More than just a lithium deal
Berlin and the EU agree on a strategic raw materials partnership with Serbia, giving them exclusive access to Serbian lithium. The aim: greater independence in battery production and stronger influence in Serbia.
BRUSSELS/BERLIN/BELGRADE (own report) - Thousands of people across Serbia have been on the streets protesting against the EU’s plans to extract the country’s lithium deposits. They fear that the mining project will result in serious environmental and social costs for their country, while the profits will flow to Europe. In July, senior politicians from Serbia, Germany and the EU, including German Chancellor Olaf Scholz, met with the heads of several leading corporations for what was called the Critical Raw Materials Summit. The talks centred on plans for extracting Serbian lithium. For its part, the Serbian government hopes the EU will enable the country to develop a processing industry alongside lithium mining. It wants to go beyond battery production and launch electric vehicle manufacturing. Brussels and Berlin are striving to gain a foothold in the expanding e-mobility market, now dominated by the Chinese. Speaking in Belgrade, Scholz compared the strategic importance of lithium deposits with that of crude oil. Economies were, he noted, dependent “above all” on lithium-ion batteries for electromobility. Serbia and the EU agreed in Belgrade a raw materials partnership. It is more than just a lithium extraction deal. The EU is keen to expand its political influence in Serbia.
Tussle over commitment to local processing
On the Belgrade side, those engaged in talks at the mid-July Critical Raw Materials Summit included Serbian President, Aleksandar Vučić, and the country’s finance, mining and energy ministers. Among the EU group were German Chancellor Olaf Scholz, Mercedes CEO Ola Källenius and European Commission Vice-President Maroš Šefčovič, who is responsible for the Green Deal, along with officials from the European Bank for Reconstruction and Development (EBRD) and the German Kreditanstalt für Wiederaufbau (KfW).[1] The high-level summit ended with the signing of several documents that could promote the development of the value chain for battery and electric vehicle production” in Serbia, according to the Serbian government.[2] At the summit press conference, Vučić emphasized his wish to build “the entire value chain in Serbia” and thus prevent Serbia from becoming a mere raw material supplier of lithium. However, as “concessions” could not be avoided, he said only “smaller quantities” of lithium would also “go to Germany”.[3]
German promises
The German side, on the other hand, stuck to generalisations about creating value chains in Serbia, while emphasising above all that “a deal on the extraction of lithium in Serbia” had been concluded.[4] It has been reported that business representatives, including Mercedes and Stellantis, have already signed some initial agreements on access to this key raw material for batteries.[5] The Serbian government also says it is also in talks with Volkswagen.[6] At a personal level, Scholz told Serbian President Vučić that the EU wanted not only to extract the lithium deposits in Serbia but also establish processing companies. However, Berlin and the EU were apparently not prepared to make written pledges on this. Vučić emphasised, at least publicly, the EU’s verbal promise, saying it that Scholz obviously “didn’t need to sign anything” regarding the value chain.[7] This publication pointed out five years ago that the German government made a similar promise in Bolivia when a German company applied to mine that country’s sizeable lithium reserves. The project ultimately failed to materialise, yet there were already well-founded doubts as to whether the promise would have been kept.[8]
China, the market leader
Industry in Germany and the EU clearly has a strong interest in establishing an independent European production chain for the manufacture of lithium-ion batteries – and certainly would not rule out manufacturing sites in Serbia as part of the solution. China currently dominates the lithium market. It is the leader not only in extraction but, above all, also in lithium battery production. If the EU wants to establish its own stable supply chains in an era of economic sanctions and trade wars, securing exclusive access to Serbian lithium deposits will not be nearly enough. Further steps in the battery value chain will have to be performed independently of its Chinese competitor. There are reports that Rio Tinto, the company commissioned to mine lithium in Serbia, has agreed to build an on-site plant for processing the raw material. A “local [e-mobility] supply chain” in Serbia would “also” make “a lot of sense” for Europe, said a spokesperson for the mining giant. Mercedes boss Källenius has also indicated that he would have no objections to the location of a lithium processing industry in Serbia. It remains rather vague: to make the establishment of a European-dominated value chain for e-mobility and batteries “economically viable”, “certainly some” production stages would take place in Serbia, “possibly [!] up to the production of battery cells.”[9]
