On December 10, the Australian Lowy Reader published an article entitled "The Geopolitics of Argentine Lithium", written by Zhang Yue, an associate professor at the Institute of Australia-China Relations at the University of Technology Sydney, Australia. The following is an excerpt from the full text:
The clean energy transition has become a new frontier in the strategic competition between China and the United States, expanding the scope of the ongoing "chip wars" and having global implications. Countries are racing to gain security in critical minerals that are critical to the energy transition. The focus on strategic mineral reserves, increasing domestic production and reshaping the ** chain through cooperation with allies has prioritized strategic interests over economic efficiency. These initiatives reshape global and bilateral partnerships and have significant geopolitical implications.
Perhaps surprisingly, Argentina has emerged as a key player and perhaps a strong competitor to Australia. With its abundant lithium reserves, Argentina faces a strategic dilemma.
On the one hand, there is the option of maintaining a lucrative alliance with China, and on the other hand, the possibility of harmonizing with the US-led **chain of electric vehicle and lithium-ion battery production**.
Argentina has the world's largest salt lake lithium resources, accounting for 21% of the global total, and the production cost is relatively low. Despite this, Argentina's lithium production is currently only 6%, lagging behind leading countries such as Australia (52%) and Chile (26%). This is mainly due to technical and capability limitations. In recent years, Argentina has used preferential policies such as tax cuts to attract investment. In response, Chinese companies have deepened their presence in Argentina and established long-term partnerships with the country, supported by strategic investments in the infrastructure sector and the transfer of green technologies.
Javier Milley, who was elected Argentina's **, had previously made it clear that he intended to shift Argentina's foreign policy towards the United States. However, the prospects for Argentina's transformation face a series of major challenges and are fraught with complexities.
First of all, Chinese companies have played an important role in the Argentine lithium industry. Their billions of dollars of investment have benefited the country, both spurring jobs and increasing export earnings. Crucially, about one-third of Argentina's export value comes from lithium sales to China, and shifting the focus away from China could have an immediate economic impact.
Second, a realignment with the U.S. could revive Argentina's shaky economy by allowing Argentina access to the North American EV market. However, it is unclear whether Argentina could benefit from the US Inflation Reduction Act. The bill requires a significant portion of the metals used in batteries to come from the United States or its free ** partners — a requirement that Argentina does not currently meet.
Thirdly, Argentina's domestic political and institutional landscape is a key factor in determining the transformation of the relationship with China's lithium alliance. While Milley may propose certain national strategies, his actual influence in the Confederation** may be limited.
Finally, Argentina's choice could have implications for other lithium-rich countries such as Australia. Australia is a key partner in the US-led Mineral Security Partnership, which plays a key role in the global geopolitics of lithium. For example, Indonesia is seeking to strengthen its partnership with Australia in order to overcome the U.S. opposition to imports of nickel products under the Inflation Reduction Act, which can be seen as a strategic move to integrate into the U.S.-led ** chain.
As the world shifts from fossil fuels to renewable energy, competition around critical minerals chains has been at the heart of geopolitics. The energy crisis, exacerbated by the Russia-Ukraine war, has exacerbated these fears. This has contributed to the rise of resource nationalism, characterized by competitive industrial policies and subsidies, as well as partnerships based on political values. This trend marks a major shift in the West's traditional commitment to liberal economic values and freedom**.
However, the clean energy transition itself comes with significant economic, social and environmental costs. According to Bloomberg New Energy Finance, China's clean energy investment accounted for nearly half of the world's total clean energy investment in 2022, almost four times that of the United States. China's huge spending has brought with it enormous production capacity and an almost unsurpassed cost advantage over the alternative chains advocated by the United States. Without cost-effective Chinese-made batteries, electric vehicles would have become more expensive, even taking into account the $7,500 per vehicle tax credit, delaying their adoption in the United States.
Historically, the energy transition has redrawn the geopolitical map, creating new resource interdependencies. In the race to combat climate change, China's advantage in the clean energy transition has the potential to reduce costs, which will benefit the world. Argentina's estrangement from Beijing could pose immediate economic challenges, straining its bilateral relations with Beijing and broader within the Global South. In addition, an alliance with the United States does not guarantee Argentina geopolitical benefits and could hinder the global decarbonization agenda. (Compiled by Madan).