Protests outside the Kumtor gold mine in northern Kyrgyzstan have ended and the mine has resumed operations. But related unrest shifted south over the weekend.
Outside Jalal-Abad, Kyrgyzstan’s third-largest city, demonstrators are blocking the country’s only north-south highway, creating a traffic jam several kilometers long, local media report. Since Friday, protestors also have occupied parts of the main government building in the city.
They are demanding the release of three nationalist lawmakers serving short jail terms for stoking unrest last October amid calls to nationalize the profitable mine, which, in a good year, produces 12 percent of Kyrgyzstan’s GDP.
Jalal-Abad is the stronghold of Kamchybek Tashiev. In that October incident, he led supporters over the fence surrounding parliament, vowing to “replace this government.” A Bishkek court this March found Tashiev, Sadyr Japarov and Talant Mamytov – all lawmakers with the Ata-Jurt party, which draws its support largely from the south – guilty of trying to overthrow the government. The sentences were seen as light, but deprived the three of their parliamentary seats. Tashiev, who announced a hunger strike today, is due to be released this autumn.
Authorities in Kyrgyzstan have declared a state of emergency and curfew after police clashed with protestors who have forced the country’s largest enterprise, the Kumtor gold mine, to shut down.
Since Tuesday, hundreds of protestors have blocked the road to the high-altitude mine (or thousands, depending on the source). They are demanding Kumtor pay for new schools, hospitals and roads in the region, and calling on the government to tear up the existing operating agreement. On May 30, protestors seized an electrical substation and cut power to the mine.
Officials said 92 people had been arrested and 55 wounded, including security forces, in the May 31 clashes around Barskoon on the southern shore of Lake Issyk-Kul. Police used stun grenades and rubber bullets, according to Kloop.kg. Some local news sites reported that protestors took the head of the district hostage, later exchanging him for detained protestors.
In an open letter to the prime minister, Kumtor outlined how it has fulfilled many of the protestors’ demands through the tens of millions of dollars it pays into a development fund for Issyk-Kul province and other contributions.
The road to the Kumtor mine, which sits at 4,000 meters in the Tien Shan mountains.
For the last three days, several hundred protestors have again blocked the road to Kyrgyzstan’s largest and most lucrative enterprise: the Kumtor gold mine. Late on May 30, demonstrators seized an electricity substation and cut the power supply to the mine, the company announced on Twitter.
The protestors – mostly angry young men, judging from photos – have demanded environmental safeguards and more investment into local infrastructure. Specifically, they want hospitals, schools and gymnasia. Some also wish to tear up the government’s 2009 operating agreement with the company operating the mine.
“It’s like first slaughtering a cow and then asking her for milk,” one Bishkek analyst said of the demands.
Kumtor – which produces about half of Kyrgyzstan’s exports and, in a good year, 12 percent of GDP – is a frequent target. Environmental concerns have plagued the operation since it began in the mid-1990s, heightened by a sodium cyanide spill into a river in 1998. But few believe environmental concerns alone are behind the regular unrest.
In a country with widespread unemployment and few opportunities, young men like those blocking the road this week are easily whipped into a fury. Many observers believe they are paid. And the timing of this particular roadblock, which began on May 28, is curious.
Following the launch of a corruption probe in the UK involving a natural resources giant with strong links to Kazakhstan, the company, ENRC, has become the subject of a hostile takeover bid by powerful interests with connections to the Central Asian state.
The three oligarchs who founded the London-listed Eurasian Natural Resources Corporation – Alexander Machkevitch, Patokh Chodiev and Alijan Ibragimov (who are all believed to have powerful connections in Kazakhstan) – have teamed up with the Kazakh government to mount the takeover. Together the four parties hold a combined 55.33 percent of ENRC, with the three founders owning equal shares of 14.56 percent each and Astana owning 11.65 percent.
ENRC’s committee of independent directors has rejected the bid on the grounds that it “materially undervalues ENRC,” according to a May 17 statement.
The committee said that the City of London’s Panel on Takeovers and Mergers, which regulates takeover bids for London Stock Exchange-listed firms, had granted its request for an extension until June 3 for a decision on the bid, to allow the consortium time to make a better offer – something there is no guarantee it will do.
The takeover panel issued a statement on May 20 saying that another London-listed company linked to Kazakhstan, the Kazakhmys copper miner, is officially to be treated as part of the takeover bid, because Astana plans to use its stake in Kazakhmys to finance the ENRC buyout.
The United Kingdom’s Serious Fraud Office (SFO) has launched a criminal investigation into alleged corruption at a London-listed natural resources giant with strong links to Kazakhstan, British media report.
The SFO probe targets the Eurasian Natural Resources Corporation (ENRC), a company with interests in the energy and mining sectors mainly in Kazakhstan but also in China, Brazil and some African states. It is partially owned by three oligarchs believed to have powerful connections in Kazakhstan. The Kazakh government also holds a stake.
“The focus of the investigation will be fraud, bribery and corruption relating to the activities of the company or its subsidiaries in Kazakhstan and Africa,” The Guardian newspaper quoted the SFO – an arm of the British government – as saying in an April 25 statement.
ENRC, which is listed on the London Stock Exchange, said in a statement the same day that it “is assisting and cooperating fully with the SFO” and “is committed to a full and transparent investigation of its procedures and conduct.”
The news follows a troubled period for ENRC, whose chairman Mehmet Dalman resigned on April 23, less than two weeks after a law firm appointed by ENRC to pursue an internal inquiry into the corruption allegations – first made by a whistleblower – was abruptly replaced.
A band of crooks in Kazakhstan seems to think that a mine is a terrible thing to waste - but authorities see things differently.
