CHAPTER 10

KOGHOPOWT AND T’ALAN

The people of the village of Heyvali, north of Stepanakert, got used to the headaches, the dizziness and vomiting. It became almost part of life. Then there was a strange surge in instances of goitre, an abnormal enlargement of the thyroid gland. Some people had nosebleeds.

Locally there was consternation over foetal malformations and what seemed an unusual surge in miscarriages. Several babies were born with defects. In this remote and natural region of Nagorno-Karabakh there was little history of such things. People lived almost as close to nature as it was possible to be. Their physical lifestyles, natural, balanced diets and avoidance of excess meant that they were hardy folk.

There is one case of a child being born blind and mute. There were other unexplained infant illnesses in the area.

Stillborn numbers were on the rise. Then the people from Heyvali began to hear similar stories from Yayici, Zeylik and other villages in the area. More anecdotal evidence emerged. The region is very rural. Outside of the villages, many families lived a somewhat solitary, pastoral lifestyle. Among these widely distributed people there was a similar spike in illness.

Western scientists would call it a hotspot, where emissions from specific sources such as water or air pollution may expose local populations to elevated health risks.

In Heyvali, they are a simple people, quietly raising animals and growing crops. But when the instances of sickness grew, so did their disquiet. And in the communities around them.

Then came the unexplained deaths. Heart attacks. Sudden collapses. Too many to be a coincidence.

Public health services in Nagorno-Karabakh are scarce and, what there are, remain very basic. Especially in remote areas. There was no outcry from non- governmental organisations, no ministry support, and no investigation into the strange anomalies going on in the area.

Since 2002 the territory’s biggest mining operation, Liechtenstein-registered Base Metals, part of the Armenian Vallex Group, has held mining rights for generous gold and copper deposits in Gizil Bulag, near Heyvali.276

The people of Heyvali may be rural and poor, but they are not stupid. They looked at the local mine and saw its liberal use of cyanide.277

Cyanide is a well-known, highly toxic chemical. A tiny amount can kill a person. But few people know that it is used in huge quantities in modern gold mining. Almost all gold producers depend on it to separate gold from other ores.278

The surface dumping of cyanide treated tailings (tailings are the cyanide- treated ore wastes, from which gold has been removed), have resulted in the release of cyanide-rich waste into the surrounding water table. The nearby Sarsang Reservoir has seen pollutant levels grow.

In December 2017, writer Joseph Dagdigian visited several mining-polluted sites in Nagorno-Karabakh. His article, Oil, Gas and Mining in Armenia, published by United States-based newspaper Asbarez, stated: On a number of occasions I have visited the Sarsang Reservoir in northern Artsakh. The first time, perhaps 15-20 years ago, Sarsang’s water was clear. The next time I visited Sarsang, the water was green, undoubtedly due to a new Base Metals factory on Sarsang’s shore. Base Metals, the largest taxpayer in Artsakh, belongs to the Vallex Corporation.279

Those who fished Sarsang had begun to report almost regular mass fish deaths. Bird life was suddenly reduced.

In their book Fighting Environmental Crime in Europe and Beyond, editors Ragnhild Sollund, Christoph H. Stefes and Anna Rita Germani detail that: Toxic material therefore regularly leaks into the ground, poisoning the groundwater, rivers and lakes. Used for irrigation, poisonous water enters the food chain... The amount of toxins released into the air, ground and water is very difficult to assess because the mining companies do not gather and release data... During a research project that the Acopian Center for the Environment, the Blacksmith Institute and the RA government conducted in 2013, soil samples from 25 mining sites across five regions were gathered. The samples revealed heavy metal concentrations that were well above internationally accepted limits.280

Environmental science also notes that environmental degradation does not sit within established national borders. Tailings pollute rivers and ecosystems that are transnational. Therefore the environmentally unsafe mining practices in Armenia, and those pursued in Nagorno-Karabakh, also negatively affect Georgia and Azerbaijan, and ultimately could spread even beyond. Transboundary pollution adds to an already unstable geopolitical situation in the South Caucasus. What looks, at the outset, to be localised mining-related environmental genocide actually has ramifications to peace and security across the South Caucasus.

The beginnings of this environmental genocide can be witnessed vividly in north of Stepanakert.

Among the people’s farm animals there was a similar scene. Cows, sheep, goats and pigs dying. Birth deformities. Illnesses.

None of this has mattered to Base Metals or Vallex Group. Or indeed the company’s shadowy owners. While the mining process has extracted Nagorno- Karabakh’s riches, and left behind a trail of health issues, registration in Liechtenstein has helped shield the company’s true owners from exposure.

