ISPI - Istituto per gli Studi di Politica Internazionale

07/23/2024 | Press release | Distributed by Public on 07/23/2024 08:42

Minerals (also) for Defence: Unlocking the Emirati Mining Rush

The United Arab Emirates (UAE) is investing heavily in the mining sector in Africa and, to a lesser extent, Latin America. Mining deals allow the UAE to cope with the energy transition towards renewables and develop national industrial goals. There is something, however, that distinguishes the UAE from its Gulf neighbours. Abu Dhabi is developing its national defence industry and advanced defence technologies well ahead of Saudi Arabia, who started later, and now exports made in UAE defence products. The Emirati government also plans to reduce the carbon emissions of its armed forces. The point to be made is that most of the minerals and metals the Emiratis are securing abroad are dual-use and are therefore critical for the defence industry.

As of 2023, the Emirati defence conglomerate EDGE produces around 110 products, and about a quarter of its orders come from abroad. The UAE armed forces are now signing the majority of their supply contracts with Emirati companies, as emphasised by the 2023 edition of the International Defence Exhibition & Conference (IDEX) in Abu Dhabi. The Emiratis intend to gain control over the supply chain of the raw materials they acquire. As for the defence industry, the UAE plans to obtain a strategic edge above regional competitors through the expansion of its civilian industrial base and the control of critical materials and their supply chain - factors that have previously hindered the growth of the defence industry in the MENA region.[1] This strategy has implications for the UAE's security and defence, due to the need to protect its rising economic interests abroad.

Minerals for Defence: Industry, Advanced Technologies and Climate Change

There are three dimensions to the minerals-defence nexus in the UAE's strategy. The first is the expansion of the Emirati national defence industry. The Abu Dhabi Economic Vision 2030 identifies metals as the third most important engine of economic growth and diversification, with aviation, aerospace, and defence in fourth place. The document states that the UAE will concentrate on "developing its capabilities in the manufacturing and maintenance of civil and military aerospace equipment and parts, defence electronics and other equipment and space apparatus". The UAE has decided to focus on specific defence products: armoured vehicles, military drones, missiles and munitions, cyber and electronic warfare, and shipbuilding.

The second dimension relates to advanced technologies and artificial intelligence (AI) applied to the defence sector. Minerals and metals - starting from copper- are also fundamental for AI, which is being rapidly developed and incorporated in the domain of security and defence. Since AI models require a significant amount of energy to function, many companies are shifting to data centres powered by sustainable energy resources, thus increasing the demand for the minerals needed to generate, transmit and store clean energy. The UAE is the first Arab country to produce nuclear energy since 2020, but this is intended to cover only a quarter of internal electricity needs.

The third dimension to the minerals-defence nexus is the UAE's goal of implementing its national climate change strategy for the armed forces. Launched in 2023, this strategy lists "sustainable infrastructure and energy" and "green equipment" among the five main pillars of strategy for reducing the Emirati armed forces' carbon emissions.

In March 2024, the Emirati Ministry of Defence partnered with Masdar to develop solar plants in Abu Dhabi to produce renewable energy for the defence sector. Copper, lithium, manganese and nickel are all crucial to the technologies behind solar photovoltaics (PV), wind energy, electric vehicles and energy storage.

Dual-use Minerals and Metals: The Emirati Mining Boom

Before the current mining boom began, the EAU signed its first foreign deal with Guinea for a bauxite mine in 2013. This 5 billion dollar agreement epitomised how, at that time, the UAE was focused on the construction sector: alumina from bauxite can be used to produce aluminium for buildings and infrastructures. However, bauxite is also fundamental for photovoltaics and the defence industry - currently the UAE's top sectors. The deal comprised the development of an alumina refinery and the construction of Kamsar port.

