Green Gold: The Re-Rise of Nationalist Miners

Across Latin America, Africa, and Asia, governments are insisting on either complete or part ownership, higher taxes, and shorter lease periods for mining resources that are crucial for green energy. The new name of the game is ‘Green Resource Nationalism’

By Alam Srinivas
  • Minerals such as lithium, copper, zinc, and silver, will be the key to the future technologies such as evbatteries, solar panels, and energy storage batteries
  • Recent IMF paper says, the revenues from lithium, cobalt, copper, and nickel could be four times the current figures
  • Chile decided to create a state-owned lithium company, and force pvt MNCs to form joint ventures as minority partners with the proposed public sector behemoth
  • Mexico proposes to fast-track a move to nationalise its lithium reserves, even as it reduced the mining lease period for the private players from 50 to 30 years

Forget Resource Curse’, a phrase used to depict the fate of poor nations, which were exploited and traumatised due to the natural resources they possessed. ‘Forget Resource Nationalism’ (RN), which promoted poor and developing resource owners to nationalise energy and mineral sources, and strike back against the rich users that whisked them away. The new name of the game is ‘Green Resource Nationalism’, or ‘Green Nationalism’ (GN) for short. Across Latin America, Africa, and Asia, governments are insisting on either complete or part ownership, higher taxes, and shorter lease periods for mining resources that are crucial for green energy.

Unlike coal, fossil fuels, and iron ore that were critical in the energy-guzzling industrial age in the past century, the future belongs to green and sustainable energy. Despite the Russia-Ukraine war, which has slowed the change process, minerals such as lithium, copper, zinc, and silver, will be the key to the success of future technologies such as electric vehicle batteries, solar panels, wind turbines, and energy storage batteries. Energy expert Daniel Yergin agrees that lithium and copper are “critical elements in energy transition”. Of course, countries that own them will become strategically as important as the Middle East (largest crude producer) in the twentieth century.

New Nationalistic Fad

The real action is in Latin America, which owns half of the world’s lithium, two-fifths copper, and a quarter of nickel. Economic powers like the US, China, and Germany have flocked, or are herding, to the region to secure minerals that they will require in the future, and to pursue a China+1 supply chain policy. As the Economist puts it: “The green (energy) revolution will stall without Latin America’s lithium.” What is happening in South America today is what happened in the case of fossil fuels in the Middle East – Saudi Arabia, UAE, Iran, and Iraq – in the last century. GN has kicked in now, as RN did in the past.

Norway pursues a policy that straddles “social profitability and sovereign concerns”, it grapples with “resource nationalism” that is a “rapidly increasing feature of Norwegian renewable energy policy”

State ownership of green resources is the new nationalistic fad. Chile decided to create a state-owned lithium company, and force private MNCs to form joint ventures as minority partners with the proposed public sector behemoth. Mexico proposes to fast-track a move to nationalise its lithium reserves, even as it reduced the mining lease period for the private players from 50 to 30 years.

A recent article in the Economist stated that as per the latest Resource Nationalism Index, a ranking produced by Verisk Maplecroft, a consultancy, “Mexico jumped to third place, from 98th in 2018, Argentina is in 19th place, from 41st, Chile ranks 70th, up from 89th in 2018”.

Mining laws, codes, and rules are being overhauled in several African countries. In Congo, Zimbabwe, and Mauritania, the ruling regimes wish to recover unpaid taxes and royalties from the private miners. Uganda wants to have a separate legislation for strategic (green) minerals. Asia is not too far behind. In the Philippines, taxes on minerals went up. In Mongolia, the government hopes to cancel its investment agreement with a private party. Kyrgyzstan upped the ante against the non-state foreign-owned miners. Indonesia, the world’s largest nickel producer, banned nickel ore exports, and wants to do the same with bauxite, the ore for aluminium.

