Rare Earths
Rare Earths
Audio Recording by George Hahn
Last week, U.S. forces entered Venezuela and arrested President Nicolas Maduro. Regardless of your politics, this was a serious flex from the best-performing organization in history: the U.S. military. Army Delta Force and 160th Special Operations Aviation Regiment (specialized helicopters) accomplished in 35 minutes what Putin has been unable to accomplish in Ukraine in 35 months. But, like most Bond films, our overseas adventures begin strong but then come off the tracks.
Ostensibly, the goal was to stop the flow of fentanyl into the U.S., but there is no flow; according to the DEA, Venezuela has nothing to do with smuggling fentanyl. Trump’s real objective is oil. In a press conference announcing Maduro’s capture, the president mentioned drugs just five times, while talking about oil 27 times. Like so many things with Trump, the “Donroe Doctrine” is a noxious cocktail of greed and stupidity, garnished with calcified ideas from the past. Oil still matters to the global economy, but launching a regime change for oil is like invading Costa Rica for sand. Venezuela’s black gold is heavy crude; it costs upwards of $70 a barrel to extract oil you can sell for $58. The world power curve has been shaped by oil for decades, but a different resource is bending that curve. So, for a moment, let’s ignore that masked government agents are murdering people in American cities — and talk about the new oil. BTW, America’s very founding was an attempt to escape this type of state-sponsored depravity. But I digress.
Rare Earths
Rare earths is an umbrella term for 17 metallic elements. Despite the name, they aren’t especially rare, just difficult to extract and refine. Like petroleum, which is a raw input for more than 6,000 products, rare earths find their way into a wide range of modern technologies, including smart devices, solar panels, medical imaging equipment, and vehicles (both electric and internal combustion). Also, similar to petroleum, rare earths are vital to U.S. defense capabilities, from tanks and Tomahawk missiles to satellites. RAND estimates an F-35 fighter contains more than 900 pounds of rare earth materials in its engines and electronics. An Arleigh Burke–class destroyer requires approximately 5,200 pounds, and a Virginia–class submarine uses about 9,200 pounds. The question isn’t what do we need rare earths for, but what do we not need rare earths for? A: Nothing important.
Interests: Salt, Bird Shit, Rubber, Oil
The idea that nations don’t have friends, only interests, is a worldview variously attributed to Lord Palmerston, Charles de Gaulle, or Henry Kissinger. The maxim doesn’t capture the idealism that (sometimes) drives American foreign policy, but it does sum up how statesmen explain the logic of sacrificing blood and treasure in the pursuit of national interests. A nation that secures its interests, oftentimes natural resources, controls its destiny.
For the ancient Romans, salt was more than seasoning, it was the backbone of commerce. In Rubicon: The Last Years of the Roman Republic, historian Tom Holland views control of the salt trade as the key building block of Rome’s early wealth and military dominance, noting that Rome’s location was desirable, in part, because of its proximity to the salt pans at the mouth of the Tiber River. In SPQR: A History of Ancient Rome, historian Mary Beard argues that Rome’s government saw salt as a strategic resource akin to how modern states view energy. Rome built roads to transport salt (in particular, the Via Salaria) and even subsidized salt prices to preserve domestic order.
In the 19th century, Peru held a near-monopoly on guano (bird shit), a critical input for fertilizer as well as gunpowder. In response, the U.S. Congress passed legislation in 1856 authorizing the seizure of more than 100 guano islands. In How to Hide an Empire, historian Daniel Immerwahr notes that guano was so valuable that many called it “white gold.” As Immerwahr writes, “It was the pursuit of this ‘white gold’ that made the U.S. an oceanic empire and laid the foundations for overseas territorial conquests to come.”
During World War II, Japan’s push into Southeast Asia cut off 90% of the global supply of natural rubber, spurring the U.S. to launch a program to mass produce a synthetic alternative. Without rubber, America couldn’t produce tires for trucks and planes, life rafts, oxygen masks, pontoon bridges, certain medical supplies, raincoats, boots, and thousands of other products necessary for waging war. In The Economic Consequences of U.S. Mobilization for the Second World War, Alexander J. Field, professor of economics at Santa Clara University, argues, “Redressing the loss of Southeast Asian rubber imports was more important than the Manhattan Project in making Allied victory possible.”
