Pentagon Moves on Critical Minerals as Iran War Escalates
Iran, The architecture of isolation and the geometry of what comes next. Image: RTK
The War-Driven Supply Chain Shift
⟁ OPINION | Tina Abelshauser, Mon 09 Mar, 2026Cite | Share
The supply of critical minerals has become a central issue in contemporary geopolitical competition, particularly as advanced defense technologies and semiconductor systems increasingly depend on specialized materials with highly concentrated global supply chains.
In early 2026, the United States Department of Defense (DoD) requested proposals from industry to strengthen domestic supply for thirteen critical minerals essential to national security. The initiative reflects growing concern within U.S. strategic planning circles about reliance on foreign mineral supply chains—particularly those dominated by China.
This article analyses the strategic significance of the Pentagon’s request, focusing on the role of rare earth elements within defense technologies, the structural vulnerabilities of global mineral supply chains, and the emerging shift toward industrial policy in the United States. Drawing on data from the U.S. Geological Survey (USGS), the International Energy Agency (IEA), and defense policy reports, I argue that the central bottleneck in rare earth supply chains lies not in mining but in downstream processing and advanced materials manufacturing. The Pentagon’s request therefore represents an early signal of a broader transformation in Western industrial policy in which supply chain resilience becomes a strategic priority.
1. Introduction: Critical Minerals and National Security
Over the past decade, access to critical minerals has emerged as a major issue in global economic and security policy. Advanced defense systems—including missile guidance technologies, radar systems, directed-energy weapons, satellites, and advanced aircraft engines—require a range of specialized metals and rare earth elements. These materials are often produced in geographically concentrated supply chains that create vulnerabilities for countries dependent on imports.
Concerns about supply chain security have intensified amid increasing geopolitical competition between the United States and China. China currently dominates production and processing across several categories of critical minerals, including rare earth elements, graphite, and various specialty metals used in electronics and defense systems.
The concentration of supply has raised concerns among policymakers that geopolitical tensions could disrupt access to materials essential for national security.
In early 2026, the U.S. Department of Defense quietly requested proposals from industry to develop projects that could strengthen domestic supply chains for thirteen critical minerals. The request was distributed through the Defense Industrial Base Consortium (DIBC), a network that includes more than 1,500 companies and research institutions involved in defense manufacturing. Industry proposals are due by March 20, and projects may receive funding between $100 million and $500 million.
This initiative reflects a broader strategic shift in U.S. policy. Historically, the United States relied primarily on global commodity markets to supply industrial minerals. However, increasing geopolitical competition and export restrictions have prompted policymakers to reconsider the risks associated with concentrated supply chains. As a result, mineral security is increasingly treated as a core element of national security and industrial policy.
2. Strategic Minerals and the Defense Industrial Base
2.1 The Pentagon’s List of Critical Minerals
The Pentagon’s 2026 request for industry proposals identified thirteen minerals considered strategically important for defense and advanced technology manufacturing:
arsenic
bismuth
gadolinium
germanium
graphite
hafnium
nickel
samarium
tungsten
vanadium
ytterbium
yttrium
zirconium
These materials serve a wide range of industrial and military functions. Germanium and arsenic are used in semiconductor manufacturing and advanced electronics. Tungsten and vanadium are critical for high-strength alloys used in armor and aerospace components. Graphite is widely used in battery systems and advanced industrial applications.
Several of these materials are also subject to significant supply concentration. China is the dominant global supplier for multiple critical minerals and plays a particularly important role in rare earth processing and magnet manufacturing.
The Pentagon’s request signals growing concern about the resilience of defense supply chains. According to reporting on the initiative, the U.S. government is exploring both domestic mining and recycling projects to reduce dependence on foreign sources of supply.
2.2 Critical Minerals in Modern Defense Systems
Critical minerals are embedded in nearly every advanced military technology. Rare earth elements, in particular, play a key role in electronic warfare systems, missile guidance systems, radar equipment, and high-performance electric motors.
For example:
Rare earth magnets are essential components in missile control systems and radar arrays.
Specialty metals such as hafnium and zirconium are used in aerospace components and nuclear systems.
Tungsten alloys are widely used in armor-piercing munitions and high-temperature aerospace applications.
