Pakistan’s Rare Earth Opportunity Hinges On Security, Stability And Reform |
Last week, US Deputy Assistant Secretary John Mark Pommersheim was in Islamabad discussing expanded cooperation in energy and critical minerals and advancing a proposed US–Pakistan Critical Minerals Framework Agreement. Just days earlier, Federal Minister for Energy Ali Pervaiz Malik had represented Pakistan at the US-hosted Critical Minerals Ministerial in Washington, DC. The choreography was deliberate. Pakistan wants to signal readiness. Washington wants alternative suppliers. Both sides see opportunity.
But opportunity is not outcome. Unless Pakistan’s domestic conditions improve, its rare earth and minerals diplomacy will remain aspirational. The barrier is not geology. It is the state of security, politics and the investment climate.
The US push on critical minerals is part of a larger effort to diversify supply chains away from China’s dominance in processing and midstream control. Rare earth elements are indispensable for electric vehicles, wind turbines, precision-guided systems and advanced electronics. Copper is central to electrification and renewable grids. Washington’s February ministerial was framed as coalition-building with South and Central Asian states to secure more resilient supply chains.
Pakistan fits into this conversation as a potential upstream supplier. The Reko Diq copper-gold deposit in Balochistan is one of the largest undeveloped reserves of its kind. The project is structured with Barrick holding 50 per cent, while 25 per cent each is held by the Government of Balochistan and the federal state-owned enterprises. The US Export-Import Bank has approved 1.25 billion dollars in financing related to the project, underscoring American strategic interest.
Beyond copper and gold, geological surveys have identified chromite, antimony and rare earth element occurrences in parts of Balochistan and Khyber Pakhtunkhwa. However, internationally verified data on commercially viable rare earth reserves remain limited. Exploration and certification are still required before large-scale production becomes credible. The term “rare earth” has entered political discourse faster than it has entered bankable reserve statements.
The 500 million dollar MoU signed in September 2025 between US Strategic Metals and Pakistan’s Frontier Works Organization was presented as a breakthrough. Pakistan also dispatched an initial shipment under that agreement as a symbolic milestone. Yet MoUs are not final investment decisions. Mining projects require multi-year sequencing, including detailed feasibility studies, environmental approvals, infrastructure development and security arrangements. Only sustained political commitment can carry them through.
Expectations of rapid, large-scale new US investment appear optimistic. Without stabilising existing commitments, attracting additional capital will remain difficult
Expectations of rapid, large-scale new US investment appear optimistic. Without stabilising existing commitments, attracting additional capital will remain difficult
There is also a domestic political dimension to this diplomatic activism. Engagement with Washington offers more than economic signalling. It provides international validation for the civil–military hybrid regime and reinforces official narratives of economic revival. In a climate of internal contestation, visible US engagement strengthens claims of external confidence. Yet legitimacy secured abroad cannot compensate for fragility at home. Investors distinguish between diplomatic optics and institutional stability.
Security remains the most immediate constraint. In recent months, Balochistan has seen a surge in Baloch Liberation Army attacks. The escalation has directly affected investor sentiment. Barrick has publicly reviewed aspects of the Reko Diq project, including security, scheduling and capital allocation, following the violence. When the flagship project undergoes review, the signal to other investors is unmistakable.
Saudi Arabia’s reported interest in acquiring a stake in Reko Diq through Manara Minerals, potentially valued between 500 million and 1 billion dollars, illustrates the stakes. If security conditions deteriorate, Saudi participation becomes conditional. Mining capital is patient but not indifferent.
Security concerns are not limited to Balochistan. TTP and ISKP activity in Khyber Pakhtunkhwa, along with incidents in Islamabad, broadens risk perception to transport corridors and workforce safety. The Tira Valley displacement linked to counter-TTP operations underscores how militancy shapes the wider environment in which mining must operate. Investors assess systemic risk, not isolated project boundaries.
These are not new problems. Baloch grievances over resource distribution date back decades. Sui gas has supplied much of the country since the 1950s, while local communities have seen limited benefit. Political reconciliation efforts have faltered, including after the killing of Nawab Akbar Bugti in 2006. The result is a cycle in which security operations replace political settlement, and youth recruitment into insurgent networks persists. Mining projects located in such terrain cannot rely on security forces alone. They require social legitimacy and visible economic inclusion.
