The rare earth calculation
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The rare earth calculation is John Kiriakou's account of why Chinese control of rare earth metals is a matter of economics rather than geology, and what that control would mean in a war.

The question put to him

Kiriakou was asked whether China, holding export restrictions on gallium, dysprosium, neodymium and the magnets and guidance and radar systems that depend on them, would use those restrictions if the United States attacked Iran, leaving America unable to build the interceptors it supplies to Israel.

His answer began by widening the frame. "That makes perfect sense. It's not just a question of, oh, should we hit them or should we not hit them? There are an awful lot of moving parts in this."

Why the deposits are not the point

Kiriakou's substantive contribution was to correct the assumption that rare earths are rare. The United States had been getting most of its supply from the Congo, "when that was a country", which is "just flush with rare earth metals."

"But the problem with rare earths, they exist all over the place. We even have them under the Salton Sea in the California desert. They're very, very expensive to mine because most of what you mine with rare earths is just waste. It's rock and sand and it's just wasted. So it costs you more to mine it than the value of the finished ore."

Why China takes the loss

The monopoly, in his telling, is a purchased position. "The Chinese are willing to take that economic loss because first, their economy is very robust and they have the money. They spend literally a fraction, less than a 10 percent of what we spend on national defense or about 10 percent of what we spend on national defense and it allows them to control the entire world market for rare earth metals."

The exposure

Kiriakou closed on the sequence that follows. "So what happens then, as you just posed, when we attack Iran on behalf of Israel, we fight Israel's battle for it. And then the Chinese cut us off from the sale of rare earth metals. What are we going to use for missile guidance systems? Or cell phones or the computers that run our cars?"

The second lever available to Beijing is at dumping the treasury bonds.

See also

- Dumping The Treasury Bonds
- Afghan rare earth minerals
- China as economic threat
