Broken Promises: Western Hypocrisy in the Global Minerals Scramble
LIKE CANADA DOESN'T
Western governments need to enforce strong regulation that ensures responsible mining and holds accountable all companies involved in extracting and sourcing minerals.
By Alex Kopp
August 23, 2024
Source: FPIF
Anti-extractivist coalition actions in Quito, Ecuador in March 2024
Anti-extractivist coalition actions in Quito, Ecuador in March 2024
| Image Credit: @memed.act
Western governments have finally realized that the energy transition is happening—and that the resources needed are mostly in Chinese hands. Transition minerals, by some dubbed the “new oil,” are the key ingredients for renewables technologies like EV batteries, solar panels, and wind turbines that make the transition happen. A large share of those minerals are extracted in the Global South, but China controls their value chains to a large degree. China processes over 90 percent of rare earth elements, almost 100 percent of graphite, over 75 percent of cobalt and over 60 percent of lithium. China also produces around 80 percent of the world’s solar panels and makes between 60-80 percent of the world’s electric vehicles, wind turbines, and lithium-ion batteries.
Hardly a week goes by these days without Western governments announcing a new partnership or strategy to gain the upper hand in the minerals scramble. It’s difficult to imagine that just a few years ago an American company sold off one of the world’s biggest cobalt mines to a Chinese company. Resource nationalism has replaced the Western vision of a globalized free market for raw materials.
From the Spanish Conquista’s gold and silver plundering to the more recent minerals booms, those unfortunate enough to live on land bearing valuable resources have often been driven away and/or seen their land polluted. In policies and press releases Western governments vow that this time it’s going to be different with declarations about projects with “respect for human rights” using “responsible practices” and declare they will follow “high” and “rigorous ESG standards.” Yet, a closer look at recent policy decisions leaves much doubt whether Western countries live up to their promises.
Weak Regulation
The hastily negotiated Critical Raw Materials Act from last year is the basis for the European Union’s approach to better access key raw materials. The EU vows that supported projects shall be “implemented sustainably,” particularly with regard to the “prevention and minimization of environmental…and socially adverse impacts through responsible practices” but allows at the same time the fast-tracking of permitting processes and authorities to “override” adverse impacts on the environment.
With almost 70 percent of the world’s transition minerals extraction projects located on or near indigenous people’s or farmer’s land, their meaningful consultation is key to avoiding the environmental and social problems mining has caused in the past. And yet many mining projects are launched without properly informing affected communities, let alone obtaining their consent.
The United States doesn’t have sufficient regulation in place to hold mining companies accountable for their overseas operations. Instead, it relies largely on the industry’s self-policing through voluntary schemes that have often failed in the past. A prominent example is the Brumadinho tailings dam that broke in 2019, killing 272 people in Brazil despite an inspection having certified the dam’s stability just four months before.
Turning a Blind Eye to Corruption
The extractive sector accounts for one in five cases of transnational bribery. Bribes do not only deprive the often poor population in resource-rich countries of revenues, but the massive unearned income from natural resources can also undermine countries’ democratic institutions and rule of law, a phenomenon called the “resource curse.” Past commodity booms have unleashed large waves of corruption, which is why governments’ strong stance against corruption is particularly important at this moment. But the United States and UK have sent out opposite signals.
In December 2017, the United States sanctioned the Israeli businessman Dan Gertler for his corrupt deals in Democratic Republic of Congo (DRC) through which he is alleged to have siphoned off over $1.3 billion of public funds to his companies, which Gertler denies. In a sharp turnaround, the United States has now proposed to lift the sanctions if Gertler sells off his remaining stakes in giant copper and cobalt mining operations in the country, effectively allowing him to further profit an estimated $300 million from ill-gotten assets. The United States hopes that the deal will incentivize Western-leaning companies to better access the DRC’s minerals. Seventy percent of the world’s cobalt—a key ingredient for EV batteries—comes from the DRC. U.S. government officials also mentioned to the Wall Street Journal that Saudi Arabian mining companies are interested in buying stakes in Congolese cobalt and copper mines through which American companies would get some of the metals.
In August 2023, the UK dropped a 10-year investigation into the Kazakh mining company ENRC centered on suspected bribes for cobalt and copper mining contracts in the DRC, saying it had “insufficient admissible evidence to prosecute” after facing a wave of legal proceedings from the company, which vehemently denies wrongdoing. By signaling to the mining sector that it is not under a close watch, such decisions risk spurring further corruption.
