Why is there no longer any diplomacy for commodities?

At the time of the “one ocean summit”, the first fiction is “the clean exploitation of off-shore hydrocarbons would justify the exploitation of submarine mines”. The fight against carbon does not justify a cure worse than the disease.

In La tribune 08/02/2022

The global Covid-19 pandemic and the energy transition have put back on the agenda the need for Western countries to revive a raw materials doctrine on which the economic development and sovereignty of a country depend. This raises the question of why such a doctrine has been abandoned in the past by these countries.

The energy transition opposes environment and industry. The antagonism is not new. I have often been confronted with it in the metallurgy and mining industries. For example, during the appearance of auto catalytic converters, which protect the environment, but are loaded with PGM’s from mines. Moreover, these metals, platinum-palladium-rhodium, were originated either in South Africa and its former apartheid regime or from USSR during the Cold War. The antagonism is all the more acute as our post-Cop21 and post-Covid-19 world is rapidly shifting from a dependence on hydrocarbons to a dependence on the metals needed for production, transport, storage, and electrical consumption in generators, connectors, chargers, batteries and finally motors.

Constraints require a state doctrine on raw materials

A raw materials doctrine is the prelude to the construction or political transformation of our states. They differ from one another in their dependence, independence or interdependence with regard to natural resources, which themselves create the economy, but also security and therefore diplomacy in connection with these doctrines.

Our countries, producers or consumers of commodities, adopt three doctrines: the national agricultural doctrine and food self-sufficiency, the national energy doctrine and energy independence, and the national mining doctrine and industry. The absence of any one of these prohibits a sustainable nation. The geopolitics of natural resources is this great game in which the doctrines and diplomacy of commodities producing states and those of consumer states collaborate or confront each other.

They are each very long-term trajectories, intergenerational Strategic Solidarities that shape the particular relationship between the population and its concept of nation. The governments and administrations that succeed one another at the head of countries rarely modify them, except during a revolution, a change of regime, or a major economic shock: the French mining code after 1789, South Africa in the 1990s, Russia 10 years later, the French oil and nuclear power crisis… and sometimes they tinker with them, as is the case with the entire European energy transition.

Strategies of power and influence

These doctrines guide the supremacy strategies of producer countries on their soils or subsoils : it is the resource nationalism. It is open or closed, favorable or unfavorable to consumer countries which, in order to obtain privileged access to these raw materials, exercise diplomatic strategies of influence towards these producer countries, while also engaging in circular economy logics via recycling and eco-design. Influence does not necessarily mean predation or corruption. It takes the form of infrastructure and industry in the producer countries: transfer of knowledge and skills, structuring of industrial sectors and production capacities, training and job creation… The Chinese industry at the foot of the Indonesian mines is an example.

These strategies of supremacy and influence are power struggles, but rarely is one consumer or producer unilaterally dominant. The world of raw materials is not a one-way street: if China were to ban the export of a particular metal, its imports of a particular mineral, foodstuff or energy would be blocked in return. Russian gas in Europe does not escape these conclusions, as the Ukrainian crisis demonstrates.

Strategies classify metals

An abundant metal has been sought and discovered by a dynamic industrial fabric and an inventive diplomacy. Then a range of technologies will prove opportune to extract it from the ground, to refine it, and thanks to eco-design, to consume it in decreasing unit quantities and increasing uses. Finally, it is recycled.

But it can become sensitive if any of the previous steps fail. It will become a critical metal if there is a high risk of a deficit without a scientific breakthrough paving the way for substitutions. It will be critical in one industry, but not in another, in one country, but not in another, and this changes over time.

Prudent producers and consumers with a long memory will regularly question the supply and demand balances of metals, otherwise the danger is to freeze the abundant or critical character, without temporal dynamics. Moreover, if a metal is a by-product of another metal, observation of the latter’s equilibria is essential. South African chromium is a by-product of platinum mining, so its production will be subject to the demand for platinum in catalytic converters or jewelry, rather than its own in the steel industry.

Finally, a strategic material is not based on geological or market criteria. It is a resource that is essential to the sovereign missions of the State, to national security, or to the fundamental political ambitions of a consumer or producer country. Iron ore is abundant, but it have been very strategic for a consumer, China, and its steel for its urbanization policy. At the beginning of 2022, coal was strategic for a producer, Indonesia, as it temporarily banned its export to meet its own consumption.

