UK’s determination to lobby for the troubled Armenian Amulsar mine
Internal correspondence released under a freedom of information (FOI) request shows how the UK Embassy in Yerevan sought to discuss Lydian International’s $400m Amulsar gold mine with the Armenian prime minister’s office in 2020.
The UK has supported Armenia’s attempts to clean up its mining industry – long associated with corruption, pollution and poor environmental standards – and Lydian, originally a Jersey-registered company, was a flagship project in this responsible mining drive.
But Amulsar has been at the centre of public controversy since Armenia’s 2018 “Velvet Revolution”, when it was blockaded by local residents and environmental campaigners over ecological and social impacts, forcing a standoff between international development banks that supported the mine, the Armenian government and those against the project.
Both the US and UK have ‘pressured’ Armenia’s new government during the confrontation over the mine, according to a confidential EU report obtained by openDemocracy in May 2020. Other records released by the UK Foreign Office showed regular records of meetings between the Jersey-registered mining company and the British Embassy in Armenia in 2013-2018.
The new Foreign Office correspondence released under FOI is largely redacted on grounds of commercial confidentiality and potential damage to international relations. But the documents show how, for example, in September 2020, UK embassy staff in Yerevan prepared to engage with the Armenian government on the controversial mine, using a new national policy initiative released a few days earlier.
“I understand that work on the National Transformation Strategy is being led at the strategic level by in the PM’s Office – so the strategy would be a useful area of conversation to lead with if we wanted to discuss Lydian with him,” read one email, dated 24 September 2020, as part of an email chain titled “Proposed Meetings”.
The Armenia Transformation Strategy 2050 is a policy initiative released by prime minister Nikol Pashinyan’s government on 21 September last year. It aims to foster dialogue and solutions for Armenia’s development towards 2050.
“It is the role of diplomatic missions to talk to host governments on a wide range of issues, including in support of UK businesses,” said an FCO spokesperson. The Armenian prime minister’s office did not respond to a request for comment.
Lydian has called the mine blockade illegal, and accused the Armenian government of “inaction” over the situation. Indeed, in March 2019, Lydian notified Armenia of a potential international arbitration dispute under British and Canadian bilateral investment treaties over what it calls an “ongoing campaign by the Armenian Government targeting Lydian’s investments in Armenia”.
To address concerns over environmental impacts, in August 2019 the Armenian government published a specially-commissioned technical report on Lydian’s environmental mitigation measures.
Though the report detailed significant areas where Lydian’s measures fell short, it did state that the possible impact on nearby water sources in Jermuk and Lake Sevan was nil. The government did not order a new environmental impact assessment to be drawn up – and Pashinyan gave the project a green light on the basis that “not even one litre of polluted water will reach [Lake] Sevan or Jermuk”.
In response, the company said it was “deeply disappointed” with the report, and noted that an independent auditor had found the company in “substantive conformance” with international standards.
A year later, protesters returned to the Amulsar site after the company hired a new private security firm and removed a trailer belonging to activists – with tense scenes between protesters and the private security team broadcast on national media as a result.
“During these protests, the police detained 10-20 people and opened administrative cases against them for refusing to obey police orders,” said Tehmine Yenoqan, an activist and resident of Gndevaz, who also noted that Lydian had opened defamation cases against activists for speaking publicly against the company.
“It makes us think: if we decide to come out and protest again, who will defend us – when they can lock activists up?” Yenoqyan continued. “The government and the prosecutor’s office is working in Lydian’s interests, and this pressure has an effect on people – although in the last two and a half years, of course, we’ve seen everything under the sun. That said, they’ve defeated the hardest resistance, and they’ll defeat what comes next.”
While prime minister Pashinyan appears to have approved the project, he has also sought to assuage those who are against the mine.
“There are both supporters and opponents of the exploitation of Amulsar in Armenia. And we must come to a balanced solution,” he said in Jermuk, a town located close to the mine site, in June 2021. “When the government develops a specific proposal, I will personally come, and we will discuss everything and give a solution to the issue together taking into account every detail.”
Previous correspondence obtained after an FOI request by openDemocracy suggested that the UK had lobbied closely for the Amulsar gold mine with Armenia’s former government, including monitoring the public statements of environmental activists in the country, and interceding in a previous dispute in 2013.
Foreign Office emails from the height of the crisis over the mine in 2018 have largely been redacted under international relations exemptions, but contain subject lines such as ‘Possible meeting with Armenian PM – urgent advice requested’, ‘Questions for the Ambassador’, ‘Meeting with Acting PM Pashinyan key points’ and ‘Readout of meeting with Lydian’.
