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‘Unprofitable’ nickel and the colonial legacy in New Caledonia

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Violent protests in Nouméa, the capital of the French overseas territory of New Caledonia in the South Pacific, which have left five people dead, have alarmed the French government.

While Paris declared a state of emergency in the region, blaming “external forces” for the unrest, the island’s indigenous population argues that the new law in the French National Assembly will reduce indigenous representation.

“The proposal to reopen the electoral institution is nothing more than a return to the settler-colonial strategy,” New Caledonian Kanak Senator Robert Xowie, a member of the French Senate, told Interior Minister Gérald Darmanin in March.

A brief history of colonialism

When New Caledonia was recognised as part of the Second Empire in 1853, European settlers flocked to claim indigenous land and set up independent cattle farms.

This low-tech agricultural economy was eventually fuelled by colonial ambitions to turn New Caledonia into a sugar island, similar to the plantations of the Caribbean and Mauritius.

Wealthy planters from Réunion, another French overseas territory in the Indian Ocean, moved in due to crop shortages and invested heavily in sugar cane plantations south of New Caledonia’s capital, Noumea.

These landowners brought with them thousands of ‘indentured labourers’ of Indian, Vietnamese and Chinese origin. Together with the indigenous Pacific Islanders, the Kanaks, these immigrants formed the underclass of New Caledonian colonial society. As landowners and bureaucrats working in France, they would work to enrich wealthy French landowners who were not part of the archipelago society.

The aim of the French white settler landowners was to send their profits to the settler colony in Australia in the hope of ‘economic mobility’ in Europe. New Caledonia as a colony therefore only functioned for the white settlers in the exploitation of natural resources.

How did the self-determination process work?

In the 1980s, when New Caledonia was rocked by violence, including assassinations and kidnappings that left dozens dead, tripartite agreements were finally reached between independence supporters, French supporters and the French government, recognising the Kanaks as the indigenous population of New Caledonia and launching a process of self-determination.

The Nouméa Agreement of 1998 promised that the French Republic would devolve more political power to New Caledonia and its original inhabitants, the Kanaks, over a twenty-year transition period and provided for independence referendums.

The referendums were held in 2018, 2020 and 2021. Although these votes were in favour of ‘staying with France’, the Kanak Socialist National Liberation Front (FLNKS), a coalition of pro-independence parties, had called for the vote to be postponed and for the Kanaks not to participate, arguing that ‘lockdown’ measures and traditional mourning ceremonies during the pandemic had prevented a proper campaign. In 2021, turnout in the referendum was 43.8 per cent.

Protests against the proposed reform of the region’s electoral body, which independents say will weaken the representation of the indigenous Kanak population, are fuelled by deep economic turmoil in the region.

New Caledonia’s wealth is largely derived from its struggling mining sector. With almost 30 per cent of the world’s reserves of nickel, an important material for making stainless steel and batteries for electric vehicles, New Caledonia was expected to play a major role in Europe’s race to catch up with China for critical raw materials.

However, nickel production in the region has fallen sharply and foreign investors have begun to leave the archipelago. The industry suffers from export restrictions imposed by the New Caledonian authorities and high energy costs, making nickel production much more expensive and less profitable than in Indonesia and other Asian competitors.

Huge gap between Kanaks and Europeans

According to the 2019 census, 41.2 per cent of New Caledonia’s population identifies as Kanak and 24.1 per cent as European, with the former group facing significant socio-economic challenges, including lower wages and higher poverty rates.

For example, according to a 2014 study, in 2009 a young non-Kanak was seven times more likely to have a tertiary education than a young Kanak.

A 2012 statistic showed that only 3 per cent of Kanaks had completed tertiary education, compared to 23 per cent of the rest of the population, while the unemployment rate among young native Kanaks was 38 per cent, four times higher than the rest of the population.

In 2010, one in five jobs paid less than two-thirds of the minimum wage in mainland France, and the proportion was much higher in agriculture, domestic work and hotels and restaurants, where part-time work is common.

