Strategic Material-U.S. Vulnerability AUTHOR Major Gilda a. Jackson, USMC CSC 1988 SUBJECT AREA National Military Strategy EXECUTIVE SUMMARY TITLE: Strategic Materials- U.S. Vulnerability I. Purpose: To focus on the importance of strategic minerals as a vital component of the United States' national security, economic stability, and technological competitiveness. II. Problem: U.S. reliance on foreign-supplied strategic minerals, such as manganese, cobalt, chromium and platinum group metals, is unacceptably high. The disruption in supply of these foreign-supplied critical strategic materials makes the U.S. vulnerable. III. DATA: The United States is dependent on imports of some one-hundred critical minerals. The world's supply of these minerals is found largely in South Africa and the Soviet Union. The U.S. imports 98 percent of its cobalt and 82 percent of its chromium. Major uses for these imports range from jet engines to computer chips. Hence, the strategic importance to the U.S. defense system, economy and technology. IV. CONCLUSION: The United States must place greater emphasis on reducing its import vulnerability in non-fuel materials and, in particular, critical strategic minerals. V. RECOMMENDATIONS: Over-reliance on foreign-supplied strategic minerals can be reduced to some extent by taking appropriate action to: (1) identify domestic reserves and resources; (2) properly maintain the stockpile through regularly-updated risk assessments; (3) research the possible substitution of more readily available minerals; (4) increase supply through recycling scrap materials; and (5) form cartels targeted at those minerals that are designated high-risk items. STRATEGIC MATERIALS-U.S. VULNERABILITY Outline Thesis statement: The United States must place greater emphasis on reducing its import vulnerability in non-fuel materials and, in particular, critical strategic minerals. I. Introduction II. Dependency A. How dependent is the U.S. on imports B. Generally accepted strategic materials C. The world supplier of strategic materials III. Soviet Threat A. The Soviet aim to control the treasure houses B. The Soviet Union's forward maritime defense strategy C. Increased surrogate activity IV. Principle Issues A. U.S. foreign policy B. Resource war C. Maritime capabilities D. Airlift capabilities V. Strategies to Reduce Dependency A. Stockpiling B. Conservation C. Substitution D. Cartels E. Seabed mining VI. Conclusion STRATEGIC MATERIALS-U.S. VULNERABILITY Introduction The United States has a stable economy, bountiful agricultural production, and a complex internal transportation system. These foundations permit full exploitation of technological advances in industry, science, and commerce, and as a result, most Americans believe that the United States is a wealthy nation. Prior to the Arab oil embargoes of the 1970's, few Americans had ever realized that the U.S. could be dependent on any foreign nation, or that any such dependency could possibly disrupt the way Americans do business. When the price of petroleum products quadrupled, the fact that the United States imported oil at all finally struck home. America at one time had been the world's leading producer and major oil exporter. Something had gone wrong! Now, in response to the 1973/8 oil embargoes, this country is becoming less dependent on foreign oil imports. The United States may never achieve total fuel-energy independence. However, enough progress has been made to ensure that a disruption in the flow of foreign-supplied oil will never again so affect the American public as it did in the 1978 oil crisis. Although our oil status is moving in the right direction, the reliance on foreign sources for a number of important, non-fuel minerals, considered by some less important, is cause for alarm. Here dependency makes the U.S. commercial, industrial and defense structures vulnerable, with potentially very damaging effects. Not well publicized is the vulnerability of the U.S. defense system, which results almost exclusively from the vulnerability of the industrial base that supports the current, tremendous weapon modernization. The U.S. military is better equipped to meet the threat than ever before but still has attainable goals to meet. More sophisticated weapons and advanced component system are at the heart of most newly-developed weapon and support systems. Surprisingly many of these systems require large amounts of some rather valuable, critical, strategic minerals. Strategic minerals are often defined as minerals required to supply the military, industrial, and essential civilian needs of a country during a national emergency, and not found in or produced by that country in sufficient quantities to meet its need. In today's world any interruptions in the flow of these minerals will affect not only our national security, but also our economic stability and