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pushing to place the mine – scene of the second highest gold mining operation
in the world, located in the Tian Shan mountains more than 4,000m (14,000ft) above sea level and 60 kilometres from the Chinese border – in state hands.
Was he bluffing or did something happen to change his mind? Some Kyrgyzstan watchers suggest one need look no further than the truly dire state of the country’s economy caused by the coronavirus crisis. Indeed, it appears to have only dawned on Japarov in the past couple of months just what a mess the government’s books are in.
Acute budget deficit
Nikita Mendkovich, of the Russia-based Eurasian Analytical Club, was one analyst who took in the Kumtor uproar from this angle, telling 24.kg: “There
is one factor – an acute budget deficit – behind the current attempts to [once again] revise the agreement on the project, as well as behind other similar stunts that [have been pulled by] all previous presidents of Kyrgyzstan.”
Mendkovich cautioned: “I have always considered attempts to renegotiate
the terms of concluded agreements as alarming symptoms. Such actions cause serious and long-term damage to the economy. They are much more harmful than compliance with agreements
that have been previously concluded, even those that may be financially disadvantageous.”
Kyrgyzstan saw its GDP shrink by over 8% in 2020 and by another 9.4% in the first quarter of this year amid the pandemic’s impact. It is the second poorest country in Central Asia, being only slightly better off than Tajikistan. Food aid has lately been arriving from the country’s oil-rich neighbour, Kazakhstan, while the United Nations
part of the reality at play in the state taking control of the mining asset.
“Of course, ecology is an important element, but has there been any recorded damage to public health associated with environmental disturbances in this area? I believe that the state is simply faced with the
“Kyrgyzstan saw its GDP shrink by over 8% in 2020 and by another 9.4% in the first quarter of this year amid the pandemic’s impact. It is the second poorest country in Central Asia”
Development Programme (UNDP), Asian Development Bank (ADB) and Kyrgyz Economic Policy Research Institute have predicted a 25% decline in much needed remittance inflows and an unemployment level that is expected to reach 21%. Income from tourism and travel services is thought to have dropped by around 90% in 2020.
Japarov officials are wont to make loud complaints about environmental damage that they allege has been caused by operations at the Kumtor mine – claims that KGC has been illicitly dumping waste on glaciers, for instance, may be one aspect of the case that will be looked at in response to Centerra’s international arbitration suit – but such objections are unlikely to amount to more than a minor
task of finding additional sources of income to solve the problem of the state budget,” Kyrgyz economist Asylbek Ayupov told Vesti.kg.
“In 2024, gold at [Kumtor] is expected to dry up and the project will close.
And next year, Kyrgyzstan needs to pay off the bulk of its external debt. And someone [in the government] thinks that Kumtor will help solve the country's economic problems,” Ayupov added.
Ticking clock
Even during previous battles with Centerra, Kyrgyzstan has looked
at Kumtor in the light of its ticking clock. This, for example, was seen in the dilution of Kyrgyzstan’s shares in the Canadian miner in 2016 as the government settled on the promise
of greater dividends from the firm in anticipation of the flagship gold mine’s fast-approaching demise. It would make sense that with 2024 very much nearer, Kyrgyz officials are going for a short- term hard squeeze.
Even as a short-term strategy, however, the latest scope of Bishkek's potential investor-shakedown might prove to be something of an overreach.
“When you read the news about the sky-high fine of $3bn, you can’t help but begin to think that the matter is far from violations of the rules that the foreign company is accused of. It seems to me that this is how investors are [normally]
Japarov is known as a fervent nationalist (Image: duma.gov.ru CC-BY-SA 4.0).
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