Strategic Leverage or Dependency? The Real Stakes in Pakistan’s Mineral Diplomacy

In September 2025 Pakistan and the United States launched a landmark minerals partnership, signaling a shift from Pakistan’s traditional role as a security partner toward a resource-based strategic alliance. In the midst of rising US–China rivalry, Washington is eager to diversify its supplies of critical minerals (such as copper, rare earths and lithium) used in technology and defense. At the same time Pakistan, facing deep economic challenges and a mountain of foreign debt, has for the first time foregrounded its vast mineral wealth officially estimated at “trillions” of dollars as a national asset.

Pakistani leaders even showcased samples of rare-earth ores at a White House meeting in late September, underlining their pitch (as per press reports) that Pakistan can offer an alternative to China’s near-monopoly in these commodities. Media accounts note that the US saw this as an opportunity to secure new supply chains, reduce dependence on China, and also to reward Pakistan for recent diplomatic outreach (for instance, Pakistan lowered its tariffs on US goods and publicly supported US positions, according to diplomatic sources).

In this geopolitical context, Pakistan’s military-run Frontier Works Organization (FWO) signed a $500 million Memorandum of Understanding with Missouri-based US Strategic Metals (USSM) in early September. The initial terms envisage USSM investing in Pakistani mineral extraction and processing starting with the export of “readily available minerals” in exchange for a future stake in refining capacity. According to company statements and Pakistani officials, the first shipment under this deal was dispatched in early October: it reportedly contained antimony, copper concentrate and light rare earths (neodymium and praseodymium) from Pakistan to the US. This launch has been hailed as the opening chapter of a broader economic partnership, aiming to tap Pakistan’s minerals and to strengthen both countries’ supply chains.

As per my analysis, Pakistan’s minerals deal with the US is being presented as a diplomatic triumph, but this optimism should be tempered with caution. Pakistan has a history of grand resource pitches that have under-delivered, and critics worry that the rush to seal deals has not solved basic governance issues. Questions persist about transparency (opposition parties have lamented “secret” agreements), about how much of the actual wealth will stay in Pakistan, and whether local communities will benefit. In short, Pakistan’s handling of this new “resource diplomacy” seems driven by immediate needs rather than a clear strategy for long-term national gain. Any error in contracting or oversight could leave Pakistan with little more than empty promises.

Minerals included and their global importance

The reported agreement focuses on metals and minerals deemed strategic for advanced industries. Media coverage of the first shipment lists antimony, copper concentrate, neodymium and praseodymium as examples. These fall into three broad categories:

Copper and Base Metals: Copper is essential for electrical infrastructure, power grids, renewable-energy systems and industrial manufacturing worldwide. Pakistan has well-known copper deposits (Saindak and Reko Diq), and recent exports of copper concentrate reflect this. The deal also mentions gold and tungsten as part of its scope. Tungsten is critical for military applications (armor, jet engines), while antimony is used in electronics, flame retardants and batteries. These metals are on the US list of “essential” minerals for national security and industry.
Rare Earth Elements (REEs): The shipment included light rare earths like neodymium and praseodymium, which are key ingredients in high-tech magnets for electric vehicles, wind turbines, and defense systems. Rare earths (a set of 17 elements) are not actually scarce but require specialized processing. China currently dominates about 85% of global rare-earth refining, and analysts note that securing alternative sources is a US strategic priority. Pakistan’s geography suggests deposits of other REEs (cerium, lanthanum, etc.) in bastnäsite and monazite sands, although commercial quantities have not been fully proven. If realized, exploiting these could supply a small but important portion of the world’s needs.
Lithium and Other Critical Minerals: While lithium was not named in the initial shipment, diplomatic observers emphasize that Pakistan’s rock formations (especially in Balochistan and Gilgit-Baltistan) may contain lithium, cobalt, nickel and other battery metals. The US is keen on lithium for electric-vehicle batteries. Pakistani analysts have boasted of large lithium “potential” though exploration is at an early stage and the government has moved to make it easier to auction lithium and rare earth projects. If tapped, these resources would further Pakistan’s value in global clean-energy supply chains.

Each of these minerals is critical in the modern economy: rare earths and lithium power cutting-edge technology and green energy; copper and nickel power everything from smartphones to power plants; tungsten and antimony support defense and industrial uses. In short, analysts say the deal centers on the building blocks of the 21st century industrial base. The US side reportedly views Pakistan as a promising new supplier of these raw materials, while Pakistan sees the partnership as a revenue bonanza and a source of technology and jobs.

