Requiem for Reko Diq

REKO Diq, an ancient volcano in Chaghi, Balochistan, literally means sandy peak. This is something of a misnomer.

It should be called Tangav Diq, or gold peak, because below the sands, according to development expert Syed Fazl-e-Haider, lie “12.3 million tons of copper and 20.9 million ounces of gold.” There is a saying in Balochistan that a Baloch child may be without socks, but when he grows up every step he takes will be on gold. Reko Diq, Saindak, Sui all prove that the barefooted Baloch do tread on gold. That this wealth hasn’t benefited them isn’t accidental.

Since 1947, successive governments at the centre have pursued a policy of intimidation and coercion towards the Baloch. Most provincial governments have played the disgraceful role of legitimising and lending respectability to army operations, forced disappearances, extrajudicial killings, incarcerations and the acquisition of land. The goal has been to coerce the population into acquiescence so that exploitation can be conducted in a threat-free environment. Of late, much-publicised mega projects are actually depriving the Baloch of their resources and said to be adversely changing the demographic balance in the province.

Credible international surveys indicate the wealth of resources and suggest that the area is home to one of the biggest copper reserves in the world with over 11 billion pounds of copper and nine million ounces of gold. The Australian firm Tethyan which entered into a joint venture with the Balochistan government estimates an annual production of 200 to 500 million pounds of copper from the Reko Diq mining project. A large number of porphyry rocks are also known to exist.

The interests of the Australian company in Reko Diq and its neighbourhood were taken over by the Toronto-based Barrick Gold Corp and the Chilean Antofagasta Minerals. These companies were handed a very lucrative deal. The terms agreed upon show that there is more to the issue than meets the eye. Royalties were reduced from the initial four to two per cent. Terms for the provision of cost-free land for an airport and a 400 km Reko Diq-Gwadar road were accepted. An unjust clause is that a 25 per cent share will be paid to the Balochistan government but only after it invests 25 per cent in the project.

According to Rob Maguire of the Dominion paper, “Barrick is the foremost gold mining corporation in the world, with sales exceeding $2.6bn in 2005 and the largest reserves in the industry, at nearly 90 million ounces. They plan to mine gold under the Andean glaciers at Pascua Lama (Chile) and in order to process the ore there, Barrick will use 7,200 kg of cyanide and 10 million litres of water per day. Cyanide contamination of water resources can be devastating — cyanide concentrations as little as one microgram (one-millionth of a gram) per litre can be fatal to fish.” The people at Pascua Lama are resisting Barrick’s operations.

Mining uses sodium cyanide, arsenic and other chemicals which produce toxic by-products. According to Marcel Claude, vice-president of the international environmental group Oceana, “Gold mining dumps 79 tonnes of waste for every 28 grams of gold, and produces 96 per cent of the world’s arsenic emissions. On the same theme, Antonia Fortt, an environmental engineer, says that fears about cyanide are justified “because this chemical is used to separate the gold from the sterile material, rock and dust, and it comes mixed with it.” Health problems directly linked with arsenic exposure include cancer, deformation, miscarriage and underweight children.

Antofagasta’s net assets at the end of 2007 grew to almost $5bn. In December 2005 its release said: “Tethyan’s principal assets are a 75 per cent interest in the highly prospective Chagai [sic] Hills region of North West Pakistan known as Reko Diq, including the Tanjeel Mineral Resource. This mining district hosts significant copper-gold porphyry deposits as part of an extended copper-gold belt. Total indicated and inferred mineral resource estimates at these properties are 1,213 million tonnes with a copper grade of 0.58 [per cent] and a gold grade of 0.28 grams per tonne. Estimates include probable reserves at the Tanjeel of 128.8 million tonnes with a copper grade of 0.7 [per cent]”.

The firm’s chairman Jean-Paul Luksic said: “We will continue to focus on managing costs even amid higher copper prices and the cash retained will be used to achieve future profitable growth in projects such as Esperanza and Reko Diq, and on the potential for future exploration and acquisitions”.

