A Russian-backed development bank is set to finance a controversial mining project in Armenia which has been lobbied for heavily by the UK Foreign, Commonwealth and Development Office (FCDO).<\/p>\n
The Eurasian Development Bank (EDB), in which Russia holds a 44% interest, is now committed to investing $100m in the Amulsar gold mine in Armenia \u2013 which the UK has closely supported over the past decade.<\/p>\n
The breakthrough deal comes after the UK has spent the past 12 months attempting to cut off the Russian state\u2019s access to the international finance system via sanctions.<\/p>\n
Anna Shahnazaryan, a member of the Armenian Environmental Front volunteer group which opposes the mine, told openDemocracy it was \u2018surprising\u2019 to see the EDB invest in Amulsar given the mine had been billed as a Western project, with the UK government\u2019s close support.<\/p>\n
\u201cSupporters of the mine used to try and dismiss environmental protesters and local residents\u2019 concerns with this rhetoric of \u2018Russia vs the West\u2019 [by saying] those who resisted supposedly wanted Amulsar to be handed over to the Russians,\u201d Shahnazaryan said.<\/p>\n
The UK FCDO has long supported the company behind Amulsar, Lydian International, apparently seeing the mine as a flagship Western investment as well as a chance to improve its environmental and social impacts. Lydian was originally registered in Jersey, and headquartered in the US and Canada.<\/p>\n
Together with the UK-backed European Bank of Reconstruction and Development (EBRD), the FCDO supported Lydian as the company navigated a series of crises in its relationship with the Armenian government and society over the past 10 years, according to documents obtained by openDemocracy.<\/p>\n
Emails released to openDemocracy under freedom of information law show the UK FCDO, and the UK embassy in Yerevan,\u00a0lobbied\u00a0the Armenian government<\/span> <\/a>to advance Lydian International\u2019s interests as it faced direct fallout from the country\u2019s 2018 \u2018Velvet Revolution\u2019.<\/p>\n That year, protesters and local residents\u00a0blockaded the $400m Western-backed mining project<\/span><\/a>\u00a0in the weeks after Armenia\u2019s \u2018old regime\u2019 was pushed out of power. Neighbours and protesters said that, under the previous repressive Serzh Sargsyan regime, they had felt like they couldn\u2019t campaign against the Amulsar project.<\/p>\n Citing concerns over the gold mine\u2019s environmental and social impacts, protesters provoked, with their blockade, a serious conflict between the Armenian government and the company set to be the country\u2019s biggest international investor.<\/p>\n Lydian threatened international arbitration over the government\u2019s failure to clear protesters\u2019 blockade at Amulsar. The mine, once online, had been projected to become one of the top contributors of taxes to the Armenian state, creating thousands of jobs.<\/p>\n Yet the protesters\u2019 blockade, alongside government investigations and environmental audits, eventually resulted in Lydian going through a court-protected restructuring process in Canada in 2019-2020. The company said it had simply lost too much money as it sought to regain access to the blockaded mine and complete construction \u2013 causing it to default to its major creditors, bankruptcy documents show.<\/p>\n Now, the mine project \u2013 once financed by the EBRD \u2013 is set to receive $100m in loans from the Eurasian Development Bank (EDB) as part of a fresh push to bring the project online. The EDB has\u00a0said\u00a0it is currently \u2018boosting its portfolio\u2019 in Armenia, to which it is now paying special attention.<\/p>\n Prior to the blockade, the mine was believed to be near completion. It now requires a further 18 months of construction work, Lydian says.<\/p>\n The new investment effort will include $7m in payments to local communities annually and a 12.5% equity stake, free of charge, for the Armenian government.<\/p>\n But unlike Lydian\u2019s previous multilateral backers such as the EBRD and World Bank\u2019s International Finance Corporation (IFC), the EDB \u2013 signed into effect by Russian and Kazakh presidents Vladimir Putin and Nursultan Nazarbayev in 2006 \u2013 pools funds for infrastructure and finance projects from a select range of states: Russia, Kazakhstan, Belarus, Kyrgyzstan, Armenia and Tajikistan.