More Ebrd Money To Fund More Mittal Tragedy In Kazakhstan?

More EBRD money to fund more Mittal tragedy in Kazakhstan?

Published by CEE Bankwatch

18th May 2007

Following a postponement, the Mittal Steel Temirtau Health & Safety Project will be discussed and likely approved on June 12, 2007 by the board of directors of the European Bank for Reconstruction and Development (EBRD).

The project is intended to improve the metal and mining complexes in Temirtau (in the Karaganda region of Kazakhstan) of Mittal Steel Temirtau (MST). The particular aim is to improve the health and safety practices at MST's coal mines in Karaganda and bring them into line with international best practice.

On first sight, this proposed project is not controversial. However, when the actions (or non-actions) of MST in recent history are considered, there must be serious doubts about MST's willingness to improve labour and safety conditions for its workers.

In 1997 the EBRD approved a USD 54 million loan for MST to restore the company's productive capacity and improve the efficiency of its steel mills and coal mines. The loan to Mittal was co-financed by the IFC and accompanied by additional financing programs through financial intermediaries with the aim to mitigate the environmental and health and safety impacts of the facilities and align the company's performance with World Bank standards. The project is considered by the EBRD to be complete and successfully implemented.

However MST remains one of the largest polluters in Kazakhstan, emitting 95 percent of the total harmful pollutants into the air of Temirtau. With the increased steel plant production, the total amount of pollution deriving from MST activities has increased

Repeated accidents in the coal mines have left doubts about Mittal's successful implementation of the coal mines' Environmental Action Plans within the project.

A methane explosion at the Lenin mine killed 41 miners in September 2006; an explosion at another MST-owned mine killed 23 people in December 2004.

In 2004 the cases of industrial injuries leading to fatalities at MST increased by a factor of five; and the rate of industrial accidents tripled. In 2006 there were 217 cases of industrial accidents, including 48 fatal cases and 17 which lead to severe injuries.

The approach to health and safety issues demonstrated by MST up to now raises serious doubts about its ability to bring the company into line with international best practice. Workers in Temirtau and Karaganda have long alleged that the company has done little to improve the labour and safety conditions since taking over Kazakhstan's largest metal factory and the mines that fuel it 12 years ago.

According to MST's Metallurgical trade union leader Yuri Baranov, the equipment at the plant has become obsolete. The same situation exists with the equipment at Mittal's coal mines. Some of the miners who survived in September's blast said that some of the equipment they were using was more than 20 years old. None gave their name for fear of losing their job.

So what can be the results of the Environmental Action Plans at MST's coal mines that were so successful according to the EBRD? Why is the EBRD now interested in providing a new loan to a company that clearly did not implement the requirements of its previous project? It's also worth bearing in mind that Arcelor Mittal, which runs 61 plants in 27 countries, should be pretty well placed to provide decent coal mining equipment without recourse to European taxpayers' money.

It is not the only one inexplicable aspect in the MST case. Mittal Steel's acquisition of the Termitau steel and power plants and coal mines results from a tax-alleviation scheme and generous state incentives. According to the contract signed with the Kazakh government in 1995, the investor did not need to observe any new environmental laws for a ten-year period following the date of privatisation of the facility and was exempt from paying taxes and pollution fees.

The company was also exempt from any social liabilities of the previous owners of the steel plant and coal mines. During this ten-year period regional governing organisations such as the Karganda department for environmental protection and others have had very limited access to the company's sites and documentation. Such an agreement has had a devastating effect on the environment. And on many occasions MST has violeted national environmental and work and safety legislation.

There has also been no public access to the project's environmental information nor opportunities to participate in the project after the completion of its due diligence. People living in Termitau, Karaganda and other communities have not been able to voice their concerns about the environmental and social impacts associated with the project since no project-related information was made available for public reference.

MST has created serious environmental and social implications for the citizens of Temirtau and the results of the previous EBRD financed project at MST are still unclear for local communities. So far an environmental audit on MST recently conducted by Golder Associates Europe has not been released and local people have once again been excluded from the process of environmentally important decision-making.

The delayed EBRD vote on this project may be an indication that alarm bells are ringing in London. This is long overdue.

Dana Sadykova, EcoMuseum