6 November 2023

Mission critical: Europe eyes new suppliers in geopolitical race for metals

Eurydice Bersi (Reporters United)
Eurydice Bersi (Reporters United)
Maxence Peigné
Maxence Peigné
Maria Maggiore
Maria Maggiore
The EU is brokering deals with Africa and Latin America for critical raw materials. But it finds itself squeezed between China, Russia and the US for the minerals essential to the green transition.
"It is very important that Africa is not seen as a reservoir of raw materials that continues to be exploited by Westerners to create added value elsewhere." The warning comes from Celine Tshizena Pegasus, a Congolese lawyer and advocacy director at Afrewatch, a natural resources watchdog.

In July, Afrewatch and dozens of international NGOs sent an open letter to the European Commission, slamming its strategy to source critical raw materials from the Global South. Deposits of minerals such as cobalt, lithium, nickel and rare earths are barely explored in Europe, let alone mined in the quantities required for the green transition. Yet, they're crucial for the production of electronics, electric vehicles and renewable energy. Their extraction can have devastating impacts on the environment, indigenous land and human rights.

"We, in resource-rich countries, are already experiencing the double impacts of the climate crisis," the letter read. "On one hand via the effects of climate change itself and on the other hand from the increase in mining and renewable technologies infrastructure resulting from decarbonisation plans of rich countries."

Democratic Republic of Congo, where Pegasus lives, produces over 60 per cent of the world's cobalt. Getting the metal out of the ground is essential to make car batteries and computers. But cobalt mining is driving deforestation and child labour, while often lining the pockets of armed groups in the conflict-torn country

The EU has just signed a deal with the Congolese government to enjoy better access to its natural resources. Pegasus fears local interests are an afterthought:  "Civil society is not informed and has not been consulted," she says.
Ursula von der Leyen with Chilean President Gabriel Boric during a June visit to the country.European Union

Similar concerns are voiced in Latin America, where Brussels is also eyeing mineral riches. "Deals are signed without any kind of transparency or public debate and environmental and human rights are almost never in the heart of the negotiation," says Pia Marchegiani of Farn, an Argentinian sustainable development NGO. "Latin America needs a different type of cooperation, one that does not reproduce the colonial elements of the past."

In a recent trip to Chile, EU Commission President Ursula von der Leyen promised a break with the past and a different, “win-win” approach. “We think differently,” she said. "Others take the minerals after they have been extracted and bring them to their countries and have the processing, and thus the added value is created there.

“We think it is much better for the local communities that you not only have the mining and extraction here, in an environmentally respectful manner, but that we also have the processing process and the whole value chain." The charm offensive by von Der Leyen is part of EU efforts to lessen the dependency on China, a strategy politely described as “derisking”.

As mines and processing facilities shut in France, Germany and Britain, China is where minerals from all continents (including some European mines) are turned into metals and industrial products like electric car batteries.

Critical materials: a fast-tracked EU law

Enters the Critical Raw Materials Act. Few European laws have gone through the EU system so quickly as the soon-to-become-law CRMA, which aims to increase mining and metals recycling within the bloc and find new foreign suppliers. This fast-track reflects real concerns. 
"We worry about military escalation between the US and China. There would be massive consequences for Europe. That is the worst case scenario that we would have to derisk," says Janka Oertel, director of the Asia programme at the European Council on Foreign Relations. Ideally, the EU should be able to navigate tensions between the US and China as an autonomous actor, but it may not have the option.

Oertel identifies two scenarios.  First, a more limited escalation or blockade around the Taiwan Strait which would trigger trade disruptions for at least months. Second, is something that we are already seeing to a point: "salami-tactics, slowly pushing the envelope to see what works and what the reactions are, which would not be an all out stop to all critical raw materials exports.”

Recent Chinese restrictions on graphite, gallium and germanium exports illustrate the point. Long-term investments in mining, processing and recycling are not the only answer the EU could give. Stockpiling important materials and finding ways to pressure China in areas where the EU has leverage are options that, according to Oertel, need more careful examination.

A possible emergency, where Europe would need to immediately start mining, would require detailed information about each country’s deposits. The CRMA is pushing countries to explore and map this potential in detail. Also, not to be underestimated: the crucial importance of CRMs to the defence industry.

Deals are signed without transparency and environmental and human rights are almost never in the heart of the negotiation.

