Eric's Insight: Are Sino-Pak ties threatened by Pak-US metal deal?

“Pakistan-China ties in jeopardy over Rare Earths issue, China strongly reacts to Pakistan’s selling of Rare Earth Metals to US, China pulls out of CPEC after Pakistan signs Rare Earths deal with US…” These headlines have recently buzzed the social and digital media platforms as well as few mainstream international media outlets, particularly those of West and India.

However, the fact and the ground reality are completely different. The fact is that Pakistan signed a memorandum of understanding (MoU) and not some landmark Agreement, worth $500 million with an American metals company, the United States Strategic Metals (USSM), on September 8.

The USSM is a US entity that specializes in extracting critical metals from old lithium-ion batteries and mining cobalt, nickel and copper. At that time, a statement from the PM House in Islamabad stated that that a delegation from American firm USSM delegation visited Pakistan to explore opportunities for expanding the country’s mining operations and assessing the potential for value addition in mineral resources and the development of supporting infrastructure.

On the other side, two days before signing of this deal with USSM, Pakistan and China signed 21 memorandums of understanding and joint ventures worth $4.2 billion to enhance business-to-business (B2B) cooperation in diverse areas with Pakistani Prime Minister Shehbaz Sharif assuring Chinese businessmen removal of all hiccups in investment procedures.

Now coming back to the Pak-US Rare Earths deal, one has to be very clear that the said deal was of merely $500 million whereas Pakistan’s Rare Earths’ value is estimated to be somewhere between 6 to 8 trillion US Dollars. So it stands clarified that this deal is mere a very small pie of the overall market of Pakistan in this direction. Then one need to see that through the USSM deal, Pakistan has not given US firm the “Exclusive Rights” to get Rare Earth metals from Pakistani soil.

Why did Pakistan sign the deal with USSM?

The answer is very simple: The incumbent US President Donald Trump was desperate to collect rare earth metals from every part of the globe and that he was tapping every potential State with Rare Earths. Pakistan also got the reports that apart from Ukraine, both Australia and India were also looking for eyes of Donald Trump for obtaining Rare Earth Metals. Pakistan also needed to maintain very cordial relations with the US administration for seeking favors regarding IMF programs.

China never wanted to see Pakistan facing any extreme financial crisis, immense security challenges and any sort of diplomatic isolation and also since there were no harm to Chinese interests through this deal, Islamabad got Beijing’s nod before sealing the deal with USSM. Both Beijing and Islamabad also did not want to let an impression develop as China has a desire of bloc politics or Pakistan getting in a certain bloc because both Pakistan and China equally disapprove bloc politics or international bloc diplomacy.

Islamabad has successfully been maintaining the balance of its ties between Washington and Beijing with the policy of not maintaining ties and signing deals with any other country on the cost of its diplomatic, political and defense relations as well as strategic partnership with China. Similarly, Beijing has also never been having any objection to Pakistan’s economical and diplomatic relations with any third country including the US.

China has never been showing any discomfort but in fact, Beijing was deemed very satisfied with Pakistan regaining its strategic position in Regional, South Asian and Global Politics. Beijing was also very pleased to see Pakistan’s growing diplomatic success at Washington when the US declared the top terrorist organizations BLA and its extensions like Majeed Brigade as Foreign Terrorist Organization (FTO), bringing these terror entities, operating specifically against Chinese nationals and Chinese Projects in Pakistan, under extended watch and scrutiny.

The history indicates that Pakistan remained the sole player to bring US-China closer and enabled both to initiate diplomatic relations back in the 70s when the visit of the then US Secretary of State Henry Kiesinger to Beijing was organized by Pakistan which was followed by US President Richard Nixon’s historic trip to China. It was Pakistan’s strong and warm ties with the US that enabled Islamabad to play the key role in bringing these two countries together and there is every possibility that in the current tension between Beijing and Washington, Islamabad’s influence and warmth in ties with Washington, Pakistan could again play a vital role in cooling down and normalizing the ties between the two sides, heating up due to ongoing Trade War.

China, Pakistan communicated on the Pakistan-US deal

Defense and security analysts believe that with US stakes in Pakistan’s mining sector, US will not only use its influence over different Afghans who are reportedly getting some $ 68 million from the US annually, but will also extend extraordinary help and tactical support to Pakistan, backed with strong US and UN legislations against terrorist groups.