Risky Finance
In their quest to catch up with Chinese competitors in accessing critical minerals, Western governments are willing to prop up mining operations with big sums of money. Through export credit agencies providing government-backed loans and insurance, Western governments support projects that investors may otherwise deem too risky. The White House senior adviser for energy and investment recently admitted as much when he said, in May 2024, that “the government has a real role here of incentivizing private capital by taking more risk.”
In the past, mining projects backed by public funds have destroyed unique habitats, used forced labor, fueled violent conflict, and heavily polluted the environment. As part of the Minerals Security Partnership, a U.S.-led coalition of allied governments, the U.S. Development Finance Corporation offered a loan of up to $150 million in November 2023 for a graphite mine project in Mozambique. It is located in a region of the country where it may have serious human rights impacts given a conflict between the government and an Islamist insurgency that has led to almost 5,000 deaths during the last five years .
The EU’s strategic partnership approach, designed to secure a steady supply of critical raw materials, provides finance for producer countries through the Global Gateway, the EU’s version of China’s Belt and Road Initiative. In February, the EU agreed on a partnership on “sustainable raw materials value chains” with Rwanda, which should raise major red flags. After having plundered 3T (tin, tantalum, tungsten) minerals directly in the DRC during the second Congo war, Rwanda has profited from taxing smuggled minerals, which have been connected to conflict ever since. The strategic partnership is being negotiated at a time when the Rwandan army has invaded the DRC and supports the armed group M23, which controls much of the smuggling from some of the largest coltan mines in the world. The European Commission proposes “traceability…at the core of the EU-Rwanda critical raw materials partnership,” supposedly to counter the risk of sourcing conflict minerals. Yet Global Witness has shown that the dominant traceability system for 3T minerals in Rwanda has laundered huge volumes of smuggled conflict minerals since it has been set up.
Investor Courts Undercutting Environmental and Social Regulation
Free trade agreements with producer countries are another common tool for Western governments to secure access to minerals from third countries. These often impose an untransparent investment protection system that allows investors to sue governments for billions of dollars for state action that may negatively affect their investments.
When the Guatemalan supreme court ordered a halt to a mining project for lack of consultation with affected indigenous peoples in 2016, the mining company Kappes, Cassiday & Associates (KCA) initiated a lawsuit against the government for over $400 million for not providing adequate protection to KCA’s investment against community protests, effectively claiming that the government did not do enough to suppress local opposition to the company’s mine.
Colombia faces 14 arbitration processes and eight more in pre-arbitration stage, many of which involve mining companies. Altogether, Colombia is being sued for an estimated $13.2 billion. By insisting on such investment settlement clauses in trade agreements, Western government are complicit in undermining protection for mining-affected people and land.
New Frontiers, New Destruction
While Western governments haven’t set targets to reduce materials use that could curb minerals demand, they support projects in new, high-risk territories that will likely have devastating environmental impact. The deep sea is one of the few areas that has so far been spared from destructive mining. Norway, however, is determined to change this, and among U.S. lawmakers support for deep sea mining is growing as well. As the seabed has scarcely been researched, it’s difficult to assess the precise effects that mining would have, but experts assert that it would lead to indefinite reductions in biodiversity and impacted areas wouldn’t recover for decades or even centuries.
As if these prospects weren’t dire enough, there are even greater risks looming on the horizon. With Western governments and allies forming clubs such as the Minerals Security Partnership against the Chinese market dominance, pressure on producer countries to align with one or the other side mount.
If the CEO of the world’s biggest EV manufacturer had his way, foreign interventions against governments who are unwilling to bow to Western conditions could soon be back. Reacting to a Twitter user’s allegation that the United States organized a coup against Bolivia’s president to access the country’s lithium, Tesla’s CEO Elon Musk wrote “We will coup whoever we want—deal with it!”.
Some analysts fear that we may see military escalation of the scramble for the “new oil” in the near future. The Arctic region, home to a large rare earth mine, is one area that has recently come into the crosshairs of geopolitical interests with Europe, the United States, Russia, and China struggling for influence.
Global superpowers must keep the quest for minerals within the boundaries of economic competition and refrain from using force. Western governments need to live up to their promises of a just energy transition by putting in place and enforcing strong regulation that ensures responsible mining and holds accountable all companies involved in extracting and sourcing minerals.
