Russia’s invasion of Ukraine could delay the global shift away from fossil fuels, analysts said Thursday, a perhaps counterintuitive impact of what’s likely to be the largest land war in Europe since World War II.
The price of crude oil surged to $105 on Thursday for the first time in years, a reflection of Russia’s vast oil and gas exports that are also the source of its modern economic might.
Earlier this week, Harvard economist Jason Furman, a former adviser to President Barack Obama, dismissed Russia to The New York Times as “basically a big gas station,” saying the country was “incredibly unimportant in the global economy except for oil and gas.” Bill McKibben, founder of the environmental group 350.org, said in a tweet on Tuesday that “Russia can only afford to fight because of its oil and gas… so it might be wise to stop using oil and gas now.”
But analysts say even if the world magically moved away from fossil fuels, Russia would still remain a big player in the global energy supply chain. That’s because, as E&E News mining reporter Jael Holzman first noted, Russia is a major source of key metals that batteries and clean electricity depend on, such as nickel and aluminum, as well as a top exporter of nuclear reactor technology.
“Initially, this could slow the energy transition,” said Julian Kettle, an analyst and senior vice president at the British energy consultancy Wood Mackenzie.
“We can’t pull metal out of the ground fast enough” to produce the renewables needed to keep warming below 2 degrees Celsius, or 3.6 degrees Fahrenheit, he added.
Russia produces roughly 7% of the world’s mined nickel. However, it generates 20% of the global supply of Class 1 nickel, the grade of the metal most commonly used in lithium-ion batteries to increase how much energy they hold and how long they stay charged.
When nickel prices rose about 21% last year, Elon Musk, the billionaire chief executive of the electric auto and battery giant Tesla, called nickel supplies “our biggest concern for scaling” battery production. While electric vehicle sales spiked by more than 80% last year, a “minuscule” number of those cars were powered by no-nickel batteries.
On Thursday, the price of nickel climbed to more than $25,000 per ton, the highest it’s been since 2011.
“Any sanction leading to an export ban would likely have further impact on the nickel price, which is already at decadelong highs,” said Caspar Rawles, an analyst at Benchmark Mineral Intelligence, a London-based research firm that specializes in lithium-ion batteries.
Even after the West sanctioned key Russian industries following the invasion of Crimea in 2014, metal producers largely avoided such penalties. There was one notable exception: the aluminum maker Rusal, which the United States sanctioned in 2018 in a bid to punish its billionaire founder, Oleg Deripaska, in connection with Crimea and various other fights with Russia.
The sanctions, which were lifted in 2019 when Deripaska relinquished control of the firm, sent the price of aluminum up 35% in a matter of days, according to Reuters.
Today Russia supplies around 6% of the world’s aluminum, the price of which shot up to a record high of $3,450 per ton on the London Metal Exchange on Thursday.
Far more than just the main source of the kitchen foil mainstay, aluminum is so key to building solar panels that a January study in the peer-reviewed journal Nature Sustainability found that solar energy, at its current rate of growth, could eat up half the world’s supply of the metal by 2050. It’s also used to make the high-voltage power lines needed to carry solar and wind energy from where it’s available to where it’s needed.
One problem with aluminum is that it normally requires large amounts of fossil fuels to smelt. But even there Russia has an advantage as companies like the Anglo-Russian En+ Group, which has ties to Rusal, build low-carbon smelters in Siberia that use hydropower made increasingly abundant through melting ice.
And sanctions, particularly for metals, are not necessarily effective because Russia could redirect its sales to China, which is importing metals to fund its energy transition and could process the raw materials and sell them to buyers in the very countries in the West seeking to limit Russia’s access to markets as punishment for the invasion of Ukraine.
Even nuclear energy — the zero-carbon electricity source that skeptics of renewable energy favor — is a key asset for Russia. The nation’s state-owned nuclear company Rosatom became the world’s leading supplier of reactors in 2017, cutting deals to build new plants in countries such as Bangladesh, China and Egypt.
Russia also produces about 2% of the world’s cobalt, the metal used in various battery chemistries, according to Benchmark Mineral Intelligence, and Russian mercenaries have played a notable role in developing mining supply chains in sub-Saharan Africa, where most of the world’s supply comes from.
China still enjoys a near-monopoly on the production of rare earth minerals, a group of 17 metals with unique magnetic properties that make them crucial for making batteries and other electronics. But Russia boasts the fourth-largest known reserves of these minerals. In August 2020, the country announced plans to invest $1.5 billion into boosting the production of rare earth minerals, with an aim of becoming the No. 2 supplier after China by the end of this decade.
The Biden administration is seeking to counter its geopolitical rivals’ dominance in the clean energy supply chain. China’s control over flows of lithium and rare earths in particular has become a sticking point that pro-fossil fuel opponents of decarbonization policy have used to argue that reducing use of oil, gas and coal poses risks to the United States’ national security.
On Tuesday, the White House announced plans to invest $35 million in the United States’ lone rare earths producer, the California-based miner MP Materials, as part of a plan to increase domestic output of metals needed for decarbonization.
“China controls most of the global market in these minerals,” President Joe Biden said in a speech Tuesday. “We can’t build a future that’s made in America if we ourselves are dependent on China for the materials that power the products of today and tomorrow.”
The same could be said of Russia, if to a lesser degree.