Officials in Kazakhstan have announced they charged “several” people involved in a case of illegal gold mining in the western village of Bestyube in Akmol Province, Russia’s Lenta.ru, is reporting. Another suspect, who appears to have been a co-organizer of the illegal operation, remains on the lam and faces an Interpol warrant. The illegal mining operation is believed to have started in 2012, Lenta.ru reported.
In the course of the investigation, police discovered “at least seven” units of drilling and sifting equipment at several addresses, as well as more than six kilos of ore containing gold materials worth about $265,000, according to Lenta.ru. A separate report distributed by the newskaz.ru website stated that several units of processing equipment were discovered at seven addresses. Neither outlet named the suspects. The ore came from mines belonging to the Kazakh nationalized mining agency, Kazakhaltyn.
Several news outlets also reported a sinister-sounding development: one of the suspects is said to be one of the leaders of Bestobe Jaamat, a Salafi Islamist group. While not illegal in Kazakhstan, the movement, which advocates adherence to a pure form of Islam, is considered radical and “non-traditional.” The newskaz.ru report throws in a mention of unregistered weapons being discovered alongside the ore.
A state commission in Kyrgyzstan has used claims of environmental damage at the country’s largest, most lucrative gold mine, Kumtor, to argue for a new agreement with the company operating the mine, Toronto-based Centerra Gold, and to fine Centerra almost half a billion dollars.
Economics Minister Temir Sariev, who headed the commission, says he has evidence, including two reports by European scientists, that the mine is inflicting “colossal damage” on the environment.
But, until now, hardly anyone in Kyrgyzstan has seen those scientists’ supposedly damning reports.
In December and February the commission, acting, respectively, through two state agencies – the State Inspectorate for Environmental and Technical Safety (SIETS) and the State Agency for Environmental Protection and Forestry (SAEPF) – fined Centerra approximately $467 million for alleged environmental damages, waste disposal and water treatment violations dating back to 1996. Centerra calls the claims “exaggerated or without merit.”
In its report for the state commission, SIETS said discharge from Kumtor is a "serious contamination threat" leading to "irreversible environmental impact on water resources."
Yet the two independent environmental audits Sariev commissioned, carried out by Slovene and German researchers last fall, found nothing unusual in Kumtor’s discharge. The Slovenes said water samples do not “indicate an environmental pollution or contamination situation.” The Germans said cyanide (used in the gold milling process) and heavy metals in Kumtor effluent “are significantly below the limit values of the German Ordinance on Waste Water.”
Basically, the reports – which EurasiaNet.org has seen – do not support the state commission’s environmental claims.
An industry survey has called Kyrgyzstan one of the world's “least attractive” places for mining companies to invest. In one category, Kyrgyzstan, which is embroiled in a contract dispute with its largest foreign investor, ranked last for "uncertainty concerning the administration, interpretation and enforcement of existing regulations.”
The survey, released February 28 by the Fraser Institute, a non-profit Canadian research outfit, is based on interviews with representatives of 742 mining companies working in 96 jurisdictions (countries, states, provinces) who spent a total of $6.2 billion in exploration worldwide last year.
Fraser uses something called the Policy Potential Index (PPI), “a comprehensive assessment of the attractiveness of mining policies in a jurisdiction, [which] can serve as a report card to governments on how attractive their policies are from the point of view of an exploration manager.”
Overall, Kyrgyzstan ranked 92nd of 96.
Miners answered questions about topics like environmental and tax regulations, land disputes, “socioeconomic agreements, political stability, labor issues” and security. Corruption (where Kyrgyzstan also plumbed the bottom of the rankings) was surveyed but not factored into the PPI.
Kyrgyzstan fared slightly better in “potential” and quite high in “room for improvement.”
Numbers released this week by Kyrgyzstan’s National Statistics Agency suggest a strike at the crucial Kumtor Gold Mine last winter played a major role in shrinking the country’s economic growth from 5.7 percent in 2011 to minus 0.9 percent in 2012.
Workers at Kumtor laid down their tools last February to demand parent company Centerra Gold cover their social security taxes. The walkout was resolved after 10 days, with Toronto-listed Centerra – which is one-third owned by the Kyrgyz government – agreeing to make the payments, even though it said the strike was illegal because it violated a collective agreement with workers.
By then the damage was done. Centerra later reported that while workers were neglecting the high-altitude open-pit mine, ice had formed there, and the company decreased its production forecast by one-third. It had previously predicted it would mine 575,000 to 625,000 ounces of gold in 2012; it eventually pulled 315,238 ounces from the ground.
The mine’s fundamental role in the delicate Kyrgyz economy is well documented. In 2011, Kumtor’s output accounted for 12 percent of Kyrgyzstan’s GDP, and over 50 percent of industrial production, according to official figures. That year, GDP was hurt by another incident: In November, villagers blocked the road leading to the mine. Their weeklong protest drove down the country's year-on-year GDP growth from 8.5 percent for the first 11 months of the year to 5.7 percent by year's end.
Investors operating in three post-Soviet Central Asian republics face an “extreme risk” of having their businesses expropriated, according to a survey released last week in the UK.
Maplecroft, a Bath-based political risk consultancy, said on January 9 that it had found plenty of reasons to be wary of the business climate in Kyrgyzstan, Tajikistan and Turkmenistan after “evaluating the risk to business from discriminatory acts by the government that reduces ownership, control or rights of private investments either gradually or as a result of a single action.” Recent fits of resource nationalism in Kyrgyzstan -- where the Kumtor gold mine, operated by Toronto-based Centerra Gold, accounted for 12 percent of GDP in 2011 and more than half the country’s industrial output – and rampant authoritarianism in places like Tajikistan and Turkmenistan have led Maplecroft to rank these countries among the most risky in the world. Not far behind, Kazakhstan and Uzbekistan both fall in the “high risk” category.