A play for greater influence
The raw materials partnership between Serbia and the EU is by no means only about lithium. A letter of intent shows the EU wants to tap into the “high raw materials potential of Serbia” by “exploring new ... raw material deposits”. Brussels also wants to open a path to new direct investment from the EU in Serbia worth billions,[10] a move designed to strengthen political, economic and social ties with Serbia. The agreement is supposed, not least, to “represent a building block in advancing Serbia’s integration within the EU single market” [11] – and achieving this without EU membership. However, it is doubtful whether the lithium project will be a suitable vehicle for strengthening social ties between the two sides. On July 29, just ten days after the raw materials partnership was signed, thousands took to the streets in Serbia to protest against the deal. Apart from widespread fears of serious environmental damage, there is no expectation that the profits will remain in the country.[12]
Between the blocs
Serbia has been in official accession negotiations with the EU for ten years – so far without success. Hardly anyone in Belgrade, as in the other capitals of non-EU states of south-eastern Europe, now believes that EU accession will actually come about. This explains why EU efforts to use the prospect of EU membership as political leverage in matters such as foreign policy have also proved ineffective. Much like the Ukrainian government before the 2014 coup, the Serbian government has been trying to position itself between the major powers without clearly subordinating itself to any one power bloc. Although Belgrade is engaging in negotiations with the EU, it is also determined to cultivate its relations with Russia and China. It recently concluded a free trade agreement with China and still refuses to comply with the Western sanctions regime against Russia.
Double standards
When asked about anti-EU sentiments in his country in a recent interview with the Handelsblatt newspaper, President Vučić noted that Serbian opponents of EU accession believed “that the EU and NATO have double standards” when it comes to Russia today or “NATO’s bombing of our country in 1999”. The legacy of NATO’s war of aggression against the former Yugoslavia remains a strain on relations. Moreover, the Belgrade government – along with five EU states (Spain, Slovakia, Romania, Greece and Cyprus) – is not prepared to recognise the secession of Kosovo by force from its territory. So it remains to be seen whether the EU will actually succeed in using the lithium project to bind the country more closely or even exclusively to the single market despite these contradictions. In any case, the Serbian president has said he is expecting “further pressure” from the EU.[13]
[1] Critical raw materials great chance for Serbia. srbija.gov.rs 19.07.2024.
[2] Summit on Serbia’s Critical Raw Materials. Predsednik.rs 19.07.2024.
[3] Dana Heide, Martin Murphy: Serbiens Präsident erläutert den Rohstoffpakt mit der EU. handelsblatt.com 17.07.2024.
[4] Lithium-Abkommen: Wohlstand und Frieden im Westbalkan stärken. bundesregierung.de 19.07.2024. EU und Serbien schmieden Lithium-Pakt. handelsblatt.com 19.07.2024.
[5] Europa steht vor Lithium-Deal mit Serbien. handelsblatt.com 17.07.2024.
[6] Dana Heide, Martin Murphy: Serbiens Präsident erläutert den Rohstoffpakt mit der EU. handelsblatt.com 17.07.2024.
[7] Belgrad: Pressekonferenz mit Olaf Scholz und Aleksandar Vučić (Präsident Serbien). Phoenix 19.07.2024.
[8] See also: Protest gegen deutsche Rohstoffsicherung in Bolivien.
[9] EU und Serbien schmieden Lithium-Pakt. handelsblatt.com 19.07.2024.
[10] Memorandum of Understanding between the European Union and the Republic of Serbia on a Strategic Partnership on sustainable Raw Materials, Battery value chains and electric vehicles. 19.07.2024.
[11] EU and Serbia sign strategic partnership on sustainable raw materials, battery value chains and electric vehicles. neighbourhood-enlargement.ec.europa.eu 19.07.2024.
[12] Ivana Bzganovic: Thousands protest Serbia’s deal with the European Union to excavate lithium. apnews.com 30.07.2024.
[13] Dana Heide, Martin Murphy: Serbiens Präsident erläutert den Rohstoffpakt mit der EU. handelsblatt.com 17.07.2024.
