The European Union and Serbia signed a deal on Friday to develop the supply of lithium seen as a crucial building block to achieve Europe’s transition to a green economy.

The memorandum of understanding inked during a “critical raw materials summit” in Belgrade is seen as the first step in developing Serbia’s lithium resources and potentially moving up the supply chain to include manufacturing lithium batteries and component parts.

Lithium is a strategically valuable metal needed for electric vehicle batteries, making it key for helping Germany’s flagship automotive sector shift to greener production.

The deal comes just days after a court decision saw the Serbian government re-approve a lithium mining project that had been on hold for two years following mass protests.

Serbia has vast lithium deposits near the western city of Loznica, where a mining project being developed by Anglo-Australian mining giant Rio Tinto has been a perennial political fault line in the Balkan country in recent years.

“There will be no project without full protection, and we know it will happen because we are bringing the best experts from Europe to Serbia,” said Serbian President Aleksandar Vucic during the summit, which was attended by German Chancellor Olaf Scholz and European Commission Vice-President Maros Sefcovic.

“Chancellor Scholz has offered Germany’s support for Serbia to develop a more extensive lithium production value chain, which will bring us billions in investments,” Vucic added.

Scholz said the deal would help ensure that Europe remains “sovereign in a changing world” and “is not dependent on others”.

Scholz praised the deal that paves the way for the disputed excavation of lithium, a mega project that could reduce Europe’s dependency on China but one that has been fiercely criticized by environmentalists and opposition groups.

He said after the signing ceremony that “this is an important European project,” adding that it’s necessary for Europe “to remain sovereign in a changing world and not be dependent on others, which is why new sources of raw materials should be discovered.”

“I’m glad the decision was made,” Scholz said. “I admit, this decision required courage, but it was made at the right moment.”

“This is a project that is good because it will be developed in an environmentally compatible way, and is good because it creates economic activity and prosperity where world history made it possible to bury raw material in the earth, and we are now extracting it,” Scholz said.

The EU is seeking to boost European production of lithium and electric vehicle batteries to avoid becoming dependent upon China.

The Serbian government reinstated the licenses for the mining project earlier this week, after revoking in 2022 the permits granted to Rio Tinto following a string of demonstrations over environmental concerns.

The move came after Serbia’s constitutional court ruled last week that the permit cancellations were “not in line with the constitution and the law”, paving the way for the government to resume the project.

Vucic, whose party won parliamentary elections in December, has said environmental protection would be a priority after extracting new assurances from the company.

Rio Tinto has said Serbia’s the Loznica mine could produce an estimated 58,000 tonnes of lithium annually, enough to make batteries for 1.1 million electric vehicles.

During an interview with Germany’s Handelsblatt ahead of the Belgrade summit, Vucic said conversations were ongoing with a range of European automakers including Mercedes, Volkswagen and Stellantis.

Vucic also said the country’s lithium exports would be sold only to European partners for the time being, despite interest from Chinese manufacturers.

Germany’s VDA auto industry association praised the deal, saying it would help “achieve the ambitious goals of climate protection”.

Opponents remain worried however over the mine’s impact on the environment and public health.

Critics of the mine have long accused Vucic’s government of having a poor track record with regulating its industrial sector.

Outside of the summit, a small group of protestors surrounded by police slammed the deal.

“Leave lithium and democracy to the Serbian people,” said Savo Manojlovic, a leading organiser of the protests against the mine.

Protestors also say the country is taking the biggest environmental risks with the mine for the sake of the EU’s transition to a green economy.

Vucic has hinted that Serbia could begin mining lithium as early as 2028.

The president has also said he would push for guarantees that limited the sale of raw materials in favour of Serbian-produced batteries or component parts.