Politics

Have Kumtor’s Revenues Fallen Since Government Seizure? – The Diplomat


Last week, a deputy in the outgoing Kyrgyz parliament, Osmon Turdumambetov, asked Kyrgyz Finance Minister Almaz Baketaev how much gold the Kumtor Gold Mine had produced under government management, where it was sold, and what revenues and taxes were received. The minister was unable to answer; the ministry followed up two days later with a reply that appeared to demonstrate a drop in revenue at the mine. This comes a month after Centerra Gold claimed the Kumtor mine’s output had fallen.

According to 24.kg, the Finance Ministry’s official response stated that budget revenues from the Kumtor Gold Company amounted to 6.99 million Kyrgyz soms in the first 11 months of 2021, down 2.6 million soms (27.2 percent) from 2020 revenues. The ministry noted that Kyrgyzaltyn purchases the mine’s outputs and further processes them for sale. The Kumtor Gold Company told RFE/RL’s Kyrgyz Service they were surprised by the Finance Ministry’s statement, claiming that the ministry’s numbers only covered taxes on the company’s gross income and not other taxes paid to the state.

It’s unclear where Kyrgyzstan is selling its gold, as the country was suspended from the London Bullion Market’s list of acceptable traders in September.

Back in mid-May, the Kyrgyz government took control of the lucrative Kumtor Gold Mine from Centerra, the Canadian mining company that had long run the mine through a subsidiary, the Kumtor Gold Company. The Kyrgyz state, via the state mining company, Kyrgyzaltyn, is the largest shareholder in Centerra. The mine has been a flashpoint for decades, with current President Sadyr Japarov rising to political infamy in 2012 on the back of strident calls to nationalize the mine.

Bishkek seized Kumtor following the passage of a law that allowed it impose external management for up to three months on any mining company operating under a concession agreement in Kyrgyzstan if it was found to have violated environmental regulators or endangered the environment. Tengiz Bolturuk, who had served as one of Kyrgyzstan’s three representatives on Centerra’s board of directors from December 2020 to May 17, was put in charge. 

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Three months later, the Kyrgyz parliament amended the law to extend the period of external management from up to three months to until the violations are resolved — essentially until the government decides to relinquished control. 

Centerra is pursuing Kyrgyzstan via international arbitration, but Kyrgyzstan is also pursuing Centerra. Also last week, Kyrgyzstan said it had filed a criminal lawsuit against Centerra over the company’s alleged blocking of user and administrator access to Kumtor’s computers from May 2021. Centerra has pushed back, with a spokesperson telling Mining.com: “As we have said previously, when government authorities confiscated computers and passwords of individual Kumtor employees, Centerra’s global IT systems restricted user access to preserve the integrity of the organization’s global IT infrastructure and its confidential information. The mine’s safety systems were not impacted.” The company claimed the lawsuit was just another tactic to divert attention.

In September, Centerra had warned that the Kyrgyz government actions were jeopardizing the mine’s safety and sustainability. The company noted that “Centerra’s claims will be adjudicated in arbitration proceedings to be held in Stockholm, Sweden and conducted under the rules of the United Nations Commission on International Trade Law.” It’s unclear how long that process may take to play out.

Meanwhile, back in Kyrgyzstan a number of political figures have been called in for questioning over alleged corruption involving the Kyrgyz state’s relations with the Canadian company and the mine. Most dramatically, Kyrgyzstan’s first president, Askar Akayev, returned to Kyrgyzstan for the first time since his 2005 ousting in August to cooperate with the investigation. It was under Akayev’s presidency that Centerra began operating the mine. 

After another short visit last week, RFE/RL reported that Akayev had again left the country and they’d been told that he was cleared of any charges related to corruption at the mine. Kyrgyzstan’s State Committee on National Security, which is handling the investigation, has not commented publicly on Akayev’s case.

Two Kyrgyz members of parliament, Asylbek Jeenbekov (the brother of former President Sooronbay Jeenbekov) and Torobay Zulpukarov, were released from jail on December 9 a day after the outgoing Kyrgyz parliament voted not to revoke their parliamentary immunity. Both had been detained in June. This may just be a temporary reprieve, however, as the new Kyrgyz parliament will be sat on December 23.

Needless to say, there is a lot going on with regard to Kumtor. There’s the international aspect encompassing Centerra’s battle with the Kyrgyz state, which has effectively nationalized the mine. Then there’s the domestic political battle stemming from the base necessity to pin blame on someone, and the real utility of Kumtor as a political weapon. There are few high-level politicians in the country in the last 30 years who have not had their hands in the golden pie in some way. And finally there’s the economic question: Kumtor is one of Kyrgyzstan’s most lucrative assets, and a large employer. But there have been reports of domestic contractors being laid off at the mine, plus the apparent drop in revenue, which do not bode well.

In a statement to the diplomatic corps earlier this month, Chairman of the Cabinet of Ministers Akylbek Japarov (no relation to the president) said he considers Kumtor to be the root of all evils in Kyrgyzstan’s 30 years of independence: enslaving contract terms and constant looting from the top down. He characterized the Japarov government as cutting the Gordian knot of Kumtor. Time will tell.



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