Geopolitics Underground: Critical Raw Materials and EU's Strategic Dilemma

Access to critical minerals has become a global priority.

These materials are essential drivers of sustainable industrialisation, as well as a growing source of geopolitical tension. From smartphones to laptops, they are embedded in technologies we rely on daily. Even more crucially, they are indispensable for the production and functioning of wind turbines, solar panels, and electric vehicles — all pillars of the green transition.

It’s no surprise, then, that critical minerals are top of mind for investors navigating geopolitical risks. Their strategic importance has grown, particularly since Donald Trump’s return to the U.S. political scene. The prospect of a more protectionist foreign policy has rekindled concerns about the security of supply chains.

In this context, the European Union’s timely Critical Raw Materials Act (CRMA) underscores the urgent need to secure and diversify the EU’s supply of these vital resources.

The CRMA, officially entered into force on May 2024, currently lists 34 materials as critical, with 16 of them identified as particularly strategic, selected for their key role in the green and digital transition, such as lithium, cobalt, nickel, copper, and some rare earth elements.

But what exactly are critical raw materials? Which ones matter most? And which countries hold the keys to this new resource map? A global overview of the distribution of critical minerals is essential to understand why they’ve become the focus of such intense international attention.

What exactly are critical raw materials?

In the EU, two main parameters are used to classify materials as critical.

Firstly, the economic importance is adjusted using the Substitution Index for Economic Importance (SIEI), which considers the technical and cost performance of potential substitutes in different applications.

Secondly, supply risk, which reflects the vulnerability of the supply chain, is measured at the most critical "bottleneck" stage for the EU, whether that’s extraction or processing. This methodology follows that also adopted in other international contexts, such as in the United States with the Department of Energy's list of critical materials.

Note on terminology

Before moving forward, a note on terminology will be necessary. The production of raw material is a complex process that involves several stages.

“Mine production” refers to materials that are physically extracted from the ground, but these raw materials typically require additional processing to become usable.

That leads us to refined production, which involves converting and separating minerals into a pure or final form for manufacturing use.

Interestingly, the countries responsible for mining are often not the same as those dominating refining — a distinction that has major geopolitical implications. The most emblematic case is that of China, which has invested heavily in refining plants despite not being a leader in the extraction of all minerals.

Another key concept is “Reserves”, which must not be confused with resources.

While resources represent the total known quantity of a mineral, reserves refer specifically to deposits that can be mined economically under current conditions. In short, all reserves are resources, but not all resources are reserves.

Given the growing strategic importance of many critical minerals, this article will focus on a few that are particularly essential, starting with cobalt.

Found in nearly every mobile phone and laptop, cobalt plays a crucial role in the batteries that power electric vehicles (EVs). It is a key component of many lithium-ion battery technologies, although the precise future demand for cobalt will depend on the evolution of alternative battery chemistries. For example, lithium-iron-phosphate (LFP) batteries are being developed that reduce cobalt dependency.

When we look at global cobalt production, based on mined (not refined) output, the Democratic Republic of Congo (DRC) stands out as the dominant player, accounting for almost 74% of global extraction.

However, as already highlighted, mining and refining often take place in different countries, and cobalt is no exception. While the DRC leads in extraction, it plays only a marginal role in processing. The refined cobalt supply chain is overwhelmingly dominated by China, which controls approximately 76% of global refining capacity. The next largest player, Finland, contributes just 10%.

Lithium is essential for the booming battery industry and is crucial for scaling up low-carbon energy solutions.

The relevance of lithium in particular becomes even more evident when looking at the projected growth in global battery demand.

Indeed, the demand for battery-grade raw materials is expected to surge by 14 times by 2040, compared to 2020 levels.

While lithium is widely recognized as a cornerstone of the green transition, being essential for the production of lithium-ion batteries used in electric vehicles, energy storage systems, and renewable energy technologies, its significance extends well beyond the energy sector, playing a vital role in healthcare.

In medicine, lithium is used as a mood stabilizer, particularly in the treatment of bipolar disorder. For decades, lithium salts (such as lithium carbonate) have been considered the gold standard for preventing both manic and depressive episodes.

Its therapeutic benefits are so well-established that the World Health Organization (WHO) includes lithium on its List of Essential Medicines, which identifies the most effective and safe medicines needed in a health system.

Recent research also suggests lithium may have neuroprotective properties, with some studies exploring its potential in treating neurodegenerative diseases such as Alzheimer’s and Parkinson’s. While these applications are still under investigation, they point to lithium’s broader biomedical relevance.

