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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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Fico accuses Merz of blackmail over threat to veto EU budget

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Slovak Prime Minister Robert Fico has hit back after German Chancellor Friedrich Merz threatened to veto the EU budget unless funding for Ukraine is secured.

Merz said he would block the EU’s seven-year budget if no agreement is reached on financial assistance for Ukraine.

The chancellor’s intervention has angered Central European leaders who are net beneficiaries of EU funds but do not want to take part in the next round of funding to support Ukraine’s war effort.

“What the chancellor is doing is typical blackmail, and I will not bow to it,” Fico told reporters in Bratislava.

Fico spoke alongside his Czech counterpart, Andrej Babiš, whose government has refused to participate in a future loan to Ukraine.

“I do not know why he said this,” Babiš said, referring to Merz’s stance.

Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday.

In a letter to European Council President António Costa, who will chair the meeting, obtained by The Guardian, Merz wrote:

“We must maintain our support for Ukraine in its struggle to defend itself. This is our shared vital interest. Yet bilateral aid provided to Ukraine is distributed unevenly, with the burden shouldered mostly by only a few member states.”

The EU agreed last year to provide a €90 billion loan to Ukraine, intended to cover two-thirds of its military and civilian spending for 2026 and 2027.

Since then, however, Russia’s relentless bombardment has placed a heavier financial burden on Kyiv, prompting President Volodymyr Zelenskyy to ask for €70 billion to plug the budget deficit.

The EU has endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, such as Britain and Canada, are expected to cover the rest.

Last year, Merz launched an initiative to tap €210 billion in frozen Russian state assets held in the EU, but the plan fell through due to opposition led by Belgium, which holds most of the funds in Brussels.

The €90 billion loan was the backup plan. Having opted out of that loan, Hungary, Slovakia, and Czechia indicated that they would not take part in the next round either.

Bulgaria joined these three member states following the election of Prime Minister Rumen Radev last April.

The question of funding for Ukraine is now spilling over into the fraught negotiations on the 2028-34 EU budget.

Germany, the largest net contributor, wants substantial cuts to the proposed budget and opposes the EU providing generous funding to member states that refuse to contribute to Ukraine’s financial needs.

Merz states in his letter that a “collective commitment without exceptions” is a “fundamental prerequisite” for closing Ukraine’s financing gap and for “discussing other matters, particularly those with financial implications.”

He also notes that, in the context of the EU’s next seven-year budget, known as the Multiannual Financial Framework, all member states must contribute to a “robust” financial perspective for Ukraine from 2028 onwards.

A German government official said:

“For the Multiannual Financial Framework (MFF) to be successfully concluded, it is vital that all EU member states provide financial support to Ukraine.”

Berlin is also aiming to shift decision-making on funding for Ukraine from unanimity to qualified majority voting, in an effort to prevent a single government from blocking EU decisions.

The letter reflects mounting frustration among the EU’s northern member states, Ukraine’s most generous backers, over lower contributions from other EU countries in Central and Southern Europe.

The task of brokering an agreement on the budget falls to Costa, the former Portuguese prime minister.

Costa wants a deal by the end of the year, ahead of elections in France, Poland, and Italy in 2027 that could complicate the process.

A spokesperson for Costa confirmed receipt of the letter without elaborating on details. “President Costa will dedicate time to the Ukraine issue at the informal European Council meeting in Dublin this week,” the spokesperson said, adding that funding for Ukraine would be addressed at a dedicated summit on the EU budget scheduled for 26-27 November.

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EU expects next Israeli government to adopt less aggressive posture

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The EU expects the next Israeli government to mend its “difficult relationship” with Brussels and adopt a more constructive approach toward Gaza and illegal settlements.

Israeli President Isaac Herzog tasked Gadi Eisenkot, the leader of the anti-Netanyahu bloc, on Sunday with forming a government.

Eisenkot stated that the country faces a “catastrophic diplomatic crisis” as traditional allies begin to reassess their relations with Israel.

Speaking to Rapporteur, several European diplomats stationed in Tel Aviv said they expect ties to get back on track.

“Whatever government comes in, we can try to revitalize relations because Israel is clearly a very important partner,” one European diplomat said, adding that Brussels expects the next administration to be “less aggressive”.

The diplomat noted that relations with Europe are currently “not very good”.

Israel cut off communication with Kaja Kallas, the EU high representative for foreign affairs and security policy, after Rapporteur revealed in June that she had compared Israel to apartheid-era South Africa during a visit to Mexico.

The diplomat stated that this decision, taken ahead of elections, was political in nature. A second European diplomat based in Brussels explained that the announcement came only a few days before an official visit by Dubravka Šuica, the European commissioner for the Mediterranean.

“This could have been interpreted as a tactic to divide Europe, but Israel had asked Kallas to deny the report; she did not do so,” the second diplomat said.

Brussels has repeatedly voiced its frustration with Israel over the humanitarian crisis in Gaza and the expansion of West Bank settlements.

However, EU governments blocked almost all sanctions proposed by the European Commission.

A third diplomat said opposition parties would “almost certainly take the issue more seriously” when it comes to tackling violence by West Bank settlers:

“We see Palestinians being expelled from their homes and new illegal settlements being built in the West Bank. There is a reluctance on the part of the current government to address this issue, which causes problems in our relations.”