technological competitiveness. Therefore, the United States must place greater emphasis on reducing its import vulnerability in non- fuel materials and, in particular, critical strategic minerals. Dependency Just how dependent is the United States on foreign- supplied minerals? The United States depends on imports of about one-hundred minerals, sixty-seven of which are used in the manufacture of defense-related equipment. The remainder are used by the private sector in medicine, scientific research, space exploration, and household service products. There are no substitutes for some half-dozen of these one hundred minerals. Click here to view image Four of these imports are generally recognized as critical strategic minerals: manganese, essential to iron and steel production; cobalt, a superalloy used in the production of F/14/15/16 jet engines; chromium, used in the metallurgical, chemical, and refractory industries; and platinum metal group (PMGs) minerals, used in the electronic, telecommunication, and aerospace industries. Of these "Big Four", the United States is ninety percent dependent on imports (see table 1). Particularly ironic for the U.S. is the geographic location of these minerals. South Africa and the Soviet Union are the world's major suppliers of these minerals. The United States and the Soviet Union have been adversaries since World War II, and U.S.-South African relations have been deteriorating in recent years. Soviet Threat Does the Soviet Union pose a mineral threat to the United States? As U.S. dependence for critical strategic minerals continues to increase, the capability of the Soviet Union and its surrogates to disrupt the flow of certain key materials or to influence a third country's policy increases daily. In 1973, Soviet Party Leader Brezhnev stated that the Soviet aim is to gain control of the "...two great treasure houses on which the West depends: the energy treasure house of the persian Gulf and the mineral treasure house of Central and Southern Africa." (2:1) This strategy has remained unchanged, and Soviet leaders following Brezhnev have remained loyal to the same. The Soviets have increased their presence in the world in the past two decades. The Soviet Union has dramatically increased its deep-water naval capabilities, with the introduction of the Soviet base at Cam Ranh Bays Additionally the fishing rights agreement with the Gilbert Islands in the Pacific suggests that the Soviets are pursuing a forward maritime defense strategy. This expansion has frequently been in close proximity to countries that are U.S. allies or part of our national interest. Also, this movement has not been without a noticeable relationship to present sea lines of communication. Soviet surrogates have also moved into vital areas in close proximity to U.S. sources of supply for a number of strategic minerals. The Cubans, for example, are increasingly active in southern Africa, particularly in the neighboring countries to the north and northwest of Zaire and Zambia, two of the world's largest suppliers of cobalt. It is believed that approximately 40,000 Cuban surrogates are in central and southern Africa. Their major presence is forces occupying Angola. The U.S. news media and members of Congress have hinted that Angola may be edging toward an alignment in international politics closer to the Russians and further away from the United States. This move would weaken already strained trade relationships between the U.S. and southern African nations. A similar pattern seems to be evolving in Central America where the Cubans are now assisting the Sandinistas in Nicaragua and are believed to be in an advisory capacity in Guatemala, El Salvador, and Panama. Principal Issues The policy toward fuel energy changed drastically in response to the Arab oil embargoes. This country now stockpiles oil in larger quantities than before. The United States went to multiple-supply sourcing for oil, reducing its dependency on Arab-supplied oil. However, the United States must rely on the strategic materials provided by a small number of foreign producers, increasing its vulnerability and, under specific conditions, influencing foreign policy decisions. Internal and international condemnation of South Africa's white minority government and its policy of separate states for different racial groups has become increasingly vocal among people opposed to apartheid. Demands from black African countries and American interest groups for a more aggressive form of trade sanctions have been stone-walled by what the U.S. refers to as the "constructive dialogue" approach. What sanctions have been imposed purposely excluded strategic minerals, for reasons of national security and economic stability. Proponents for stronger foreign policy against South Africa state "that despite inconvenience, both economic and political, the United