Could a $500m MoU draw Pakistan into a US–China minerals rivalry?

KARACHI: Experts and analysts expressed mixed views about the $500 million Memorandum of Understanding (MoU) between Pakistan and US with a view to increasing cooperation in the critical minerals sector.

The MoU was recently signed between US Strategic Metals (USSM) and Pakistan’s Frontier Works Organisation (FWO).

China dominates mining and processing of many critical minerals, especially rare earth elements, while countries like the US, and Japan are looking for alternative supply chains. Recently Pakistan and France have also explored avenues for collaboration in the minerals and mining sectors.

Speaking to Business Recorder , Dr Sultan Ahmed Khoso, Professional Mining Engineer and Professor in the Department of Mining Engineering at the Mehran University of Engineering and Technology, Jamshoro, said the agreement marks a strategic policy shift toward diversified mineral partnerships but carries significant repercussions.

Economically, it may attract new investment, technology, and market access while reducing dependence on China. But geopolitically, it introduces US–China competition within Pakistan, testing Islamabad’s neutrality and diplomatic balance, he said.

China may accelerate China Pakistan Economic Corridor (CPEC) and mining projects to maintain influence. Regionally, Pakistan gains leverage, but risks strategic pressure from both powers, according to him.

Managing this dual alignment through transparent governance, environmental safeguards, coupled with local community inclusion, and consistent foreign policy will determine whether the shift yields sustainable growth or geopolitical strain, he added

China dominates mining and processing of many critical minerals, esprescially rare earth elements. Countries like the US, and Japan want alternative supply chains

Dr Khoso said Pakistan possesses vast mineral resources, including critical and rare earth elements (REEs), yet its mining sector remains technologically underdeveloped. Efficient exploration and extraction require modern geophysical surveying, advanced beneficiation, domestic refining, and environmentally sustainable practices. Without these, Pakistan risks underutilizing its resources and missing critical opportunities in the global minerals market.

“Historically, China has been Pakistan’s primary partner through CPEC, providing large-scale infrastructure and financing. However, China’s engagement often prioritizes its own strategic interests, with limited technology transfer or value addition. In contrast, the recent MoU with the US government brings advanced mining and processing technology, access to global markets, and a focus on sustainable, high-value extraction,“he said.

“Considering China’s limitations and the US’s technology-driven approach, the US emerges as a more reliable partner for Pakistan’s long-term, efficient, and sustainable mineral development, while China remains valuable for large-scale infrastructure support.” he added.

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Last month former technocrat Zahid Maqsood Sheikh wrote that it may seem surprising to many that a country so closely connected to China would send such an important resource to Washington.

“After all, rare earth minerals are one of China’s strongest economic tools in its ongoing rivalry with the United States”.

But, he said, this move is not about betraying China. Instead, it’s a careful and practical step taken by Pakistan to secure its economic future.

“This decision reflects the urgency of the moment and Pakistan’s growing need to maintain a balanced strategy in its foreign relations.”

Meanwhile economic strategist and regional expert Dr Mehmoodul Hassan Khan said the pact with the US could have serious socio-economic, geopolitical and geostrategic spillover repercussions which run the risk of increasing levels of distrust and displeasure between Islamabad and Beijing.

He told Business Recorder that many Chinese companies have been working in Reko Diq for a long time and inclusion of US companies may upset them. He believes they are considering quitting the work they are doing. Furthermore, expected inclusion of Japanese companies in this project has further irked Beijing.

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As a result, the country could experience a drastic reduction in Chinese investments, which could create serious economic woes and diplomatic snags, he said.

According to him, “the past history of our political and diplomatic engagements with Washington vividly reflect the real essence, colors and motives of the US which remained one-sided simply protecting its own vested interests in the region and beyond.”

“Whereas our diplomatic ties with China remained positive, productive, participatory and peaceful without any specific conditions. Our relations successfully converted into a “Iron-Clad” win-win proposition and mutually beneficial equation and ultimately it became the biggest investor and contributor to our economy.”