The Gulf’s Critical Minerals Balancing Act

Despite the US and China’s efforts to align the Gulf states with their minerals policies, they are likely to maintain hedging and diversification to guarantee their agency in the long term.

China may have underestimated the implications of its critical minerals export controls on friendly countries like the Gulf states. The Gulf states are pursuing three interconnected ambitions: emerging as global hubs for artificial intelligence (AI) infrastructure and data centres, build domestic manufacturing capacity for renewable energy technologies and electric vehicles, and maintain strategic partnerships with both China and the United States (US). However, China’s tightening of its critical minerals export controls in April and October 2025 threatens all three. Beijing’s new licensing requirements, extraterritorial provisions, and end-use restrictions strike at the heart of the Gulf’s development strategies. The Gulf statesthat have long used  US-China competition to their advantage, Beijing’s export controls f whether genuine neutrality between the two superpowers remains viable.

At first glance, the Gulf states’ ambitions align seamlessly with Washington’s push to reduce its dependence on China for critical mineral supply chains.. The Trump administration views Saudi Arabia and the United Arab Emirates (UAE) as ideal intermediaries—countries with substantial mineral deposits, export-oriented infrastructure, deep financial reserves, and growing mining partnerships across Africa and Latin America. The strategy follows a familiar playbook: integrate Gulf AI infrastructure and data centres into the US regulatory ecosystem, then leverage those partnerships to secure access to the critical minerals such as gallium, germanium, indium, tantalum, silicon, and copper that underpin advanced computing. For Washington, the Gulf offers a rare combination: capital to finance mining projects, political stability to anchor supply chains, and strategic location to process minerals extracted from the Global South.

The Trump administration would be mistaken to interpret Gulf’s cooperation on critical minerals as a willingness to decouple itself from China. Gulf states are pursuing diversification, not substitution.

Yet the Trump administration would be mistaken to interpret Gulf’s cooperation on critical minerals as a willingness to decouple itself from China. Gulf states are pursuing diversification, not substitution. Even as they deepen partnerships with Washington on AI and rare earth processing, they maintain China as their largest trading partner and continue relying on Chinese technology for telecommunications and renewable energy projects. For Riyadh, Abu Dhabi, and Doha, the optimal strategy is hedging as they seek to protect their nascent manufacturing and AI ecosystems.

The Impact of Chinese Export Controls

China’s expansion of rare earth export licensing in April last year was imposed in retaliation to the Trump administration’s “Liberation Day” tariffs. An October extension then asserted jurisdiction over foreign goods containing Chinese components. Together, these measures injected acute uncertainty into Gulf’s AI and industrial development projects that relied on stable supply chains. Beijing’s strategy shifts supply chain risk to downstream partners by tightening upstream regulations. This forces rare earth producers in third countries to secure Chinese approval for selling products manufactured using Chinese equipment or containing Chinese components. Such an approach  transforms China’s dominance in mineral supply chains from being a structural advantage into a regulatory chokepoint,  precisely the kind of vulnerability Gulf policymakers sought to avoid as they develop their own processing and manufacturing capabilities. The consequences are procurement delays, surging costs, and weakened long-term planning capacity.

Price volatility in minerals tells the story. Yttrium oxide, one of the rare earths targeted by Chinese controls, surged by 4,400 percent outside China between January and November 2025. The mineral is critical for speciality alloys in turbines and high-temperature coatings in the energy sector. GE Vernova, which is installing five H-class gas turbines at Saudi Arabia’s Qurayyah Power Plant under multi-billion-dollar contracts, was directly affected and is now working with the US government to boost stockpiles. Siemens, with major power plant contracts in Saudi Arabia and the UAE, says it is monitoring the restrictions “with concern.”

Such an approach  transforms China’s dominance in mineral supply chains from being a structural advantage into a regulatory chokepoint,  precisely the kind of vulnerability Gulf policymakers sought to avoid as they develop their own processing and manufacturing capabilities.

Gulf megaprojects, spanning across AI data centres, renewable energy infrastructure, and industrial manufacturing are, dependent on rare earth elements embedded throughout their supply chains, making them acutely vulnerable to Beijing’s regulatory reach.

Adopting the AI playbook in Minerals

The effects of China’s export policies are shaped less by  direct Gulf-China trade in critical minerals than by the way global supply chains are structured. Sensing an opportunity, Gulf states are positioning themselves as trusted partners to the US in recalibrating critical mineral supply chains away from Chinese dominance. During President Trump’s May 2025 visit to Saudi Arabia, the two sides signed an agreement to explore joint ventures in critical minerals, including refining facilities, workforce training, and research institutions. Last November, Saudi Crown Prince Mohammed bin Salman signed a joint framework to coordinate policies on strategic minerals and broaden global supply chains for rare earths. In doing so, Gulf states are capitalising on US overtures to bring them closer to Washington’s global agenda.

