Saudi Arabia Strives to Become Major Player in Mineral Supply Chains

Vision 2030: Mining and industrial value added

Saudi Arabia’s prosperity is rooted primarily in the production and export of oil and gas. However, the decline in global oil prices in 2014–15 and the acceleration of the green transition have put pressure on the King­dom to diversify its economic model. In 2016, Saudi Arabia responded to that pres­sure by launching “Vision 2030”, which pro­vides for significant investments in tourism, renewable energy and large-scale construction projects such as the NEOM megacity. At the same time, it is ambitiously expanding its mining industry, with the focus not only on tapping its mineral resource reserves but, more important, on boosting local process­ing capacity. Also, Saudi Arabia is aiming to increase industrial value added through battery and hydrogen production as well as the manufacture of electric vehicles (EVs). To achieve these goals, the Kingdom is actively seeking partners and expertise from both the West and China (the latter’s strategic approach to the resources sector closely resembles Saudi Arabia’s current strategy). It is the financial strength of the PIF that largely underpins the Saudi efforts across various stages of the supply chain – from resource extraction to EV production – raising questions about the market viability of those projects and the potential risks for partnerships.

Until now, mining has played a minor role in the Saudi economy, contributing less than 1 per cent to GDP. The main focus has been on gold, while phosphate, bauxite, copper, zinc, feldspar and silver are mined, too. Those minerals the EU considers stra­tegic, copper and feldspar, account for just 0.3 per cent and 1.6 per cent of global pro­duction, respectively. However, Saudi Ara­bia has repeatedly pledged to invest heavily in domestic mining: it recently set the tar­get of investing some US$46 billion by 2030. For its part, the consortium Ajlan & Bros, in partnership with the British firm Moxico Resources, plans investments of around US$14 billion by 2030.

Internationally, Saudi Arabia is seeking to establish a favourable image on the global resource market. Since 2022 it has hosted the annual Future Minerals Forum (FMF), in a bid to position itself as a hub for international resource diplomacy. At the last FMF, which took place in January 2024, the Kingdom released a new estimate of the value of its mineral resource reserves, in­clud­ing untapped deposits such as rare earth elements: approximately US$2.5 tril­lion. Currently, the state-owned Saudi Ara­bian Mining Company (Ma’aden) operates 17 local mines and sites. Because geological data are lacking, Saudi Arabia launched a US$530 million geological survey pro­gramme in 2020 in cooperation with the Chinese Geological Survey. The Kingdom, which relies on foreign expertise and in­vestment for exploration and new mining projects, has been actively seeking to attract international companies. In 2021, new legis­lation that aims to facilitate foreign access to mining licences went into effect. By the end of 2023, the number of mining licences had increased from eight to 19 and exploration licences from 58 to 259.

Currently, foreign investors have to ob­tain a licence from the Saudi Ministry of Investment to operate in the country. Start­ing in February 2025, a legislative amendment will streamline this process: instead of the licence requirement, applicant will have to complete a simplified registration process and foreign investors will receive equal treatment with Saudi companies. Other regulations for mining companies, including licences for extraction projects, are drawn up by the Ministry of Industry and Mineral Resources, which in January 2024 launched a US$182 million exploration funding programme aimed at reducing financial risks for companies. Despite all these measures, it will take years for Saudi Arabia’s mining sector to significantly in­crease production, as both the planning and construction of new mines are time-intensive.

Saudi Arabia’s alliances: Balancing between West and East

Within the framework of Vision 2030, Saudi Arabia is seeking to strengthen transactional economic relations and present itself as a geopolitically neutral partner. It is this status that it leverages in its resource diplo­macy, as was evident at the FMF in January 2024, which attracted 14,000 participants and 75 government representatives. Numer­ous memoranda of understanding were signed across geopolitical divides. In prac­tice, however, Saudi Arabia appears to be aligning more closely with the West, pro­moting itself as a reliable partner for the latter’s diversification efforts.

This westward orientation is also reflected in Saudi Arabia’s “Green Shoring Initiative”, aimed at appealing to Western inves­tors interested in Saudi Arabia’s green energy potential. The Kingdom is cooperat­ing especially closely with the US, which remains its most important political part­ner, despite recurring tensions. In 2023, the US ranked sixth in terms of Saudi exports and second in terms of imports. Also, US and other Western companies are active in Saudi mining, where networks are already established and the number of joint ventures with Western firms, such as Alcoa (bauxite extraction), is growing.

However, at the institutional level, resource cooperation with the US is limited: there is no free trade agreement enabling Saudi companies to benefit directly from the Inflation Reduction Act (IRA), nor is Saudi Arabia a member of the US-led MSP; moreover, such membership is unlikely, as it would contradict Saudi Arabia’s declared geopolitical neutrality. Nonetheless, amid the US push to decouple from China, Saudi Arabia is an important partner for the United States. The two countries have already dis­cussed securing critical minerals in Africa. For its part, the US seems to view Saudi Arabia as a strategic partner for investments in mineral-rich countries and regions that Western companies consider too risky and in which they are therefore reluctant to invest.

