Lithium ore falls from a chute at a facility in Australia in this file image. Carla Gottgens/Getty Images/Bloomberg Creative Photos© Carla Gottgens/Getty Images/Bloomberg Creative Photos
- Russia wants to become a top lithium producer but faces a challenging environment.
- Its largest lithium mining project was sanctioned by the US in January.
- China, a partner in Polar Lithium, may be spooked by the sanctions, experts said.
Russia’s plan to develop one of its vast untapped lithium reserves is hitting major roadblocks.
Russia sits on an estimated one million tons of lithium, an amount comparable to the US.
Lithium is used to make lithium-ion batteries, and has been in increasing demand since the EV boom.
With oil and gas sanctions weighing on Russia’s economy after its full-scale invasion of Ukraine, mining lithium is becoming more attractive.
“The production of this metal is, without exaggeration, a strategically important task,” President Vladimir Putin said in the fall.
But a slowing market, US sanctions and a complex mining environment are challenging this ambition, experts told Business Insider.
It’s a wide-ranging ambition: Russia has struck international deals and currently occupies Ukrainian land believed to hold lithium deposits.
The jewel in Russia’s lithium crown is the Kolmozerskoye field in Murmansk in the country’s arctic northwest.
Polar Lithium was set up in 2023 as a joint venture between the state nuclear energy company Rosatom and the privately-owned metals giant Nornickel.
There is technical backing from the Chinese engineering firm MCC International Incorporation.
It’s projected to come online by 2030 and produce some 45,000 tons a year — putting it roughly on a par with Chile, the world’s second-largest producer.
Rosatom has said that Russia aims to become self-sufficient for lithium and capture 10% of the global market by 2030, catapulting it ahead of the US and into the world’s top five producers.
A sanctions chilling effect?
On January 10, the outgoing administration of former President Joe Biden imposed a slew of sanctions on Russia’s energy sector.
On its list was Polar Lithium, an inclusion that could spook China’s involvement.
Writing last year, analyst Vita Spivak said sanctions could “limit the further integration of China and Russia’s metals supply chains, as Chinese firms would be wary of being targeted by Western secondary sanctions.”
Speaking to BI in the wake of the recent US announcement, Pavel Devyatkin of The Arctic Institute agreed.
“The sanctioning of Polar Lithium creates risks for the Chinese company and may affect the company’s plans,” he said.
“Chinese companies have not shown a willingness to challenge US sanctions, including in the Arctic economy.”
Philip Andrews-Speed, a senior research fellow at Oxford Institute for Energy Studies, also said that China has been “very careful” about investment in Russia’s energy sector.
“My guess is that the Chinese might withdraw, or just slow things down,” he said.
The extent of MCC’s involvement in the project is unclear — Rosatom’s announcement described its technical know-how in extracting and processing but didn’t talk about what sort of payment it would get, whether in cash or in the form of mined lithium.
Laurence Haar, a financial economist specializing in energy markets at the UK’s University of Brighton, told BI that a so-called offtake agreement, giving away some of the product, is likely the only way Russia can pay for China’s expertise. China has used that model in lithium projects elsewhere.
Asked about the extent of MCC’s involvement both before and after the sanctions, Polar Lithium spokesperson Vasily Zakharov told BI: “The project continues to advance in accordance with its planned timeline and operational objectives.”
Business Insider wasn’t able to reach MCC; a listed email address was inactive.
A challenging market
Lithium is often hailed as “white gold” or “the oil of the 21st century” — but for the time being it’s not that rare.
Despite a rise in prices during the EV boom, oversupply cooled the market in 2024.
The lithium market “has become highly competitive,” Ahmed Mehdi, another senior research fellow at the Oxford Institute for Energy Studies, told BI by email. China gets plenty from its domestic industry as well as from Australia and Africa, he said.
Mehdi added that it’s also difficult to know how much investment would be needed to make Polar Lithium commercially viable, “particularly given potential infrastructure constraints and market opportunities (given its sanctions profile).”
Those infrastructure constraints are considerable, Haar told BI, and “would be challenging at the best of times.”
Working in the remote and cold High North requires significant transport and civilian infrastructure just to get going, he said, which will add to production costs.
This makes Russia’s ambition of taking up 10% of the world’s market “a bit optimistic,” Haar said, adding: “I don’t see it as a threat to the market.”
Polar Lithium isn’t doomed, yet
This doesn’t mean the project is dead in the water.
Lithium mining isn’t a complex process, and Andrews-Speed, the OIES academic, said Russia could move ahead without Chinese cooperation in the hopes that sanctions will be lifted later.
Since taking office, President Donald Trump has overturned some of the Biden administration’s sanctions. The State Department declined to comment on its plans for Polar Lithium’s sanctions.
Even under sanctions, it would not be hard to quietly sell the unprocessed lithium, Haar told BI. Russia has taken a similar approach with its oil and gas.
“Once it’s turned into batteries and processed into oxide, no one can know from where it came,” he said.
But the real money is in processing it, he added.
“The Chinese have cornered the market in processing lithium,” he said. “Which is smart because beneficiation, moving downstream into producing the oxide, and then actually producing batteries, is where you make the money.”
