Open Democracy | 5 May 2020
Armenia ‘under pressure’ from UK and US over mining dispute, says EU report
by Thomas Rowley
An internal report by the European Union Delegation to Armenia states that the UK and US have pressured the country over a controversial gold mining project, 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.”
The internal EU report, dated October 2019, touches on the international dimension to the Amulsar standoff. 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 resource investment funds, the European Bank for Reconstruction and Development (EBRD), as well as the UK and US governments.
The report, obtained under Freedom of Information from the European External Action Service (EEAS), states that ‘Prime Minister Nikol Pashinyan has been under pressure from the different stakeholders, including US and UK governments’ over the Amulsar standoff.
‘The US and UK governments,’ the partially redacted report continues, ‘hope Lydian would not be discriminated [against] and a similar approach towards other mining companies operating in Armenia would be applied.’
“There will be no mining industry in Jermuk. Those who try to open a mine here will waste their money”
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. For some observers, the impasse over Amulsar is deemed worrying for foreign investors in the country.
Campaigners, as well as a British MP, have criticised the role of the UK Foreign Office in supporting Lydian International in its dispute with the Armenian government.
“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.”
An FCO spokesperson said: “We do not accept this characterisation of the Embassy’s routine engagement with the Armenian Government on the Amulsar gold 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.
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 in 2018, as well as redacted internal Foreign Office correspondence concerning the mine. A list of contacts between the Embassy and Lydian shows regular contact over a five-year period.
A 2018 register of British 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 documents relating to the Amulsar project also include redacted correspondence about a EU Heads of Mission meeting with prime minister Pashinyan in November 2018.
“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.”
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.
“British Embassy Yerevan officials regularly make representations to the Government of Armenia on a range of issues,” a Foreign Office minister commented in response to a parliamentary question earlier this year.
The report 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. The EEAS 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’.
‘Unimpeded access to the public of the internal note would also give valuable information to adverse actors to jeopardize the success of possible future EU diplomatic moves,’ the EEAS stated in its accompanying letter.
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.”
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 ‘heavily politicised’, the report states, ‘with opponents (but also some supporters) of the revolutionary Armenian authorities uniting around this issue, albeit pursuing different goals.’
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’.
‘We request that you as Ambassadors of western democracies stand by high environmental standards for people in Armenia and with human rights values,’ the open letter stated, noting that the UK, US and Swedish governments ‘have invested significantly in democracy building in Armenia’.
‘Perhaps it would be more fair to put [this] into a context of being in the United States or Great Britain or Sweden. 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.’
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.
“The Prime Minister is in a very difficult situation”
Following the publication of a government-ordered independent audit of the project 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: “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 a request for comment.
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’.