Consider the U.S. International Development Finance Corporation’s critical-minerals fund with two unlikely partners: Abu Dhabi’s sovereign wealth vehicle ADQ and Orion Resource Partners , a private investment firm specializing in mining and metals finance. Washington, in effect, has recruited a country that mines almost none of these minerals—and a firm built to finance exactly that kind of project—to help secure them.

The bigger story here is simple. Gulf sovereign wealth funds—flush with oil-era money and facing a long-term decline in oil demand—are investing their way into the global supply chains for copper, lithium, cobalt, nickel, and rare earths, the raw materials that modern chips, power grids, and AI data centers depend on. For the U.S., that’s an opportunity: China dominates mineral processing today, and Washington can’t build a rival supply chain fast enough on its own. Gulf capital offers relief. Used well, it’s one of the few realistic ways to loosen China’s grip.

Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies , has been making this case for a while. The Gulf states, she has written, “should be a central part of U.S. efforts to create resilient supply chains,” given their capital and access to resource-rich markets where Washington has made limited headway. Her reasoning: the U.S. doesn’t have to find and fund risky mining projects in Africa or Central Asia itself if wealthy allies are already doing it.

The Gulf side of the trade is just as easy to explain: oil won’t fund these governments forever, so they’re using today’s oil wealth to buy a stake in tomorrow’s economy. Saudi officials now put the kingdom’s untapped mineral reserves at $2.5 trillion, up 90% since the Vision 2030 overhaul launched in 2016, and Riyadh is targeting $63 billion in annual mining GDP and $27 billion in new mining investment by decade’s end. Drawing on some of the world’s cheapest solar and wind power, the kingdom wants to become one of the world’s top seven mineral processors by 2030.

The UAE runs a similar playbook more quietly, using funds like ADQ to buy stakes in mines and plants it could never build at home, since the desert holds none of the minerals it needs.

The deals already underway show how far along this is. Manara Minerals—a joint venture between Saudi Arabia’s Public Investment Fund and the kingdom’s mining giant Ma’aden— paid $2.5 billion in 2024 for a 10% stake in Brazil’s Vale base-metals business, plus a long-term deal locking in a share of its future nickel and copper output. That’s a direct line for Saudi Arabia into two metals the U.S. also needs for EV batteries and the power grid, supply that doesn’t run through Beijing.

In Zambia, the UAE’s International Resources Holding put more than $1.1 billion into a majority stake in the Mopani Copper Mines , reviving one of Africa’s largest copper complexes; Qatar’s sovereign fund put $500 million into Ivanhoe Mines this year. Each deal adds another non-Chinese source of metal the U.S. needs.

Western capital has often stayed away from mining projects in poorer countries, wary of political risk. Gulf capital, backed by governments willing to take on more risk, is filling that gap—just as data centers and grid modernization are proliferating.

A cutting-edge chip is useless without the copper, silicon, and rare-earth magnets. By buying stakes in mines and processing plants—turning raw minerals into usable metal—Gulf funds sit between the ground and the finished product. For the U.S., every ton processed outside China, on someone else’s money, eases the stress.

The bet isn’t foolproof. Gulf funds have almost no mineral deposits of their own. Tony Sage, chief executive of the U.S.-listed Critical Metals , said that the Gulf states “can’t mine it.” At the same time, they also lack in-house mining expertise and face Chinese processors that already control most of the world’s refining capacity.

Geopolitics adds another layer of risk. The U.S.-Saudi relationship isn’t frictionless: during this year’s Iran war, Riyadh’s initial refusal to let Washington use its bases for a counter-Iran strike drew Washington’s ire, and it threatened a pullback in military support, even as UAE-U.S. economic ties deepened.

The Gulf states aren’t marching in lockstep either: Saudi Arabia and the UAE are still working through their own rift over Yemen. None of that has touched the mineral deals so far, but there’s also no guarantee Gulf-financed metal ends up in U.S. hands rather than China’s, since these sovereign funds do business with Beijing too and can sell to the highest bidder rather than the most allied one.

But Washington doesn’t need to worry as much as it might seem: the relationship runs both ways. Publicly traded mining companies answer to shareholders every quarter, while Gulf sovereign funds can wait 10 or 15 years for a mine to pay off.

That is the strategy China has used for two decades to build its dominance. Gulf capital is now following that playbook, marketed as an alternative to China. In return, the U.S. offers something Gulf money can’t buy on its own: access to American capital markets, the security backing that protects those investments, and the legitimacy that comes from partnering with Washington rather than working around it.

All of this puts Western governments in an odd spot. Gulf money does what U.S. industrial policy has struggled to do on its own: fund mines and refineries outside China’s control. But it also hands a chokehold on physical materials to governments whose interests won’t always align with Washington’s.

A policy that subsidizes chip factories at home while leaving the mines and refineries that feed them in the hands of governments Washington doesn’t control solves only half the problem: it secures the finished product while leaving the raw-material chokepoint in someone else’s hands.

The better approach is to work with the Gulf states—not push them toward Beijing with tariffs. Indeed, the U.S. could co-invest alongside Gulf funds in specific mines and refineries, agree in advance to buy a share of what they produce, and give allied processing projects the same loan guarantees and tax breaks already offered domestic chip factories. The new DFC-ADQ-Orion fund referenced at the top is a first, small test of whether that kind of partnership can work.

“Securing critical minerals is a paramount matter of U.S. strategic interest and economic prosperity,” said Ben Black, chief executive of the DFC .

The defining economic leverage of this century won’t belong only to the companies writing AI software or the countries assembling the finished product. It will belong to whoever owns, finances, and processes the physical materials it all runs on. The Gulf has figured that out and is spending its oil fortune accordingly. The smartest move for the U.S. is to lock arms with that money now, while the Gulf is still looking for a partner.