Bolivia Starts Lithium Production

Lithium production is set to start this month, with finished product ready for export early in 2011.  This will be extremely interesting, namely, because few countries as poor as Bolivia have tried to develop complex mining operations without foreign technical assistance.  We’ll also see if actual production will make investment via a foreign partnership more attractive to big mining conglomerates.  Something to keep an eye on.

Bolivia Starts Lithium Production

Lithium Blogging

Matt Yglesias has a post up about an article posted on CNAS’s national security blog about lithium and mentions political problems between the U.S. and Bolivia. This is the key part:

But going forward, the center of lithium influence is likely to shift to Bolivia, since vast reserves lie beneath its Salar de Uyuni salt flats. For the United States, this could be a problem: the Morales government remains hostile to U.S. concerns, and there is potential for instability given serious rifts in Bolivian politics. (emphasis added by Yglesias)

As Yglesias says, “[t]his mostly strikes me as an example of how the American foreign policy establishment’s ability to gin up ‘threats’ to our national security is really impressive.” It goes a bit beyond that, as if we wanted to improve our relations with Bolivia and Morales, we easily could.

But first, I think Yglesias does not frame the problem well. He argues, essentially, we shouldn’t worry because we have money, and since we have money, it’s a done-deal we’ll get a slice of the lithium. On the world commodity markets, I think that’s true. But if we want to get in on the extraction of lithium, and view that as a national security prerogative, I don’t think Bolivia will magically open the gates for us. Just in Asia, we are competing with China, Japan, Russia, and South Korea for lithium extraction rights. Yglesias likens the Bolivia/lithium issue to the Venezuela/oil issue, but there are key differences between the two. Neither the U.S. nor Bolivia are dependent on lithium the way the U.S. and Venezuelan economies are dependent on oil. This gives room for the both countries to shape the contours of the relationship and the economic structure of lithium extraction. If we don’t get our act together, I think it’s likely Bolivia will award contracts to states they are friendly with. For example, a state like China, who is working with Bolivia on creating a satellite. That doesn’t mean we wouldn’t be able to buy lithium, as it will be an internationally traded commodity, but our mining businesses will miss out and our national security apparatus might deem it prudent to have a hand in the extraction process.

Implicit in this conversation is the fact that the Morales government will keep tight control over any foreign venture extracting lithium. For our businesses to have a shot at getting in at the ground level, we need better bilateral relations with Bolivia. In a few easy steps America could drastically improve our relations with the Morales government, who is almost certain to win reelection, and gain a foothold for U.S. companies in any lithium extraction. There’s two things to keep in my mind. First, that Morales rise to power was a reaction to the failure of Goni’s presidency. And in the atmosphere where a president has fled the country for safe haven in the U.S. after riots and protests, the refusal of the U.S. to extradite the man to face charges in Bolivia makes anti-U.S. rhetoric an easy (and successful) electoral strategy. Second, the costs of bad relations with the U.S. hurts Bolivia a lot more than it hurts us.

In no particular order, these are a few actions that would directly improve U.S. relations with Bolivia at little cost to us:

The point is these are all relatively painless actions for the U.S. and would buy goodwill with Morales, yet we refuse to do so. It’s almost as if we are trying to keep Morales mad at us, by deliberately sticking it to Bolivia. I’ll take CNAS’s national security blog post as an invitation for a Nirvana video, too:

Lithium Blogging

Russian Interest in Bolivia’s Lithium Reserves

Russia is the latest player to show interest in the lithium fields in Bolivia. Under the Salar de Uyuni, the largest salt flat in the world, sits the world’s largest reserves of lithium (approximately half of the world’s reserves.) Interest in lithium is based on expectations that it will become a key ingredient in electric car batteries. Russia’s team of experts is only the last group to express interest in the fields, including France’s Bolloré and Japan’s Sumitomo and Mitsubishi. But the Russian visit highlights an important aspect of international relations today: power vacuums get filled, and quickly at that.

In 2008 Bolivia expelled the U.S. ambassador, declaring him a persona non grata. The U.S. replied in turn by expelling the Bolivian ambassador from Washington. Bolivia officially expelled our ambassador for attempting to overthrow Evo Morales government, but was the capstone of steadily deteriorating relations between the U.S. and Bolivia throughout the Bush Administration.

With the collapse of U.S.-Bolivian relations, other players are stepping in to fill the void. During the boom years, Venezuela was a reliable patron state, and is a more unsteady one now (or until oil prices balloon again.) Russia and China have both increased diplomatic attention on Bolivia as well. The U.S. would benefit by opening up diplomatic relations again. Despite Bolivia’s continued dependence on the U.S. economy, with the Morales government’s focus on state control of resources, U.S. companies will not be able to compete with foreign firms without diplomatic support.

Update:

Today Los Tiempos is running an article on a statement from Russia’s ambassador, highlighting military assistance Moscow plans to provide Bolivia in the future.

Russian Interest in Bolivia’s Lithium Reserves