The Curse of the "Tsar Lithium"
The Curse of the "Tsar Lithium"
The resurrection of the Rio Tinto lithium mine in Serbia
Today, lithium and "Rio Tinto" are two of the most controversial words in the political discourse in Serbia and the Republic of Srpska.
On July 11th, the Government of the Republic of Serbia reinstated the decree establishing the spatial plan for the realization of the "Jadar" project, which would allow "Rio Tinto" to begin lithium mining in Serbia. Similarly, the National Assembly of the Republic of Srpska rejected a declaration against the opening of a lithium mine in the Lopare municipality. These two political decisions have deeply divided society in the region.
In this political battle, concerned citizens and local communities stand on one side, while the authorities from Belgrade and Banja Luka stand on the other. For one side, lithium and "Rio Tinto" are associated with ecological catastrophe and a neo-colonial position of the region in relation to the rest of Europe and the world; for the other, they are associated with economic improvement and accelerated integration into the European Union.
The Second Coming of Jadar
In an attempt to convince the citizens of Serbia of the latter option, German Chancellor Olaf Scholz made a special trip to Belgrade on July 19th. It is unclear why Scholz, representing a country with far more lithium deposits than Serbia and Srpska combined, came to Belgrade to provide guarantees and give speeches about how lithium is crucial for the future of Serbia and Europe. If lithium is so crucial, why haven't they opened mines in Germany?
The answer to this question might lie far back in history. On July 27, 1189, the great Serbian prince Stefan Nemanja hosted the German Emperor Frederick Barbarossa in Niš, who was on his way to the Holy Land to begin the Third Crusade. Although still a subject of debate, it is said that the Serbian ruler dined with a fork and knife, while the German emperor ate with his hands.
Following this logic, it seems that Serbia is ahead of modern Germany. Of course, in an era of rapid information flow, such sarcasm should be left to those paid for it, while special attention should be paid to facts.
The resurrection process of the "Jadar" project is adorned with various hypotheses but is mostly shrouded in secrecy, which brings daily political discourse back to the Balkan modus operandi of "he said, she said." It is ungrateful to have an opinion and stance in such an environment, precisely due to the lack of valid and easily verifiable data. It is also ethically wrong to rush into such a large project without an adequate number of studies. Especially when, according to various surveys and estimates, more than 50 percent of Serbian citizens oppose it.
The United Nations Environment Programme (UNEP) conducts a detailed environmental impact assessment before each project. UNEP aims to predict and assess the dangers and impacts of the proposed project or development plans, considering all negative and positive impacts on the socio-economic, cultural, ecological, and other spheres of society that would arise from a specific human activity.
Apart from "Rio Tinto," none of the relevant authorities have conducted such an assessment. This intentional or unintentional omission has created a vast space for speculation and the presentation of various claims, many of which are based on untruths. Of course, "Rio Tinto" claims that the planned mining will comply with environmental protection requirements.
Such assessments are questionable, given that a group representing British pension funds that are investors in "Rio Tinto," the Local Authority Pension Fund Forum (LAPFF), has expressed concern about the company's water management at its Oyu Tolgoi copper mine in Mongolia and ilmenite mine in Madagascar. This is just one in a series of numerous criticisms that follow the company "Rio Tinto."
What is particularly concerning is the fact that this would be one of the first lithium mines in the world in a populated and agricultural area. The Institute of Chemistry, Technology, and Metallurgy at the University of Belgrade indicates in its scientific research the potentially devastating impacts on groundwater, soil, water use, biodiversity loss, and waste accumulation. The exploratory drilling conducted by the mining company has already caused environmental damage, as mining water containing high levels of boron leaked from exploratory wells and caused crop drying.
Given the potential environmental damage that such a project could cause, it is necessary to conduct a large number of independent studies and research and, based on the available data, make a final judgment regarding Jadar. As the saying goes, "Patience is a virtue." Perhaps Olaf Scholz came to Serbia because the European Union is actually in a hurry to achieve energy independence in a period of geopolitical instability. The Jadar deposit alone would meet over 90 percent of the European Union's energy needs.
The Curse of Natural Resources
If we assume for a moment that Jadar is completely safe for the environment and surroundings, then we need to consider whether such a project can truly economically strengthen a country. Inevitably, such a project can attract direct investments, but examples from other countries throughout history clearly indicate that natural resources are accompanied by a curse.
In the past, for states, the discovery of natural resources was a real lottery. However, the rapid development of international trade and globalization has changed this. The Netherlands discovered large natural gas deposits in 1959, and its increased exploitation led to the decline of other economic sectors in the country, so this phenomenon was named the "Dutch disease."
New natural resource deposits require an influx of foreign investments that enable the exploitation process. This influx of foreign capital that spills over into the rest of the economy raises the value of the domestic currency in a short period and leads to a decrease in competitiveness in the foreign market because domestic products are automatically more expensive compared to foreign markets. This means that it is then cheaper to import products into the country rather than export them. All this happens to the detriment of domestic production because all state capital spills over into the new sector, leading to indirect deindustrialization.
Increased exploitation leads to the creation of a large number of jobs in the new sector, which automatically raises the value of real wages but to the detriment of other sectors in the economy, leading to increased economic inequality in the country.
In the long run, indirect deindustrialization leads to an increase in the number of unemployed in production sectors, which further worsens the fiscal deficit because the state must socially support a large number of people who have lost their jobs. This is further aggravated by the decrease in revenue from the production sector, which in the worst-case scenario can lead to a complete economic collapse of the state, as was the case with Venezuela, which has the largest oil reserves in the world.
There is an abundance of economic studies that have empirically proven that countries with fewer resources, such as Singapore or South Korea, economically advance better than countries with large resources, such as Nigeria, Venezuela, and the Democratic Republic of Congo.
At the beginning of the 20th century, it was discovered that 80 percent of the small island state of Nauru contained phosphates, and mining rights were sold to Germany, which then colonized Nauru. By the beginning of the First World War, about 80 million metric tons of phosphate had been exported, and after the war, the export was taken over by Australia. When Nauru became independent in 1968, it continued with phosphate exports, and by 1981, Nauru had become the richest country by GDP per capita.
The state provided its citizens with free healthcare and education, but such an economy put Nauru in a position where it had to import all necessities into the country. Phosphate mining destroyed the nature and domestic agriculture of the island, increasing dependence on imported food. When phosphate revenues declined, cheap and processed food was imported, causing an obesity epidemic that has lasted for 40 years, and the life expectancy has decreased to only 60 years.
If the "Jadar" project and the mine in the Lopare municipality are realized, Serbia and Srpska would have to follow the examples of Norway and the United Arab Emirates, which managed to overcome the "Dutch disease" through economic diversification.
However, judging by historical circumstances, the Western Balkan region has been plagued by curses and diseases for centuries, and it seems that the "Dutch disease" is next in line. Thus, the curse of Tsar Lazar has been replaced by the curse of the "Tsar Lithium."