Germany's new lithium deal aims to reduce Europe's reliance on China

German Chancellor Olaf Scholz was in Serbia on Friday to discuss a tentative deal with the Balkan country to excavate lithium, a mega project that could reduce Europe's dependency on China but one that has been fiercely criticised by environmentalists and opposition groups.

Germany, the largest carmaker in Europe, is seeking to secure lithium for its electric vehicle makers as the European Union struggles to reduce its dependence on imports from China. Lithium is a critical substance in making batteries for electric vehicles

China currently dominates the supply chain for lithium-ion batteries.

The excavation of lithium was back in the limelight after Serbia's constitutional court earlier this month overturned a previous ruling to cancel a USD 2.4 billion mining project launched by British-Australian mining giant Rio Tinto in the western Serbian valley of Jadar, which is believed to be the largest lithium discovery in Europe.

The Serbian government's decision to cancel the excavation plans came after thousands of protesters in Belgrade and elsewhere in Serbia blocked major roads and bridges in 2021 to oppose Rio Tinto's plans because of potential hazards to the environment. The protests were the biggest challenge yet to the increasingly autocratic rule of Serbian President Aleksandar Vucic.

Scholtz met Vucic on Friday at a critical raw materials summit where a memorandum of understanding between the EU and Serbia's government on a strategic partnership on sustainable raw materials, battery supply chains and electric vehicles will be signed, officials from both countries said.

There will also be a letter of intent signed by the Serbian government and several companies related to the lithium mining project and car battery producers. The memorandum will contain a commitment to high environmental and sustainability standards, German government spokesperson Steffen Hebestreit has said.

Vucic and other Serbian officials have said the lithium excavation will go ahead if Germany and other EU states build factories for their car batteries in Serbia, rather than directly exporting raw materials to those countries.

Vucic said on Friday that the lithium mining presents a huge opportunity for Serbia and its development.

We have talked already and I can say I am satisfied," he said. "This presents big hope for us, Serbia. We are convinced that we will not miss that chance. We are known for missing most chances. This time we must not allow that.