ZNetwork is funded solely through the generosity of its readers. Donate
Alex Kopp
Alex Kopp is a senior policy advisor on transition minerals for Global Witness.
Western governments have finally realized that the energy transition is happening—and that the resources needed are mostly in Chinese hands. Transition minerals, by some dubbed the “new oil,” are the key ingredients for renewables technologies like EV batteries, solar panels, and wind turbines that make the transition happen. A large share of those minerals are extracted in the Global South, but China controls their value chains to a large degree. China processes over 90 percent of rare earth elements, almost 100 percent of graphite, over 75 percent of cobalt and over 60 percent of lithium. China also produces around 80 percent of the world’s solar panels and makes between 60-80 percent of the world’s electric vehicles, wind turbines, and lithium-ion batteries.
Hardly a week goes by these days without Western governments announcing a new partnership or strategy to gain the upper hand in the minerals scramble. It’s difficult to imagine that just a few years ago an American company sold off one of the world’s biggest cobalt mines to a Chinese company. Resource nationalism has replaced the Western vision of a globalized free market for raw materials.
From the Spanish Conquista’s gold and silver plundering to the more recent minerals booms, those unfortunate enough to live on land bearing valuable resources have often been driven away and/or seen their land polluted. In policies and press releases Western governments vow that this time it’s going to be different with declarations about projects with “respect for human rights” using “responsible practices” and declare they will follow “high” and “rigorous ESG standards.” Yet, a closer look at recent policy decisions leaves much doubt whether Western countries live up to their promises.
Weak Regulation
The hastily negotiated Critical Raw Materials Act from last year is the basis for the European Union’s approach to better access key raw materials. The EU vows that supported projects shall be “implemented sustainably,” particularly with regard to the “prevention and minimization of environmental…and socially adverse impacts through responsible practices” but allows at the same time the fast-tracking of permitting processes and authorities to “override” adverse impacts on the environment.
With almost 70 percent of the world’s transition minerals extraction projects located on or near indigenous people’s or farmer’s land, their meaningful consultation is key to avoiding the environmental and social problems mining has caused in the past. And yet many mining projects are launched without properly informing affected communities, let alone obtaining their consent.
The United States doesn’t have sufficient regulation in place to hold mining companies accountable for their overseas operations. Instead, it relies largely on the industry’s self-policing through voluntary schemes that have often failed in the past. A prominent example is the Brumadinho tailings dam that broke in 2019, killing 272 people in Brazil despite an inspection having certified the dam’s stability just four months before.
Turning a Blind Eye to Corruption
The extractive sector accounts for one in five cases of transnational bribery. Bribes do not only deprive the often poor population in resource-rich countries of revenues, but the massive unearned income from natural resources can also undermine countries’ democratic institutions and rule of law, a phenomenon called the “resource curse.” Past commodity booms have unleashed large waves of corruption, which is why governments’ strong stance against corruption is particularly important at this moment. But the United States and UK have sent out opposite signals.
In December 2017, the United States sanctioned the Israeli businessman Dan Gertler for his corrupt deals in Democratic Republic of Congo (DRC) through which he is alleged to have siphoned off over $1.3 billion of public funds to his companies, which Gertler denies. In a sharp turnaround, the United States has now proposed to lift the sanctions if Gertler sells off his remaining stakes in giant copper and cobalt mining operations in the country, effectively allowing him to further profit an estimated $300 million from ill-gotten assets. The United States hopes that the deal will incentivize Western-leaning companies to better access the DRC’s minerals. Seventy percent of the world’s cobalt—a key ingredient for EV batteries—comes from the DRC. U.S. government officials also mentioned to the Wall Street Journal that Saudi Arabian mining companies are interested in buying stakes in Congolese cobalt and copper mines through which American companies would get some of the metals.
In August 2023, the UK dropped a 10-year investigation into the Kazakh mining company ENRC centered on suspected bribes for cobalt and copper mining contracts in the DRC, saying it had “insufficient admissible evidence to prosecute” after facing a wave of legal proceedings from the company, which vehemently denies wrongdoing. By signaling to the mining sector that it is not under a close watch, such decisions risk spurring further corruption.
