20th Jan 2022

EU pulls raw materials paper amid squabbling over commodity speculation

The European Commission has decided to delay the publication of a policy paper on raw materials and commodity markets at the eleventh hour after senior officials flagged up a number of areas likely to run into member-state opposition, primarily from France.

On Tuesday (25 January) a spokesman for the EU executive said the delay was unlikely to exceed one week, with other individuals insisting the decision was taken before critical comments were made by French President Nicolas Sarkozy a day earlier.

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Having recently taken over the presidency of the Group of Twenty major economies (G20), Paris has set itself the task of breaking what it perceives as a strong link between commodity speculation and price fluctuations of products such as wheat and oil, with suggestions the commission may be less convinced of the connection causing alarm.

"I will recommend a date for the publication of a study showing that speculation does not result in global price rises of raw materials: 1 April," Mr Sarkozy said ironically on Monday when questioned by a journalist over the commission's imminent document.

Later, French agriculture minister Bruno Le Maire said he found it hard to believe the commission's final draft of the paper - originally scheduled to be published this Wednesday - would deny the link between speculation and commodity prices. "If that was the case it would mean that we don't live in the same world," he said.

Since then, EU officials have been at pains to stress that they do believe there is a link between the two issues, arguing however that its exact nature is unclear.

"We have to refine our analysis to understand properly the reasons why markets fluctuate," said spokesman Olivier Bailly on Tuesday. "Is it demand led, is that why prices go up? Is it the weight of certain investments or speculation? We have doubts, we have queries, but we have no evidence."

Rises in global food prices in 2008 caused riots in a number of countries including Haiti and parts of Asia, while more recent unrest in parts of northern Africa has also been attributed to concerns over food prices.

Faced with presidential elections in May 2012, analysts say Mr Sarkozy has pinpointed the issue as a potential vote winner, hoping to use a successful G20 presidency this year as a springboard for re-election.

Other EU member states and international institutions are more cautious however, with one study by the IMF earlier this month suggesting rising demand from emerging nations such as China and India was a key determinant in setting commodity prices.

Privately, EU officials admit that, while Mr Sarkozy was probably quoted a line from an old draft of the commission's communication, the current document still needs further screening to make it more "politically acceptable", especially after a decision to merge two separate papers on raw materials and commodity markets was taken only one week ago.

Reports suggest that decision followed a request from France, prompting German concern the issue of commodity markets could detract attention from the need to devise a suitable EU strategy on securing access to raw materials.

As Europe's main manufacturer, Germany has been alarmed by recent restrictions on certain raw materials, in particular a decision by Beijing to limit exports of rare earth minerals, used in many electrical goods such as mobile phones.

"The new delay doesn't make a whole lot of sense," Green MEP Reinhard Butikofer told this website by telephone on Tuesday. "Commission President Jose Manuel Barroso is trying to pay a favour to Sarkozy and that is not the way to run the EU institution," added the German euro deputy who sits on the European Parliament's powerful industry committee.

People who have seen the commission's latest draft say earlier language on using WTO pressure to secure access to raw materials has been replaced with the need for greater EU co-operation with producer counties such as the Democratic Republic of Congo (DRC).

By 'co-operation' the paper means helping to provide infrastructure, granting access to key technologies and advice on good governance, said Mr Butikofer.

The document is also set to stress the need for transparency in the mining industry, with NGOs citing the struggle to secure control over valuable mineral deposits in eastern DRC as a primary reason behind the conflict in the region.

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