The Coming Lithium Wars

Happy Thursday from glorious Northern Italy!

Last week, I was watching one of my favorite YouTube channels, CaspianReport. Its latest video is “India discovers $410 billion lithium deposit.”

Nice one.

CaspianReport has a particular affinity for the BRICS countries and their allies, to be fair.

Four of the following five listed videos are:

  1. China plans to dethrone the dollar
  2. Pakistan is dying (and that is a global problem)
  3. Russia plans to annex Belarus by 2030
  4. Russia and Iran join forces with India

I love watching these videos because I’ve been to many countries and find their politics fascinating.

Many Western analysts either don’t look at this stuff, don’t understand this stuff, or don’t want to give “the enemy” any ideas.

After all, Jim O’Neill of Goldman Sachs Asset Management coined the term “BRICs” in a marketing ploy to get his research read.

Now, they’re America’s #1 headache. And for good reason.

And that headache grows larger daily, not least because of India’s lithium find.

But first things first.

If the Lithium Doesn’t Cross Borders, Will Armies?

It’s commonly believed that Claude Frédéric Bastiat (1801-1850) coined the phrase, “When goods don’t cross borders, soldiers will.”

Sadly, he never said that. But many, including myself, believe it to be true nonetheless.

The Liberty Fund did a bit of digging and found that Otto T. Mallery came the closest to writing the phrase.

In his book, Economic Union and Durable Peace, Mallery advocates mutually beneficial economic agreements for the following three reasons:

  1. Economic bargains which are likely to be kept are preferable to political agreements which are likely to be broken.
  2. If soldiers are not to cross international boundaries on missions of war, goods must cross them on missions of peace.
  3. Unless shackles can be dropped from trade, bombs will inevitably drop from the sky. (p.10)

Though I’d never heard of Mallery before, I liked him immediately.

Incentives are better than promises.

What concerns me about all these metal finds is they’re not happening in the West.

Europe is resource-poor. That’s why it’s always had to become an empire of some sort.

Financial historian and world-famous author Niall Ferguson’s theory of empires and resources suggests that empires’ success largely depends on their ability to control and exploit resources.

According to Ferguson, empires that can secure access to resources at a lower cost than their competitors are more likely to be successful in the long run.

If the BRICS control the resources, where does this leave the West? It’s a conundrum I’ve not been able to answer. But it can’t be good.

Lithium is essential because of green power and electric vehicles. Rightly or wrongly, this is the direction the world is heading.

So let’s start at the beginning.

What is Lithium?

If you’re a Sopranos fan, lithium is what made Tony see this beautiful creature in Season 1:

The Sopranos character

Credit:The Sopranos via Uproxx

Maria Grazia Cucinotta. Impossibly beautiful. I never wanted to take drugs so badly.

Alas, she was a figment of Tony’s imagination. Let us raise a glass to Tony’s imagination.

But mental health treatment is only one of lithium’s uses.

Can you imagine teenage boys taking a dose of lithium while wearing Apple’s new virtual reality headsets? In a month, you’d have to buy them guide dogs…

Ok, what is lithium, and what else is it for?

Lithium is a soft silver-white metal within the Alkali group of the periodic table. It is a crucial component of electric batteries used widely, from smartphones to electric vehicles.

Batteries: Lithium’s most extensive single use is in Lithium-ion batteries. They’re rechargeable batteries in many electronic devices, including smartphones, laptops, and electric vehicles. Lithium’s high demand for these batteries is due to its ability to store a large amount of energy relative to its weight and volume.

Mental Health Treatment: As mentioned, lithium is used to manage bipolar disorder. It can help control mania episodes – periods of excessively elevated mood and behavior.

Aerospace and Military Applications: Lithium and its compounds make special glasses and ceramics, including the Mount Palomar telescope’s 200-inch mirror. Lithium deuteride was the fusion fuel in experimental thermonuclear weapons.

Lubricating Greases: Lithium is used as a thickener for lubricating greases, which is its most significant non-battery use. Lithium greases are stable at high temperatures, water-resistant, and resist the effects of oxidation.

Air Treatment: Lithium chloride and lithium bromide are hygroscopic materials used in air conditioning and industrial drying systems.

Metallurgy: Lithium (as lithium carbonate) is used in the manufacture of iron, aluminum, and certain kinds of steel to improve their strength and hardness.