These low wages must be seen in the context of the very high prices in New Caledonia. With a minimum wage of 78.5 per cent of the French level and prices 34 per cent higher, the purchasing power of minimum wage earners was 59 per cent of the metropolitan level, and even 50 per cent for agricultural workers.

More strikingly, among the regions that make up New Caledonia, the poverty rate reached 52 per cent in the Loyauté Islands, compared to 9 per cent in the Southern Province. In 2014, the employment rate was 65 per cent in the Southern Province, 52 per cent in the Northern Province and 40 per cent in the Loyauté Islands. It should also be noted that the Kanak population in Loyauté is 94.6 per cent.

The collapse of nickel

Despite hundreds of millions of euros in French subsidies, the nickel industry continues to collapse, with production in the first quarter down 32% on the same period last year.

French officials warned in 2023 that New Caledonia’s three main nickel processing plants could soon close, increasing unemployment on the island by 50%.

As protests grow, major investors such as Switzerland’s Glencore and France’s Euramet are either pulling out or refusing to invest further.

Last year, the government came up with a new plan to bail out the industry with subsidies of up to 200 million euros to lower energy prices. But instead of easing tensions, the new ‘Nickel Pact’ was criticised by the New Caledonian independence movement as a ‘colonial pact’ that would give too much power to local authorities.

After months of negotiations, New Caledonia’s representatives blocked ratification of the pact, which is still on ice.

The pact was an attempt by French Finance Minister Bruno Le Maire (who visited New Caledonia on a fact-finding mission in November 2023) to provide around 200 million euros in emergency aid, on condition that New Caledonia’s nickel industry commits to deep reforms to reduce production costs and possibly find new markets in Europe.

The Kanaks argue that the pact in its current form does not ask for enough commitment from the nickel industry companies and also requires New Caledonia to find more than $65 million to finance a cost-cutting electricity scheme, which would require the introduction of new taxes and thus increase the burden on the local population.

No more colonial mining

The mining sector in New Caledonia still bears the mark of colonialism. Considered the cheapest and most aggressive method of extraction, “open-cast” mining was favoured by mining companies for its simplicity, and its immediate environmental damage was ignored. So much so that 330 mines were opened over a period of time on an island 30 times smaller than France, where only 256 mines were open at the height of the coal mining boom.

In the 1930s, the indigenous Kanaks were moved to reservations covering only 10 per cent of their ancestral land in an attempt to increase the availability of mineral rights without harming the cattle industry.

Currently, the mining industry on the island is controlled by three major companies. The largest is SLN, a subsidiary of the French metallurgical company Eramet. The Koniambo nickel plant is operated by Glencore, which is majority-owned (51%) by the Northern Province, where the plant is located. The Brazilian mining consortium Vale operates a large hydrometallurgical plant in the Southern Province.

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U.S. sets up new ‘air defence base’ in Poland

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The United States inaugurated a new air defense base in northern Poland on Wednesday, marking a significant move in NATO’s defense strategy. Polish President Andrzej Duda stated that the base strengthens Poland’s security as a NATO member, especially as the war in Ukraine continues.

Located in Redzikowo, a town near the Baltic coast, the base has been in development since the early 2000s. Amid concerns following Donald Trump’s election, some NATO members are uneasy about future commitments. However, Polish officials emphasize that the consistent support of the base project across U.S. administrations underscores the enduring military alliance between Poland and the United States.

“The United States is the guarantor of Poland’s security,” Duda asserted, underscoring that the presence of U.S. troops highlights Poland’s sovereignty and reinforces that it is “not in Russia’s sphere of influence,” despite its historical ties as a socialist state until 1989.

On the other side, Kremlin officials described the base as an attempt to “contain Russia” by positioning American military infrastructure closer to Russian borders.

The Redzikowo base is a vital component of NATO’s Aegis Ashore missile defense shield, designed to intercept short- and medium-range ballistic missiles. Other key elements of this NATO defense shield include a base in Romania, U.S. Navy destroyers stationed at Rota, Spain, and an early warning radar located in Kürecik.

