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Sep 14, 2023

Russia is plundering Ukraine's natural resources

Ukraine is known as one of Europe's biggest grain producers. But it also possesses highly valuable natural resources such as iron ore and coal — which Russia is keen to exploit. Dig into the earth

Ukraine is known as one of Europe's biggest grain producers. But it also possesses highly valuable natural resources such as iron ore and coal — which Russia is keen to exploit.

Dig into the earth near the Ukrainian city of Dniprorudne, and you will hit ore with an iron content of over 60%.

Before the war, about 4.5 million tons of this high-quality iron ore were mined each year — with the lion's share exported to Slovakia, the Czech Republic and Austria. Selling this strategically important resources earned Dniprorudne mines the equivalent of €200 million ($216 million) per year. One-third of the ore was made into steel at a plant to the west, in the city of Zaporizhzhia, and also exported.

But all that changed in the summer of 2022, when Russian troops occupied Dniprorudne. Ukraine's highly coveted and strategically important natural resources are now being sent to Russia. Ukrainian, Slovak and Czech investors in the mining business have had their property seized by Russia.

Metallurgy ore exports fell by nearly 60% in 2022 from 2021, dropping to a total value of less than $3 billion (€2.8 billion), according to industry analysts GMK Center, a Ukrainian-based think tank. Part of this drop is attributed to Russia's occupation of Ukrainian mining regions. In 2022, the Canadian think tank SecDev estimated the total value of deposits in occupied Ukraine at over $12 trillion. In addition to iron ore, key resources such as coal, titanium and manganese are found in Ukraine. Gold, natural gas, oil, kaolin, salt, gypsum, zirconium and uranium are also present.

The country's largest iron ore deposit, the Kryvyi Rih basin, remains under Ukrainian control, and so do its processing combines. Yet this region is systematically shelled from nearby territories under Russian control.

"Moscow's political plan is primarily to destroy Ukraine's economic potential," Yaroslav Zhalilo, an economic analyst with Kyiv's National Institute for Strategic Studies, told DW. "To do that, it doesn't matter whether you seize resources or destroy them through shelling."

Zhalilo said the resource shortage was having dramatic consequences for Ukrainian steel production. While Ukraine exported almost 20 million tons of metallurgical products in 2021, that figure dropped to just 2.5 million tons in the first half of 2023, which, if extrapolated for the entire year, would indicate a 80% drop. While Russian troops destroyed major Ukrainian steel mills when they conquered Mariupol, those that remain are now struggling to stay operational.

About 80% of Ukrainian coal deposits are located in Russian-occupied regions. All of Ukraine's anthracite, or black coal, which has a high energy density, is presently under Russian control. This means that Ukraine is forced to import coal from countries such as the United States and South Africa. These imports are particularly costly because of the Russian blockade of Ukrainian Black Sea ports. So, instead, the resources brought to ports in neighboring Poland or Romania and then transported onward by rail.

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These logistical problems also complicate the export of goods, undermining Ukraine's industrial competitiveness. "Russia wants to bleed Ukraine's economy dry and portray the country as a 'failed state' that cannot survive without Russia," Zhalilo said.

Seizing Ukraine's natural resources was one of Russia's key motives for launching the invasion, Olivia Lazard of the Brussels-based Carnegie Europe think tank told DW. She said using force to gain control of strategically important resources was a recurring theme in Russian foreign policy.

"For years we can observe the Kremlin's push in Africa — via Wagner mercenaries — to have access to a number of natural resources like gold and diamonds, but also a number of different transition materials such as lithium, rare earths and cobalt," Lazard said.

The European Union established a strategic resource partnership with Ukraine in July 2021, mere months before Russia invaded. The EU identified 30 natural resources needed for its green energy transformation — two-thirds of which could be sourced from Ukraine. Russia is also keen to gain control over these essential resources, especially as the danger of climate change grow ever more apparent.

"Russia has a certain understanding that the shortage of resources caused by the climate crisis will make it one of the key players in future in terms of energy provision, food- and water supply chains," Lazard said. "We are seeing now with the abandoned grain deal that Russia is taking the food security hostage to its political ambitions. Natural resources are extending Russia's control basis countering the EU, countering NATO," she added.

Today, lithium is one of the world's most sought-after minerals, as it is needed for smartphone and car batteries, among other things. Ukraine is trying to to woo foreign investors with promises of the "largest lithium reserves in Europe" — though concrete figures have not been made public. "This is a state secret: No one will tell you," Dmytro Kashchuk, of Ukraine's Geological Investment Group, told DW.

Russia has begun eyeing two Ukrainian lithium deposits — a total of four are believed to exist in the country. One of them, at Kruta Balka, lies in the Zaporizhzhia region, which has been under Russian occupation since spring 2022. The other, Shevchenko, is situated in the Donetsk region, only a few kilometers from the frontline. An Australian investor who obtained a mining license for Shevchenko shortly before the war started has put the project on hold."Lithium mining in Ukraine is expected to be more expensive than in South America or other parts of the world, given the geological nature of the deposits. If additional risk factors are added, mining becomes economically unviable," Kashchuk told DW.

In addition to the Kruta Balka site, Russia also occupies also three of Ukraine's rare earth deposits, according Kashchuk. The resource expert added that zirconium, uranium, but especially graphite and titanium will grow in demand. "Graphite is used in battery production and coveted," he told DW. Two of Ukraine's graphite deposits are under Russian control. Yet the remaining four remain under Ukraine's control, and at one, mining is already underway, he said.

He also sees great potential for Ukraine becoming a major titanium supplier. Already today, the country produces 7% of the world's titanium, placing it in the global top five.

This article was originally published in German.