Antofagasta is presently embroiled in a dispute with inhabitants near Chile’s largest copper mines, Los Pelambres, over water rights. Its new dam is cutting off valuable water supplies and poisoning them.

These predator corporations are bothered only about their hefty profits and they ride roughshod over all human, social and environmental concerns where they operate. They customarily disregard people and the environment in search of profit. They have outsourced services to Pakistani contractors such as Capital Drilling, Security 2000, Rak Mor Drilling, Zain Company and Zia and Brothers. In April 2008, Zain Company showed its brute force and terminated services of 40 drilling assistants and recruited novices and non-locals. The AZAT Foundation has tried to protect their rights, and on June 14, 2008 a well-attended demonstration was held outside the Quetta Press Club.

There are many advocates of such mega projects who claim that the Baloch have benefited from their trickle-down effect. Such logic reminds me of Ghalib’s Persian couplet.

He says:

Sharminda-e-nawazish-e gardoon na manda amm

Gar chaak dokht, jamma ba mazd-e-rafoo girraft.

(Should I acknowledge the favour of his darning of a tear?

If the very darner then robs me of the darned shirt I wear.)

These ruthless corporate predators along with conniving corrupt politicians and officials have scripted the requiem for Reko Diq. The people will end up poorer and the aquifers and the environment in general will be contaminated with cyanide, arsenic, etc with unremittingly grave consequences for the people.

Given the frenzied way in which the authorities, the politicians and predatory corporations are ravaging Balochistan’s precious resources, one can only wonder why the rulers in Islamabad are surprised, offended and annoyed when the resentment against such injustices results in insurgencies.

mmatalpur@gmail.com

Cutting government expenditure

ON Sept 19, a day before the bombing at Islamabad’s Marriott hotel, which killed scores of people, including some foreigners, Finance Minister Naveed Qamar announced what is a far-reaching restructuring of government finance.

A day later, President Asif Ali Zardari, in his first address to a joint sitting of the national legislature recognised that the economy presented the most serious challenge for his fledgling administration. Minister Qamar’s announcement of the withdrawal of all government subsidies and President Zardari’s proclamation were two important signals that the government, after a lengthy period of inaction, had finally begun to move.

I also found comfort in one other announcement by the finance minister. He said that his government had no intention of going to the IMF for help. In several articles contributed to this paper over the last couple of months I had argued for the adoption of this stance. I had written that an approach to the IMF for funds would once again result in the adoption of a programme that would not be right for a country in Pakistan’s position. The Fund would require Islamabad to move rapidly towards adjustment and that would compromise growth prospects for years to come.

It has been my long-held belief that it is better to adjust with growth than without growth. Adjustments are less painful in a growing economy than in an economy that has stalled. The Fund has not bought this hypothesis and its programmes continue to build retrenchment and rapid adjustment. In the Fund’s case, the thesis is that delayed adjustments inflict heavy long-term costs on the economy.

Pakistan’s economy currently suffers from several ailments. The first, of course, is a sharp escalation in the pace of inflation. By late September, the rate of increase in prices had approached the level of 25 per cent a year. This was the highest price rise rate in Pakistan’s history. The cause was not only outside events such as the increase in the price of oil and other commodities of particular interest to the country. It had also resulted from the loose monetary policy followed by the central bank in the early 2000s and the growing budgetary deficit.

The deficit was financed by Islamabad through resort to central bank funding which meant the printing of money beyond that needed by the rate of economic expansion and changes in the structure of the economy. There was too much money chasing too few goods which, as any undergraduate student of economics knows, results in inflation.

What is worrying for Pakistan is that inflationary expectations have begun to affect economic behaviour. Producers of goods and the sellers of various kinds of goods and commodities are incorporating inflation into their decisions. This kind of response produces a spiral and, unchecked, can lead to the type of hyper inflation that destroyed so many Latin American economies in the 1980s.

