The resource nexus is geopolitical

Climate & Natural resources30 Jan 2014Pim Kraan, Jaap Smit

Geopolitical action is required to cope with the enormous resource challenges that lie ahead.

There is a need for engagement to facilitate an evolution of resource governance mechanisms. New platforms will have to be created for dialogue and discussion on resource matters between consuming and producing countries, mining corporations, non-governmental organizations, scientists, formal and informal networks, hard and soft power actors, etc. Conflict looms widely and the planet’s ecological boundaries have already been exceeded; the world’s population is growing and industry continues to grow along with it. Facilitating a new platform for resource governance is a task of gigantic proportions, but the Dutch are perhaps well positioned to broker parts of it.

Professor Lester Brown of the Earth Policy Institute recently issued a press release about water stress in the USA. He paints a picture of a battle between farmers and urban dwellers over access to water. “Every drop is allocated,” he says, “and extra consumption in urban areas can only be catered for at the expense of supply to agriculture.” As a result, many farmers prefer selling irrigation rights to producing crops. Subsequently, between 2000 and 2005, 400,000 acres of arable land already dried out. This trend can also be observed in India and parts of northern Africa. In India, Pakistan and Saudi Arabia, ancient aquifers are used and, in some cases, have already been depleted. Millions of people depend on the production of food based on these sources for irrigation. This is quite alarming, given the fact that the expected growth of the world population to 9.5 billion in 2050 will force us to produce 70% more food.

Water shortage is an important dominator in the resource nexus. Individual stress factors mutually increase the overall pressure, too. Stepping up food production, for instance, requires pumps, electricity, water and fertilizer. To produce fertilizer and pumps, industry needs raw materials, electricity and water. Minerals come from mines, which are also large consumers of electricity and water. Mines often swallow large portions of productive land and have a negative impact on the environment. Where mining occurs, large-scale agricultural production often disappears. It is a vicious circle and it is still getting worse.

Increases in production imply a larger climate footprint, which we cannot afford as the planet’s boundaries have already been exceeded multi-fold. In 2013, the world had exhausted the regeneration capacity of the planet for that year by August 20th. But after that date, we did not stop consuming. On the contrary. Hence, year by year we increase the planetary debt and eat into the savings account of future generations. How long will that last? What will be the consequences?

Not a single country on earth can cater entirely for its own needs from domestic production. We simply are all import dependent. Open and safe sea lines of communication are essential. They are being compromised, however, by pirates from fragile states like Somalia, where development is at a low level. In Africa an estimated 9 million people work in small-scale artisanal mining. Some 54 million people, almost 6% of Africa’s population, depend on income from mining. Miners often make a scanty living and are isolated from economic development. These social imbalances and the lack of standards and control are a serious source for potential unrest and even conflict. The trigger is often food. Food is not only economically relevant; its availability and affordability is one of the most important politically-influencing aspects. We are now aware that the background of the Arab Spring had much to do with high food prices.

Many countries and companies have acquired large portions of fertile land in Asia, Africa and Latin America. They grow food crops, but also biomass, biofuel and feeder stock for the green economy. Relocating indigenous people without proper compensation is another breeding ground for conflict.

Security of supply for all is at the core of the Dutch government’s policy. The Dutch government published its Raw Materials Policy Brief in 2011. It actively promotes the application of the ‘Voluntary Guidelines on Responsible Governance of Tenure of Land, Forests and Fisheries in the Context of National Food Security of the Committee on World Food Security’. This is done via country-specific embassy programmes, supporting the International Land Coalition and the Global Land Tool Network and fostering partnerships with Dutch NGOs, knowledge institutes and corporates. Recent discussions with Dutch financial institutions revealed that Dutch banks and pension funds are financing corporates active in mining and agriculture in developing countries. The Dutch government and Dutch financial institutions have agreed to organize round tables with NGOs at national and international level on fostering land governance.

Dutch investors have various transparent procedures in place that are meant to minimize the risks that their clients get involved in issues like land grabbing, human rights abuses and the like. In case clients do not act according to the agreed investment agreements, Dutch financial institutions are committed to do their utmost to put a stop to issues that are not in line with the principles used when assessing the investments.

The biggest challenge is to engage the largest consumer in resource terms: China. At the moment China accounts for about one-third of the world’s production of raw materials. The World Economic Forum predicts that by 2020 this might be even half. China is investing in mines, land and industries in Asia, Africa and Latin America to secure enough resources for its economy. In Europe and the USA strategic acquisitions of companies, trading houses and commodity exchanges are taking place.

Recently the foreign ministers of Germany, Italy and the Netherlands wrote a letter to the High Representative of the European Union, Catherine Ashton. The ministers urge Lady Ashton to design a preventive foreign policy to cope with the challenges ahead, like water-related conflicts, resource stress and the results of climate change. We all want an evolution rather than a revolution of the resource governance system and that requires geopolitical action.