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Europe still has a lot of financial power, including large banks and export credit agencies. These should be brought to the table as part of any future CTIP.
A new acronym is born in Brussels: CTIP. These “Clean Trade and Investment Partnerships” promise to take Europe’s resource diplomacy to new highs. The EU Clean Industrial Deal commits to launching these partnerships to “diversify supply chains and forge mutually beneficial deals”.
But a number of similar projects already exist. Most notably, strategic partnerships, so far signed with 14 countries from Chile to Zambia, as well as dedicated chapters on raw materials under various free trade agreements.
But despite numerous partnerships and memorandums of understanding, the EU’s progress in critical minerals diplomacy has been under-whelming. It does not have to be this way as the EU gets better at using its financial, technological and diplomatic leverage.
So, how can this new tool turn the continent’s minerals fortunes around while benefitting resource rich countries?
Firstly, the EU needs to become more strategic about choosing partners for those partnerships. Answering questions on where the biggest opportunity is and who our friends are or can be should guide this.
We are not a global behemoth when it comes to minerals diplomacy or foreign investment. China invested over USD16 billion into mines globally in 2023 alone, mostly in Africa. Its companies control the majority of the nickel processed in Indonesia, the world's largest producer. The US started to catch up quickly under the Biden administration.
Now Europe needs to find its niche. The Philippines is one opportunity. The country is the second largest nickel miner but has until now exported its ores to Indonesia for processing. This is set to change quickly as the country has just passed a law to ban raw nickel exports to encourage more local value from processing. This is the perfect time for the EU to come in, support the country’s value addition goals and share its own policy experience of putting in place better governance and minerals standards.
Strategic analysis should be done for key countries and raw materials, taking into account the geopolitical and economic considerations. There is no time to simply go with the flow.
Next, the EU needs to better understand its own strengths and how they fit partner countries’ needs.
It is clear that one of the top things resource-rich countries want is finance to develop their resources. Most of them are considered high risk, so they struggle to secure cheap loans. Europe still has a lot of financial power, including large banks and export credit agencies, such as KfW in Germany. These should be brought to the table as part of any future CTIP, with the European Commission and governments providing public risk guarantees.
And what better leverage than becoming an investor itself? The Commission should revamp its Global Gateway programme to allow it to operate more like a development finance institution. It should go as far as to take stakes in key strategic projects directly.
Most resource-rich countries also want to stop directly exporting their minerals and instead seek to build their own industries and add more local value. Talking about value add is not new, but we must move from words to action.
The EU has a lot of excellent technology and companies, e.g. in green energy, infrastructure and chemicals. Getting our wind champions to build wind farms in Global South countries - as Vestas did in Kenya - not only helps their population access affordable energy; it also creates new export growth opportunities for the EU. Helping countries develop their own industrial policies and allowing them to prioritise local suppliers can bring even more benefits.
Finally, does the above mean we should forget about upholding high standards and environmental stewardship? Not at all. With leverage over projects comes the power to control the conditions under which they are operating.
But this cannot be a pure finger wagging exercise. The corporate due diligence and deforestation laws are the right frameworks to spur action, but a lot more is needed to help Global South countries benefit from them.
This means providing financial and technology support to roll out better water and waste treatment facilities, e.g. turning dangerous tailings dams into safer underground backfilling facilities. This also means working with countries and smaller companies in Global South countries to explain, train and help implement some of the more complex requirements.
It’s clear the EU needs to up its game when it comes to minerals diplomacy, and the new Clean Trade and Investment Partnerships might well be the answer. To succeed, these need to be strategic, focused on actual projects on the ground and balance the EU’s strengths with partner countries’ needs.