These partnerships are taking concrete shape. MP Materials, the US Department of Defense, and Saudi mining company, Maaden, signed an agreement to develop a rare earth refinery in the kingdom, with MP Materials and the Pentagon holding 49 percent and Maaden 51 percent stakes, respectively. Last October, the US International Development Finance Corporation, Orion Resource Partners, and Abu Dhabi’s ADQ contributed US$ 600 million each  to establish the Orion Critical Mineral Consortium, targeting a corpus of   US$ 5 billion. The UAE joined the US-led Pax Silica Initiative last December, aiming to secure critical mineral supply chains and counter China’s dominance, followed by Qatar soon after.

What is evident is how the Trump administration is applying its AI playbook to minerals. In May 2025, Saudi Humain and the UAE’s G42 signed multi-billion-dollar agreements with Nvidia, Microsoft, AWS, and Oracle to scale up its domestic compute capacity using advanced AI chips and cloud software. The UAE called Washington the “partner of choice” in AI. Notably, major Saudi and Emirati firms simultaneously pledged to divest from Chinese partnerships.

Chinese AI and semiconductor firms are being relegated to secondary roles in Gulf markets, ceding early ground in a rapidly expanding ecosystem.

The latest proliferation of US-Gulf deals presents two challenges for Beijing. First, Chinese AI and semiconductor firms are being relegated to secondary roles in Gulf markets, ceding early ground in a rapidly expanding ecosystem. Second, integrating Gulf states into the US AI regulatory framework risks isolating China’s Global South–focused AI governance push, creating regulatory incompatibilities between Chinese and GCC and drawing the GCC closer to US-led rule-setting.

Beijing appears to recognise that its rare earth restrictions may backfire. During his December visit, Foreign Minister Wang Yi urged Riyadh and Abu Dhabi to sign a GCC-China free trade agreement, underscoring the need to “deepen cooperation” in traditional industries and expand collaboration in emerging areas.

Hedging Remains the Gulf Policy of Choice

Consistent with their AI strategy, the Gulf states will likely hedge between the US and China while diversifying global partnerships in critical minerals. First, Riyadh and Abu Dhabi aim to advance their domestic development agendas and present themselves as reliable providers of high-tech and manufactured goods worldwide. Gulf states are accelerating licenses for foreign mining and exploration. Saudi Arabia revised its estimate of untapped mineral resources from US$ 1.3 trillion to US$ 2.5 trillion and announced a US$100-billion mining initiative in early 2025 in partnership  with firms from the US, Europe, India, and China. Among companies awarded licenses since Trump’s tariff war with Beijing is China’s Zijin Mining, covering Jabal Sayid and Al Hajar belts in Saudi Arabia. Elsewhere in the Gulf, Oman reached an agreement with Hunan Zhongke Electric in June 2025 to build its first lithium-ion anode production facility, with an estimated investment of  US$ 1.1 billion.

Saudi Arabia stands out for its rapid expansion in midstream and downstream mineral capabilities by leveraging some of the world’s lowest energy costs, with an aim to rank among the world’s top seven mineral processors by 2030.. Gulf companies are acquiring minority stakes in mining companies abroad to influence offtake agreements, mirroring China’s approach of combining mineral acquisition with control over export hubs, primarily ports, to integrate supply chains.

Second, most Gulf mining initiatives remain nascent and require external expertise. This means Gulf companies will  likely remain dependent on Chinese mineral supplies, processing technology, and mineral-intensive manufactured products for years. Electric vehicles—where a single battery requires up to 200kg of critical minerals—illustrate this dependency. Gulf imports of Chinese cars accounted for nearly 14 percent of total automobile imports in 2021–2024, up from zero a decade earlier.

Beyond minerals and manufacturing, the GCC has continued to hedge in advanced technology. One telling fact is how the GCC sourced the majority of semiconductors from China during 2020-2023, despite the Biden administration’s restrictions on AI chips:  81 percent for Saudi Arabia and 67 percent for theUAE. Both countries are compartmentalising AI and data centre partnerships, running parallel tracks with the US and China —a trend likely to continue in the foreseeable future.

All Gulf states except Kuwait participated in the latest Critical Minerals Ministerial in Washington, which aims to “reshape the global market for critical minerals and rare earths.” Gulf states are expected to participate in similar US-led initiatives throughout 2026, even as they avoid appearing too close to China. Yet as Washington and Beijing each try to loosen the other’s grip on the Gulf, both should remember that Gulf states retain agency. Their hedging strategy is neither opportunistic nor temporary, but a deliberate policy choice that will endure.

Ahmed Aboudouh is an associate fellow with the Chatham House Middle East and North Africa Programme, based in London.