For example, the Joint Research Centre (JRC) and Pisa University are investigating the role of lithium-niobate in innovative Cochlear Implants (CIs), intending to analyze the social impacts of this innovative device along its life cycle, compared to traditional devices.

Similarly to cobalt, the gap between China and the EU becomes even more stark when comparing projected production capacity for battery-grade processed raw materials and battery cells by 2030.

For lithium, China is expected to account for around 34% of global processing capacity, while the EU lags behind at just 4%.

Despite efforts to diversify sources, China is projected to remain the dominant supplier of refined battery materials through 2030. This geographic concentration continues to raise concerns over strategic dependencies and supply vulnerabilities.

These trends reinforce the urgency of securing access to critical minerals, not only through domestic mining, but even more so by scaling up refining capacity and building resilient, transparent global value chains. In response, the European Commission has intensified its focus on raw materials diplomacy, engaging in strategic partnerships and policy dialogues with non-EU countries to diversify sources of supply.

However, opening the door to new mining and extraction projects — whether in Europe or abroad — has sparked serious social and environmental concerns, particularly regarding protection for local communities and responsible sourcing standards.

To date, the EU has signed raw materials partnerships with Chile, Greenland, Ukraine, Canada, Norway, and Rwanda. Yet, some of these agreements have been met with strong criticism.

The Memorandum of Understanding (MoU) signed between the EU and Rwanda, aimed at deepening cooperation on sustainable raw material value chains, has raised significant geopolitical and ethical concerns. The European Parliament has called for its suspension, urging the Commission and the Council to halt the agreement until Rwanda ceases its interference in the Democratic Republic of Congo (DRC) — particularly the export of minerals from M23-controlled areas. MEPs have also demanded that all direct budget support to Rwanda be frozen until humanitarian access to conflict zones is guaranteed and ties with armed groups are severed.

Moreover, they stress that military and security assistance to Rwanda should be paused to avoid contributing to abusive operations in eastern DRC.

Beyond Rwanda, the EU faces additional strategic challenges: Russian interference in the region’s instability and the increasing dominance of Chinese actors in the DRC’s mining sector are compounding risks — particularly when these actors operate with limited adherence to social and environmental responsibility standards.

An excessive push for a race to secure strategic partners risks undermining other key objectives, notably the ecological transition and respect for human rights, and ultimately corrodes the credibility of critical-raw-materials diplomacy. The case of Rwanda was not unique in sparking controversy: Serbia’s memorandum, centred on securing lithium supply, has similarly provoked widespread debate. Over the summer, intense discussions in Serbia about the social and environmental costs of large-scale mining fuelled a broad, nationwide anti-government movement that persisted through the winter. If Brussels continues to pursue resource diversification at the expense of local consent and robust environmental safeguards, it risks deepening social tensions, jeopardising Serbia’s EU accession prospects and ultimately undermining Europe’s own green-industrial objectives.

Conclusion

In a world increasingly defined by the race for clean technologies and digital innovation, critical minerals have become the new oil — fundamental not only for powering the green transition, but also for shaping the next geopolitical order.

As the demand for materials like lithium, cobalt, and magnesium continues to surge, access, processing, and supply chain resilience are no longer just industrial concerns: they are matters of economic security and political sovereignty.

In this context, it is clear the Ukraine’s relevance. After China’s ban on the export of certain rare earth minerals to the US, the urgency from the White House to secure a deal for Ukraine’s mineral resources has become clear.

If the US wants to reduce its dependency on China — which controls 75% of the world’s rare earth deposits — Ukraine will be one of the few viable alternatives.

Ukraine is home to a third of all European lithium deposits, and holds 7% of Europe’s titanium supplies — a lightweight metal used in the construction of everything from airplanes to power stations.

Other critical elements found in Ukraine include beryllium and uranium, both essential for nuclear reactors and weapons. According to the World Economic Forum, Ukraine possesses around 20,000 mineral deposits covering 116 types of minerals — yet only about 15% of these were being actively exploited at the time of Russia’s full-scale invasion in 2022. For instance, the country’s sizable lithium reserves remain largely untapped. Similarly, rare earth deposits are known to exist, but none have yet been mined due to a lack of investment.

This urgent need for capital brings Ukraine and the US even closer. Ukraine will have new technologies that their mining industry lacks and most importantly, capital. That means more jobs and tax payments.

But what role is there for the EU in this equation remains an open question.