[Editor’s note: This story originally was published by Real Clear Wire.]
By Portia Roberts
Real Clear Wire
To witness a key feature of how the Biden Administration intends to implement the goals of the Inflation Reduction Act (IRA) we need to look to Riyadh, not Washington D.C. Agreements signed at the Saudi Future Minerals Forum in January reveal a deeply complex, almost neo-colonial path for achieving the IRA’s green energy transition goals.
A central feature of the IRA as originally promoted—a feature reportedly critical to Senator Manchin’s decision to cast a bill-passing vote––was to stimulate domestic industries to supply critical “energy minerals” needed to build green hardware, from batteries for EVs to solar modules. What we’re seeing instead, however, is a creative repurposing of the IRA’s language, and funds, to source critical minerals from Africa, backed by Saudis and refined for export in Morocco.
It’s likely that more than a few in Congress will question how sourcing from the Middle East and Africa will make America the “leader in clean energy,” and how such sourcing might instead create new security exposures along with a host of ethical issues.
It’s widely known now that aggressive goals for deploying green energy will demand enormous supplies of critical minerals. And it’s not that the U.S. couldn’t, in theory, eventually, supply those minerals domestically. But we lack the political appetite and requisite labor force.
Despite the existence of huge critical mineral reserves, opening new mines in America is not only notoriously difficult, but appears politically impossible at the scales needed. Consider, in just one example, the decade-long battle over approval for, never mind the construction of, a copper mine in Arizona (something local Native Americans still oppose). And when, or if, approvals happen, employers face a growing shortage of skilled workers, something bound to impact our industrial future even without the added pressure of green energy goals.
Sourcing refined minerals through Morocco is one of the legal workarounds because that country is within the U.S. Free Trade Agreement framework, which the IRA specifies as equivalent to “domestic” sourcing. Perhaps the writers of the IRA intended such, but it’s not what was expected by many who voted for the legislation as a means to support American manufacturing and innovation. Per Senator Manchin: “Going forward I will push back on those who seek to undermine this significant legislation for their respective political agenda, and that begins with my unrelenting fight against the Biden Administration’s efforts to implement the IRA as a radical climate agenda instead of implementing the IRA that was passed into law.”
The eagerness to source from the Middle East is motivated significantly by geopolitical worries about China. That nation has heavily invested in the entire minerals supply chain, including and especially on the African continent. Downstream of the mines, China utterly dominates global minerals refining and materials production as well as the components for lithium-ion batteries and solar cells. And upstream, China has long invested in African mining and infrastructure projects necessary to support extractive industries and the transport of raw materials to refineries and ports. China’s policies have also supported local development, operating schools to promote Chinese language and culture across the continent and providing African leaders with “education” and training.
China is, in short, deeply integrated into the opaque complexities inherent in the supply chains of all manner of energy products, from gasoline and diesel to lithium, nickel, cobalt, copper and other critical minerals. We are already seeing China’s emergent pricing power as its recent overproduction of EVs and nickel (from Indonesian mining investments) threaten the economic viability of clean energy projects globally. For this reason and due to its Africa investments, disconnecting the world, and the U.S., from reliance on China will prove more than difficult. In fact, it may be nearly impossible even with the kind of workaround exhibited by turning to Saudi Arabia.
Additionally, the U.S. is hardly alone in looking to the Saudis, who are committing billions of dollars to African minerals markets despite fluctuations in market prices, the kind of volatility that typically frightens private capital players. “Saudi Arabia is location-wise between three continents…we think we connect the whole world all together,” stated Khalid al-Mudaifer, Saudi Arabia’s vice minister for mining. Recent agreements with the U.S., Russia, and China plus strategic investments from Brazil to Pakistan certainly make the kingdom an epicenter. Saudi Arabia is also now extremely well positioned in the event of any shift in global balances of power.
It is no exaggeration to say that ensuring secure access to critical minerals via the Middle East will depend on America’s ability to maintain hegemony in the face of strengthening BRICS countries (Brazil, Russia, India, China, and South Africa). As, or if the U.S. economy starts to diminish in comparison to that of the BRICS, the long-standing U.S. dollar dominance may become less appealing and further complicate the path to Saudi sourcing of energy minerals.
