Email This Post - Print This Post Print This Post

MOSCOW (Mineweb.com)-Despite the visit this month to Moscow of a 64-person delegation of South African government and corporate officials – the largest ever to come to Russia – the outcome appears to be a cooling in mutual sentiment. One-sided lobbying by Russia’s natural resources minister, Yury allies is one of the reasons. Reluctance to challenge him on the part of his SA counterparts is another.

On the Russian side, there is unspoken frustration at the year-long campaign by President Thabo Mbeki to secure a South African seat in the expanded UN Security Council, without sufficient consensus from other UN members.

Sources in Moscow are aware that Mbeki made the admission of South Africa to a permanent seat in the UN Security Council a personal priority this year.

High-level African sources, present at the G-8 summit at Gleneagles, Scotland, in early July told Mineweb that they believed Mbeki, attending as one of several African Union observers, had asked President Vladimir Putin for Russia’s support of SA’s Security Council plan. All that Russian spokesmen would say about their conversation was that “the development of bilateral economic relations was discussed.” Regarding talk of a UN seat for SA, the Russian Foreign Ministry said they “do not have such operational information”.

Mbeki then ordered Foreign Minister Nkosazana Dlamini-Zuma, to Moscow to meet her Russian counterpart Sergei Lavrov on July 12. In no uncertain terms, she was told that Russia would not support expansion of the UN Security Council unless there were demonstrable backing from the entire UN membership, a point which Dlamini-Zuma could not demonstrate. The Russian Foreign Ministry then issued a brief communique confirming that Dlamini-Zuma had made the UN Security Council her priority. But the diplomatic language treated the SA initiative coolly.

Dlamini-Zuma returned to the same issue again, when she met Lavrov in Moscow on October 6. By then, most UN representatives had concluded that seating African states in the Security Council had been effectively stopped by US action. Why then were Mbeki and Dlamini-Zuma insistently repeating their request for Russian backing?

Lavrov’s ministry issued a new communique, acknowleding Dlamini-Zuma’s visit, and repeating that “reform of the United Nations” should be carried out “on the basis of the widest consent, and what is even better, the consensus of member states.”

There was nothing new in the Russian position, and officials at the Department of Foreign Affairs (DFA) IN Pretoria claim the Russians are “still open” on Security Council reform, adding that “the situation is changing all the time,” Dlamini-Zuma and Lavrov are reported to be personally on the best of terms.

When great powers meet, there usually is no time for senior officials to address more than a handful of priority concerns at a sitting. For several years, the South African priority in Moscow was to lift a 5% import duty penalty which South African exports to Russia were trading under, compared to rivals in South America. That penalty was finally removed in 2002.

This year, the priority has been the UN Security Council seat, and Mbeki has obliged Dlamini Zuma to expend most of her time on that, aware that other African states with Security Council ambitions were dangling the possibility of oil concessions and other inducements to Russian oil companies who have clout with the Kremlin.

Nigeria, South Africa’s leading rival for the Security Council, has clashed with Minister Lavrov over the detention in a Lagos prison for two years, without trial, of Russian seamen caught up in an oil smuggling scheme, masterminded by Nigerian officials. On the other hand, the Nigerian government recently offered an oil exploration concession to LUKoil – a name that will appear again in this story. Egypt, another candidate for a Security Council seat, has already granted LUKoil a concession.

On the South African side, sources at major mining companies express concern that South African government officials, including the new Minister of Minerals and Energy, Lindiwe Hendricks, have done too little to deal with Russian restrictions on South African mining companies investing in Russia; and perhaps too much to endorse Russian involvement in the South African mining sector.
It has been customary for the two governments to issue a detailed report on the results of their annual inter-government commission on trade and economic cooperation (ITEC). At the conclusion of the last session in Moscow in 2003, the joint communique ran for four single-spaced typed pages. In one excerpt, the two governments “undertook to encourage South African business and capital investments in the Russian economy.” There was no reference then, or since, to the most obvious restriction on South African mining investment in Russia — the statutory 49% limit on foreign control of a Russian diamond-mining venture.

A source at DFA in Pretoria claimed that the minutes of the latest round of talks in Moscow were signed, and a press conference held to discuss the results. Lasting 12 minutes, this set a speed record.

Instead, Russia’s co-chairman at ITEC, Yury Trutnev, the Minister of Natural Resources since 2003, issued a summary of his own interests as expressed at a meeting with counterpart, South Africa’s Minister of Minerals & Energy, Lindiwe Hendricks. Trutnev repeated previous promotional statements he has made on behalf of the Renova group’s plan to mine manganese in the Kalahari.

DME’s head of licensing, Jacinto Rocha, told Mineweb in August that he had issued a manganese exploration and mining licence to Pitsa ya Setshaba, Renova’s BEE partner. It is unclear, however, whether Renova, owned by Russian metals oligarch Victor Vekselberg, intends to bring significant cash into South Africa for the project, honouring its pledge to DME to bring foreign investment into the country; or else borrow funds from South African banks.