If insecurity can prompt reviews at Reko Diq, it also casts a shadow over existing Chinese projects such as Saindak and wider CPEC-linked infrastructure, especially in Gwadar. Heightened security costs, attacks on Chinese nationals and uncertainty about the state's capacity to protect long-term investments strain bilateral trust. In that context, expectations of rapid, large-scale new US investment appear optimistic. Without stabilising existing commitments, attracting additional capital will remain difficult.
Provincial politics adds another layer. In Khyber Pakhtunkhwa, the PTI government recently faced backlash over a proposed Mineral Development and Management Company law. The move revived tensions already visible during earlier federal attempts to expand oversight of the minerals sector. When jurisdictional authority is contested, investors hesitate. Mining requires regulatory clarity over decades, not months.
Reassuring Beijing through transparent policy, improved security for Chinese personnel and timely resolution of energy payment disputes is as important as courting Washington
Reassuring Beijing through transparent policy, improved security for Chinese personnel and timely resolution of energy payment disputes is as important as courting Washington
At the national level, political polarisation between the current civil–military leadership and the PTI-led opposition creates uncertainty over policy continuity. Mining contracts outlive governments. Without a minimum level of political accommodation and institutional stability, investors will assume that agreements signed under one dispensation may face renegotiation under another. Structured political reconciliation would reduce sovereign risk perception more effectively than any foreign investment summit.
Macroeconomic fragility compounds the issue. Exchange rate volatility, fiscal stress and recurring IMF programmes limit confidence. Despite the creation of the Special Investment Facilitation Council, bureaucratic bottlenecks and regulatory opacity persist. Long-term mining projects compete with short-term speculative investment patterns in real estate and trading. Without macroeconomic stability and credible contract enforcement, even well-intentioned reforms struggle to gain traction.
Foreign policy choices intersect directly with investment risk. Relations with Taliban-led Afghanistan remain tense, resulting in periodic border closures and trade disruption despite the necessity of cooperation against cross-border militancy. Engagement with Kabul is essential if TTP networks are to be contained. With India, recurring escalation raises regional risk premiums even if the linkage to mining is indirect. Stability in neighbourhood diplomacy lowers investor anxiety. Confrontation raises it.
Meanwhile, Pakistan must manage its relationship with China carefully. China remains embedded in projects such as Saindak and retains global leverage in rare earth processing. Any perception that US mineral engagement represents a geopolitical pivot rather than economic diversification could complicate existing partnerships under the China–Pakistan Economic Corridor. Reassuring Beijing through transparent policy, improved security for Chinese personnel and timely resolution of energy payment disputes is as important as courting Washington.
The way forward is neither rhetorical nor quick.
First, Balochistan requires a credible political compact that addresses representation, resource sharing and local development in measurable terms. Without equitable participation and meaningful provincial inclusion, security operations alone will not secure long-term investment.
Second, a durable minerals framework must clearly delineate federal and provincial authority and survive changes of government. Regulatory continuity is central to mining capital.
Third, macroeconomic reform must anchor stability. Predictable taxation, currency management and repatriation guarantees are prerequisites for attracting large-scale foreign direct investment.
Fourth, political reconciliation at the national level is essential. Whatever one’s political view, Imran Khan remains a central political actor with significant public support. Lowering the temperature between the regime and the PTI, restoring confidence in electoral processes and ensuring policy continuity across political cycles would materially reduce investment risk.
Fifth, regional diplomacy must prioritise de-escalation. Constructive engagement with Afghanistan, reopening trade channels, and sustained diplomatic communication with India reduce systemic risk. External actors may exploit vulnerabilities, but unresolved domestic grievances create the space for such exploitation.
Finally, transparency and technical credibility matter. Publicly verified reserve data, environmental safeguards and community benefit agreements will strengthen confidence in Pakistan’s mineral claims.
Pakistan’s rare earth and critical minerals potential is real but conditional. International interest has created a window. Whether that window becomes an era of sustained investment or another cycle of announcements depends not on ministerial visits or framework agreements but on reform at home. Without security, political reconciliation and regulatory clarity, the current mineral moment will remain more promise than performance.