By Mark Dovich
A key regional development bank has signaled that its decision to finance a large portion of the funds needed to put Armenia’s Amulsar gold mine into operation will depend on the findings of an environmental impact assessment.
Two senior officials at the Eurasian Development Bank (EDB) said last week that while they stand ready to extend a multimillion dollar loan to allow the long-stalled, controversial mining project to go ahead, their final decision will hinge on the results of an EDB-led environmental audit, expected around August.
“I think that by the end of the summer, there will already be certainty in terms of the project itself — whether it is moving forward or not,” Deputy Chairman Denis Ilin told ArmInfo.
What’s the background?
The Armenian government moved earlier this year to revive the Amulsar project by signing a $250 million memorandum of understanding with the EDB, as well as with Lydian Armenia, an Armenian mining company owned by two private equity firms in Canada and the United States.
In return, Lydian agreed to cede 12.5% of its shares in the mine to the government, while the EDB pledged to extend a $100 million loan to Lydian.
Economy Minister Vahan Kerobyan has welcomed the deal, saying the government expects Amulsar to boost Armenia’s $21 billion gross domestic product by about 1%.
“That is quite a high figure, and we have no right to refuse such an opportunity,” he told reporters after the signing ceremony in February.
Lydian says the project will create up to a thousand jobs and pour hundreds of millions of dollars in taxes into Armenia’s state coffers over a decade of planned operations.
Why the controversy?
Amulsar has a long and contentious history in Armenia, catching the government between an impulse to attract international investment and the need to answer to the public, where firm opposition to the mine remains widespread.
Lydian broke ground at Amulsar in 2016, but development was indefinitely suspended two years later when environmental activists and residents of nearby communities began staging blockades of the mine entrance.
The demonstrators raised concerns that acid drainage from the project could leak into nearby rivers, including one that flows into Lake Sevan, Armenia’s largest source of freshwater. Residents and activists were also alarmed by the planned use of highly toxic chemicals at the site, which is located fewer than 10 miles away from the famed resort town of Jermuk.
Lydian repeatedly threatened to bring the case to international arbitrage if operations remained stalled, but never did so.
Shortly after taking office in 2018, Prime Minister Nikol Pashinyan charged a Lebanese consultancy with conducting an environmental impact assessment, but the group’s report proved inconclusive.
Meanwhile, Armenia’s main investigative agency opened an inquiry into allegations that officials at the Environment Ministry intentionally downplayed Amulsar’s potential environmental damage. The inquiry ended in 2021 after investigators found no evidence of criminal conduct.
What’s the context?
Armenia has considerable deposits of copper, gold, and molybdenum, and the mining industry is one of the country’s biggest sources of employment and government revenue.
Lydian’s cession of shares is not the first time the Armenian government has taken a stake in one of the country’s mines.
In 2021, a subsidiary of a Russian company controlled by oligarch Roman Trotsenko ceded a quarter of its shares in the Zangezur Copper-Molybdenum Combine, Armenia’s largest and most profitable mine, to the government. The circumstances of the transfer were never made clear, and Armenian officials have repeatedly refused to comment on the matter.
Armenia’s deepening ties with the EDB
The EDB’s potential involvement in Amulsar comes as Armenia deepens its ties with the Kazakhstan-based lender. Last month, Armenia’s parliament endorsed a deal to buy out a portion of Russia’s stake in the bank for $64 million, increasing Armenia’s shares to 4.23% from a meager 0.07%.
That came after the EDB’s board unanimously approved a major shakeup that will see Russia lose its majority stake, a move believed to be designed to reduce the bank’s exposure to potential sanctions. After the shares are redistributed, Russia’s stake will be reduced to about 45%.
Kazakhstan and Russia founded the bank in 2006 to finance major projects and deepen regional integration among former Soviet countries. Armenia, together with Belarus, Kyrgyzstan, and Tajikistan, joined later.
