to resolve differences through diplomacy.

2. India leveraged its exempt status to expand long-term contracts with Chinese suppliers for gallium, graphite, and other rare earth elements (REE). The attempts proved successful for India.

3. Indian AI start-ups received additional state funding under a new AI Growth Initiative, taking advantage of the West’s supply uncertainty.

4. India clearly shifted another step further towards China, seeing the importance of access to China’s resources as far more important than any of its compartmentalised relations with the West.

Australian Response

1. Canberra reaffirmed its commitment to act as a secure supplier of critical minerals to the U.S., EU, and Japan.

2. Fast-track permits were issued for new gallium and graphite projects, with federal loan guarantees.

3. Australia proposed an Indo-Pacific Critical Minerals Partnership to align standards and pool reserves with Quad partners.

Japan’s Response

1. Tokyo declared an industrial emergency and authorised subsidies to secure alternative imports of gallium, germanium, and HF.

2. Japan sought bilateral assurances from India and Australia for priority access to new projects. Australia granted assurances but India stalled and delayed talks.

3. The Ministry of Economy, Trade, and Industry (METI) launched a semiconductor resilience package to expand domestic processing capacity for key chemicals.

Key African States Responses

Namibia, Tanzania, Mozambique announced a Critical Minerals Export Charter, pledging to sell a fixed portion of their annual output under long-term contracts to India, Japan, and Gulf buyers. The move was presented as a way to diversify away from Chinese overreliance. Beijing immediately countered, dispatching state-owned enterprises with aggressive pre-payment offers and equity bids to lock up future supply before these charters could take full effect. This sparked a bidding war, with Chinese financiers undercutting rival deals through higher royalties and fast-track infrastructure packages.

China ultimately came out very well from the contest, regaining significant influence, although India managed to secure meaningful offtakes and improved its standing in the region. DRC and Zambia: Finalised plans to build in-country state-controlled refining hubs, requiring all foreign firms to co-locate refining facilities if they wanted access to new concessions. This represented a structural break with earlier models where ores were exported unprocessed.

Private-Sector Observations and Actions (2028)

Finance and Investment

Hedge funds and commodity traders drove a second wave of price spikes, with gallium, terbium, and dysprosium futures doubling within weeks.
Asset managers began shifting capital into Australian gallium projects, Indian wafer fabrication, and African refining hubs.
Sovereign wealth funds in the Gulf expanded holdings in Chinese and African mineral refiners, aiming to arbitrage supply gaps between blocs.
Banks and insurers tightened risk models for semiconductor supply chains; premiums on East Asia trade finance increased sharply.

Extractive and Mining

Australian producers announced record forward sales of gallium and graphite to U.S. and Japanese buyers, supported by Canberra’s fast-track permits.
African miners renegotiated contracts to include local refining requirements, boosting national revenue shares.
Western mining firms sought joint ventures in South America, especially Chile and Brazil, to secure lithium and rare earth substitutes.

Technology and Semiconductors

U.S. hyperscalers (Google, Microsoft, Amazon) warned of delayed AI datacentre rollouts due to shortages in GaN and high-purity HF. Emergency procurement teams were dispatched to India and Japan.
European chipmakers lobbied Brussels for emergency subsidies to cover soaring costs. Their campaign was successful: the European Commission authorised a new loan facility financed through the European Investment Bank, allowing member states to funnel billions into semiconductor firms to prevent mass production shutdowns.
Taiwanese and Korean fabs announced production cuts in high-performance AI accelerators, citing shortages of germanium and etching chemicals.

Manufacturing and Industrials

U.S. EV and robotics firms cut production targets, citing graphite and magnet shortages, while redirecting R&D toward magnet-free motor technologies.
European automakers reported severe pressure on margins as AI-enabled EV platforms became costlier to produce.
Japanese robotics and sensor manufacturers launched crisis programmes to diversify suppliers, but warned of delays in fulfilling defence and industrial contracts.
Indian EV makers and AI robotics firms scaled exports into Europe, benefiting from stable Chinese supply.
Defence contractors in the U.S. and EU pressed governments for priority access to restricted materials from stockpiles, citing national security obligations. This achieved limited success.

Market-Wide Consequences

A clear two-tier AI race emerged: China, India, and BRICS partners expanded capacity, while the U.S. and EU slowed deployment timelines.
Western corporates faced escalating compliance burdens, forced to certify sourcing lines under U.S. and EU subsidy programmes.
After years of growing geopolitical tension, the structural premium baked into AI-critical minerals (gallium, germanium, graphite, and heavy rare earths) was larger than ever. More than ever, investors treated them as a strategic asset class on par with oil in the 1970s, driving sustained gains for Chinese and Indian mining equities while Western tech and automakers faced persistent downgrades under chronic cost inflation.

