[Americans failed to safeguard
decades of diplomatic and financial investments in Congo, where the world’s
largest supply of cobalt is controlled by Chinese companies backed by Beijing.]
By Eric Lipton and Dionne Searcey
It was 2016, and a deal had been
struck by the Arizona-based mining giant Freeport-McMoRan to sell the site,
located in the Democratic Republic of Congo, which now figures prominently in
China’s grip on the global cobalt supply. The metal has been among several
essential raw materials needed for the production of electric car batteries —
and is now critical to retiring the combustion engine and weaning the world off
climate-changing fossil fuels.
Mr. Perriello, a top U.S. diplomat
in Africa at the time, sounded alarms in the State Department. Mr. Kapanga,
then the mine’s Congolese general manager, all but begged the American
ambassador in Congo to intercede.
“This is a mistake,” Mr. Kapanga
recalled warning him, suggesting the Americans were squandering generations of
relationship building in Congo, the source of more than two-thirds of the
world’s cobalt.
Presidents starting with Dwight D.
Eisenhower had sent hundreds of millions of dollars in aid, including transport
planes and other military equipment, to the mineral-rich nation. Richard Nixon
intervened, as did the State Department under Hillary Clinton, to sustain the
relationship. And Freeport-McMoRan had invested billions of its own — before it
sold the mine to a Chinese company.
Not only did the Chinese purchase
of the mine, known as Tenke Fungurume, go through uninterrupted during the
final months of the Obama administration, but four years later, during the
twilight of the Trump presidency, so did the purchase of an even more
impressive cobalt reserve that Freeport-McMoRan put on the market. The buyer
was the same company, China Molybdenum.
China’s pursuit of Congo’s cobalt
wealth is part of a disciplined playbook that has given it an enormous
head start over the United States in the race to dominate the electrification
of the auto industry, long a key driver of the global economy.
But an investigation by The New
York Times revealed a hidden history of the cobalt acquisitions in which the
United States essentially surrendered the resources to China, failing to
safeguard decades of diplomatic and financial investments in Congo. The sale of
the two mines, also flush with copper, highlights the shifting geography and
politics of the clean energy revolution, with countries rich in cobalt, lithium
and other raw materials needed for batteries suddenly playing the role of oil giants.
The loss of the mines happened
under the watch of President Barack Obama, consumed with Afghanistan and the
Islamic State, and President Donald J. Trump, a climate-change skeptic
committed to fossil fuels and the electoral forces behind them. More broadly,
it had roots in the end of the Cold War, according to previously classified
documents and interviews with senior officials in the Clinton, Bush, Obama,
Trump and Biden administrations.
For decades, the United States
worried that the Soviet Union would gain control of Congo’s copper, cobalt,
uranium and other materials used in defense manufacturing. Securing U.S.
interests there was a topic of presidential-level concern and involved extensive
interventions by the Central Intelligence Agency.
With the collapse of the Soviet
Union, both Democratic and Republican administrations shifted attention away
from containing Communism and slashed generous financial aid that had helped
American companies do business in Congo, the documents and interviews show.
In Africa, in particular, the
United States pivoted toward human rights and good-governance issues. And
globally, after 2001, the War on Terror became an all-consuming preoccupation.
Mr. Perriello, who has since left
government, said he learned of the plan in 2016 to sell Tenke Fungurume not
long after touring the mine. The owner had a tarnished reputation for its
operations in other countries, and Mr. Perriello had counted himself a skeptic.
Still, he was convinced that
American ownership was good not only for the United States but for the people
of Congo. Freeport-McMoRan got largely favorable reviews on the ground, was
employing thousands of Congolese and had built schools and health care clinics
and provided fresh drinking water.
“What can we do?” Mr. Perriello
recalled asking Linda Thomas-Greenfield — who was then an assistant secretary
of state with responsibility for Africa and is now President Biden’s ambassador
to the United Nations — about keeping the mine under American control. Mr. Perriello
said he raised the issue with the National Security Council as well. (A
spokeswoman for Ms. Thomas-Greenfield said she remembered the sale of the mine
but not the conversation with Mr. Perriello, and several members of the N.S.C.
also said they could not recall such a conversation.)
The only serious bidders were
Chinese companies, leaving no doubt about the consequences of standing by.
“They were able to move swiftly and quicker than anybody else could,” Kathleen
L. Quirk, Freeport-McMoRan’s president, said in an interview. “So we got the
deal done.”
