It is clear that the EU must change its approach to counter China and engage in a more explicit realpolitik designed to counter Beijing’s moves, particularly in its own backyard, writes Robert Veldhuizen.
Robert Veldhuizen is an intelligence analyst at the strategic advisory firm Sibylline.
Despite the uncharacteristically sharp criticism levelled at China from Berlin these days, the European Union has a history of treading lightly when it comes to dealing with Beijing. The events unfolding between Lithuania and China demonstrate why: after Vilnius allowed Taiwan to open a representative office in the country, Beijing angrily embargoed Lithuanian imports, including products from other EU countries that contain parts from Lithuanian supply chains, effectively exposing the EU’s vulnerability to economic coercion from Beijing.
French President Emmanuel Macron, taking advantage of the French Presidency of the Council of the EU, has been scrambling to mobilise a forceful response on the EU level, fearing the bilateral stand-off could spiral into a trade war with China.
The conflict is a case study on how Europe can fall victim to coercive Chinese diplomacy when trade and delicate supply chains are concerned. It should draw Brussels’ attention back to its dependency on China in strategic areas such as rare earth elements (REEs) and critical raw materials (CRMs).
China controls around 80% of the world’s production of rare earth materials, while the EU is importing 80% of its REEs and 90% of CRM needs. However, the decades-long idealism permeating European foreign policy makes mounting a meaningful “realpolitik” response difficult, notwithstanding the recent imposition of sanctions against Chinese officials involved in human rights abuses in Xinjiang.
To safeguard REEs and CRMs, the EU in May 2021 updated its industrial strategy, identifying 30 critical materials for which it is import-dependent. It also launched the European Raw Material Alliance (ERMA) to investigate barriers and opportunities. The European Commission is now working to identify mining and processing projects that could become operational by 2025.
However, this reactive approach to shifting geopolitics pales in response to the proactive policies enacted in China, which has recognised the value of rare earth since 1992.
It’s no secret that Beijing is playing the long game when it comes to securing strategic resources for its economic might, and Chinese strategists have never wasted time pouncing on opportunities when they arise, most recently in 2021.
Alarmed by global shortages and surging material costs, China formed the China Rare Earth Group, a megacorporation comprising a slew of domestic metal, mining, rare earth and technology giants, tightening Beijing’s grip on the global market and key resources that Europe requires.
On top of quickly exploring new mining opportunities in Afghanistan after the Taliban takeover, Beijing has also expanded into Europe’s own backyard: Zijin Mining Group, one of the first Chinese miners to enter the continent in 2018, owns approximately 25 assets in Serbia.
But as Europe begins to confront such misalignment and shifts its approach via bodies like the ERMA, Brussels risks missing other critical domains where Beijing is making inroads. Rare earth is one of the most visible and obvious issues, however, a singular focus on this area is causing other pressing supply chain vulnerabilities to fall by the wayside – and food security is one of them.
The EU has been largely silent on China’s manoeuvres in Ukraine. For Beijing, the huge swathes of fertile agricultural land in Europe’s breadbasket ensures domestic food security. In return, it exports excess production and capital to Ukrainian industries and infrastructure not touched since the collapse of the Soviet Union.
Beginning in the early 2010s, Chinese investment worth tens of billions of dollars has been channelled into Ukraine. This started with a $28bn contract in 2013, where Ukraine supplied agricultural produce to China in exchange for fertilisers, agricultural equipment and investment in key sectors.
As the main non-EU supplier of grain, exporting €1.9bn of corn, wheat and barley in 2021, or 30% of total supply, the increasingly complex geopolitical game in Ukraine undermines Europe’s food security. However, few in Brussels consider this in their approach to Kyiv.
While Beijing offers what appears to be mutually-beneficially economic benefit driven by a business-focused agenda, European leaders tether trade and capital inflows to political and economic reforms. Even worse, Brussels had undermined Ukraine and its geopolitical value by allowing Nord Stream 2 to move forward, and given a disunited response to increased hostilities from Russia, most recently when Germany blocked arms shipments to Kyiv.
Brussels is, seemingly unknowingly, in a precarious position, once again failing to see the dangers China’s approach poses to its own food security. Ukraine is merely a part of a broader range of far-reaching investments in agriculture, designed to ensure access to staple crops and grains to satisfy China’s growing population’s increasing appetite for meat.
In 2018, Chinese President Xi Jinping pledged €52 billion in financing for agricultural projects across Africa, including dispatching 500 agricultural experts. This move is in line with the Minister of Agriculture and Rural Affairs Tang Renjian credo that “seeds are the ‘computer chips’ of agriculture, and cultivated land is the ‘lifeblood’ of food production.”
Indeed, China managed to hoard over half of the world’s grain supplies last year, at a time when it is increasingly focusing on building a “Food Silk Road” along with the Belt and Road Initiative, emphasising food and agricultural cooperation. Again, China is playing a long game that it could win at the EU’s expense.
Policymakers in Brussels are thus facing a strategic encirclement of sorts, one that affects access to critical resources, be it minerals or farmland and its produce. It’s evident that the EU must change its approach to counter China and engage in a more explicit realpolitik designed to counter Beijing’s moves, particularly in its own backyard.
Assurance and proper engagement from the highest echelons of EU leadership would be a great signal and first step to show that it is serious in participating in the geopolitical long game and improve independent access to critical resources.
If Brussels fails to do so, the consequences for the EU’s economic and food supply chains could be severe. The EU’s response to China’s bullying and coercion of Lithuania could thus indicate how the bloc will deal with such threats on a grander scale.