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Securitising rare earth minerals

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 8 provides a case study of a mineral resource at the heart of the ‘economic-security nexus’ in the Asia-Pacific: rare earth minerals. These are a group of metals essential for a range of applications in both the consumer electronics and aerospace/defence industries; and while not geologically rare China controls 98 percent of world production. Hitherto uncontroversial, rare earths shot to the top of the international agenda in 2010 when the Chinese government announced a series of policies which restricted supply to foreign customers. Justified by the Chinese government as an environmental protection initiative, many affected parties have alleged the policies are instead a Chinese attempt to economically blackmail the United States, Japan and European Union. The result has been an intense series of international disputes, including a frantic US rush to sponsor rare earths production ‘anywhere but China’, a series of Sino-Japanese diplomatic clashes, and a landmark dispute at the World Trade Organization (WTO) that has recast the principles of international trade law for natural resources. The rare earths dispute highlights how the securitisation of resources is multilayered, connecting domestic debates over sharing the benefits of resource exploitation to international concerns over geopolitics.

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Regional politics: soft-law cooperation

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 5 explores the interactions between producer and consumer governments by evaluating regional architectures for resource interdependence. There has been no shortage of efforts to promote resource cooperation in the Asia-Pacific, with many regional organisations (including ASEAN, APEC and their associated bodies) launching new resource security initiatives during the 2000s. However, the outcomes have been decidedly poor. None have moved from talk-shop activities to more impactful forms of cooperation, and many initiatives have either foundered due to poor compliance or been vetoed by governments outright. This is symptomatic of a ‘soft-law’ approach to resource security, where sovereignty-protective vetoes limit cooperation to dialogue and principle-setting activities. These patterns are then traced to the effects of securitisation and economic nationalism, which have meant governments are unwilling to commit to anything but low-cost (but arguably ineffective) dialogue-based responses to resource insecurity. The absence of effective cooperation means the potential benefits of regional interdependence have not been fully exploited and have left the Asia-Pacific without institutions to manage resource tensions between governments.

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Producer politics: resource nationalism

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 4 considers resource policies in the producer countries servicing Asian markets: Australia, Brazil, China, India, Indonesia, the Gulf States, Russia, the United States and the Central Asian republics. It identifies resource nationalism, a governmental strategy to exercise control over mining and energy industries, as one of the defining features of the global boom of the 2000s. It reviews emerging forms of resource nationalism, including state ownership, nationalisations, and restrictive trade and policies, to demonstrate the high levels of governmental control that characterise regional resource markets. These forms of resource nationalism are connected to the securitisation of resources, particularly regime security in authoritarian rentier states, industrialisation strategies in developing economies, and uncertain geopolitical environments. It is argued that resource nationalism has contributed to international conflict by exacerbating resource insecurity, preventing the integration of regional markets, and undermining governments’ commitment to trade and investment liberalisation.

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The Northeast Asian scramble for resources

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 6 explores the emerging ‘scramble’ among Japan, Korea, and China to acquire resource projects abroad. Driven by intensifying energy insecurity and anxieties over being locked-out of key regional markets, these governments all launched mercantilistic energy strategies around the middle of the 2000s. But while their national oil companies (NOCs) collectively acquired over 100 oil and gas projects, few tangible benefits for either national or regional energy security have resulted. Intense investment competition for scarce assets have forced their NOCs to waste billions on costly projects with little commercial viability, while the governments have fallen victim to ‘investment shakedowns’ by nationalistic suppliers. Moreover, energy competition has led to several security spill-overs – particularly controversies over pipeline routing and territorial disputes in the South China Sea – which are complicating already tense geopolitical relations in the Asia-Pacific. Securitisation has meant resource interdependence is a factor for conflict, rather than cooperation, amongst regional powers.

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Natural resources in international politics

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 2 develops a framework to theorise the role of natural resources in international politics. It reviews existing IR approaches, identifying their bias towards systemic theorising as a problem which obscures the distinctive political economy dynamics surrounding resource interdependence. It then develops the theoretical argument that the securitisation of resource policy is the factor explaining the likelihood of international conflict. Securitisation is a conceptualised as a variable process, contingent on economic dynamics (namely, world market cycles) and political factors specific to certain states (such as external dependence, rentier institutions and complicating geopolitical relationships). When these securitising pressures are high, governments respond with economic nationalist policies. This encourages rivalrous behaviour and creates an environment prone to inter-state conflict. Conversely, when securitising tendencies are low, governments are less likely to adopt nationalistic policies. This instead enables forms of cooperative behaviour, by augmenting markets and enabling cooperation for shared energy goals. Securitisation is therefore the variable which determines whether international resource politics is conflictual or cooperative.

