Beyond Supply Risks: The Conflict Potential of Natural Resources

While the public debate about resource conflicts focuses on the risk of supply disruptions for developed countries, the potentially more risky types of resource conflict are usually ignored. As part of a two-year research project on behalf of the German Federal Environment Agency, adelphi and the Wuppertal Institute for Climate, Energy, and Environment have analyzed the risks of international conflict linked to natural resources in a series of reports titled Beyond Supply Risks – The Conflict Potential of Natural Resources.

Resource extraction, transportation, and processing can create considerable crises and increase the risk of conflicts in producing and transit countries. This phenomenon – widely referred to as the “resource curse” – impacts consuming countries only if it leads to shortages and higher prices. However, in the producing and transit countries it can have much wider destabilizing effects – from increasing corruption to large-scale violent conflict. In addition, the extraction, processing, and transportation of resources often create serious environmental risks. Overexploitation, pollution, and the degradation of ecosystems often directly affect the livelihoods of local communities, which can increase the potential for conflict.

The eight reports that comprise Beyond Supply Risks explore plausible scenarios over the next two decades, focusing on four case studies: copper and cobalt in the Democratic Republic of Congo; theNabucco natural gas pipeline project across Southern Europe and Turkey; lithium in Bolivia; and rare earth minerals in China.

Lithium in Bolivia

Bolivia possesses the world’s largest known lithium deposits, a potentially important resource for the development of electric vehicles. While the development of Bolivia’s lithium reserves could provide major economic benefits for one of the poorest countries in Latin America, our analysis identifies two main potential risks of conflict.

First, the environmental consequences of developing industrial-scale lithium production might have negative effects on the livelihoods of the local population. The local population in the lithium-rich department of Potosí has shown that it is capable of organizing itself effectively in defense of its interests, and past resource conflicts have turned violent, making a conflict-sensitive approach all the more important. 

Second, the Bolivian economy is largely dependent on natural resources, and consequently is susceptible to price shocks. At present, this risk is primarily associated with natural gas. But lithium production, if developed, might be subject to the same dynamics, which could potentially destabilize the political system. 

For consuming countries, these conflicts threaten supplies of lithium only if local protests or broader destabilization were produce bottlenecks in the supply chain.

Rare Earths and China

Like lithium, rare earths are likewise essential for some new technologies. China’s well publicized monopoly on 97 percent of the global production spurred a heated debate on the security of supply of strategic minerals. While our case study identifies supply risks for consuming countries, it also outlines some of the conflict risks China might face internally.

First, local populations could protest against the severe ecological impact of rare earth mining and production. In addition, conflicts might arise if those who profit from economic development (entrepreneurs or regional power-holders) undermine the traditional centralized party structures and expand their own influence.

International conflicts over access to Chinese rare earth resources, while they dominate the headlines, do not appear to be the dominant risk. Instead, internal political tensions could result in a weakened China that is not able to exploit its monopoly position for foreign policy gains. Or the government could enter into multilateral agreements and thus avoid a confrontational approach towards consumer nations.

Ultimately, the actual rate of diffusion of environmental technologies and the development of new technologies remain the key factors in determining whether relative shortages in global supply of rare earths will in fact occur. If industrialized nations and emerging economies commit to the same technologies to attain climate policy goals, international resource governance and coordinated promotion of (environmental) technology will also play a role in preventing conflict and crisis over rare earths.

The Way Forward

The series concludes with five recommendations to mitigate the risks of future resource conflicts:

• Introduce systematic policy impact assessments to understand how policy goals and strategies, especially in regard to climate and environmental policy, interact with resource conflict risks.
• Increase the transparency of raw material markets and value creation chains to prevent extreme fluctuations in prices and improve information on markets, origins, and individual players.
• Improve the coherence of raw material policy by linking raw material policies with security, environmental, and development policies.
• Demand and promote corporate social responsibility along the whole value chain.
• Increase environmental and social sustainability as a means of strengthening crisis and conflict prevention by systematically taking into account social and conflict-related aspects in the resource sector.

However, none of these strategies alone would be capable of mitigating all the risks of future resource conflicts. But together they represent a methodology that, with intense coordination among the key players, could make a far-reaching contribution to reducing risk and preventing international conflict over the long term.

The individual reports from the project can be downloaded here:

• Conflict Risks (GERMAN only)
• Supply and demand (GERMAN only)
• Case Study: Nabucco Pipeline (GERMAN only)
• Case Study: Congo
• Case Study: Bolivia
• Case Study: China
• Conflict Resolution Strategies (GERMAN only)
• Summary and Recommendations

Lukas Ruettinger is a project manager for adelphi, mainly focusing on the fields of conflict analysis and peacebuilding as well as resources and governance. Moira Feil is a senior project manager for adelphi and has participated in more than 30 projects with various partners and clients on natural resource links to crises, conflicts and peacebuilding, and corporate responsibility.

Sources: Government Accounting Office.

Article source: The New Security Beat

Image source: Olmovich