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Centerra’s battle for the Kumtor gold mine rages on

Canada is weaponizing investment funds in order to maintain control of Kyrgyzstan’s gold

EnvironmentAsiaCanadian Business

Dump trucks carrying extracted gold ore from the mine site to the processing plant at the Kumtor gold mine, one of the largest mines in Central Asia. Photo by Vladimir Voronin/AFP.

On September 16, former Prime Minister of Kyrgyzstan Djoomart Otorbaev (2014-2015) was detained by the country’s State Committee for National Security (UKMK). He is suspected of having given consent to Centerra Gold, a powerful Canadian mining company whose flagship asset is the Kumtor gold mine in the eastern Issyk-Kul region, to dump industrial waste on glaciers near the mine in violation of the country’s environmental regulations. The disposal of mining waste on the Issyk-Kul glaciers is a cause of great concern for environmental activists in the country, who fear that Centerra’s actions will cause irreversible damage to the waterways of not just Kyrgyzstan, but all of Central Asia. The glaciers are a water source for the Kumtor River which feeds into the Syr Daria, a sprawling waterway that reaches into Uzbekistan, Tajikistan, and Kazakhstan. Many fear the pollution of this river may have deleterious downstream effects on neighbouring countries as well.

The destruction of the glaciers in Issyk-Kul served as the justification for the Kyrgyz state to take temporary control of Kumtor in May 2021, triggering a prolonged and bitter legal battle between Centerra and the Kyrgyz state that continues to this day. Otorbaev is not the first former head of government to be called to testify in the Kumtor case—in fact, he is the sixth to appear in the legal war that is rocking Kyrgyzstan’s political scene and implicating numerous preceding administrations in a morass of alleged corruption.

The Kumtor gold mine is one of the largest mines in Central Asia. In 2019, it accounted for close to 45 percent of Kyrgyzstan’s total exports. Ownership has frequently changed since 1997, the mine’s first year of operation, but in the subsequent decades there was a gradual drift toward majority ownership by Canadian capital. In 1998, the Kyrgyz state owned 60 percent of the mine. Forty percent belonged to a Saskatoon-based mining company called Cameco. By 2021, the state owned 26 percent and the mine was being managed by a subsidiary of Centerra Gold, a corporate spin-off of Cameco. The Centerra subsidiary, Kumtor Gold, was created in 2009. It managed the mine until the government takeover in May of this year.

The election of Sadyr Japarov in January 2021 was in part a refutation of what the public viewed as the political establishment’s complicity in Centerra Gold’s corrupt profiteering. Japarov had previously campaigned for the nationalization of the mine, including by submitting a takeover proposal to parliament during anti-Centerra protests in 2012 (it was voted down). Japarov emerged as a leading figure in the 2018 protests that overthrew Social Democratic president Sooronbay Jeenbekov, and Centerra became a point of galvanization for segments of the protest movement. Centerra’s offices in Bishkek were attacked and many miners burned company equipment on their worksites. When new presidential elections came around, Japarov’s conservative nationalist party Ata-Zhurt won with 80 percent of the vote.

Since his inauguration, Japarov has made anti-corruption initiatives and the nationalization of Kumtor two central planks of his appeal. While some accuse him of cynically employing these popular issues to secure personal power, it is undeniable that his administration has turned up the heat on Centerra in the past few months. His administration’s most significant moves against the company occurred in May, with the imposition of a $3 billion fine for violating environmental regulations and the announcement that Canadian management would be marginalized by the implementation of governmental oversight at the mine. These moves resulted in overt condemnation from Canadian government officials, who decried the “imposition [of] Kyrgyz control” at a mine worked by Kyrgyz miners inside Kyrgyzstan.

Kumtor gold mine, December 2008. Photo from Wikimedia Commons.

Responding to the nationalization, Centerra announced that it had “initiated binding arbitration to enforce its rights under long-standing investment agreements with the government.” Their legal response has been aggressive. In July, Centerra hired Sullivan & Cromwell, an international corporate law firm, to represent its interests in a US Bankruptcy Court. Sullivan & Cromwell has a well-known sordid history that includes assisting IG Farben in Nazi Germany’s arms buildup in the 1930s and conspiring with US government officials to overthrow the Guatemalan government in 1954. The law firm argued for chapter 11 sanctions against Kyrgyzstan to extract $1 million per day from state coffers. Earlier this week, the sanctions proposal was shot down by the US court, cutting off another legal route by which Centerra has sought to maintain dominance over Kyrgyzstan’s gold exports.

One of the areas which the Kyrgyz investigators have focused on is the period of 2014-2017, and particularly the relationship between the state and Centerra during these years. This period is important to the ongoing battle over Kumtor because it was when the Kyrgyz state adopted amendments to its water code which allowed industrial work on the Dadydov and Lysy glaciers. Former opposition leader Omurbek Tekebaev claims that “since 2011, Centerra has begun work on glaciers, destroying them. Every year the government issued a permit for such work. Later, in order to legalize them… a law was passed that allowed the further destruction of glaciers.” A whole slate of politicians, including former Prime Minister Tayyrbek Sarpashev, have been accused of conspiring with Centerra to liberalize environmental laws and thereby permit the destruction of the country’s glaciers.

One day after detaining Otorbaev, Kyrgyz investigators accused several Centerra Gold employees of “corrupt” practices, claiming that they stole up to $200 million in 2013. The country added four high-ranking Centerra officials to its wanted list: Ian Atkinson, former Centerra Gold manager; Michael Fischer, former chief of Kumtor Gold; Andrei Sazonov, former chairman of the subsidiary’s managing council; and John Suter, former vice president of Kumtor Operating Company. Centerra has called Kyrgyzstan’s actions against its former employees “wrong and illegal,” and none of the above figures have yet agreed to cooperate with the state.

In this legal battle, the Canadian government has thrown its weight behind Centerra. In May, after the announcement of the nationalization, Minister of Foreign Affairs Marc Garneau and Minister of Small Business, Export Promotion and International Trade, Mary Ng, announced that Kyrgyzstan’s plans “will potentially have far-reaching consequences on [Canadian] foreign direct investment in the Kyrgyz Republic.” Canada has long tied foreign direct investment to the promotion of private business, particularly the mining sector, and in this case the government has clearly threatened to weaponize investment funds against Kyrgyzstan in order to maintain Canadian control of Kyrgyz gold.

As the Kumtor legal battle rages on, Centerra’s legal options for extending its management of the mine look more limited by the day. Any Canadian who is interested in how their country’s capital functions on the global stage, and how affected countries are trying to resist this neocolonial domination, should eagerly follow new developments in the case.

Owen Schalk is a writer based in Winnipeg. His areas of interest include post-colonialism and the human impact of the global neoliberal economy. Follow him on Twitter @OwenSchalk.

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