Armenia ‘under pressure’ from UK and US over mining dispute, EU report says

Thomas Rowley

An internal EU report states that the UK government has pressured the Armenian government in a two-year standoff between protesters, an international mining company and the authorities.

• In the aftermath of Armenia’s 2018 “Velvet Revolution”, local residents and activists started a blockade of a $400m international gold mine in the country – run by a mining company registered in Jersey

• Amid the ongoing crisis, mining company Lydian International has threatened the Armenian government with international arbitration over the blockaded Amulsar project – which the UK has strongly supported

• Following openDemocracy reporting, a British MP criticised the UK Foreign Office over why ‘it would take such a political risk’ in backing the mine

An internal report released under EU Access to Documents states that the UK and US have pressured Armenia over a controversial gold mining project in the country, openDemocracy reports today.

The Amulsar gold mine shot to the forefront of Armenian politics after the country underwent its “Velvet Revolution” in 2018, when public protests forced the ruling Republican Party out of power. In the aftermath local residents and environmental activists began a blockade of the unfinished $400m mining project, bringing them into conflict with British-American mining company Lydian International, the company’s international supporters and the Armenian government.

“It doesn’t matter to us who wants to exploit the mine. There will be no mining industry in Jermuk,” local activist Shirak Buniatyan recently told the newspaper Hraparak. “Those who try to open a mine here will waste their money.”

As a result of the nearly two-year blockade, Lydian has been unable to access the Amulsar site and finish construction on the project, which is backed by the European Bank for Reconstruction and Development (EBRD), resource investment funds as well as the UK and US governments.

Lydian calls the mine blockade illegal, and accuses the Armenian government of ‘inaction’ over the situation. In March 2019, the company notified Armenia of a potential international arbitration dispute under British and Canadian bilateral investment treaties.

An internal note, dated October 2019, by the European Union Delegation to Armenia states that prime minister Nikol Pashinyan ‘has come under enormous pressure related to the future’ of the Amulsar gold project, including from the UK and US.

‘The US and UK governments,’ the report continues, ‘hope Lydian would not be discriminated [against] and a similar approach towards other mining companies operating in Armenia would be applied.’

The partially redacted report was obtained from the European External Action Service (EEAS), the EU’s diplomatic service, which noted that the ‘full public release of the whole document would reveal assessments concerning aspects and impact of this project by the EU Delegation in Yerevan intended for internal use only’.

“This report confirms the suspicions held by many that the UK is acting on behalf of a company seeking to open a dangerous gold mine,” said Jean Blaylock, campaign and policy manager at Global Justice Now. “And more, a company that is using ‘corporate courts’ to try and bully the Armenian government into shutting down public protests against the mine.”

Lydian, which is registered in Jersey and headquartered in Canada, states it has followed the highest international standards on environmental mitigation and protection – as required by the EBRD and the World Bank’s International Finance Corporation, which withdrew from the Amulsar project in 2017.

Opponents of the mine, which former British Ambassadors have called ‘potentially the largest British investment in Armenia’ and an ‘excellent example of UK-Armenia business cooperation’, claim their concerns over potential environmental damage are well-founded.

The document does not disclose the nature of official UK or US pressure on Armenia over the Amulsar gold mine, the largest foreign investment in the country.

“We do not accept this characterisation of the Embassy’s routine engagement with the Armenian Government on the Amulsar gold mine,” an FCO spokesperson said. “It is the role of diplomatic missions to talk to host governments on a wide range of issues, including on behalf of businesses. In this case, the British Embassy in Yerevan has discussed the mine with the Government of Armenia, to better understand their approach to the situation.”

A US State Department spokesperson said: “We hope the Armenian Government and Lydian International will continue to work together to discuss all possible options for a mutually agreeable, impartial, and expeditious resolution regarding Amulsar.

“We wish to see an orderly resolution of this issue in accordance with the law. The predictable, transparent, and uniform application of the law to all investors assures stakeholders and provides confidence to existing and potential investors.”

The Armenian Foreign Ministry did not respond to request for comment.

Lydian stated via email that ‘considering the current situation around the project, we do not give any comments’.

The EU Delegation report remarks that Armenian prime minister Pashinyan is ‘having to weigh environmental considerations against the economic benefits of the [Amulsar] project’ in a mining industry which has a ‘notoriously poor’ environmental protection record. With the mine finished, Lydian says it was set to employ 750 people, create an additional 3,000 jobs via local companies, and contribute $488 million to the Armenian state budget over a ten-year period.