As defense technologies become increasingly dependent on advanced electronics and precision manufacturing, the strategic importance of these materials continues to grow.
3. Rare Earth Elements and Military Technology
Among the minerals identified in the Pentagon’s request, several rare earth elements are particularly important for defense applications. Although rare earth elements are relatively abundant in the Earth’s crust, economically viable deposits and processing capacity are geographically concentrated.
Four rare earth elements included in the Pentagon’s list—yttrium, samarium, gadolinium, and ytterbium—are used in specialized defense technologies.
3.1 Yttrium
Yttrium is used extensively in high-temperature ceramics and thermal barrier coatings that protect turbine blades in jet engines. These coatings allow aircraft engines to operate at extremely high temperatures without structural degradation, improving fuel efficiency and performance.
Yttrium-based materials are also used in lasers, phosphors, and superconductors.
3.2 Samarium
Samarium is a key component in samarium-cobalt permanent magnets. These magnets retain their magnetic strength at high temperatures and in radiation-intensive environments, making them suitable for aerospace and military applications.
Samarium-cobalt magnets are commonly used in missile guidance systems, satellite components, and military aircraft.
3.3 Gadolinium
Gadolinium possesses strong neutron absorption properties, making it useful in nuclear reactor control rods and radiation shielding systems. It is also used in specialized alloys and electronic components.
In defense contexts, gadolinium is relevant to nuclear technologies, sensors, and certain electronic systems.
3.4 Ytterbium
Ytterbium is increasingly used in fiber laser technologies, which are central to emerging directed-energy weapons and advanced sensing systems. High-power lasers are being explored for applications ranging from missile defense to drone interception.
These niche rare earth elements illustrate the complexity of modern defense supply chains. Although they represent small volumes in global commodity markets, their absence could disrupt the production of critical military systems.
4. Global Supply Chain Concentration
4.1 Mining Concentration
The global rare earth supply chain is highly concentrated geographically. According to data compiled from U.S. Geological Survey statistics, China produces approximately 60 percent of the world’s rare earth mining output. The United States is a distant second, accounting for roughly 16 percent of global production.
Despite the existence of rare earth deposits in several countries—including Australia, Vietnam, and Brazil—China’s early investment in mining and processing created a dominant position in the industry.
4.2 Processing and Refining Bottlenecks
Mining represents only the first stage of the rare earth supply chain. After extraction, rare earth ores must undergo a complex series of chemical separation and refining processes to produce usable materials.
China’s dominance is far greater in these downstream stages.
According to analysis by the International Energy Agency, China accounts for roughly 91 percent of global rare earth separation and refining capacity.
The country also dominates the production of permanent magnets made from rare earth metals. China produces approximately 94 percent of global permanent magnet output, making it the world’s largest supplier of a component essential to advanced electronics, energy technologies, and defense systems.
This concentration creates a structural bottleneck in global supply chains. Even when rare earth ores are mined outside China, they are often exported to Chinese facilities for processing and magnet production.
4.3 Import Dependence
The United States remains heavily dependent on foreign sources for rare earth processing.
Although the United States operates a major rare earth mine at Mountain Pass, California, much of the extracted material has historically been shipped to China for refining due to limited domestic processing capacity.
This dependence highlights the complexity of building resilient supply chains. Mining alone does not guarantee access to finished materials.
5. The Downstream Supply Chain Problem
The rare earth supply chain typically consists of four major stages:
Mining and extraction
Chemical separation and refining
Metallization and alloy production
Magnet manufacturing and component integration
Most Western policy discussions initially focused on stage one—mining. However, analysts increasingly emphasize that the true chokepoint lies in stages two through four.
China has spent decades building integrated industrial ecosystems for rare earth processing and manufacturing. These ecosystems include chemical separation plants, metallization facilities, magnet factories, and advanced materials research centers.
This vertical integration allows Chinese firms to produce high-value components such as rare earth magnets at scale.
Academic research on mineral supply chains suggests that vulnerabilities often arise not from raw material availability but from intermediate processing stages where supplier concentration is highest.
Consequently, supply chain resilience requires investment across the entire value chain rather than simply expanding mining capacity.