Across the border in neighbouring Azerbaijan, the UK government recently supported opening up Nagorno-Karabakh, over which Armenia and Azerbaijan fought a brutal 44-day war last year, to mining by a UK company.
Monitoring the risk
The past 18 months has seen Lydian International go through corporate restructuring after the blockade prevented work from going ahead. As a result, the mining group is now owned by its three senior lenders, the investment firms Orion Resource Partners, Osisko Mining and Resource Capital Funds.
The European Bank for Reconstruction and Development’s investment in the project has since been terminated as a result of the company’s restructuring. An independent monitoring mechanism at the London-based multilateral development bank is currently considering whether its equity investment in Lydian was in line with its environmental and social policy.
“One of the keys to [the company’s] success is the dialogue which Lydian has conducted: with the Armenian government, local authorities, civil society and perhaps most crucially with the local communities,” said Judith Farnworth, then UK Ambassador to Armenia, at the project’s launch ceremony in 2016. “Through this engagement Lydian has provided assurances that it is committed to responsible mining, bringing economic and social benefits to Armenia whilst respecting the importance of environmental protection.”
But while the UK Foreign Office has lauded environmental and social standards at Amulsar, including local engagement, support for the mine has placed it in a tense confrontation with local residents and environmental campaigners. In 2018, 3,000 residents of Jermuk signed a petition against mineral mining in the area. The EBRD and World Bank’s International Finance Corporation, a former financial supporter of the project, have also received several complaints by local residents.
“The UK (and US) has taken a lot of flak from civil society, despite the project receiving funding from the World Bank and the EBRD,” reads a Foreign Office email from August 2020. “Our line to the various [parliamentary questions] and queries we’ve received is that British Embassies support British business in new markets and this is a normal part of our diplomatic work.
“In addition, on the current stand-off between the protesters and the company, we stress that we want all sides to engage in dialogue to overcome this impasse. The reality is that the case is likely to end in the courts.”
The correspondence also made reference to a ‘ministerial letter’ regarding Lydian. The Foreign Commonwealth and Development Office has refused to release it.
Beyond the environmental impacts, however, Armenian journalists have also raised concerns about the land acquisition process at Amulsar.
In January 2021, Hetq, an Armenian investigative journalism outlet, published information regarding land sales at Gndevaz, the village where Lydian’s Amulsar mine site is based.
According to Hetq, a number of local public officials and their relatives had bought land plots for several hundred dollars each – mostly during early stages of exploration but also after – and then sold them at much higher sums to Lydian during the land acquisition process in 2015 and 2016.
This included the head of Gndevaz village council, who was later charged, together with his son, with abusing his official powers over the sale of a single land plot to Lydian. That case continues to be heard in court, and no final verdict has yet been made.
During the land acquisition process as a whole, Hetq reports, the company bought 278 plots of land – from 152 owners for an approximate total of $2.8m. Around 20 people, mostly local officials and their relatives, sold their land plots for a combined total of $2.1m to the company.
In an email to openDemocracy, Lydian’s Armenian branch stated that the “basis for land purchases was the location of the lands and not the status of the landowners.”
The email continued: “The implemented land acquisition by Lydian Armenia was unprecedented in Armenia and was in line with the international best standards and principles as well as the Armenian legislation.” Lydian added that it “ensured engagement with affected households” by holding meetings, providing updates and collecting feedback from residents.
“The same equal conditions and principles were used while evaluating all the lands, including the detailed evaluation of existing trees and plants on the land, their age and quantity, and fruit yield and not the market price of the lands only,” Lydian continued, stating that there were no complaints or court cases against the company over the land acquisition process.
The unfinished Amulsar mine was set to employ 750 people once online, with another 3,000 jobs created by local companies linked to the mining operation. Company projections place the number of its tax and royalty contributions to the Armenian state budget at €432 million through the ten-year operation of the mine.
“Any sector-specific projects which are directly related to the mining industry may present an increased risk of reputational damage,” reads an excerpt from an undated 2020 “country register” for Armenia provided by the Foreign Office.
“Staff in embassy are monitoring the risk,” the entry on Amulsar continued. “It has been escalated through the FCO but no actions have been recommended.”
Armenian gold mine Amulsar – EBRD investment finished
Lydian International’s Amulsar gold mining project in southern Armenia has been under blockade for the past two years, by local people and environmental activists. They blocked access to the mine in the wake of the country’s 2018 ‘Velvet Revolution’. Now European Bank for Reconstruction and Development investment in a controversial $400m gold mine in Armenia is to end, a new assessment by the bank’s complaint body states.