In 1973, Americans got a crash course in the geopolitics of oil when the OPEC nations flexed their economic muscle to undermine U.S. support for Israel during the Yom Kippur War. The fallout from the embargo caused the U.S. to reassess our dependence on Middle Eastern oil, leading to increased domestic production and a greater emphasis on energy efficiency. Beginning in 2019, nearly 50 years after OPEC’s embargo, the U.S. is now a net exporter of oil. Though we still import some oil, 52% comes from Canada and another 11% from Mexico. Notwithstanding the Donroe Doctrine, which can be summed up as “alienating allies and comforting enemies,” the U.S. oil supply is no longer vulnerable to exogenous shocks.
Leverage
If rare earths are the new oil, China is the new OPEC. Chinese mines supply nearly 70% of the ore from which rare earth elements are extracted, and more than 90% of the refined materials. Meanwhile, the U.S. imports 70% of its rare earths from China. This asymmetry is a strategic vulnerability. According to a 2025 report from the Center on Strategic and International Studies, China has demonstrated a willingness to “weaponize” rare earths. In 2010, for example, China cut off rare earth exports to Japan over a maritime dispute, threatening to halt its automotive production. Japan responded by importing more rare earths from Australia in the short term and ramping up domestic production long term. Since then, Japanese rare earth imports from China have fallen from 90% to 60% — still too high, but low enough that Tokyo has options if Beijing restricts access. This week, China again banned the export of rare earths to Japan over its support for Taiwan, but, notably, the ban included a far broader category of goods, suggesting China’s rare earth leverage over Japan has weakened.
It’s a different story for the U.S. In April, China retaliated against Trump’s so-called reciprocal tariffs by restricting the export of seven types of rare earths. Trump folded, naturally, but even after reaching a deal in October to resume exports, the U.S. remains at China’s mercy. According to a recent Bloomberg report, continued restrictions on deliveries of raw materials “hamstring” U.S. efforts to build domestic rare earth processing capacity. Meanwhile, the president’s plans to secure alternative sources of rare earths would be laughable if they weren’t so stupid, i.e., hurting others while hurting ourselves. We’re threatening to seize Greenland from Denmark, a NATO ally, despite Greenland’s rare earth deposits being low-grade and costly to extract. We also shook down Ukraine for rare earths, but that deal could take more than a decade to bear fruit, as 40% of Ukraine’s mineral resources are inaccessible due to Russian occupation. While we flounder, China dominates. As Deng Xiaoping famously said back in 1992, “The Middle East has oil, China has rare earths.”
Bonanza?
In 2024, reports out of Wyoming suggested that the U.S. had hit a rare earth mother load at Halleck Creek. Geo Hussar, an (outstanding) influencer who focuses on geopolitics, believes Halleck Creek, with an estimated 2.3 billion metric tons of ore, 50x China’s reserves, will eventually break Beijing’s stranglehold over rare earths. But according to Karl Friedhoff, a fellow at the Chicago Council on Global Affairs, Halleck Creek is likely to net closer to 7.5 million metric tons of usable rare earth material after extraction and processing. Even using the lower estimate, that’s enough to catapult the U.S. from seventh to third place, just behind Brazil. Still, the objective is getting rare earths out of the ground and into the supply chain. Unfortunately, it takes American mining firms an average of 29 years to go from discovery to operations, putting the U.S. next to last worldwide, just ahead of Zambia.
Long Game
China monopolized rare earths by providing capital to its leading firms, encouraging rare earth acquisitions abroad, banning foreign companies from buying domestic mines, and eventually consolidating its industry into a few giant players, giving it leverage over prices. In other words, China played the long game. According to a 2025 Carnegie Endowment for International Peace analysis, both the Biden and Trump administrations correctly identified the need to contest China’s rare earth dominance. But to do so, the U.S. must marshal a combination of innovation, international cooperation, and long-term industrial planning. Based on our history, I’m optimistic. Based on our present, however, the good money is on pessimism / catastrophe. Cutting research funding and pursuing a xenophobic immigration policy undermine innovation. Careening from one budget crisis to the next renders long-term industrial planning nearly impossible. And alienating allies while comforting dictators squanders the soft power that made the U.S. the indispensable nation.
One of my favorite aphorisms says “old men should plant trees whose shade they know they’ll never sit in.” Our rare earths deficit developed at the speed Hemingway attributed to bankruptcy — gradually, then suddenly. Our failure is bipartisan, and blame goes to the public and private sectors alike. Rare earths aren’t rare. Long-term, strategic investment is. And the scarcest resource in America today is leaders who will invest in a future we don’t immediately profit from.
Life is so rich,
P.S. My Prof G Markets co-host Ed Elson has launched a Substack. How original. Ed’s first installment is a deep dive into the business that defined 2025: OnlyFans. Read it here.