Almost a decade later, the UAE is multiplying the number of mining deals with other countries, focusing first on Latin America, and then on Africa. In Brazil and Peru, the UAE-based JFR Investments (owned by an Angolan businessman) signed two agreements in 2021, centred on copper, the king metal for electrification. The first was with JPB Cabral Minerios (Brazil) to develop upstream assets, and also included tantalum and nickel; the second was with Negociaciones Y Construcciones EIRL (Peru), covering iron ore. Brazil was again at the centre of a 2022 deal negotiated by The Dubai Investment Fund (DIF) to participate in the Ignitica Minerals project to develop niobium deposits and mines in Nigeria. Niobium is a metal used in electronics, aerospace and aviation.In 2022 again, Emirates Steel established a joint venture with the national company of Mauritania for iron oxide pellets for steel production: steel is obviously widely used in the defence industry.

2023 was a game-changing year for the UAE's mining strategy. The newly-established International Resources Holding, led by Shaykh Tahnoon bin Zayed Al Nahyan, embarked on a series of deals: in Zambia, the company acquired a majority stake in the Mopani copper mine worth 1.1 billion dollars, while it withdrew the offer for another copper mine; in Angola in 2024, it signed joint venture agreements for iron ore extraction at two sites and in Burundi it announced that it was in "advanced talks" for a deal concerning nickel, a fundamental metal for batteries and also used to make steel for the aviation industry. In 2023, the Abu Dhabi-based gold trader Primera Group signed a 25-year deal (1.9 billion dollars) with the Democratic Republic of Congo (DRC) to acquire export rights for artisanally mined ores and to develop at least four sites, probably mining tin, tantalum and tungsten (the actual ores not being specified in the contracts). These are all key metals for defence applications, including ordnance. The DRC produces about 70% of the world's cobalt.

In 2023, the UAE-based conglomerate Nation Trust Holding (TNTH) signed an agreement with Kohinoor Spinning Mills Limited (KOSM) to establish a raw and value-added mineral-based business in Pakistan focused on bauxite; in the same year, the Abu Dhabi company F9 Capital Management and the South African company Q Global Commodities (QGC) established a partnership to produce green metals. QGC has investments in South Africa, Botswana, Zambia, Tanzania and Namibia, with a portfolio built mainly on lithium (key for green batteries), nickel and copper. In 2024, the UAE signed a Memorandum with Kenya on collaboration in the mining and technology sectors, focused on mineral exploration, mine development, mineral processing, refining, and mineral marketing in the African country. Kenya is home to copper and tantalum mines.

The UAE is now planning new mining agreements: Australia and Afghanistan could be the next candidates. Abu Dhabi is finalising a Comprehensive Economic Partnership Agreement (CEPA) with Australia, and this could pave the way for a future copper deal, like that with Kenya, which signed a CEPA with the UAE in early 2024 before the mining deal was announced. In Taliban-ruled Afghanistan, the UAE has presented an investment proposal for operating lithium mines.

Building the Supply Chain: The Importance of Ports

In the field of critical raw materials, the UAE aims to build a supply chain that controls all aspects of the process. The International Resources Holding (IRH), founded in 2022 as a unit of the International Holding Company (IHC), embodies this ambition: geo and tech, mining, refinery, and trading are all consolidated under the IRH, which is now the region's second-largest company by market capitalisation after the oil company Saudi Aramco.

The role of Shaykh Tahnoon is decisive in mining strategy too. The brother of UAE ruler Mohammed bin Zayed Al Nahyan, Shaykh Tahnoon is simultaneously deputy ruler of the UAE, national security advisor and businessman. He is chairman of the Abu Dhabi Investment Fund, of the IHC, and of G42, the country's main technology and AI firm. Shaykh Tahnoon therefore oversees Emirati mining and AI strategies - sectors that are directly connected. Artificial intelligence needs minerals and metals to function, starting from copper, and both raw materials and advanced technologies are fundamental to developing the nation's defence industry and reducing the carbon emissions of the Emirati armed forces.

In a recent interview, the CEO of the IRH stressed that the strategy of the holding is to buy mining concessions rather than provide investments to others in return for the future supply of raw materials. Many Emirati operations in the mining sector are joint ventures. As for the supply chain, trading already sees the UAE very well positioned. This is mainly due to the primacy of Dubai as a trading hub, and to the leading role of the DP World (Dubai) and AD Ports Group (Abu Dhabi) logistics companies. The rise of Emirati port concessions, and the increasing number of ports under construction in Africa and, to a lesser extent, in Latin America (where DP World has a presence in Peru, Ecuador, Argentina, Brazil and Chile), strongly support the UAE's ambitions in the raw materials trade.

