There is a growing belief that, when we discuss critical minerals and rare earths, Europe needs strategic autonomy. However, the new report on Rare Earths in Spain and Europe, which we present on September 7 at the Ateneo de Madrid, argues precisely that the wager should be different: the objective should not be self-sufficiency, whether partial or complete, but rather the construction of balanced interdependencies. In other words, contrary to what has been frequently argued in recent years, our economic vulnerabilities in this sector do not stem from interdependence. Rather, they arise from the lack of real interdependence, since we find ourselves in a state of net dependence in almost all critical minerals.
“Our economic vulnerabilities in this sector do not stem from interdependence. Rather, they arise from the lack of real interdependence”
All advanced economies require this interdependence, and the problem in Europe is the asymmetry that has developed over decades. Europe depends on other continents, while almost no one depends on us for their supply of critical minerals, which are increasingly central to major transformations, such as the digital and the ecological, as well as to sectors like national security and defense.
The Mirage of Strategic Autonomy
The current state of mining operations for these materials in Europe is limited. At the same time, the identification of the resources needed to substitute domestic demand for these inputs used in the manufacture of consumer products (electronic components, etc.) is not concentrated within the continent either. European mining operations tend to be costly, and once the ore is extracted, in many cases there is no other refiner besides China to process it. This situation challenges the idea that complete strategic autonomy is achievable and shifts the focus to the necessity of concentrating on mitigating bottlenecks in these processes.
However, in order to act realistically, we must acknowledge that it is not about producing everything in Europe and asking ourselves: what can Spain contribute to autonomy? Rather, it is about reducing those dependencies that can become political and economic vulnerabilities. The objective is not exclusively domestic production, but a balanced system that mitigates strategic vulnerabilities. To this end, Spain can contribute the existence of some deposits where it becomes possible to generate domestic demand for extraction and refining technologies that China currently dominates, thereby giving opportunities to small local and European enterprises to develop solutions to these problems and to build viable business models that allow retaining autonomous access and refining capacity to these materials and to export them. But what our report points out is that we are approaching the issue from an incomplete and somewhat unrealistic strategic perspective given our possibilities and capacities.
Spain’s Response: A Boutique Logic
Spain does not possess the financial resources, the industrial scale, or the geological endowment required to compete across all the critical raw materials that the European Union regards as strategic. Attempting to do so would spread efforts too thin and yield little effectively. Therefore, we must focus our efforts and adopt a boutique logic that enables us to achieve these objectives through selective specialization. Spain needs to select those materials and those segments of the value chain where it can develop hard-to-substitute capabilities and minimize potential external coercive pressure. The most reasonable candidates, given the territory and ongoing projects, are tungsten, lithium, copper, and some specific rare earths such as neodymium or praseodymium, among others. A smart stance would be to focus precisely on developing this advantage and to become an indispensable player in these areas.
“Spain can contribute by having some deposits where it can begin generating domestic demand for extraction and refining technologies that are currently dominated by China”
Thus, it is illusory to think that it is possible to develop a competitive advantage in all critical materials. Therefore, Spain should advocate, at the level of industrial policy, for a boutique perspective that analyzes which are the few strategic sectors and which are the most promising fundamental minerals to enable a scenario where Spain has real chances of becoming a key actor in the value chain. In this way, a balanced interdependence could be built, where we depend on others and others depend on us. In this approach, cooperation is necessary and no one can impose abusive terms or exploit vulnerabilities in an anti-competitive manner. This should be the objective, since self-sufficiency leads to economic inefficiencies.
Being Indispensable Is More Important Than Being Self-Sufficient
If Spain builds a relevant European capacity in certain minerals, in their processing, or in the associated technologies, these capabilities can be exported and, in this way, diversify access to these minerals in external deposits, potentially even providing extraction capabilities and services in third countries as other mining companies do around the world. This is a common occurrence, for example, in the case of Canadian or Australian companies.
Moreover, this building of capabilities should not be focused solely on resource extraction, which would continue to expose us to the monopsony of purchasing that is typically seen with rare earths. We remain trapped in a dependency structure. Tungsten is a good example: it is the only one of these materials where Spain is a net exporter, and even then, it sells it as concentrate without carrying out higher refining stages. To avoid this, diversification and retention of refining capacity must be considered. This is a stage even more concentrated in the material’s value chain, which does not always occur at the origin. Such facilities require a high concentration of specialized human capital and financial resources to build and operate. Here Europe holds the strategic advantage of having the technical capabilities and financial institutions to undertake this kind of long-term investment with institutions such as the European Investment Bank or KfW.
The fundamental objective is that refining investments are sustainable independently and that we preserve our strategic autonomy by diversifying the sources of unrefined materials through volume purchase contracts or exploitation agreements. In this sense, the key is always to identify which material–link combinations we can build a strategic edge in, so as to help generate a balanced interdependence, in which we gain greater influence and the interconnection between political and economic objectives is understood in shaping national interests and smart industrial policy proposals.