<\/p>\n Ultimately, the bank says, its aim is to build economic ties between member states, all former states of the Soviet Union.<\/p>\n Some analysts believe that the bank is\u00a0under the influence of a single state<\/span><\/a>\u00a0\u2013 the Russian Federation \u2013 and as a result could face the impacts of Western sanctions.<\/p>\n Assessing the EDB\u2019s sanctions risk in the wake of Russia\u2019s invasion of Ukraine, credit ratings agency Fitch considered that Russia\u00a0\u2018exerts strong influence\u2019 on the EDB\u2019s board, management and strategy as the bank’s biggest shareholder, with 66% of its capital coming from the Russian Ministry of Finance.<\/p>\n EDB did not respond to a request for comment. The chair of the bank\u2019s management board, Nikolai Podguzov, has previously\u00a0dismissed<\/span><\/a>\u00a0claims of political influence, saying that the bank is \u201cbeyond any political constructions\u201d.<\/p>\n Amid\u00a0speculation over the sanctions risk\u00a0for EDB after Russia\u2019s invasion of Ukraine, in January 2023 Russia\u2019s stake in the bank was reduced from 66% to 44%. That reduction brought the Russian state\u2019s interest in the EDB under the 50% threshold where EU, US and UK sanctions apply.<\/p>\n Sanctions expert George Voloshin told openDemocracy that while most international development banks pose little sanctions risk as the stakes of member states are small, the EDB \u201chas always been different because of the elephant in the room \u2013 Russia\u201d.<\/p>\n Voloshin cautioned that while Russia\u2019s stake reduction in January would help the EDB \u201cavoid [UK, EU and US] sanctions\u201d, \u201cAmulsar and other projects funded by the EDB could still get much of their money from Russia\u201d given the size of Russia\u2019s contributions to the bank.<\/p>\n When asked about the possible tension over the Amulsar mine in relation to western funds and the EDB, Lydian Armenia director Hayk Aloyan\u00a0said<\/span><\/a>\u00a0that the bank was an \u201cinternational financial institution\u201d, and that Armenia\u2019s membership \u201cwas decisive for our shareholders to attract a loan from the bank\u201d.<\/p>\n Following the redistribution of Russia\u2019s stake in the EDB in January, Armenia\u2019s interest in the bank\u00a0went from less\u00a0than 1% to 4%.<\/p>\n Long history In the years after, FCDO records show\u00a0regular meetings\u00a0between the UK embassy and Lydian International as the company sought to bring the mammoth gold operation online.<\/p>\n But as protesters blockaded the Amulsar mine in summer 2018, emails released via Freedom of Information suggest that the UK embassy in Armenia stepped up its support, closely guiding Lydian as it asked Armenia’s post-revolutionary government for help negotiating with the protesters.<\/p>\n Messages with subject lines like \u2018Possible meeting with Armenian PM \u2013 urgent advice requested\u2019, \u2018Questions for the Ambassador\u2019 and \u2018Meeting with Acting PM Pashinyan key points\u2019\u00a0bounced back and forth\u00a0between the Embassy in Yerevan and the company, records show. An internal diplomatic report by the European Union later\u00a0claimed\u00a0that the UK, together with the US, had \u2018pressured\u2019 the Armenian government to accede to Lydian\u2019s requests that it clear away the protesters.<\/p>\n \u201cThe UK has had an active and aggressive involvement with the Armenian government over the Amulsar mine, despite public protests and letters to the UK embassy [urging it] to stop the political pressure,\u201d Shahnazaryan told openDemocracy.<\/p>\n Further FCDO emails newly obtained by openDemocracy show that the UK has continued following the matter closely, even after Lydian went through restructuring in Canada in 2020.<\/p>\n For example, the FCDO received a briefing from Lydian in June that year that the company had approached the Armenian government to reset the relationship with a \u2018framework agreement\u2019, as well as an offer of an equity stake to the government. The Nikol Pashinyan government responded to the framework agreement, the email suggests, by faxing an invoice to the company \u201crequesting an upfront payment\u201d. (The Armenian Ministry of Economy did not respond to a request for comment.)