The new government is expected to ease pressure on Palestinians and halt construction of the E1 settlement project, a controversial plan to build settler housing in the West Bank east of Jerusalem.

“They will probably try to deal with the problem of extremist settlers in the West Bank,” the diplomat added.

On Gaza, the diplomat described the situation as “a complete nightmare”, with two million Palestinians crowded into an area that accounts for roughly 35% of the territory.

“There are not enough tents for the winter, and not enough vaccines are reaching the area despite an increase in diseases,” the diplomat said.

The European official argued that Donald Trump’s peace plan met all the conditions for Europe. Although the EU had much to offer, neither the US nor Israel appeared interested in EU involvement in the process.

“We are currently training Palestinian police in the West Bank, and if permitted, we could do the same in Gaza,” the diplomat said.

The diplomat disclosed that Israel had agreed with Šuica that Europe would finance two projects aimed at improving sewage and water infrastructure in Gaza, continuing:

“However, none of these projects has started yet because there is a serious problem with dual-use goods. Getting materials into Gaza is very difficult because the Israelis say they could be misused if they fall into the wrong hands of Hamas.”

Israel insists that Hamas must be disarmed before subsequent phases of Trump’s plan can proceed.

With disarmament unlikely to happen in the near term, the EU argues that certain measures can be carried out in parallel.

“We can begin rebuilding sanitation systems in Gaza. We can start building desalination plants. We can begin providing energy and water to Gaza,” one diplomat said.

While Brussels hopes for progress on Gaza and the West Bank, it maintains that expectations regarding the establishment of a Palestinian state need to be “managed”.

The EU continues to advocate a two-state solution, yet most leading Jewish parties oppose the creation of a Palestinian state.

The diplomat noted that the next Israeli government will likely have “a very slim majority and not much room for manoeuvre”.

There is also a “major misunderstanding” between the EU and Israel that must be addressed. According to the diplomat, Europeans fail to recognize the “psychological impact” of 7 October on Israelis.

“This event changed the country and made the two-state solution even more distant than before,” the diplomat said.

In return, some Israeli politicians believe Europe has betrayed Israel despite what they view as a fight against “Islamist terrorism”.

“Their argument is that European politicians are somewhat afraid of the Muslim population in Europe,” the European diplomat said.

Europe strongly opposes Iran and the possibility of Tehran acquiring nuclear weapons, imposing sanctions in response.

However, the diplomat argued that the EU would not participate in a war because it lacks a common army:

“We are a diplomatic and economic power, which is why we resort to sanctions and diplomacy. The expectation that we would take part in a military operation is unrealistic.”

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Germany threatens EU budget veto over long-term Ukraine aid

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Germany has threatened to veto the European Union’s joint budget for the 2028-2034 period, which is currently under negotiation, unless every member state commits to providing financial support to Ukraine in 2027 and subsequent years, German Chancellor Friedrich Merz warned.

According to a report by the Financial Times (FT), Chancellor Merz set out Berlin’s condition for the budget talks in a letter addressed to European Council President António Costa.

In his letter, Merz wrote: “A collective commitment that every single one of us, without exception, will make a fair contribution to closing Ukraine’s budget deficit is an indispensable prerequisite for resolving this budget issue and, in particular, for addressing subsequent matters that carry financial implications.”

The German Chancellor stressed that a formula backed by all member states must be established to provide Ukraine with a reliable, multi-year financial perspective starting from 2028.

Merz also insisted that any agreed solution must cover the interest payments on debts incurred to finance the assistance provided to Kyiv.

Conversely, several countries within the bloc have cut financial aid to Ukraine, and the number of capitals adopting this stance is projected to rise next year.

In December 2025, Hungary, Slovakia, and the Czech Republic approved the EU’s 90 billion euro loan package for Kyiv only on the condition that they would not contribute to its costs themselves.

Alongside these three countries, Bulgaria has also stated that it does not plan to participate in subsequent financial assistance packages for Ukraine.

In France, far-right leader Marine Le Pen, who could potentially win the presidential election scheduled for spring 2027, recently told the FT that Paris has run out of funds.

Le Pen assessed: “The honest approach is to tell Mr Zelensky clearly, and even warn him: ‘Look, we cannot do more. We have already allocated the 90 billion euro EU loan, in which France’s share amounts to 18 billion euros. 18 billion euros is genuinely a huge amount of money.'”

The EU’s 90 billion euro loan, covering the 2026-2027 period, aims to meet two-thirds of Ukraine’s financing requirements.

Brussels expects the remaining 45 billion euros to be covered by other partners, including Canada, the UK, Norway, Japan, South Korea, and Australia.

Germany remains the largest net contributor to the EU budget.

In contrast, the four Eastern European countries seeking to avoid financing Ukraine rank among the largest net beneficiaries of the bloc’s budget.

Leveraging this balance, Chancellor Merz aims to use his influence in the EU budget negotiations to secure uninterrupted support for Kyiv in 2027 and the years beyond.

According to the FT, Berlin is also demanding that future aid packages be decided by qualified majority voting rather than unanimity, which is required under the current system.

A German government spokesperson told the newspaper:

“The issue of Ukraine’s financial needs must be resolved within the framework of the next EU budget. Financial support for Ukraine from all EU members is decisive for the successful conclusion of the budget talks.”

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