A third world country now controls a huge chunk of the production flow of heavy rare earths and methamphetamine, and it's China's so-called ‘pragmatic’ approach to trade, where human rights violations and illegal practices are ignored, that is to blame.
Azzet’s Mission Critical is a weekly column that lays out the ebbs and flows around critical minerals supply chains - from pricing, production, refinement and mergers & acquisitions, to manufacturing and consumer products.
In October 2024, Myanmar's rebel Kachin Independence Army (KIA) seized two towns in a move that changed everything. The towns of Chipwi and Pangwa sit atop deposits containing half the world’s heavy rare earths - dysprosium and terbium - critical for electric vehicle (EV) motors and wind turbines.
Insurgents now control a resource China desperately needs and the West is scrambling to secure. Between 2017 and 2024, Myanmar exported over 290,000 tonnes (t) to China, worth US$4.2 billion, with US$1.4 billion shipped last year alone.
The country has become China’s most important external supplier of heavy rare earths, accounting for over 60% of import value, yet when the KIA muscled into the mining belt, Chinese imports from Myanmar fell by a third.
Beijing rattled the sabre, threatening to halt all imports and shut border crossings, but within weeks it was cutting deals.
“An early ceasefire and peace talks between the Myanmar military and the Kachin Independence Army are in the common interests of China and Myanmar as well as their people,” China’s Foreign Ministry spokesperson said at the time.
By December, China agreed to a fixed price, and the KIA slapped a 20% levy on all exports - a move potentially generating US$200 million a year.
A dirty supply chain
China commands 70% of global rare earth mining, but Myanmar is now its Achilles’ heel.
That's because domestic Chinese heavy rare earths output is getting pricier - thanks to rising environmental costs and declining ore quality - while Myanmar’s ionic clay-hosted REE deposits are easier to extract and cheaper to work.
Chinese companies built Myanmar's REE industry, supplying kit, expertise - and cash, according to Wood Mackenzie consultant Yue Wang.
And when Beijing tightened its environmental rules in the mid-2010s, production simply hopped the border into Myanmar's unregulated Kachin-controlled territory.
Satellite imagery shows at least 28 mining sites, with 26 controlled by the Chinese-backed United Wa State Army (UWSA) and two more springing up near the Thai border.
These aren’t conventional mines - it’s a sprawl of spray-and-leach chemical processing on hillsides, churning out turquoise pools of toxic soup that bleed into the Mekong River system across into Thailand.
Thai scientists have found 60-70% heavy metal contamination in the Kok River which trace back to Myanmar’s rare earths operations.
With zero environmental oversight, cowboy-level safety practices and no clean-up requirements, the extraction rips out forests, poisons groundwater and leaves behind waste that will be toxic for generations.
Most of the minerals are trucked to China as “rare earth oxides” for processing - a stage China dominates worldwide.
This dependency explains Beijing’s 'pragmatic' viewpoint on trade: even while backing Myanmar’s junta on paper, it does deals with whoever’s holding the mine sites.
Basically, the KIA’s push forced the CCP to choose between politics and supply chains - and supply chains won.
- Find out more: Mission Critical: Why China can keep weaponising REEs
- Find out more: Mission Critical: The gravity of China's rare earth bans
The crystalline method
As a testament to China's indifference and the West's inability to intervene, Myanmar's KIA and USWA also produce enormous quantities of heroin and crystal meth in a true narco-economy which is used to fund their war against the ruling Junta.
It was recently discovered that 70% of meth that hits Australian streets is being produced by the same Burmese armed rebel goup that delivers the world its heavy rare earths fix.
Think tank Australia Strategic Policy Institute (ASPI) says that by the early 2000s global demand for heroin had peaked at the same time as production in Afghanistan increased.
“In contrast, the demand for low-purity methamphetamine, colloquially known as ‘yaba’, was growing across Southeast Asia,” ASPI said.
Illicit drug preferences among users in countries like Australia, Canada and the US were also changing.
“While the demand for plant-based drugs like cocaine and heroin had slowed, there was a growing market for crystal methamphetamine, or ‘ice’.”
Washington’s misstep
On July 25, the Trump administration lifted sanctions on Myanmar, signalling it believed the U.S. could somehow tap rebel-controlled rare earths in a hotly disputed jungle on China's doorstep.
Potentially jokingly (this author hopes at least), U.S. lobbyists floated two plays: cut a direct deal with the KIA or mediate a joint venture between KIA and the junta.
The first is a logistical nightmare; the second assumes Washington can call the shots in a theatre where it has almost no pull.
And Kachin State is landlocked, ringed by conflict zones and Chinese territory, so any shipment to Western markets would have to cross thousands of kilometres of hostile ground.
University of Sussex professor David Brenner called it naïve to think America would gain any access to the country's rare earths riches.
“If the KIA were motivated solely by profit, it would have already caved to Chinese pressure for a bilateral ceasefire. It has not, because its goals are political, not commercial.”
The reversal of sanctions actually ended up boosting Beijing - easing the squeeze on the junta while giving Washington zero real access.
The power balance
The KIA, fielding roughly 15,000 fighters with decades of combat and smuggling experience, has gone from a territory-holding rebel force to a resources powerhouse.
Its demands to Beijing are blunt: recognise its border control and stop pushing for ceasefires with the junta. recently.
The UWSA, which owns 26 mines, is an even bigger player.
Born from the ashes of Myanmar’s old Communist Party, this Chinese-backed militia runs like a mini-state, together running parallel rare earths producing economies, sidestepping both the Myanmar government and global regulations.
Three forces shaping the future
Myanmar’s rare earth game runs without environmental laws, labour rights, or corporate accountability.
Armed groups control the ground, China needs the feedstock, and the West has no fallback - none of which is changing anytime soon.
- First: Demand is roaring - EVs, wind turbines and F-35 fighters all chew through rare earths, and there’s no scalable alternative on deck.
- Second: New supply is still a trickle; despite big investment, Western output is years away from scale, and a Pentagon-backed Texas plant will pump out in a year what China refines in a day.
- Third: Fresh mines are appearing monthly in northern Myanmar and contamination rippling across borders - an international headache whether governments admit it or not.
So, for the time being, our “green” transition is leaning on some of the dirtiest mining on earth, run by rebels at war with the government…
Meanwhile, every EV motor and wind turbine on the planet will most likely continue to contain a slice of the ongoing chaos.
The KIA and UWSA know they’ve got the upper hand. They’ve seen Beijing posture up and then back down and watched Washington flip policy for a long-shot bet at a piece of the action. As long as the market needs what they’ve got, they’re untouchable.
It’s a fragile, high-stakes balance - but with alternate supply a decade out, Myanmar’s rebel groups - the same that produce large quantities of meth - will remain an unlikely necessity of our global energy transition.