<\/p>\n Lydian\u2019s bankruptcy proceedings, however, provoked discussions at the FCDO as to whether the operation was, in fact, a UK company. (Today, the restructured Lydian group has a UK private company as part of its structure.)<\/p>\n A June 2021 FCDO email obtained via freedom of information law stated that following the company\u2019s restructuring, \u201cit can no longer be defined a [sic] UK company\u201d.<\/p>\n \u201cIt does have some UK investment but is now an identifiably Canadian operation,\u201d the internal email to Ambassador John Gallagher read.<\/p>\n The briefing noted further caution and a possible \u201creputation management challenge\u201d for the UK FCDO if Lydian\u2019s operation was sold on to an unnamed Russian-led investment consortium (not the EDB) following bankruptcy, mooting possible \u201callegations about standards\/ethics\/social impact of this project under the new ownership\u201d.<\/p>\n The FCDO has insisted its role in the affair is routine, but Armenian campaigners have long drawn attention to what they see as the UK\u2019s over-the-top support for the controversial project. A 2019\u00a0letter\u00a0by prominent members of Armenian civil society called on the FCDO to withdraw its support for the Amulsar mine over its potential environmental impacts.<\/p>\n Those impacts were meant to be mitigated by top-of-the-line environmental measures, as paid for, in part, by the international EBRD and IFC banks. The IFC withdrew from the mine in 2017, as did the EBRD in 2020, after\u00a0two years of the protesters\u2019 blockade.<\/p>\n An independent compliance report by the IFC later\u00a0found\u00a0that Lydian\u2019s capacity to address environmental and social risks had been overestimated, as well as failing to assess the mine\u2019s impacts on the nearby spa town of Jermuk, a tourist centre. The EBRD is conducting its own compliance process over the mine, but has not published an update for over two years. The EBRD compliance team did not respond to a request for comment.<\/p>\n Lydian, now owned by resource companies Orion and Osisko Mining, did not respond to a request for comment. The company has always said it has pursued the highest international standards on mitigating social and environmental impacts of the mine.<\/p>\n The EDB said in its\u00a0statement\u00a0that it expects to \u201cimplement a project that meets high environmental standards, has a positive impact on the economy and creates employment opportunities\u201d.<\/p>\n \u201cThe UK government\u2019s direct involvement in supporting this business interest in the face of the democratic aspirations that we have in our country is an almost too explicit reality check for us: the UK government is all about capital\u2019s interest, it has no interest in people\u2019s autonomy or access to natural resources,\u201d said Shahnazaryan.<\/p>\n Thomas Rowley<\/strong><\/span><\/a> This flagship Western investment, backed strongly by the UK, will receive funds from a bank 44% owned by Russia.<\/p>\n","protected":false},"author":2,"featured_media":300975,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"tstyn_error":""},"categories":[10,65991,66047],"tags":[71693,88463,65048,88462],"_links":{"self":[{"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/posts\/332440"}],"collection":[{"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/comments?post=332440"}],"version-history":[{"count":0,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/posts\/332440\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/media\/300975"}],"wp:attachment":[{"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/media?parent=332440"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/categories?post=332440"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/epress.am\/en\/wp-json\/wp\/v2\/tags?post=332440"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n<\/strong>
\nThe UK\u2019s interest in the Amulsar mine dates back to 2013, when the Armenian government made a sudden change to a proposed site for its \u2018heap leach\u2019 facility \u2013 a key part of the mine that uses a cyanide solution to break down ore-bearing rocks. That move threatened to derail mine construction and financing plans with significant unbudgeted costs, and\u00a0emails show\u00a0how the UK ambassadors to Armenia promised to Lydian that they would raise the conflict with Sargsyan himself.<\/p>\n
\nJames Dowsett<\/strong><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"