Risky Finance
In their quest to catch up with Chinese competitors in accessing critical minerals, Western governments are willing to prop up mining operations with big sums of money. Through export credit agencies providing government-backed loans and insurance, Western governments support projects that investors may otherwise deem too risky. The White House senior adviser for energy and investment recently admitted as much when he said, in May 2024, that “the government has a real role here of incentivizing private capital by taking more risk.”
In the past, mining projects backed by public funds have destroyed unique habitats, used forced labor, fueled violent conflict, and heavily polluted the environment. As part of the Minerals Security Partnership, a U.S.-led coalition of allied governments, the U.S. Development Finance Corporation offered a loan of up to $150 million in November 2023 for a graphite mine project in Mozambique. It is located in a region of the country where it may have serious human rights impacts given a conflict between the government and an Islamist insurgency that has led to almost 5,000 deaths during the last five years .
The EU’s strategic partnership approach, designed to secure a steady supply of critical raw materials, provides finance for producer countries through the Global Gateway, the EU’s version of China’s Belt and Road Initiative. In February, the EU agreed on a partnership on “sustainable raw materials value chains” with Rwanda, which should raise major red flags. After having plundered 3T (tin, tantalum, tungsten) minerals directly in the DRC during the second Congo war, Rwanda has profited from taxing smuggled minerals, which have been connected to conflict ever since. The strategic partnership is being negotiated at a time when the Rwandan army has invaded the DRC and supports the armed group M23, which controls much of the smuggling from some of the largest coltan mines in the world. The European Commission proposes “traceability…at the core of the EU-Rwanda critical raw materials partnership,” supposedly to counter the risk of sourcing conflict minerals. Yet Global Witness has shown that the dominant traceability system for 3T minerals in Rwanda has laundered huge volumes of smuggled conflict minerals since it has been set up.
Investor Courts Undercutting Environmental and Social Regulation
Free trade agreements with producer countries are another common tool for Western governments to secure access to minerals from third countries. These often impose an untransparent investment protection system that allows investors to sue governments for billions of dollars for state action that may negatively affect their investments.
When the Guatemalan supreme court ordered a halt to a mining project for lack of consultation with affected indigenous peoples in 2016, the mining company Kappes, Cassiday & Associates (KCA) initiated a lawsuit against the government for over $400 million for not providing adequate protection to KCA’s investment against community protests, effectively claiming that the government did not do enough to suppress local opposition to the company’s mine.
Colombia faces 14 arbitration processes and eight more in pre-arbitration stage, many of which involve mining companies. Altogether, Colombia is being sued for an estimated $13.2 billion. By insisting on such investment settlement clauses in trade agreements, Western government are complicit in undermining protection for mining-affected people and land.
New Frontiers, New Destruction
While Western governments haven’t set targets to reduce materials use that could curb minerals demand, they support projects in new, high-risk territories that will likely have devastating environmental impact. The deep sea is one of the few areas that has so far been spared from destructive mining. Norway, however, is determined to change this, and among U.S. lawmakers support for deep sea mining is growing as well. As the seabed has scarcely been researched, it’s difficult to assess the precise effects that mining would have, but experts assert that it would lead to indefinite reductions in biodiversity and impacted areas wouldn’t recover for decades or even centuries.
As if these prospects weren’t dire enough, there are even greater risks looming on the horizon. With Western governments and allies forming clubs such as the Minerals Security Partnership against the Chinese market dominance, pressure on producer countries to align with one or the other side mount.
If the CEO of the world’s biggest EV manufacturer had his way, foreign interventions against governments who are unwilling to bow to Western conditions could soon be back. Reacting to a Twitter user’s allegation that the United States organized a coup against Bolivia’s president to access the country’s lithium, Tesla’s CEO Elon Musk wrote “We will coup whoever we want—deal with it!”.
Some analysts fear that we may see military escalation of the scramble for the “new oil” in the near future. The Arctic region, home to a large rare earth mine, is one area that has recently come into the crosshairs of geopolitical interests with Europe, the United States, Russia, and China struggling for influence.
Global superpowers must keep the quest for minerals within the boundaries of economic competition and refrain from using force. Western governments need to live up to their promises of a just energy transition by putting in place and enforcing strong regulation that ensures responsible mining and holds accountable all companies involved in extracting and sourcing minerals.
ZNetwork is funded solely through the generosity of its readers. Donate
Alex Kopp
Alex Kopp is a senior policy advisor on transition minerals for Global Witness.
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