Shooting for the Stars with a Paper Airplane: The US-Pakistan Rare Earths Deal

January 27, 2026

Pakistan’s Critical Mineral Reserves: Hype and Reality

Although Pakistan does own extensive reserves, which its government states have an estimated value of $6 trillion and stretch across 230,000 square miles, the possession of these reserves is only one component of an extensive framework which is required to actually use and profit from these reserves. Ultimately, there is a stark disconnect between the promises being made to secure investment and the realities of what can actually be delivered.

The first question that must be considered is why Pakistan has not already tapped into its ample minerals supply, particularly since it has been mired in a dire economic crisis for many years now. Despite the fact that Pakistan has some of the world’s greatest mineral supplies, its minerals sector only accounts for a mere 3.2% of its GDP and only 0.1% of all global mineral exports. Shehbaz Sharif has spoken about his vision of Pakistan saying “goodbye to institutions like the IMF” thanks to its “trillions of dollars” of mineral deposits. This seems highly unrealistic, particularly considering the time scale the government appears to suggest – if this industry is intended to solve the country’s debt crisis, it seems they expect a relatively fast turnaround in these profits.

Pakistan’s opaque reporting on its mineral reserves raises further doubts about the credibility of government claims that these deposits are worth $6 trillion. Pakistan has released no JORC or NI 43-101 data, which are two internationally certified standards for geological data. These standards require independent certification, detailed assessments and crucially, economic feasibility studies. Not all countries use these two standards, but all major producing countries (such as China, Australia, Brazil, India) either use these or their own national mineral reporting code that adheres to the Committee for Mineral Reserves International Reporting Standards. Pakistan does not adhere to these standards, which heavily implies their government estimates are vastly inflated.

A second question worth raising is this: if foreign direct investment is all that Pakistan needs to tap into its mineral reserves, why have Chinese investments not been leveraged for that purpose? China has poured $65 billion into Pakistan via the China Pakistan Economic Corridor and it is difficult to understand how such investment has not transformed Pakistan’s rare earth mineral industry. China does have a number of ongoing mining projects within Pakistan, but many are not yielding the promised results and those that do have become embroiled in controversy.

The Saindak copper mine, developed with Chinese funding in the 1990s, while fully operational has been heavily criticized for hiding revenue figures, not obtaining adequate provincial permission, and providing limited local benefits. Locals have complained of poor crop harvests and damage to the local water supply, which has been described as more like saline than water.

It could also be argued that China is much better positioned than the U.S. to capitalize on Pakistan’s minerals industry, since China controls 92% of the world’s minerals refining industry as well as 61% of rare earth production. Even if the US successfully helps Pakistan extract its minerals, they would then need to depend on China for the refinement process. Since most of Pakistan’s mineral reserves are sparsely distributed, it would also be very costly to develop refinement infrastructure in every reserve location, limiting the benefit of such a heavy investment.

Although China announced a year-long suspension on proposed export controls on five rare earth minerals in a deal with the U.S. in November, this is only a temporary solution to US dependence on China for rare earth minerals. China still has the ability to leverage its dominance in this industry in future months and by the time the suspension deal expires, the U.S. will again be vulnerable. Even if their ventures in Pakistan prove successful, it is estimated it will take a decade before real impact is seen. Furthermore, until a longer-term agreement is reached between the U.S. and China, Washington cannot depend on China granting access to its refinement processes. It should also be considered that if US mining projects in Pakistan become more successful than China’s, China will be even less inclined to help refine these raw materials.

Another obstacle in the US plan to rely on Pakistani minerals is the outdated technology in Pakistan’s mining and minerals industry. Their extraction processes are severely inefficient and historically the country has focused heavily on the export of raw minerals, leaving much of the production and refinement process to other competitors. This has meant Pakistan has lost out on a significant proportion of the potential revenue from their minerals, as they are less valuable in their raw form.

Yet another barrier concerns the complex regulatory framework and bureaucracy in Pakistan. In 2010, Pakistan passed an 18^th constitutional amendment that altered the country’s division of power. It enabled the decentralization of power by granting greater authority to the country’s provinces, which now have considerable autonomy over their own mineral resources. This indicates that the central government is actually not in a position to promise its mineral resources to the U.S. or any other interested party and that any guarantees are misleading.

There have already been serious delays in the major Reko Diq project (a copper and gold mine) in Balochistan, which has had its start date pushed back to 2028. There have been allegations that the central government has not yet transferred funds for the project’s security arrangements, which has made investors uneasy. It has been reported that the Interior Division requested a grant of Rs1.8 billion to cover the cost of security arrangements, but the Finance Division only approved Rs257 million, just a fraction of the requested amount. It seems the government has nowhere near the funding to pay for the security of this project, which is supposed to be the “crown jewel” of Pakistan’s mining industry.

When asked about the deteriorating situation, government officials said all concerns were unfounded. The Reko Diq Mining Company, however, has admitted its concerns and has thus contradicted the government’s reassurances. Now officials are reluctant to speak on the record about the case. This seems to be an attempt by the government to cover up a stalling project that is facing issues other investors are also likely to encounter. Investors seem unwilling, however, to maintain the government’s façade.

It is also problematic that the vast majority of Pakistan’s mineral resources (around 80%) are located in Balochistan, its most turbulent region. While Balochistan has been the site of numerous infrastructure projects funded by foreign investors, the local population hardly share in the profits and feel their resources are being plundered by foreign entities while they themselves remain in poverty, with a per capita GDP of under $1,000.

There has been a string of violent attacks against Chinese workers in the region and although army chief Asim Munir reassured a robust security framework for future investors, they are in no position to make this guarantee. Violence in Balochistan has only continued to escalate, with last year’s Jaffar train hijacking incident leading to the deaths of 21 civilian hostages.

For rare earth minerals to be processed and refined, a stable water supply is pivotal, and is not something Balochistan’s arid climate is likely able to supply. Mining in water-scarce areas can also lead to detrimental ecological consequences like habit loss and food chain disruption, likely to cause even greater local tensions. Since the 18th Amendment grants the Balochistan provincial government greater autonomy over its natural resources, including significant veto power if extraction proves environmentally or socially harmful, Pakistan is likely to face substantial obstacles in translating the roughly 80% of its rare earth minerals located in Balochistan into profit. If Pakistan chooses to ignore the conditions of the amendment, this will further stoke local tensions and create an even more unstable environment for infrastructure projects.

Signalling over Substance?

Given all these obstacles, it appears unlikely that the U.S. will consistently commit to making transformational investments in such an unstable environment. While the U.S. does require critical minerals to advance its green energy capacities, and its defense and technology sectors, Washington cannot afford to wait decades for Pakistan to update its technology, infrastructure, training programs, bureaucratic and regulatory barriers, and security measures.

It is possible that US interest in Pakistani minerals has more of a symbolic purpose- to show China they have other options and cannot be so easily strong-armed. Furthermore, China’s attempts to pressure the U.S. by threatening to restrict mineral supplies – followed by Pakistan’s willingness to step in and fill the gap – has likely antagonized Beijing, especially given its long-standing and substantial investments in Pakistan. Ultimately, the U.S. needs new mineral supplies as soon as possible to ensure they can still compete on a global stage in a range of sectors, though it seems Pakistan is not currently in the position to facilitate this.