The report notes the tense situation in which the company’s foreign backers, including the UK government, have found themselves in Armenia. The Amulsar standoff is, the document says, ‘heavily politicised, with opponents (but also some supporters) of the revolutionary Armenian authorities uniting around this issue, albeit pursuing different goals.’

‘The Amulsar issue,’ it continues, ‘has been one of the key points exploited by the domestic opponents of the Pashinyan Government […] These opponents argue that the PM has no regard for protecting the environment and question why the British and Americans should exploit Armenia’s natural resources.’

Official statements by the UK Foreign Office tend to downplay support of Lydian International, which was set to become one of Armenia’s biggest taxpayers prior to the start of the public campaign in 2018.

When asked in parliament whether the Foreign Office had made representations to the Armenian government over the Amulsar mine earlier this year, a Foreign Office minister replied: “British Embassy Yerevan officials regularly make representations to the Government of Armenia on a range of issues.”

Campaigners, including a British MP, have criticised the role of the UK Foreign Office in supporting Lydian International in its dispute with the Armenian government.

In response to a government-ordered environmental audit of the Amulsar project in August 2019, representatives of Armenian civil society called on the British and US Embassies, as well as Sweden, to withdraw support for the Amulsar mine, calling the audit ‘staggering in its implications’.

“Perhaps it would be more fair to put [Amulsar] into the context of the United States or Great Britain or Sweden,” the open letter stated. “Would any license to operate an open pit mine, in your backyard, ever be granted on the basis of incomplete, inaccurate and fraudulent ESIA [Environmental and Social Impact Assessment]? We know the answer to this is ‘no’ and ask that this standard be applied to the citizens and residents of Armenia.”

Internal correspondence from British Embassy Yerevan obtained by openDemocracy under Freedom of Information contains redacted emails relating to Embassy meetings with both Lydian International and the Armenian government regarding Amulsar, as well as redacted internal Foreign Office correspondence on the situation surrounding the mine. A list of contacts between the Embassy and Lydian shows regular contact over a five-year period.

A 2018 list of Embassy documents relating to Amulsar contains titles 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”. Embassy correspondence relating to the Amulsar project also includes redacted correspondence about a EU Heads of Mission meeting with prime minister Pashinyan in November 2018.

Prime minister Pashinyan initially ordered inspections in Armenia’s mining industry after taking the post in 2018, saying that he would have opposed the Amulsar project if he had been in power during the approval process.

Following the publication of a government-ordered audit in August 2019, Pashinyan, an opposition politician who led mass protests against Armenia’s former regime, began calling on protesters to end the mine blockade. He stated that there was no legal basis to oppose Amulsar, and that the mine should reopen.

Lydian International states that there was no basis for the government-ordered independent audit in Armenian law, and that the company has succeeded in ‘meeting or exceeding rigorous and leading global standards of environmental stewardship and sustainability’.

“The Prime Minister is in a very difficult situation, I believe,” said Sona Ayvazyan, executive director of Transparency International Armenia.

“He has his own values, such as democracy and care for the environment, his promises that the voices of Armenian citizens matter and that they are the masters of their own lives, that his government is different from the previous corrupt regime, etc. But Pashinyan faces strong public pressure and boosted expectations of people who supported the 2018 revolution, and meanwhile his actions are not in line with his values and promises.

“Apparently, he has been under significant pressure from the international community and, more specifically, the UK and US Embassies, risking to affect future foreign investments in the country. Obviously, it has been very hard for the Prime Minister to make a decision in this situation.”

A US State Department spokesperson said: “The United States supports economic development of well-regulated extractive industries. In our own experience, responsible development is the best means to create jobs and contribute to sustainable economic growth that can lift populations out of poverty and protect natural resources.”

In December 2019, Lydian filed for a court-protected restructuring process in Canada. Court filings for the company, which was delisted from the Toronto Stock Exchange in January this year, state that it is currently ‘advancing discussions with a potential purchaser’ for the mine, and continuing dialogue with the Armenian government ‘to see whether an agreement can be reached regarding access to the Amulsar Project’.

“There seems to be no good reason for UK diplomats to throw their weight behind a mining company with main offices variously in Colorado, Canada and Armenia, a company registration in a Channel Island tax haven, and a recent letterbox registration in a building in London where no one from the company actually works,” said Jean Blaylock from Global Justice Now. “It appears Lydian doesn’t even have a bank account in the UK.”

This article was produced with the support of Journalismfund.eu.

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