States can distance itself from South Africa without posing a significant threat to American national interest." (6:1) I submit to you that this is the wrong attitude or position to take. Th.e U.S. may, in the short-term, have some limited capabilities but the long-term prospects are bleak. Impala Mine Strike: Resource War This paper will dismiss the notion that for the U.S. there is no degree of vulnerability. The speed at which a minor disruption from a major supplier can affect a market was illustrated as recently as January 1986 when the black work force at the Impala Platinum Mines, South Africa's largest producer of platinum group metals, began a strike over pay and working conditions. There were reports that the company forced workers to work to keep the mines going but finally had to give in to demands. The unrest lasted for nearly two months and is estimated to have cost the company up to a quarter of the total 1986 platinum market production. The outcome of this event was a sharp rise in the price of platinum, for which there are no viable substitutes in the majority of applications, and for which the U.S. is very import-dependent (see table 1). The price was driven by the supply shortfall and the possibility of the strike spreading to other South African platinum mines. This was a minor skirmish, but the potential for more prolonged and more damaging labor unrest in South Africa is very evident. The 1976 civil war in Angola halted the supply of cobalt from Zaire, which was at that time producing sixty-three percent of the world's supply of cobalt. The resultant price increases were three hundred percent and led to a change in U.S. stockpiling policy for cobalt ore and hoarding of cobalt by the Soviets. Do the U.S. and its allies have the resources to forcibly obtain and transport strategic minerals? Consider the January 1986 Impala Platinum Mines' strike as a prototype for a crisis during which the supply of PMG's is cut off. Feeling the effect of the cut-off, the United States and its allies decide to take military action to obtain badly needed materials from South Africa. The United States and its allies depend on sea and air lanes . While sea and air lanes are essential in peacetime for trade, they are critical in war. Recent U.S. conflicts have relied on extensive use of sea and air lanes for deploying armed forces and striking a military target, e.g., the landing on Grenada and the Libyan air strike. During a protracted conflict could the U.S. Navy keep the sea lanes open for commercial shipping? I think not; a bigger Navy and a bigger U.S. flag merchant fleet both would be needed. Of the seventy-two raw materials vital to U.S. industry and defense and those of its allies, the U.S. Commerce Department states "that fully 69 must be imported by the sea." (9:42) Additionally the bulk of these raw materials now imported by the United States is carried by foreign- flagged ships. If the U.S. had to rely on its own Navy alone in a time of crisis, it would be hard to meet defense and civilian requirements. The Navy, now facing the possibility of limited growth, is not capable of fighting a sea battle, while at the same time keeping NATO commitments and protecting the civilian container ships loaded with critical strategic minerals. Click here to view image Should the U.S., in the event of a crisis in South Africa, mount a sealift effort, the now forward-deployed Soviet Navy would be in a good position to interdict the flow of strategic supplies over the thousands of miles of open ocean that would have to be traveled before the minerals could be offloaded in the U.S. or other countries. The thousands of miles of open sea are not as open as one might be led to believe. The tactician looking at the world's geography would note that the routes that ships must take are dictated by a number of choke points: the Panama Canal, Cape Horn, the Straits of Gibraltar, the Cape of Good Hope, the Suez Canal, the Gulf of Aden, the Straits of Hormuz, and the Straits of Malacca (figure 1). A hostile power controlling any of these points could seriously affect our peacetime trade, as demonstrated by the present activities in the Straits of Hormuz, and most definitely our wartime deployment capabilities. If the Navy is not an option, the U.S. could turn to airlift. Strategic airlift would most likely not be able to lift much. Many air routes are less restricted by geography (figure 1) than are sea routes; however, they are constrained by our flight restrictions and the need for intermediate stopping points. As an example the U.S. would not have been able to make the Libyan bombing raid if it had not been for the fly-over rights and refueling stop in the U.K. Also, it was noted that France did not allow U.S. "war" planes to fly through French air space. The airlift of millions of tons of critical PMGs would require a large