Russia has long viewed the base as a threat, initially opposing the project in 2007. NATO maintains that the shield is “purely defensive” and asserts that it’s not targeted at Russia.

According to military sources cited by Reuters, the Redzikowo system currently targets missiles from the Middle East. Redirecting the radar to intercept missiles from Russia would require a policy shift and complex procedural adjustments.

Polish Defense Minister Wladyslaw Kosiniak-Kamysz recently called for expanding the defense shield, stating that Warsaw would discuss further plans with NATO and the United States.

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German think tank DGAP: Germany and Europe must build military strength in the Asia-Pacific region

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Germany’s leading foreign policy journal, Internationale Politik, calls for significant rearmament and militarization efforts to strengthen European influence in the Asia-Pacific region.

According to Internationale Politik, published by the German Council on Foreign Relations (DGAP), European nations should rapidly expand their armed forces and take control not only of their own continent but also, “if necessary, the Mediterranean, the Red Sea, and the Strait of Bab el-Mandeb,” to “reduce reliance on U.S. troops in Europe.”

If successful, the journal argues, the United States would retain adequate military capacity “in the event of a war in the Indo-Pacific.” In such a scenario, European nations should also prepare for a potential conflict with China and enhance their defense industrial capacity to replenish depleted U.S. munitions if required.

The ‘Asianization’ of security architecture

Calls for a stronger German and European military presence in the Asia-Pacific are driven by the intensifying power struggle between the West and China and the increasing inclination of Asian nations to pursue independent military policies rather than aligning with declining Western dominance.

Felix Heiduk, director of the Asia Research Group at the German Institute for International and Security Affairs (SWP), describes this trend as the “Asianization” of regional security architecture.

Indonesia exemplifies this shift. Since 2007, Indonesia has conducted regular military exercises with the United States, the latest spanning August 26 to September 6, 2024. However, Jakarta has also expanded ties with Russia. During a recent meeting with President Vladimir Putin, Indonesia’s current president and former defense minister, Prabowo Subianto, expressed that he sees Russia as a “great friend” and intends to strengthen relations with Moscow.

Last week, Russia and Indonesia held their first joint military exercises, which Jakarta considers a demonstration of its independent foreign and military policy.

The ‘Indo-Pacific’ as a Japanese-American concept and Germany’s role

The concept of the Indo-Pacific frequently underpins arguments for expanding military activities into the Asia-Pacific. In Internationale Politik, Heiduk clarifies that this term is “neither geographically neutral nor value-neutral” but rather “purely political.”

Heiduk explains that the concept of a “Free and Open Indo-Pacific”, which the U.S. adopted from Japan, aims to encircle China and maintain U.S. hegemony in Asia. He further notes that Germany is also entangled in this geopolitical struggle.

Heiduk points to Germany’s Asia-Pacific military deployments in 2021 and 2024, along with maneuvers involving German air and ground forces in Australia and other countries in the region. These actions align with Berlin’s official Indo-Pacific Strategy—a conflict framework Germany has adopted in alignment with the U.S. in its great power struggle with China.

Europe’s Need to Rebuild Its Land Armies

Max Bergmann, an expert from the Center for Strategic and International Studies (CSIS) in Washington, illustrates the pressure for greater militarization in the Asia-Pacific in a recent article for Internationale Politik.

Bergmann describes European nations as lacking “hard power,” noting that European armies have been underfunded for two decades and that rebuilding ground forces should be the priority. He argues that while Britain and France possess advanced weapons systems, including anti-submarine capabilities, their forces are “too thinly deployed.”

While Russia remains the immediate military priority for Europe, Bergmann sees a long-term role for European security in the Indo-Pacific.

Reducing the U.S. military rresence in Europe

The CSIS expert suggests six strategic steps Europe can take to reduce U.S. military presence.

The first step, according to Bergmann, is for Europe to focus on securing the continent, the Mediterranean, and, if needed, the Red Sea and Bab el-Mandeb. This would allow the U.S. to concentrate fully on the Indo-Pacific if war broke out in the region.