They believe that such US support to ensure safety and security from terrorism will also complement and supplement the CPEC projects and would come as a win-win situation for all engaged parties in these projects. Since expected areas for exploration of REEs being on adjacent locations to those of CPEC projects in Baluchistan and KPK, it is certain that US measures for protection of USSM projects from any terror activity will automatically extend a security cushion to CPEC projects.

On October 13, Beijing announced that Pakistan had provided assurances its mineral sector cooperation with the United States will not compromise Beijing's interests or their strategic partnership.
"China and Pakistan have communicated on the issue of Pakistan-US mineral cooperation," Foreign Ministry spokesman Lin Jian stated during a press conference in Beijing. He confirmed that "the Pakistani side stressed its engagement with the US would never undermine China's interests and China-Pakistan cooperation."

Beijing's statement coincides with China's expanded restrictions on rare earth exports, including limitations on processing technologies and requirements for government authorization before foreign cooperation. Lin clarified these measures "have nothing to do with Pakistan," describing them as "a legitimate step taken by the Chinese government in accordance with the laws and regulations."

China and Pakistan maintain what both describe as an "all-weather strategic cooperative partnership". Lin emphasized the "ironclad friendship" between China and Pakistan has "stood the test of time" with "high level of strategic mutual trust." At the same time, Islamabad has comprehensively assured Beijing that China’s interests would at no cost be let harmed because of this deal or any other deal with any country.

China is inseparable in Pak-US cooperation on rare earth

According to some international media reports, Pakistan’s USSSM deal is initially spanning over three phases that include imploring readily available minerals from Pakistan, establishing 5 to 10 mining projects to extract REEs, and establishing minerals processing plants and refineries in Pakistan, coupled with transfer of technology for refining of REEs.

Apparently there are, apart from China, some three other countries that have some capacity of refining REEs that include an Australian company in Malaysia Lynas Rare Earths Ltd , a Japanese firm, named Mitsui Mining and Smelting Co., Ltd and a Toronto headquartered Estonian company known as Neo Performance Materials.

However, China has dozens of state of the art REE refining facilities and with recently introduced legislations, both Chinese and any foreign company having Chinese refining tech have been put under authorization from Beijing to move further for any other country.

In the scenario, some Mining and REE experts and political as well as diplomatic observers believe that the REE campaign by the US President is just a simple bluff as he only want to show the world that he is gathering as many as REE reservoir as possible and thus is a step forward to his Chinese counterpart or that the US is securing a win over China in the field of REEs which is vital for future industrial development and technological advancement.

However with no options to engage into to refining these REEs and with China being the only ultimate option to do so, this mass gathering of REEs is practically a futile exercise and that the crazy REE campaign by the US will abruptly end with the end of Trump tenure.

They also believe that since Pakistan stands absolutely nowhere by any means in US-China trade war, describing Pakistan as favoring any of the two players in this trade war is nothing but a smear campaign to make Pakistan controversial with the ultimate aim to dent Pakistan-China Iron Brotherhood.

Pakistanis see the deal as good for fair competition

The people belonging to different walks of life including industrialists, minors, Journalists, intellectuals etc. believe that the USSM deal could never be something of a worry for China as not only that Pakistan must have taken Beijing into complete confidence before going for this initiative but in fact, Chinese are already into mining and exploration sectors of Pakistan for decades starting from the Saindak Project to the recently launched minerals projecting Gilgit-Baltistan.

They see Pakistan Government constantly inviting Chinese companies for joining the projects similar to the USSM deal as a very positive sign for a healthy competition in this sector. They also think that with China joining the healthy competition in this sector, there would be more opportunities for locals to benefit and that Chinese companies, unlike the US and other Western companies, are expected to bring more incentives and will explore the downstream industry including refining etc. while engaging the local man power and small-scale industry lists.

An international affairs expert at an Islamabad based International University opined that Pakistan’s REE’s and minerals sector would be a wonderful opportunity for both Chinese and US companies to get engaged in a very healthy and fair competition.

It can easily be concluded that there’s no substantial public evidence of a US-Pakistan rare earths deal causing diplomatic fallout between China and Pakistan and that the narrative circulating online appears to be mere propaganda and not factual, clearly driven by geopolitical motives rather than journalistic accuracy.

Writing by Makhdoom Babar; Editing by Wang Shixue

(The writer is the Editor-in-Chief of The Daily Mail, Pakistan and Chairman of Global Research Institute for Peace.)