In New Caledonia, China and France fight over nickel

Mark O'Neill January 17, 2022 09:26

In December, the people of New Caledonia in the South Pacific voted in a third referendum not to become an independent state but remain part of France. The news was greeted with jubilation in Paris – but dismay in Beijing, which wanted the other outcome.

The reason is the island’s reserves of nickel, a key component in the batteries of electric cars, in which China wants to become the world leader. It already consumes half of global production of nickel.

New Caledonia is a territory of 18,600 square kilometres, which was annexed by France in 1853. Since 1946, it has had the status of an “overseas territory”. It is 1,400 km northeast of Australia. It has 7.1 million tonnes of nickel reserves, about 10 per cent of the world’s reserves of the metal, ranking fourth in the world, after Indonesia, Philippines and Russia. Production in 2020 was 200,000 tonnes.

It has 272,000 inhabitants, of whom 41.2 per cent are Kanaks, the indigenous people, 24.3 per cent Europeans and the rest are mixed race or from other islands in the South Pacific.

Demands for independence from the Kanaks forced France to hold three referenda, in 2018, 2020 and last December on the issue. In the first two, 56.7 per cent and 53.3 per cent voted against independence. Last December, the pro-independence side boycotted the vote; the pro-French side won with 96 per cent of the vote.

Control of the nickel resources is the main reason why France has retained control of New Caledonia for 170 years.

In 2020, Brazilian miner Vale decided to sell the Goro nickel mine, one of the largest in the island. A Chinese investor made a bid to take it over, but the French state vetoed the offer. After intense negotiations, the mine was sold to different investors – a 51 per cent stake owned by the provincial authorities and other local interests, 19 per cent to Swiss commodity trader Trafigura and a share to automaker Tesla.

“Tesla has secured great control over its battery metal supply chain with agreement to buy metal from Goro Mine,” Tesla said in a statement. “It will have access to long-term supply of nickel from the mine and will set as a technical advisor on the project.”

Philippe Gomes, a local pro-French parliamentarian, said that, if New Caledonia were independent, Goro would certainly be acquired by a Chinese company.

Another point of difference between Paris and Beijing is that France wants to process the metal in New Caledonia, to add value, before exporting it. China prefers to import the raw mineral.

In 2017, a year before the first referendum, the Chinese ambassador in Paris visited the island for a week, with half a dozen counselors.

“He asked us what we needed in terms of infrastructure and offered his help,” said Gomes. “He said that his country could send 100,000-300,000 tourists a year, on condition that it built hotels for them, preferably constructed by Chinese companies and staffed by Chinese.”

Beijing has good relations with the pro-independence camp in New Caledonia.

China is the main economic partner of many independent states of the South Pacific, including the Solomon Islands, Vanuatu and Papua New Guinea. Its firms dominate commerce, build infrastructure and have access to natural resources.

Popular anger against the dominance of Chinese traders was a major reason for three days of violent unrest last November in the Solomon Islands that left four people dead. Much of Chinatown in the capital Honiara was burnt down by protestors angry over high unemployment, crowded housing and lack of running water.

A report of the Institute for Strategic Research of the French Military School in Paris said that, if New Caledonia were independent, it would be under Chinese influence.

In addition to its nickel, the island has an exclusive maritime zone of 1.5 million square kilometres, rich in fishing resources.

The French navy has a base in New Caledonia. An independent state might be willing to allow the People’s Liberation Army to set up a base there, a short distance from Australia. In the rising military tension between China, Australia and the U.S., such a base would be a prize asset.
With its victory in the December referendum, France has won the latest round in its battle with China over New Caledonia. But, with the pro-independence Kanaks being the largest single group in the island, it was only one battle in a long-running war.

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Mark O'Neill

A Hong Kong-based writer, teacher and speaker.