What happened?
Serbia has signed a letter of intent with the European Commission on a strategic partnership in the areas of batteries and critical raw materials, including lithium. The letter was signed in New York on September 22nd, when Serbia’s president, Aleksandar Vucic, met Maros Sefcovic, a vice-president of the Commission, but the agreement became public only after an investigation by the Danas newspaper.
Why does it matter?
The agreement suggests that the government has not given up on a plan to allow the mining of lithium at Jadar in western Serbia, despite having cancelled an agreement with the Anglo-Australian company Rio Tinto in January 2022 in the face of mass public protests about potential damage to the local environment. The letter of intent adds to existing circumstantial evidence of the government’s intention to press on. In September the government signed an agreement with the Slovak company Inobat, a partner of Rio Tinto, on construction of a battery factory in Cuprija.
The exploitation of lithium could potentially be highly lucrative for Serbia. The country contains 1.3% of the world’s known reserves of the metal, which is essential for the production of batteries for electric vehicles. The estimated value of Serbia’s lithium of €4bn and its extraction over the course of a decade could potentially provide hundreds of jobs and a steady stream of revenue for the government. The EU could also benefit from the development of the Jadar mine, which would allow a reshoring of a vital resource at a time of growing geopolitical tensions and competition for minerals access.
In pressing ahead, however, the government risks a political backlash. Environmental groups and residents of Jadar have come out in opposition to the letter of intent. They have accused Mr Vucic and the prime minister, Ana Brnabic, of being traitors to Serbia and lackeys of the EU and Rio Tinto. The public debate over the agreement could be damaging for the government ahead of the parliamentary election in December. The government has denied that it has concrete plans to exploit the Jadar mine and insists that the letter amounts to no more than a statement.
What next?
The likelihood is that the mining project will eventually go ahead, given the backing that it has from the government, the EU and Anglo-Australian interests. However, in a replay of the dynamics seen ahead of the April 2022 election, the government is likely to stall the plans, reviving them only once the December election is over.
Source: EIU
