MAC: Mines and Communities

Freeport-Rio Tinto: Gold's other price

Published by MAC on 2005-12-28

Freeport-Rio Tinto: Gold's other price

by Jane Perlez and Raymond Bonner / New York Times

28th December 2005

JAKARTA. The closest most people will ever get to the remote Indonesian province of Papua, or the operations of Freeport-McMoRan, is a computer tour using Google Earth to swoop down over the rain forests and glacier-capped mountains where the American company mines the largest gold reserve in the world.

With a few taps on a keyboard, satellite images quickly reveal the deepening spiral that Freeport-McMoRan has bored out of its Grasberg Mine as it pursues a virtually bottomless store of gold hidden inside. The images also show a spreading soot-coloured bruise of almost a billion tons of mine waste that the company, based in New Orleans, has dumped directly into a jungle river of what had been one of the last untouched landscapes in the world.

What is far harder to discern is the intricate web of political and military ties that have helped shield Freeport-McMoRan from the rising pressures that other gold miners have faced to clean up their practices. Only lightly touched by a scant regulatory regime, and cloaked in the protection of the military, Freeport-McMoRan has managed to maintain a nearly impenetrable redoubt on the easternmost Indonesian province as it taps one of the country's richest assets.

Months of investigation by The New York Times found a level of contacts and financial support to the military not fully disclosed by Freeport-McMoRan, despite years of requests by shareholders concerned about potential violations of U.S. laws and the relations between the company and a military whose human rights record is so blighted that the United States severed ties for a dozen years until November.

Company records obtained by The Times show that from 1998 through 2004, Freeport-McMoRan gave nearly $20 million to military and police generals, colonels, majors and captains, and to military units. Individual commanders received tens of thousands of dollars, in one case up to $150,000, according to the documents. The records were provided by an individual close to Freeport-McMoRan and confirmed as authentic by current and former employees.

Freeport-McMoRan said in a written response to The Times that it had provided a secure working environment for its more than 18,000 employees and contract workers in accordance with U.S. and Indonesian laws.

"There is no alternative to our reliance on the Indonesian military and police in this regard," the company said. "The need for this security, the support provided for such security, and the procedures governing such support, as well as decisions regarding our relationships with the Indonesian government and its security institutions, are ordinary business activities."

While mining and natural resource companies sometimes contribute to the costs incurred by governments in securing their operations, any payments to individual officers would raise questions of bribes, said several people interviewed by The Times, including a former Indonesian attorney general who said it was illegal under Indonesian law for officers to accept direct payments.

The Times's investigation also found that, according to one current and two former company officials who helped set up a covert program, Freeport-McMoRan intercepted e-mail messages to spy on its environmental opponents. Freeport-McMoRan declined to comment.

More than 30 current and former Freeport-McMoRan employees and consultants were interviewed over the past several months for these articles. Very few would speak for attribution, saying they feared retribution by the company.

Freeport-McMoRan's close support of the military is one measure of its extraordinary working environment in Papua. In the 1960s, when Freeport-McMoRan entered Papua, its explorers were among the very first outsiders ever encountered by local tribesmen.

Since then, Freeport-McMoRan has built what amounts to an entirely new society and economy, all of its own making. Where nary a road existed, Freeport-McMoRan, with the help of the San Francisco-based construction company Bechtel, built virtually every stitch of infrastructure over impossible terrain in engineering feats that it boasts are unparalleled on the planet.

That history, the extreme remoteness of Papua and the long ties the company has with Indonesian government have given Freeport-McMoRan sway over a 21st-century version of the old company town, built on a scale unique even by the standards of modern mega-mining.

"If any operation like this was put forward now, it wouldn't be allowed," said Witoro Soelarno, a senior investigator at the Indonesian Department of Energy and Mineral Resources, who has visited the mine many times. "But now the operation exists, and many people depend on it."

For years, to secure Freeport-McMoRan's domain, James Moffett, a Louisiana-born geologist who is the company chairman, assiduously courted Indonesia's dictator, Suharto, and his cronies. Freeport-McMoRan paid for their vacations, some of their children's college education, and cut them in on deals that made them rich, current and former employees said.

On the Freeport-McMoRan board, in the United States, Moffett turned to influential people outside the fields of mining, like Henry Kissinger, the former U.S. secretary of state, and J. Stapleton Roy, a former U.S. ambassador to Indonesia.