Exacerbating illusions of secure or “transparent” supply chains is the fact that minerals are inherently fungible. Once a material is refined, its upstream origin is unknowable unless information (sourcing, contracts, etc.) is tightly controlled; such controls require reaching into practices and governance of both nations and private or state-owned corporations. There is little about current plans for the IRA that resolves this. Indeed, despite the lessons of supply chain fragilities triggered by global pandemic lockdowns, what we might call “the Morocco Route” for IRA implementation amplifies challenges related to already serpentine supply chains, not least of all “ethical sourcing.”
Consider that, despite much awareness and some progress, conflict diamonds persist in plaguing an industry far less opaque and complex than that of energy minerals. Investigative journalism into the energy minerals supply chain already reveals not only similar issues but also reliance on known, potentially unsavory players––at least in the case of Democratic Republic of the Congo––now with the backing of the U.S. government and tax-payer dollars. DRC, Angola, and mines across Africa have notorious records for working conditions and unreliable reporting. Angola has a particularly poor track record in using its vast mineral wealth to uplift the conditions of its citizens.
Saudi and Chinese track records on human rights aren’t stellar either. A decade or so ago, Foxconn practically became a household name when a labor rights group called on Apple to account for conditions at its major China-based iPhone factory following the death of a teen worker. A PR nightmare and ongoing efforts to improve supply chain ethics ensued and continue. Nike and Adidas were caught up in similar supply chain issues recently. It won’t be surprising if sourcing for green machines follows similar trajectories, and that consumers and taxpayers will come to care as much about ethically sourced car batteries and electrical hardware as they do their favorite sneakers.
From Presidents Jimmy Carter to George W. Bush, American politicians have long decried our dependence on oil from the Middle East. While increased domestic production has dramatically reduced oil dependencies, the potential for foreign disruptions remains, as the war in Ukraine and conflict in Gaza make clear. It is more than ironic, then, that to deploy IRA workarounds leads to renewed dependence on the Middle East— and upstream of there, other dependencies in a web of emerging markets willing to do the mining we seem to prefer to have out of sight, and offshore.
Even if Saudi Arabia is America’s closest Arab ally in that region, there’s no avoiding the fact that the Middle East and North Africa (MENA) are cauldrons of regular conflict. At times and for varying reasons, the U.S. has been drawn into those conflicts. It happened in 1974 with the Shatt al-Arab conflict, again with the Gulf Wars of 1990 and 2003, and now the Red Sea Crisis that threatens merchant traffic in one of the world’s most critical trade routes. Now comes our MENA focus for access to critical energy minerals. There’s a time-worn saying about doing the same thing over and over and expecting different outcomes.
The IRA minerals “workaround” demands a hawkish mindset, the political will to consistently engage and defend trade routes in the Middle East, and to expand that engagement to regions where the U.S. has historically been largely absent. The Arab Spring overturned rulers in a handful of countries across MENA. Geopolitical strategists may wonder what the U.S. would do if something similar happened and disrupted trade with Morocco. Do the IRA implementers contemplate, for example, a greatly expanded budget and role for the Defense Department’s U.S. Africa Command if (or when) regional conflicts disrupt the new Lobito corridor through central Africa?
Energy is self-evidently critical, as are the supporting supply chains. And mining is not just an inherently dirty business, but a very complex, capital-intensive, and time-consuming one: According to the IEA (International Energy Agency), the global average time needed to create a net-new mine is 16 years. That says nothing about the necessary workforce that the U.S. needs to encourage to expand a mining industry.
Set aside whether it’s necessary to aggressively shift our current energy dependencies away from hydrocarbons, which are now, in the main, domestically supplied. There are some big questions about basic ethical values and principles of owning our own destiny when it comes to critical supply chains, as well as lessons anchored in history and the long-tail risks of fraught geopolitical alignments.
Meanwhile, America produces films that personalize and dramatize conflict minerals and pop stars whose one night performance in 1985 raised over $130 million (in today’s dollars) to end famine in Ethiopia. We are a country that historically cares. Odds are that many Americans, and our political leaders, will come to recognize the implications of the IRA “workarounds” and perhaps pursue a different path to an affordable, ethical, and secure energy future.
Portia Roberts is a principal in Great Eagle Markets and holds an MA from Johns Hopkins SAIS.
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