Gary Zhou 
It is a wild but real question: Would Russia be invading Ukraine right now if Elon Musk hadn’t shifted the course of automotive history?
This article came about from some people proposing that the rise of Elon Musk and the EV revolution made Ukraine’s mineral deposits too valuable for Putin to ignore. Depending on who you believe, the abundance of rare-earth metals in Ukraine needed to power the EV revolution is the “real” reason that Russian President Vladimir Putin has launched an invasion on the sovereign nation.
It’s unrealistic to think that Putin invaded Ukraine just for some more natural resources. As most Ukrainians and Putin experts have pointed out, the gruesome invasion appears to be a combination of Putin’s disdain for Ukrainians who think they aren’t part of Russia (which means almost all Ukrainians), the threat of a free and blossoming democracy right next door to Russia (which might give more Russians ideas that Putin doesn’t want them to have), and Putin’s dream of putting the USSR back together — or a Russia even further back in time and larger in geography. (Notably, Putin also got divorced in the year that he invaded Crimea, 2014, and he seems ridiculously isolated from the rest of the world these days, especially since the COVID-19 pandemic began.) All of those explanations do not mean that there isn’t an EV and Elon Musk angle, though.
The transportation industry is electrifying. Nowhere is that more apparent than in Europe. In 2021, 19% of new passenger vehicle sales in Europe were plugin vehicle sales, and 10% were full-electric vehicle sales. There were the same percentages in January 2022, and January is known to be one of the weakest months — if not the weakest — for EV sales, so expect 2022 to fly past 2021’s result.
Meanwhile, while large superpowers like the US and China have very diverse economies, the Russian economy is largely based on oil & gas. The late Senator John McCain famously said, “Russia is a gas station masquerading as a country.”
“It’s kleptocracy. It’s corruption. It’s a nation that’s really only dependent upon oil and gas for their economy, and so economic sanctions are important,” he added.
And all of that is important without noting that Russian oil & gas production has become harder and harder, more and more costly, and less and less profitable.
The Russian Gas Station
Wikipedia writes, “The oil and gas sector accounted up to roughly 40% of Russia’s federal budget revenues, and up to 60% of its exports in 2019.[51] In 2019, the Natural Resources and Environment Ministry estimated the value of natural resources to 60% of the country’s GDP.[52]” In an article two years ago, the Warsaw Institute wrote, “Vladimir Putin has not taken advantage of the long years of the oil boom and huge state budget revenues from oil exports to reform the economy. Instead of diversifying and strengthening other industrial sectors, it turns out that in the years 2010-2018 Russia has become even more dependent on hydrocarbons. … It turns out that the share of oil and gas production in the Russian economy increased from 34.3% to 38.9%. The share of other types of production activity, in particular, the manufacturing industry, decreased from 53.2% to 50.7%.”
A move away from oil, something that is happening much faster than most presumed, is a great threat to the Russian economy, and thus to Vladimir Putin. Perhaps Putin did see this threat arising and decided that he would pursue his dream of expanding Russia before it was too late. Perhaps he thought, alone in his bubble of emptiness and callous “nationalism,” that he had better “return Russia to its former glory” now, before dying of COVID, a coup, or a citizen uprising.
Next, we have to admit that one of the reasons we’re here in 2022 talking about a very certain electric future for automobiles is the success of Tesla — and that is due largely to the influence of Elon Musk. Tick that box as “true,” but we’ll explain it in more detail further down.
Are you with us so far? Now, we’ll ask you again: Would Russia be invading Ukraine right now if Elon Musk hadn’t shifted the course of automotive history by investing in Tesla in 2004?
Are We Blaming Elon for War in Ukraine?
Obviously, we are not blaming Elon Musk for the Russian invasion of Ukraine. That said, it wasn’t all that long ago that Russia was spoken of as part of a “BRIC” of nations (Brazil, Russia, India, and China) that some believed would come to collectively dominate global economic growth by 2050.
