RESOURCE NATIONALISM IN THE KYRGYZ REPUBLIC

C O N F I D E N T I A L BISHKEK 001368 SIPDIS SIPDIS DEPT FOR SCA/CEN (GEHRENBECK) DEPT FOR EEB/ESC/IEC/EPC (GRIFFIN) E.O. 12958: DECL: 11/15/2017 TAGS: EPET PGOV EMIN KG SUBJECT: RESOURCE NATIONALISM IN THE KYRGYZ REPUBLIC REF: STATE 150999 Classified By: Deputy Chief of Mission Lee Litzenberger for Reasons 1.4 (b) and (d) ¶1. (C) Summary: To the extent it exists here, resource nationalism in the Kyrgyz Republic has focused on gold mining operations. Political grievances over the Canadian-run Kumtor gold mine concession have generated demands for greater Kyrgyz ownership, additional tax assessments, environmental damage claims and other obstacles. A recent agreement between the Canadian firm and Kyrgyz officials, which resulted in an increased Kyrgyz share in the Canadian operator's parent company, could mark the end of this prolonged dispute. However, such disputes may often benefit individual, rather than national, interests. Although more egregious instances of resource nationalism in neighboring countries provide possible models to Kyrgyz officials, there is no overt concern about western investment in the Kyrgyz natural resources sector. End summary. The Luster of Gold -------------- ¶2. (C) With limited proven deposits of natural gas and oil, resource nationalism in the Kyrgyz Republic focuses mainly on gold. Eyeing the enhanced revenues obtained by hydrocarbon-rich neighbors, as well as questioning the legitimacy of mining concessions granted by former President Askar Akayev's government, Kyrgyz government officials and parliamentarians have challenged the incumbent Canadian concession holder to cede more control and revenue over its operations at the Kumtor mine in eastern Kyrgyzstan. ¶3. (C) Political grievances have been manifested in pressure to increase the Kyrgyz government stake in the Canadian mining operator's parent company, claims of environmental damage, additional tax assessments and other obstacles. The Kyrgyz parliament prepared draft legislation on the Canadian company's operations which threatened nationalization. The Canadian firm and Kyrgyz officials subsequently agreed on an arrangement which doubled the Kyrgyz government's share in the Canadian company in return for the affirmation of the concession and resolution of other issues. However, the dissolution of the Kyrgyz parliament in advance of upcoming elections has prevented the requested parliamentary ratification of this agreement. ¶4. (C) While there have been disputes involving other mining concessions in the Kyrgyz Republic, some outside observers consider these disputes to be attempts by incumbent political forces to squeeze investors for the benefit of individual, rather than national, interests. Although the government has gained assets in the Kumtor dispute, no state-owned enterprises have derived particular benefit from recent actions. The results of these disputes have simply empowered politicians and generated more assets for disbursement. In the midst of efforts by Russian and Kazakh interests to exercise greater influence over Kyrgyz natural resources, Kyrgyz officials occasionally express concerns about the potential excessive influence on and ownership by Chinese interests of Kyrgyz natural resources. Meanwhile, Kyrgyz officials continue to express the country's openness to western investment. YOVANOVITCH