Sovereignty Over Green Resources

Green Resource Nationalism (GN), unlike Resource Nationalism (RN), is catching on in the West, or developed nations. In the US, the state of Nevada adopted new laws to increase taxes on larger silver and gold mining operations. However, the classic case is that of Norway, which is more energy secure, and self-sufficient in renewable energy than almost any other country. According to a recent piece (www.sciencedirect.com), “In the Danish Energy Agency’s self-sufficiency index, Norway reigns supreme.” As the nation pursues a policy that straddles “social profitability and sovereign concerns”, it grapples with “resource nationalism” that is a “rapidly increasing feature of Norwegian renewable energy policy”.

Norway’s Centre Party “stresses the importance of natural resources remaining in Norwegian hands and that energy sovereignty must not be ceded”. Its fears are that Norway’s wind power will be used to electrify other European nations at the expense of local households and industry. Foreigners will acquire renewable infrastructure. Smart companies and businesspeople will con their country, and make a fortune. Hence, the party wants lesser energy integration between Norway and the European Union, and it shapes the new green energy narrative in terms of local self-determination and national sovereignty at both “popular, sub-national, and national levels”.

Discussion is Ongoing

At a theoretical level, GN is being touted by experts as an alternative to RN, and according to experts like Daniele Conversi, connects nationalism to the “phenomenon of climate change”. But, in the present discourse, nations strive to pursue an environment-focused agenda for both political and environment goals. Some of the ruling politicians accept that exploitation of green resources can be harmful to the planet, and that there is a need to use them in a sustainable manner, more to help their citizens rather than outsiders. In this sense, the debate between climate change and development is hugely influenced by the former factors with a nationalistic flavour.

The real action is in Latin America, which owns half of the world’s lithium, two-fifths copper, and a quarter of nickel. Economic powers like the US, China, and Germany have flocked, or are herding, to the region to secure minerals that they will require in the future, and to pursue a China+1 supply chain policy

In fact, experts like Conversi talk about Reflexive Green Nationalism (RGN), an ideology shared by large segments of a nation-state that make civil and political society increasingly self-critical of modernization efforts that disrupt the environment, endangering human, and non-human life”. RGN drifts away from RN, which is “mostly a self-idolising and uncritical form of nationalism”. RGN, unlike RN, “accepts and encourages critique and reflection on the risks that national modernization projects create, and facilitates the search for solutions”. It incorporates both short-term and long-term consequences on climate change and environment.

At a practical level, economic, political, and moral issues dictated the global trend towards GN. Post-Covid, the finances of most regimes were in tatters. Loss of revenues was evident due to disruptions across sectors, except a few ones like healthcare and technology. This was exacerbated by huge jumps in expenditure on free vaccines, subsidised medical treatments, free food and dry rations, and cash incentives to compensate for lack of jobs. There were major financial crises, even as inflation reared its ugly head, and interest rates went northwards. Ruling parties across the globe needed to explore fresh options to raise revenues, and manage their looming deficits and debts.

Yielding Wealth

Fortunately, post-Covid, thanks to demand surges, the prices of commodities like fossil fuels and minerals shot up. Prices of battery-grade lithium carbonate went up nine times in some countries like China. This will only zoom as the world strives to achieve net-zero emissions by 2050. According to a recent IMF paper, the revenues from lithium, cobalt, copper, and nickel could be four times the current figures. In the next two decades, global producers could benefit by $13 trillion. This bonanza, states the Economist, “is about the same as the forecast value of global oil production over the same period”. Resource-rich nations drool over the potential profits.

One of the reasons is that production and exports from the green minerals comprise a large chunk of these nations’ exports and GDPs. Mining constituted 15% of Chile’s GDP, and more than 60% of its annual exports. If nations play the right cards, they can woo foreign investments on their own terms. Over the next five years, for instance, Argentina expects inflows of more than $4 billion, or 0.7% of its GDP. Brazil recently gave a green signal to a start-up to invest $5 billion over the next few years to mine lithium. Electric vehicle makers like Tesla have signed long-term deals with Latin American nations to procure the scarce, but coveted, minerals.