No strategy classifies metals or minerals as what the media or politics have ignorantly designated “rare metals”. This category does not exist, its appearance is the result of a diplomatic fake-news promoted by a pro-oil lobby to counter the electric car, but we will come back to it later.

Competitive consumption

The fusion between critical and strategic metals leads to two phenomena. On the one hand, it destroys demand, since the metal is unavailable and its price is high. On the other hand, competitive consumption becomes a necessity, i.e. the producer favors the consumer closest to his own strategy: in the first place, his national industry.

This is why such crisis will remain short-lived. The exploration of the “untraceable” metal will resume or a substitution will start: electric vehicles have already motors without rare earths and batteries without cobalt or nickel, and perhaps later without lithium.

However, if the notions of criticality and strategy merge, the neophyte, innocently inspired by old grids of reading of the great oil and gas game, imagines “metal wars” that will seize tensions created around metals that have become “untraceable”. This is a mistake, as a high-intensity oil conflict such as the first Gulf War is unlikely to be repeated for platinum mines in South Africa, copper in Chile, lithium in Australia or Tibet, nickel in Indonesia, Russia or Canada.

Complotism and diplomacy

Everyone remembers how a diplomatic fake-news story emerged at the United Nations and initiated the second Gulf War, but also the lie in the Australian submarine affair. The height of the diplomat is to be fooled by the infox or the liar, and then to make a wrong diagnosis. In this case, in order to re-establish good judgment, diplomacy must be renewed more by different blood than by new blood.

Since our country and Europe are not self-sufficient in metals, the action of our natural resource doctrines must follow from good diplomatic diagnoses. This was simple as long as we had active natural resource doctrines and hoax were absent from the metals world. The “palladium crisis” of 2001-2002 cost the automobile industry: Ford in 2001-2002 lost $1 billion; the “uranium crisis” of 2007 led to the demise of Areva. More recently, in 2011-2012, the “rare earths crisis” arose from a combination of underproduction and geopolitical tension surrounding a Chinese fishing boat boarded by Japan; but it only left its mark on the valuation of Japanese industrial stocks. In all three cases, it was the market that was manipulated and the victims were neither diplomats nor state politicians, but corporates.

On the other hand, in the interval 2017-2019, in the form of “rare metals”, the first metallic fake-news aimed at the diplomatic-political world appeared.

Under the cover of an environmental fake-news, purposely mixing the erroneous notion of “rare metals” with that of “rare earths” or lanthanides, a conspiracy thesis, financed by a pro-oil lobby from Texas, was directed against the electric car. With slogans such as “green car, red battery”, the infox discredited the mine, its jobs and trades, then the refining and metallurgical plants and achieved its goal by discrediting electric mobility. Remember how its promoters hit their target, the political and automotive world, which blindly adopted it, hence European delays in the electric car with their cohorts of industrial and social problems. Already in the 1990s and 2000s, this type of deindustrialization made huge fortunes for some individuals.

Then, the first fake-news made the West sink in a second one: the guilty.

Without the guidance of natural resource doctrines, rather than simply acknowledging the strategic error of this surrender of sovereignty, it was politically more comfortable to evade our mistakes by accusing China of being unfairly ahead of us in accessing resources. Then, China having achieved its objectives of access to and transformation of resources essential to its first development, it continues in the same vein by getting ahead of us in the resources essential to the products of the future.

Not in China, Korea, Japan or Russia

Worse, this Chinese race for raw materials since the 1990s has been perceived either positively, because it was justified by its desire for progress and the development of a population that was poor, or it has been encouraged by painless loss of our sovereignty: why should we care that China produces half of the world’s steel, since our peak steel consumption is behind us and it has produced for us and for less?

I denounced this dereliction of duty at length, because I saw that there was no abandonment of the commodity doctrine in China, Korea, Japan or Russia, and that sovereignty problems would result. The latter were coming out of the closet during the Covid-19 crisis: various shortages and inflation of raw material prices.

The hoax blurred the vision between illusion and reality: the illusion was that an ancient intuition of scarcity would have guided China, the reality is that for 30 years, the West has put aside any reflection on its raw materials doctrines: Beijing has implemented its natural resources doctrine while we have abandoned ours.

Secondly, the fake-news now leads to false solutions, to the negation of two fictions to meet the needs of the energy transition.

