As US and China vie for Pacific influence and resources, tiny New Caledonia can play an outsize role
- Far-flung French territory holds 7.1 million tonnes of high-grade nickel vital for making lithium-ion batteries to power electric vehicles
- Mining and politics merge as pro-independence indigenous Kanak population seeks more local control and closer Beijing ties
The hairpin curves and bumpy roads connecting the mining settlement Goro to the outside world slice through coral-fringed cliffs and forests lined with waterfalls and streams. Yet what makes this picturesque area noteworthy lies deep beneath its red earth: nickel, also known as green gold.
The stakes for the US run high. It has no domestic nickel-processing capacity and boasts only one active nickel mine, located in Michigan and due for closure in 2025. Energy officials call grade-one nickel a “key vulnerability and key opportunity”.
Last year the Biden administration’s 100-day review of critical supply chains called on the US government to “invest in nickel-refining capacity in coordination with allied nations”.
The move to secure the world’s largest EV maker’s nickel supply chain dovetails with Biden’s recently announced goal of friend-shoring EV manufacturing and assembly by 2030.
While Tesla’s involvement has sparked hope of better productivity and an improved environmental record in New Caledonia, the territory’s bloody past and the decades-long struggle of its indigenous Kanak population to reclaim control of land they deem sacred could sink the plan, and, France fears, enhance China’s leverage.
Loyalists to France want the European power to stay “invested in the control over natural resources”, said Matthias Kowasch, an Oceania specialist at the University College of Teacher Education in Graz, Austria. In contrast, “pro independence groups demand New Caledonia, not France, take full control of its natural resources”.
Perched on the southern edge of New Caledonia’s mainland, Goro is one of three major nickel smelters in the territory. Its open-pit mine, named after a nearby tribe, has for decades been beset by local opposition over ecological disasters and financial losses.
Andre Vama, a Goro clan chief, said tribal elders in 1991 allowed Canadian mining giant Inco to set up a US$4.5 billion nickel refinery on the assumption it would bring jobs and prosperity. He claimed the community was not told beforehand that acid would be used to extract nickel or of the need to clear endemic trees to make way for the mine.
“Most of these trees have medicinal properties,” Vama explained. “If we lose these plants, we can’t pass on this knowledge to our next generations.”
After Inco refused to halt the project in 2006, clashes broke out between Kanak protesters and French troops. Operations changed over the next two years. The new owner Vale, a Brazilian company, introduced high-pressure acid leaching to extract a more refined version of nickel.
Yet other problems surfaced. Since 2010, at least four acid leaks have been reported at the site, resulting in thousands of dead endemic and endangered fish species.
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Five pro-independence members of New Caledonia’s government resigned over the decision. That precipitated the collapse of Thierry Santa’s government in early 2021, making way for Louis Mapou, the first pro-independence ethnic Kanak to serve as president, to lead the territory.
Vale instead cut a deal with Prony Resources, an international consortium, of which Swiss-based commodities trader Trafigura owns a 19 per cent stake. Over half the shares are jointly owned by local communities, including tribal representatives. Members of the Chiefs of the Clan Council, composed of local tribal leaders, regularly attend board meetings and monitor the mine’s environmental impact.
For all its political intrigue, the nickel industry remains the lifeline of New Caledonia’s economy, generating 90 per cent of the territory’s total exports and between 7 and 10 per cent of its GDP.
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New Caledonia stands to gain from an anticipated EV sector boom, but experts say it needs to produce more than 100,000 tonnes of nickel annually to cash in on soaring global demand for class-one quality.
Kowasch, the Oceania specialist, said nickel smelters in New Caledonia were predicting profitability based on the booming demand, this after years of posting losses.
The Goro mine is in a technical and industrial partnership with Tesla to produce “green nickel”, Kowasch said, as New Caledonia’s other nickel smelters seek to ramp up their production.
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According to London-based Benchmark Mineral Intelligence, the world needs at least 72 nickel-mining projects averaging 42,500 tonnes in production to meet current battery demand for refined nickel.
At any rate, the industry is a major employer in New Caledonia, where unemployment nearly totals 17 per cent. One in four private sector jobs in the territory is related to nickel, according to the Institute of Statistics and Economic Studies of New Caledonia.
And more than half the mines’ employees are Kanak, mostly in blue-collar positions. This fact ties their fortunes to the greater geopolitical rivalry playing out in the region.
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France’s effort in 2015 to block nickel exports to China culminated in a month-long blockade by Kanak drivers who feared job cuts. The New Caledonian Congress later approved the exports. China now accounts for 57 per cent of the territory’s nickel exports.
In fact, China in 2018 was the top export destination for New Caledonia, accounting for 31.7 per cent of trade and mostly owing to nickel. China was also the territory’s third-biggest importer.
The Koniambo mine, jointly run by Kanaks and Swiss company Glencore, is reportedly already partnering with China’s Yichuan Nickel Industry and South Korean steelmaker Posco.
But there is more to New Caledonia than nickel.
Cleo Paskal, a senior fellow at the Foundation of Defense of Democracies, said it was evident “none of the Western powers want New Caledonia independent” and that “there’s high awareness of China wanting New Caledonia independent”.
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“New Caledonia was the base for US operations in that part of the Pacific during the second world war,” Paskal said, noting that many French “military and intelligence assets” are based there.
In China’s push to influence independent Pacific countries, its approach “puts people at the ground level of the economy”, Pascal added. “Look what happened in Tonga and the Solomon Islands.”
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A 2021 report by the Institute of Strategic Studies of the Military Academy under the French defence ministry warned that “an independent New Caledonia would be de facto under Chinese influence”.
The report described New Caledonia as becoming “the keystone of the Chinese anti-encirclement strategy, while isolating Australia” and said the territory “would also ensure China a supply of raw materials, especially nickel”.
New Caledonia today remains sharply divided, mostly between pro-independence Kanaks of modest socioeconomic standing and relatively affluent pro-France Europeans.
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Tess Newton Cain, a senior researcher with the Griffith Asia Institute in Australia, said future referendums would be more likely to benefit Kanaks as census data revealed an uptick in their population while the reverse was true for non-Kanaks, who typically support French control.
“The longer the wait, the bigger their voting base will be,” Cain said of Kanaks. “With every year that passes, they have got more young Kanak people eligible to vote.”
Sonia Backes, leader of the Caledonian Republicans, a pro-France political party, believed France’s exit would let China “take advantage of the situation”.
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New Caledonia has elevated its profile, becoming a full member of the Pacific Islands Forum in 2016 to cooperate better across Oceania. But it was excluded from Biden’s Pacific Forum slated for September 28 and 29, aimed at countering China’s regional clout.
Jessica Collins of the Lowy Institute in Australia believed the US was not “ignoring” New Caledonia and that Biden was “respecting France’s governance in the Pacific”.
New Caledonia would only be of strategic value to China if it became independent, Collins said, adding it would be “challenging” for the “US to control the supply chains from New Caledonia, regardless of whether Tesla manages to succeed in its venture or whether it becomes independent”.