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A Look Across the Atlantic – Germany Seeks Resource Cooperation in South America as Competition Heats Up

The global race for critical mineral resources is heating up. Against the backdrop of soaring demand and rising geopolitical tensions, nations are scrambling to diversify their critical mineral supply chains away from adversary nations, i.e. primarily China, and, in the case of Europe, also Russia.

While the European Union works to flesh out what is expected to be landmark legislation said to rival the U.S. Inflation Reduction Act to combat climate change and strengthen supply chains, German Chancellor Olaf Scholz traveled South America to lobby key mineral producing countries to prioritize resource cooperation with Germany.

After years of complacency, fueled in part by what German officials described to Reuters as a “distaste for the dirty business of mining and faith in the open market,” German stakeholders are now pushing for securing and diversifying supply chains “for example through offtake agreements, stakes in mines, or possibly the establishment of Germany’s own processing capacity.”

During his trip, Scholz signed a commodity partnership agreement with Chile aimed at strengthening cooperation via an annual bilateral forum and “state instruments” like investment guarantees. According to Reuters, Chile and Germany recently launched a hydrogen pilot project in Patagonia drawing on wind energy which is backed by the German government while leveraging technology from Siemens Energy.

While South America is a target-rich environment for Scholz’s lobbying efforts, with the region home to key mineral producers, the southern hemisphere has also seen a rise of resource nationalism which may complicate his mission.  Although he also visited Argentina on his trip, no agreement with the country has been announced, and a 2018 Bolivian-German lithium joint venture fell apart in 2020 amid domestic political turmoil in Bolivia. [See our post on nascent resource nationalism in Central and South America here.]

Scholz’s lobbying tour to South America comes as the EU-co-funded EIT Raw Materials, an innovation community within the European Institute of Innovation and Technology, calls on the European Union to use its to-be-released Critical Raw Materials Act to speed up permitting and and strengthen investment into the metals and minerals underpinning the green energy transition.

While the EU and the United States are close allies, Europe will not only have to compete with China and Russia for resources, but also with the U.S., with the Biden Administration’s Inflation Reduction Act serving as a key vehicle to spur investment in the critical minerals sector.

As EIT Raw Materials CEO Bernd Schaefer argued in an interview earlier this week, “[w]e all know Europe isn’t as agile and quick when it comes to decision-making. The Americans take the fast track and the super fast track has been taken by the Chinese.”  

With the comment that what passes for fast from the European perspective isn’t nearly fast enough, it’s encouraging that we can expect more activity across the Atlantic in the coming months.

It’s a brave new world, in which stakeholders will have to strike a sustainable balance between competition and cooperation in the critical mineral resource sector.  It’s not an easy task, but one that the United States can achieve with a comprehensive and decisively implemented all-of-the-above approach to mineral resource security.