This is not a unique situation across Nagorno-Karabakh or Armenia.

France24 notes that: Open-pit mining has left scars on the tiny country’s once pristine landscape. Corruption allowed developers to flaunt environmental regulations and locals’ rights.281

In a separate report, as late as July 2018, France24 noted that: A mountain in the south-east of Armenia has been the site of a long-standing protest between local activists and a subsidiary of international mining company Lydian International. For over three weeks now, environmentalists and locals have been blocking the roads to the Amulsar mountain site in an attempt to put a halt to the construction of a mine that they say would pollute 30% of the country’s water resources. Our observer told us that locals and activists are fighting to make sure that the mine is stopped, and their waters stay clean.282

The Armenian Environmental Front published figures showing that Lydian International – which had current Armenian President Armen Sarkissian on its board – would use 2,000 tonnes of sodium cyanide and 1,000 tonnes of hydrochloric acid per year at the site, which is one kilometre away from the Arpa River,whichfeedstheVayotsDzorregion.283 Acrossadecadethiswouldequate to 20,000 tonnes of cyanide, equivalent to 67 billion lethal doses to humans.

The European Union Action to Fight Environmental Crime’s report Environmental crime in Armenia noted: The European Union can use their influence to reinforce current international laws that discourage environmental crime in Armenia... Non-governmental organisations presented a case to the United Nations Economic Commission for Europe claiming that Armenia was not compliant with the Aarhus Convention. Upon review, the United Nations Economic Commission for Europe agreed and has since pressured Armenia.284

Known better as the Aarhus Convention, the United Nations Economic Commission for Europe Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters.285

Yet with much of the mining industry either in the hands of the Karabakh Connection – Kocharyan, Sargsyan, their family members or associates – or licensed through suspect deals through the Ministries of Energy Infrastructures and Natural Resources in Yerevan and Stepanakert, the kind of transparency demanded by the Aarhus Convention was always going to remain politically- inexpedient.

The kind of citizen activism reported by France24 is unusual in Armenia. And comes too late for many regions and people in Armenia and Nagorno-Karabakh.

“The Teghut (in Armenia’s northern province of Lori) copper-molybdenum mining project in particular poses a threat both to the environment and to sustainable development,” writes Dr. Svetlana Aslanyan of the Center for the Development of Civil Society. “The government has also failed to address pollution, deforestation, soil degradation and other environmental issues, making the effective implementation and enforcement of environmental laws, as well as increased transparency and public participation in policymaking essential.286

Arnika, a Czech non-profit organisation focusing on the environment undertook a programme in the Caucasus nation, part of a ‘Involvement of Civil Society in Decision-Making Process on Mining in Armenia’ project, which is supported by the Transition Promotion Programme of the Ministry of Foreign Affairs of the Czech Republic. Reporting in April 2018, Arnika stated: The level of contamination of the environment in North Armenia is the subject of a new research study conducted by experts from the University of Chemistry and Technology in Prague. Accompanied by the Czech organisation Arnika, the team collected soil and sediment samples. In the university laboratories, the materials are now being analysed for toxic substances. The findings of the research are expected to be published in November 2018.

The sampling took place in the most polluted Armenian province, Lori. Here, mining and metallurgical activities are concentrated, including the Alaverdi copper smelter and non-ferrous iron-ore mines in Teghut and Akhtala.

“We’ve witnessed suspicious phenomena during our fieldwork,” explains Arnika’s project coordinator Nikol Krejčová. “Grey, blue and yellow rivers, damaged tree leaves or the spread of fine ash – the question is whether and how those are linked to the environmental pollution caused by, for example, the Alaverdi copper smelting plant, smoke from which flows through the valley striking the neighbouring villages,” she continues.287

“The project is of great importance for the local population in order to have a better future. The people living in polluted areas will have the right to ask the appropriate state authorities for a solution to the problem and protection...” says Elena Manvelyan, director of the non-governmental organisation Armenian Women for Health and a Healthy Environment.288

Who is behind this degradation to the environment, the polluters? At the outset, at least, the answer takes us to Europe’s least-visited country, inhabited by the fewest people and with very little land, the ultra-discreet Principality of Liechtenstein which hides the majority of the secrets of the international super rich and ruling dynasties. Here in this mysterious tax haven – squeezed into half a valley between Austria and Switzerland – there are more registered companies than citizens and it has the highest gross domestic product per person in the world. Secrecy and security has been a consistent feature and there have been no leaks of confidential documents from Liechtenstein along the lines of the Panama Papers.