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Introduction: Asia-Pacific resource politics between boom and crisis

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

What explains the emergence of international resource conflicts in the Asia-Pacific during the last decade? This chapter first introduces the empirical scope of this book – providing a broad overview of the global resource boom of the 2000s, the resource security challenges it has posed, and emerging patterns of inter-governmental conflict these have engendered. It then reviews existing theoretical approaches to international resource politics, outlining how these fail to move beyond the systemic level to probe the wider range of factors at both the international and domestic levels driving government’s policy behaviour. It argues that to adequately explain these dynamics, it is necessary to examine why resource interdependence has become a securitised policy domain, and the political-economic factors driving this shift.

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International Resource Politics in the Asia-Pacific

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Resource security is a new battleground in the international politics of the Asia-Pacific. With demand for minerals and energy surging, disputes are emerging over access and control of scarce natural resource endowments. Drawing on critical insights from political economy, this book explains why resources have emerged as a source of inter-state conflict in the region.
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Consumer politics: resource mercantilism

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 3 examines how the three resource-poor and import-dependent consumers in the Asia-Pacific (China, Japan and Korea) have responded to the global boom. It reviews the emerging ‘resource crisis’ facing these economies and identifies how these governments have all adopted mercantilist resource security strategies. These are strategies where governments seek to have national firms (either private or state-owned) take control of mining and energy projects abroad in order to preferentially supply home markets. Resource mercantilism is driven by both economic security concerns (including political imperatives to protect important economic constituencies domestically) as well as national security issues (due to geopolitical rivalries causing a lack of confidence in international resource markets). However, resource mercantilism is an inherently zero-sum security strategy, and a ‘race for resources’ has developed between these governments as they compete to lock-up foreign supplies. This race has further fuelled inter-governmental conflict in the Asia-Pacific, and seen resources become linked with several emerging geopolitical tensions.

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Conclusion: Asia-Pacific resource politics from boom to bust?

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 9 explores the future of resource politics of the Asia-Pacific. It begins by summarising the core findings of the study: that international resource conflicts are driven by domestic and international securitising pressures, which have been intensifying in the Asia-Pacific since the mid-2000s. It then explores how these dynamics are likely to develop in future years, particularly as the resource boom has begun to turn to ‘bust’ since 2014. While falling prices might notionally be expected to help ameliorate resource conflicts in coming years, the political-economy drivers of securitisation remain deep-rooted in the domestic politics of key regional players. While resource insecurity remains an existential problem for regional governments such as China, Japan and Korea, they will remain committed to conflictual economic nationalist policies. In many producer states, the securitisation of resources is as much to do with domestic regime security as movements in international prices, and will persist through the market downturn. For rising powers in the region – such as China and Russia – the intersection between geopolitical aspirations and resources make their future de-politicisation unlikely. Resource interdependence can be expected to contribute to conflict tendencies in the international politics of the Asia-Pacific for some years yet.

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The Australia–China iron ore war

The Political Economy of Conflict and Cooperation

Jeffrey D. Wilson

Chapter 7 examines a perplexing bilateral dispute over iron ore between China and Australia. These economies are ‘natural complements’ in the iron ore sector, with the Australian economy structurally dependent on iron ore exports and Chinese heavy industry equally reliant on low-cost Australian supplies. But despite trade growing rapidly from 2005, the China–Australia resource relationship has been marred by continuous controversy. A series of inter-firm, inter-state and state-firm disputes emerged over alleged Australian resource nationalism targeted against China, the market power of Anglo-Australian iron ore mining firms, and attempts by the Chinese government to manipulate regional markets using cartels and ‘strategic’ investments. These tensions spilled over in 2009 during the ‘Stern Hu’ espionage scandal, which saw both inter-firm and inter-governmental relations between Chinese and Australian actors almost irrevocably break down. The China–Australia iron ore war demonstrates how otherwise mutually beneficial relations between producers and consumers can be derailed by resource securitisation and the conflict and mistrust it engenders.