The UK spent years lobbying for this Armenian goldmine. Now Russia is funding it

24 August 2019, protest march against Amulsar mine, Yerevan, Source: News.am / YouTube

That year, protesters and local residents blockaded the $400m Western-backed mining project in the weeks after Armenia’s ‘old regime’ was pushed out of power. Neighbours and protesters said that, under the previous repressive Serzh Sargsyan regime, they had felt like they couldn’t campaign against the Amulsar project.

Citing concerns over the gold mine’s environmental and social impacts, protesters provoked, with their blockade, a serious conflict between the Armenian government and the company set to be the country’s biggest international investor.

Lydian threatened international arbitration over the government’s failure to clear protesters’ blockade at Amulsar. The mine, once online, had been projected to become one of the top contributors of taxes to the Armenian state, creating thousands of jobs.

Yet the protesters’ blockade, alongside government investigations and environmental audits, eventually resulted in Lydian going through a court-protected restructuring process in Canada in 2019-2020. The company said it had simply lost too much money as it sought to regain access to the blockaded mine and complete construction – causing it to default to its major creditors, bankruptcy documents show.

Now, the mine project – once financed by the EBRD – is set to receive $100m in loans from the Eurasian Development Bank (EDB) as part of a fresh push to bring the project online. The EDB has said it is currently ‘boosting its portfolio’ in Armenia, to which it is now paying special attention.

Prior to the blockade, the mine was believed to be near completion. It now requires a further 18 months of construction work, Lydian says.

The new investment effort will include $7m in payments to local communities annually and a 12.5% equity stake, free of charge, for the Armenian government.

But unlike Lydian’s previous multilateral backers such as the EBRD and World Bank’s International Finance Corporation (IFC), the EDB – signed into effect by Russian and Kazakh presidents Vladimir Putin and Nursultan Nazarbayev in 2006 – pools funds for infrastructure and finance projects from a select range of states: Russia, Kazakhstan, Belarus, Kyrgyzstan, Armenia and Tajikistan.

Ultimately, the bank says, its aim is to build economic ties between member states, all former states of the Soviet Union.

Some analysts believe that the bank is under the influence of a single state – the Russian Federation – and as a result could face the impacts of Western sanctions.

Assessing the EDB’s sanctions risk in the wake of Russia’s invasion of Ukraine, credit ratings agency Fitch considered that Russia ‘exerts strong influence’ on the EDB’s board, management and strategy as the bank's biggest shareholder, with 66% of its capital coming from the Russian Ministry of Finance.

EDB did not respond to a request for comment. The chair of the bank’s management board, Nikolai Podguzov, has previously dismissed claims of political influence, saying that the bank is “beyond any political constructions”.

Amid speculation over the sanctions risk for EDB after Russia’s invasion of Ukraine, in January 2023 Russia’s stake in the bank was reduced from 66% to 44%. That reduction brought the Russian state’s interest in the EDB under the 50% threshold where EU, US and UK sanctions apply.

Sanctions expert George Voloshin told openDemocracy that while most international development banks pose little sanctions risk as the stakes of member states are small, the EDB “has always been different because of the elephant in the room – Russia”.