Freeport-McMoRan had been
determined to sell. The company, one of the world’s largest copper-mining
outfits, had made a catastrophically bad bet on the oil and gas industry just
before oil prices tanked and the world began to shift to renewable energy. With
debt piling up, the company saw no option but to unload its Congo operations.
The American response, in essence,
was nothing because it was a straight financial transaction. Though the
country, through the Committee on Foreign Investment in the United States,
reviews overseas investments in American companies for national security risks,
it has no oversight of transactions by American companies abroad.
The crisis, exposing significant
blind spots of U.S. leaders, was just the kind of opportunity the Chinese
government excels at exploiting, according to previously unreported documents
and emails and interviews with diplomats, mining executives, government
officials and others in China, Congo and the United States.
Over the past year, as the clean
energy transition has accelerated, the
U.S. government and the private sector have moved more rapidly to
recover from past mistakes, scouring the world for new cobalt supplies and
deploying cobalt-free batteries in some shorter-range electric cars.
But all of that falls far short of
Chinese efforts to take over resources critical to a green future, including
cobalt, lithium and others.
“We ‘help’ U.S. businesses abroad,”
said Mr. Perriello, pointing to efforts by the State and Commerce Departments
on behalf of Walmart and other companies with a big overseas presence. “But
that’s not actually a strategy.”
A strategy to keep the mine in
Western hands — perhaps a government subsidy for Freeport, or tax incentives
for a different U.S. company to step in — would have required a tool kit of
options requiring a formal government policy.
That is something only now being
formulated by Congress and the Biden administration.
A bill that passed the House last
week included tax incentives for buyers of electric vehicles and funding for
charging stations across the United States. Separate bipartisan legislation
that passed the Senate in June would funnel nearly a quarter-trillion
dollars into research and development to compete with China, though none of
that would address supply-chain threats like the sale of the Congo mines.
The lack of a formal industrial
policy for minerals and metals has come at a cost to the United States,
diplomats from the last two administrations said.
“The U.S. is just not organized
like China is to approach this in a systematic way,” said Tibor P. Nagy Jr., an
assistant secretary of state for African affairs during the Trump
administration. “That is a constant source of frustration to those of us who
really see the potential of Africa.”
The fallout is now complicating Mr.
Biden’s push to make electric vehicles a central pillar of his climate change
agenda. At a General Motors factory in Detroit last week, Mr. Biden acknowledged that “something went wrong
along the way,” adding, “You know, up until now, China has been leading in this
race, but that’s about to change.”
Cold War Gamesmanship
Nixon stood outside the White House with the first lady, who
was holding an enormous bouquet of roses, one morning in August 1970. President
Mobutu Sese Seko of Zaire was about to pay a visit.
It had been a decade since Zaire,
now the Democratic Republic of Congo, had secured independence from Belgium,
and as the leader of a country abundant in natural resources, Mobutu found
himself with considerable global clout.
Not only did he control those
resources, but he had emerged as a key intermediary for the United States in
its efforts to keep the Soviet Union from making inroads in Africa.
Access to minerals and metals in
Congo had been a top priority for the United States since at least World War
II. Albert Einstein wrote to President Franklin Delano Roosevelt in 1939 urging
him to stockpile Congolese uranium, used in the first atomic bombs.
“The United States has only very
poor ores of uranium in moderate quantities,” Mr. Einstein wrote, noting that “the most important source
of uranium is Belgian Congo.”
Uranium, cobalt, copper and other
ores from Congo are coveted for their extraordinary purity. They are of such
high grade that waste piles from old mines often contain more cobalt
and copper than most active mines elsewhere in the world.
By
the mid-1960s, the C.I.A. had set up one of its most extensive operations in the country, secretly bankrolling a
small army of mercenaries and Congolese troops. The agency ran missions with
the help of U.S. warplanes to suppress Soviet-backed rebels.
“If Zaire goes, every African state
will draw the conclusion that the Soviet Union (which they don’t like all that
much) is the wave of the future,” Henry Kissinger, the secretary of state,
warned Nixon, according to a transcript of the once classified
exchange.
Corporate America saw the U.S.
intervention as an opportunity to make money while promoting American-brand
capitalism. Citibank, General
Motors, Goodyear and
others set up manufacturing outposts or offices in Congo. In 1971, Pan Am built
one of the first luxury hotels in Kinshasa, the capital, with financial support from the U.S. government.
