Pakistan’s military is taking a key role in the development of one of the world’s biggest untapped copper and gold deposits, which is stalled by a multi-billion US dollar legal wrangle with foreign mining firms, multiple sources familiar with the situation said.
The Reko Diq mine has become a test case for Pakistani Prime Minister Imran Khan’s ability to attract serious foreign investment as the nation struggles to stave off an economic crisis that has forced it to seek an IMF bailout.
Ten current and former provincial and federal government officials and mining sources familiar with the project in the Baluchistan region said that the military has become the most important voice on the future of Reko Diq, which it sees as a strategic national asset.
Illustration: Tania Chou
The military would not only be in a position to decide which investors develop the deposit, but an army-controlled engineering firm, Frontier Works Organization (FWO), is positioning itself to be a member of any consortium involved, the people said.
“This has been taken over by GHQ,” a senior Baluchistan official said, referring to the Pakistan army’s General Headquarters in the garrison city of Rawalpindi.
In a statement in response to questions about its role in Reko Diq, the military spokesman’s office said: “[The military] may only participate in government’s plan of development of Reko Diq, as per national requirements.”
However, it acknowledged that FWO, best known for building roads through Pakistan’s rugged and lawless border regions, has developed “substantial” mining capability and would be interested in taking a role in the project.
“If an opportunity arises of participating in developing Reko Diq, FWO may work at par with other competitors [or] companies, provided the project is financially viable [or] suitable,” the statement said.
A spokesman declined to elaborate on the statement.
Pakistani Minister of Information and Broadcasting Fawad Chaudhry said that civilian authorities in the insurgency-hit southwestern province of Baluchistan were in charge of Reko Diq and, along with Khan, would make a decision, but added that the military “and all other stakeholders are obviously important players.”
FWO referred questions to the military spokesman’s office.
Khan’s spokesman, Iftikhar Durrani, said that Baluchistan Province was in charge of Reko Diq, and referred questions to the provincial government and the military spokesman’s office.
The maneuvering behind the project shows how the military, which has historically dictated Pakistan’s security and foreign policy, is leveraging its sway over the civilian government at federal and provincial level to carve a growing role in the nation’s business affairs.
The army has ruled the nuclear-armed nation for nearly half its history and is considered to have a major influence over Khan’s government. A military spokesman declined to comment.
“The military has taken a front seat,” said Ayesha Siddiqa, author of the book Military Inc, which analyses the army’s business interests and influence in Pakistan.
“They’ve understood that the economy is important for having a strong military,” she said. “Control of the economy also gives the military a handle over expanding their business interests.”
Buried at the foot of an extinct volcano near the frontier with Iran and Afghanistan, the mine’s development has long been delayed by a dispute with previous investors in the project, Canada’s Barrick Gold and Chile’s Antofagasta.
The government is urgently trying to settle the dispute as a World Bank arbitration tribunal, which ruled against Pakistan in 2017, is in the next few months expected to announce how much in damages the nation must pay to the foreign firms, who are claiming more than US$11 billion.
The dispute relates to the withholding of a mining lease.
Islamabad is also trying to find new partners to invest in the project, but any new investors would need the blessing of Pakistan’s military, government officials and mining sources said.
State-run companies from China have long coveted Reko Diq and more recently Saudi Arabia has shown interest, Pakistani officials said.
Some Western diplomats said that the Reko Diq dispute has been a significant foreign investment deterrent, with international businesses unnerved at how Pakistan dealt with the companies that had pledged to invest US$3.3 billion to develop the nation’s then-biggest mining project.
Barrick Gold and Antofagasta, whose joint venture Tethyan Copper Co (TCC) discovered vast mineral wealth in Reko Diq, said they had invested more than US$220 million by the time the Baluchistan government in 2011 unexpectedly refused to grant them the critical mining lease needed to keep operating.
Pakistan said its move was legitimate because TCC’s feasibility study was incomplete and the Pakistani Supreme Court voided the deal in 2013, but in 2017, the World Bank’s International Centre for Settlement of Investment Disputes ruled against Pakistan.
TCC did not respond to requests for comment and Antofagasta and Barrick Gold both declined to comment. Reporters could not determine whether either company would be willing to return to the project.
The last serious attempt at settling the Reko Diq case was scuppered in 2016 by the military, which vetoed paying hundreds of millions of dollars to TCC, according to a senior Baluchistan official and two former senior officials in Islamabad.
However, the military has since changed its stance and is more open to a settlement with TCC, said a lawmaker close to the military and a source close to Khan.
The military was also involved in appointing Pakistan’s current legal team.
In response to a question about blocking the previous settlement effort, the military said: “Let’s see how the case progresses.”
It did not elaborate or comment on whether it was playing any role in the latest negotiations.
Some mining experts said that a likely solution would be for a new investment consortium to pay the settlement fee on behalf of cash-strapped Pakistan in exchange for future royalty fees or mining rights.
Chaudhry said that Pakistan was engaged in negotiations with “both” the current investors about a settlement and also potential new investors, with interest coming from the Middle East and Europe. He declined to name the potential investors.
Pakistani Minister of Finance, Revenue and Economic Affairs Asad Umar in October last year said that Saudi Arabia has inquired about investing in Reko Diq and another government official confirmed talks were ongoing.
Saudi Arabia did not respond to a request for comment on Reko Diq.
During Crown Prince Mohammed bin Salman’s visit to Pakistan last month, the kingdom pledged to invest US$2 billion in mineral development projects, although the provisional agreements were vague and did not mention any specific projects.
China’s state-owned miner China Metallurgical Group Corp (中國冶金科工集團), which operates the Saindak copper and gold mine close to Reko Diq, has been eyeing the bigger deposit for more than a decade, mining and company officials said.
A few years ago, Chinese state giant Norinco (北方工業) also made an approach, two sources familiar with Norinco’s offer said.
Neither company responded to requests for comment.
When a mining company approached former general Abdul Quadir Baloch about Reko Diq around 2016, when he was federal minister for the frontier regions, he took their proposal not only to then-Pakistani prime minister Nawaz Sharif, but also to the army chief.
“The military has to give a [security] guarantee to any company coming in to explore or exploit this project, so they are a stakeholder,” Baloch said.
The military declined to comment on Baloch’s assertions. Sharif, who has since been jailed on corruption charges, could not be reached for comment.
The army-run FWO does not have the funds or the expertise to develop the Reko Diq project, which boasts 5.35 billion tonnes of ore, but it could be part of a consortium alongside global miners who have the know-how to mine such a gargantuan deposit.
However, the military’s role in developing natural resources in Baluchistan also carries risks, analysts say.
Aboriginal Baloch people view outsiders with suspicion, and their anger about Islamabad exploiting the province’s vast natural resources has been one of the key themes fueling a separatist insurgency that began around 2004.
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