Bolivia’s ambition to become a global leader in lithium extraction has once again hit a legal and political impasse. A local court ruling in the Andean region of Potosí has ordered the suspension of two high-profile contracts for lithium industrialisation with Chinese and Russian firms, effectively halting over $2bn in combined proposed investments. The decision not only exposes systemic weaknesses in Bolivia’s resource governance but also lays bare the deepening rift between the national government and indigenous communities over environmental protection and democratic accountability.

The contracts in question, signed with Russia’s state owned Uranium One Group, a multinational conglomerate that is part of the management network of TENEX Group under Rosatom State Corporation, and China’s Hong Kong CBC (a subsidiary of CATL), were designed to establish large-scale lithium carbonate plants using Russian-developed direct lithium extraction (DLE) technology in the Salar de Uyuni. These agreements had yet to receive legislative approval but had already prompted preliminary activities on-site—something opponents argue occurred without proper authorisation or environmental assessments.

The legal order, issued by a mixed court in the locality of Colcha K, was prompted by a popular action filed by the Central Única Provincial de Comunidades Originarias de Nor Lípez, representing more than 50 indigenous communities in the Uyuni area. Their petition cited violations of environmental rights and indigenous self-determination, demanding comprehensive environmental impact studies and formal consultation processes prior to any industrial development.

As reported by Infobae and PV Magazine, the ruling bars the state-run Yacimientos de Litio Bolivianos (YLB) and the Ministry of Hydrocarbons from undertaking any administrative or operational steps related to the contracts until the judicial process is concluded. The communities hailed the injunction as a “historic measure” defending their territories, water sources, and cultural heritage from what they see as extractivist overreach.

Despite this, the Bolivian government has maintained that it has not been formally notified of the ruling. Vice Minister of Alternative Energies, Álvaro Arnez, claimed that until official communication is received, the legislative process surrounding the contracts will continue. His statement, quoted by El Periódico de la Energía, insisted that “the contracts are not in effect until approved by the Assembly,” brushing aside allegations that unauthorised exploratory operations were already impacting local water availability.

The contracts themselves reflect a bold strategy by the Arce administration to industrialise Bolivia’s immense lithium reserves, estimated at 23mn tonnes, the largest in the world. Yet critics have repeatedly warned that the agreements disproportionately favour foreign investors and expose Bolivia to significant financial and operational risks.

According to Fundación Milenio, the Uranium One contract obliges YLB to repay all construction and exploration costs, despite the Russian partner having no obligation to operate the plant unless a separate agreement is reached. “The core issue is what happens if UOG refuses to operate the facility. YLB is left vulnerable, potentially saddled with a plant using foreign technology it may not know how to manage,” cautioned Henry Oporto, the think tank’s director, in an interview with El Diario.

Further concerns include the contracts' embedded royalty and legal clauses, which could limit Bolivia's flexibility to revise financial terms should national regulations change. While YLB President Omar Alarcón argues these provisions offer legal certainty and ensure national control over commercialisation, the opacity surrounding the deals and the rushed implementation of DLE technology—still unproven at commercial scale—raise serious doubts.

Minister of Economy Marcelo Montenegro has dismissed the judicial suspension as a "politically motivated obstacle to regional development." He lamented that “progress for Potosí and Oruro is being jeopardised,” pointing out that the international firms were offering technological services, not foreign ownership of Bolivian resources.

With general elections looming in August, the lithium saga is rapidly becoming a litmus test for Bolivia’s economic policy, democratic legitimacy, and environmental stewardship. Given the tense political climate, significant changes are likely as the country navigates the complex challenges surrounding its “white gold.” Bolivia’s lithium remains as politically volatile as it is strategically valuable.