US ties to Israel rattle rare earth deal in Malaysia

Published 20 July 2026 · politics

Malaysia's rare earth refinery in Gebeng is essential to a strategic deal between the Pentagon and Australia's Lynas mining corporation. Now, Malaysian activists are using

Malaysia's rare earth refinery in Gebeng is essential to a strategic deal between the Pentagon and Australia's Lynas mining corporation. Now, Malaysian activists are using it as leverage to support Palestinians in Gaza. The US needs to secure a supply of rare earth elements independent of China — but Washington's Middle East policy is now triggering pushback on a $96 million (€84 million) rare earth deal in Muslim-majority Malaysia. In March, the US Department of Defense (DoD) signed a four-year deal with Australian mining firm Lynas to obtain 17 metals known as rare earths. These elements are at the core of modern industrial production and used for everything from smartphones and electric cars to cutting-edge weapons systems. The strategic deal, however, hinges on Lynas' main processing plant in Gebeng, a gritty industrial town hugging the east coast of mainland Malaysia — the largest facility of its kind outside of China. Malaysia's government pressured over US-Israel ties The news of the deal has prompted strong backlash in Malaysia, which has a long record of championing Palestinian statehood and rebuking Israel over its actions in Gaza and the West Bank. Locals are urging the government in Kuala Lumpur to either block the Lynas deal or provide guarantees that the rare earths that pass through the Gebeng plant would not end up in any weapons system. In an open letter to Malaysian Prime Minister Anwar Ibrahim, over 50 non-government groups said the deal risks implicating the country in "credible allegations of violations of international law across multiple theaters" including Gaza, pointing out that the US is one of Israel's main arms suppliers. The connection between Malaysian rare earths and Israeli weapons, however, is less than straightforward. While the materials can be used to build fighter jets and missiles, they could also end up in washing machines or wind turbines.

"What the Malaysian protesters demand is the equivalent of banning natural rubber exports to the US because the tires might end up on Israeli vehicles in Gaza," Thomas Kruemmer, director of Ginger International Trade and Investment, a Singapore-based firm focused on the rare earths market, told DW. Lynas key to providing dysprosium and terbium A parliamentary committee held a hearing last week to determine if the Lynas project would jeopardize "Malaysia's reputation as a staunch supporter of Palestine." Anwar's government now has until the end of the month to state its official position on the deal. "For the Malaysians, this isn't really a case about rare earths. It's a case about Palestine," Kruemmer said, The activists hope to use the Gebeng refinery as leverage affecting US geopolitical calculations. The US' rival China currently does most of the world's mining and processing of the metals. Beijing has also been restricting exports of these materials to the West. Recycling rare earths in Germany to reduce China dependence To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Moreover, Australia's Lynas is one of the few companies that can provide commercial quantities of two particular rare earths: dysprosium and terbium, according to Kruemmer. He notes that America's flagship rare earths investment project, MP Materials' Mountain Pass mine in California, has little of either. "And since China stops rare earth exports destined for military applications, Lynas will be the only source available to the Pentagon for the time being," said Kruemmer. Rare earths 'national security imperative' for US With few rare earth sourcing options outside of China at the moment, the US government is investing in several projects both at home and abroad. But these can take years to come online, says Meredith Schwartz, an associate fellow at the Center for Strategic and International Studies.