Summary
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In the last two decades, China has come to dominate global supply chains for critical raw materials and the green energy and other technologies they enable. This increases competition and economic risks for Europe.
- In an effort to build CRM supply chains insulated from China, the EU has signed strategic partnerships with several politically friendly countries around the world, including in Africa.
- However, the EU will only realise its de-risking ambitions if the European private sector invests in CRM supply chains in partner countries in Africa and elsewhere. Yet the incentives for European companies to enter mining and processing operations in these markets are too weak.
- The example of Namibia shows that the EU’s strategic partnership with the country has borne little fruit – and may even be benefitting Chinese firms at European expense.
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To address this, the EU must enhance support to European companies to invest in securing access to critical raw materials. This should include new financial incentives and measures to protect against China manipulating prices on international markets.
Critical juncture
Despite heightened focus in the West about dependence on China – and high-level efforts to recalibrate these relations at the strategic level – Europeans’ economic reliance on China has continued to grow in recent years. EU imports from China reached €515.9 billion in 2023, across a wide array of products, many of which are vital to advanced economies.
At the heart of these entangled relations is European states’ and economies’ dependence on China for the critical raw materials (CRMs) needed to produce green energy technologies, including solar modules, electric vehicle (EV) batteries, and permanent magnets for wind turbines. The central importance of these technologies today risks leaving Europe heavily reliant on other countries for their supply – an acute challenge when production is highly concentrated in China as strategic competition intensifies between China and the West.
To respond to this situation, the European Union has vowed to diversify its energy sources and build out CRM supply chains and processing capabilities that are unconnected with China (ex-China). The bloc has introduced an array of policies aimed at achieving this. “De-risking” supply chains is the way the EU terms its efforts to reduce its economic reliance on China. This de-risking approach encompasses the green energy technologies critical for the EU’s decarbonisation and energy security, as well as a range of other technologies, including in the military field. Managing European exposure to China in different domains is vital not only for Europe’s energy security, but also for the EU to retain and enhance its geopolitical and geoeconomic strength in a rapidly changing world.
In its quest to access ex-China CRMs, the EU has turned to resource-rich African countries it regards as politically friendly. In the last two years, it has signed strategic partnerships to develop sustainable CRM value chains with several African countries, and it is supporting the development of an economic corridor in southern Africa. The EU hopes such agreements will unlock opportunities for European participation in CRM supply chains in these African countries.
Despite these ambitious policies and the strategic partnerships signed to date, Europeans are struggling to overcome market forces to break their dependence on China. Other players, including Saudi Arabia, Turkey, and the United Arab Emirates, are also entering CRM mining and processing and are focusing on Africa in particular. Time is fast running out for Europe to win access to the CRMs it needs. The sluggish progress indicates a wide gap between ambitions and reality, especially regarding CRM projects in Africa. It is essential that Europeans understand this disconnect and consider how to address it.
This policy brief aims to support this understanding and propose solutions. It begins by situating EU efforts within the evolving global CRM landscape. The paper examines the EU-Namibia strategic partnership on sustainable CRM value chains in order to show what it will take to increase European participation in ex-China CRM supply chains in African countries. This agreement illustrates the ways in which political factors may have influenced the EU’s selection of third country partners more than the commercial reality of a country’s CRM opportunities. At the same time, market dynamics and commercial viability challenges continue to deter European private sector involvement in CRMs in Africa.
The paper suggests ways Europeans can begin to turn this state of affairs around. Most urgent is the need to innovate with new financial mechanisms offered by the EU and member state governments, which have so far failed to motivate European companies to enter CRM supply chains in African countries. If the EU is to succeed in its stated mission, it will need to provide greater financial support to better align European private sector interests with the bloc’s own energy security and de-risking objectives. This will come at a cost. But it is the price it must pay if the EU is to reduce its dependence on China and others.
About the authors:
Sarah Logan is a visiting fellow in the Africa programme at the European Council on Foreign Relations. Her main research interests are in energy and investment in Africa, with a focus on more fragile settings. She is an economist and lawyer with significant experience working with governments of countries experiencing fragility and conflict.