Such cooperation could also appeal to the EU and Germany. Although there is no institutionalised form of collaboration in mineral resources between Saudi Arabia and the Union, the groundwork is being laid. In 2022, the EU and the Gulf Cooperation Council (GCC) issued a joint declaration on a strategic partnership. At the inaugural EU-GCC summit in October 2024, discussions focused, among other things, on regional security, cooperation in energy and mineral supply chains, and the potential for a free trade agreement. Currently, mineral supply relations between the EU and Saudi Arabia remain marginal; for instance, just 12 per cent of Saudi aluminium exports went to the EU in 2022. Meanwhile, German com­panies are active in Saudi Arabia: Siemens, for example, secured a billion-dollar power plant contract in 2024. And there are plans for a second lithium processing plant, which would process Austrian lithium ore and supply companies like BMW.

To the east, Saudi Arabia is also deepening its relationship with China, which until now has remained primarily transactional and is considered at the political level to be expandable. This relationship is driven largely by the energy sector: China is by far the largest buyer of Saudi oil. Mutual investments are increasing, although they lag those with Western nations. In the resource sector, the geological survey agen­cies of the two countries are working together and agreements have been signed on the downstream processing of mineral resources.

So far, there is no known major Chinese-Saudi investment project in the mining sec­tor. One likely reason for this is potential competition between the two countries within the resource sector. China already has significant processing capacities, from which it can benefit strategically. It remains unclear to what extent the People’s Repub­lic is willing to share its technology or pur­sue joint ventures. Competition is emerging in resource diplomacy, too. At the FMF in 2024, Riyadh introduced the concept of a “super-region” extending from Africa to Central Asia under Saudi leadership – a project that strongly resembles China’s Belt and Road Initiative.

A similar dynamic can be observed in BRICS+ cooperation in the resource sector. The invitation extended to Riyadh to join BRICS+ attracted international attention, as Saudi membership would add a raw material producer and investor to the forum. But the Kingdom has shown little interest in becoming a full-fledged member. While it participates in BRICS+ meetings, it is seen as playing a passive role and has not yet responded officially to the membership invitation. Furthermore, BRICS+ resource cooperation is less active than public per­ception suggests. Although there have been initial steps taken towards cooperation among geological survey agencies, the plans to establish a preferential trading platform (similar to the plans by the MSP) among BRICS+ remain vague. Concerns among Western actors that BRICS+ may be prepar­ing to form a cartel in the resource sector are unfounded at this time. Unlike the oil market, mineral supply chains are complex, which makes the formation of a cartel more difficult. Also, there is significant rivalry between the various production locations, especially in processing, which is a sector dominated by China.

Saudi Arabia’s diplomatic efforts – like those of other Gulf states – are increasingly targeting resource-rich countries of the “Global South”, primarily in Africa and Latin America, to secure stakes in mining projects. In July 2024, Saudi Mining Minis­ter Bandar Al-Khorayef visited Chile and Brazil. The topic of resources featured pro­minently at the first Saudi Arabia-Africa summit in 2023, while delegations from Riyadh have been active in mineral rich countries – such as Zambia – where Saudi Arabia is planning for investments.

Saudi engagement in the Global South is perceived ambivalently. On the one hand, the Kingdom is welcomed both as a geo­politically “neutral” actor with no Western colonial past and as a financially strong, fast-track investor alongside China. On the other hand, some actors are wary of this newcomer – for two reasons. First, while the Kingdom offers investment packages similar to those of China, its lack of experi­ence and doubts about proper implemen­tation are cause for concern, not least because of the rapid conclusion and opaque nature of deals. Second, Saudi plans to estab­lish local processing and technology pro­duction within its own borders are viewed critically by many producers in the Global South, as this plan conflicts with their own ambitions to add local value.

Supply chain standards and transparency risks

As it seeks to diversify its supplies of raw materials, the EU remains concerned about the issue of transparency and standards setting in resource supply chains. Although Saudi Arabia has shown the will to imple­ment “best practices” with respect to en­vironmental, social and governance (ESG) criteria, the Union should take a closer look at what it is doing, as there are gaps in standards setting and implementation both in Saudi Arabia’s mining sector and along its supply chains. This is of direct relevance for European buyers: with the adoption of the EU Corporate Sustainability Due Dili­gence Directive (CSDDD) and the impending ban on products made with forced labour on the EU market, there has been a signifi­cant expansion of legally mandated cor­porate due diligence obligations. Furthermore, information on sustainability govern­ance in the Saudi mining sector remains limited. While the revised mining law of 2021 is considered the most progressive in the Gulf region, analyses point to deficiencies in standards setting and enforcement. Observers also criticize the restricted access to up-to-date and transparent data.