6. Emerging U.S. Industrial Policy
6.1 Defense Production Act Investments
In recent years, the U.S. government has begun investing directly in domestic critical mineral supply chains. These investments are often carried out through the Defense Production Act (DPA) and the Department of Defense’s Office of Strategic Capital.
Since 2020, the Department of Defense has committed hundreds of millions of dollars to projects aimed at building domestic rare earth mining and processing capabilities.
These projects include funding for rare earth separation facilities, metallization plants, and magnet manufacturing facilities.
6.2 Strategic Partnerships with Industry
The U.S. government has also begun forming strategic partnerships with private companies in the mining and materials sector.
Recent policy initiatives include federal investment in domestic rare earth producers and support for the development of magnet manufacturing facilities. These efforts are intended to create a fully integrated rare earth supply chain within the United States and allied countries.
In addition, the Pentagon has increasingly used procurement contracts and research funding to stimulate innovation in mineral processing technologies.
6.3 Allied Supply Chains
Another emerging policy approach involves cooperation with allied countries to diversify supply chains.
Countries such as Australia, Canada, and Japan possess significant mineral resources and technical expertise in materials processing. By coordinating investments across allied economies, policymakers hope to reduce dependence on single-country supply chains.
Such initiatives may eventually lead to the creation of a “critical minerals alliance” among industrialized democracies.
7. Strategic Competition and Export Controls
Recent export restrictions have intensified concerns about mineral supply security.
China has introduced export controls on several strategic minerals used in electronics and defense technologies. These restrictions include controls on gallium, germanium, and certain rare earth elements.
The International Energy Agency warns that export controls on rare earth processing technologies could slow the development of new refining capacity outside China, reinforcing the country’s dominant position in global supply chains.
Export controls therefore function not only as trade policy tools but also as instruments of geopolitical leverage.
8. Implications for Industrial Strategy
The Pentagon’s request for critical mineral projects represents an important shift in how governments approach supply chain security.
For decades, Western economies relied on market forces and global trade to allocate mineral resources efficiently. However, recent geopolitical developments have revealed the strategic risks associated with concentrated supply chains.
The emerging policy framework increasingly resembles a form of industrial strategy in which governments actively support the development of key sectors.
This strategy includes:
direct public investment in mining and processing facilities
strategic stockpiling of critical materials
research funding for advanced materials technologies
cooperation with allied countries to diversify supply chains
Such measures reflect a growing recognition that mineral supply chains underpin both economic competitiveness and national security.
9. The Pentagon’s Initiative as Strategic Signal
Although the Pentagon’s request for proposals received limited public attention, it may represent a significant strategic signal.
Government funding commitments between $100 million and $500 million per project suggest that policymakers are prepared to support large-scale industrial investments.
More broadly, the initiative indicates that defense policy is increasingly shaping the structure of critical mineral markets.
Defense demand historically played a major role in the development of technologies such as semiconductors, aerospace materials, and nuclear energy. The critical minerals sector may be entering a similar phase in which government demand and strategic priorities drive industrial development.
10. Decade of Interrupted Ambition
To understand what is now at stake, I believe it is necessary to revisit what was lost.
When the JCPOA was signed in 2015, it triggered an immediate and significant wave of European industrial interest in Iran. Italy's Danieli, Spain's Sarralle Equipos Siderogicos, Germany's SMS Group, and Russia's INTECO were among the most prominent steel equipment manufacturers to establish or deepen formal ties with Iranian counterparts during the post-deal window of 2016 to 2018.
The flagship venture was the Danieli Persia plant — a joint Iran-Italy facility designed to be the largest steel factory in the Middle East and operated entirely by Iranian engineers. It was a statement project, an embodiment of the JCPOA's promise: that Iran could be integrated into the global industrial economy as a peer, not a pariah. SMS Group signed a reported $400 million agreement to expand capacity at Iran's Mobarakeh Steel Company. Sarralle established a local joint venture, Pars Sarralle, and developed an active portfolio across multiple Iranian facilities. The ambition was real. The capital was mobilising. The engineers were drawing plans.
Then the window closed.