Why the US chose Pakistan as partner

A confluence of strategic, geographic and economic factors led Washington to Pakistan for this mineral deal. First, diversification of supply chains is key for the US. After recent disputes with China over trade and technology, US policymakers have sought partners outside China’s orbit. Pakistan offers an obvious counterbalance: it sits in South Asia (a region where China has invested heavily, e.g. via CPEC) yet has large untapped mineral deposits. By engaging Pakistan, the US can build alternative routes – for example, shipping minerals via Pakistan’s Arabian Sea ports – that do not pass through hostile territories or Chinese-controlled nodes.

Second, raw-material potential and urgency. Reports note that the US Department of Defense and other agencies are scrambling to lock down sources of lithium, copper, rare earths and more to fuel clean energy and semiconductor industries. Pakistan’s government claims reserves worth ~$6 trillion and points to projects like Reko Diq (one of the world’s largest copper-gold deposits) as proof of their wealth. In a global race for resources, US investors now see Pakistan’s “frontier” status poor infrastructure but big mines as an opportunity. A recent US State Department delegation and a Minerals Summit in Pakistan underscored this interest.

Third, political and geographic calculus. Pakistan occupies a unique position: it shares borders or close ties with Afghanistan, China, Iran and India. A port like Pasni (on the Arabian Sea) lies close to China’s Gwadar port and to India’s Chabahar port. By forging ties with Pakistan, the US potentially gains a strategic foothold near these regions. Reports from Asia Times and others note that US engagement in Pasni and Balochistan is seen in Beijing as an undercutting of China’s CPEC vision.

For Washington, cultivating Pakistan may also drive a wedge between Pakistan and Beijing, giving the US geopolitical leverage. Finally, the domestic US political context played a role: lowering tariffs on Pakistani exports (from 29% to 19%) and investing in Pakistan’s minerals sector were signals that a new Trump administration was serious about rewarding allied supply partners and punishing adversaries. Overall, US choice of Pakistan is a blend of seeking supply security, punting China’s influence, and trying to cement a friendly relationship with a country that had drifted from its orbit.
Pakistan’s rising strategic profile

This deal has instantly raised Pakistan’s strategic importance on the world stage. Traditionally seen in Washington as a security helper against terrorism or a bridge to Afghanistan, Pakistan is now being courted for its economy. By entering the “critical minerals club,” Pakistan hopes to recast itself as an asset, not a liability. Some Pakistani officials publicly say the agreement could generate billions in revenue, spur job growth, and bring technology transfer. If investors actually build processing plants and refineries here (as the MoU envisions), Pakistan might move from a mere exporter of ores to a hub in the global supply chain. In the short term, the deal has earned Pakistan high-level access: meetings at the White House and a rare signing ceremony with the US Army Chief present.

Regionally, this move could make Pakistan a more pivotal player. Gulf Arab states, already co-investing in Pakistani mining projects, may accelerate their engagements if the US is involved. India – which has watched Pakistan tilt between powers – is forced to take note: any closer US-Pakistan ties could complicate Indo-US relations, although publicly India is unlikely to object to US companies trading minerals with Pakistan. Afghanistan’s future governments might have mixed feelings: if Western attention shifts toward Pakistan’s stability and growth, Afghanistan could lose a bit of influence. However, an economically stronger Pakistan could also mean more support (or at least less interference) for Afghan rebuilding, depending on how ties evolve.

Internationally, China is by far the most affected player. Analysts in Asia note that Pakistan’s deal with the US and talk of an American role at Pasni port would severely undermine China’s investments. Over the past decade, China sank over $60 billion into Pakistan (roads, ports, mines) through CPEC. A US presence in Balochistan – near China’s Gwadar port – is seen in Beijing as a strategic betrayal. Chinese officials have not commented publicly, but state media and think-tanks warn that these developments could stoke Sino-Pak distrust. In short, Pakistan has briefly jumped into the spotlight: both Washington and Beijing now see it as a contested partner rather than a captive ally.

Potential challenges and risks for Pakistan

Pakistan faces several challenges in implementing the deal. Security considerations are significant, as mineral zones are located in regions like Balochistan and Khyber Pakhtunkhwa where insurgencies and ethnic tensions exist. Previous incidents involving Chinese workers indicate potential risks that may affect foreign investment decisions without adequate safety measures for operations and infrastructure.

Transparency and governance require attention. Opposition leaders have raised concerns about the deal’s negotiation process. The Reko Diq case, which resulted in substantial penalties due to contract disputes, provides historical context. Pakistan’s mining sector currently contributes under 3% of GDP, indicating limited institutional capacity for regulation, environmental oversight, and labor standards.

Economic factors include commodity price fluctuations and phased funding arrangements. The initial $500M allocation covers exploration through 2026, with subsequent phases requiring additional investment and political continuity. Changes in government or policy in either Pakistan or the US could affect implementation. China’s potential economic response, given Pakistan’s dependence on Chinese loans and CPEC projects, represents another consideration.