Turn 3 - 2030

African Supply Shock

By 2030, the Chinese embargo announced in 2028 remained firmly in place. Despite two years of diplomatic engagement with Beijing, only minor concessions had been extracted. Restrictions on AI-critical inputs were still largely intact, keeping Western industries under strain. Partial concessions achieved included:

Limited waivers for Japanese and South Korean fabs, allowing small volumes of hydrogen fluoride and solvents to flow under tight quotas.
Narrow exemptions for European automotive firms, which secured modest supplies of graphite and NdFeB magnets after direct pressure from Berlin and Paris.
India obtained expanded allocations of gallium and rare earth oxides, though under strict end-use pledges not to re-export to the West.

Overall, these adjustments did little to alleviate Western dependency. China kept the core embargo intact, ensuring that U.S. and EU technology and defence sectors continued to operate under conditions of scarcity and strategic vulnerability.

Turn 3 commenced in March 2030, as the Democratic Republic of Congo (DRC) entered a deep political crisis following disputed elections. Rebel groups gained control over mining operations in Katanga province, disrupting exports of cobalt, germanium, and rare earth by-products. In parallel, Namibia’s government announced a suspension of all new export permits for rare earth concentrates pending a full contract review, citing the need to increase domestic value capture. Regional instability spread as logistics routes through Mozambique and Tanzania were disrupted by strikes and sporadic violence, further delaying shipments.

China’s Role

Beijing moved quickly to exploit the crisis. The Congolese authorities accepted Chinese loans, security assistance, and state-owned enterprise stabilisation agreements, formally granting Beijing priority rights over cobalt and rare earth exports. This marked a decisive shift of the DRC into China’s sphere of influence, consolidating its leadership in Africa’s critical minerals sector.
Chinese state-owned enterprises redirected cobalt, germanium, and rare earth element concentrates from the DRC and Namibia to refining hubs in Guangdong and Inner Mongolia, tightening Beijing’s dominance over processing capacity.
Chinese and Russian intelligence services coordinated covert operations against Western-linked assets. Mining infrastructure in Canada, Australia, and Greenland suffered unexplained shutdowns, fires, and strikes, widely attributed in Western intelligence assessments to sabotage.
Similar disruptions hit logistics nodes in East Africa and the Middle East that were vital for EU and U.S. backed diversification efforts.
Chinese banks rolled out yuan-denominated rescue finance to African governments, with mineral export guarantees tied to BRICS trading blocs — ensuring Western financiers were pushed out of African negotiations.

U.S. Response

Deployed U.S. intelligence and special operations resources to counter Chinese–Russian subversion in Africa, focusing on protecting Western mining infrastructure in Tanzania, Zambia, and Kenya.
Invoked the Defense Production Act, expanding coverage to germanium, gallium, and cobalt substitution research, with accelerated funding for non-Chinese refining capacity in Canada, Australia, and South America.
Launched a multilateral initiative with the EU, Japan, and Australia to coordinate naval patrols protecting mineral shipping lanes in the Indian Ocean and East Africa.
Publicly called for an emergency UN Security Council session, accusing China and Russia of destabilising African states for economic gain, despite anticipating Chinese and Russian vetoes.
Within the National Security Council, the U.S. began to seriously consider military options to secure direct access to resources in Africa. Pentagon assessments concluded these options were highly unlikely to achieve lasting control of supply and carried extreme escalation risks.
Senior officials also explored creating a well-funded covert task force to sabotage Chinese means of production and refining, but the plan was shelved on the grounds that Chinese retaliation would outweigh any temporary disruption.

EU Response

Activated the Crisis Mechanism under the Critical Raw Materials Act for the second time, coordinating joint procurement of cobalt, germanium, and rare earth elements through the European Raw Materials Board.
Expanded strategic stockpiling programmes, instructing member states to secure reserves equivalent to at least 12 months of consumption for priority industries, including automotive, defence, and semiconductors.
Announced a new Africa–EU Minerals Partnership Facility, committing €15 billion to support security, governance, and infrastructure around mining corridors in Namibia, Mozambique, and Zambia.

Launched direct negotiations with Beijing seeking exemptions for European firms from the embargo. Beijing demanded:
- EU withdrawal from U.S.-led technology sanctions against Chinese firms
- A suspension of European restrictions on Huawei and other Chinese telecom vendors
- Preferential Chinese access to EU battery and EV markets.