Together with a roster of former CIA and U.S. military officials, those powerful allies helped Freeport-McMoRan navigate the intricate byways of Indonesian politics as well as its deepening entanglement with the military.

It was a marriage of mutual convenience. As Freeport-McMoRan prospered into a company with $2.3 billion in revenue, it also became one of the largest sources of revenue for the Indonesian government, in some years the biggest. It remains so.

Freeport-McMoRan says that it provided Indonesia with $33 billion in direct and indirect benefits from 1992 to 2004, almost 2 percent of the Indonesian gross domestic product. With gold prices hitting a 25-year high of $540 an ounce this month, the company estimates it will pay the Indonesian government $1 billion this year.

With Suharto's ouster in 1998, after 30 years of unchallenged power, Freeport-McMoRan's special place was left vulnerable. But its importance to the Indonesian treasury and its carefully cultivated cocoon of support have helped secure it against challenges from local people, environmental groups and even the Indonesian Environment Ministry.

Letters and other documents provided to The Times by government officials show that the ministry repeatedly warned the company since 1997 that Freeport-McMoRan was breaching environmental laws. They also reveal the deep frustration of Environment Ministry officials.

The frustration stems from an operation that Freeport-McMoRan estimates will generate six billion tons of rock and waste before it is through, more than twice as much earth as was excavated for the Panama Canal.

Much of that waste has already been dumped in the mountains surrounding the mine or down a system of rivers that descends steeply onto the low-lying wetlands, close to Lorentz National Park, a pristine rain forest that has been granted special status by the United Nations.

A multimillion-dollar study in 2002 by a U.S. consulting company, Parametrix, paid for by Freeport-McMoRan and its joint venture partner, Rio Tinto, and not previously made public, noted that the rivers upstream and the wetlands inundated with waste were now "unsuitable for aquatic life." The report was made available to The Times by the Indonesian Environment Ministry.

The Times made repeated requests to Freeport-McMoRan and to the Indonesian government to visit the mine and its surrounding area, which requires special permission for journalists. All the requests were turned down.

Freeport-McMoRan declined to make any official available for an interview and would respond to questions only in writing. A cover letter signed by its legal counsel, Stanley Arkin, said that Grasberg is a copper mine, with gold retrieved as a by product, and that many journalists had visited the mine before the government tightened its rules in the 1990s. "Freeport-McMoRan has nothing to hide," Arkin wrote.

At Grasberg, Freeport-McMoRan Copper and Gold is mining the third-largest copper deposit in the world. The mine also has proven reserves of 46 million ounces of gold, according to the Freeport-McMoRan 2004 annual report. This year, Mining International, a trade journal, called the Freeport-McMoRan gold mine the biggest in the world.

Social tensions erupt

Since Suharto's ouster, Freeport-McMoRan employees say, Moffett's motto has been "no tall trees," a call to keep as low a profile as possible.

But even before then, the new world that Freeport-McMoRan created was growing smaller. By the mid-1990s, with production in full swing, and the expanding impact of the Grasberg operations ever more apparent, Freeport-McMoRan was beset on all sides.

Environmental groups, able to coordinate more effectively by using the Internet, made Freeport-McMoRan a target. Local tribes were more and more restless at seeing little benefit for themselves as vast riches were extracted from their lands. And some Indonesian military commanders in Papua saw increasing value of the mine as ripe for the plucking.

To fortify itself, Freeport-McMoRan, working hand in hand with Indonesian military intelligence officers, began monitoring the e-mail messages and telephone conversations of its environmental opponents, said an employee who worked on the program and read the e-mail.

Lawyers for Freeport-McMoRan were nervous, said a person who was at the company at the time, but the lawyers decided that no law prohibited the company from reading e-mail messages outside the United States.

Social tensions around the mine, meanwhile, were growing, as was the population in Papua. The province, mostly animist and Christian because of long years of missionary work, is distinct in many ways from the rest of Indonesia, the largest Muslim country in the world. Almost from when Indonesia became independent, Papua had rumblings of a separatist movement.

For many years Freeport-McMoRan maintained its own security force, while the Indonesian military battled a weak, low-level insurgency. But slowly their security needs became entwined.

