Sticking to the deal

When the old Soviet Union broke up, mining and mineral exploration companies swarmed in to pick up opportunities. As a mining consultant said at the time, “every man and his dog” was in central Asia in the early 1990s. The Iron Curtain had risen, once and for all, and the industry was fascinated with what might be behind it.

Building mines along the old Silk Route or in the taiga of Siberia was one of the great adventures in the globalization of the mining industry. Some did well at it: Newmont at Muruntau; High River Gold in Buryatia; Cameco in Kyrgyzstan; Amax, and then Kinross, at Kubaka.

Others did not, finding that a deal was not always a deal in the new lands. In Kazakstan, World Wide Minerals saw a deal for the Tselinny uranium mine evaporate. Pan American Silver lost an auction for a mill at its Dukat property in the Russian Far East, and wound up settling for a 20% interest in the whole property. Archangel Diamond has been trying to resolve a contractual dispute over the Verkhotina project in Russia for almost seven years — and there was yet another jurisdictional hearing in the case two months ago.

So the former Soviet Union has dealt out both success and failure to the industry, in keeping with the unsettled society that the fall of communism left behind. The habits that were survival skills under the old system — secrecy, mistrust, padding, the careful cultivation of the powerful — all found their uses in the new world. Some Western companies were ready, and some found they weren’t. There are conflicting opinions of political risk in the old Soviet Union, but the record, in aggregate, isn’t a good one.

That is the backdrop of the recent elections in Kyrgyzstan, where the splintered opposition parties are finding common ground to protest the conduct of the vote at the end of February. Central Asia was not seen as a likely breeding ground for the kind of mass protest that changed governments in Georgia and Ukraine after tainted elections there. Sure, governments ranged from the relatively open and tolerant Kyrgyz way to the truly wacky Turkmenistan of Saparmurat Niyazov, who renamed a month after his mother; but the universe would unfold in the predictable way, and existing governments would stay firmly in power. Nobody in the impoverished backwoods of the ‘stans had an Orange Revolution in him.

Perhaps not: the demonstrations in Kyrgyzstan — which now extend to Karakol and Naryn, the two major cities nearest Centerra Gold’s Kumtor mine — are not violent, the government isn’t overreacting, and the electoral machinery is still functional, if unfair. But people insistent on democracy are turning up in the oddest places in the last two years, and every success has emboldened another electorate tired of the same old crowd.

If the Kyrgyz opposition does fold up that predictable universe and force out the existing government, we have reason to hope that it will be responsible about its showcase mine. The government of Askar Akayev, whatever may be said about its imperfect approach to representative democracy, has been firmly liberal in economic matters, and has respected the agreements it made for Kumtor. Centerra, and Kyrgyzstan, deserve to have those agreements survive any change in government; the chance at prosperity and opportunity that Kumtor brought matters very much to the Kyrgyz.

But fair dealing in politics, in the end, is the only guarantee of fair dealing in commerce. If what the Kyrgyz opposition seeks is fairness, that is a good sign of how they will conduct themselves if one day they come to power.