The EU’s dependence on highly concentrated critical raw material (CRM) supply chains, above all on China, has emerged as a central economic security vulnerability. The ReSourceEU Action Plan seeks to address this by accelerating selected projects, coordinating financing, establishing a coordination Centre, and strengthening resilience across CRM value chains through an encompassing policy framework. ReSourceEU makes effective use of constrained financial leeway and can viably stabilise a limited number of strategic bottlenecks: permanent magnets, batteries and defence-relevant inputs. However, it falls short of delivering a broader structural shift just yet. Many of the most consequential tools, such as joint purchasing, price stabilisation and diversification obligations, remain indicative or politically contingent. To reduce exposure more durably, the EU must now consolidate fragmented funding, anchor long-term demand, address refining chokepoints, and turn strategic partnerships into bankable, diversified supply.
Critical Raw Materials: ReSourceEU to the Rescue?1
On 3 December, alongside its new economic security communique, the Commission unveiled theReSourceEU Action Plan. The initiative reflects the EU’s attempt to reduce highly concentrated dependencies on critical raw materials (CRMs), above all on China, after a year marked by the growing weaponisation of economic interdependence. The timing is critical: at a moment when the EU is preparing to use more forceful tools to defend its industry against state-subsidised competition and coercion, these dependencies have become a strategic liability, constraining Europe’s ability to act credibly and consistently across its wider economic and security agenda.
This is not the EU's first attempt to address these vulnerabilities. The Critical Raw Materials Act (CRMA) set ambitious targets for domestic extraction, processing and recycling, but largely fell short of translating ambition into reality.
ReSourceEU seeks to close this gap. Rather than announcing new targets, it focuses on aligning existing instruments across trade, industrial, environmental, defence and security policy; prioritising a narrow set of strategically critical value chains; and introducing stronger conditionality to ensure that supported capacity serves European supply needs. The creation of a dedicated coordination centre and the mobilisation of €3 billion for selected projects mark a tangible step forward.
At the same time, the initiative exposes the limits of Europe’s current set-up. Many of ReSourceEU’s most consequential tools, including demand aggregation, joint purchasing, price stabilisation and diversification obligations, remain subject to further legislative debate and are framed in indicative rather than binding terms. Their eventual impact will depend on political and private-sector follow-through alike. Member states must be willing to align national strategies and funding instruments and to delegate stronger levers to the EU level. Firms, in turn, must commit to greater information sharing and to de-risking arrangements, including accepting the associated costs.
Europe’s new era of material insecurity
Critical raw materials have moved from largely invisible components of globalised supply chains, representing only a small fraction of global trade by volume, to central parts of industrial resilience and geopolitical leverage. Every major technological and industrial system the EU seeks to scale, from electric vehicles and grid storage to wind turbines, semiconductors and precision‐guided defence systems, depends on materials that Europe neither produces nor processes at scale. It imports nearly all its rare earths and most of its lithium, graphite, nickel and manganese. The bloc also relies overwhelmingly on non-EU countries, above all China, for the processing that turns raw ores into usable industrial inputs.
While Europe physically has CRM deposits and historically had its own refining capacities, it has outsourced capital-intensive mining projects and environmentally dirty processing for decades. Today, it operates no substantial rare-earth mines, limited extraction facilities for other CRMS and runs few processing facilities. China, by contrast, has spent decades building near-monopolies in processing, conversion and permanent magnet manufacturing – an indispensable input for many clean-energy and advanced defence technologies – while investing heavily in mining projects both domestically and abroad. The outcome is a full-chain dependency: Europe relies on China not only for raw materials but for the intermediate processing steps without which downstream manufacturing cannot function.
Figure 1: EU dependencies for CRM extraction and processing (European Commision, 2023); * signifies each resource’s share of overall global production
CRMs as leverage in an increasingly competitive arena
Beijing has been increasingly using these dependencies as geopolitical leverage. Following earlier export restrictions on graphite, gallium and germanium, China imposed export licensing on seven rare earth materials and certain rare-earth magnets in April 2025. While triggered by tensions surrounding US tariff and semiconductor policy, these measures had direct implications for the EU. Exporters are now required to obtain individual licences from China’s Ministry of Commerce, reducing the availability of key heavy rare earths used in high-performance permanent magnets and contributing to price spikes, delayed shipments, and heightened uncertainty for industry.
