Skip to content

Will The Ukraine War Derail The EV Industry?

The Russian invasion of Ukraine, if successful, may allow Moscow to add to its list of export commodities, this time with rare earths.

Lady charging her electric car
Photo by Jenny Ueberberg on Unsplash

Due to the Russian invasion of Ukraine, the world has had to reorient itself on many issues pertaining to global economic recovery. Struggling to recover from Covid -19 pandemic-induced lockdowns, record-high inflation, and sky-high prices, most countries were contemplating restructuring supply chains to prevent shortages and ensure the availability of essential goods.

The shortage of commodities like microchips and rare earth has been a significant impediment on the road to recovery for automobiles and other sectors. Lithium is a naturally occurring metal in the earth's crust that, besides being critical in the manufacture of Lithium-ion batteries, is used for glasses, ceramics, pharmaceuticals, and aluminum production.

It is interesting to speculate whether the trade balance in commodities like rare earth would have shifted had Ukraine not been attacked. Researchers in the country had speculated Ukraine's eastern region could hold close to 500,000 tons of lithium oxide, a source of Lithium. Had the preliminary assessment been verified, Kyiv could have had one of the largest reserves in the world. Vital to the clean energy transformation and myriad industries, it could have helped the Ukrainian economy move away from coal.

Months before the invasion, Kyiv was preparing to auction off exploration permits to develop its lithium reserves, cobalt, and nickel. The auction was thought to be of "strategic importance for the establishment of Ukraine on the global stage, in a new role," according to Roman Opimakh, head of the State Geological Service of Ukraine.

European Lithium, an Australian firm, had expressed interest in lithium deposits in the Donetsk region and Kirovograd, in the country's center. These regions were expected to position the firm as one of Europe's largest lithium suppliers. A Chinese firm had also evinced interest in the auction. It would have been Beijing's first foray of such a nature on the European continent.

The Russian invasion of Ukraine has increased lithium prices by around 600%. The supply is controlled chiefly by China, Congo (mostly Chinese-operated mines), and Australia. With the war, developed countries' search for a reliable supply of crucial elements like Lithium has again brought the focus to Africa. Though half the world's reserves are located in South America (Chile, Argentina, and Bolivia) and Australia, the little-explored African continent is speculated to hold vast untapped reserves of Lithium, copper, cobalt, nickel, and zinc.

China is already on its way to laying claim to the lion's share. Reports that Chinese conglomerate BYD is in the process of buying six new lithium mines in Africa (countries not specified) have made the news. Chinese firms already have a strong presence in the Democratic Republic of Congo.

Zimbabwe is expected to become one of the largest exporters of Lithium in the next ten years. According to Zimbabwean estimates, the country has enough Lithium to meet at least 20% of the world's demand.

For the United States, a focused and well-planned entry into the continent would allow for greater supply chain security and a counter to China's ever-growing economic presence in Africa.

A scientist and former director of environment and natural resources at the National Intelligence Council, Rod Schoonover, said, "It may not be the motivation for the invasion, but there's a reason why Ukraine is so important to Russia. And that's its mineral base."

Should Moscow succeed in annexing the mineral-rich regions of Ukraine, it could become one of the lead suppliers of tomorrow's hot-commodity – rare earths. Whether the Russian invasion of Ukraine will derail the developed world's fantastical plans to move away from fossil fuels remains to be seen. One thing is clear: the Ukraine war will have far-reaching impacts on the global economy, especially on the affordability of EVs, in years to come.

Electric vehicles drive lithiums rally

Share on Facebook       Share on Twitter

Please share with anyone who would benefit from the tippinsights newsletter. Please direct them to the sign-up page at: