Kyrgyz Authorities Clash With Owners of Massive Kumtor Gold Mine
Despite reaching the additional accord initially touted as a success, the Kyrgyzstani government has recently been sending mixed signals about its further intentions. This is undoubtedly due to the downfall of the government of Sapar Isakov, widely considered the driving force behind the new deal. Isakov was dismissed by President Sooronbay Jeenbekov in April 2018, following a vote of no confidence in the parliament. He was subsequently interrogated four times in connection with a corruption affair at Bishkek’s thermal power plant, in which Chinese interests are believed to have received unduly favorable treatment. He was eventually arrested in early June. Just weeks later, Isakov’s successor, Mukhammedkalyi Abylgaziev, said that the 2009 agreement with Centerra Gold should be reviewed to take a proper account of Kyrgyzstan’s strategic interests. The same information was quickly confirmed by the speaker of parliament, Dastan Jumabekov, although no details were immediately forthcoming .
The Kumtor Gold Mine first became a subject of contention shortly after production began, in 1997. The following year, Kumtor Gold Co. caused a major cyanide spill near the mining site. However, the tensions ultimately subsided, only to be revived again in early 2012, when a parliamentary commission was formed to investigate the 2009 signing of the new terms of cooperation by the administration of then-president Kurmanbek Bakiyev. The latter was deposed by a popular revolution and fled the country in 2010. The government then decided, in 2013, to file a series of lawsuits against Centerra Gold, the single owner of Kumtor Gold Co. since 2004. Most of them relate to multiple environmental violations, which the Canadian company has been invariably contesting. Centerra recently let it be known, through its 2017 annual filing, that it had received $465 million worth of claims since the latest wave of lawsuits beginning in 2012. In September 2017, when the foreign investor took on extra commitments, a new $200 million lawsuit was dropped, but litigation resumed in the spring of 2018, on the eve of then–prime minister Isakov’s dismissal .
The Kumtor controversy is fraught with considerable negative consequences for Kyrgyzstan, many of which are hard to quantify in advance. Legal action against foreign investors working on large-scale, capital-intensive projects, whether successful or not, is always perceived as a red flag by other companies envisaging similar projects. The troubled legal history of Centerra’s operations in Kyrgyzstan has been compounded by domestic political instability, leading to frequent government reshuffles and two presidents being ousted by their own people, in 2005 and 2010. In addition, Kyrgyzaltyn, the state-owned gold mining enterprise, currently owns 26.6 percent of Centerra Gold’s issued share capital; therefore, depriving the Canadian company of its key asset, or encumbering it with new liabilities, would be tantamount to the government shooting itself in the foot. All in all, Kyrgyzstan may be the most democratic country of Central Asia, but its economic prosperity continues to be beholden to politicking with unpredictable implications.
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