number of planes. A rough estimate leads me to believe that it would take all of America's and NATO's strategic airlift assets to carry a small percentage of the tonnage. The operation would require a well-thought-out plan that involved both naval and air assets, which, even if successful, might only yield a fraction of the strategic materials required to compensate for a long-term disruption in flow of materials. Strategies to Reduce Dependency The preceding was a simple example designed to show the many issues involved in the problem of U.S. import vulnerability. Securing supplies from producer countries could be done by long-term contractual agreements supported by diplomatic and financial policies, with the threat of military intervention as a last resort. Over-reliance on foreign-supplied strategic minerals can be reduced to some extent by taking appropriate action to: (1) identify domestic reserves and resources; (2) properly maintain the stockpile through regularly-updated risk assessments; (3) research the possible substitution of more readily available minerals; (4) increase supply through recycling scrap materials; and (5) form cartels targeted at those minerals that are designated high-risk items. Stockpiling is an effective way to cushion dislocation caused by supply cutoff s and to provide for the defense requirements of a protracted conflict. The concept of stockpiling started in 1939, although it was not until the end of the Korean War that any supplies were actually placed in the stockpile. Currently there are some one hundred minerals in the stockpile which is maintained at a three-year level. The defense strategic stockpile is the main U.S. security safety net. The President has authority to draw metals from the strategic inventory if they are needed for national defense. The stockpile would help the U.S. defense industrial base endure a short break in supply flow. Like all government programs the stockpile is subject to political, economic and budgetary pressures. Although not designed to be used to regulate the prices on the metal market, the stockpile has been sold at the metal exchange market or withdrawn from the market to accomplish this very thing. The trade demand for these strategic materials is high. The stockpile has also been used by the administrations to try to help balance the budget or offset the national deficit. Policy management of the stockpile has been seriously short-sighted. Since the formation of the stockpile, it has been misused by every government agency that has had any part in management responsibilities. However, steps to move the management from its present controlling agency, Federal Emergency Management Agency, to the Defense Department are a start toward ensuring that the stockpile remains an insurance policy against the threat and not just a commodity account used to offset the national deficit or to be used as an extra fund to solve other budgetary problems. Conservation, in the form of reduced consumption of strategic materials, recycling, and design changes where applicable, provides another alternative. Conservation is an effort that includes not only the defense industries but also requires the help of commercial industries that provide goods and services to the public. Public awareness and a full- scale conservation program have not been engaged since the tin drives to support the war effort of WW II. The strategic minerals recycling industry is a new one. The recovery of chromium from steel making, industrial and chemical waste has been on the rise. But the most successful campaign has been in the recovery of platinum from catalytic converters for scrapped automobiles. The platinum metals removed from automobiles could be bought by the defense and electronics industries. In extremis, catalytic converters on still-operational automobiles could be removed, scrapped, and the PMG's salvaged, and all future production of automobiles would be sans converter. Cartels strong enough to affect the price of minerals may cause a demand vs. supply model. In order for a cartel to obtain monopoly profits, it must control a large proportion (more than 51%) of the world's output and restrict output, in a situation where both demand and supplies from other sources are relatively inelastic. Thus since the U.S. does not have such control, it alone cannot possibly form a cartel. The U.S. government and its allies could form a cartel, with the U.S. providing the mining technology (not just equipment, but know-how) to allied countries. This joint venture would increase the output of materials and, with government supports, the enforcement of the cartel's output and sales quotas is more likely to work. Finding substitutes for some strategic minerals in short supply could take years, because the motivation of both government and commercial sources seems related to three basic