28 Comments
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Donnie T needs to watch Landman…Billy Bob done explained the oil industry in two sentences…
“China monopolized rare earths… encouraging rare earth acquisitions abroad, banning foreign companies from buying domestic mines, and eventually consolidating its industry into a few giant players… In other words, China played the long game.”
Wish we had leaders that did the same, instead of playing nothing but the short game to win re-election for our do nothing, lifetime politicians. And we all keep re-electing them. Even the liberal capital of the country, California keeps re-electing Pelosi (insert inside trading joke) who is opposite of what liberals claim they want.
I love your analysis, your Adrift book, your newsletter, and how deep you go. However, as a Venezuelan-American, I feel you are supporting Maduro when you name him as President, instead of a dictator, which he truly was. Not just for semantics. He lost the last election by a landslide, didn’t admit it, and has put in jail most people who are against him. I don’t like Trump at all (since I became a US citizen, I have always voted for democrats), but I’m deeply grateful, as most of us Venezuelans are, for someone finally willing to take action and take him to jail. We don’t care if it was because of oil or whatever. When you are drowning, and someone rescues you, you don’t care if they are a pirate. We still have a long way to go, but it’s a start that we have been waiting for more than 20 years.
Why don’t you stop speculating about the situation in Venezuela and come live here or in Cuba, so you can have a strong point of view, not the weak one you have now? Besides, calling a criminal with millions of prior offenses PRESIDENT shows you’re completely out of touch. He’s also tired of stealing elections with the support of the DEMOCRATIC PARTY, which is totally complicit in all of this, to the point that even the DEA is involved. I recommend you do better research on Venezuela and the region, which is being held hostage by narco-governments, and all of this was allowed thanks to so many periods of Democratic rule, which deceived you, as is typical of socialist tendencies (backwardness). I considered you a mentor, but I’m starting to think I was wrong.
While we are complaining about the absence of strategic thinking, let’s not forget the historical and current disregard for education, health and social wellbeing. If only old white men cultivated trees (of any kind) instead of enemies, we would be lucky.
The ability to play well with others seems to be in short supply.
Whatever the reasons for the US move on Venezuela, they have nothing to do with access to niche RE. CAD, AUS and Brazil alone can swamp potential US RE feestock needs, never mind the political hotbed resources the US houses itself. So, take these niche RE elements off the recent Trump move motivation list. GLTA – Rare Earths Investor (REI)
This was terribly written, complete waste of my time to read. I commend you for being willing to share your opinion proudly, but I’d suggest reminding readers that this is an opinion. There is nothing wrong with opinions, but it is wrong to present opinion as objective facts. Had you done this I’d continue reading your opinion, but I’ll be sure to unsubscribe from your ego. Be careful with success it leads to a certain (unappealing) tone, trump is a good example of this.
Honestly? What are you, 12 years old? You’re a subscriber, and you weren’t aware this is Prof G’s OPINION? Should Playboy (back when they were a thing) have reminded everybody that it was a girly magazine? So unsuspecting people wouldn’t be shocked when they saw pictures of naked women? That’s the most idiotic comment I’ve seen on one Prof G’s blog posts. Dude, try Sesame Street–they’re pretty upfront about what they are.
We don’t seem to have a real handle on what our real rare earth resources actually are. Mines and processing facilities have taken a long time to develop. So we are now actually starting to address this issue. Let’s let our entrepreneurial resources go to work on finding a solution.
I believe China can get more than enough oil and NG from Russia. Coal can continue from NK. But China continues to push solar/wind/wave/geothermal development for its own consumption. They are going to lap us and leave us in the dust in this regard.
As for Rare Earth: I have made some good money on USAR/MP/CRML stock over the past year and even more since Jan 1. I root for their success for our country, our compannies, and my own selfish wallet.
1. Strike a country under false pretenses (WMD’s & al Qaeda! Drugs & commies!)
2. Call in the oil barons (at least Trump is being honest about this, unlike Bush/Cheney)
3. Hang the “Mission Accomplished” banner
4. Wait for the insurgency
Where have I seen this movie before?
Trump is trapped in the past. He wants to restore Big Oil in Venezuela a half century after Perez and Chavez nationalized it. As you explained, we solved the problem of our dependence on foreign oil. If oil prices do rise, literally millions of dormant U.S. wells from the Gulf of Mexico to the Dakotas can spring to life. Donald Trump is solving problems that Fred Trump complained about. Today’s challenges such as developing rare earth supplies and increasing clean electricity production are completely off his radar.
REE’s are vítal to info era based on justície.