Yet it is gold we are dealing with in Heyvali, and elsewhere in Nagorno- Karabakh. With estimates north of $50 billion worth of gold in the territory – quite apart from other minerals – one only has to look to the elite in Yerevan. And to those who would have the political power to secure such valuable contracts.

Yerevan has been leading a new gold rush.

When Spanish explorers first arrived in the “New World” they met the native South Americans. These two cultures had been separated by a vast ocean, they had never touched one another, they spoke different languages and lived entirely different lives. Yet they had one thing in common – they both held gold in the highest esteem and used it to make some of their most important objects.

Throughout the history of our planet, almost every established culture has used gold to symbolise power, beauty, purity and accomplishment. Today we continue to use gold for our most significant objects: wedding rings, Olympic medals, Oscars, Grammys, money, crucifixes and ecclesiastical art.

No other substance of the same rarity holds a more visible and prominent place in our society. Some 500 years on from the Conquistadors’ 16th century arrival on that continent, perhaps the most surprising use of what we consider this most wealth-inferring element is in your hand. Take a good look at your smartphone. From the display and metal casing to the circuit boards that power the device, your phone is a mine of precious metals.

According to a report by CNN Money back in 2011, each iPhone contains around 0.034g of gold.289 Which translates to roughly £1.35 at current prices. It is used in iGadgets because it is a good conductor of electricity and – unlike the cheaper copper – it does not corrode as quickly.

Gold is one of the rarest elements in the world, making up roughly 0.003 parts per million of the earth’s crust.290 In 2017, global gold production was a reported 3,247 tonnes,291 with China continuing to be the world’s top producing nation, accounting for 13% of global gold extracted.292

From resource-rich West African nations, to the mining giants of the Pacific and North America, it seems every time a government signs a deal to allow mining of its natural resources there are corruption risks – no matter where that country is. In Armenia, the rush to profit from natural resources had left behind a visible toll.

In 2017 Transparency International included Armenia in research on corruption in the mining industry,293 while in May 2018 a segment on France24 titled ‘How corruption has damaged Armenia’s environment’ laid bare the issue while stating that: Open-pit mining has left scars on the tiny country’s beautiful landscape. Corruption allowed developers to flaunt environmental regulations and locals’ rights.294

Perhaps the best work on corrupt practices in the Armenian mining sector was done by journalists from Yerevan-based Hetq Online. Across multiple articles published in February 2011, including pieces titled ‘Parliament President’s Mining Interests’295 and ‘Who’s Minding Armenia’s Natural Resources’,296 the site detailed quite alarming instances of the perfidious system in place.

This included mines or operating licenses owned by Ministers and Members of Parliament through shell companies and mines or operating licenses sold to foreign entities with no scrutiny, or due process, overseen privately by Ministers and Members of Parliament. Highlighted in particular by Hetq Online was a 2010 deal when Paramount Gold Mining, owned by National Assembly President Hovik Abrahamyan and parliamentarian Tigran Arzakantsyan, was awarded a 25- year operating license for the Meghradzor gold mine in the Kotayk Province.

There was no tendering process and the license was granted without oversight. Abrahamyan had given himself lucrative rights to a copper and molybdenum mine in the Vayots Dzor village of Yelpin. The license was awarded to Argamik Ltd, a company owned by Hovik’s son, Argam Abrahamyan.297

Arzakantsyan was also fingered in another mining scam, partnering with fellow parliamentarian Vardan Ayvazyan. In January 2011, Hong Kong-based Chinese Fortune Oil Company purchased 35% of Bounty Resources Armenia, owner and operator of three iron ore mines in Armenia. The deal would be valued at $24 million by the London Stock Exchange, an amount that Ayvazyan and Arzakantsyan attempted to mask through a series of transactions and holding companies.298 Ayvazyan was involved in another mining-related scandal that rocked Yerevan, when Connecticut-based Global Gold Corporation publicly accused him of demanding a $3 million bribe from its top executives after the Armenian Ministry of Environment terminated the company’s license to carry out exploratory and mining operations at a small gold deposit in Hankavan, central Armenia. Ayvazyan, who was environment minister at the time, would find himself subject to a United States federal court ruling ordering him to pay more than $37 million in damages to Global Gold Corporation.

Ayvazyan is a close political ally of Kocharyan and considered a friend of the former Armenian President.