When the United States withdrew from the JCPOA in 2018, the consequences for European firms were swift and structural. Danieli's CEO publicly confirmed that banks had withdrawn financing from Iranian projects worth an estimated 1.5 billion euros, citing the threat of U.S. secondary sanctions. SMS Group wound down its operations in the country. Sarralle went quiet. Western companies did not leave Iran because they wanted to. They left because the architecture of the global financial system — overwhelmingly denominated in U.S. dollars and subject to American regulatory reach — gave them no choice. The most consequential sanctions are not always the ones applied directly. They are the ones that reshape private risk calculus before any government order is issued.
11. The Geostrategic Stakes for Metals and Mining
Unamine's assessment is that the metals and mining industry should be treating this diplomatic moment as a primary-level risk and opportunity factor, not a peripheral political development.
Iran is not a marginal player in global metals. It is one of the ten largest steel producers in the world, with output continuing to expand even under maximum pressure. In November 2025 alone, Iran produced approximately 3.4 million tonnes of crude steel — a year-on-year increase of more than 9 percent. This growth has been achieved despite the absence of Western technology, without access to international capital markets, and in the face of an EU ban on steel and metals trade with Iran that came into full effect on January 1, 2026, following a transition period for contracts signed before September 30, 2025.
The structural reality is this: Iran has been producing steel at scale with degraded technology, limited access to raw material trade, and no meaningful partnership with the advanced economies that drive global metals innovation. If sanctions are lifted — even partially — the variables governing Iran's industrial output would change substantially and rapidly.
Consider the investment case. Iran holds the world's second-largest natural gas reserves and among the largest iron ore deposits in Asia. Its steel industry is vertically integrated by necessity but technologically constrained by isolation. A sanctions relief scenario would introduce:
Access to Western capital and project finance. The deals that Danieli, SMS Group, and Sarralle were pursuing in 2016 and 2017 remain, in many cases, structurally viable. The Iranian industrial base still exists. The counterparties still exist. The market need — for modernised, efficient, lower-carbon steelmaking — has only deepened. A diplomatic resolution would restart conversations that were never truly concluded, only suspended.
A competitive dynamic with China. In the years since Western companies departed, China has become Iran's dominant industrial partner across multiple sectors, including metals. A sanctions relief environment would introduce genuine competition between Chinese and Western suppliers for Iran's industrial modernisation contracts. For global metals equipment manufacturers, this represents a significant commercial opportunity. For China, it represents a potential dilution of influence in a country it has cultivated as a strategic partner under duress.
Commodity market recalibration. Iran's re-entry into normalised commodity markets — for steel, for iron ore, for scrap — would introduce new supply dynamics across the regional and potentially global markets. The Gulf region's steel market, in particular, would face heightened competition. Countries that have positioned themselves as regional steel hubs in Iran's absence should be modelling these scenarios now.
12. The Window Is Narrow — and Could Close Violently
The diplomatic moment is genuine. It is also extraordinarily fragile. Trump has set a 10-day deadline and has publicly stated he is considering limited military strikes even as negotiations continue. Two carrier strike groups are in position. Iran's ambassador to the UN has warned that American military assets in the region would be "legitimate targets" if the U.S. acts militarily. Russia's Foreign Minister Lavrov has cautioned that strikes on Iranian nuclear infrastructure could trigger a nuclear disaster. The Omani and Qatari mediators who have brought the two sides to the table are working against a countdown clock they cannot fully control.
The scenario matrix, from an industrial investment perspective, runs from transformative to catastrophic. A durable deal that includes substantive sanctions relief would represent the most significant reopening of an emerging markets economy to Western industrial investment since the lifting of Myanmar restrictions in the early 2010s — on a vastly larger scale, and with far deeper industrial infrastructure already in place. A breakdown in negotiations leading to renewed military action would inflict further damage on Iranian industrial capacity, potentially destabilise regional commodity flows, and foreclose the opportunity for another generation.
13. What Industry Stakeholders Should Do Now
My view is that companies operating in the metals, mining, and industrial equipment sectors should treat the current diplomatic window as a planning trigger, not a waiting period.