A second, more far-reaching package followed in October 2025, extending controls to five additional rare earths as well as refining and magnet-manufacturing equipment, including certain foreign-made products using Chinese materials or processing technology. Crucially, the package introduced categorical denials for defence-related end use. Although implementation was suspended for one year until November 2026, the episode underscored how quickly China can constrain access to critical midstream capacity. Beyond economic disruption, the explicit targeting of defence applications highlights the national-security implications at a time when Europe is undertaking its largest military build-up in decades.
The United States responded forcefully to the weaponisation of dependencies by pursuing an integrated ‘mine-to-magnet’ strategy. This combines Inflation Reduction Act (IRA) tax credits, Defense Production Act guarantees, equity participation and long-term off-take contracts, i.e. agreements under which buyers commit in advance to purchase a fixed volume of future output at agreed terms. These efforts have recently been reinforced by a $100 billion package for critical minerals and wider energy supplies. In 2025 alone, the US government took equity stakes in mining and smelting companies, including a 15% stake in MP Materials, while guaranteeing minimum prices for rare-earth supply over a decade.
Greater global diversification could, in principle, reduce Europe’s exposure. Yet diversification only strengthens resilience if access is secured. Replacing dependency on Beijing with an exclusive dependency on Washington is not a strategic upgrade by default. US programmes are designed first and foremost to serve domestic priorities; if they absorb the limited pool of non-Chinese capacity through long-term off-take, Europe risks being crowded out of the diversification it seeks.
Recent cases illustrate the reality of the risk that the US will pull scarce European capacity across the Atlantic: USA Rare Earth acquired the UK-based processor Less Common Metals, while Belgium’s Solvay, having opened a rare-earth processing facility in France in April 2025, earmarked large volumes of output to US magnet manufacturers, pointing to stronger commercial commitment from US partners.
What Europe has done so far
The EU has long been aware of its exposure to concentrated raw-material dependencies. As early as 2008, the EU identified concentrated raw-material dependencies as a strategic risk through its Raw Materials Initiative, yet structural exposure persisted. The Critical Raw Materials Act (CRMA), adopted in March 2024, represents the most comprehensive attempt so far to reverse this trajectory. It sets ambitious 2030 benchmarks: 10% extraction, 40% processing and 25% recycling, while seeking to cap single-country dependencies at 65% across the value chain.
To advance these objectives, the CRMA introduced a framework for “Strategic Projects”, granting public-interest status, streamlined permitting and access to public support. It also established the Raw Materials Mechanism to aggregate demand and link EU buyers with suppliers and project developers. But a notable gap emerged between ambition and delivery. The CRMA provided no new financing, while the permitting acceleration only modestly reduces the long lead-times of mining operations.
In the absence of investment and risk-sharing at the EU level, member states moved individually. Germany, France, Italy, and more recently the Netherlands, set up their own national CRM funds. Delivery, however, has been glacial. France’s €500 million fund has yet to announce any investments, Italy’s €1 billion vehicle remains inactive, and Germany’s €1 billion fund took over a year to make its first investment in December 2025. Divergent national eligibility criteria further fragment project development incentives, complicating cross-border projects and directing capital towards nationally favoured materials rather than addressing EU-wide bottlenecks (Figure 2).
Figure 2: National and EU-level funding vehicles diverge on eligible materials (DERA, Bpifrance, EU’s Raw Materials Information System)
ResourceEU: What does it do and how likely is it that it can shift the trajectory? The Action Plan rests on three pillars; targeted finance to accelerate European projects: centralised coordination to overcome fragmentation; and a broader resilience agenda to manage dependencies through circularity, demand-side tools, crisis-response measures, and global partnerships.
1. Accelerating European Capacities and Supply
Financing the EU’s Strategic Projects
ReSourceEU largely catalogues how existing EU and national funding streams can be mobilised to support the secure supply of CRMs. This includes the €1 billion 2025 clean-tech Innovation Fund call, up to €1.5 billion under the forthcoming European Defence Industry Programme (EDIP), and complementary national co-financing through CRM funds, state aid, cohesion instruments, Important Projects of Common European Interest (IPCEIs) and the Security Action for Europe (SAFE) instrument.