Brussels judged these demands politically impossible to accept, and talks collapsed.
Issued a temporary subsidy package for European automakers and wind turbine producers to offset soaring input costs.

Long-Term Private Sector Judgments by 2030

After turn 3, we asked the private sector to assess the big picture at hand and the position it found itself in. The private sector largely concluded that Western efforts to diversify had failed. China’s dominance was seen as entrenched, especially with Russia supporting covert disruption abroad.

Across sectors, executives shifted from short-term crisis management to long-term restructuring, accepting higher costs, slower growth, and the likelihood of a fragmented global market for the foreseeable future.

Private-Sector Demands of Western Governments (2030)

In the aftermath of repeated supply disruptions, Western corporates and investors became more vocal about what they needed from their governments to remain competitive against China’s entrenched dominance. The main demands included:

Finance and Investment
• Stability guarantees: clearer state-backed insurance and credit support for investing in high-risk jurisdictions like Africa and South America.
• Strategic clarity: predictable long-term industrial policy, avoiding fragmented or short-lived subsidy programmes that undermine investment confidence.
• Public–private coordination: creation of standing government–industry taskforces on critical minerals to share intelligence and coordinate risk responses.

Extractive and Mining
• Regulatory acceleration: streamlined permitting for mines and refineries in the U.S., EU, Canada, and Australia to cut lead times from decades to years.
• State financing: more generous loan guarantees and equity injections to compete with Chinese state-backed enterprises.
• Security partnerships: Western governments to provide physical and cyber protection for mining operations abroad against sabotage from Chinese–Russian intelligence activity.

Technology and Semiconductors
• Export control realism: firms urged Washington and Brussels to calibrate sanctions on China carefully, warning that sweeping restrictions risked accelerating Beijing’s retaliation.
• Allied coordination: calls for deeper U.S.–EU–Japan–India cooperation in semiconductor materials, with shared strategic reserves of HF, gallium, and germanium.
• R&D funding: stronger state funding for research into substitutes for rare earths, gallium, and graphite, as well as next-generation semiconductors less dependent on Chinese inputs.

Manufacturing and Industrials
• Priority allocations: automakers, turbine producers, and defence contractors demanded preferential access to government stockpiles to keep production lines open.
• Reshoring incentives: subsidies and tax breaks to build magnet, battery, and chip component facilities inside allied countries.
• Diplomatic leverage: corporates pressed for Western governments to negotiate long-term access agreements with India, Gulf states, and South America, treating these as strategic relationships on par with energy security.

Overall Private-Sector Message and Government Response

Western firms were clear - they could not succeed on their own against China’s state-backed dominance. They needed decisive, coordinated, and well-funded government action across finance, security, R&D, and diplomacy. Without this, many judged that Western industries would remain permanently disadvantaged by 2030 and beyond.

By 2030, only a portion of the private sector’s lobbying translated into concrete government action. In finance, state-backed insurance and credit guarantees were approved, though only in limited volumes and primarily for African projects. In extractives, regulatory streamlining and loan guarantees moved forward in the U.S., Australia, and Canada, but not at the pace industry had hoped. Technology firms were most successful: EU chipmakers won emergency subsidies through European Investment Bank loans, and Washington expanded R&D funding for substitutes and recycling initiatives. By contrast, demands for preferential stockpile allocations and long-term mineral access agreements were largely ignored or deferred, leaving defence contractors and automakers facing continued shortages.

Turn 4 - 2033
China’s India-U.S. Wedge

By 2033, Beijing had already secured significant influence over India’s rare earth and critical mineral policies, ensuring preferential flows and strict controls against re-export to the West. However, China judged that this was not enough. Confident in its technological lead and growing global dominance, Beijing sought to pry India further away from Washington’s orbit — especially in defence and strategic technology.

To achieve this, in February 2033, China rolled out a coordinated pressure campaign, including:

Suspension of preferential supply contracts for Indian refiners and manufacturers unless Delhi reduced defence-industrial cooperation with the U.S. and EU.
Compliance blacklist targeting Indian firms linked to joint defence or AI projects with Western partners; these companies were banned from accessing Chinese minerals, machinery, or finance.
Joint warnings with Moscow, declaring Indian collaboration with U.S. defence primes 'unfriendly activity within BRICS'.
Covert intelligence operations escalated with cyberattacks on Indian refining hubs in Odisha and Gujarat, and sabotage of logistics routes through Myanmar and Sri Lanka, all attributed to Chinese proxy actors.
Conditional reinstatement of supplies were offered if Delhi agreed to:
- Restrict defence-industrial cooperation with the U.S. and EU.
- Expand Chinese participation in Indian digital and infrastructure networks.
- Support Beijing diplomatically on key UN votes concerning African security and Taiwan.
- Leave the Quad (a strategic diplomatic partnership between Australia, India, Japan, and the U.S.)

