MAC: Mines and Communities

Kyrgyzstan bans foreign companies from future mining projects

Published by MAC on 2021-03-08
Source: Reuters, OCCRP

“Subsoil areas of national importance” will only be conducted by state-owned companies.

Kyrgyzstan’s new president, Sadyr Japarov, has banned foreign companies from future large mining projects. Meanwhile, authorities have detained former Prime Minister Mukhammedkalyi Abylgaziev over allegations of corruption and profiteering relating to gold-mining operations in the Issyk-Kul region. Canadian-owned Centerra Gold, which operates the Kumtor mine, stands as the largest foreign investor in the country.

See also:

2020-10-08 Wave of protests against foreign owned gold mines in Kyrgyzstan

2016-05-18 Centerra Shirks Blame for Glacier Damage in Kyrgyzstan

Foreign investors banned from future mining projects in Kyrgyzstan

Kanat Shaku in Almaty

February 1, 2021

Kyrgyzstan’s new president, the populist Sadyr Japarov, has banned foreign companies from future large mining projects for gold and other minerals in the country. Existing licences are unaffected by the decision.

The move marks Japarov’s first major decision as president and bears a striking relation to his rise to power—Japarov was serving a prison sentence stemming from the October 2013 kidnapping of a provincial governor during protests over the Canadian-owned Kumtor flagship gold mine in Kyrgyzstan, but was last October busted out of jail by supporters amid the upheaval in the country sparked by demonstrations against a parliamentary election that opposition parties claimed was fixed.

The Kyrgyz economy is heavily reliant on gold mining, mainly on that which takes place at Kumtor. Centerra Gold, which owns and operates Kumtor, stands as the largest foreign investor in Kyrgyzstan.

Given the many instances of negative sentiment expressed against foreign investors in Kyrgyzstan, especially during the country’s latest troubles, Japarov’s targeting of the involvement of foreign investors in the mining of the country’s valuable natural resources might only be the beginning of a wave of investment populism. 

Under the new mining order, the development of “subsoil areas of national importance” can only be conducted by state-owned companies.

Kyrgyzstan has been looking into options for developing its Zhetim iron ore deposit in recent months.

Fervent nationalist

Fervent nationalist Japarov, who was inaugurated as president on January 28 after serving as interim president, embarked on his path to power in a fashion that caused the US embassy in Bishkek to express concern last October. The mission referred to the political developments in Kyrgyzstan as presenting a threat to the country’s democracy from organised crime.

The events of the past four months in Kyrgyzstan amount to the country's third revolution since 2005.

At the same time as the presidential poll, voters were asked to participate in a referendum on changing the constitution to grant sweeping powers to the president at the expense of the parliament. The official result of the referendum showed 80% of voters as in favour of what critics have dubbed a ‘Khanstitution’. It is set to enter force by June.

Nationalist sentiment in Kyrgyzstan has long been directed at foreign-owned entities benefiting from the country’s natural resources, with opponents citing examples they allege are at the expense of the population and the environment. Nationalistic attacks on foreign businesses were observed during the October turmoil prior to the fall of the Sooranbai Jeenbekov presidency. 

There were attacks on gold mines that led to the temporary suspension of operations and development works, including one at Jeruy mine. Jeruy is the second biggest gold mining project in Kyrgyzstan after Kumtor. Its reserves are estimated at 88 tonnes and ore mining has already begun at its deposit. Jeruy is operated by the Russia-owned Alliance Altyn, set to be the country’s second largest gold producer.

Chinese investment scrapped

Another prominent example of anti-foreign investor hostility in Kyrgyzstan came in February 2020 when mass protests caused the scrapping of a $275mn Chinese logistics centre investment.

Aside from gold, Kyrgyzstan depends on remittances sent home by Kyrgyz migrant workers in Russia and on trade with neighbouring China—both of these revenue sources have been seriously hampered by the ongoing coronavirus pandemic.

The country’s GDP fell by 8.6% in 2020, marking the biggest decline in Kyrgyz economic output in 26 years.

Kyrgyzstan Arrests Former PM for Environmental Graft

29 January 2021

Authorities in Kyrgyzstan have detained former Prime Minister Mukhammedkalyi Abylgaziev over allegations of corruption and profiteering relating to gold-mining operations in the Issyk-Kul region, including an environmentally-protected area.

The State Committee for National Security (UKMK) said on Thursday that Abylgaziev had, during his tenure as leader of the country’s government between 2018 and 2020, signed a decree allowing the Kumtor Gold Company to expand its enterprise in Eastern Kyrgyzstan.

Subsequently, authorities claimed that the politician had “illegally increased” his personal finances in excess of several times his official income, using property and construction investments, as well as dummy corporations, to disguise the allegedly illicit origin of his assets.

Abylgaziev’s decision to green-light plans for expansion by the company reportedly contravened a pre-existing ban on development in Issyk-Kul, specifically designed to protect the fragile ecosystems of the eponymous, one of the deepest in the world, and several surrounding glaciers.

UKMK said that the former legislator’s alleged abuse of office, itself a “manifestation of corruption at the highest echelons of power,” would have led to “severe environmental consequences for the flora and fauna” of the local biosphere, as well as causing significant disruption to the country’s clean-energy sector.

Long-dogged by resounding allegations of corruption levelled at successive governments, Kyrgyzstan recently scored just 31/100 on Transparency International’s 2020 Corruption Perception Index for 2020, with at least 24% of public service users reported to have paid bribes to public officials over the last 12 months alone.

The Central Asian country has been the focus of two wide-ranging investigations — Plunder and Patronage and The Matraimov Kingdom — undertaken by OCCRP and its partner centres.

Conducted despite multiple threats against the reporters and editors involved, as well as the murder of a key source, those efforts recently saw the United States impose sanctions against one of the men at the very heart of the projects: a former deputy of the Kyrgyz Customs Service, Raimbek Matraimov.

Just weeks after the publication of Plunder and Patronage in November 2019, Prime Minister Abylgaziev had himself asked for a formal probe into the allegations against Raimbek and his co-conspirators.

In an ironic twist, he resigned his post the following June amid allegations his government had, in a separate criminal case, been involved in the illegal sale of radio frequencies to mobile operators in the country.

Abylgaziev was subsequently replaced as leader of the Kyrgz government by former legislator Sadyr Khaparov in October 2020, who was appointed to the post by a group of MPs during an emergency session convened in response to protests over widespread allegations of vote-buying during the general election earlier that month.

In the days before, Khaparov had been freed from prison by demonstrators, where he was serving an 11-and-a-half-year sentence for the 2013 kidnapping of a regional governor.

Commentators have expressed grave concern that Khaparov’s appointment may have been orchestrated by organized criminals looking to capitalise on the recent civil unrest, in particular Kamchybek Kolbayev, the U.S.-designated king of Kyrgyzstan’s illegal narcotics trade.


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