Why an Australia-US Rare Earth Deal Sparked Backlash in Malaysia |
Features | Diplomacy | Southeast Asia
Why an Australia-US Rare Earth Deal Sparked Backlash in Malaysia
There are worries that processing operations in the country will drag Malaysia into the middle of China-U.S. competition.
As intensifying China-U.S. competition reshapes global supply chains, Malaysia is finding it increasingly difficult to remain on the sidelines. A recent rare earths agreement between Australia’s Lynas Corporation and the U.S. Department of Defense has sparked domestic backlash, highlighting how middle powers like Malaysia are being drawn into strategic – and potentially military-linked – economic networks.
Earlier, a coalition of 57 Malaysian civil society organizations issued a joint memorandum opposing the approximately $96 million rare earths supply deal between Lynas and the U.S. Department of Defense. The groups warned that the agreement could link rare earth processing operations in Malaysia directly to foreign military supply chains, and urged Prime Minister Anwar Ibrahim to intervene.
In their April 14 memorandum, the coalition argued that recent U.S. military actions have been associated with alleged violations of international law. Given that rare earth oxides are essential inputs in advanced weapons systems, they warned that allowing Lynas to process materials at its Gebeng facility in the state of Pahang for supply to the U.S. defense sector would effectively make Malaysia part of that military supply chain.
Direct Military Link Raises Legal Concerns
In an interview, Meenakshi Raman, president of Sahabat Alam Malaysia (Friends of the Earth Malaysia), said the coalition’s primary concern is that the agreement directly links rare earth processing on Malaysian soil to foreign military supply chains, thereby implicating Malaysia in U.S. military operations.
She noted that there are credible allegations that some U.S. military engagements involve serious violations of international humanitarian law and international human rights law. Linking Malaysia to such operations, she argued, would fundamentally contradict the country’s longstanding commitment to peace and its consistent opposition to the use of force in international relations.
“Allowing such arrangements to proceed would undermine Malaysia’s credibility as an independent voice in multilateral forums and could weaken its principled positions on conflicts involving Palestine, Iran, and elsewhere,” Raman said.
The coalition also stressed that economic activity must be grounded in ethics and legality. “Any agreement that could lend support to war crimes, genocide, or crimes against humanity cannot be justified on the basis of economic gain. Such arrangements are unconscionable and must be condemned,” Raman added.
She further emphasized that adherence to international humanitarian and human rights law is fundamental to maintaining Malaysia’s non-aligned and neutral foreign policy stance. “Clear legal and regulatory safeguards are needed to ensure that companies operating in Malaysia are not complicit in international wrongdoing, particularly in supply chains linked to military or conflict contexts,” she said.
She also pointed to Malaysia’s obligations under international law, including the Articles on Responsibility of States for Internationally Wrongful Acts (ARSIWA), adopted by the United Nations General Assembly in 2001.
“Malaysia must ensure that all actors operating within its jurisdiction respect and uphold international law, including international humanitarian law and international human rights law. Under Article 16 of ARSIWA, Malaysia must not knowingly aid or assist another state in committing acts that would be unlawful if carried out by Malaysia itself, including war crimes, crimes against humanity, or genocide,” she said.
She added that when such commercial activities take place on Malaysian soil and are approved through regulatory and licensing frameworks, the government cannot remain indifferent to how its territory and institutions are being used.
“Allowing Lynas to proceed with the agreement without proper scrutiny, despite clear risks, could at best constitute a failure to meet international obligations, and at worst amount to willful blindness to potential complicity in internationally wrongful acts,” she warned.
Raman added that the coalition would continue to press for a response through public advocacy and social media if the government fails to act.
The backlash to an agreement involving two foreign entities underscores the growing diplomatic sensitivity of rare earth projects – and Malaysia’s difficult balancing act as it attempts to position itself within global supply chains.
Malaysia’s Rare Earth Strategy
Malaysia first moved to develop its rare earth sector about 15 years ago during the premiership of Najib Razak. Although the policy was initially opposed by the then-opposition Pakatan Harapan, the current government has since taken the position that rare earth resources should be prioritized for domestic use, with a focus on building local processing capacity.
According to Azmi Hassan, a senior fellow at the Nusantara Academy of Strategic Research, the decision to develop the sector was ultimately the right one despite earlier criticism.
He noted that as China increasingly leverages rare earths as a geopolitical tool, Malaysia’s........