DRC Conflict Minerals and China's Economic Interests

Introduction

Globalization is a significant part of the business world. It offers many opportunities for change and growth, and helps people connect to one another even across vast distances. Being able to buy something from the next town over or the other side of the world can help companies expand and gain new clients. However, what is being bought and where items are coming from matters greatly. Some globalization has resulted in demand for items originating in countries where people are not being treated well. When that happens, it can constitute a serious violation of human rights and cause significant problems in the exporting country. Such is the case with the Democratic Republic of Congo (DRC), where there is an ongoing conflict over minerals (Magistad, 2011).

These "conflict minerals" — gold, wolframite, cassiterite, and coltan — are all widely found in the DRC and are very important to the broader economy (Nest, 2011, p. 12). However, they are being mined in poor and dangerous conditions, and human rights abuses and armed conflict are concentrated mainly in the furthest eastern provinces of the DRC (Magistad, 2011). Many groups within the country are seizing these minerals without paying or compensating those who mine them. China's desire to mine these minerals is separate from the abuses carried out by some of these groups, but it remains part of the issue examined here. The United States also plays a role, as it has enacted its own laws and regulations governing the purchase of minerals from countries like the DRC.

The research question guiding this paper is: How is the conflict over getting minerals from the Democratic Republic of Congo important to China's economy?

This is a serious question without easy answers. The answer must focus on China's specific economic needs, but there are other actors involved in extracting minerals and natural resources from the DRC (Magistad, 2011). It is not only a matter of whether China can obtain these minerals, but also whether other countries can, and under what conditions the minerals are collected. Research has shown that globalization can produce both peace and conflict, though conflict currently appears most prominent. Thomas Barnett, among others, has discussed how globalization can create stress initially, and how that stress may eventually give way to something more peaceful over time.

The Conflict Minerals

Whether this will happen with the DRC, and what role China may play in it, remains to be seen. This paper explores that trajectory in an effort to fully answer the research question and understand globalization more clearly.

The conflict minerals mentioned above — coltan, wolframite, gold, and cassiterite — are all relatively abundant in the DRC (Magistad, 2011). In order to better understand the issue, it is important to know what these minerals are and what they are used for once they are mined and processed. Currently, four minerals fall under the category of conflict minerals, although more could be added at a later date if they are found to be sufficiently valuable.

This mineral provides tungsten (Eichstaedt, 2011, p. 13). It is extremely important to have adequate supplies, as tungsten is a very dense metal used in a wide range of applications. The most common are the heads of golf clubs, the tips of darts, and fishing weights (Eichstaedt, 2011, p. 13). The mineral is also hard and resistant to wear, making it suitable for milling, drill bits, and metalworking tools (Eichstaedt, 2011, p. 13). "Green" ammunition is now being made with tungsten as a substitute for lead (Eichstaedt, 2011, p. 14). Other applications include the mechanism that makes cell phones vibrate and various other electronic devices (Eichstaedt, 2011, p. 14). Because tungsten is used in so many different things, the wolframite from which it comes is highly valuable — which is why there is conflict over mining it in the DRC.

Used in electronics, dental work, and jewelry, gold commands a high price and has many applications (Eichstaedt, 2011, p. 14). Chemical compounds created to make semiconductors also rely on gold (Eichstaedt, 2011, p. 15). The market for gold can be volatile, and extracting it from the ground is difficult, dangerous work. That is a large part of why controlling a region with abundant gold deposits is so strategically significant.

Without this mineral there would be no tin, as it is the main ore needed to produce it. Tin cans are made from it, and electronic equipment requires it for the solder used on circuit boards (Eichstaedt, 2011, p. 15). Tin also has many other uses, including fungicides, biocides, PVC pipe, and high-performance paint (Eichstaedt, 2011, p. 15). In order to have tin available for all of these applications, the right quantities of cassiterite must be mined and processed from regions like the DRC.

Coltan is the African colloquial term for columbite-tantalite, from which the element tantalum is extracted. Tantalum is primarily used to make capacitors for high-performance, high-reliability applications in a small format (Eichstaedt, 2011, p. 16). Its uses range from airbags, ignition systems, and GPS devices to pacemakers and hearing aids (Eichstaedt, 2011, p. 16). Tantalum is also found in laptop computers, mobile phones, anti-lock braking systems, video and digital cameras, and video game consoles (Eichstaedt, 2011, p. 16). Because the material is highly resistant to wear and very hard, it is also used in milling tools, drill bits, and turbine blades for jet engines (Eichstaedt, 2011, p. 16).

Blood Diamonds and Rebel Supply Chains

Conflict minerals are strongly related to blood diamonds — diamonds mined in a war zone and used to finance the efforts of an invading army, a warlord, or an insurgency (Ma, 2013, p. 2; Magistad, 2011). Most of these diamonds come from Africa, though some also originate in Russia (Magistad, 2011). The diamonds are mined and then sold or traded for cash, weapons, or anything of value desired by those who control them. Because of that, these diamonds carry high economic value but are shunned by many countries and activist groups. Conflict minerals generally fall into the same category.

Several groups are involved in mining these conflict minerals, including the Congolese National Army, the National Congress for the Defense of the People, and the Democratic Forces for the Liberation of Rwanda (Meale, 2009, p. 22). Foreign groups from Rwanda, Burundi, and Uganda were also involved in the Congo Wars and removed and processed minerals from the region (Magistad, 2011). Governments from those countries still smuggle minerals out of the DRC today, and fighting over control of the mines remains frequent. The Second Congo War has been financed in part through the sale of these minerals (Meale, 2009, p. 30).

