By John Helmer in Moscow
The sudden death, announced Tuesday, of Guinea’s 25-year president, Lansana Conte, threatens to uproot United Company Rusal from its lucrative bauxite mining concessions in the west African republic of Guinea. The bauxite reserves, whiuch Rusal controls, are among the largest and most valuable in the world, and are vital to supply Rusal’s aluminium smelters.
A threat to the longstanding Russian position in Guinea creates a new opportunity for Chinese aluminium concerns, as well as for Middle East and North American rivals.
“While Lansana Conte is the president of Guinea, I don’t think anything could happen with Rusal’s licenses there,” said a Moscow specialist on African politics, Vladimir Zaitsev, president of Rosafroexpertiza. He was speaking in November, when Conte, who has been ailing for many years, was still alive. Conte, he added, was “well-known for supporting Rusal there.” Earlier this year, Zaitsev added, Rusal’s involvement in accidents that caused chemical and oil spills “went unnoticed, and with the help of President Conte, the local regulatory commissions created to investigate went nowhere.”
Wire service reports from the Guinean capital Conakry indicate that, following the announcement of Conte’s death in the evening of December 22, a group of Guinean soldiers forced entry into the state radio headquarters, and broadcast a communique, declaring the constitution and government institutions suspended. The statement claimed a ruling council will be installed shortly to name a president, prime minister and a new government to fight corruption.
Corruption of the bauxite and other mining concessions in the country has been charged by Conte’s critics against him, as well asmembers of his family and government cronies.
In November, rioting over fuel prices in Conakry led to a blockade of the rail line connecting Rusal’s bauxite mine to the port. Two people were killed in the demonstrations, before shipments resumed. Much of Rusal’s bauxite is mined in Guinea, and its bauxite is calibrated for the Nikoalev refinery which Rusal owns in the Ukraine. That refinery, in turn, is a key supplier of alumina to Rusa’s Russian smelters.
According to a report issued by Rusal in October, 13.5 million tonnes of bauxite were produced by the group worldwide in the nine months of this year to September 30; that represented 3.4% growth over the same period of 2007. The growth, according to a Rusal statement, came from the Guinean mines. Alumina output was 8.4 million tonnes in the same period, up 2% on 2007. Growth in alumina production also came from the Friguia refinery in Guinea, the company said.
Rusal’s concession to mine bauxite in Guinea was granted to Compagnie de Bauxites de Kindia (CBK) for a 25-year term, following a decision by President Conte in May 2001. Two-thirds of CBK’s bauxite is shipped to Nikolaev.Additional bauxite and alumina are produced by Rusal at a second Guinean concession, which was awarded in 2002, also by Conte, to the Alumina Company of Guinea; this operates the Friguia site. In 2006, Conte agreed to privatize the refinery in Rusal’s favour.
If Conte’s successors and the new Guinean regime review privatization and mine concession awards like these, as part of the type of anti-corruption campaign that has also been pursued in neighbouring Nigeria and Democratic Republic of Congo, Rusal is likely to find itself isolated at a time when its controlling shareholder, Oleg Deripaska, is desperately short of cash.
A Rusal statement, issued in response to the Guinean protests in November, claimedthe company operates in “full conformity with the conditions of the agreement, with the legal coordination which has passed all stages with the government of Guinea, and in full conformity with the procedures existing in this country.”
The Russian company’s vulnerability in west Africa has also been exposed this week by the kidnapping of two Rusal employees at the company’s Nigerian aluminium smelter, near the regional town of Ikot Abasi. It is the second time in eighteen months that Rusal has been hit by hostage-takers. The company said in a statement that those responsible were “militants”.
Rusal’s takeover of Nikolaev is also subject to a new review by the Ukrainian government authorities. According to Nina Burluk, of the Ukrainian State Property Fund of Ukraine, the terms of the Nikolaev privatization agreement were extended to the end of 2009. “Currently, everything is fine there. But, and this is a big but, the head of the Fund has clearly stated that none of the enterprises which are controlled by the Fund [including Nikolaev] would be allowed to violate the investment terms, reduce the workforce, or do any other similar action, even in the strong credit crunch. Such enterprises would be immediately returned under control of the Ukrainian government to rescue the jobs and the factories themselves.”