Falling commodity prices in a volatile corner: Why 'quiet' Mauritania is being watched closely

Mauritania is of strategic importance in the “war on terror”, on account of its “ungoverned” spaces. But loss of mining revenues threatens stability.

MAURITANIA doesn’t often make the news. It’s mostly desert and sparsely populated – just 3.5 million people for a land area larger than Egypt or Nigeria.

But Mauritania is of strategic importance in the “war on terror” in Africa, on account of its “ungoverned” spaces – as US securocrats see places like the vast Sahara desert – which run the risk of being used as a safe haven or rear base for terror groups.

Last year, the US Africa Command gave Mauritania a $21m pair of military aircraft outfitted with advanced surveillance equipment; cooperation between the two countries has deepened in recent years amid growing threat from al-Qaeda in the Islamic Maghreb. 

The country is also hosting French troops as part of the regional counter-terrorism Operation Barkhane, launched in July 2014.

Mauritania borders Mali to the east and south; last week, an Al-Qaeda-allied group, Al-Mourabitoun, claimed responsibility for the attack on Radisson Blu hotel in Bamako, Mali’s capital, in which 21 people were killed.

Mali has been embroiled in political militancy in the north of the country, particularly in the past three years, with both separatist and jihadist groups pursuing their causes through violence. 

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It makes Mauritania’s stability of particular importance to countries like the US and France. Mauritania’s president Mohamed Ould Abdelaziz came to power in a coup in 2008, and his authority rests heavily on his ability to control the political elite, military and civil service through patronage.

Since he came into power he has kept defence spending high, particularly military salaries.

But Mauritania’s economic position is deteriorating in the wake of China’s slowdown, which is drying up public coffers and increasing the risk of civil unrest.

In the latest outlook brief on the country, risk analysts PGI Intelligence underscores Mauritania’s vulnerability – the country depends on the mining industry, particularly iron ore, for around 70% of export revenues.

However, high production and transportation costs over the vast Sahelian hinterland has cast doubt over the economic viability of many mining projects.

In March, Swiss-based miner Glencore announced it had abandoned its Askaf iron ore project, saying it was not economically viable in current market conditions. The company had already spent $1 billion on rail and port infrastructure to support the project, highlighting the operational challenges associated with mining in Mauritania’s remote interior.

Mauritania needs an iron ore price of over $100 a tonne for its mining to be profitable, but iron ore prices have sunk to the lowest level in at least six years. Ore was trading at $43.89 a tonne this week, compared to a record high of $190 a tonne in Februrary 2011.

Popular in China
The country is especially vulnerable to blowback from the Chinese slowdown because its iron ore has a high silica content, which European importers tend to avoid but is popular in China.

The outlook is gloomy - Chinese iron ore prices are expected to drop below $40 by the end of the year, analysts say, and will likely not recover for at least two years as a result of long-term over-production at Chinese steel mills. Exports of Mauritanian iron ore to China were down 74% in the first quarter of this year.

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Mauritania’s gold mining sector faces similar difficulties. In September, Canadian mining company Kinross laid off 20% of its workforce at its flagship Tasiast gold mine – 300km north of the capital Nouakchott – in response to a 30% drop in gold prices since 2012.

The company had announced in February that it had indefinitely postponed a $1.6 billion investment to increase annual production ten-fold. Latest estimates on the cost of producing an ounce of gold at Tasiast were at $1,063, compared to $690 an ounce at Kinross’s Chirano mine in Ghana.

Fractious system
The prolonged loss of mining revenues has potentially destabilising consequences for Mauritania’s weak and fractious political system, the PGI brief states.

The military has a history of intervention in politics, including in 2005 and 2008, but so far president Abdelaziz has maintained broadly positive civil-military relations, by keeping close allies in senior ranks and maintaining high defence spending.

The deteriorating economy, however, gives the president less flexibility to co-opt potential rivals within the military, increasing the possibility of a coup as his opponents attempt to exploit tensions relating to the succession process.

In this volatile political context there is a “moderate risk” of a military coup in the next four-year outlook, the analysts say, though this is partially mitigated by the president’s competent political management and security cooperation with the West.

The “quiet” country is worth watching closely in the coming months.

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