Decarbonisation is central to Saudi Ara­bia’s Vision 2030. Riyadh hopes that cheap green energy will serve as a competitive advantage, especially for energy-intensive industries like steel and aluminium, which are subject to the EU’s Carbon Border Adjustment Mechanism (CBAM). Ma’aden, for instance, aims to achieve climate neutrality by 2050. However, there is still a long way to go, as currently Saudi Arabia’s energy cost advantage is based largely on fossil fuels. In 2023, renewables accounted for just 1.4 per cent of Saudi electricity generation. Besides decarbonisation, there are other environmental standards that need to be significantly improved in the Saudi mining sector. Licence applicants are required to submit environmental impact assessments and management plans and (since 2021) provide financial guarantees for environmental rehabilitation. However, a study suggests that these regulations should be amended: the current provisions are deemed too vague, while the lack of clear guidelines and weak sanctions hinder effective implementation.

With regard to the ambitious plans to develop the sector, there are challenges related to social and labour rights as well as human rights risks. Although Ma’aden has a community management system, which guides the companies engagement with mining-affected local communities, overall Saudi Arabia lacks legal requirements for corporate responsibility or a social licence to operate – namely, the approval of, and ongoing support from, all local stakehold­ers, which is common in other mining geographies. Meanwhile, reports by inter­national human rights organizations have raised concerns: activists opposed to forced relocation for the NEOM megaproject have allegedly been persecuted and, in some cases, sentenced to death.

Among the efforts to increase jobs for the local population, the “Saudisation” policy stands out. According to Ma’aden, Saudi nationals already make up 70 per cent of the company’s workforce, but finding quali­fied professionals remains challenging de­spite competitive salaries. Many new posi­tions – especially temporary ones created for the construction of mines and process­ing facilities – are for lower-skilled work­ers and offer less attractive conditions of employment; whether Saudi nationals will fill those positions remains uncertain. More­over, labour conditions for foreign workers in Saudi Arabia have come under intense scrutiny. Despite improvements in the legal framework, the enforcement of the law remains weak and there is a signifi­cant risk of abuse. Amnesty International highlighted these issues in the context of a memorandum of understanding between the United Kingdom and Saudi Arabia about collaboration in the mineral sector. Additionally, labour protection in the min­ing industry is considered insufficient not least because effective complaint mechanisms are lacking and both the formation of independent labour unions and strikes are prohibited.

Going forward, Saudi Arabia is likely to become more important as a trading and processing hub. However, like China, it would act as a “link” in the supply chain, issues of transparency and insufficient stand­ards could present challenges for European buyers. In this context, multilateral frame­works are essential to promote international cooperation and standards. Saudi Ara­bia’s participation in those frameworks would be important. The Kingdom is now a member of the International Governmental Forum on Mining and Minerals (IGF) but is still not taking part in key initiatives such as the Extractive Industries Transparency Initiative (EITI) and the new United Nations Panel on Transition Minerals.

Recommendations for targeted cooperation with Saudi Arabia

Strengthening the resilience of Europe’s resource supply and de-risking from China are top political priorities for the EU and Germany. To this end, Europe is seeking strategic partners to diversify its supply chains. For its part, Saudi Arabia is actively positioning itself as a potential partner in this area; the groundwork for closer co­opera­tion is currently being laid through the GCC. However, there are obstacles to forging a strategic raw material partnership with Saudi Arabia that could be deemed suitable.

First, significant systemic differences exist between Saudi Arabia and the EU, especially with regard to governance, which has direct implications for economic policy. Through Vision 2030, Saudi Arabia is seek­ing to diversify its economy while main­taining state control over it. Not least, it is the resource sector that is subject to direct political influence owing to the dominance of the PIF, which holds majority stakes in Ma’aden and Manara. This could impact the operational efficiency of the sector and poses the risk of supply relationships being co-opted for foreign policy objectives. More­over, direct state control does not foster transparency and concerns are rife about environmental and human rights standards in mining and processing. For this reason, a strategic raw material partnership with Saudi Arabia is currently not advisable as it might be perceived by EU companies as offering political support and could involve state financing – for example, from Ger­man resource funds.

Nonetheless, targeted, selective cooperation should be pursued. Saudi Arabia is playing an increasingly important role in mineral supply chains and has demonstrated the will to improve its standards setting so that they align with international best practices. The EU, alongside MSP partners such as the United States and the United Kingdom (which already cooperate with Saudi Arabia), could intensify dialogue in areas such as governance and standards setting and encourage Saudi Arabia’s in­volvement in international frameworks, including the EITI.

Furthermore, European companies are expected to become increasingly involved in Saudi Arabian supply chains through both direct investments and offtake agree­ments, as in the case of BMW. German sup­port for the private sector should therefore be stepped up. For example, the German Chambers of Commerce Abroad (AHK) and the German Mineral Resources Agency (DERA) could offer their expertise and advice about the opportunities and risks of cooperating with the Saudi raw minerals sector as well as the specific due diligence requirements.