Pia Marchegiani, Farn

“The European council really wants to hurry up. This has to do with the demands of the space and defence sector,” an experienced Brussels insider with direct knowledge of the plans tells IE. “This is a taboo somehow.”

Meanwhile, derisking is already underway, but “it's not necessarily in the interest of everyone,” explains Oertel. Big German companies active in China are becoming more Chinese, localising their supply chains to be able to respond to potential trade disruptions. Others, including small and medium-sized German companies, are enhancing their footprint in the US to make use of the rich subsidies of President Biden's flagship package to build a clean-energy economy, the Inflation Reduction Act.

“The Inflation Reduction Act siphons away a lot of investments that we wanted to attract. It means long-term dependency, not partnership with the US," says Olivia Lazard, fellow at Carnegie Europe, a think tank. 

At the RawMat2023 conference in Athens in late August, Lambros Bisalas, CEO of Sunlight Group Energy Storage Systems, said the company is planning a €2 billion investment in lithium batteries and has not yet decided between Greece, the US or some other country. “It is incredible what happens now in the US, how much money is given to businesses in order to develop a local supply chain,” he said.

Greece’s Deputy Minister of Environment and Energy, Alexandra Sdoukou, rushed to reassure him she would do whatever it takes to keep the investment in the country.
The Xinjiang Rare Metals National Mine Park in China. Europe relies on China for much of its rare earths supply.Shutterstock

No fresh EU money

EU green policies, including fostering battery production, are “Europe's man on the moon moment”, according to von der Leyen. But with little money on the table to counter Chinese pressure and American competition, Lazard says that "the EU is shooting for the moon without a vessel".

With its Global Gateway programme, launched in 2021, the EU aimed at mobilising €300 billion for development and climate action globally, including critical raw materials projects. But the eye-catching amount turned out to be recycled money already committed to other plans. What was meant to be Brussels' answer to China's $1 trillion Belt and Road initiative, which has been funding infrastructures around the globe for years, may be no more than  "a public relations exercise", according to a report by civil society groups.

Behind the big words, the EU Commission is being pragmatic as to what the EU can really achieve. “We organise workshops, we invite all the interested member states, financial institutions, banks, geological surveys, companies and industrial alliances," says a source in the EU executive. “We organise the matchmaking. But then they go off in a room and they do what they do. Our job is not to be a dealmaker.”

The source also admits that, in contrast to its competitors, Europe’s biggest weakness is that it does not bring money to the table - and that it cannot offer the know-how of global mining and processing firms.

The EU is shooting for the moon without a vessel.

Olivia Lazard, Carnegie Europe

Deals have been signed with Namibia, Canada, Kazakhstan, Ukraine, Chile, Argentina and most recently DRC and Zambia. The Namibia deal has yielded no concrete projects so far. And in Ukraine, one of the Union's first bets in July 2021, the partnership has not moved forward following Russia's invasion in February 2022.

“At the time, that partnership was very important, the idea was to develop Ukraine’s potential for a number of different industries. With the invasion, it totally collapsed,” Carnegie Europe’s Lazard points out. She describes the scramble for Ukraine as part of a wider Russian strategy, also seen in Africa and Central Asia. “It is essentially about trying to constrain the ability of Europe to deliver on its climate law,” she says.

A number of African governments have experienced coups lately and Russia is aiming to take advantage of the increased instabilities, as some nations look to redefine their role as suppliers of raw materials for Europe and the world.

In Mali, a former French colony rich in lithium and manganese (both critical for the energy transition), Russian support for the new government goes hand in hand with anti-colonial rhetoric and efforts to keep more mining revenue in the country, via an unprecedented audit of the mining sector and the introduction of a new mining code that could double state revenue. In Guinea, where a coup occurred in 2021, Russian aluminium giant Rusal already operates several bauxite mines. It emerged in June that it plans to increase investment in the country to help supply its planned new alumina plant back in Russia.

Amidst all this great power jostling around raw materials, a fundamental question remains:  Would the green transition suffer if cooperation with China, a country that holds both the materials and the technology, is discouraged?  Are we now at a stage where reducing security risks may increase climate risks? Is that the trade-off we are facing?

“Yes, there are trade offs,” answers Janka Oertel, whose recent book examines ways in which Europe could strengthen its own position and respond to China's new global role. “And this is something that should be discussed with great sincerity.”

Editors: Chris Matthews & Ingeborg Eliassen
Graphics: Marta Portocarrero


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