London-based rights group Amnesty International has called on British authorities to investigate British-Australian mining giant Rio Tinto for “a possible breach of EU economic sanctions on Burma” over the role it played in a controversial sale of the Burmese assets of a Canadian firm Ivanhoe Mines, a sale that according to a leaked US State Department cable may have involved internationally blacklisted billionaire Tay Za as a middle man.
Vancouver-based Ivanhoe Mines was involved in the Monywa copper mining project by way of its 50 percent stake in a joint venture called Myanmar Ivanhoe Company Limited (MICCL), a partnership with a Burmese state-owned company, which began operating the mine in the late 1990s. When Ivanhoe announced in August 2011 that its Burmese assets had been sold off, Rio Tinto owned a 46.5 percent stake in the Canadian mining firm—founded by mining mogul Robert Friedland—and had appointed half of its directors. Rio Tinto has subsequently increased its stake in Ivanhoe, and since 2012 has owned a majority stake in the firm—now called Turquoise Hill Resources and primarily focused in Mongolia.
The handling of Ivanhoe’s Burmese assets was mired in controversy long before Wikileaks published diplomatic cables implicating Tay Za in the eventual sale. In February 2007, Ivanhoe established what it claimed at the time was an independent third party trust called the Monywa Trust to take control of its 50percent stake in MICCL in preparation for a sale. The Trust was established as part of an agreement between Ivanhoe and Rio Tinto that was reached prior to Rio Tinto buying a substantial stake in the Vancouver-based firm, which already had the rights to a giant copper deposit in Mongolia that underpinned their partnership.
Ivanhoe’s founder and long time chairman, Robert Friedland, has described Rio Tinto’s role in creating the trust as, “a matter of public record, that the creation of the Monywa Trust structure was dictated entirely by Rio Tinto as a condition of its significant equity investment in the Company [Ivanhoe Mines].”
Following the creation of the Trust, Ivanhoe claimed that it no longer had anything to do with the mine’s operations, a claim Amnesty challenged in a lengthy report released in February citing leaked diplomatic cables quoting the mine’s acting general manager as saying that “Ivanhoe Headquarters” was still giving him instructions on how to operate the mine nearly two years after the ostensibly independent trust was created. In a detailed press release issued on April 16, timed to coincide with Rio Tinto’s annual shareholders meeting, Amnesty highlighted Rio Tinto’s connection to the controversial disposal of Ivanhoe’s Burmese assets and the possible violation of sanctions.
“Rio Tinto’s role in the creation of this trust raises serious questions about whether the company was involved in activities which may have had the effect of circumventing EU economic sanctions, a criminal offence under UK law”, Amnesty International UK’s Economic Relations Program Director Peter Frankental said in the press release.
“Information obtained by Amnesty International suggests that the Trust’s subsequent sale of Ivanhoe’s stake could have involved a breach of economic sanctions on Myanmar [Burma], by making assets available to the military-owned conglomerate the Union of Myanmar Economic Holding (UMEHL) and Tay Za, a ‘broker’ for the Myanmar government,” read Amnesty’s press release, a reference to a number of leaked cables which quote MICCL’s acting general manager Glenn Ford detailing Tay Za’s involvement in the negotiations for the sale.
Amnesty’s extensive research found that Ivanhoe established the trust in the British Virgin Islands (BVI), an overseas British territory. Because it was based in BVI the Trust’s activities were subject to British and EU sanctions, which were in effect at the time of the sale, targeting Tay Za, the apparent broker of the sale and the military holding company UMEHL which took over the project. Following Ivanhoe’s departure, UMEHL and a subsidiary of Chinese weapons manufacturer Norinco—called Wanbao Mining—have moved to significantly expand the mine and develop the Letpadaung deposit against the wishes of local farmers whose protests have been harshly dealt with by government authorities. Responding to the Irrawaddy’s questions a spokesperson from Britain’s Foreign and Commonwealth office indicated that Amnesty’s concerns were being looked into.
“The UK is a leading advocate of strengthening financial and sanctions compliance worldwide. We have alerted authorities in the British Virgin Islands to this alleged breach, and requested that appropriate steps are taken to investigate,” read an emailed statement from the UK Foreign & Commonwealth Office. Despite this assurance, it remains far from certain whether the British Virgin Islands, an autonomous jurisdiction known as the home of a financial system with extremely lax regulatory enforcement, will actually follow up on the matter,
Rio Tinto, which did not did not respond to The Irrawaddy’s request for comment, has repeatedly sought to distance itself from the controversy over the sale of Ivanhoe’s assets. In a letter to Amnesty earlier this year, Rio Tinto CEO Sam Walsh took issue with allegations raised in Amnesty’s report on the Monywa mine. “We do not agree with a number of your assertions, or the conclusions you seek to draw from them,” read the letter, which was re-published in Amnesty’s report.
“It was, and remains, our understanding that the measures required by Rio Tinto and put in place by Ivanhoe on the disposal of the Myanmar asset were fully compliant with all applicable laws giving effect to sanctions. Rio Tinto was not aware of any facts or circumstances that would suggest any non-compliance with those laws at the time of, or prior to, the apparent divestment of the interest in mid-2011,” Walsh concluded.
Although Walsh claimed in his letter to Amnesty that the “conditions which Rio Tinto placed on Ivanhoe’s disposal of the Myanmar assets also illustrated our recognition of the importance of meeting the high social, environmental and human rights standards to which we are committed,” his firm has long been the focus of heavy criticism from rights groups over allegations relating to rights abuses and environmental destruction at various Rio Tinto project sites around the world.
In 2008, the Norwegian Government Pension Fund—Global divested itself of its $850 million stake in Rio Tinto, citing environmental concerns over the firm’s 40 percent stake in a massive mine in Indonesian-controlled West Paupa, operated by the firm’s partner Freeport McMoRan. According to the fund, the decision to dump the Rio Tinto shares was made because of the “unacceptable risk that the Fund, through continued ownership in the company, would contribute to ongoing and future severe environmental damage.”