More significantly, the initiative announces the mobilisation of €3 billion within the next 12 months to support additional projects in three priority segments: permanent magnets, batteries, and defence-critical inputs. While critics note that this announcement largely repackages existing funds – €2 billion in European Investment Bank (EIB) lending and €300 million from the EU’s Battery Booster initiative were announced in March 2025, while a further €700 million stems from the already planned 2026 Innovation Fund call – its configuration is not without added value. The EIB lending is newly de-risked via InvestEU and tied to a clearer timeline for deployment. More importantly, EU support comes with novel supply-related conditionality: supported projects must deliver output to the EU, while the 2026 Innovation Fund call explicitly requires domestic or alternatively diversified sourcing plans.
Commission estimates suggest that mature projects in the three segments will require around €2.15 billion to reach final investment decisions and are set to reduce single-supplier dependence in the three priority segments by 30–50% by 2029. To showcase its financial muscle, ReSource announced two investments, adding €250 million to Vulcan Energy’s lithium extraction project in Germany and extending European financing to Greenland Resources’ Malmbjerg molybdenum project, critical for defence supply security.
Overall, the Commission has used the limited financial leeway available under the current EU budget framework effectively, streamlining and leveraging existing instruments to crowd in investment where possible. However, it should issue clearer criteria used to fund projects: the Malmbjerg project has not yet been designated as a Strategic Project. Without greater transparency, the Strategic Project label risks losing credibility and may deter firms from pursuing the lengthy application if the award does not reliably translate into preferential treatment or faster access to finance.
The headline figure, while significant, also remains below what is needed to finance projects across CRM value chains more broadly, with the EU-funded agency EIT RawMaterials estimating more than €10 billion are needed to reach the CRMA targets. A genuine step-change in Europe’s ability to de-risk projects more widely and supply the large amount of capital required is likely only to come with the next Multiannual Financial Framework (MFF). In 2025 prices, the Commission’s proposal for the 2028–2034 period allocates €115.7 billion of the €362.3 billion European Competitiveness Fund to resilience, security, defence and space. This would dwarf the €25.3 bn dedicated in the current budget. While the share ultimately earmarked for critical raw materials remains unclear, such an envelope would represent a significant increase. Its survival through the upcoming political negotiations, however, is far from assured.
Recycling and innovation
ReSourceEU elevates recycling as a supply-side channel, announcing a dedicated €593 million call under Horizon Europe’s 2026–2027 work programme and a further €100 million via the European Innovation Council. This reflects a clearer strategic prioritisation of recycling within the EU’s existing innovation framework. Further, the Commission will put legislation forward to increase available feedstock for Europe’s recycling industry by restricting exports of magnet scrap and other CRM-rich waste, alongside labelling and recycled-content disclosures to support future lead markets. While these are sensible measures, the real-world impact will take time: recyclers face high costs, uncertain off-take and limited demand-side pull, underscoring the need to embed support for innovative recycling practices within a broader industrial policy.
Permitting and regulation
ReSourceEU seeks to accelerate the delivery of projects by speeding up permitting procedures and revising environmental rules on water, chemicals and carcinogens for CRM projects. Yet the link between ambition and delivery remains weak. The CRMA already introduced binding timelines and required member states to establish Single Points of Contact, but implementation gaps persist: several authorities have yet to fully operationalise these structures or remain under-resourced. Crucially, designation as a Strategic Project does not override national environmental law or local political contestation.
The Kiruna rare-earth project in Sweden is a good example of these constraints. Earlier this year, LKAB confirmed 2.2 million tonnes of rare-earth oxides, making it one of Europe’s most significant known deposits, which was swiftly designated a Strategic Project. Yet permitting is still expected to take 10 to 15 years. Further, the deposit cuts across Sami reindeer migration corridors, requiring extensive consultation and engineered mitigation measures, which could further delay the process. If Europe is serious about domestic extraction and processing, it must accept that accelerating projects will require explicit political choices on land use, indigenous rights, compensation mechanisms and public-interest prioritization. The choices largely remain within national and local competence and are therefore difficult to resolve at the European level.