At the time of the “one ocean summit”, the first fiction is “the clean exploitation of off-shore hydrocarbons would justify the exploitation of submarine mines”. The fight against carbon does not justify a cure worse than the disease. The impact on biodiversity of the exploitation of hydrothermal mounds or undersea nodules is unknown, uncontrolled and therefore incompatible with responsible mining. Moreover, many consumers forbid themselves to use such production.

Second fiction: “the exploitation of extraterrestrial minerals”, in the manner of the film “Don’t look up”. It offers no medium-term financial, technical or bio-environmental solution.

Moreover, underground mines are not exhausted and we should rethink our mining codes without repeating the mistakes of the Ancien Régime.

Then the culmination of the “rare metals” infox: it has so discredited mining that at the dawn of the world metal boom, French mining engineers and geologists, trained in Orleans, Nancy, Beauvais, Alès, Rennes… are unemployed in France. Lost for the nation, they expose on the social network Linkedin their skills absorbed worldwide by the Australian or Canadian mining industry. This is where the “rare metals” policy is populist.

Politics and diplomacy have thus fallen victim to the infox in metals because they have not examined reality in a contradictory way, by looking at the facts, by auditing pseudo-scientific studies, distorting documentaries or caricatured books promoting error, sensationalism and deleterious emotion. Victor Hugo already predicted this: “Ignorance is a reality that one feeds on; science is a reality that one fasts on. To be a scientist and to be healthy; to graze, and to be an ass everywhere”. The “rare metals” infox will undoubtedly remain a textbook case of intoxication to be taught in journalism, infowar and political science schools!

Facts and reality in natural resources

Of the last six Chinese presidents and prime ministers, with the exception of the current prime minister, Li Keqiang, a lawyer, all had engineering backgrounds: mechanical engineering from 1993-2003 with President Jiang Zemin, and electrical with Premier Zhu Rongji, hydroelectric from 2003-2012 with Hu Jintao while his premier Wen Jiabao was a geologist, and from 2012 to the present, Xi Jinping, a process chemist, knows agriculture.

It is easier to achieve the national goal when you understand the path. This academic timeline thus corresponds to the country’s successful industrial stages: power plants, hydropower, mining and energy geopolitics coinciding with the development of electric mobility, process chemistry and agribusiness. So many Strategic Solidarities secured by China thanks to one idea: security is a public good that the market can neither guarantee nor provide. On our side, how many engineers or technicians head of state had we to lead France or Europe?

Then, if the world’s leading producer of copper is Chile, if Indonesia, the Philippines, Russia, New Caledonia and Canada share the leading positions in nickel, if South Africa is first in platinum and rhodium while Russia is first in palladium, if the iron ore market is dominated by the Australia-Brazil pairing, if Guinea supplies as much bauxite, if China is first in rare earths or tungsten, if Australia and Chile are first in lithium and the Democratic Republic of Congo in cobalt, it is not the result of victories of bellicose strategies of these producing countries vis-à-vis other producers, but the results of the exploitation of their metal-rich sub-soils. Conversely, France has world-class mining deposits. Why doesn’t it exploit them? Because of an absent French mining doctrine, Beijing’s diplomacy has nothing to do with it!

Finally, China imports cobalt from the DRC, but how did China Molybdenum become the owner of the world’s largest cobalt mine in the DRC in 2016? Did Beijing ask its army to intervene, colonize or invade this territory? Did it use underground networks to infiltrate the entire decision-making chain? None of this, it simply bought two giant mines from an American mining company, Freeport-McMoRan, because without a mining doctrine, U.S. diplomacy did not have the intelligence to stop this transfer.

Worse, in the midst of the 2018 trade war between China and the United States, the world’s largest lithium producer, Chile’s SQM, saw 24% of its shares held by Canada’s Potash Corp bought out by China’s Tianqi for more than $4 billion. Why no Western reaction? Because our diplomacy did not have a natural resources doctrine to lead its mind.

For a diplomacy of natural resources

2500 years ago, the Greek strategist Themistocles expressed the first natural resources doctrine for a democracy. His fellow citizens pooled the wealth of the Laurion silver mine to finance 200 ships and defeat the invader Xerxes at Salamis in 480 BC. He had made the right diagnosis and determined the right doctrine and a good diplomacy for the survival of his people.

As the consumption of hydrocarbons disappears, other infoxes will blur the diagnoses about metals, hydrogen, nuclear, renewable energies, digital, carbon… In order to make the right diagnoses and build its natural resources doctrine, diplomacy must flush them out in order to be useful in the challenges of the energy transition.