As Saudi Arabia and the UAE Expand Foreign Mining Interests, How Can Producing Countries Prepare?

Where are Saudi Arabia and the United Arab Emirates investing in mining and why?

Laury Haytayan: Saudi authorities, institutions and companies are acting as dictated by Crown Prince Mohammed bin Salman’s Vision 2030. An important part of that vision is to grow the Saudi economy beyond the oil sector.

The energy transition has put more pressure on the kingdom to act quickly and efficiently. Investing in critical minerals or in minerals in general is part of growing and diversifying the economy , and finding new streams for revenues, job creation and foreign investment.

The Saudis are investing in critical minerals outside the kingdom for two reasons. First, they seek political leverage through control or equity in critical minerals. Second, authorities see growth opportunities in importing raw materials from producing countries for processing in Saudi Arabia and then exporting finished products.

Saudi Arabia has signed memoranda of understanding with the Democratic Republic of the Congo, Egypt and Morocco. Nothing much has happened beyond these MoUs. But more concretely, the state minerals company Manara has been investing in already established multinational mining companies such as Vale.

The United Arab Emirates is investing in critical minerals in Africa and Latin America, and Emirati influence is more complex. While not new per se—Emirates Global Corporation has produced bauxite in Guinea since 2019—these interests are complexifying. Yes, there is a purely commercial goal: UAE companies are investing in sectors that are booming globally. But the UAE also needs minerals for its own defense and AI industries. Investing in Latin American and African mining is also strategic for the UAE because Emirati companies have invested in port infrastructure and management in those regions. In Africa alone the UAE has invested in mining in Angola, DRC, Guinea, Kenya, Nigeria, South Africa, Zambia and Zimbabwe.

Lower-income counties rich in mineral resources have often struggled to benefit when foreign investors have made deals to extract minerals and metals. What should officials and civil society actors in producing countries keep in mind when fielding interest from Gulf countries?

Thomas Scurfield: Officials from over 25 African states attended Saudi Arabia’s Future Minerals Forum in January. This demonstrates the considerable opportunities that Gulf interest generates for lower-income countries.

A wider range of potential investors increases the bargaining power of mineral-rich countries, and therefore–if managed carefully–the ability of their governments to negotiate good deals. China’s response to the planned U.S.-led Lobito corridor railway development that will link Zambia and the DRC to an Angolan port–a commitment to rehabilitate a Zambia-Tanzania railway to make exports to the east easier–shows what this increased bargaining power can deliver. The entrance of Gulf investment also likely helps low-income countries avoid being seen to favor either the West or China as geopolitical competition increases—though this could change as the relationships of the Gulf states with these blocs evolve.

Another benefit of Gulf investment is its apparent insensitivity to short-term price signals. Price declines for minerals such as lithium, nickel and cobalt have slowed mining activity globally in the last year or so. In contrast, Saudi Arabia and UAE—similar to Chinese companies—have continued to invest. Such countercyclicality makes Gulf countries a particularly valuable investment option for lower-income countries, smoothing the impact of market volatility on potential interest in their sector.

However, like with other investors, these opportunities won’t automatically translate into benefits for people in mining countries. And this deep-pocketed Gulf investment comes with specific challenges. Investments originating from foreign sovereign wealth can be opaque and complex, particularly when mining deals are part of a larger investment package like those the Gulf countries appear to be offering. As countries such as the DRC have experienced with Chinese resource-backed investments, such bundled deals require that producing country officials negotiate carefully to ensure that deal terms reflect assets’ true values. Governments should therefore ensure that the foundations of good governance are in place—including a clear strategy, strong negotiating capacity and robust transparency and accountability mechanisms—when engaging in this new investment landscape. 

As transition minerals become key for moving away from fossil fuels, how can investment from Gulf countries benefit both global demand and the interests of people where those minerals are found?

TS: Boosting mineral supply for the global energy transition and providing a good deal for people in mining countries go hand in hand. Stable supply relies on stable relationships between mining companies, governments and communities. Examples of discontent leading to supply disruptions abound.

Policymakers and influential bodies are increasingly recognizing the importance of a “triple win” for people in producing countries, their environment and the energy transition. For example, the recently established UN Secretary-General’s Panel on Critical Energy Transition Minerals focuses on equity and justice for mining countries. Commitments in this vein are encouraging, but follow-through in the form of action is crucial.

Laury just shared that Saudi Arabia aims to import raw minerals to develop downstream industries, but its investments should also support greater value addition in lower-income countries. Gulf countries must also offer fair deals on tax and minimize social and environmental harms. Only by doing so will they represent a genuine alternative for lower-income countries and support the global energy transition.