The unsexy wealth of commodities

Natural resources like oil and gold are instantly associated with wealth, but there are plenty of other, less glamorous commodities that generate a lot of money – or conflict – for the countries who have them.

Commodities have no real difference in product quality from one unit to the next. They are the raw materials used to make things we buy, from food to electronics to petrol.

While oil paid for the breathtaking construction of emirates like Abu Dhabi and Dubai, other countries are reliant on their own, lower-key resources.

These include natural gas used for fuel, coltan used in electronics, corn for human and livestock feed, nickel for stainless steel consumer products, and bauxite, which is turned into the widely-used metal aluminium.

Some powerful companies have surprisingly low profiles, because they trade in commodities which are sold directly to other businesses rather than consumers.

For example, the world’s largest mining company Australia’s BHP Billiton is more profitable than companies including HSBC, Unilever, and McDonald’s.

Australia benefits from huge deposits of mineral commodities. Exports of minerals like iron ore, coal, gold, lead, zinc, uranium and aluminum earn the country about US$140 billion a year.

Iron ore is used to make steel and is a quietly powerful resource. Almost 95 per cent of all metal used each year is steel, and analysts believe of all commodities only oil is more crucial than iron ore to the world’s economy.

While resources are a blessing for countries like Australia, they can be a curse for those living in less stable regions.

In June, US geologists announced they had discovered nearly US$1 trillion worth of mineral deposits in Afghanistan – a country with a total economic output (GDP) of US$12 billion.

The deposits include huge amounts of iron ore, copper, gold, and lithium. Afghanistan may have as much lithium as Bolivia, which has the world’s largest known reserves.

Used in batteries, lithium will become even more valuable as a crucial ingredient for hybrid and electric cars. As a result, Afghanistan could become one of the world’s most important mining countries.

But the discovery could make the Taliban even more determined to regain control of the country. At the very least, it will increase the corruption already rife in Afghanistan’s government, as China and the US scramble to secure the mining rights to the deposits.

A study by the World Bank has found that the greater a country’s dependence on a handful of export commodities, the greater the chance of fighting within that country.

Rebels from Angola to Sierra Leone were infamously funded by ‘blood’ diamonds, but it was the less flashy trade in timber which kept the dictatorship of Charles Taylor alive in Liberia.

Taylor is known as “Africa’s monster” because of his brutal rule between 1997 and 2003.

Currently on trial at the Special Court for Sierra Leone, he is accused of instigating murder, mutilation, rape and sexual slavery during wars in West Africa, which claimed more than 250,000 lives.

Taylor’s regime relied on the trade of timber for revenue. UN sanctions were imposed, but the trade in timber was not included at the insistence of France, which imported up to a third of it.

The promise of timber, oil and other valuable resources was a major reason why Indonesia invaded East Timor in 1975.

The invasion and subsequent 25-year occupation led to the deaths of at least 100,000 East Timorese by murder, starvation and disease.

In 1998 a war broke out in the Democratic Republic of Congo that has killed more than 5 million people.

Known as 'Africa's world war', many of the neighbouring African nations and armed groups who got involved were enticed by the Congo's vast mineral wealth.

Despite the war officially ending in 2003, rebel groups continue to battle the military in the east of the country for ownership of the mines.

The violence is fuelled by western companies, who buy the minerals from the rebel-controlled mines.

Even members of the national armies have focused on getting rich from their control of mining sites, rather than stopping widespread human rights abuses including mass killings and rape.

More conflict like that seen in East Timor and Congo is possible, as growing populations and industry lead to global shortages of commodities from water to precious metals.

Already, tensions are rising about countries stockpiling key commodities. The US and the EU are considering a World Trade Organisation case against China restricting its exports of commodities like magnesium and bauxite, important for producing steel.

Sir David King, the UK’s former chief scientific adviser, has predicted that a dwindling supply of commodities will see this century marked by “resource wars.” That may be true, though it’s certainly nothing new.

By Nick Jones