DME appears to be unaware that in recent weeks, following a spate of disclosures in the Ukrainian media and statements by Ukrainian government officials, Renova has been accused of corruption to obtain shareholding control of the Nikopol manganese processing plant in the Ukraine. Action by the Ukrainian courts has blocked Renova’s manganese investment there, at least for the time being.Following his meeting with Hendricks, Minister Trutnev also announced that he had met with a delegation from De Beers. Russian sources confirm there was such a meeting; and that it lasted for a few minutes. Neither De Beers nor Alrosa has reported publicly on the meeting, and both were surprised when Trutnev did so.

The two world leaders in diamond mining are quietly assembling a work group to consider joint exploration for diamonds in northwestern Russia. However, a significant obstacle to cooperation remains existing, as well as new Russian legislation preventing foreign diamond-miners from mining any diamonds they
discover.

Hendricks did not issue her own communique.lt appears that she failed to ask Trutnev why Russian legislation is becoming increasingly restrictive, and how South African miners could be expected to pursue exploration in Russia, if they cannot be assured of the right to mine what they find.

Trutnev has already demonstrated that he is disinclined to respond to this concern. During last year’s ITEC round in Pretoria, Trutnev was hosted at De Beers headquarters, and asked what he was willing to do to resolve a long-running dispute over the Russian refusal to transfer the mining licence for the Verkhotina project and the Grib diamond pipe in the northwestern region of Arkhangelsk. Trutnev replied that the dispute was a “commercial” one, meaning he did not intend to take any action.

De Beers’s affiliate, Archangel Diamond Corporation (ADC), discovered the pipe with its partner, Arkhangelskgeoldobycha (AGD), in 1996. But the latter then seized the development rights for itself. AGD is controlled by Vagit Alekperov, the CEO of LUKoil, one of Russia’s leading oil producers. Russian mining sources believe Alekperov promoted Trutnev to his post, replacing a minister who was more troublesome for LUKoil than Trutnev has proved to be.

Trutnev hasn’t exactly done nothing, as he implied when speaking to De Beers a year ago. A few months ago, he arranged to replace the head of the supervisory agency responsible for monitoring licence compliance, when it challenged AGD’s performance at the Verkhotina project. Alekperov then went public to defend his pet company. Trutnev’s action eliminated the danger.

According to his public statement, Trutnev claims credit for the fact that De Beers and Alrosa “have agreed upon realization of joint projects in the field of search and prospecting works in the territory of Russia and other countries.” This is false. There is negotiation, but no agreement.

Trutnev went on to claim that his ministry is “developing criteria of reference for sites of sub-soil resources as ‘strategic deposits’.” Actually, Trutnev’s ministry had been doing this for years before he arrived, and the only reason the criteria haven’t been delivered to parliament for enactment is that Russian miners and their government allies have been unable to decide how to mine the treasure themselves.

If large enough to be purportedly strategic, foreign miners will not be able to develop the deposits. In addition to all diamond deposits under the current legislation, this new measure will extend to gold deposits, such as Sukhoi Log; the Udokan copper deposit; and possibly platinum, coal, iron-ore, and other minerals as well.

US, Japanese, Chinese and other government officials have already made clear their dissatisfaction with Trutnev’s arbitrariness, particularly in the oil and gas sector. But as a leader in the hard-rock mining community, the South African government has been silent.

Although it has been one of the proponents of transparent African resource development, the Mbeki administration is well aware of Russian efforts to enter oil and mineral resource exploitation in Angola, Nigeria, Guinea, and the Democratic Republic of Congo. Why the terms of their entry should be unreciprocated by the Russian government is the question Hendricks should have raised at ITEC, but didn’t. In short, she failed to do what Russian officials expect their counterparts to do, if they are to earn reciprocity – they should state their national interest, and be serious in pursuing it.

In one of his most detailed statements on Africa this year, President Vladimir Putin had this to say, following a meeting in Moscow with UK Prime Minister Tony Blair. One of the topics discussed had been forgiveness of African state debt. Another had been human rights. Putin agreed to Blair’s position on the former. Responding to Blair’s criticism on the latter issue, Putin remarked, according to the following translation: “We all know that African countries used to have a tradition of eating their own adversaries. We do not have such a tradition or process or culture and I believe the comparison between Africa and Russia is not quite just.”

Had Putin’s attention been drawn to Alekperov’s attempt to swallow the diamond deposit he seized from ADC, or Norilsk Nickel’s part in trying to eat Gold Fields, he might have been dissuaded from employing his metaphor at the expense of Africa. In the mineral resource world, eating the adversary is a standard operating option, if not always the wisest procedure. Unless Hendricks and other SA officials demonstrate otherwise, Russians like Trutnev are bound to conclude that there is no objection in Pretoria to the Russian appetite, or their eating habits.

Leave a Reply