2. One Centre to Rule them All?
Institutional design and intended function
On the institutional side, ReSourceEU establishes a European Critical Raw Materials Centre, modelled on Japan’s Organization for Metals and Energy Security (JOGMEC). The Centre is designed to serve two distinct functions. First, it acts as a coordination hub on the supply side, aligning EU and national financing tools, consolidating market intelligence, and managing project pipelines and stockpiling, building on the Raw Materials Mechanism’s role in market transparency and matchmaking and on the EU’s Stockpiling Strategy.
Second, the Centre is intended to go beyond this coordination function to address the demand-side market failure that has held back investment in critical raw materials: the absence of predictable, long-term demand at viable prices. ReSourceEU therefore foresees the gradual introduction of instruments, including joint purchasing, price-stabilisation tools, diversification obligations and closer alignment of defence procurement with secure and diversified sourcing.
In its initial phase, however, the Centre remains a coordination vehicle rather than a market-shaping instrument. Until a second legislative package – expected in Q2 2026 and unlikely to be operational before 2027 – expands its mandate, the Centre will function primarily as an intelligence and ‘matchmaking’ hub. Its effectiveness therefore depends heavily on voluntary cooperation by member states via their national funds and industry sectors, while many of the more consequential measures remain exploratory or contingent on wider political consensus.
The Raw Materials Mechanism improves transparency, reduces transaction costs and facilitates access for smaller firms by pooling market intelligence and coordinating procurement. Its uptake, however, cannot be assumed. Effective and encompassing use would require a fundamental shift in how firms coordinate along the supply chain. Despite repeated warnings, most companies have so far failed to diversify away from China and have resisted sharing the granular supply-chain data needed for aggregation. Procurement of rare earths and other CRMs therefore remains fragmented across supplier tiers, with limited visibility over quantities, specifications and delivery timelines, and continues to rely largely on ad-hoc spot purchases or bilateral contracts. The Mechanism’s focus on non-Chinese supply chains also implies higher costs, signalling that diversification is likely to come at a price premium that firms must be willing to absorb.
Mandatory risk assessments and diversification obligations appear powerful on paper, but their bite will depend on the content of delegated acts and the political willingness to confront large industrial incumbents. Proposed price-floor or stabilisation tools could be transformative yet remain vague and underdeveloped.
The defence sector offers the most plausible entry point to overcome these constraints. States already play a central role through public procurement, strategic partnerships and long-term contracting, providing a degree of predictable off-take largely absent in other sectors. Defence-led demand could therefore serve as a testing ground for more assertive aggregation, off-take commitments and price-support mechanisms under the Centre’s coordination.
3. Managing International Dependencies
Concerted pushes from the EU and US will not eliminate dependencies in the near term, with the International Energy Agency estimating that Chinese dominance over CRM supply chains might only be reduced by 15% over the next decade.
ReSourceEU recognises these risks and advances a set of measures to strengthen the EU’s crisis-management capacity and limit foreign control and technology leakage. From May 2026, the Commission plans to rely on the Internal Market Emergency and Resilience Act (IMERA) to mandate priority deliveries or coordinate stockpile releases in emergency situations. It also excludes Chinese entities from CRM-relevant Horizon Europe calls and reiterates the role of the FDI Screening Regulation in scrutinising significant foreign investments in CRM projects.
To shield emerging European producers from targeted price manipulation that could undermine their business case, the Commission signals a more assertive use of trade defence instruments, primarily through anti-dumping and anti-subsidy investigations. For now, it remains uncertain whether these inherently lengthy procedures can offer timely protection, although an announced review by Q3 2026 could accelerate their application.
Externally, ReSourceEU reiterates the EU’s ambition to make its global partnerships more operational. In practice, however, it largely repackages existing cooperation frameworks. The Action Plan points to greater use of Horizon Europe, Global Gateway, and European Fund for Sustainable Development Plus guarantees to support third-country projects, and to multilateral coordination through the G7 and G20 to co-de-risk investments and promote standards-based markets.
The central constraint remains commercial anchoring, which the plan does not address. Without predictable EU off-take guarantees at commercially viable prices or comparable risk-absorbing instruments, the EU will struggle to bring new developments to fruition and struggle to compete with actors able to offer clearer long-term demand signals and faster capital deployment, notably China and the US.