Mobutu,
a charismatic former army sergeant who would become a corrupt, luxury-loving
dictator, saw the Americans as an ideal partner in his bid to grow the
country’s mining wealth.
With an eye to developing Tenke
Fungurume, he reached out to a prominent New York diamond merchant named
Maurice Tempelsman, according to a series of now declassified cables, to discuss giving him mining
rights in the area.
But just before his trip to
Washington in August 1970, Mobutu made a surprise announcement: He had decided
to contract a Belgian company to develop the mine. Washington went into crisis
mode as it tried to wrestle back the concession, and its generosity knew no bounds.
“Whatever Mobutu wants, give it to
him,” Herman J. Cohen, an American diplomat in Congo at the time, recalled
Nixon signaling to his administration.
Hundreds of millions of dollars in U.S. aid had
already been sent to Mobutu. Now Nixon agreed to give him several giant C-130 transport
planes, including one that would later be loaded with
$60,000-worth of Coca-Cola, at Mobutu’s insistence. The Congolese leader would
convert one of the planes into his presidential
aircraft, lining the pilot seats in leopard skin.
The United States also committed
$130 million in loan guarantees and other financing to help develop Tenke
Fungurume. Separately, a U.S.-funded project that cost
more than $800 million brought electricity to the remote area.
The campaign reached a tipping
point at a black-tie dinner for Mobutu at the White House, according to Mr. Cohen.
After the meal, Mr. Tempelsman took
Mobutu for a private boat ride on the Potomac. Word soon came that the
Americans were getting the mining concession after all, generating speculation
about what the two men had discussed.
“No one will really dare to say in
the open what personal profits General Mobutu made out of the deal concluded
with Mr. Tempelsman,” one World Bank official later wrote in a confidential memo, first obtained by a University of
Arizona researcher.
The United States had won the international
competition, at least for the moment.
“The Belgians were still acting a
little childish over the fact that they were beaten,” read a confidential 1970 letter from the U.S. embassy in
Congo to the State Department.
A ‘Grand Reopening’
Mark Mollison, a mining engineer
from New York City, climbed into a Toyota Land Cruiser in southeastern Congo,
where he had traveled to visit Tenke Fungurume. It was by then an abandoned
construction site with a mythic reputation for buried riches.
Mr. Mollison was amazed. He saw
hilltops with bald spots where copper and cobalt poked through the surface. The
metals were so concentrated they had killed off the grass.
“The ore was 10 times as rich as
what we were mining in Arizona,” Mr. Mollison recalled. “It was quite
incredible.
There were also decades-old ruins:
The concrete foundation for an ore crusher had turned to rubble and weeds, and
an employee golf course had been engulfed by the surrounding brush.
It was the late 1990s, and Mr.
Mollison belonged to a new wave of mining executives who had arrived to pick up
the pieces left by the Tempelsman group two decades earlier.
After angling during the Nixon
administration to get the concession and spending $250 million, the group had
pulled out when it ran into a series of hurdles, including anti-government rebels
who shut down a railroad needed to ship the cobalt and copper to the sea.
Mr. Kissinger, the secretary of
state, helped craft a cable to apologize to the Congolese
government in January 1976, explaining that the United States “deeply regrets”
the “mothballing” of the project, which left behind little but these ruins.
Interest rekindled many years later
after Mobutu was
overthrown. The rebel leader, Laurent-Désiré Kabila, had recently seized
valuable land near Tenke and Fungurume, the two towns that gave the mine its
name, and used the perch to launch his insurgency.
“Everybody thought, boy, this is
the grand reopening, a new awakening of Congo,” Mr. Mollison said.
Western mining executives and their
Wall Street bankers, smelling opportunity in the changing leadership, arrived
in the rebel region by charter planes to find armed teenagers using rubber
stamps with Walt Disney characters to process their passports.
The investors gathered on the
terrace of what had been a posh hotel, its pool covered in green slime, as Mr.
Kabila’s representatives secured financial commitments for mining access. A memo written by one banker summed up Mr. Kabila’s
perspective: “Rules of the game: you give and I give.”
Lundin Group, a Canadian mining
company, was so determined to seal a deal that it agreed to give the rebels $50
million. An adviser to Mr. Kabila told reporters at the time that
the cash would almost certainly be used to buy weapons for the rebel takeover.
