INSIGHTS | Arming the Alliance: The mineral gap behind NATO’s US$4.2 trillion plan

As NATO allies commit to the largest defense build-up since the Cold War, the race to rearm has become a race for the minerals that make it possible.

At last year’s summit in The Hague, NATO allies pledged to spend 5% of GDP per year on defense by 2035, more than doubling their current pace. Of this, at least 3.5% will be allocated to core defense requirements and up to 1.5% to critical infrastructure, cyber defense, civil resilience and the defense industrial base ¹. Assuming they hit that target, the Alliance will be spending roughly US$4.2 trillion a year, some US$2.7 trillion more than it spent in 2024 ².

There is a longstanding requirement that at least 20% of NATO defense expenditures be devoted to major equipment and associated R&D ³. That will put roughly US$480–580 billion annually into equipment that depends, more than any generation of weaponry before it, on a small and contested set of raw materials ⁴.

Meeting that challenge will require NATO to treat critical mineral supply chain resilience as a core component of collective defense, one that demands as much strategic coordination, dedicated financing and Alliance-wide commitment as the rearmament agenda itself.

Critical minerals in modern weaponry

Previous generations of fighter jets and armored vehicles primarily required steel, aluminum and copper. Those metals are still vital, but today’s precision-guided, electronically sophisticated weapons systems depend increasingly on a small group of minerals used for highly specific purposes.

A guided missile, for example, depends on magnets made from rare earth elements (REEs). The actuators that tilt a missile’s fins in flight rely on rare-earth permanent magnets that hold their strength even under extreme temperatures ⁵. Neodymium and praseodymium provide the base magnetic strength, while dysprosium and terbium are added to maintain that strength as the missile heats mid-flight. The capacitors that stabilize its onboard electronics rely on tantalum, valued for how much electrical charge it can hold in a tiny space. The heat shields protecting the missile’s nose tip on re-entry, capable of withstanding temperatures above 2,000°C, often use tantalum as well ⁶.

A fighter jet, too, relies on an array of minerals ⁷, with an F-35 requiring 418 kg of rare earth elements ⁸ across numerous subsystems. Its radar depends on gallium nitride semiconductors, which handle roughly ten times the electrical current of silicon while shedding far less heat, allowing a single radar array to pack thousands of components into a fraction of the space older systems required ⁹. Its engines, made from an alloy of titanium and vanadium, can maintain their shape and strength at temperatures that would deform ordinary steel. The same alloy is used in landing gear, wing spars, and fasteners across most modern military aircraft ¹⁰. The turbine blades inside the engines depend on small amounts of rhenium, an element so scarce it is only recovered as a byproduct of copper and molybdenum mining, to prevent failing under extreme heat ¹¹.

Naval vessels, too, rely on critical minerals. Submarines and surface ships use rare-earth magnets for electric propulsion. A single Virginia-class submarine requires a sizeable 4,600kg of rare earths ¹². In nuclear-powered vessels, hafnium’s unusual ability to absorb neutrons makes it a standard material in the control rods that regulate the reactor, a role it has played in US naval reactors since the earliest days of the nuclear submarine program ¹³.

These are just a few examples of critical defense minerals and their uses in defense. While these minerals play different roles, they have two things in common: scarcity and not being substitutable. Mining and processing capacity for nearly all of them is controlled by a small number of countries. None of the critical minerals can be substituted without redesigning the weapon system. This concentration and reliance leaves NATO’s rearmament plans dependent on supply chains the Alliance does not currently control.

Supply chain exposure

Despite clear need and growing demand, NATO allies depend on imports for all twelve defense-critical raw materials identified by the Alliance’s Industrial Advisory Group ¹⁴. Currently, China controls 60–90% of global processing capacity for these minerals, including 99% of gallium, 95% of magnesium, 83% of tungsten and over 69% of all rare earths. The US currently has a net import reliance of over 80% for eight defense-critical minerals.

