US losing ground to China, Russia in South American lithium rush

U.S. companies are hitting speedbumps in the race to win contracts to extract lithium in the Americas, particularly as the Chinese and Russian governments throw their weight around to land such agreements.

While the most easily exploitable currently known lithium deposits are in Chile, Argentina and Bolivia, the United States has so far not been able to capitalize on its influence in the Western Hemisphere to support its companies.

“My friends in the hemisphere, and my own observations, tell me that the Chinese are ‘eating our lunch.’ Their diplomats are active, visible, responsive, and skilled. Just like U.S. officials used to be, except they are said to be more willing to use ‘financial incentives’ (bribes) to convince foreign decision-makers to ‘buy Chinese,’” said Otto Reich, who served as assistant secretary of State for Western Hemisphere affairs under former President George W. Bush. 

Lithium has a variety of industrial uses, but its importance has skyrocketed as the main component in modern rechargeable batteries.

Bolivia’s lithium deposits in particular are the largest of their type in the world, but the landlocked country has had trouble commercializing its lithium because of technical and political issues.

The Bolivian government this year launched a contest among international companies to showcase their lithium mining technologies. 

EnergyX, a U.S. company that had begun production tests at the Uyuni salt flats, was disqualified on a technicality in June, casting doubts on the impartiality of the process.

While EnergyX was the only company in the tender to deploy its technology on site, six companies — one from the United States, one Russian and four Chinese — are still competing for the right to partner with state-owned Yacimientos de Litios Bolivianos.

The Bolivian government last month delayed its final decision on the tender, saying a winner will be announced in December.

But the sudden disqualification of EnergyX, a company that says it has the most advanced and environmentally friendly lithium extraction technology, raised questions about U.S. influence in the region.

“We should have a tremendous relationship with Chile, Argentina, and Bolivia,” said Teague Egan, CEO and founder of EnergyX.

“The U.S. is lagging behind is what we’re seeing. China and Asian countries do the majority of the investment into South America and we’re really falling behind. China is literally investing billions, Korea’s investing billions, Russia is trying to invest billions,” added Egan.

South American lithium deposits are highly sought after in part because they are easier to extract, as they are mainly found as dissolved salts in brine, allowing for a filtering process to extract the valuable metal.

Bolivia’s deposits are potentially the largest, but they also have a high magnesium content and present other logistical challenges due to their remoteness and high altitude.

Other countries, such as Australia and Mexico, have large deposits of lithium, but they are mineralized in rock formations and require traditional, invasive mining methods to extract.

U.S. embassies around the world have cut services both because of the pandemic and the whiplash of aggressive policy changes from the Obama to Trump and now to the Biden administrations.

Rep. Raul Ruiz (D-Calif.), whose district holds one of the largest lithium deposits in the United States, blamed former President Trump’s “isolationist” approach to foreign policy that “left a void that Russia and China has taken advantage of in terms of their involvement and investments for infrastructure development.”

“That was a wrong national security move that has weakened the United States,” Ruiz said.

But the decay of U.S. influence in the Western Hemisphere started long before Trump took office due to political winds in the U.S. and in Latin America.

In the 1990s, U.S. influence in Latin America was such that American companies were seen to have a leg up on third-country competitors throughout the region, armed with more capital, better technology and a supportive diplomatic corps.

On the U.S. side, geopolitical attention veered away from Latin America toward the Middle East and Asia.

“I think the best term an academic came up with years ago is ‘benign neglect.’ It’s not like we purposefully turned our back, but we just have not paid attention,” said Dan Foote, a U.S. diplomat who most recently served as President Biden’s special envoy to Haiti.

That benign neglect was itself fed by a wave of nationalist governments in the region led by Venezuela’s Hugo Chávez, Ecuador’s Rafael Correa, Cuba’s Fidel Castro and Bolivia’s Evo Morales.

In the 1990s, said Foote, the United States was seen as a positive influence in the region, bolstered by free trade agreements and events such as the 1994 World Cup.

“​​That’s totally changed with the propaganda — the Chávez, Correa, Castro, Evo propaganda that’s kind of flipped the field in the favor of our adversaries,” said Foote.

The case in Bolivia isn’t helped by the fact that the United States hasn’t had a formal ambassador in the country since Morales expelled former Ambassador Rob Goldberg in 2008.

“I mean, what do you expect? We haven’t had an ambassador to Bolivia since Goldberg got booted out in ’08. We haven’t exchanged ambassadors since Rob Goldberg left. And, you know, I don’t know that China and Russia have great embassies there either, but at least they probably have ambassadors,” said Foote.

Asked for comment, a State Department spokesperson told The Hill in an email that “the United States recognizes the importance of cooperation on supply chain issues with international partners and allies.” 

“The Department maintains strong and ongoing cooperation with international partners and allies, including in South America on developing resilient, responsible, and diverse critical minerals supply chains,” the spokesperson added.

The geopolitical difficulties and global supply chain issues have made the idea of mining lithium in the United States more attractive, but it wasn’t until Biden’s infrastructure deal added federal funds to the mix that the idea became viable.

“Until that came through, it didn’t make sense for us to look at U.S. resources because the U.S. resources are dramatically of less quality than South America. So without that subsidy, why would you look at something that’s a worse quality? But with that extra support, yes. Now it makes sense,” said Egan.

One of the places in the United States with the best lithium potential is California’s Salton Sea, which abuts Ruiz’s district.

Ruiz said an environmentally exploited Salton Sea could cover U.S. lithium requirements while creating economic development in the area.

“Right now I know that we’re sitting in a goldmine, but in this case, it’s a lithium mine, or what we refer to down in Southern California as a lithium valley that is going to be transformative for our nation and for a lot of our allies,” he said.

But, Ruiz said, domestic development is not mutually exclusive with securing overseas contracts for U.S. companies.

“I think that we need to be strategic. I think that we have our domestic lithium supplies and if being strategic for our national security and partnerships to help our steady supply of lithium [means searching] for lithium in other countries, I think that that could be included as well,” said Ruiz.