Mr. Mollison’s job, when he arrived
several months later, was to evaluate if his company, now called
Freeport-McMoRan, should partner with Lundin to finish what Mr. Tempelsman had
started at Tenke Fungurume. Freeport-McMoRan would later publicize that
undertaking as the biggest private investment ever in Congo.
“What’s this place going to need?”
Mr. Mollison recalled wondering. “Electric power. Lots of it. Roads. Plenty of
water. Just how difficult is it going to be to operate in a place like this?”
Freeport-McMoRan eventually landed
a controlling 57.75 percent stake in the mine, while Lundin got 24.75 percent.
Congo’s state mining enterprise, Gécamines, kept 17.5 percent.
By the end of 2007, after yet
another civil war in Congo, the project got fully underway. But the roads were
in such bad shape that it took an entire day to drive the 100 miles to the mine
from the closest major city. Mining executives soon used airplanes to make the
commute.
Freeport-McMoRan went on a building
spree. It helped construct a highway so cobalt and copper could be exported to
other parts of Africa. To ensure it had enough power, the company spent $215 million to refurbish an aging hydroelectric plant.
“It was very impressive,” said
Pierrot Kitobo Sambisaya, who worked as a metallurgist at the mine for a
decade. “It was what I call American style.”
Sensitive to concerns that the mine
would not benefit the Congolese, Freeport-McMoRan and Lundin drilled wells to
provide water to 64 villages, built schools to serve more than 12,000
students and, in Fungurume, where the population had exploded as people arrived
to fill jobs, constructed a large market hall to keep vendors dry during the
rainy season. They also paid for a brickmaking business with about 370 workers,
an anti-malaria project and a series of gardens to preserve rare plants that
were being destroyed by activity at the mine.
“They were training the Congolese
workers not just for menial tasks but getting them degrees and advanced degrees
at universities in the United States and elsewhere,” said Mr. Perriello, the
Obama-era special envoy to the region. He began to question his critical view
of Freeport-McMoRan, which had drawn international protest for harm
to the local environment and clashes with local residents near another
large mine in Indonesia.
Conflicts still emerged. Entire
villages — Amoni, Kiboko and Mulumbu — were leveled to make room
for the mining complex, and relocating their 1,600 residents was a fraught
process. Some protests turned deadly as security forces fought with
trespassers being ejected from the land.
Still, this part of Congo had never
seen a private-sector project so big, ambitious and lucrative.
Freeport-McMoRan had developed one
of the most modern and productive cobalt and copper mines in the world, and
before long, the Congolese government began pressuring the company for a bigger
share of the profits.
The company turned to the U.S.
government to help push back, and the State Department, under Mrs. Clinton,
dispatched the American ambassador to the mine.
The ambassador, William J.
Garvelink, told Congolese officials that “Freeport-McMoRan (unlike other
companies which he described as ‘cowboys’ coming to the DRC only to try to make
money quickly) has a long-term vision of its operations in the country,” according
to a cable that described a May 2009 meeting.
Congo largely backed down, agreeing
to a relatively modest increase in its ownership stake, to 20 percent from 17.
In signing off on the new
arrangement in 2010, Richard Adkerson, Freeport-McMoRan’s chief executive, said
the company was “committed to continuing our positive partnership” with the
Congolese “for decades to come.”
A Hail Mary Pass
That commitment lasted just six
years.
Freeport-McMoRan made a monumental
blunder. Instead of doubling down on mining, it ventured into fossil
fuels, spending $20 billion in 2012 to buy two oil and gas
companies.
When oil prices plummeted,
Freeport-McMoRan found itself mired in debt. The company shut down offshore oil
rigs in the Gulf of Mexico and laid off hundreds of workers. It fired the president and other top executives at its
money-losing oil and gas division and searched in vain for a buyer.
Mr. Adkerson, who had spent most of
his career at Freeport-McMoRan, liked to tell
a story about making a bad snap on his high school football team in
Mississippi and losing a big game.
Now he had done it again. And
Freeport-McMoRan needed a Hail Mary pass to stay in the game.
“It breaks my heart to do it,” Mr.
Adkerson told Wall Street analysts in May 2016 when he announced the company
would sell Tenke Fungurume.
The only bidders that wanted all of
the company’s stake were from China. Backed by billions of dollars in
government loans, Chinese mining companies had been waiting for just this kind
of opportunity.