Social and environmental aspects include potential displacement, water management, and health considerations. In Balochistan, local communities have expressed concerns about resource extraction benefiting external parties. Establishing appropriate safeguards and benefit-sharing mechanisms will be important to address these concerns. In summary, Pakistan has an opportunity to develop its strategic position, though implementation involves multiple factors. The agreement outlines cooperative intentions, with various operational, contractual, and security considerations to be addressed during execution.

Implications for regional players

The deal is a setback for China, which expected exclusive access to Pakistani projects like Gwadar port. US involvement at Pasni or in Baloch mineral exports directly challenges China’s corridor and access to critical resources. Growing Pakistan-US ties suggest Pakistan may defy China’s terms, potentially straining China-Pakistan relations despite Beijing’s public downplaying. India’s response is cautious. While closer US-Pakistan ties may unsettle New Delhi due to rivalry, India remains a key US ally with its own critical mineral’s agenda. India likely views this as a US-China issue but will monitor new Pakistani trade routes like the Pasni rail link for regional trade impacts.

Afghanistan faces mixed effects: Pakistan’s stability could reduce insurgent sanctuaries; US investors might favor shipping Afghan minerals via Pakistan, reducing Taliban leverage. China may speed up lithium deals with Afghanistan amid Pakistan’s shift. Afghanistan’s official stance is unclear but will adjust to Pakistan’s new alignments.

Other regional players are attentive. Iran views Pasni and Balochistan as rivals to its Chabahar port, potentially impacting Indo-Iranian trade to Afghanistan. Gulf states show interest in Pakistan’s minerals, possibly balancing US and China ties. Russia, an arms supplier to Pakistan, watches US presence in the Indian Ocean carefully due to its interests in Iran and Afghanistan. Overall, Pakistan’s deal adds a new layer to South Asian geopolitics, positioning it as a resource-rich partner beyond its war-on-terror role. This may ease traditional hostilities but risks alienating old allies. Regional stability depends on Pakistan balancing its US partnership with existing relationships.

Strategic recommendations for Pakistan

To make the most of this opportunity, experts suggest Pakistan take proactive steps:

Insist on local value-addition. Pakistan should negotiate clauses requiring on-site processing (smelting, refining, battery/magnet manufacturing) rather than exporting raw ore. Historical examples (like Indonesia’s nickel policy) show that export bans or minimum processing rules can force companies to build facilities locally. Over time, refining metals in Pakistan would capture more revenue and build domestic industry.
Build strong institutions. The government should fast-track creation of a dedicated minerals authority or accelerate the new Mineral Harmonization Framework. This body should include geologists, environmental and legal experts and work transparently with provinces. Clear rules for contracts, royalty rates and environmental protections will attract legitimate investors and reduce the risk of elite capture or corruption. As one analysis noted, the contest over minerals will be decided in “policy chambers and contract clauses” – Pakistan must modernize its rulebook quickly.
Diversify partnerships. While the US deal is promising, Pakistan should avoid a single-partner dependency. It can invite Australian, European or Japanese technology in mining and processing. For example, Japanese firms have expertise in rare-earth separation. By engaging multiple countries (perhaps through forums like BRICS or SCO), Pakistan can compare terms and avoid giving any one partner too much leverage. In particular, fostering India–Pakistan cooperation on transit (for example, linking Pasni and Chabahar) could turn regional rivalry into shared gains.
Ensure transparency and public inclusion. Address domestic skepticism by releasing MoU details (to the extent possible) and involving parliament in oversight. Create community-development agreements for mining areas so that local Baloch and tribal populations see roads, schools and jobs in exchange for resource access. Good governance will prevent grievances that could spark conflict.
Invest in capacity and exploration. Use initial revenues (even token proceeds from early exports) to fund geological surveys and train Pakistani engineers/miners. The state should encourage joint ventures where foreign investors train locals. Over time, cultivating an educated workforce will reduce Pakistan’s need to import expertise.
Manage strategic balance. Diplomatically, Pakistan will need to reassure China that it is not abandoning CPEC, even as it pursues the US deal. This might involve keeping some Chinese projects active or negotiating adjustments to debt. At the same time, Pakistan should signal to the US and other partners that its foreign policy will remain independent (for instance, by not automatically aligning with US rivals). By playing both sides carefully, Pakistan can extract maximal economic benefit without becoming a battleground for great-power rivalry.

If Pakistan follows these strategies, it can turn a headline-grabbing MoU into a sustainable engine of growth and global relevance. The minerals underfoot could help stabilize the economy and give Pakistan new diplomatic clout but only if Pakistan acts with strategy, transparency and long-term vision.