Kyrgyz leadership is desperately searching for a way to protect its assets in Centerra. President Almazbek Atambayev reproaches the Parliament of populism and the government - in indecision and encourages officials to resolve the situation with Kumtor mine, while it is not too late.
"Good opportunity on Kumtor was last year, -Almazbek Atambayev said. - Last year, Parliament should have done less populism and support the initiative of former Prime Minister Zhantoro Satybaldiyev on forming joint venture. Then we would have a 50 percent stake in the project. Now we can lose this opportunity and, because part of our shares are arrested. We can be left with nothing, if we continue to bury our heads in the sand like an ostrich. Our situation is getting worse day by day, but the government must find a way to solve the situation."
However, whether the government seek proper and beneficial for the economy of the KR solution is not clear. Cabinet of Dzhoomart Otorbayev works with an eye to the parliament, in which the policy continues to prevail over the economy and, unfortunately, common sense. Individual members of the ruling coalition require the implementation of a radical scenario - the nationalization of the project, which is known to put the country on the brink of bankruptcy.
Supporters of nationalization, of course, argue that the transfer of all property of the operator of Kumtor Gold Company CJSC project and the further development of the field by their own has no risks to the state. At the same time they are trying not to think about what put assets of Kyrgyzstan in Centerra under the threat, naively believing that ignoring these facts, we can convince the public that it is right. Investors, who lost earlier in the country's assets, filed a claim to the authorities of the country of nearly $1 billion. And some of their property is nationalized by the interim government, some members of which now require Cabinet to step on the same rake.
It is obvious that Centerra won't abandon the project, in which it has invested about $1 billion for twenty years. The nationalization of mines will inevitably lead to loud and scandalous proceedings in international arbitration. It is naive to hope that the Kyrgyz party will win. Various experts, including foreign government officials themselves has repeatedly warned the Parliament about this. How the republic will pay the bills?
Version of deputies that after the nationalization of Kumtor "we won't be affected" and that after withdrawal of assets from Centerra, Kyrgyzstan will be more secure, to put it mildly, is unconvincing, because the republic won't leave the world stage and can't close its economy itself. Gold of Kumtor, about which our parliamentarians dream - the main export commodity of the country. It should be assumed that means of its implementation will be arrested for providing a multibillion-dollar lawsuit. After all, Centerra, obviously, will put claim to the country even for loss of profits. According to the most conservative estimation, the sum will exceed the current external debt of Kyrgyzstan.
There are two ways out of this situation: either to mine gold for free for a number of years, until the debt is repaid, or store it in Kyrgyzstan and jeopardize the already international reserves of the republic, which it keeps in foreign markets. Very disturbing perspectives, isn't it? But, unfortunately, this is just the beginning, as the most unpleasant will face the republic and the nationalization supporters later.
"It is as easy as pie to build castles in the sky!" It seems that logic of individual parliamentarians is fully explained by these lines from the children's song. Indeed, far from production and economy deputies are unlikely to realize that the state can't manage such a large project as Kumtor. First of all, because the government has no free funds that would be required for development and maintenance of the object, and, as history shows, it is extremely difficult for Kyrgyzstan to attract money from outside. There will be need of loans, which sooner or later must be repaid and returned. And if we take into account the fact that many business leaders perceive the situation with Kumtor as litmus paper of real investment policy, then wishing to risk will be hardly found.
In other words, lack of funds for operating expenses of the large, throughout Kyrgyzstan, enterprise will rather quickly turn into a bunch of problems. First, it will run out of fuel and there will be nothing for transportation of ore. Of course not to harness horses to juggernaut. Then it will be found out that complex technical equipment needs spare parts, and gradually the factory will stop its activity. For example: the total capital costs in 2014 (except for capitalization of stripping works) are planned in the amount of $85 million. About $42 million of them are allocated for upgrading capital assets: repair of mining fleet, purchase of gear for ball mill of the gold processing plant, building of tailings dam and other projects. Investments in development are expected to reach the amount of $43 million. Capitalization of stripping operations in 2014 is expected to cost $191 million. Are there such available funds in the budget? Alas. As a result, the mine - quite possibly - will be closed for a while, and it will be a formidable challenge for the country. By the way not only in economic terms.
Currently works on Kumtor open pit are associated not only with gold mining, but also with maintenance of its infrastructure, the removal of ice masses. If one suspends works on Kumtor - even for a short time, the republic is unlikely to be able to launch it by itself in the short term. In fact, the object will have to be launched as if to start a project in a new place. But what about environment? Indeed, in case of nationalization there won't be anyone to conduct reclamation of the facility.
As a result, there is not only loss of important economic project, which share is estimated at least 10 percent of GDP, but environmental issues as well. One can only hope that common sense will triumph over officials' fear of parliamentarians. Otherwise Kyrgyzstan will face very difficult times.