Once materials are removed from the DRC, they pass through a number of intermediaries before multinational electronics companies purchase them. Most of the materials arrive at processing plants in East Asia (Magistad, 2011). U.S. Conflict Mineral Law requires electronics companies to verify and disclose that their sources of these minerals are conflict-free. The law applies to any minerals originating in the DRC, as well as minerals claimed to originate there, whether or not that origin can be conclusively proven (Magistad, 2011). Additionally, because the DRC shares borders with nine countries — Burundi, Congo Republic, Central African Republic, Angola, Sudan, Rwanda, Zambia, Tanzania, and Uganda — the U.S. law also applies to minerals coming out of those countries, to prevent easy circumvention of the requirements (Magistad, 2011).

Because of the number of middlemen involved, it can be difficult to determine whether minerals were mined fairly, which is why the law requires disclosure of origin. Generally, U.S. companies will not use minerals mined in conflict. As a result of the law, both U.S. and European companies pulled back from purchasing minerals from the DRC (Nest, 2011, p. 58). They are not prohibited from buying these minerals, but choose not to do so because they risk losing customers concerned about the origins of the materials.

China's Interest in DRC Minerals

China has no equivalent law governing where its supplies of minerals and ores must come from, and its electronics companies are not required to disclose anything to the government about the supplies used to make electronic components or other devices. Because of this, Chinese buyers continue to purchase minerals from the DRC (Magistad, 2011). A more pressing issue for the DRC, however, is that Chinese buyers have become essentially the only buyers. This gives them the ability to set their own prices, because the DRC has no other willing buyers offering more. Chinese buyers are now paying 20 to 30% less than they did when U.S. and European buyers provided competition (Magistad, 2011). Although they are buying large quantities, the overall volume of trade is still lower than when more buyers were active in the market. Tin and coltan are the main interests for Chinese buyers, with coltan being especially important because it also contains usable quantities of uranium (Magistad, 2011; Nest, 2011, p. 31).

Uranium reserves are extremely high in the DRC, and the minerals containing them can be sold to Chinese buyers when they could not have been sold to European or U.S. buyers. When U.S. and European buyers were active in the DRC market, they would not purchase anything with a uranium content greater than two percent (Magistad, 2011). Chinese buyers have no such restriction; even a five percent uranium content does not deter them (Magistad, 2011). That allows a larger portion of the minerals to be mined and sold, but Chinese buyers alone are still not enough to sustain the DRC's mining sector at its previous level. Many mines have suspended operations, and miners are not bringing their minerals to market because there are no buyers willing to pay a profitable price.

The DRC holds such rich reserves of conflict minerals that China will be supplied with them for a very long time. Chinese warehouses are full, with constant turnover (Magistad, 2011). There are more sellers than buyers, which is keeping China's economy growing while the DRC struggles to survive. Since the DRC's government depends on mining for roughly half of its budget, the loss of European and U.S. buyers has significantly harmed the country as a whole (Magistad, 2011). Many miners who no longer have buyers are being recruited into army and rebel groups, going where they are directed in hopes of earning some income — a very different life from when Western buyers were eager to purchase their minerals.

Many of the armed groups that formerly operated the mines have since been removed by the government. This is a positive development, as these groups caused serious harm to local communities — including sexual violence against women and forcing children to mine at gunpoint (Magistad, 2011). Now approximately 60% of the mines are free of such behavior (Magistad, 2011). The government saw a significant opportunity to clean up the mines when the Conflict Minerals Law was enacted, but did not anticipate how dramatically the business of mining would decline as U.S. and European buyers withdrew entirely from the region (Ma, 2013, p. 4; Magistad, 2011).

China also has a broader agreement with the DRC beyond simply buying minerals at lower prices. There is a resources-for-infrastructure deal valued at $6 billion (Magistad, 2011). It was originally intended to be a $9 billion agreement, but both the IMF and the World Bank expressed serious concerns that the DRC would be unable to manage a debt of that size to China (Magistad, 2011). Critics of the current deal argue that it requires the DRC to repay China before repaying other debts, was unclear on mineral pricing and valuation, and contained vague terms susceptible to misinterpretation (Magistad, 2011).

Despite the critics, China maintains that the deal benefits both sides (Magistad, 2011). Without the minerals, China could not produce the volume of electronics it manufactures for domestic use and export. Since minerals can now be purchased at reduced cost due to a lack of competition, China's economy is growing rapidly (Magistad, 2011). In return, the DRC receives infrastructure built by Chinese teams — a benefit the DRC could not easily provide for itself (Magistad, 2011). Even so, the DRC is not receiving compensation commensurate with the value of what China is extracting. However, the DRC recognizes that without the deal, it would lose even more. If it has millions of dollars' worth of minerals in the ground but lacks the people and infrastructure to retrieve them, it can at least receive hundreds of thousands of dollars by granting China the right to do so — money it would not have obtained otherwise (Magistad, 2011). Both sides benefit, even if the arrangement is far from equitable.

Conclusion

As can be seen, there are several facets to this issue. The most significant is the situation in the DRC itself and how its people have been treated by the rebel groups and other armed actors who seized and operated so many of the mines. Now that fewer mines are being run by these groups and more are under government control, the rate of abuses is declining (Magistad, 2011). Still, the region is struggling financially. The majority of the country's income was generated through mining, and while some people are shifting to farming and other livelihoods, change on such a large scale takes time. As a result of U.S. law, buyers for DRC minerals are now largely limited to China, which means miners are being paid less and overall purchase volumes have decreased.