No investigation has directly linked Freeport-McMoRan to any human rights abuses, but increasingly it became associated in the minds of Papuans with abuses by Indonesian military units, which in some cases used company facilities.

Finally, in March 1996, long-simmering anger at the company erupted in rioting when anti-mine sentiment among different groups coalesced into what was perhaps the biggest threat to the company to this day. The mine and its mill were shut down for three days. Rioters destroyed $3 million in equipment and ransacked offices.

The company intercepted e-mail messages that, according to two persons who read them at the time, suggested that certain military units, the community and environmental groups were working together.

In recent interviews, current and former Freeport-McMoRan officials recalled how they were stunned when, among those rioting, they saw men with military haircuts, combat boots and walkie-talkies. They seemed to be directing the rioters, at one point, to a Freeport-McMoRan laboratory, which they ransacked.

It was not long before a worried Moffett flew to Indonesia in a company jet.

Freeport-McMoRan declined to comment on the meeting that followed. But a company official who was there recounted that Moffett met with a group of senior Indonesian military officers at the Sheraton Hotel in the lowland town of Timika, near the mine. An all-powerful general, Prabowo Subianto, son-in-law of Suharto and commander of the Indonesian Special Forces, presided over the meeting.

"Moffett, to protect you, to protect your company, you have to help the military here," Prabowo began, according to the company employee who was present.

Moffett is said to have replied: "Just tell me what I need to do."

The cost of security

In short order, Freeport-McMoRan spent $35 million on military infrastructure: barracks, headquarters, mess halls and roads. It also gave the commanders 70 Land Rovers and Land Cruisers, which were replaced every few years. Everybody got something, even the navy and air force.

Freeport-McMoRan set up a special department, the Emergency Planning Operation, to handle the new relationship with the Indonesian military. It began making direct monthly payments to Indonesian military commanders, while a Security Risk Management Office handled the payments to the police, according to company documents and current and former employees.

Freeport-McMoRan gave the military and the police in Papua at least $20 million from 1998 to May 2004, according to company documents. In interviews, current and former employees said that at least an additional $10 million was also paid during those years.

Seven years of accounting records were provided to The Times by an individual close to the company. Additional records for three years were provided by Global Witness, a non government organization that released a report last July, "Paying for Protection," about the relationship between Freeport-McMoRan and the Indonesian military.

Diarmid O'Sullivan, who works for Global Witness in London, criticized the payments. It may be necessary for a company to help governments with security, he said, but "they should give the money through the proper channels, in a transparent way."

Freeport-McMoRan told The Times, "Our books and records are transparent and accurately reflect the support that we provide."

That support, the company said in its responses, included "mitigating living costs," as well as "infrastructure, catered food and dining hall costs, housing, fuel, travel, vehicle repairs, allowances to cover incidental and administrative costs, and community assistance programs conducted by the military and police."

The company said all its expenditures were subject to a budget review.

The records received by The Times listed payments to individual military officers under headings such as "food cost," "administrative services" and "monthly supplement."

Current and former employees said that the accounting categories did not reflect what the money was actually used for and that it was likely that much of the money went into the officers' pockets. The commanders who received the money did not have to sign receipts, said current and former employees.

The records list the commander of the troops in the Freeport-McMoRan area, Lieutenant Colonel Togap Gultom, as being the largest recipient of funds. He declined to be interviewed.

During six months in 2001, the records list him as being given just under $100,000 for "food costs," and more than $150,000 the next year.

The records also list payments to at least 10 other commanders of a total of more than $350,000 for "food costs" in 2002.

By 2003, following the Enron scandal and passage of the Sarbanes-Oxley Act in the United States, which imposed more rigid accounting practices on companies, Freeport-McMoRan began making payments to military and police units instead of individual officers, according to records and current and former employees.

The company paid police units in Papua slightly under $1 million in 2003, according to the records.

Freeport-McMoRan told The Times that "company policies take into account the potential for human rights abuses in determining what types of assistance to provide."

According to the records received by The Times, the Mobile Brigade, a paramilitary police unit often cited by the U.S. State Department for its brutality, received more than $200,000 in 2003.

Questions of accountability

Freeport-McMoRan has resisted nearly any detailed disclosure of its payments to the military, saying they are legal and even required under Indonesian law.

