New Caledonia - China Relations
French President Emmanuel Macron on 12 December 2021 hailed the outcome of the third independence referendum of New Caledonia, a nickel-rich French overseas territory east of Australia in the South Pacific. In a press release, Macron said that 96.49 percent of the Caledonians have voted against independence from France. "Caledonians have chosen to remain French. They decided it freely. For the entire nation, this choice is a source of pride and recognition. Tonight, France is more beautiful because New Caledonia has decided to stay," Macron said.
Under the Noumea Accord (named after New Caledonia's capital) signed in 1998, the French overseas territory was granted the right to three referendums on its future political status. The first referendum was held in 2018, with 56.7 percent of the voters against independence, and the second in 2020 showed a 53.3 percent of population against independence. If the 2021 referendum supported separation from France, the outside world expected this would help China strengthen its influence locally and even in the region, and affect the territory of the Indo-Pacific region. However, the local “independence faction” called for a boycott of the referendum on the grounds that the new crown epidemic would weaken the number of indigenous people who tend to support independence, but the referendum was rejected by France.
At stake in the vote was one of France's biggest overseas territories which is home to about 10 percent of the world's reserves of nickel, which is used to make stainless steel, batteries and mobile phones. Nickel mining in New Caledonia is a major sector of the New Caledonian economy. The islands contain about 10.3 million tonnes of nickel reserves, about 11% of the world's total. With an annual production of 200,000 tonnes in 2020, New Caledonia was the world's fourth largest producer after Indonesia (760,000), Philippines (320,000), and Russia (280,000), followed by Australia (170,000) and Canada (150,000).
The territory is also a key part of France's claim of being a Pacific power, with New Caledonia granting France rights to the surrounding ocean, as well as a military staging post. Experts suspect that an independent New Caledonia would move closer to Beijing, which has built up close economic links and political influence on other Pacific islands. "If the French safeguard disappears, all elements would be in place for China to establish itself permanently in New Caledonia," said French international relations analyst Bastien Vandendyck. Other nations in the region, including Fiji, Vanuatu, the Solomon Islands and Papua New Guinea, had already become "Chinese satellites", Vandendyck told AFP. "All China needs now to complete its pearl necklace on Australia's doorstep is New Caledonia," he said. China is already the biggest single client for New Caledonia's metal exports.
Vandendyck also pointed out that neighboring countries Fiji, Vanuatu, Solomon Islands and Papua New Guinea have become "Chinese satellite countries", "China only needs New Caledonia to complete the "pearl necklace" directly in front of Australia." The "Melanesian Pioneer Group" (MSG) composed of the above four countries and FLNKS condemned France for ignoring the Kanak people's will in the referendum as scheduled, and urged other island countries not to recognize the results of the vote.
New Caledonia has a large ocean exclusive economic zone, which is rich in natural resources. At present, the local finance depends on France, and the funds obtained from Paris each year account for about 18% of the GDP, and its own income mainly comes from exporting metals. China has become the largest local metal export destination in recent years. Last year alone, it bought nearly US$200 million (approximately HK$1.56 billion) of nickel, cobalt and nickel products from the local area, which is higher than the total of the previous four years.
Some analysts have pointed out that if New Caledonia becomes independent, the aid provided by France will inevitably be reduced, which may help China to increase its influence on the ground. A report issued in October by the Institute of Strategic Studies of the Military Academy (IRSEM) under the French Ministry of Defense stated bluntly: “Independent New Caledonia will actually be influenced by China.”
New Caledonia has nickel reserves accounting for about 25% of the world's reserves, ranking first in the world. Due to New Caledonia's rich nickel ore reserves and special geographical location, the local French and some Western media paid great attention to the 2021 referendum. Some Western media believed that it will become a strategic point for the Western world to "wrestle" with China, especially after the "submarine crisis" in France and Australia, an independent New Caledonia is more susceptible to China's influence. China was also said to need New Caledonia to build an "island chain" at its doorstep in Australia.
Many media such as French News Network, Radio One Europe, LCI News, etc. all emphasized "China's influence on New Caledonia" during the referendum, but some other obserrvers said that New Caledonia's independence referendum wa part of the decolonization movement after World War II, and is the spontaneous right of local voters. Using "demonizing China" to intimidate local people against independence may be counterproductive.
At Foreign Ministry Spokesperson Zhao Lijian’s Regular Press Conference on November 30, 2021, AFP asked: "The Pacific island of New Caledonia is to hold a referendum on independence from France in mid-December. Does China support New Caledonia’s independence? And also there are concerns that this would be a chance for China to increase its influence in the Pacific Island region. How do you respond to this?" Zhao Lijian replied: "Perhaps those people are overthinking this. New Caledonia’s referendum on independence is France’s internal affair, on which China has no comment."
Experts believe that after independence, New Caledonia may be more compliant with China's development, partly motivated by the benefits of the huge local nickel reserves; China is already the largest single customer of New Caledonia's metal exports. Nickel production accounts for 18% of GDP and 94% of exports from the Oceanian archipelago.
Koniambo boasts the largest open-cast nickel mine in New Caledonia. On the slopes of the Koniambo mountain range nestles the largest open-cast nickel mine in New Caledonia. A joint venture was created in 2006 to operate the mine: KONIAMBO Nickel SAS (KNS). The company rapidly grew to be a global nickel-producing giant. Seawater desalination technology to help the mining complex reduce its water and energy consumption while raising its production levels and preserving the environment.
The Vale New Caledonia (“VNC”) Project is one of the world’s largest nickel development projects employinghigh-pressure acid leaching (HPAL) technology, and the volume of nickel resources tobe developed under the project is also expected to be among the world’s largest. But equipment trouble took place during the project’s test operation phase, and it put thelaunch of full-scale production at VNC Project behind schedule. The necessary repair work was completed in 2012 and production was scheduled to get under way in earnest by year’s end. The repair and improvement costs stemming from the equipment problems were quite substantial.
Political leaders in the French Pacific region agreed on 08 March 2021 to sell a majority stake in Vale's nickel business to a consortium called Prony, which includes Swiss commodity trader Trafigura. The agreement will grant 51% of Vale’s shares to the New Caledonia provincial government and other local interest groups. Trafigura will hold a 19% stake in Vale, lower than the 25% planned in the initial transaction with Vale.The move aimed to end the violent protests triggered by the planned sale of the Goro nickel-cobalt mine, which forced Vale to close the mine in December 2020.
The electric car manufacturer Tesla will become the technical consultant of the conflict-prone New Caledonia nickel mine. This is the company’s efforts to ensure key batteries as part of the metal supply, the company’s CEO Elon Musk pointed out that this is his biggest concern. The automaker also obtained the right to mine lithium in Nevada and reached an agreement to purchase cobalt from Glencore. But it is most concerned about nickel, which is a large part of the negative electrode of lithium-ion batteries. In October 2021, Prony Resources of New Caledonia signed a multi-year nickel supply contract with electric vehicle manufacturer Tesla.
Denise Fisher, the former Australian Consul General in New Caledonia, pointed out that this will dilute the local nickel industry’s dependence on China. He also believes that even if the local area is independent, the struggle for influence will only become more open. Australia and the United States And New Zealand will also join the competition.
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