EU loses Donbass lithium mine, new challenge for green ambitions

As demand for lithium increases for batteries and electric vehicles, losing access to this vital resource could make it difficult for the EU to secure a supply chain of the mineral essential to the green industry.

The Shevchenko lithium mine in Donbass is considered one of the most important resources for European industry.

According to research, the mine contains about 13.8 million tons of lithium ore with an estimated pure lithium oxide content of up to 207,000 tons. In addition to lithium, the area also has rare minerals such as tantalum, niobium and beryl, essential materials in the production of high-tech equipment.

In late 2021, the mining company European Lithium, owned by a British businessman and registered in Australia, announced that it was taking steps to secure mining rights to the Shevchenko mine.

In January 2024, the company announced that it had been granted a special mining license for a 20-year term and was preparing to launch operations after receiving approval from shareholders.

Russia's control of the region has upended the mining plans of Western companies and posed major challenges for the EU in securing lithium supplies to support its green industrial ambitions.

A 2020 European Commission report predicted that the bloc will need 18 times more lithium by 2030 and 60 times more by 2050 to meet its energy transition and clean technology development goals.

Lithium is the core ingredient in the production of lithium-ion batteries, which are widely used in electric vehicles, electronic devices and renewable energy storage systems.

The lithium shortage could have a major impact on Europe’s electric vehicle industry, with major carmakers such as Volkswagen, BMW and Renault racing to compete with China and the US in the sector.

Without securing a stable supply at reasonable prices, the EU risks falling behind in the electric vehicle race, as China and the US currently control much of the global lithium supply chain.

In addition to the pressure on the electric vehicle industry, the loss of the Shevchenko mine also exacerbates the industrial crisis in Europe.

After the EU cut off energy supplies from Russia, high energy prices have forced heavy industries such as metals and chemicals to scale back production or move production outside the region. The loss of further supplies of strategic minerals such as lithium has added to the pressure on European companies, making them more competitive against global rivals.

Faced with this reality, the EU is looking for alternative supplies from Latin America. This region is home to the three countries of the "Lithium Triangle" - Argentina, Bolivia and Chile, with the world's largest lithium reserves.

European companies have been actively negotiating to invest in mining projects there to reduce their dependence on other sources. However, this strategy also faces many obstacles. Latin American countries are increasingly tightening controls on resource extraction, requiring foreign corporations to partner with local companies and comply with strict environmental regulations. This could make access to lithium more complicated and costly for the EU.

The loss of the Shevchenko mine is a major blow to the EU’s ambitions for strategic autonomy in the green industry. The loss of cheap energy supplies from Russia has already led to a significant decline in industrial production in the region, widening the competitive gap with the US and China.

Without finding stable and sustainable alternative sources, the EU risks facing increasing dependence on external suppliers, undermining the bloc's energy independence strategy.

Analysts say Brussels needs a long-term strategy to secure the supply chain of critical minerals. One way to do this is to strengthen cooperation with non-European partners, step up research and development of lithium recycling technology and encourage investment in domestic mining, although this will take time and resources.

In addition, the EU also needs flexible policies to minimize geopolitical risks, especially in the context of increasingly fierce competition for strategic minerals globally.

Russia's control of the town of Shevchenko not only disrupts the mineral exploitation plans of Western corporations but also puts the EU in a difficult position in its energy transition efforts.

As global geopolitics continue to evolve, how the EU responds to this challenge will have a major impact on the future of the green industry and the region's ability to maintain its competitive position in global markets.