News that the EBRD’s investment is due to end comes as protests have been renewed at the Amulsar site in recent weeks, after the Lydian group hired a new private security firm and removed a trailer belonging to activists.
The London-based development bank has funded exploration, drilling and feasibility studies and environmental and social mitigation measures by Lydian since 2009, and has been targeted with criticism by civil society groups over its support for the company.
“The EBRD owes the public a proper statement expressing its position on the project and current developments,” said Fidanka McGrath, EBRD policy officer at CEE Bankwatch Network. “The recent despicable provocation by Lydian’s security company [at Amulsar] is only a sign of the reputational damage that this investment will continue to inflict on the EBRD, even after its shareholdings in Lydian International are wound up.”
The Amulsar blockade has led to a complex standoff between Armenia’s government, headed by former protest leader Nikol Pashinyan, Anglo-Canadian mining company Lydian International and protest participants themselves. The standoff has also drawn in the mine’s international backers, including the EBRD, as well as the UK and US governments.
The ongoing blockade and a government-ordered environmental audit have prevented Lydian, Armenia’s largest foreign investor, from completing work at the mine, as well as causing it financial difficulties. An assessment report by the EBRD’s Independent Project Assessment Mechanism (IPAM), published on 7 August, states that the bank’s investment will be “terminated” as part of Lydian’s corporate restructuring process.
After Lydian’s lenders revoked their agreement to suspend the company’s interest and principal payments, which had been initiated as a result of the Amulsar blockade, the group is now owned by its three senior lenders, resource investment firms Orion Resource Partners, Osisko Mining and Resource Capital Funds. Lydian’s existing parent company in Jersey, in which EBRD held a 5% shareholding, is being liquidated as part of this restructuring. The IPAM report states that EBRD “has no financial interest” in restructured Lydian’s new parent company, which is incorporated in Canada, and the completion of the Jersey proceedings “will result in the termination of EBRD’s shareholding”.
Writing on Facebook, Lydian Armenia stated that “EBRD and other shareholders ceased to be part of the Amulsar programme exclusively as a result of domestic illegality in Armenia”, and that the company would continue to observe the development bank’s environmental standards.
“The EBRD can still redeem itself by speaking up in support of democracy and by working with the Armenian government to remedy the environmental harm and social conflicts caused by the project,” said Fidanka McGrath. “Either way the bank will have to answer for its failure to ensure proper consultations with affected communities.”
Disagreements over the potential environmental and social harm of the Amulsar mine, which is 75% complete, have animated much of the public tension over the flagship mining project. Campaigners have cited concerns over the mine’s potential impact on environmental damage, local tourism and social change, and a petition signed by 26,000 people has called on the mine’s financial backers, including the EBRD, to divest. In 2017, the International Finance Corporation, the World Bank’s development arm, withdrew its funding from Lydian International, stating that its investment was no longer necessary.
Lydian calls the mine blockade illegal, and has accused the Armenian government of “inaction” over the situation. In March 2019, Lydian notified Armenia of a potential international arbitration dispute under British and Canadian bilateral investment treaties over what it calls an “ongoing campaign by the Armenian Government targeting Lydian’s investments in Armenia”. Lydian, originally based in Jersey, states it has followed the highest international standards on environmental mitigation and protection for the proposed mine – as required by EBRD, which has been invested in the company since 2009.
“There is no environmental issue here, it has grown into a political issue,” Lydian Armenia director Hayk Aloyan said in a recent interview. “The entire world follows the situation in Armenia, where the most environmentally-sound mining investment project has become hostage to political games.”
The unfinished mine was set to employ 750 people once it came online, Lydian states, with another 3,000 jobs created by local companies linked to the mining operation. Company projections put the number of its tax and royalty contributions to the Armenian state budget at €432 million through the ten-year operation of the mine.
The EBRD IPAM report comes in response to a complaint by residents of the local tourist town of Jermuk, as well as five non-governmental organisations in May this year. They claim that Lydian had “failed to ensure that the project complies with the requirements of the bank’s Environmental and Social Policy”, and that they had “already experienced serious environmental harm from the project, resulting from pollution of water, air and land”.
The EBRD stated in response to the complaint that “environmental and social due diligence on the Project was undertaken and that the issues presented in the Request had been adequately addressed by the Company”. The report did not state Lydian’s position on the specifics of the complaint, but that the company “had indicated their willingness… to move discussions with stakeholders forward and with the intent of resolving issues”.
In its summation, IPAM stated that “Problem Solving would offer limited potential for a constructive dialogue… due to the lack of trust between the Parties”, and that the “Parties share irreconcilable differences in their own principles”.