Afghanistan. Make a deal with the Taliban for the Rare Earths. The country may be able to mine its way out of being stuck in the 6th or 12th century…
wise as always.
Scott –
You failed to give credit for the superb performance of the 3d Bn 75th Ranger Regiment from Fort Benning that was the force, the muscle, behind the raid.
The Rangers appeared silently out of the darkness, secured the perimeter, cordoned off the house, killed off the Cuban protection force, and blocked reinforcements whilst killing 75 Cuban mercenaries.
Once done, Delta breached the house, secured the package, and transported it to safety.
Think of Delta like the surgeons who arrive after the Rangers have secured the operating theater.
And, remember, RLTW — Rangers lead the way.
“People sleep peacefully in their beds at night only because rough men stand ready to do violence on their behalf.” – George Orwell <<< also attributed to a half dozen others includng Winston Churchill
Well done, Rangers. and that is coming from an ex-Marine.
I thought it was “former marine”…
You can guarantee that the US will siphon off Halleck Creek to preferred cronies – and absolutely terminate any and all environmental regulations in the name of “national security”. Eventually, the entire region area will be so toxic that nothing can be done with it – and the taxpayers will get stuck with the cleanup bill. See also: the entire history of resource extraction by the US.
Warren Buffett said, “No one wants to get rich slowly.” President Trump fits this aphorism perfectly, his lifelong pursuit has been one get rich quick scheme or scam after another. Rare earths are the long term play to prosperity, security and the future and Donald Trump is a blind man in this regard.
But I had to laugh at Scott calling the US military, “ the best-performing organization in history”. That’s just plain silly. One word: Vietnam. No? How about Abu Ghraibe? How about Afghanistan? Somalis? F-35? Cyber warfare? I’m struggling to think of what they’ve done successfully on any battlefield in the last 50 or 60 years: hot, cold, online or otherwise.
I’m a big fan of Prof G but his American exceptionalism and worship at the alter of the American Dream seriously handicap his judgement.
Surely the only rational reason for the Venezuela situation is not to secure the supply of oil, but to prevent China from getting it? Without a cheap source of oil it would be difficult for China to invade Taiwan or dominate the East. Am I missing something?
Agree more with you than you do with yourself.
This whole thing is a strategic move to blunt Chinese and Russian influence in S America whilst acting tactically to counter Venezuela, drugs, narco-terrorism, Hezbollah, Cuba, and gangs like TDA.
There will be a domino effect — Venezuela >>> Cuba >>> Iran >>> Hezbollah, Hamas, Houthis >>> Yemen.
Each of these moves will lessen Russian and Chinese influence, hurt R/C economically around the pumphead or refinery, and punish customers (talking to you, India). Just like what happened in Syria. Huge Russian loss of influence like Egypt in 1973.
Keep your eye on the ghost ship confiscations. That has a real possibility for a military confrontation between the US and Russia, but, of course, Russia has a for shit navy. Ukraine droe their Black Sea Fleet off whilst sinking their flagship. FFS.
Scott,
Another liberal bias hit piece. You fail to mention the impact on:
1) the Russian / Ukrainian war… I wonder if Putin is ready for lower oil prices…not
2) getting China and Russia the hell out of the western hemisphere
3) causing Cuba to fall without Venezuelan crude and other subsidization
4) the best part is prosecution of a Maduro in Brooklyn the home of the newfound socialist. It doesn’t get much better than this.
I completely disagree with you as I believe that Trump is planting trees the shade from which he will never see. He has no choice but to do the things that he has been doing because of the neglect over decades.
Absolutely correct.
So on point. A totally domino effect
Across business and politics, we’ve built a system that rewards leaders for planting trees whose shade they’ll personally enjoy. Fast growth, quick wins, tidy headlines. The forest can worry about itself later. Executives optimise for their tenure. Politicians optimise for the next election. Stewardship doesn’t feature heavily because it doesn’t show up on the scorecard. So the shade gets crowded, the soil gets tired, and the same mistakes keep sprouting in new uniforms. If we want better leadership, we need to stop applauding who gets the shade and start valuing who plants the forest they’ll never sit in.
Scott,
How about Venezuela as a geopolitical issue where China and Russia were exerting their influence and shipping cheap oil to China and the Maduro socialist propaganda that started with Chavez delivery of free oil in 2007 to NYC. Did Maduro implement a game plan with China and Russia to send in immigrants and create havoc politically and for everyday life?
Remember China is oil and food dependent and Maduro was literally fueling their ability to attack Taiwan ? hmmm