Marsillam Simanjuntak, who was minister of justice and later attorney general in one of the first governments after the fall of Suharto, said it was a violation of Indonesian law for soldiers or police officers to accept payments from a company.

But many companies do it, he said. The better question to ask, he said, was, "Is it allowed by the laws of the United States?"

This year, the New York City pension funds submitted a shareholder resolution asking Freeport to review its policy on paying the Indonesian police and military. They argued that payments could violate the Foreign Corrupt Practices Act, which forbids U.S. companies to pay bribes to foreign officials. Freeport opposed the resolution.

In 2002, the funds submitted a similar resolution demanding that Freeport disclose how much it was paying to the military. Freeport kept it off the ballot.

In later filings with the U.S. Securities and Exchange Commission, Freeport reported that it had paid the military a total of $4.7 million in 2001 and $5.6 million in 2002.

Freeport, in its responses to The New York Times, said it was complying with the Voluntary Principles on Security and Human Rights, a set of guidelines drawn up by the State Department.

They recognize that natural resource companies "may be required or expected to contribute to, or otherwise reimburse, the costs of protecting company facilities."

The principles do not address the question of direct payments to individual officers. Nor do they require companies to account for the payments.

Freeport has also said that the payments were required under its Contract of Work, its basic agreement with the government of Indonesia, first signed in 1967 and updated in 1991.

The company declined to provide a copy of the contracts to The Times.

A copy of each was provided by Denise Leith, author of "The Politics of Power: Freeport in Suharto's Indonesia." They contained no language requiring payments to the military.

Evelyn Rusli contributed reporting.

Mountain of gold leaves a river of waste

By Jane Perlez and Raymond Bonner / The New York Times

29th December 2005

JAKARTA. As Freeport-McMoRan Copper and Gold sealed its relations with the military, the fledgling Indonesian Environment Ministry could do little but watch while the waste piled up from the company's mine in Papua, the easternmost province of Indonesia.

This year, Freeport-McMoRan told the Indonesian government that the waste rock in the highlands now covers about eight square kilometres, or three square miles, and in some places is 275 meters deep, or 900 feet.

Down below, about 230 square kilometres of wetlands, once one of the richest freshwater habitats in the world, are virtually buried in mine waste, with levels of copper and sediment so high that almost all the fish have disappeared, according to Indonesian Environment Ministry documents.

The waste, the consistency and colour of wet cement, belts down the rivers and inundates and smothers all in its path, said Russell Dodt, an Australian civil engineer who managed those tailings for Freeport-McMoRan on the wetlands for 10 years until 2004.

About a third of the waste has moved into the coastal estuary, an essential breeding ground for fish, and much of that "was ripped out to sea by the falling tide that acted like a big vacuum cleaner," he said.

But no government, even in the new era of democracy in Indonesia, has dared encroach on Freeport-McMoRan's prerogatives. The strongest challenge came in 2000, when Sonny Keraf, a politician who was sympathetic to the Papuans, was appointed environment minister.

As he had done once before, James Moffett, chairman of Freeport-McMoRan, which is based in New Orleans, flew out to Jakarta.

Keraf initially refused to see Moffett but eventually agreed, and on the day kept him waiting an hour and a half. "He came in so arrogant," Keraf recalled of the meeting in a recent interview.

Freeport-McMoRan declined to comment on the meeting. The U.S. ambassador to Indonesia at the time, Robert Gelbard, said in an interview, "It was a terrible meeting."

Keraf said Moffett had recounted that his company had never polluted. "I told him that he should spend the money he spent on paying off people not to talk about the mine to properly dispose of the waste," Keraf said.

Behind the scenes, Keraf kept up the pressure, angered that the company was using the rivers, forest and wetlands for its mine waste, a process allowed during the Suharto years.

An internal ministry memorandum from 2000 said the mine tailings had killed all life in the rivers and noted that this violated the criminal section of a 1997 environmental law.

In January 2001, Keraf wrote to the coordinating minister for economic affairs, arguing that Freeport-McMoRan should be forced to pay compensation for the rivers, forests and fish that its operations had destroyed.