China introduced export licensing requirements for gallium and germanium in 2023, followed by antimony in 2024. It subsequently imposed an outright ban on exports of all three materials to the US. In early 2025, export controls were expanded to include tungsten and other strategic metals. Later in 2025, China placed seven medium and heavy rare earth elements and their associated magnets under a global export licensing regime. A second, broader round of controls followed in October, adding five more rare earth elements and extending restrictions to foreign-made products containing Chinese-sourced rare earth materials.

Analysis by the defense-analytics firm Govini, drawing on US Department of War procurement data, found that more than 80,000 parts across roughly 1,900 US weapon systems incorporate antimony, gallium, germanium, tungsten or tellurium, meaning nearly 78% of all Department of War’s weapon systems are potentially affected.

Over 91% of Navy systems and 62% of Marine Corps systems rely on parts tied to these minerals. The figures are US-specific, but the European Union’s Institute for Security Studies notes that European-produced weapon systems are likely to show a similar degree of dependence, since they draw on the same materials ¹⁵. Supply chain dependency is no longer a theoretical vulnerability, it is an active constraint already shaping Europe’s and the Alliance’s defense manufacturing capacity.

Appian recommendations

Count critical mineral investment toward the 5% commitment
Critical mineral expenditures should formally count toward NATO members’ 5% GDP commitments, and the 1.5% industrial base allocation should explicitly recognize mineral supply chain development as a defense obligation, not an adjacent industrial policy. If there was a common accounting standard and independent verification established to qualify new investments across the mining value chain, it would enable more consistent capital deployment across the Alliance. Canada has already moved in this direction. Last year, Prime Minister Mark Carney confirmed that Canadian investment in critical-mineral extraction, processing and connecting infrastructure will count toward its 5% commitment. NATO has an opportunity to formalize Canada’s unilateral move into a common standard that every member can follow.

For European members in particular, this would unlock capital already flowing through the EU’s Critical Raw Materials Act and RESourceEU programs. Rather than asking member states to build a separate pool of money from scratch, it would simply recognize the money they are already spending as part of collective defense.

Right now, there is no shared definition of what qualifies as a defense-critical mineral investment under the 1.5% allocation. Without one, a euro spent on a mining project in Poland and a dollar spent on a magnet plant in Texas may be counted, reported, and prioritized completely differently. That makes it nearly impossible to track whether the Alliance, as a whole, is closing the demand gap.

A common accounting standard for investments in defense-critical minerals would allow NATO members to benchmark progress against one another. It would also make it easier for the EU’s own instruments, the CRMA’s strategic project designations and the financing mobilized through RESourceEU to plug directly into NATO’s broader defense spending framework, rather than running on a parallel and disconnected track.

Use the spending commitments to incentivize private investments
This approach will be even more impactful if private-sector co-investments were included in the accounting standard, as it would draw more private capital into the sector on predictable terms. While Europe’s domestic geological endowment is more limited than North America’s, it has clear competitive advantages in its financial services ecosystem. Europe-based Appian is one of the largest private equity investors in critical minerals projects, with over US$5 billion in AUM and a track record of bringing 12 mines into production since 2016. The capital and technical expertize exists in abundance in Europe.

Because of the technical complexity of mining, effective public-private partnerships (PPPs) are essential to building these supply chains. Public finance can help mitigate political risk, while specialized private capital brings sourcing expertise, technical due diligence and an operational track record. Appian is already putting this model into practice, partnering with the World Bank’s International Finance Corporation (IFC) in October 2025 on a US$1 billion fund that has since helped unlock critical mineral projects in Africa and Latin America.

PPPs represent a rare area in metals and mining where Europe could seize an advantage. A NATO framework that brings together more of these partnerships could move the dial in strengthening collective security across the Alliance.

Build integrated supply chains
NATO members should prioritize capital, public and private alike, toward projects across critical mineral supply chains with an integrated approach to developing mining, processing and related manufacturing capacity in allied jurisdictions.

Appian’s own portfolio shows this approach at work. Its graphite mines in Brazil (Graphcoa) and Coated Spherical Purified Graphite processing plant in the US (Allied Graphite) together form a vertically-integrated graphite anode supply chain, while its Gippsland Critical Minerals rare earth project in Australia and the Atlantic Strategic Minerals processing facility in Virginia, US illustrate how allied mining and processing capacity can be linked into secure supply chains.