That notion was largely driven by those nations’ low labor costs, “favorable demographics” (whatever that means), and abundant natural resources at a time of a global commodities boom in the early aughts. Natural resources aren’t created equal, however, and petroleum certainly isn’t the long-term, slam-dunk investment it once appeared to be (Goldman’s BRICS fund has lost 88% since 2010) … and that has an awful lot to do with Tesla.
Really? Tesla!?
Think of the automotive landscape in March of 2009, when Tesla first unveiled the Model S. The car business was in chaos, reeling from the global financial crisis. Only weirdos like Ed Begley Jr. and – well, me and Zachary and Chelsea Sexton … were thinking seriously about EVs. The closest thing there was to a “mainstream” electric car was the Chevy Volt concept GM showed in 2007 … and that was still a few years away.
There was nothing, in other words — and certainly nothing desirable. Heck, even the Tesla was a bit of a niche thing with a limited audience and a questionable future, according to the zeitgeist of the moment.
Then the videos started showing up on YouTube. All of a sudden, an electric car wasn’t just an expensive car. An electric car became a fast car. So fast, in fact, that it made the old guard of Mustang, Camaro, and Corvette buyers sit up and take notice. Heck, it made real supercar buyers sit up and ask themselves what it was, really, that made a car “super” at all — especially when the family sedan in the other lane just wiped the floor with their mid-engined exotic.
The Tesla Model S quickly became the car to have if you wanted the fastest car on the block, or wanted to be seen as a forward thinker. The virtue signaling of electrification and environmental responsibility was a bonus.
Fast forward to 2022, and just about every carmaker bar Honda and Mazda have committed to majority electric or all-electric lineups by the next decade, Tesla is the most valuable carmaker on Earth (worth more than the next several automakers combined), and even the blue chips like Ford are looking for ways to run their companies like Tesla.
And, yes, it’s noteworthy that none of those automakers — not a one — can build the millions of electric cars they’ll need to stay profitable without a bunch of rare natural resources. It is also true that Ukraine has an abundance of the very kind of natural resources that the EV revolution needs.
The Natural Resources Argument: What Has Ukraine Got?
Gallium, titanium, lithium, rare earths … it seems like there’s a lot worth fighting over in the Ukraine — especially if you’re the kind of person who values the upward trajectory of your stock portfolio over decency or human life. And, while some companies are bending over backwards to ensure their EV materials are ethically sourced and part of a closed-loop system to minimize their long-term environmental impact … others are not.
But, again, those minerals have always been there — and the calculus of the past, at least, balanced out “against” invasion. That may have changed, and a trillion-dollar valuation may have had something to do with that.
On the topic of lithium, The Indian Express writes, “Ukrainian researchers have speculated that the country’s eastern region holds close to 500,000 tons of lithium oxide, a source of lithium, which is critical to the production of the batteries that power electric vehicles. That preliminary assessment, if it holds, would make Ukraine’s lithium reserves one of the largest in the world. …
“Late last year, Ukraine started to auction off exploration permits to develop its lithium reserves, as well as copper, cobalt and nickel. All are natural resources that play critical roles in the clean energy technology essential to the shift away from fossil fuels that scientists say is necessary to ward off the worst consequences of climate change….
“Ukraine’s potential for lithium production had started to attract global attention. In November, European Lithium, an Australian firm, said it was in the process of securing rights to two promising lithium deposits in the Donetsk region, in eastern Ukraine, and Kirovograd, in the center of the country. The company said at the time it aimed to become Europe’s largest lithium supplier.
“The same month, the Chinese company Chengxin Lithium also applied for rights to lithium deposits in Donetsk and Kirovograd, according to news media reports, a move that would give it its first foothold in Europe. Neither company responded to requests for comment.”
Tell Me More About Chaos
Do you think a 17-year-old Elon Musk moving to Canada so he could avoid conscription in the South African army (which, while we’re here, seems like it was the right thing to do) was the starting domino in a long chain of events that would eventually see Vladimir Putin order Russian troops to march on Ukraine, or is this just another example of whatever it was that Jeff Goldblum’s character was going on about in Jurassic Park?