India’s Response

Delhi quietly accepted that continued access to Chinese minerals was too important to jeopardise. It agreed to restrict defence-industrial cooperation with the U.S. and EU, shelving several joint drone and missile projects that had been under negotiation.

The government authorised limited participation of Chinese firms in Indian data and infrastructure projects, allowing Beijing-linked companies back into telecoms, smart grid, and transport tenders.

At the UN, India aligned with China on two high-profile African security votes, breaking with Western partners and signalling a more Beijing-friendly tilt.

While Delhi maintained rhetorical neutrality, in practice India had tilted decisively toward China, calculating that survival of its AI and manufacturing sectors outweighed the strategic costs of distancing itself from Washington.

Privately, India agreed with Beijing that it would leave the Quad by the end of 2036.

U.S. Response

The State Department launched an urgent diplomatic campaign in Delhi, offering expanded trade access and new defence cooperation packages in an attempt to counterbalance Beijing’s pressure.

Washington authorised a new defence-industrial pact, promising technology transfers for UAVs, naval propulsion systems, AI, and missile defence if India reversed course.

The U.S. Treasury created a $20 billion credit facility to finance Indian critical minerals projects in Africa and South America, pitched as an alternative to Chinese supply guarantees.

American officials publicly reaffirmed support for India’s role in the Quad, while privately warning allies that Delhi was slipping further into Beijing’s orbit.

Overtures to India resulted in failure. Within the National Security Council, analysts concluded that India’s concessions represented a strategic loss, strengthening arguments that China’s mineral dominance could not be contained through diplomacy alone. This fed into growing discussions about more direct options — severe economic coercion or even military contingencies — should China continue on its current aggressive path.

EU Response

Brussels expressed concern over India’s concessions to Beijing but avoided open criticism, fearing further alienation.

The EU instead redirected diplomatic and financial resources toward Africa and South America, seeking to lock in long-term mineral access agreements to offset its growing dependency. This brought limited success, but quantities could not meet demand.

Quiet approaches were made to Delhi to maintain at least limited graphite and rare earth element flows for European automakers, but these overtures achieved little as India prioritised its arrangement with China.

Key African Responses

DRC and Zambia deepened integration with Chinese state-operated enterprises, signing exclusive long-term offtake agreements that tied cobalt and germanium flows to BRICS markets for the next decade.

Namibia and Tanzania accepted expanded Chinese security deployments around major mining sites, formalising Beijing’s role as both financier and guarantor of mineral corridors.

Mozambique signed a 30-year infrastructure-for-minerals package with Beijing, covering rail and port modernisation in return for guaranteed exports of graphite and rare earth elements.

South Africa announced the launch of a BRICS-backed Critical Minerals Exchange, headquartered in Johannesburg, giving China and its partners more control over pricing and contract standards.

African Union (AU) leaders praised the new arrangements as ‘securing stability’, but Western observers noted that African supply diversification projects tied to U.S. and EU finance were collapsing, squeezed out by Chinese-backed alternatives.

Market Observations in 2033

• Finance: Investor enthusiasm for India — so strong between 2028–30 — began to crumble. Delhi’s concessions to Beijing cast doubt on India’s role as a secure ‘neutral hub’, and capital flows slowed as hedge funds and asset managers reassessed exposure. Risk premiums on Indian mining equities and infrastructure bonds widened significantly.

• Western Tech: U.S. and European technology firms viewed India’s tilt as a severe blow. Hopes of relocating further semiconductor and AI production to Delhi now looked unrealistic, leaving Western corporates trapped in dependency on Chinese-controlled inputs. Share prices for Western chipmakers and datacentre firms slumped on revised outlooks.

• Extractives: Australian mining firms were split. Some saw opportunity in Europe and Japan’s scramble for non-Chinese supply, expecting strong offtake contracts. Others worried that China’s deepening control in Africa would allow Beijing to flood markets or undercut prices, threatening long-term profitability for Australian projects.

2035 - Turn 5
The Hainan Crisis

In June 2035, the Chinese Navy boarded and seized a U.S.-destined bulk carrier transporting rare earth concentrates from Mozambique to California via Singapore. The vessel was diverted to Hainan under Chinese escort, with Beijing declaring the cargo a violation of its mineral export restrictions.

