Glaring as Germany’s shortsightedness about Russia now appears, the U.S. is stumbling into an analogous trap with our primary geopolitical opponent, China.
What’s true with Russia, will be true for China, too.
E namored though English-speakers are of Anglo-American heroics, the 20th century’s European wars can be viewed through another lens: contests between the German and Russian peoples for continental supremacy. In the aftermath of the Second World War, the United States provided the bulwark against Russian domination, shielding West Germany from the threat to the east and allowing it to flourish economically. In the present century, a re-united, hubristic Germany has chosen to ignore or downplay the risk posed by Russia centering its policy toward Moscow on the energy trade. As part of its Energiewende, Germany is weaning itself off domestic coal and existing nuclear generation and has replaced a large portion of that power output with energy sourced from Russia.
In 2021, imports from Russia accounted for more than half of Germany’s coal use, along with more than a third of crude-oil and natural-gas use. For the past decade, Germany has been the largest export market for Gazprom, a company in which the Russian state has a majority stake and effective control. The pièce de résistance of the Russo-German energy axis was supposed to be the Nord Stream 2 natural-gas pipeline.
The flaws in the German framework are almost too painfully blatant to spell out: Putting a significant part of your energy-supply system in the hands of an aggressive, revanchist state like Russia is to offer a potent geopolitical lever. The Kremlin has made no secret of the direction it has been going since, at least, its war with Georgia (construction work on the first Nord Stream pipeline began some two years after that war). Given the danger that Russia, a state that puts power politics above economic efficiency, would use that leverage as a way to influence the direction of German foreign policy in the event of further adventurism from the Kremlin, this was unwise. But even if Russia did not pull that lever, any failure by Germany to extricate itself from its dependency on Russian fossil fuels would make it an unwitting funder of the Kremlin’s predations.
Too late for its energy security and, more obviously, too late for the Ukrainians, the Germans have realized the folly of energy alignment with a geopolitical foe. As Russian forces gathered on the border with Ukraine in February, new German chancellor Olaf Scholz announced a certification halt to Nord Stream 2. As the invaders moved deep into Ukraine, Scholz announced that Germany will increase its strategic reserves of natural gas and coal. Even with these changes, though, Germany refuses to starve the Russian war machine by abstaining from its energy exports altogether. Inexplicably, the German government decided on March 9 not to extend the lifespan of the country’s existing nuclear facilities. Decades of policy errors associated with the Energiewende, coupled with a refusal to devote adequate funds for defense, have rendered Germany tottering geopolitically.
Glaring as Germany’s shortsightedness now appears, the U.S. is stumbling into an analogous trap with our primary geopolitical opponent. Menacing though Russia is, for the United States, the long-term challenge is China, a state seeking to establish hegemony in the world’s most populous and most economically dynamic region, the Asia-Pacific. This century’s global politics will be defined by Sino-American competition in that region — and the world more broadly. Amid this reality, the United States ought to reconsider an energy and environmental orientation that favors China.
Just ten months ago, the International Energy Agency (IEA) released a report warning that dependence on China is an inherent risk in the Biden administration’s forced energy transition. “The rapid deployment of clean energy technologies as part of energy transitions,” the IEA wrote, “implies a significant increase in demand for minerals.” China, which the Biden administration deems “our most serious competitor,” has a dominant presence in the production (and more) of mineral resources required for the energy system President Biden champions — one anchored by wind, solar, and battery technology. While it is a major producer of many of the minerals in question, China’s processing and refining prowess is its key advantage. China processes more than half of the world’s cobalt, lithium, and the class of rare-earth elements (REEs) that includes neodymium, dysprosium, praseodymium, and terbium.
Wind energy, despite its simple appeal, demands significant quantities of scarce minerals. IEA shows that offshore and onshore wind power requires twice as much mineral mass per megawatt of electricity generation than nuclear power and more than five times as much as natural-gas power. The rare-earth elements that wind turbines require are the components upon which the risk from China weighs most heavily. China produced 60 percent of the world’s REE total in 2019 and held a 90-percent market share in REE processing. IEA describes China’s position vis-à-vis REEs as “dominance . . . across the value chain.”
The solar-panel situation is not much better. Copper is an important component for deploying photovoltaic solar power, and China is the world’s leading copper processor, with a market share of 40 percent. It is also the world’s third-largest copper producer, and the largest outside of South America. China is dominant in the production of solar panels themselves as well. According to the Bloomberg NEF solar-research division, China now produces 80 percent of the polysilicon and 98 percent of the wafers and ingots that are used in panels worldwide.
Batteries are what, in theory, would make wind and solar viable as lead contributors to a power grid. Without batteries, wind and solar are undermined by their intermittency, generating only at nature’s whim. As IEA describes, China is the central global actor in battery production. Minerals crucial to battery performance, longevity, and energy density are largely under the control of Chinese interests. China’s position in the lithium, cobalt, and graphite supply chains is, from a geopolitical perspective, dangerously strong. According to IEA, more than half of global lithium chemicals are produced in China. Chinese companies like Tianqi Lithium also hold large stakes in South American producers. In lithium hydroxide, China’s presence is even greater; China produced four-fifths of the global total in 2019.
While the Democratic Republic of Congo (DRC) is the global hub of cobalt mining, China processes 70 percent of global production. Moreover, IEA notes, “China has influence over many assets in the DRC through foreign direct investment. It is estimated that one-third of China’s imported intermediate products are from mines or smelters in which it has a stake.” China accounts for more than two-thirds of global graphite production, currently the top choice for the anode in lithium-ion batteries.
In order to meet the requirements of the Paris climate agreement, to which President Biden has re-committed the U.S., IEA anticipates a skyrocketing of the global energy system’s demand for a wide range of these minerals. In the Paris-conforming scenario, by 2040, demand for lithium would see a 42-fold increase relative to 2020, graphite a 25-fold increase, cobalt a 21-fold increase, and REEs a seven-fold increase. The optimist would argue that a continent-spanning country like the United States ought to be able to produce and process these minerals or comparable alternatives with as much success as China. While there is good sense to that position, our politics prevent it. Just as the Biden administration hampers domestic fossil-energy production, it retards production of the very resources needed for its own agenda. In January of this year, for example, President Biden’s Interior Department cancelled two federal leases for the mining of copper, nickel, and other minerals in Minnesota. To the extent that opportunities exist for onshoring resource production, we are spurning them. The parallels to Germany’s failed Energiewende are eerie and portend grave risk, particularly as China threatens its own Ukraine analogue, Taiwan.
Energy is at the core of economic productivity and living standards. Placing those values into the clutches of a rival invites calamity. Unwilling to cut its energy ties with Russia, Germany will continue to send it money, even as it sends weapons to Ukraine. The United States cannot risk giving China a similar lever by forcing its energy economy in China’s favored direction. Our current policies do just that, limiting American energy productivity and layering on geopolitical advantages for our only near-peer competitor.