Six months later, one of his deputies, Masnellyarti Hilman, wrote to Freeport-McMoRan, saying a special environmental commission had recommended that the company stop using the river as a waste chute and instead build a system of pipes. She also told Freeport-McMoRan to build sturdier damlike walls to replace the less solid levees that it used to contain the waste on the wetlands. The levees are still there.

Freeport-McMoRan said that local and regional governments approved its waste management plans and that the central government approved its environmental impact statement and other monitoring plans.

But in a July 2001 letter, Keraf took the governor of Papua to task for having granted Freeport-McMoRan a permit in 1996 to use the rivers for its waste. The governor, Keraf said, had no authority to grant permits more lenient than the provisions of national laws.

Despite all these efforts, nothing happened. Keraf was unable to secure the support of other government agencies or his superiors in the cabinet.

In August 2001, a new government came to power, and a less aggressive minister, Nabiel Makarim, replaced Keraf. At first, he, too, talked publicly of setting stricter limits on Freeport-McMoRan. Soon his efforts petered out.

The Environment Ministry has begun trying to put teeth to its rules where it can. It brought a criminal case against the world's largest gold company, Newmont Mining that included a charge of not having a permit to dispose of mine waste into the sea. Newmont has fought the charges vigorously.

But in the case of Freeport-McMoRan, the ministry has had no traction.

Freeport-McMoRan still does not hold a permit from the national government to dispose of mine waste, as required by the 1999 hazardous waste regulations, according to Rasio Ridho Sani, assistant deputy for toxic waste management at the ministry. Stanley Arkin, legal counsel for Freeport-McMoRan, said that the company cooperated well with the ministry and that Freeport-McMoRan would not otherwise comment.

"Freeport-McMoRan says their waste is not hazardous waste," Rasio said. "We cannot say it is not hazardous waste."

He said his division and Freeport-McMoRan were now in negotiations on resolving the permit question.

'A massive die-off'

The ministry was not the first to challenge Freeport-McMoRan over how it has disposed of its waste in Papua.

The Overseas Private Investment Corp., a U.S. government agency that insures U.S. corporations for political risk in uncertain corners of the world, revoked Freeport-McMoRan's insurance policy in October 1995. It was a landmark decision, the first time that the agency had cut off insurance to any U.S. company for environmental or human rights concerns.

In doing so, two environmental experts, Harvey Himberg, an official at the agency, and David Nelson, a consultant, after visiting the mine for several days, issued a report critical of Freeport-McMoRan's operations, especially the vast amount of waste it had sent into rivers, something that would not be allowed in the United States.

The company went to court to block publication of the report, and only a censored version was later released. A person who thought it should be made public provided an uncensored copy to The Times.

Freeport-McMoRan says the report reached "inaccurate conclusions." The company says it has considered a full range of alternatives for managing and disposing of its waste, instead of using the river, and settled on the best one.

A storage area would not be large enough and would require a tall dam in a region of heavy rainfalls and earthquakes, it said. A waste pipeline, rather than the river, would be too costly and prone to landslides and floods.

To the U.S. auditors, such arguments were not convincing. Freeport-McMoRan "characterizes engineered alternatives as having the highest potential for catastrophic failure when the project otherwise takes credit for legendary feats," the audit noted, like the pipelines more than 100 kilometres long that carry fuel and copper and gold slurry down the mountains.

At the time of the investigation, the waste was jumping the riverbanks, "resulting in a massive die-off of vegetation," the report said.

Freeport-McMoRan threatened to take the agency to court over the cancellation of its insurance. After protracted negotiations, the policy was reinstated for a few months. That was a face-saving gesture to Moffett, according to Ruth Harkin, then the head of the agency. The policy was not renewed.

Bright green water

Many of the same problems persist, but on a vastly larger scale. A perpetual worry is where to put all the mine's waste, which is accumulating at a rate of some 700,000 tons a day.

The danger is that the waste rock atop the mountain will trickle out acids into the honeycomb of caverns beneath the mine in a wet climate that gets up to 3.5 meters of rain a year, say environmental experts who have worked at the mine.

Stuart Miller, an Australian geochemist who manages Freeport-McMoRan's waste rock, told a mining conference in 2003 that the first acid runoffs began in 1993.

The company could prevent much of it, he said, by blending in the mountain's abundant limestone with the potentially acid-producing rock, which is also plentiful. Freeport-McMoRan says it collects the acid runoff and neutralizes it.

