Response: In Kyrgyzstan, a Kumtor Shakedown or Setup?

2 September 2013, Transitions online

A new video appears to show that extortion has been behind some anti-mining protests.

For years industry observers have asserted that environmental protests outside the Canadian-run Kumtor Gold Mine in Kyrgyzstan’s eastern mountains were part of an elaborate shakedown scheme. Now a video has emerged that appears to substantiate this view.

Kyrgyzstan’s State Committee on National Security (GKNB) announced the opening of a criminal investigation after the video appeared on state television 28 August, purporting to show two men who had previously voiced environmental concerns demanding $3 million from a Kumtor representative in exchange for an apparent guarantee not to orchestrate protests. The video purportedly has a time stamp of 31 July.

Kumtor gold mine in Kyrgyzstan. Photo by CEE Bankwatch.

The video’s appearance on state television suggests that central government officials in Bishkek are intent not only on solidifying their hold on power, but also want to forge a stronger working relationship with Kumtor’s operators, and, more broadly, boost foreign-investor confidence shaken by regular mining-related riots. GKNB representatives declined to address the video’s provenance.

Speaking in broken Russian in the video, the two men, identified as Bakhtiar Kurmanov and Ermek Dzhunushbaev, tell Douglas Grier, Kumtor’s director of sustainable development, that if their demands are not met the mine would suffer dire consequences. “We will close Kumtor,” one claims. They go on to threaten they are ready to “declare war, there will be a civil war, there will be a revolution,” if Kumtor does not give them what they want.

Kamchybek Tashiev
The two claim in the video to have the support of nationalist politicians Kamchybek Tashiev and Sadyr Japarov. Those two recently lost their seats in parliament when the Supreme Court found them, along with another Ata-Jurt lawmaker, guilty of attempting to seize power in connection with an October 2012 incident, in which an anti-Kumtor demonstration erupted into a riot.

In late May, another riot and roadblock outside Kumtor – related to the then-pending case against Tashiev and Japarov – caused a shutdown at the mine. Disturbances also resulted in at least 55 injuries before police restored order.

Dzhunushbaev and Kurmanov, the two men appearing in the video, contend it is fake. Adding muscle to their claim, several hundred supporters blocked the road near the mine overnight on 28 August, local news agencies reported. Throughout 29 August there were scattered reports of other attempts to block the road near the mine.

Grier confirmed to EurasiaNet.org that the demands, and the meeting seen in the video, are genuine. In an 29 August statement, Kumtor Operating Company, which is owned by Toronto-listed Centerra Gold, said the company has been “constantly receiving threats of possible road blocks in the event of non-compliance with various kinds of demands.” The statement added that Kumtor representatives are cooperating with the official investigation.

Kumtor executives have regularly complained about shakedowns and threats from locals purporting to represent villagers’ environmental concerns. The men in the video, one Kumtor executive told EurasiaNet.org, had continued to threaten the company throughout August.

The video scandal follows on the heels of reports that Bishkek and Centerra are close to agreeing on a new operating arrangement after months of wrangling. Prime Minister Jantoro Satybaldiev said on 22 August that the two sides had agreed to operate Kumtor through a joint venture and that he hoped to submit the deal for parliamentary approval in September.

Centerra announced on 23 August that, under the terms of the proposal, the state-run Kyrgyzaltyn gold company “would exchange its 32.7 percent equity interest in Centerra for an interest of equivalent value in a joint venture company that would own the Kumtor project.” Company representatives went on to stress that “while Centerra believes that progress has been made in those discussions, no final agreement has yet been reached.”

As news of progress trickled out this month, many industry insiders expected that opposition leaders would again use environmental concerns and local protests in an attempt to thwart the deal – and undermine the fragile ruling coalition – when parliament convened next month.

In this context, the video is such a boon to the government that some are calling it a blatant setup: “This is PR to discredit these guys … so that the protests that were planned for autumn will be discredited. These guys fell for the bait,” said Turat Akimov, editor of Dengi i Vlast (Money and Power), a magazine in Bishkek.