situations: (1) the change in technology, (2) the price of materials in the market place, and (3) the ability to obtain the required amount from other countries (imports) at less than the cost to produce in the United States. The price of cobalt in 1978 rose to a high of $48.00 per pound. The price of cobalt is now around $25.00 per pound, but growing tension in the countries that surround the cobalt-producing country of Zaire has caused U.S. manufacturers to look for a less expensive and more abundant material. The aerospace industry's use of cobalt for superalloys in jet engines has been regarded as unavoidable. The F-14/15/16 jets frequently used the superalloy in engine blades. However, R&D programs to reduce the needed amount of cobalt have met with success. An upgraded version of the F-15/16 military aircraft engine will use a nickel-aluminum- molybdenum alloy containing no cobalt. Machine tools and construction machinery also contain cobalt, and it is expected that new this tri-metal alloy will replace most of the cobalt in these items. Substitution and recycling are on the rise in the United States. Many metallurgists, employed in prIvate industry, have created new alloys and discovered uses for them. As a result, the mining industry is getting a new lease on life, as many mines are beginning to reopen to provide a number of materials used in these new alloys. This revitalization is due to changes in prices and technology resulting in more productive research and development by both government and private industry. There is the possibility of mining the sea bottom for nodules containing critical minerals such as manganese and cobalt. In 1983 President Reagan signed a bill declaring the coastal waters around the Unites States to be "exclusive economic zones" (EEZs) . Federal and state agencies have been busy mapping the EEZs and granting industrial rights for exploration for critical minerals. The seabed mining of cobalt and manganese is possible, but current market prices make it economically unfeasible. Those industries that posses seabed mining capabilities are unwilling to commit to mining without long-term government price guarantees and subsidies. Conclusion As can be seen from the preceding, the overall strategic mineral problem is extremely complex and has many interesting economic, political, and security implications. The maintenance of an adequate supply of critical minerals and metals involves private industry, numerous government agencies, and other powers - not all favorable to the United States. For example, South Africa is in no danger of running out of strategic minerals but may not always be willing to share. The national security aspects of the mineral problem lie in the fact that, in the time of war, the United States will need these minerals as the basic building blocks for the aircraft, missiles, and other ordnance and equipment items needed by its armed forces. Defense implications are paramount in the minds of those who are in the war fighting profession. More people are becoming aware of the mineral problem. The executive and legislative branches of our government have studied the problem and realize that we are vulnerable. One potentially positive result could be the development of a long-term national strategic mineral policy. BIBLIOGRAPHY 1. Fawcett, Clifford and Leonard G. Gaston. "Global Responsive Aerospace Systems Planning." Air Force Journal of Logistics, (Winter 1985) , 23-30. 2. Hansen, James. "High Stakes in South Africa." National Defense, (May/June 1982), 42-46. 3. Karch, L.G., LtCol, USMC. Strategic Materials: Too Much Foreign Dependence." Marine Corps Gazette, (June 1982), 28- 33. 4. Maull, Hanns. "Dependence of the West-Energy and Non- Fuel Minerals." NATO's Sixteen Nations, (August 4, 1985), 32-40. 5. Mikesell, Raymond F. Nonfuel Minerals: Foreign Dependence and National Security. Ann Arbor: The University of Michigan Press, 1987. 6. Plotklin, Rhoda. "The United States and South Africa, the Strategic Connection." Current History, 85(May 1986), 201-5. 7. Ra'anan, Uri and Charles M. Perry. Special Report; Strategic Minerals and International Security. McLean, Virginia: Pergamon-Brassey's International Defence Publishers, 1985. 8. U.S. Congress. House. Committee on Armed Services. The Requirement for Strategic and Critical Material to be Stockpiled in the National Defense Stockpile, to Transfer Management of the Stockpile to the Secretary of Defense. Hearing before the Seapower and Strategic and Critical Materials Sub-committee on H.R. 1392, 100 Cong. 1st sess., 1987. 9. U.S. Congress. Office of Technology Assessment. Strategic Materials: Technologies to Reduce U.S. Import Vulnerability. Washington, D.C.: Government Printing Office, May 1985. 10. Wolfe, John A. Mineral Resources. New York: Chapman and Hall, 1984.
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