A report, obtained by The Times, written by Parametrix, a consulting company that did a study for Freeport-McMoRan, noted that before 2004, the mine had "an excess of acid-generating material." A geologist who worked at the mine, who declined to be named because of fear of jeopardizing future employment, said acids were already flowing into the groundwater.

Bright green springs can be seen spouting several kilometres away, he said, a telltale sign that acids had leached out copper and traveled much farther from the mine than the company has acknowledged.

"That meant the acid water travelled a long way," he said.

Freeport-McMoRan says the green springs are "located several miles from our operations in the Lorentz World Heritage site and are not associated with our operations."

The geologist agreed that the springs were probably in the Lorentz National Park, but said this showed that acids and copper from the mine were affecting the park, considered a world treasure for its ecological diversity.

Freeport-McMoRan says that the tailings are not toxic and that the river it uses for its waste meets Indonesian and U.S. drinking water standards for dissolved metals. The coastal estuary, it says, is a "functioning ecosystem."

The Parametrix report said that copper levels in some of the surface waters were high enough to kill sensitive aquatic life in a short time, said Ann Maest, a geochemist who consults on mining issues.

The report showed that nearly half of the sediment samples in parts of the coastal estuary were toxic to the sensitive aquatic organisms at the bottom of the food chain, she said.

An uneasy coexistence

If the accumulating waste is the despair of critics, for Freeport-McMoRan it signals ever-expanding production. To keep its mine running, the company has increasingly had to play caretaker for the world that it has created.

After anti-mine sentiment erupted in riots in 1996, shutting the mine for three days, Freeport-McMoRan began dedicating 1 percent of annual revenue to a development fund for Papua to pay for schools, medical services, roads - whatever the people wanted.

The company built clinics and two hospitals. Other services include programs to control malaria and AIDS and a "recognition" fund of several million dollars for the Kamoro and Amungme tribes. By the end of 2004, Freeport-McMoRan had spent $152 million on the community development fund, the company said.

A report commissioned by the company concluded in October that the company had successfully introduced a human rights training program for its employees and had doubled the number of Papuan employees by 2001. The company is poised to double the number of Papuans in the work force again by 2006, the audit said.

Still, Thom Beanal, the leader of the Amungme, said the combined weight of the Indonesian government and Freeport-McMoRan had left his people in bad shape. Yes, the company provided electricity, schools and hospitals, but the infrastructure was built mainly for the benefit of Freeport-McMoRan, he said.

Beanal, a vocal supporter of independence for Papua, has fought the company from outside and inside. In 2000, he decided that harmony was the better path, and accepted an offer to join the company's advisory board.

In November, he and other Amungme and Komoro tribal members met with Moffett at the Sheraton Hotel in the lowland city of Timika. In an interview in Jakarta not long afterward, Beanal said he told Moffett that the flood of money from the community fund was ruining people's lives.

When the company arrived, he noted, there were several hundred people in Timika. Now it is home to more than 100,000 in a Wild West atmosphere of alcohol, shootouts between soldiers and the police, AIDS and prostitution, protected by the military.

Beanal said he was angry and increasingly impatient with the presence of both the soldiers and the mine.

"We never feel secure there," he said. "What are they guarding? We don't know. Ask Moffett, it's his company."

Evelyn Rusli contributed reporting.

Indonesian military admits accepting cash from Freeport-McMoRan

by Associated Press

29th December 2005

JAKARTA, Indonesia -- Indonesia's military acknowledged for the first time Thursday that its commanders in Papua had received "support" from a U.S. gold-mining giant _ responding to allegations that Freeport-McMoRan Co. gave the army millions of dollars to protect its facilities in the remote province.

Maj. Gen. Kohirin Suganda said the armed forces "as an institution" had never received donations from the New Orleans-based company.

"But we have heard that Freeport provides support such as vehicles, fuel and meals directly to the units in the field," Suganda said. "That's the company's policy. It was not done because we requested it."

Suganda was responding to an article published Tuesday in The New York Times that detailed Freeport-McMoRan's payments of $20 million to military commanders in the area in the last seven years.

Indonesia regularly ranks among the world's most corrupt countries in international surveys. The latest reports will do little to raise confidence in the army _ considered one of the country's most graft-ridden institutions _ or the government's pledge to eradicate official corruption.

