«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 the agreements reached, even those that may be financially disadvantageous,» Nikita Mendkovich, a Russian expert on Central Asia, head of the Eurasian Analytical Club, said commenting on the latest Kumtor mine developments.
According to the expert, «there is one factor — an acute budget deficit behind the current attempts to revise the agreement on the project, as well as behind other similar demarches that have taken place under all previous presidents of Kyrgyzstan.»
Bishkek is putting pressure on Kumtor to generate additional budget revenues amid an acute shortage of funds.
Nikita Mendkovich
«This problem was known even before the change of power in the fall of 2020. The difficult economic situation in the country was recognized by the ex-president Sooronbai Jeenbekov and Sadyr Japarov, who replaced him,» he recalled.
Nikita Mendkovich is sure that «imposition of external management on the enterprise, as well as fines for alleged violations of environmental standards, should be taken as an attempt of the political elite of Kyrgyzstan to put pressure on the foreign investor.»
«The version of nationalization of the enterprise, if the current investors voluntarily leave, and if there are others willing to work at the mine, has the right to exist with one key issue. There are too many conditions in this scheme,» the expert noted.
He stressed: in order «this option to become «working», it is necessary, first, to come to an agreement with the Canadian company operating at Kumtor. Secondly, find and hold negotiations with a potential investor who will agree to «pick up the table scraps».
«I’m not sure that current investors will agree to this option. There are very different estimates of the profitability of the current operations at the mine and the current gold grade in the rock being mined now. The option of finding and concluding an agreement with a new investor seems even less likely. First, if we assume that the rock has a low gold content, the project automatically becomes less attractive for potential partners in Kyrgyzstan. Secondly, in case of nationalization, the country will have to deal with an actual violation of the election promises of the president, who at the end of last year announced that he was not going to nationalize the mine. Thirdly, this will be a very bad signal for any new investor who considered the mining industry of Kyrgyzstan as a possible option for investing,» Mendkovich said.
I have always considered attempts to renegotiate the terms of already concluded agreements as alarming symptoms.
Nikita Mendkovich
«Such actions cause serious and long-term damage to the economy. They are much more harmful than compliance with the already reached agreements, even those that may be financially disadvantageous,» he concluded.