Kumtor is Kyrgyzstan’s most significant economic asset. In a good year, it accounts for about 12 percent of the country’s GDP. Authorities in Bishkek have been engaged in a tussle for control over the mine all year, claiming that the previous operating deal, signed in 2009, was invalid because it was negotiated with former president Kurmanbek Bakiev, who was overthrown the following year amid widespread corruption allegations. Opposition figures such as Tashiev and Japarov had latched on to the Kumtor negotiations in what many observers felt was a populist attempt to discredit the government using unsubstantiated claims of environmental damage caused by mining operations. Raising environmental concerns has traditionally been an effective way to mobilize protesters in Kyrgyzstan.

While almost no one doubts the mine has a detrimental environmental impact, several recent, independent audits have determined that the company’s operations are not breaking any Kyrgyz or European regulations.

Some industry observers contend the video exposes a problem related to good governance. Orozbek Duisheev, chairman of the Association of Miners and Geologists, said the video shows that Kyrgyzstan’s mining industry operates in a state of “anarchy.” He continued that the government, with its “absence of clear policy,” isn’t addressing problems.

“These men are just looking to benefit themselves,” Duisheev told EurasiaNet.org, adding that the video undermines the regular environmental charges leveled against Kumtor.

Editor’s Note: Below is a response to this article from CEE Bankwatch, an organization that monitors investments made by international financial institutions.

Your article “In Kyrgyzstan, a Kumtor Shakedown or Setup?” tacitly suggests that protests against the environmental damage caused by the Kumtor gold mine in Kyrgyzstan are disingenuous and that no reliable reports evidence this damage, citing a leaked video as proof that the company is in fact a victim, rather than a culprit.

The dialogue in the video constitutes no proof that the two extortionists were involved in previous environmental protests. The two merely threaten the company with organizing a protest that would halt operations at the mine, with no indication that this action would invoke environmental claims.

Even if they had threatened to organize a fake protest with environmental claims, this should in no way be allowed to cast doubt on the legitimacy of the numerous environmental protests taking place in Kyrgyzstan over Kumtor. Doing that would not only constitute a logical fallacy, it would also be a distortion of the truth.

Since mining operations commenced in 1997, public protests and criticisms of the mine’s environmental impact have followed. The operations by the company were never clear of controversy: for instance, in 1998, a truck carrying cyanide fell into the Barskoon river and affected the local population and environment – although Kyrgyzstan’s government has no more claims on the company, some locals are still fighting in courts for appropriate compensations.

Several independent analyses and research (for example, a 2011report by hydrogeologist and geochemist Robert Moran and a 2012 Bankwatch analysis), a January 2013 state commission report* – which included independent international experts and whose claims have to date not been denied by subsequent state reports – and a mine due dilligence prepared by the international consultancy Environmental Resources Management (ERM) claim that mining operations by the company have serious effects on the environment and water systems in Kyrgystan.

ERM is the consultancy with which international financial institutions operating in Kyrgyzstan, most importantly the European Bank for Reconstruction and Development, cooperate. The findings of the ERM report are in line with the 2011 Moran analysis and the 2012 Bankwatch one.

The ERM report, for example, finds that sodium and sulphate pollution in water sources and sulphur dioxide airborne emissions exceed the maximum allowable emissions for the mine as set in the national legislation. According to the ERM report, the mine also poses threats to local infrastructure, as glacial melting caused by the mine increases the likelihood of the nearby Petrov lake overflowing and destroying roads, bridges, and the mine facilities themselves.

Such impacts are the actual source of mistrust in mining companies across the country, which can be remedied only with improved governance. More transparency is needed – particularly with respect to such environmental issues, which some reports estimate are responsible for 50 percent of related protests – as is the increased participation in decision-making processes by local authorities, academics, and civil society. This can alleviate controversy surrounding the mine and the potential for manipulation by self-interested stakeholders, while improving the possibility for all citizens of Kyrgyzstan to share in the benefits of mineral extraction.

*While not published on a governmental website, this state commission report is available for reading at the office of Tree of Life organization, where Kalia Moldogazieva, a former member of the commission, is also available for comments.