Due diligence on Iranian market re-entry should begin now. The companies that were closest to operational engagement in 2016 and 2017 — Danieli, SMS Group, Sarralle, and others — retain institutional knowledge, existing relationships, and partially-developed project frameworks that would provide a significant first-mover advantage in a reopening scenario. The firms that wait for a signed agreement to begin their analysis will already be behind.
At the same time, scenario planning for a breakdown must be equally rigorous. The military risks are real, the political obstacles in Washington are structural, and the history of Iran-U.S. negotiations is a history of agreements that did not hold. Any investment thesis built on a sanctions relief assumption must be stress-tested against the full range of outcomes.
What is not acceptable, from a strategic standpoint, is indifference. Iran's steel and metals sector is too large, too resource-endowed, and too geopolitically central to be treated as a niche consideration. The events of the next 15 days will tell us a great deal about whether the next decade of Iranian industrial development belongs to the world or remains, once again, to China alone.
14. The Industry Must Have a Position
The Danieli Persia plant was conceived as a symbol — the largest steel factory in the Middle East, operated by Iranian engineers, built through Italian partnership. It was a tangible expression of what economic integration with Iran could look like. That symbol was interrupted by geopolitics before it could fully materialise.
A decade later, the geopolitical moment is shifting again. The terms are harder. The mistrust is deeper. The military stakes are higher. But the underlying industrial logic — that Iran is a large, resource-rich, technically capable country whose isolation from global metals markets is a function of political decisions rather than economic fundamentals — remains as true as it was in 2016.
The metals and mining industry does not get to stand outside history. It is shaped by it, and it shapes it in turn. Unamine's view is that the industry must engage seriously with what is now unfolding in Geneva, in Washington, and in Tehran — and must be ready to act, in either direction, when the outcome becomes clear.
15. Conclusion
The Pentagon’s quiet request for industry proposals to strengthen supply chains for thirteen critical minerals highlights a fundamental shift in global resource policy.
Critical minerals are no longer viewed simply as industrial commodities. Instead, they are increasingly treated as strategic assets essential to national security and technological leadership.
The global rare earth supply chain illustrates the complexity of this challenge. Although rare earth resources exist in many regions of the world, processing and manufacturing capacity remain heavily concentrated in China. This concentration creates structural vulnerabilities for countries dependent on these materials.
The United States has begun responding through a combination of industrial policy, strategic investment, and international cooperation. However, rebuilding a resilient supply chain will require sustained investment across the entire value chain—from mining and chemical separation to magnet manufacturing and advanced materials engineering.
The Pentagon’s recent initiative may therefore represent the early stages of a broader transformation in Western industrial strategy. As geopolitical competition intensifies and technological systems become increasingly material-intensive, the security of critical mineral supply chains will likely remain a central issue in global economic and defense policy.
References:
Gorrissen Federspiel. (2025, October 3). EU reimposes wide-ranging sanctions against Iran. Gorrissen Federspiel Legal Intelligence. https://gorrissenfederspiel.com/en/eu-reimposes-wide-ranging-sanctions-against-iran
Seyed Abbas Araghchi, Foreign Minister, Islamic Republic of Iran, x.com/araghchi
Al Jazeera. (2026, February 16). Iran FM in Geneva for US talks, as IRGC holds drills in Strait of Hormuz. Al Jazeera English. https://www.aljazeera.com/news/2026/2/16/irans-araghchi-arrives-in-geneva-for-second-round-of-nuclear-talks-with-us
BBC, Trump says world has 10 days to see if Iran agrees deal or 'bad things happen', Feb 20, 2026
Council of the EU, The Joint Comprehensive Plan of Action (JCPOA)
World Steel Association. (2026, January). December 2025 crude steel production and 2025 global crude steel production totals [Press release]. worldsteel.org. https://worldsteel.org/media/press-releases/2026/december-2025-crude-steel-production-2025-global-crude-steel-production/
U.S. Energy Information Administration (EIA), Iran, Oct 10, 2024
Noor Mine, Opportunities and Challenges of Investing in Iran’s Mining Sector, July 15, 2025
International Energy Agency. Supply concentration risks in critical minerals markets, October 23, 2025
NB. All sources accessed March 6, 2026. URLs verified at time of publication. Unamine makes no representation as to the continued availability of external links.
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