So what’s needed now?
ReSourceEU pulls many of the right levers, but its impact will remain limited unless Europe closes the gap between the political ambition to secure critical supply chains and the instruments capable of ensuring this. While the initiative spans all the relevant policy fields – trade, industrial, environmental, defence and security – too many of its regulatory elements remain indicative rather than binding, and delivery still depends heavily on voluntary alignment by member states and industry.
Within the constraints of the current budget framework, ReSourceEU makes effective use of limited financial leeway by setting clear timelines for three priority value chains and aligning pre-announced funding accordingly. Yet if this targeted push is to serve as a stepping stone rather than an endpoint, it must be followed by a more encompassing approach to risk-sharing, demand anchoring and supply-chain data sharing.
First, member states need to commit to genuine coordination of their national CRM funds. Fragmented national pipelines should give way to a single, targeted European project pipeline with common eligibility criteria and strategic prioritisation, reducing duplication and geared towards scale-up efforts. This coordination should be institutionalised through the forthcoming legislative package (expected in Q2 2026), empowering the CRM Centre to move beyond coordination towards market-shaping functions, including equity participation, long-term off-take commitments and, where necessary, revenue-stabilisation instruments.
Second, Europe must anchor demand for domestic projects. The Innovation Fund’s conditionality is a useful starting point but is still insufficient on its own. Europe needs system-wide demand measures that create reliable off-take for European and diversified supply. The most immediate and politically feasible entry point is the defence sector. The forthcoming revision of defence-related and other security-sensitive procurement rules, scheduled for Q3 2026, should be designed to systematically favour bidders that source refined or recycled CRMs from European or diversified non-Chinese supply chains. This would also serve as a litmus test for the EU’s willingness to translate de-risking commitments into binding procurement choices.
Beyond defence, lead markets for non-Chinese and European-sourced materials should be established through the upcoming Industry Accelerator Act in January 2026. Over the longer term, Europe should develop price-stabilisation mechanisms such as ‘contracts for difference’ for recycled CRMs and needs to hard-wire sourcing conditionalities across the spending programmes of the next MFF. Together, these measures would not only improve investment incentives but also help prevent scarce European capacity from being drawn out of the Union through long-term off-take agreements with the US.
Third, Europe should take a more deliberate approach to managing outbound flows across the CRM value chain. At present, the EU lacks any framework to limit exports of critical raw materials or intermediates, allowing scarce inputs to be sold globally based on commercial considerations alone. While a more encompassing export control regime was envisaged under the EU’s Economic Security Strategy, little has materialised since. Due to their relevance to national security, critical raw materials provide a clear starting point to develop narrowly scoped export constraints in situations where supply disruptions would directly threaten defence production, in particular under IMERA scenarios triggered by shortages or market manipulation.
Fourth, Europe should adopt a value-chain-wide approach for each strategic critical raw material. Reducing dependency at the level of extraction or piece-meal improvements of refining and recycling capacities will not bring wider resilience so long as Europe remains structurally exposed in the intermediate processing. Managing this will require access to granular, sensitive supply-chain data and a much higher degree of business cooperation than has so far been forthcoming. Yet member states have remained reluctant to delegate stronger information-gathering and coordination powers to Brussels. Ironically, it is now Chinese authorities that increasingly possess this information, as firms are required to disclose detailed supply-chain data to obtain export licences for critical raw materials under this year’s new restrictions. Without a more robust EU-level authority to collect, analyse and act on such data, Europe will continue to be blindsided by new chokepoints and bottlenecks.
Fifth, to turn strategic partnerships into genuinely diversified supply, the EU should integrate financing, risk-sharing and long-term off-take into single contractual packages, coordinated by the CRM Centre. Resource-rich countries increasingly seek to capture more local value and, following Indonesia’s example in nickel, resort to export restrictions, often with limited notice. The EU should pursue targeted agreements that combine upstream investment with support for local processing and infrastructure, including energy and transport, using Global Gateway financing more systematically with clear requirements for European off-take.
1 In preparation of this policy brief, the JDC hosted an expert workshop on critical chokepoints in late October. I would like to thank all participants for their time and valuable insights. The views and opinions expressed in this brief are solely those of the author.