If governments can combine capital investors with binding domestic content requirements in defense procurement contracts, it will also give investors with patient capital a guaranteed buyer on a known timeline for materials processed within the Alliance.

Treat mineral resilience as a matter of collective security
NATO should broaden its concept of collective security beyond territorial defense to include resilience in critical minerals supply chains. This would mean leveraging existing NATO capabilities to infrastructure protection supporting mines and processing facilities in partner countries, naval coverage of shipping lanes carrying mineral exports, cyber defense support for increasingly digitized mining operations and dedicated supply chain risk intelligence.

Coupling these guarantees with long-term investment in metals and mining value chain, particularly local refining and processing capacity, would give resource-rich states in Africa and Latin America a genuine incentive to align with NATO-adjacent frameworks. It offers partner countries security infrastructure, technology transfer and a path toward value-added industrialization at home, while giving NATO members more diversified and resilient access to the materials their defense and energy systems increasingly run on.

The choice ahead

An Alliance that cannot secure its critical minerals cannot truly defend its members, no matter how much it spends. If NATO aligns its frameworks and priorities, it can unlock the much-needed investment required to fulfill this mutual obligation. It has the capital, the institutions and increasingly the spending commitments. However, it lacks the alignment to support investment in metals as part of modern defense supply chains. NATO’s US$4.2 trillion commitment is a significant fiscal lift for allied countries. Counting mineral investment toward it, setting a common standard for what qualifies, partnering with private capital, directing capital across integrated supply chain and extending collective security to the supply chains themselves will help countries meet the spending target and translate the investment into the ships, aircraft and missiles a stronger defense requires.

Appian invests in critical minerals projects and companies across the metals and mining value chain and may benefit from the policy measures discussed in this paper.

Sources:

1. https://www.nato.int/en/what-we-do/introduction-to-nato/defence-expenditures-and-natos-5-commitment
2. https://www.sipri.org/commentary/essay/2025/natos-new-spending-target-challenges-and-risks-associated-political-signal
3. https://www.nato.int/cps/ic/natohq/official_texts_112964.htm
4. Authors’ calculation, based on NATO’s 20% equipment guideline applied to projected core defense spending
5. https://www.army.mil/article/227715/an_elemental_issue
6. https://www.samaterials.com/blog/what-are-the-applications-of-tantalum-in-the-aerospace-industry.html
7. https://www.sfa-oxford.com/knowledge-and-insights/critical-minerals-in-low-carbon-and-future-technologies/critical-minerals-in-defense-and-national-security/
8. SFA Oxford, Benchmark, Appian Capital Advisory
9. https://apps.dtic.mil/sti/trecms/pdf/AD1191843.pdf
10. https://cdn.ymaws.com/titanium.org/resource/resmgr/2005_2009_papers/Gooch_Final_2007.pdf
11. https://pubs.usgs.gov/fs/2014/3101/pdf/fs2014-3101.pdf
12. SFA Oxford, Benchmark, Appian Capital Advisory
13. https://www.usni.org/magazines/proceedings/1958/may/nuclear-power-navy
14. https://www.nato.int/en/news-and-events/articles/news/2024/12/11/nato-releases-list-of-12-defense-critical-raw-materials
15. https://anderseninstitute.org/chinas-export-control-architecture-and-its-use-of-critical-minerals-as-strategic-pressure-points/
16. https://payneinstitute.mines.edu/wp-content/uploads/sites/149/2025/08/Payne-Institute-The-State-of-Critical-Minerals-Report-2025.pdf
17. https://natoassociation.ca/financing-resilience-in-critical-minerals-how-allies-are-de-risking-with-policy/
18. https://www.jonesday.com/en/insights/2026/05/the-eu-critical-raw-materials-act-and-its-impact-on-the-mining-sector-strategic-opportunities-for-industry-stakeholders
19. https://ieu-monitoring.com/editorial/eu-commission-adopts-resourceeu-to-secure-raw-materials-and-reduce-dependencies/862644