Politically, the emerging and poor nations feel that they can use natural resources to help the masses. Unlike the past, when others squandered the chances to do so during the RN phase, GN now offers the ‘green-rich’ regimes to correct past mistakes. If the state acts smartly, it can direct both state-owned and private firms to generate millions of jobs, raise wages for locals, and pay higher taxes and royalties. The first two will result in prosperity, and the third can help regimes to expand welfare schemes to pull the worst sections out of poverty. Both the producers and users (rich ones) feel that processing of minerals needs to happen where the resources are found.

Moral and social compulsions influence right-wing, left-wing, and centrist governments in a similar manner. The rightists hope to make their countries great again, as they push production locally, curtail migration, and provide jobs to their citizens. The leftists invariably believe in equality, and redistribution of wealth, which is generated both by the state and the business community. The centrists wish to bolster state ownership of resources in order to woo local voters and communities, which are more enlightened than before. Unbridled welfare is the new buzz phrase, and this requires revenues that can be generated through value-addition of green resources.

Checks and Balances

Obviously, economic nationalism, in whatever form it is pursued by various political actors, comes with attached dangers. Corruption is among the most important ones. As one witnessed in the Middle East, Latin America, Africa, and Asia, once the state becomes the owner, it emerges as more or as corrupt as the foreign MNCs. Billions of dollars, pocketed by rogue politicians, wing their way seamlessly and invisibly into the tax havens, hidden from the citizens, who continue to suffer and die despite the resources-related riches. The 2G scam and coal scandal in India in the 2010s showed how resources can be squandered away to enhance crony capitalism, and bribe ministers.

Nations that wish to embrace GN can fall into the same corruption traps as was the case with the RN countries. There need to be many checks and balances to monitor and regulate businesses, either state-owned or private ones. A strong and independent judiciary is a crucial ingredient, as is a watchdog media. At present, this does not seem to be true for many nations that possess the green minerals. But things can change, especially as voters demand more transparency from the elected representatives. Else, in both the developed and emerging worlds, where democratic roots are deeper, the people can shunt out the ruling parties, as was witnessed in the US and Brazil.

Access to technology and global best practices remain challenges for the green-rich nations. As the Economist points out, “For example, LitioMx, Mexico’s new state lithium firm, is unlikely to prosper on its own. To date, Mexico has been unable to produce lithium at a commercial scale, partly because its deposits are harder to extract, as they are in clay rather than brine. Digging them up will require technology, knowhow, and investment, which many analysts believe LitioMx lacks.” In addition, the expenditure on R&D in these nations is often dismal – less than 0.5% of GDP in some cases.
There is a shortage of skilled and semi-skilled mining workers.

Nations that wish to embrace Green Nationalism (GN) can fall into the same corruption traps as was the case with the Resource Nationalism (RN) countries. There need to be many checks and balances to monitor and regulate businesses, either state-owned or private ones

However, as many Middle East, Asian, and South American oil explorers and refiners showed, it is difficult, but not impossible, to get the requisite technology and skills. Saudi Arabia’s state-owned firm, as well as the one in Brazil, apart from the government refiners in India, proved that they can compete with the best in the world. If R&D is not developed locally, it can be purchased globally. More importantly, MNCs are dying to become partners with state regimes because of the huge profits that can be regularly mined in the future. This is evident from the way they have queued up to invest vast sums in Bolivia, Chile, Brazil, and Argentina, to name a few countries.

It remains to be seen whether GN, as opposed to RN, turns out to be a resource curse or resource purse for the citizens in several nations. As the Economist concludes, “For as long as appetite remains insatiable for green resources Latin America (and others in Africa and Asia) will have enough leverage to impose conditions on private firms without strangling investment flows. Yet the big question is whether its slice of the cake ends up being smaller than it might have been.” The answer will depend on powerful users, including MNCs, the democratic and autocratic producers, as well the stability and fragility of institutions such as the civil society, judiciary, and media.

Alam Srinivas

Alam Srinivas is a business journalist with almost four decades of experience and has written for the Times of India, bbc.com, India Today, Outlook, and San Jose Mercury News. He is working on a new book on the benefits and pitfalls of the Indian Bankruptcy Code.

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