Ukrainian conflict: The first lithium war?

• ‍Russia’s annexing of Ukraine’s massive lithium reserves has ‘benefitted Kremlin’
• Doubts about whether rest of world will buy lithium from ‘pariah state’
• But Putin has succeeded in stopping EU’s plan for Ukrainian lithium

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What is the real reason for the war in Ukraine? In a TV address at the outset of Russia’s invasion, the country’s president Vladimir Putin said that the objective was to “demilitarize and de-nazify Ukraine". But this has been dismissed as a baseless pre-text upon which Putin justified a land-grab against an independent state.

It can be difficult to discern Putin’s primary motivation for the invasion. Indeed, some argue that attempting to come up with a logical explanation for the Russian president’s actions are futile – only last month, critics of the Kremlin were speculating that Putin’s behaviour was simply attributable to “unlimited power and impunity”.

The systematic slaughter of thousands of people is madness. However, some observers argue that, while Putin’s means may bear the hallmarks of lunacy, his end is decidedly more rational. They speculate that the Russian leader ordered the invasion of Ukraine to strike a blow in the battle for control of the means of delivering the global energy transition. The logic of the argument is this: prior to the Russian invasion, it had been estimated that Ukraine had around 500,000 tonnes of high-quality lithium – a key component of the batteries used in electric vehicles and energy storage systems – and consequently the country was set to become a “key player in the global transition to green technology”.  

Lithium’s crucial role in our daily lives

It's worth a brief note here highlighting exactly how important lithium is in our day-to-day lives. As the US mining company Piedmont Lithium succinctly sums it up on its website: “Lithium plays a critical role in much of what we do in our daily lives. In addition to EVs, lithium is an essential part of the technology that powers mobile phones, computers, power tools and battery storage of energy generated from wind and solar power.” Right now, you are reading this article on a device that is powered by a battery with lithium in it. Meanwhile, the energy transition will be largely driven by wind and solar projects that produce energy that is stored in lithium batteries. Research has shown that lithium-ion batteries account for 85 per cent of newly installed energy storage capacity. As the chart below shows, worldwide demand for lithium will soar from 685,000 metric tonnes in 2023 to 2.1 million tonnes by 2030.

There is no doubt that gaining control of Ukraine’s significant lithium reserves will have benefits for Moscow. Much of Ukraine’s lithium supplies – a significant proportion of which are currently untapped – had already been earmarked for the European market. Back in July 2021, the European Union and Ukraine had launched what they described as a “strategic partnership on raw materials”, which, the EU said would “help diversify, strengthen and secure both sides' supply of critical raw materials, essential for achieving the green and digital transitions”. It added that the partnership would be decisive in “preserving global competitiveness and developing the resilience of EU and Ukrainian industry”.

Putin anxious to establish dominance in lithium trade

The pact with the EU boosted investors’ confidence in Ukraine and, within months, in November 2021, it was confirmed that listed Australian mining company European Lithium had agreed a $50 million deal to acquire Petro Consulting, a Ukraine company that was in the process of applying for special permits to extract and process lithium for two Ukraine lithium projects. European Lithium stated at the time that the acquisition, if completed, would form part of the company’s strategy to become the “largest local producer of lithium hydroxide in Europe”. Meanwhile, in the same month, it emerged that China’s Chengxin Lithium, a company with the stated aim of becoming the “world’s leading li-ion battery materials producer”, had applied for the rights to two lithium deposits in Ukraine as part of a move to gain a foothold in the European lithium industry.

Such developments will undoubtedly have spooked Putin, who is anxious to establish a dominant position for Russia in the world’s global lithium trade. To this end, the Russian president has been eyeing up the Bolivian lithium market, the significance of which cannot be overestimated given that Bolivia has the richest known lithium deposits in the world, with an estimated 21 million tonnes, or 23.6% of the global total in 2021, according to the US Geological Survey. And it appears that Putin’s courtship of the Bolivian government is proving successful, with reports claiming that companies from Russia and China are dominating the competition to unlock the potential of Bolivia’s lithium reserves.

Ukraine’s mineral base important to Russia

While acknowledging that Ukraine’s lithium supplies are of considerable interest to Russia, some commentators stop short of saying that lithium was the reason behind the Putin-led invasion. “It may not be the motivation for the invasion, but there’s a reason why Ukraine is so important to Russia. And that’s its mineral base,” said Rod Schoonover, scientist and former director of environment and natural resources at the National Intelligence Council. “This invasion puts those minerals into play.”

Yet other analysts are speculating that the Ukraine conflict represents the world’s first war over lithium. They suggest that the war represents a battle for a key resource that will become increasingly sought after – and therefore will command ever-higher prices – as the world moves towards a zero-carbon future. Much of the fighting in Ukraine has centred on the nation’s eastern region, which, in addition to being the part of the country that is closest to the Russian border – the source of the invasion – is also where much of Ukraine’s lithium resources are concentrated. If not the primary reason for the Russian invasion of the Ukraine, the annexing of the country’s lithium reserves is undoubtedly a “co-benefit for the Kremlin”, according to Schoonover. The Ukrainian Geological Survey has concluded that Ukraine possesses one of the largest lithium deposits in Europe with “proved reserves and measured resources” – the graphic below shows that two of the sites that were being prioritised for mining are located in the east of the country in the Donetsk and Zaporizhzhia regions.

Invasion scuppered EU’s lithium plan

However, the nature of the benefit to the Kremlin of annexing Ukraine's lithium reserves is open to question. The lithium deposits in the Ukraine, though plentiful, are undeveloped, so significant investment would be required in order to turn these deposits into a tradeable commodity. It is extremely unlikely that the Ukrainian lithium mining industry will secure investment in the foreseeable future and, besides, as some observers have noted, there is little chance of the rest of the world being willing to import lithium from a pariah state, especially when there are better alternatives in geopolitically more favourable countries.

Instead, there is a school of thought that what the Russian invasion of Ukraine has achieved is that it has stopped Europe from following through on its plan to secure Ukraine’s lithium reserves. This theory has credence as it would appear to fit in with the Kremlin’s modus operandi – there have been other instances of Russia trying to nullify resources that play a key role in the energy system, for example it has been reported that Russian troops have been flooding captured Ukrainian coal mines to render them useless in the event Ukraine regains lost territory.

If the claim that, by invading Ukraine, Putin was seeking to strike a blow in the battle for control of the global energy transition is indeed true, there can be little doubt that he has been successful.

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