Since 2016, the UAE has signed concession deals for 9 out of the 14 port infrastructures it currently operates in Africa, and has planned the construction of 3 new ports.[2] For instance, DP World is building a Banana port in the west of the DRC (Atlantic Ocean) thanks to a 30-year concession signed in 2021 and, in 2023, Primera Group reached a 25-year deal to develop mines in the east of the DRC, probably extracting tin, tantalum and tungsten. Both Emirati logistics companies also operated terminals at Luanda port in neighbouring Angola, DP World since 2021 and AD Ports Group since 2024. Luanda is crucial for transhipment to the DRC. However, the UAE could potentially rely on other routes to export the DRC's raw materials through the Indian Ocean: DP World operates a logistics platform with warehouses at Kigali, Rwanda, with access to the eastern coast; in 2023, DP World signed a concession to operate and modernise Dar es Salaam port in Tanzania. The IRH's copper acquisitions in Zambia could also potentially rely on a double export route: from Angola on the western coast, or from the eastern coast through Tanzania or Mozambique, where DP World operates Maputo port.

Furthermore, the UAE aims to consolidate in other segments of the supply chain. For instance, in 2023 the Emirati Tawazun Council, the national defence and security acquisitions authority, established a free zone in Abu Dhabi dedicated to the military and security sector providing commercial services for clear-cut metal industries. Also in 2024, the Khalifa Port and Economic Trade Zone (KEZAD) signed a 1.4-billion dollar agreement with the UAE-based Titan Lithium to import lithium mined in Zimbabwe (with a forecast of 150,000 tons a year). This will be processed in KEZAD and turned into battery-grade lithium carbonate and lithium hydroxide for batteries and electric vehicles, thus boosting industrial processing at home.[3]

Securing the Supply Chain: Implications

The UAE's growing acquisitions and investments in the mining sector, and the goal of building an Emirati-controlled supply chain - from exploration to trading - is a long-term strategy with notable security implications. As the UAE's mining interests in Africa and, to a lesser extent, in Latin America grow, the Emirati federation will need to secure its strategic interests abroad, with particular regard to the often unstable countries of the African continent where raw materials are found.

This is likely to further strengthen the Emirati military's influence in Africa,[4] which has been pursued and achieved - at least in part successfully - through three main tools so far. The first is that of countering jihadi terrorism (al-Qaeda and Islamic State), insurgent groups related to the Muslim Brotherhood, an organisation the UAE lists as terrorist, and piracy. The aim is to support African states in developing/improving defence capacity through military training and education. The second tool is military provision and cooperation in the defence industry sector. The goal here is to consolidate stability-oriented partnerships with allied governments of countries in which the UAE invests, partly because mining deals are necessarily long-term projects.

The third tool - and one that is likely to assume greater importance in future - is the temporary and flexible construction and use of military outposts abroad and the deployment of Emirati military trainers, contractors and, hypothetically, even small stabilisation units on the ground, if the forces of local governments prove unable to fully deter or counter threats to the UAE's economic interests.

This highlights the fact that raw materials and in-the-making supply chains, while supporting the ambitions of the Emirati defence industry, also generate security implications for its armed forces that require careful strategic consideration by the UAE.

[1] F. Gaub and Z. Stanley-Lockman, "Defence Industries in the Arab States: Players and Strategies", EUISS Chaillot Papers, March 2017.

[2] Updated numbers as of June 2024. For a broader perspective, E. Ardemagni "One Port, One Node: The Emirati Geostrategic Road to Africa", ISPI Analysis, 13 June 2023

[3] K. Young, Testimony before the U.S.-China Economic and Security Review Commission, USCC Hearing on "China and the Middle East", 19 April 2024.

[4] See E. Ardemagni, "The UAE's Rising Military Role in Africa: Defending Interests, Advancing Influence", ISPI Analysis, 6 May 2024.