Week of Monday, May 24, 2021 | Issue 34
Filipe Neves, Liam Tormey; CENTCOM
Kumtor Gold Mine[1]
Date: May 17, 2021
Location: Bishkek, Kyrgyzstan
Parties involved: Kyrgyz Parliament, Kyrgyz Government, Canadian operator Centerra Gold and its Kyrgyz subsidiary Kumtor Gold Company (KGC).
The event: On May 17, 2021, the Kyrgyz Parliament announced its support of the government’s plan to seize the Kumtor gold mine, wholly owned by Centerra Gold.[2] The announcement came after Kyrgyz President Sadyr Japarov signed a bill into law that would allow external management of the mine for up to three months in case of violation of safety and environmental regulations.[3] In addition to accusations of unpaid taxes, KGC was recently fined more than $3 billion for dumping mining waste in surrounding areas.[4] Centerra Gold said it would bring the case to an international court, calling the government’s actions unlawful.[5] There have long been calls for the nationalization of the Kumtor gold mine, including President Japarov. Japarov was responsible for a mass protest that occurred in 2013 demanding the mine’s nationalization and was found guilty of the kidnapping of governor Emil Kaptagaev, which took place during said protest.[6] He was released from prison in October 2020 by anti-government protesters amid clashes and riots with police forces and was elected president in January 2021 following the resignation of former President Sooronbay Jeenbekov.[7]
The implications: Why is this event good/bad? What are the results of this event? This can include a prediction(s).
KGC is Kyrgyzstan’s biggest taxpayer and accounts for approximately 10% of the country’s GDP.[8] It is also one of the largest investors in the country, providing jobs for more than 4,000 people, 99% of whom are Kyrgyz citizens.[9] [10] These numbers highlight the cruciality of the company to Kyrgyzstan’s economy as a major contributor to government revenue and employment, as well as the potential benefits of foreign investment in the country. The takeover of the Kumtor gold mine is likely to tarnish Kyrgyzstan’s reputation as a safe place for investors and will likely deter future investments from international companies and partners, ultimately hindering economic growth. In a country that struggles economically, the implications of this takeover are bound to deeply affect stability weakened by the COVID-19 pandemic and the political and social unrest of October 2020.
From a security standpoint, economic woes have often been exploited by terrorist groups to garner support and expand their presence. If the government ignores its international obligations to its foreign partners regarding the Kumtor mine and the Kyrgyz people suffer in the process, there is a roughly even chance that Kyrgyzstan will become more vulnerable to terrorist attacks as discontent towards state institutions increases. Despite multiple terrorist groups, such as Hizb ut-Tahrir and the Islamic Movement of Uzbekistan, is already banned in Kyrgyzstan, underground terrorist activity remains an issue in the country. The Kyrgyz government has reportedly arrested the foreign terrorist fighters (FTFs) who returned to Kyrgyzstan, however, the country remains vulnerable to terrorist infiltrations due to the mountainous terrain of its borders, particularly in the south.[11] Much like Tajikistan, the presence of Kyrgyz militants in the Taliban poses a threat to Kyrgyzstan’s national security, stressing the importance of addressing the grievances of the Kyrgyz people to make them less exposed to extremist messages. This seems particularly relevant if additional Kyrgyz FTFs and other terrorists attempt to infiltrate the country with the intent of carrying out jihad.
The bill approved by President Japarov applies exclusively to companies operating on a concession agreement. However, KGC is the only company with such status in Kyrgyzstan, reinforcing the idea that the bill was potentially pushed by the Kyrgyz political elite to either remove the Canadian company from the country and fully nationalize the gold mine, or simply increase its shares of the company. In either case, considering KGC’s profitability, it is highly likely that the Kyrgyz government intends to increase its control over this lucrative industry and consolidate its power in the country. Consequently, the nationalization of the mine will likely result in protests by the Canadian government and the current employees of the mine as the Kyrgyz government has a precedent of political and economic corruption.
[1] Kumtor Gold Mine by Michael Karavanov, licensed under Creative Commons
[2] Kyrgyz Parliament Supports Seizure Of Canadian-Run Gold Mine, RadioFreeEurope / RadioLiberty, May 2021, https://www.rferl.org/a/kyrgyzstan-canadian-centerra-gold-kumtor-mine/31258729.html
[3] Kyrgyz President Signs Law Allowing External Management Of Kumtor Gold Mine, RadioFreeEurope / RadioLiberty, May 2021, https://www.rferl.org/a/kyrgyzstan-japarov-approves-law-takeover-kumtor-gold-mine/31255421.html
[4] Kyrgyz Parliament Supports Seizure Of Canadian-Run Gold Mine, RadioFreeEurope / RadioLiberty, May 2021, https://www.rferl.org/a/kyrgyzstan-canadian-centerra-gold-kumtor-mine/31258729.html
[5] Ibid.
[6] Kyrgyz President Signs Law Allowing External Management Of Kumtor Gold Mine, RadioFreeEurope / RadioLiberty, May 2021, https://www.rferl.org/a/kyrgyzstan-japarov-approves-law-takeover-kumtor-gold-mine/31255421.html
[7] Ibid.
[8] Президент Жапаров подписал закон о введении внешнего управления на Кумторе, Радио Азаттык, May 2021, https://rus.azattyk.org/a/zhaparov-podpisal-zakonoproekt-o-vvedenii-vneshnego-upravleniya-na-kumtore/31254424.html (translated by Google)
[9] The Impact of Kumtor Gold Mine on the Economic and Social Development of the Kyrgyz Republic, University of Central Asia, 2015, https://www.ucentralasia.org/Content/Downloads/UCA-IPPA-WP32-Kumtor-Eng.pdf
[10] Operations, Kumtor, n.d., https://www.kumtor.kg/en/deposit/
[11] Kyrgyzstan 2020 Crime & Safety Report, Overseas Security Advisory Council, March 2020, https://www.osac.gov/Country/Kyrgyzstan/Content/Detail/Report/66c90479-45fe-4b1c-be58-181be27214f6