The Washington swamp, as President Donald Trump refers to it, is not the only quagmire. From Armenian Presidents who have become billionaires and enriched their immediate circles, its members of parliament also divide up the country’s natural assets amongst themselves. The tragedy, of course, is that it did not have to be like that.

One of my own heroes is Tsakhiagiin Elbegdorj who, as President and Prime Minister of Mongolia in an almost unbroken stretch reaching between 1998 and 2017 has grown to be considered one of the principal champions in emerging markets and was an influential architect of democracy, socio-economic development and good governance.299 In its latest overview of the nation, the World Bank stated: Over the past 25 years, Mongolia has transformed into a vibrant democracy, with three times the level of GDP per capita and increasing school enrolments, and dramatic declines in maternal and child mortality. With vast agricultural and mineral resources and an increasingly educated population, Mongolia’s long-term development prospects are bright.300

Mongolia has its own geopolitical challenges, sandwiched between a rising, authoritarian China and an often pugnacious and still very powerful Russia. Yet its socio-economic success has been achieved through pursuit of sustainable and inclusive growth, poverty reduction, strengthened governance and building institutional capacity. Perhaps most importantly of all, however, was transparency. It is clear that the nation faces very great challenges in anti-corruption and transparency. Yet the nation has faced this head on, as opposed to Yerevan where its political leaders have themselves become champions of profiteering.

“Corruption is a true enemy to development,” says Elbegdorj.301 On his watch Mongolia has emerged to be considered the new Asian tiger, or ‘Mongolian wolf’ as they prefer to call it. Developments in the mining industry and foreign direct investment have increased at an astonishing rate. They like to say in Ulaanbaatar that the ‘Wolf Economy’ is ready to pounce and the country’s stance towards capital markets and transparent, nation-benefitting development of its mineral wealth sees it likely to retain its status as one of the world’s fastest growing economies. Mongolia has leveraged its assets – not least Tavan Tolgoi, the world’s largest untapped coal reserve,302 and also gold and copper – with transparency and openness and ridden a mineral-driven economic boom.

In 2011, the influential San Francisco non-profit Asia Foundation hosted a dinner in honour of then President Elbegdorj. Asia Foundation President David D. Arnold would comment that: “President Elbegdorj was among the young leaders who would help guide Mongolia through its transition to democracy. There is no question that Mongolia, under President Elbegdorj, has seen phenomenal economic growth with a strong focus on environmental protection and advancing anti-corruption measures.”303

Is it possible to imagine anyone uttering the same sentiments in public about Robert Kocharyan and Serzh Sargsyan and keeping a straight face, not to mention a modicum of credibility? Under the patronage system they have dominated, the likes of Abrahamyan, Arzakantsyan and Ayvazyan are just typical examples rather than exceptions.

The Ecologic Institute-led European Union Action to Fight Environmental Crime stated in its ‘2015 Environmental crime in Armenia’ report: Despite the European Union’s efforts to promote good governance in Armenia, economic resources and political power have become interwoven in often-illicit ways. Corruption is widespread at all levels of the state apparatus. Under these circumstances, the environment frequently falls prey to the financial interests of bureaucrats, politicians and business people. Despite the fact that Armenia is signatory to several international environmental treaties and conventions, environmental laws are weak, contradictory and rarely enforced. The victims of a lax regulatory framework and environmental crime are often ordinary citizens, the economy at large and even the country’s national security. Common problem areas linked to environmental crime include Armenia’s vast mining sector, the logging industry and the hydroelectric sector.304

In contemporary times, the Armenian people themselves have begun to resist both the corruption behind the issue, and the environmental degradation. In an OpenDemocracy piece titled ‘Neoliberalism, mining and Armenia’s politics of plunder’, writer Armine Ishkanian argued that: The campaign to stop copper mining in Teghut, which is led by the Save Teghut Civic Initiative, is the largest and longest-running anti-mining campaign in the country (2007-present). Civil society resistance against mining began in 2007 and, as I argue in a recently published piece, the movement against mining in Armenia has always been more than just about the environment – it is and has been a movement against the politics of plunder that has become the norm in Armenia’s post-Soviet reality. Activists who campaign against mining describe it as “theft” (koghopowt) or “plunder” (t’alan) of Armenia’s natural resources.305

To plunder the natural assets of one’s own nation is not only a moral issue, it has far more grave repercussions. In 2013 Jan Eliasson, Deputy Secretary- General of the United Nations, told the Security Council that a wealth of resources, including timber, oil, coal, diamonds and precious metals, failed to translate into equivalent wealth for ordinary people and stated that: “Only a powerful few benefit,” adding that the result of that inequality was bitterness, mistrust and alienation the precursors to conflict.306

Perhaps even worse is to plunder another nation and, in order to achieve this, to poison the land and its people. According to Yerevan’s leaders, the raison d’être for the Republic of Artsakh is a just cause of independence. In pursuit of this cause they have wilfully seen Armenia’s economy and socio-economic development spasticised. Yet while publicly stating that Stepanakert should be welcomed into the international community of nations, several of those leaders have systematically sought to enrich themselves at the expense of its land and the people there.

