Croatia May Tamper With Danube, Kyrgyzstan Threatens Mine Operator

Plus, Putin says Russia will privatize on its own terms, and Brussels re-opens the spigot for Hungary.

by Joshua Boissevain, Ioana Caloianu, Barbara Frye, Ernad Halilovic, and Sofia Lotto Persio 25 June 2012

1. Plans to tame Croatia’s Danube raise environmentalists’ hackles

Plans to regulate the flow of the Danube River through Croatia have drawn criticism from environmentalists, the BBC reports.

The Croatian Inland Waterway Agency and its Serbian counterpart want to straighten the meandering river's course and install embankments to help barges navigate.

Several environmental groups have sent a petition to the European Commission saying the plans threaten “unique natural areas” and run afoul of EU policy on waterways management. Croatia is set to join the European Union next year.

Last year, the director of Worldwide Fund for Nature’s (WWF) Danube-Carpathian program said the severe drought in the fall of 2011 was exacerbated by destruction of riverbank wetlands, which act as a buffer zone that can soak up water during full periods and release it in dry spells.
Environmentalists also argue that river traffic is too sparse to justify the plans.  

The chaos of Yugoslavia’s breakup protected the Danube from such management plans in past years, said Arno Mohl, an Austrian conservation expert at the WWF, but now "they want to make the same mistakes we made in the 1970s and 80s." Construction crews are undoing some of the river controls once put in place in Austria, the BBC notes.

2. Kyrgyz eco report spells trouble for Kumtor mine

Authorities in Kyrgyzstan are debating whether to revoke the operating license of a Canadian mining company on the heels of a report saying the company’s Kumtor gold mine – Kyrgyzstan’s biggest – is causing environmental damage, according to EurasiaNet.org.

The study by a parliamentary commission asserted that the mine was being run inefficiently by Toronto-based Centerra Gold. Lawmakers proposed a range of measures, including nationalization of the mine or forcing the company to pay revenues to the state in advance. Prime Minister Omurbek Babanov also said Bishkek was looking into filing a lawsuit against the company.

News of the report and the ensuing legislative debate sent Centerra’s stock down 35 percent on the Toronto Stock Exchange late last week, according to Reuters. The company said in a 22 June statement that the report was baseless and that the mine “is in full compliance with Kyrgyz laws [and] meets or exceeds Kyrgyz and international environmental, safety, and health standards.” Other reports earlier this year, however, said there has been some ecological damage in the area.

The Kumtor mine has been a hot topic politically and financially in recent months. In February, more than 1,000  miners went on strike over social benefits and shut down production at the mine for 10 days. In September, a week-long roadblock by nearby villagers slowed output enough to cause a significant drop in GDP growth, EurasiaNet.org reported, citing the National Statistics Committee. The mine’s production accounts for 12 percent of the country’s GDP and Kyrgyzstan owns one-third of Centerra.

 

 

Analysts say that while Bishkek is not likely to expropriate the mine, the debate comes at a bad time. With stock prices down and tax revenue slowing from the decrease in mine production, going after Kumtor could exacerbate the country’s economic woes.

3. Putin promises privatization – on his terms

Amid dropping oil prices, population decline, and serious capital flight, Russian President Vladimir Putin made his case to investors last week at the St. Petersburg Economic forum, stressing Russia’s “relatively low debt burden, balanced budget, and fiscal discipline,” The New York Times reports.

Many were keen to hear about plans to privatize state industries – the government controls about 50 percent of the economy – and Putin assured them that Russia does not want to pursue “state capitalism.”

But he said privatizations would be more scrutinized than those of the 1990s, which put crucial assets into relatively few hands. According to the Kyiv Post, Putin told the audience that “private-sector monopolies should not replace state ones.”

The sell-offs will likely wait until the global economy picks up and state enterprises can fetch better prices. And they are not likely to include major energy assets. Putin recently put Igor Sechin, a former KGB colleague, in charge of a new energy commission. According to the Guardian, Sechin’s job will be to implement a strategy “to ‘reprivatize’ Russia's energy assets – in other words, to put them in the hands of established Putin loyalists.”

One partner in an energy business in Russia told the newspaper that his firm has stepped up moving its assets abroad.

Aleksei Kudrin, a former finance minister, told reporters at the economic forum that planned spending increases in the face of low oil prices could mean a recession for Russia.

4. EU lifts block on Hungarian funds

After being reassured of Budapest’s commitment to get its budget deficit under the European Union maximum, EU finance ministers lifted sanctions that had blocked 495 million euros destined to Hungary, Bloomberg reports.

The government plans to tax financial and telecommunication services to bring the deficit to 2.2 percent of GDP in 2013, down slightly from the 2.5 percent targeted for this year, according to Bloomberg.

Hungary has had trouble reining in its debt since its inclusion in the EU in 2004, and its deficit is the highest of the EU’s eastern members.

The European Commission blocked the EU funding in March after Hungary and gave Budapest six months to prepare a “sustainable and credible” plan to bring the deficit below the 3 percent target set by the EU.

5. Closed Lithuanian nuke plant embroiled in controversy

Lithuania’s Ignalina nuclear power plant may be shut down, but it is still causing headaches for some. A Reston, Virginia-based company has agreed to pay a fine of nearly $9 million (7.2 million euros) after being charged with bribing officials at the plant.

According to a statement issued last week by the U.S. Department of Justice, Data Systems & Solutions used bribes to win contracts for services at the plant, whose two Chernobyl-style reactors are being decommissioned.

“To disguise the scheme, the bribes were funneled through several subcontractors located in the United States and abroad,” the statement reads. “The subcontractors, in turn, made repeated payments to high-level officials at Ignalina via check or wire transfer.”

The scheme violated the U.S. Foreign Corrupt Practices Act. The Justice Department agreed to suspend further prosecution for two years, provided the Virginia company cooperates with investigators and strengthens its anti-corruption efforts.

Meanwhile, a Lithuanian subcontractor for a Russian-owned firm involved in the decommissioning is threatening to pull out of its contract at the end of the week unless it is paid arrears for work already done, the Baltic News Service reports.

The Lithuanian company, Vetruna, stopped work in late May on the project to build storage facilities for spent fuel and radioactive waste. The news agency says the combined price tag for the containers exceeds 300 million euros and the work is “some three to four years behind schedule.”

The chief executive for main contractor Nukem Technologies said the two companies are negotiating, with an aim to wrap up talks by the end of the week.