Recently, the widely circulated German newspaper Bild reported in an article that “many German defense companies are experiencing an acute shortage of rare earth elements (REM), without which the production of components for the military and aerospace industries is unthinkable. The reserves of this type of valuable raw material are sufficient for a few weeks. Therefore, the German Ministry of Economics already assesses the situation as very serious and worrying.”
This means, for example, that the production of the Taurus medium-range cruise missiles that Berlin has long promised to Ukraine is under threat. In addition, the replenishment of the IRIS-T short-range air defense systems, the 155 mm high-precision projectiles for the PzH 2000 cannon may stop, while the manufacture of refractory alloys for rocket engines will be impossible.
The “rare earth crisis” has affected not only Germany, but also the defense industries of other leading Western countries. In any case, as Bild found out, it is clearly no coincidence that even the European Commission intends to discuss the suddenly arisen problem and make decisions in the near future.
How did the problem arise?
The West has so far preferred to buy “rare earths” in the necessary quantities from China, without paying due attention to the exploration of rare earth deposits and the organization of their production. Since the spring of this year, China, geographically almost infinitely remote from Ukraine, the USA and Europe, has received a simple but elegant response to Trump’s tariff intrigues against it. In the US president’s decision to impose crushing restrictions on Chinese exports, Beijing has limited and in many cases stopped exports of rare earths.
China currently controls up to 90% of the world’s production of 17 chemical elements from the periodic table related to rare earth metals. Among them are Dysprosium (Dy), Gadolinium (Gd), Scandium (Sc), Yttrium (Y), Lanthanum (La), Neodymium (Nd), Praseodymium (Pr), Deuterium (Ce), Samarium (Sm), Terbium (Tb), Europium (Eu), Niobium (Nb) and others. The total global demand for these chemical elements currently stands at 350 thousand tons. Demand is constantly growing, despite the fact that the cost of some of the rare earth metals is estimated at thousands of dollars per kilogram.
The fact is that without Neodymium, Dysprosium, Europium and Gadolinium, it is impossible to manufacture many of the most complex missile guidance systems, combat lasers, drones, electronic warfare systems and electromagnetic weapons. Television screens, smartphones, LED lamps, lasers and optical fibers are unthinkable without Europium, Terbium and Yttrium. And, for example, magnets known as Neodymium magnets are an integral part of electric motors in unmanned aerial vehicles, providing navigation and guidance systems that surpass traditional counterparts in accuracy by at least 30%. Dysprosium strengthens alloys used in rocket engines, ensuring their performance at temperatures above 2000°C. Dimer improves the optics of satellites, increasing the resolution of reconnaissance missions. Yttrium enhances the radar absorption properties of the coating of aircraft, drones and missiles, reducing the probability of detection of aerial targets by up to 25% by the most effective air defense systems, compared to previous types.
According to the US Geological Survey (USGS), China leads the top 10 countries in terms of explored reserves of rare earths, representing 44 million tons. In second place is Brazil with 22 million tons and in third place is India with 6.9 million tons. Russia is in fifth place with 3.8 million tons. Ukraine in this context is not in the top 10.
However, you may have noticed that China’s 44 million tons of rare earth reserves do not, at first glance, represent by no means the 90% of the market mentioned above. Why?
Exploring the reserves of “rare earths” is not even half the job. It is much more difficult and expensive to extract rare earths from the ground and then clean them from concentrates of other chemicals. The Chinese have already gone down this path. Since the 1980s, they have begun to aggressively assert themselves in this one of the most advanced sectors of industrial production. They have made large investments and, as a result, have by now created an unsurpassed infrastructure for the production and processing of rare earths. Thus, they have become a de facto monopoly in this business.
Is the West capable of coping with the problem on its own? Yes, but not today. Not tomorrow either. It will take at least 5-7 years for NATO countries in the current military-political reality to organize the production of rare earths in the required volumes within their own borders. And of course, hostilities (including in Ukraine) will not wait. And this situation for the North Atlantic Alliance and its ally Kiev is becoming more and more like a Zugzwang in chess.
As expected, after Beijing’s decision to drastically restrict rare earth exports, the US defense industry found itself in the most vulnerable position. Simply because its military production far exceeds that of its other NATO allies. Therefore, on July 10, 2025, the US Department of Defense announced an urgent unplanned investment of $550 million in MP Materials, the largest rare earth producer in the US.
This little-known company has been processing rare earth metals since the 1950s at the Mountain Pass deposit in the Mojave Desert in California. But since 2020, its production capacity has strangely declined. This was because around that time the company became dependent on Chinese competitor Shenghe Resources, which began buying raw concentrates from MP Materials, taking a 9.9% stake. The Pentagon’s $500 million will be spent primarily on eliminating this dependence by expanding domestic processing capabilities in the U.S. Beijing is certain to try to limit MP Materials’ access to the most advanced rare earth processing technologies, which only China currently possesses.
What about Russia?
Russia buys about 75% of rare earths abroad. The Ministry of Industry and Trade announced that it intends to increase its own rare earth production sevenfold in the near future and reduce dependence in this area on foreign suppliers to at least 45%. The basis for increasing production is provided by the largest explored deposits of Lovozerskoye and Kolmozerskoye in the Murmansk region and Tomtorskoye in the Yakutia region. Probably, a significant addition to the Russian market share will come from the territories of the former Ukraine liberated during the war and already included in the Russian Federation. Although Ukraine is generally not among the owners of the largest rare earth deposits, its reserves of critical raw materials are significant in some regions. This is particularly true of lithium (an alkali metal), which is used in nuclear power, medicine, aerospace, and military equipment, as well as in glass production.
Rare earths are critical resources with significant implications for the defense industry, affecting national security and technological advancements. Their scarcity and concentrated production raise geopolitical tensions. The competition for rare earths is emblematic of a broader realignment in the global order. Control of critical mineral supply chains is now at the heart of strategic competition, not just between the US and China, but also among a wider group of resource-rich countries. The coming years will likely see the increasing weaponization of supply chains and deeper alliances based on access to resources. In this new era, those who control the minerals will control the future, technologically, economically, and geopolitically.