Their actions, as financial beneficiaries in the process of asset stripping, and their high-minded words are strangely at odds.

The people of Heyvali will tell you that.

On July 19th, 2007, Bako Sahakyan became what Reuters called ‘the self- styled president of Nagorno-Karabakh.’307 He was viewed by many as a safer pair of hands. Others hoped that he represented a fresh start from the rampant nest feathering of the long Kocharyan and Sargsyan era.

A former soldier in the Soviet army, after demobbing Sahakyan had worked in a factory and later joined the militia who sought to take the territory from Azerbaijan. During the long conflict he rose to a Deputy Commander’s position. In 1999, he was named Interior Minister of Nagorno-Karabakh.

As we sit in Pyatachoc Cafe-Bar on the central square, a stone’s throw from Sahakyan’s offices, it is possible to understand his meteoric rise from the views of his citizens. He is described as ‘բու’, having not only owl-like facial characteristics, but being nocturnally active. Certainly in his Interior Ministry days when he was known for a firm hand.

While we engage a group of fellow customers in some friendly banter, another is less charitable in making comparisons with nocturnal birds of prey.

“Like Heinrich Himmler,” claims my friend over a shared pizza.

Despite a mild look of a school teacher, as Interior Minister he gained a reputation for his willingness to brutalise first, ask questions later. Perhaps it was this ability to get his hands dirty that saw him promoted again in 2001, to head the local security services.

In 2007, Sahakyan ran as an independent and was resoundingly elected to head the administration. The people of the territory had looked for something fresh after three previous leaders – not least Robert Kocharyan – had viewed the territory as little more than a personal piggy bank.

Most voters had given up believing that any politician could be honest, or that anything could ever really change. Sahakyan ran as a clean pair of hands, although prevailing thought was that the ‘system’ was too well entrenched.

“...linkages between finances and the levers of power – those are the classic symptoms of kleptocracy,” says Seva Gunitsky, a University of Toronto scholar who studies post-Soviet states.308

Sahakyan took on the leadership mantle, elected on a promise to clean up corruption, but he soon got sucked in to the swamp. He faced much dissent, not least from political appointees from as long ago as the Kocharyan era, and those with their snouts in the trough. In order to get anything done, Sahakyan’s team were almost forced into a business-as-usual approach.

Sahakyan’s campaign had spoken of alleviating poverty, increasing social spending and improving security. He also promised an end to the kleptocracy that has gripped Nagorno-Karabakh.

Still suffering from health issues and living helplessly in an environment that is slowly poisoning them, as the denizens of Heyvali will tell you, his administration has never even come close.

 

 

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NARCO KARABAKH

AUTHOR’S NOTE

WELCOME TO HELL

INTRODUCTION

CHAPTER 1

A-NOT-SO-FROZEN CONFLICT

CHAPTER 2

THE ISLAMIC REPUBLIC

CHAPTER 3

FOLLOW THE MONEY

CHAPTER 4

ALL THE GODFATHERS

CHAPTER 5

THE WHORES OF STEPANAKERT

CHAPTER 6

THE NEW KHANS

CHAPTER 7

FULL WOOD

CHAPTER 8

CHASING THE DRAGON

CHAPTER 9

CHASING THE DRAGON II

CHAPTER 11

GOLD RUSH

CHAPTER 12

ALIA’S STORY

CHAPTER 13

THE REAL MADRID

CHAPTER 14

LORDS OF WAR

CHAPTER 15

FRIENDS LIKE THESE

CHAPTER 16

THE PRINCE

CHAPTER 17

A SUNNY PLACE FOR SHADY PEOPLE

CHAPTER 18

BANKING ON HEZBOLLAH

CHAPTER 19

WHERE DID ALL THE GOLD GO

CHAPTER 20

ELOI AND MORLOCKS

CHAPTER 21

WHO ELSE PROFITS?

CHAPTER 22

MISSISSIPPI BURNING