The top bidder was China
Molybdenum, which offered $2.65 billion. The company had the money available, and it
“allowed them to move very quickly,” Mr. Adkerson said.
The news troubled executives at the
mine, including Mr. Kapanga, the general manager, who had also worked as a
Congolese presidential adviser and diplomat. He phoned the American ambassador,
James Swan.
“Tenke Fungurume is the jewel in
the crown,” Mr. Kapanga said he told Mr. Swan, worried the United States was
inexplicably letting go of its biggest private investment in Congo. Mr. Swan
declined to comment when contacted by The Times.
In Washington, the Obama
administration was well aware how important cobalt was about to become to the
global economy — and how dependent the Americans were on overseas sources.
Top scientists and officials in
seven federal agencies had spent two years interviewing industry experts,
academics and researchers to identify essential raw materials that were
vulnerable to shortages or interruption.
Cobalt emerged in a White House report as among the most worrisome.
Global demand was exploding because of its use in cellphone and laptop
batteries. Domestic supply was negligible. Most cobalt was mined in Congo, the
report pointed out, and China was starting to corner the market.
Concerned about “China’s trade-distorting export restrictions on metals
and minerals,” the group proposed that cobalt should be added to a list of
so-called critical minerals to maintain “stable and flexible future supply chains for key
emerging technologies.”
The solution, the White House
decided, was to create an “early warning” system to ensure the United States was
alerted to threats to this supply.
Now the alarms were sounding, and
no one in Washington seemed to be listening.
Rick Gittleman, a mining executive
and lawyer who had worked at Freeport-McMoRan in Congo, alerted Gen. James L.
Jones Jr., who had since left the Obama administration as a national security
adviser.
But he was unmoved. “There’s no one
that’s going to be interested in that,” Mr. Gittleman recalled him saying. The
general confirmed that account with The Times.
The focus at the time for American
diplomats in Congo centered on trying to urge President Joseph Kabila out of
office. He had taken over after his father was assassinated in 2001 and spent
much of the next 15 years looting
millions of dollars from the public treasury.
On a flight to the United States,
Mr. Perriello was seated next to a Freeport-McMoRan executive after the company
had announced the sale. He asked if there was anything the American government
could do.
With the company’s financial health
on the line, there was a single-minded determination to close a deal, Mr.
Perriello recalled. The company was not focused on the geopolitical
repercussions of its choice, its own executives acknowledged.
“We don’t currently have a
mechanism to handle that discrepancy when it comes up,” Mr. Perriello said,
“this gap between corporate interest and national interest.”
No Lessons Learned
The sale of Tenke Fungurume closed in November 2016, just a few weeks after Mr. Trump
was elected president. It drew little attention in the United States outside the financial news media.
Early in his administration, Mr.
Trump signaled that challenging China’s efforts to dominate mineral supplies
might be a major focus. His administration issued reports on cobalt and the potential for supply shortfalls, taking note of the Tenke Fungurume sale.
Cobalt also made the Trump
administration’s list of metals and minerals, first proposed in the Obama
administration, that are deemed critical “to the nation’s security and economic
prosperity.”
Nonetheless, history repeated
itself.
Freeport-McMoRan still owned an
undeveloped site deep in the forest that contains one of the world’s most
important untapped sources of cobalt, a fact highlighted in the Trump administration’s document listing the element as
a critical resource.
When the company indicated late
last year that it intended to sell the site, known as Kisanfu, there was next
to no reaction from the U. S. government.
State Department and Commerce
officials said in interviews that there was no high-level discussion about it.
“Nobody even talked about this,”
said Nazak Nikakhtar, who until January served as the Commerce Department
assistant secretary in charge of tracking critical mineral supplies. “It is
horrible. I mean, this is really unfortunate.”
The sale, to China Molybdenum for $550 million, went ahead as announced,
a month before Mr. Trump left office. With it, the last major U.S. investment
in Congo’s cobalt and copper mines evaporated.
Eric Lipton is a Washington-based
investigative reporter. A three-time winner of the Pulitzer Prize, he
previously worked at The Washington Post and The Hartford Courant. @EricLiptonNYT
Dionne Searcey is part of a team
that won the 2020 Pulitzer Prize for international reporting and author of the
book, "In
Pursuit of Disobedient Women." @dionnesearcey • Facebook
