Iran’s lithium lode: A potential strategic game-changer – by Marina Yue Zhang (Lowy Institute – August 9, 2023)

Australia might find itself on a political and economic tightrope as China looks to diversify its options for the new oil of our times.

Iran’s recent unearthing of a vast lithium deposit – potentially the world’s second largest – has sent shockwaves through the global lithium competition landscape. Amid the shifting currents of these developments, two key players stand out: China and Australia.

China is the world’s largest importer and processor of lithium, as well as a major lithium battery manufacturer. Australia serves as the primary source of lithium for China’s production. The strategic battle for control of lithium supply chains now holds centre stage in global geopolitical competition, mirroring the oil disputes of past decades.

In this ongoing chess match over the security of lithium supply chains, Iran’s lithium reserves mark a potential game-changer for China’s present reliance on foreign suppliers such as Australia, Brazil, Canada and Zimbabwe, which make up 70–74% of its lithium imports. Faced with a barricade of international sanctions, especially from the United States, Beijing has a potential golden opportunity to decrease its dependency on its current suppliers and invest in Iran’s fledgling lithium industry.

Iran’s lithium discovery indicates that the dynamics of the global lithium supply chain should be evaluated from both temporal and spatial perspectives. As Elon Musk has pointed out, the critical bottleneck in lithium battery production isn’t control of lithium resources, but the capacity for processing, including the purification and refinement of lithium elements. In this regard, China possesses advantages that place it years, if not decades, ahead of its global competitors.

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