Within 12 hours, Chinese naval forces intercepted two further shipments — one EU-bound consignment of cobalt intermediates from Zambia, and a Japanese-chartered vessel carrying gallium from India.

The Ministry of Commerce announced that China would “actively enforce its mineral export controls at sea”, warning that all cargoes deemed to undermine Chinese sanctions could be interdicted.

This marked the first time Beijing had overtly used military force to block Western access to critical resources, transforming mineral restrictions from an economic contest into a maritime security crisis. The incident became known as the Hainan Crisis.

U.S. & EU Responses

The U.S. government reacted with fury and alarm to Beijing’s maritime seizures. For Washington, China’s decision to openly interdict U.S.-bound critical minerals was an overt attempt to choke America’s technological and military base.

• Emergency Mobilisation: The Pentagon ordered carrier strike groups into the South China Sea and Indian Ocean to escort mineral shipments, while Strategic Command raised readiness levels for long-range strike forces. Military planners judged that any further interdictions would need to be met with direct action.

• Alliance Coordination: In Brussels, Washington and the EU agreed for the first time in several years that a fully combined Western approach was essential. Joint naval patrols were planned, and transatlantic taskforces were established to align sanctions, subsidies, and strategic stockpiling policies.

• Diplomatic Intervention: Before escalation tipped into war, a group of MENA states — led by Saudi Arabia, the UAE, and Qatar — brokered an emergency summit. Their mediation succeeded in securing the release of detained vessels and a temporary pause in further Chinese interdictions. War was narrowly avoided, but the precedent was set: China had demonstrated its willingness to physically deny the West access to resources.

Inside Washington, the crisis triggered a profound strategic shift.

• Thucydides Trap Thinking Prevails: National Security Council analysts concluded that the U.S. and China were now locked in an unavoidable trajectory toward conflict. A consensus formed: unless Beijing’s dominance of rare earths and critical minerals was broken, the U.S. risked permanent strategic subordination.

• War Planning: The Joint Chiefs and combatant commanders were tasked with drawing up renewed campaign plans against China, framed around the expectation that the next Chinese aggression towards Taiwan, Japan or the U.S. would provide an adequate casus belli. Even if the signs of aggression were ambiguous or limited, Washington resolved that the next flashpoint would be treated as sufficient pretext for a campaign of shock and awe.

• Beyond Conflict – Occupation Planning: Parallel studies were commissioned in the Departments of Defense, State, and Energy on post-conflict options. These included scenarios for the long-term occupation of key mineral and refining zones inside China to dismantle Beijing’s monopoly and re-establish global supply under Western control.

The operation to neutralise China’s armed forces and occupy key regions of the country was named Operation Rising Eagle.

By the end of summer 2035, the U.S. had stepped across a threshold. Open conflict had been avoided until this point, but Washington concluded that a decisive confrontation was inevitable within four years.

By January 2036, Operation Rising Eagle was approved for execution at earliest opportunity.

Private Sector Views – January 2036

China was seen as firmly entrenched, its dominance in refining and processing largely intact despite years of Western diversification efforts. Most firms assumed Beijing would remain the global gatekeeper for gallium, germanium, graphite, and heavy rare earth elements throughout the 2040s. Investors priced Chinese control as the structural baseline.

India was no longer viewed as the promising investment it had once been. After years of concessions to Beijing and limited success in Africa, investor sentiment turned sharply negative. Many concluded that India had failed to establish itself as a credible alternative hub and would remain trapped between dependency on China and limited Western backing.

Western investors and corporates criticised Washington for not having a grand strategy — reacting to crises rather than shaping them, and failing to think far enough ahead to blunt China’s resource dominance. Few believed the U.S. could reverse Chinese control without unacceptable risks.

Europe was considered the weakest link. EU policy was viewed as reactive, subsidy-heavy, and highly dependent on Chinese and Indian supply. European automakers and chipmakers carried persistent downgrades in global markets, with investors sceptical of Brussels’ talk of ‘strategic autonomy’.

Technology: Western tech firms judged that China had begun to pull away dramatically. Chronic shortages, soaring input costs, and uncertain access to critical minerals undermined AI and semiconductor roadmaps. The race was no longer viewed as close, Beijing was seen as securing an enduring technological lead.

Finance: Global markets grew pessimistic about the West’s structural position. Capital inflows into Western tech dried up, with investors favouring Chinese and Gulf equities instead. U.S. and EU firms saw rising costs of capital as financiers concluded that Western industries were fighting a losing battle against China’s entrenched dominance.