Human rights groups have criticized direct payments by foreign mining and energy companies to the military, saying they were undermining efforts to bring the politically powerful armed forces under civilian command following the collapse in 1998 of the 32-year military dictatorship of former President Suharto.

Only one-third of the financing for Indonesia's armed forces comes from the state budget, while the rest is collected from non-transparent sources such as "protection payments," allowing the military brass to operate independently of the government's financial controls.

When asked about the payoff allegations, Indonesia's military commander Gen. Endriartono Sutarto would only say, "Please ask Freeport, not me."

A Freeport spokesman in Jakarta said the only company official who could comment on the matter was busy in Papua.

Reports that Freeport was paying off the military to protect the mine have circulated for years.

Last year, international watchdog Global Witness reported that Maj. Gen. Mahidin Simbolon, the region's former military commander and currently inspector-general of the army, personally received $247,705 from Freeport from 2001 to 2003.

In 2003, Freeport acknowledged in a report to the U.S. Securities and Exchange Commission and to New York City authorities that it had paid millions of dollars to the army.

"We've been deployed to difficult areas, don't we deserve better supplies?" Simbolon was quoted as saying Thursday in The Jakarta Post.

He acknowledged that the military had received payments from Freeport, but denied he benefited personally, saying the money had been given to battalion commanders to pay for various expenses and daily allowances to the troops.

The Indonesian military had previously denied receiving money directly from Freeport.

Freeport has been accused by international environmental groups of causing massive pollution in Papua's hitherto pristine jungles by allowing large quantities of toxic waste to seep into surrounding groundwater.

In its filings to the U.S. Securities and Exchange Commission, Freeport said annual payments to the Indonesian security forces were included in its contract covering operations at the giant Grasberg mine in Papua, the Indonesian-occupied half of New Guinea island.

Other U.S.-owned mining and energy companies also have come under fire for allegedly providing money and other services to the Indonesian armed forces, which are accused of having killed thousands of labor activists and other political opponents after a military coup in Jakarta in 1965.

Suharto gained Western support following the 1965 coup by opening Indonesia's economy to foreign investment. The first company to take advantage of this was Freeport-McMoRan in 1969. Critics have long condemned Freeport for allegedly obtaining the rights to the mine through a direct deal with the dictator.

At the time, Indonesia was under a reign of terror _ at least 500,000 opponents of the dictatorship were slaughtered in a political purge _ and it was impossible for local people to demand an open international tender, critics say.

Indonesia.- El Ejército indonesio admite que sus comandantes en Papúa recibieron "apoyo" de una firma minera de EEUU YAKARTA

29 Dic. (EP/AP)

El Ejército indonesio admitió hoy por primera vez que sus comandantes en Papúa Occidental recibieron "apoyo" de un gigante de la minería estadounidense, en respuesta a las alegaciones de que Freeport-McMoRan Co. dio al Ejército millones de dólares para que protegiera sus instalaciones en esta remota provincia indonesia.

El mayor general Kohirin Suganda dijo que las fuerzas armadas "como institución" nunca habían recibido donativos de esta compañía, con sede en Nueva Orleans, "pero hemos oído que Freeport presta apoyo como vehículos, combustible y comidas directamente a las unidades sobre el terreno". "Esa es la política de la compañía, no lo hace porque nosotros lo hayamos pedido", añadió.

Suganda respondía así a un artículo del 'New York Times' publicado el martes en el que se detallaban los presuntos pagos por parte de Freeport-McMoRan de 20 millones de dólares (16,8 millones de euros) a los comandantes en la zona en los últimos 7 años.

Indonesia figura entre los países más corruptos del mundo en los estudios internacionales. Los grupos pro Derechos Humanos han criticado los pagos directos por parte de compañías mineras y energéticas extranjeras a los militares, afirmando que estaban minando los esfuerzos por poner a las poderosas fuerzas armadas bajo mando civil tras la caída en 1998 de la dictadura de Suharto.

Sólo un tercio de la financiación de las fuerzas armadas indonesias procede del presupuesto estatal, mientras que el resto se recaba de fuentes no transparentes como "pagos por protección", lo que permite a los militares operar de forma independiente a los controles financieros del Gobierno.

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