So lithium is essential and versatile.

Now, where did they find this big haul?

Where (in India, China, or Pakistan) is Jammu and Kashmir?



It’s a mess. Three countries lay claim to the area, and sometimes, the area itself wants independence.

So not only do you have some BRICs arguing between themselves, you’ve got India and Pakistan quibbling as well.

A brief history of Kashmir from 1947:

When British colonial rule ended in 1947, the princely states, including Jammu and Kashmir, could accede to India or Pakistan or remain independent. Jammu and Kashmir, a predominantly Muslim state ruled by a Hindu maharaja, chose to stay independent initially. However, when Pakistani tribal militias invaded the state, Maharaja Hari Singh requested military assistance from India. He agreed to accede to India in exchange for military aid, which led to the first Indo-Pakistan war.

The United Nations (UN) intervened in 1948, calling for a ceasefire and a plebiscite to determine the region’s future. The referendum, however, never occurred. In the meantime, the region of Jammu and Kashmir was essentially divided along what became known as the Line of Control.

Over the decades, several wars and numerous skirmishes have occurred in the region, notably the wars of 1965 and 1971 and the Kargil War in 1999. An armed insurgency, beginning in the late 1980s, escalated the conflict further, with accusations of human rights abuses by both the Indian military and separatist movements.

From a geopolitical perspective, the conflict has been complicated by other factors, such as the strategic interests of China, which also controls a part of the territory known as Aksai Chin.

Back to the Lithium

Picture this — it’s 1997, and a geological survey in Jammu and Kashmir, India, whispers tales of lurking lithium reserves. However, the echoes of potential riches fall on deaf ears as lithium’s value at the time was equivalent to little more than pocket change. Thus, it was deemed unworthy of further exploration.

Fast forward to the present day — 26 years have flown by, and India, in a plot twist worthy of a blockbuster film, stumbles upon a mind-boggling 5.9 million tons of lithium deposits in the same region. Suddenly, India leaps up the global leaderboard, rubbing shoulders with the heavyweights in the lithium reserve arena.

Imagine the possibilities.

This could turbocharge India’s transformation into a green energy titan. However, as we know all too well, even the slightest tremor can trigger a geopolitical landslide. The fact that these deposits reside exclusively in India’s territory may churn the simmering pot of conflict involving the three powers.

Yet, India’s lithium jackpot isn’t just another ripple in the pond of world affairs. It’s a seismic wave in our global village, where a disturbance in India could spell a trade tsunami for the US and India.

After all, the lines we draw on maps are as influential as rivers carving out valleys. And there’s no better stage for this grand theater of territorial claims, physical geography, and real control than Kashmir, a melting pot of cultural influences nestled at the heart of South and Central Asia.

The lithium windfall could be a lifeline for India’s struggling manufacturing sector. It could bolster the country’s ability to produce high-tech goods, such as smartphones and solar panels, and launch India into the vanguard of emerging technology industries.

With a whopping $2.2 billion incentive scheme on the table, New Delhi aims to kickstart battery cell production and lure in mining and processing infrastructure. Given that the investment appetite for lithium has rocketed thirty-fold since 2010 and is predicted to multiply six times in the next two decades, it’s clear that India is betting big on a green future.

India’s ambition doesn’t stop there. The nation hopes to have renewables powering half its energy needs by 2030, slicing the emissions intensity of its GDP by a commendable 45%. This aspiration isn’t just an item on India’s to-do list; it has global climate implications, considering that India is home to a sizable slice of the world’s population.

However, before we pop the champagne and toast to a greener future, some naysayers dampen the party mood. Critics argue that the shimmer of the lithium lode may not be as bright as it seems, highlighting potential environmental, geological, and financial extraction costs. But then again, critics always rain on parades, don’t they?

In the grand scheme of things, this dramatic revelation underscores the dance between opportunity and responsibility, particularly in the compelling narrative of India’s unfolding lithium saga.

Wrap Up

There’s lots of “stuff” in the ground, and the race to get it heats up.

This time it’s lithium.

And it’s not just India. Iran has just stumbled onto its own lithium stash.

If the BRICS have one thing, it’s natural resources.

Are we sure we want to remain their adversaries? Let me know what you think by emailing me here.

The Daily Reckoning