Kyrgyzstan to Nationalize High-Profile Goldmine

This whole rule of law thing isn’t working out so well in Kyrgyzstan. After months of sporadic but increasingly energetic (and almost certainly engineered by the government) protests, Bishkek is openly toying with nationalizing the Kumtor Gold Mine.

Those not familiar with this former Soviet republic are unlikely to understand exactly how important the mine is to the national economy. Officially, it accounts for fully 10 percent of GDP, and employs thousands of locals. Unofficial estimates places its total impact on the official economy at 30 percent, and its impact on the shadow economy is even higher.

When the vein was first being developed, the Kyrgyz government and Centerra, a Canadian mining concern, agreed to a terribly one-sided deal in which Centerra would advance the know-how and capital, and Bishkek would advance the ore and the human laborers, for which it would receive roughly one-third of all profits.

Kyrgyzstan isn’t an economic mecca, and things have become grimmer since Russia began pulling its former satellite back into orbit. With other economic opportunities few and fading, the opposition began pillorying the government for miserable deal-making. The government resisted at first (never lose a chance to save face!) but has recently “reluctantly” concluded it may have to just go ahead and nationalize the whole thing.

Centerra isn’t happy, but the problem here is not just one Canadian firm. The next foreign investor in Kyrgyzstan is going to spend a long time seriously thinking about the wisdom of putting money some place staged protests can yank it away.

It is hard to remember, but this country once had a viable future. That future is morphing into an old, never-escaped past.

Image Copyright Wikimedia Commons