US agency goes back to the future to take on China’s Belt and Road Initiative

The US agency set up to counter China’s Belt and Road Initiative is blending national security with development finance to try to secure a critical minerals supply chain, according to analysts and officials. Created in 2019 during President Donald Trump’s first administration, the US International Development Finance Corporation (DFC) puts its money into private-led projects rather than those led by the state, as is often the case with China. The agency operates in more than 100 countries, mostly in Central and South America, Africa, Eastern Europe and the Asia-Pacific region. Erin Collinson, a senior fellow at the Washington-based Centre for Global Development, said the agency was reauthorised by the US Congress in December with a dual mandate and more scope for financing. “[The reauthorisation endorsed the DFC’s] development mission while giving the agency greater flexibility to pursue strategic deals tied to foreign policy and national security goals,” she said. “With the increase in the DFC’s portfolio cap to US$205 billion, there’s room to pursue both.” According to DFC CEO Benjamin Black, the agency is returning the US to an era of statecraft that it abandoned as China embarked on decades of investments that enabled it to capture “strategic” supply chains. In a keynote speech at the Council on Foreign Relations last month, Black said Trump had given the DFC the task of securing economic opportunities for Americans by providing credit, taking equity or issuing risk guarantees where necessary. “The DFC can invest in energy, critical minerals, and technology anywhere in the world and address chokepoints wherever they exist,” Black said. Among the agency’s biggest moves so far is to provide US$553 million in funding for the development of a container terminal in the port of Colombo in Sri Lanka, part of a global shipping hub the US sees as under Chinese influence. The agency also provided US$553 million to revamp the Lobito Railway, connecting the mineral-rich Democratic Republic of Congo and Zambia to Angola’s Atlantic coast. This project streamlines exports to the West of critical minerals such as cobalt, copper and coltan, serving as a strategic counter to the Tazara line, a US$1.4 billion Chinese rebuild that links Zambia to the Indian Ocean and is still a work in progress. Caroline Costello, director of China research at the Atlantic Council, a US geopolitical research group, said the DFC turned the US from “a passive observer of China’s meteoric rise” to a “serious contender” in the competition for global access to critical resources. With lending exceeding US$50 billion in 114 countries, the DFC supplied financing that helped defeat Chinese bids for the Elefsina Shipyard in Greece, a telephone licence in the Pacific Islands and a railway in Africa, among others, Costello said in an assessment in September. With the US Agency for International Development’s demise under the Trump administration, the stakes had become higher for the DFC as America’s remaining agency for international economic engagement, according to Josh Rogin of The Washington Post’s WP Intelligence. In a note in January, Rogin said officials were worried about balancing US strategic interests with genuine development in poor countries, though it “dissolves when the investment is large-scale infrastructure, which both moves the development needle and serves American strategic goals”. The processing of critical minerals, and development of ports, telecommunications infrastructure and data centres were identified as priority areas of investment to reduce gaps with China, according to the WP Intelligence report. Some of the first deals struck by the agency in Brazil, Argentina and Ukraine reflected this necessity, it noted. With the US-Israel war against Iran and the subsequent closure of the Strait of Hormuz, Trump announced in March that a further US$20 billion would be disbursed by DFC as political risk insurance. This was meant to underwrite risks traditional insurers would not touch and facilitate traffic through the contested waterway, further expanding its footprint. Still, both the US and other Western countries remain vulnerable to China’s dominance of the critical minerals and rare earths supply chain, according to James Kynge, a specialist in China studies at Chatham House, a UK think tank. “We saw the potential power of this last year, particularly on October 9, when China weaponised the chokehold that it has over rare earths and other critical minerals,” he said in testimony to the British parliament last month. China announced selective licensing for certain rare earth exports, which are used in advanced weapons and civilian manufacturing, drawing US and allied protests. Though China later softened its stance, it retains the ability to tighten controls.

US agency goes back to the future to take on China’s Belt and Road Initiative

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The US International Development Finance Corp mixes national security and foreign investment in its supply chain quest

The US International Development Finance Corp mixes national security and foreign investment in its supply chain quest