Can MENA’s critical minerals save Europe’s ‘green transition’?

Throughout what might be termed the ‘long 20th century’, energy security boiled down essentially to ensuring access to adequate and affordable supplies of fossil fuels. 21st century energy security, by contrast, will increasingly mean ensuring access to technologies that unlock renewable energies – and to the essential inputs for those technologies. As Europe begins to grapple with this massive paradigm shift, it will need to engage, actively and positively, with its immediate neighbours to the south and east.

The EU’s 9th sanctions package marks the first time Brussels has targeted Russia’s metals sector.

With the war in Ukraine approaching its first anniversary, the European Union has just enacted its ninth package of sanctions against Russia, progressively widening the scope measures aimed at hobbling the country’s economy. In a very significant development, this latest package includes a ban on new investments in Russia’s mining sector – the first time Brussels has directly targeted Russia’s metals sector.

True, the ban only applies to investment and not trade in Russian minerals, and there are – for now – explicit derogations for certain minerals deemed to be of strategic importance: titanium, aluminium, copper, nickel, palladium and iron ore. It nonetheless marks a major threshold in the ongoing ‘sanctions creep’ – to which, like the war itself, there is no end in sight.

Trade in Russia’s critical minerals is already fraught with complications. Measures hindering Russia’s access to international banking and insurance markets have had an effect, as have sanctions affecting logistics: Finnish railway company VR for example has ceased transporting nickel from Russia to Europe as of January 1st as it implements a blanket ban on Russian cargo.

For a time last year, the London Metals Exchange mulled a ban on new deliveries of Russian metals, only to back away from the idea in November after concluding that “for the most part a material portion of the market is still planning to accept Russian metal in 2023”. But ‘self-sanctioning’ behaviour by some western consumers who have been refusing to buy Russian minerals has already caused a pile up of stocks of unsold Russian copper in LME warehouses, and as the war drags on renewed pressure to implement a formal ban on trade in Russian metals can certainly not be ruled out.

This is not a blip, it is a trend: Russian minerals may be toxic for a generation.

This is not a blip, it is a trend. Sanctions are not only creeping, but they are here to stay: whatever the outcome of the war, it is almost impossible to imagine a situation in which the West will be able to wheel them back, at least as long as Vladimir Putin remains in power (and conceivably beyond that). Russia’s minerals may be toxic for a generation.

All of which is, to say the least, problematic. Russia is a major supplier of minerals that are key inputs for clean energy technologies : nickel, used in batteries and production of green hydrogen; cobalt and selenium, also used in batteries; molybdenum, for wind turbine blades; palladium, for catalytic converters and hydrogen purification, storage and fuel cells; and of course copper. Demand for all is set to soar as the energy transition proceeds, and in most cases global supply was tight even before the Ukraine conflict.

There is rich untapped potential for critical minerals across the MENA region.

As the European Union strives to “fast forward the green transition” (in the words of the European Commission’s REPowerEU strategy document), it needs to look amongst others to the Middle East and North Africa – a region with which Europe already has many very good geopolitical reasons for building closer and more collaborative relations.

There is rich untapped potential for critical minerals across the MENA region. Last May, France’s Renault struck a deal with Moroccan mining group Managem to secure supplies of cobalt sulphide for its EV batteries. Cobalt has been mined in Morocco since the 1930s and the country is currently powering ahead to boost reserves and production. Rabat has also announced the discovery of deposits of lithium in the contested Western Sahara.

In neighbouring Algeria, developing the country’s long neglected mining sector is a pet policy of President Abdelmadjid Tebboune. Keen to attract FDI to the sector, the authorities have a shopping list of “around 30 undeveloped minerals” they seek to bring on stream, including cobalt, manganese, cerium and neodymium, according to Ministry of Energy and Mining officials. To date, almost all cooperation in mining has been with Chinese state corporations, but the idea of bilateral collaboration in critical minerals is understood to have been floated by France’s President Macron when he visited Algiers last August.

Looking east, Jordan late last year signed an MoU for the production of lithium in the south of the country and has begun prospecting for various rare earth metals.  For their part Egypt, Oman and Saudi Arabia have all dusted off their mining codes in recent years, with the Saudis in particular announcing ambitious plans to attract $32bn in investments in the mining and minerals sector; among the 48 exploitable minerals identified by the Saudi Geological Survey, the Kingdom’s subsoil holds reserves of copper, cobalt, lithium and titanium. Five new exploration sites are up for licensing and the Kingdom will release details of an additional 10 opportunities this year.

European businesses and policymakers must forswear anything that smacks of ‘green colonialism’.

The countries of the region have no intention of being limited to the role of suppliers of cheap raw materials to power the ‘third industrial revolution’ in the developed economies, however. If their potential is to be turned into real solutions, European businesses and policymakers must foreswear anything that smacks of ‘green colonialism’. When it comes to new mining products, this will mean signing up to local governments’ plans to develop full value chains in-country – as Morocco is doing with its cobalt, with plans to establish major new battery manufacturing facilities in Casablanca’s industrial hub.

With its Joint Communication on Strategic Partnership with the Gulf, released in May of last year, the EU has shown that it understands it has to engage positively with Gulf oil and gas producers on climate action and decarbonisation – notably by foregrounding green hydrogen. This effort now needs to be broadened to take in the entire MENA region, and deepened to encompass mutually beneficial strategies for bringing new supplies of critical minerals on stream. Without them, the clean energy transition is at risk of stalling just when it needs to accelerate.