Beijing is signaling geoeconomic control over a chokepoint industry by deciding to resume the supply of rare-earth magnets to India on the condition of a written “no-diversion” pledge. This is more than just a contractual detail. The action encapsulates two factors influencing New Delhi’s decisions: the diffusion of great-power competition into contracts, standards, and midstream processing instead of territorial disputes, and asymmetric interdependence in critical materials.
At the same time, Kabul’s request for Indian investment in Afghanistan’s mineral industry provides a long-term hedge that is both operationally and politically ambiguous. When combined, these changes compel India to balance its long-term goal of strategic autonomy with its immediate industrial needs.
Minerals as New Geopolitics: Structure and Conditionality
Critical minerals have moved from the periphery of trade policy to the center of strategic competition. Washington’s “de-risking” and friend-shoring, Beijing’s countermeasures regarding gallium, graphite, and rare earths, and the European Union’s Critical Raw Materials Act together point to a partial bifurcation of value chains.
In this setting, critical minerals like rare earths operate more as coordination goods and less as mere commodities. Whoever controls metallization and separation sets prices, schedules, and, most importantly, others’ policy space. According to the International Energy Agency, China controls about 90 percent of the world’s rare-earth refining capacity, demonstrating its institutional rather than incidental dominance at the processing stage.
Considering this, Beijing’s “no re-export/no diversion” clause accomplishes two goals. As an extension of export control, it first aims to stop leaks to U.S. supply chains through developing countries via governance-by-contract. Second, it signals status: agreeing to the clause would be read in many capitals as an implicit acceptance of China’s gatekeeper role over magnet trade. The stakes are high right now. Electric vehicles (EV) drive trains, wind turbines, telecom networks, and an expanding array of dual-use defense systems all contain magnets — shortages in inventory result in production delays and increased costs.
Hedging Across Clocks: India’s Two-Level Game, Afghanistan, and Sequencing
India’s behavior toward the outside world can be best understood as strategic hedging. This means that it buys optionally under uncertainty by working with China’s commercial gravity while also building a partnership that counterbalances it.
New Delhi is a member of the U.S.-led Minerals Security Partnership (MSP) on the world stage. On the home front, a two-level game is underway, where line ministries prioritize throughput and costs, foreign-policy principals safeguard against weaponized interdependence, and industry lobbies advocate for predictability over provenance. Policy usually comes about at the point where those constraints are least expensive.
Afghanistan is not an immediate supply node in this hedge; instead, it is a signaling variable. Kabul’s invitation to Indian investors shows that they are not exclusive to China, weakens Pakistan’s ability to control transit, and encourages economic ties in the region that go beyond Western politics. However, the realities of running a business remain very challenging. For instance, there are problems with credible commitments (security guarantees, payment channels, and regulatory stability) and high transaction costs for infrastructure and logistics. Even though India has a route through Iran’s Chabahar Port, which is protected by a 10-year operating agreement signed in May 2024, it will still take years for India to obtain a significant quantity of rare-earth materials. Meanwhile, estimates of Afghanistan’s mineral wealth are over $1 trillion, indicating significant long-term potential, although this is not immediately apparent.
This is a clock problem. The industrial clock moves quickly; factories need magnets right now. The strategic clock moves slowly because it takes years to develop the skills required for mining, separation, and closed-loop recycling. Accepting China’s conditionality solves the industrial problem while pushing the strategic problem further into the future. Rejecting it does the opposite.
When done right, hedging is constantly changing: New Delhi sequences choices across clocks, drawing Chinese throughput to avoid short-term bottlenecks while putting enough money into non-Chinese corridors (including Afghan options) to prevent being stuck in a path-dependent situation.
Therefore, the critical inquiry is not “China or not,” but rather “in what quantity, under what conditions, and for what duration?”
The Afghan variable intensifies that analysis. It functions as a credible outside option, not because volumes will materialize soon, but because preparatory moves change expectations about India’s future bargaining position. Layered with MSP and other partnerships, this posture converts structural asymmetry into negotiating space without collapsing interdependence.
Capabilities, Risks, and Trajectories to 2030
Midstream is where India’s binding constraint is located. Although there is laboratory proficiency in alloying and separation chemistry, industrial-scale throughput, quality assurance, and waste management are still lacking. A strategic stockpile has been discussed, incentives for magnet manufacturing and recycling are in place, and public-sector consortia are purchasing assets abroad. Although the demand from EVs, grid equipment, and defense electronics is increasing, the import dependence on refined inputs remains high. A capability trap, downstream aspirations linked to upstream decisions made elsewhere, looms in the absence of a convincing plan to scale separation and metallization.
Hence, risk is not binary but compositional. While reducing short-term volatility, a China-reliant approach centralizes exposure, making it more susceptible to political linkage during border crises or more general U.S.-China shocks. An Afghanistan-enabled route trades immediacy for future diversification by distributing risk among transit, security, and finance. Although third-country routes (such as those in Australia, Vietnam, and parts of Africa) reduce geopolitical risk, they must contend with capacity limitations and premium prices until new refining lines are established. Since the relevant goal is variance minimization rather than risk elimination, an analytically sound position will de facto, if not de jure, blend all three.
India’s stance is consistent with the broader strategy of Indo-Pacific resource hedging. While Australia secures allied capital and offtake agreements, continuing to supply Chinese refineries on a large scale, Vietnam strengthens its processing ties with U.S. partners without disrupting trade with China. To manage vulnerability without destroying interdependence, institutional bricolage, layered with partial agreements, standards cooperation, and targeted subsidies, is more ideologically aligned than the regional approach. India is unique because of its size and proximity to China, which intensifies the signaling effects of every agreement and provision.
In the End, All is Interlinked
In addition to traditional military balances, rare earths now transmit power through infrastructures and interfaces. Within that framework, Kabul’s invitation and Beijing’s clause are read as positional moves. The analytical problem for New Delhi is not a binary choice; rather, it is about temporal sequencing under asymmetry, which involves balancing strategic and industrial clocks while maintaining flexibility.
Structure, not exhortation, determines results. The relevant threshold is marked by contestable dependence rather than autarky. Bargaining position is determined by midstream capability formation rather than headline mine counts. Participation in standards, such as certification, ESG, and traceability, transforms technical expertise into influence over regulations. Path dependence is lessened without destroying interdependence thanks to Afghanistan and third-country routes, which function as reliable external alternatives that change expectations even before volumes appear. By 2030, the pivotal battle will take place at the interfaces that transform resources into leverage, where ore turns into alloy and contracts into constraints. Therefore, in the coming decades, power in Asia may be measured less by missiles or GDP than by who controls the magnets that make them move.