Bergmann notes that in such a conflict, the U.S. could dedicate its full military production capacity to support Indo-Pacific logistics, but only if Europe is militarily fortified.

Beyond the ‘third way’ for Europe

Bergmann proposes additional diplomatic and security roles for European states. He advocates strengthening relations with countries like Vietnam, which have limited ties with the U.S. However, he emphasizes that Europe should not pursue a “Gaullist third way” between the U.S. and China since European interests align closely with U.S. strategic interests.

Finally, Bergmann recommends that European states establish stronger military-political and arms-industrial partnerships within the Asia-Pacific and, ultimately, bolster their own military presence in the region. The most effective way to achieve this, he suggests, would be to organize a European naval mission under the EU flag to coordinate all European naval activities in the Asia-Pacific.

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Green light from CDU for debt brake reform

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Friedrich Merz, leader of Germany’s conservative Christian Democratic Union (CDU), announced on Wednesday that the constitutional debt brake, which limits public deficits to 0.35% of Gross Domestic Product (GDP), could be open to reform under certain conditions.

Merz, the frontrunner to become Germany’s next chancellor after the collapse of the country’s “traffic light” coalition, has previously argued that Germany should adhere to the constitutionally guaranteed debt brake, a measure introduced by his party under Angela Merkel in 2009.

The debate over debt brake reform within the CDU was reignited this year by Berlin’s conservative mayor Kai Wegner. Several powerful CDU leaders from regional governments have also supported the reform push, as these states face more constraints than the federal government and lack the flexibility for new borrowing.

Merz: Revision possible if borrowing is for investment

Pressure is mounting within the party, with CDU state premiers urging Merz to include debt brake reform plans in the campaign for the early elections on 23 February.

Speaking at an event on Wednesday, Merz stated: “Of course, reform is possible. The question is: why? To what end? What would be the result of such a reform?”

Merz emphasized that he would not support reform aimed at increasing consumption or social policy spending. However, he suggested that if additional borrowing were used to increase investment, “then the answer could be different.”

According to the Greens, the only way out of the crisis is a revision of the debt brake

Merz noted that the debt brake was a “technical issue” and stated that he did not wish to engage in the discussion at that moment. Later, a source close to the CDU leader told Reuters that Merz had no immediate plans to reform the debt brake.

However, Bruno Hönel, a member of the Bundestag’s budget committee from the Greens, argued that if Merz assumed power, the debt brake would be reformed immediately, pointing out that the budget could not be financed without borrowing during such a crisis.

Hönel stated, “If you want to work with the budget in a forward-looking way, there is no other way than to reform the debt brake.” He also noted that 80 billion euros would be needed to meet NATO’s 2% defense spending target by 2028, nearly 30 billion euros more than the draft budget for 2025, which currently envisions defense spending of 53 billion euros.

Traffic light coalition collapses over debt brake debate

The debt brake was a key factor in the collapse of the coalition, leading to calls for early elections.

Christian Lindner, leader of the fiscally conservative Free Democrats (FDP), who was dismissed as finance minister last week by Social Democrat Chancellor Olaf Scholz, claimed that Scholz had pressured him to suspend the debt brake.

Suspending the debt brake in an emergency, citing special circumstances, is possible with a government majority. Germany reinstated the debt brake in 2024 after a four-year suspension to allow for extra spending on the COVID-19 pandemic and the energy crisis.

CDU’s sister party CSU opposes reform

However, reforming the debt brake requires a two-thirds majority in both the Bundestag and the Bundesrat.

The CDU premiers from the eastern states support the debt brake reform, while Markus Söder, the leader of Bavaria’s CSU, opposes it. Söder emphasized that “absurd extra spending” must be cut first.

Before discussing the debt brake, Söder argued that the fiscal equality of federal states must be addressed, referring to Germany’s income redistribution system.

The wealthy state of Bavaria recently had to transfer over €9 billion to other states. “This cannot go on,” Söder declared.

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