The fight over “green” metals in Congo reignites

The Biden administration has made no secret of its desire to improve U.S. access to critical minerals and diversify its supply chains away from Chinese influence. One area of ​​the geopolitical chessboard where the competition between China and the United States is concentrated is Africa, in a competition that is often aimed at developing the war industry rather than controlling essential technologies for the energy transition.

An emerging player between the two contenders is the Democratic Republic of Congo (DRC), where the US is seeking to weaken Beijing’s grip on the country’s resources: about 80% of the country’s copper and cobalt industry is in Chinese hands.

The BRIDGE to DRC Act is a bipartisan initiative of the U.S. Congress to establish a national strategy to develop U.S. supply chains involving critical minerals from the Democratic Republic of the Congo.

To complement the effectiveness of legislative efforts, the U.S. Department of the Treasury recently reviewed its sanctions enforcement strategies to modernize and make them more effective by calling for a structured policy framework that links sanctions to a clear policy objective.

And the Biden administration’s political goal is access to critical metals in the DRC and countering China’s activities in that country, and this time it seems that US sanctions can achieve both their economic and geopolitical goals: the Gertler affair could become a model for the future.

Dan Gertler is an Israeli billionaire who acquired, in ways believed to be fraudulent, mining and oil licenses from the DRC government or state-owned mining companies, which he then sold to multinational corporations and sometimes even to the Congolese government itself, making huge profits. According to the U.S. Treasury Department, Gertler’s operations generated more than $1.36 billion in losses for the DRC in just two years. In 2017, the Trump administration sanctioned Gertler for corruption, banning him from the U.S. banking system.

Following a memorandum of understanding last year between Gertler and the DRC government, former President Felix Tshisekedi officially called on Washington to end US sanctions.

The easing of US sanctions would allow the sale of currently sanctioned assets to US companies that could access new opportunities by investing in mining projects that currently have ties to Gertler, increasing US economic penetration in the DRC.

One possibility sees Mercuria, one of the world’s largest commodity traders, as an ideal partner for the US to acquire copper-cobalt mines in the Democratic Republic of Congo if sanctions on Gertler are lifted.

The road to reaching an agreement involves the Israeli billionaire renouncing all of his investments in Congo, terminating his relationship with Metalkol, and the decision by ERG’s Kazakh owners to sell the Congolese mines.

It is not usual practice for the US government to intervene directly in international mining projects, but it seems destined to become the new normal.

In fact, Washington recently intervened again to prevent the Congolese copper and cobalt mines of Mutoshi in Kolwezi, in the province of Lualaba, and Etoile in Lubumbashi, in the province of Katanga, from ending up at the disposal of Norin Mining Ltd., a subsidiary of the Chinese state-owned defense giant China North Industries Corporation, also known as Norinco, the main supplier of weapons and equipment to the Chinese army.

Cobalt and copper are vital metals for military equipment: they are used in superalloys for fighter jets, as well as in wiring and munitions. A United Nations report found that Norinco was among the Chinese firms that supplied weapons to Congo between 2015 and 2019, and since 2020 the U.S. Treasury has banned American companies or individuals from owning Norinco shares.

In the background remain the strategies for the control of a market, the African arms market, which has a role significantly greater than that attributed to the “ecological” transition in that continent.

The rise of new conflicts and insurgencies on the African continent creates growing business opportunities for Chinese arms dealers, especially now that Russia, historically Africa’s largest arms supplier, has reduced its capacity due to the war in Ukraine, opening the door for Chinese arms manufacturers, including Norinco, eager to increase their market share at the expense of Russian companies.

Norinco, in particular, has been at the forefront of China’s efforts to build and expand military and security ties in West Africa, especially in former French colonies: the Chinese company supplies those countries with battleships, offshore patrol vessels, man-portable air defense systems, helicopters, unmanned aerial vehicles (UAVs), armored vehicles, tanks, fighter aircraft (jets and trainers), large artillery, and transport aircraft.

Hence the US Government’s commitment to prevent Norinco from increasing its access to Congolese resources by inserting itself into the ongoing negotiations.

In 2022, Trafigura extended a $600 million loan to Chemaf Resource Ltd., a Congolese mining company, to finance the development of two mines, Mutoshi and Etoile, in exchange for the rights to market its cobalt hydroxide. But rising costs and falling cobalt prices have stalled the company’s plans, and last October, Chemaf said its debt stood at $690 million, including $510 million from its credit facility. Trafigura was meanwhile turning to the U.S. government to find buyers.

However, while none of the US attempts to sell those assets have been successful, the Congolese state mining company Gécamines, which effectively controls all mining concessions in the DRC, has since blocked the sale of Trafigura to Norin Mining Ltd.

Gécamines’ opposition to the sale is not new to the company, which usually takes advantage of any situation to negotiate concessions or review its royalties. Although its decision clashes with the commitments made by the government of President Félix Tshisekedi, who had already approved the sale, Gécamines has long wanted to take greater control of the marketing of the mineral extracted in its concessions and is evaluating every possible option under the current president Lukama. Nothing new in reality: over a year ago, the Tshisekedi government’s Finance Minister, Nicolas Kazadi, explained that, although China was a very important player at a global level for any country, it was not in their interest “put all the eggs in the same bag”.

This story vividly represents the different approach between the West and China to raw material supply chains: for Beijing they embody both the logic of capital and that of the state, which is driven by a series of all-encompassing imperatives, including profit-making, the extension of the country’s political and diplomatic influence, and access to strategic minerals. In stark contrast to the goals of profit maximization that drive the logic of global mining companies.