Breaking a dependency: why Europe needs to minimize the reliance on Russia for battery minerals

The dependence

The war in Ukraine quickly placed a spotlight on the European continent’s heavy dependency on Russian gas, which in 2021 constituted 45% of European imports. In some sense, another core dependency was overlooked — that of key minerals required for the energy transition. For example, Russia supplied 39% of Germany’s raw nickel in 2020, and remains a key supplier of other battery minerals lithium and cobalt, as well as palladium, platinum and iridium which are required for alternative fuels.

As a fully-integrated battery manufacturer requiring raw minerals, Northvolt started engaging with the Russian mining industry in early 2018–2019, to measure its environmental impact and opportunities for improvement. Northvolt evaluated the environmental, social and governance (ESG) performance of miners and refiners, scrutinized sustainability commitments and control systems, and searched for companies that were willing to improve their operations and work within the clearly defined expectations of Northvolt’s terms of agreement. (An outline of Northvolt’s approach to sourcing is available in its Sustainability & Annual Report, 2022.)

As the world’s largest nickel producer and one of few providing class one nickel of a quality sufficient for battery production, Russia’s Nornickel was of interest. Significant for Northvolt, the company offered clear traceability of materials, from mine to refinery to Northvolt — something which few other suppliers could provide. Acknowledging that Nornickel has incurred a major negative environmental impact around its mines, and still operates with one of the largest corporate environmental footprints in Russia, a comprehensive due diligence process was undertaken. Ultimately, a supply agreement tied to a plan of environmental improvement and material traceability was devised.

The overarching idea was for Nornickel to conduct multi-billion-dollar investments in environmental protection and to lower emissions throughout its production chain in Russia and Finland. Notably, this included expectations on sulfur dioxide emission reduction, to be secured through significant investment in new technologies and infrastructure.

The program was positioned to enable long-term regional sourcing of cleaner nickel and cobalt for Northvolt and other European battery companies, with high demands on environmental performance. The project commenced, and the first materials were shipped for Northvolt’s early-stage prototype production. But then, in February 2022, Russia invaded Ukraine.

The options

The war in Ukraine prompted different reactions in different parts of the European battery industry. Some producers decided to continue their sourcing strategies — a choice permitted as Russian battery minerals have not been sanctioned by the European Union. Other producers decided to quickly pivot towards new suppliers in Indonesia, where nickel production has been accelerating in recent years. Alarmingly, however, the majority of this production is proceeding with concerning environmental practices, including rainforest clearing and the release of heavy metals and slurry tailings into bodies of water relied upon by local communities.

Northvolt’s decision was to pause its cooperation with Russian miners and minimize its dependence on Russian minerals to the greatest extent possible and as fast as possible. In seeking new supply agreements, mining projects in Indonesia were not considered viable alternatives — the need to move away from Russian dependency could not justify neglecting environmental principles and the need for traceability.

There are other pathways. One is to work with other existing mining operations like those in Finland, Australia and Canada — the ESG performance of which can invariably be improved through engagement and collaboration.

While requiring lengthier timescales, another path is to explore entirely new operations, including ones here in Europe, like Northvolt’s joint venture with Galp to refine lithium in Portugal. Sweden too holds potential for opening new mines of its own.

There is also widespread support from international NGOs, development organizations and national governments to have European battery makers bring their knowledge and high ESG standards into mining and refining activities across multiple African countries. Northvolt is hoping to do just this, albeit recognizing that such initiatives require long-term strategy and mutual commitment, and outcomes are not quick solutions.

The need

The need for support from the European Union in all these complex tasks is massive. But so far, the reaction has been slow. While the EU has set clear goals for the phasing out of Russian oil and gas, in addition to quick investments and policy decisions to lessen this category of dependence as fast as possible, the European strategy to phase out Russian energy transition minerals remains vague.

EU policy has been put forward — with the Critical Raw Materials Act being presented in March 2023 — but the core need for fast solutions remains unaddressed. For example, the suggested maximum time for permitting processes to enable new mines is still 24 months, which means that actual change of the European landscape is in all likelihood at least several years away.

What is needed is a strategy providing clear, meaningful actions across three areas:

1. Expanding European mining and refining quickly, not only through faster permitting processes but also much larger streams of funding and investment in competence.
2. Engaging in major strategic partnerships with third-party mining countries, with commitment to advocate for higher ESG standards, and enabling imports through eliminating customs duties for battery materials and finishing key free trade agreements, such as the one being negotiated with Australia.
3. Ensuring that all end-of-life batteries and waste battery materials in Europe remain in Europe for recycling by its growing recycling industry, and thereby support a circular battery economy which further reduces dependency on virgin raw minerals.

Naturally, the European battery industry would welcome peace, and a Russia returning on a path towards partnerships with the international community. This would once again enable long-term cooperation to minimize the environmental footprint of Russian minerals which have a key role to play in the decarbonization of society.

But until then, Europe needs to minimize its dependence on Russian minerals just as it’s phasing out Russian oil and gas, by reinvigorating the European mining and refining industry and advocating for sustainable practices with global partners. It’s no easy feat, but it must be done — and done at a much faster pace than what we see today.