How to handle this situation? The standard prescription is to make money more costly by raising interest rates. This the State Bank has done to some extent; it will need to go much further to squeeze money out of the economic system. But such an approach will have a severe effect on the economy’s growth, increase unemployment and also increase the number of people living in poverty. Instead of relying excessively on a monetary solution to the inflation problem, I would focus much more on the fiscal situation.

This can be done by raising government revenue and by cutting down public expenditure. Increasing taxes and tax collection takes time; cutting expenditure can be done much more quickly and much more effectively. It is well known that there is much waste in the way the government spends. This is in the areas of both development and non-development expenditures.

Governments find it hard to cut expenditure. Strong vested interests come into play whenever attempts are made to pull the government back from extravagance. One way of handling this might be to entrust the job to a group of politicians — a small committee that has representation from all the major political parties. The committee’s mandate should be to reduce the government’s expenditure by two to three percentage points of GDP over the next couple of years.

Half of this should come from the non-development part of expenditure and one half from the development side. The committee should be assisted by both the Planning Commission and the Ministry of Finance. The former should focus on non-development spending, the latter on development outlays. The committee’s recommendations should be presented to the National Assembly before the end of the calendar year.

The second imbalance is on the trade and balance of payments side. The trade gap is rapidly eating into the country’s foreign reserves. These have dropped precipitously over the last several months. They will disappear altogether if action is not taken to reduce the trade deficit while mobilising resources from abroad to pay for the difference that remains.

The government can’t do much to reduce the amount of imports drastically. A good part of these is made up of essential imports: food, edible oil and fuel oil, industrial raw material. These are all essential items. In addition the country also requires capital equipment for factories and for buildings and roads. The military also requires equipment and needs to replenish that which wears out. Cutting these imports will have a serious impact on the state of the economy. The only long-term solution is to expand exports, something the country has not done in earnest. Even if a switch is made now from the traditional import-substitution strategy to the one that focuses on export expansion it will take time to produce results.

The only area where the response to the right kind of stimulus can be rapid is agriculture. By concentrating the government’s effort on producing, processing and exporting agricultural products, Pakistan could begin to increase its exports. Pakistan is located in an area where personal incomes are increasing rapidly and consumption habits are changing. These offer considerable opportunity for the export of agro-processed items.

To return to the restructuring of government finance and why I believe that this is an important decision is to emphasise that a lot of government expenditure is misdirected. It leads to wrong price signals for both consumers (in particular of various items of energy) and to producers (in particular of agricultural goods). By correctly giving the right kind of signals, which will now happen, the government will remove some costly distortions from the economy.

Time for geo-engineering?

SCIENTISTS have their own way of putting things. This is how Dr Oerjan Gustafsson of Stockholm University announced the approach of a climate apocalypse in an e-mail sent last week from the Russian research ship Jakob Smirnitskyi in the Arctic Ocean.

“We had a hectic finishing of the sampling programme yesterday and this past night. An extensive area of intense methane release was found. At earlier sites we had found elevated levels of dissolved methane. Yesterday, for the first time, we documented a field where the release was so intense that the methane did not have time to dissolve into the seawater but was rising as methane bubbles to the sea surface.”

Gustafsson’s preliminary report, published in The Independent of Sept 23, is a development far more frightening than the current financial crisis, although it will get only one-thousandth of the coverage. The worst that the financial crisis can bring is some years of recession. The worst that massive methane releases in the Arctic can bring us is runaway, irreversible global warming.

Molecule for molecule, methane gas is 20 times more potent than carbon dioxide as a warming agent. However, since methane doesn’t stay in the atmosphere as long — around 12 years, on average, compared to 100 years for CO2 — and human activities do not produce all that much of it, concerns about climate change have mostly been focussed on carbon dioxide. The one big worry was that warmer temperatures might cause massive releases of methane from natural sources.

There are thousands of megatonnes of methane stored underground in the Arctic region, trapped there by the permafrost (permanently frozen ground) that covers much of northern Russia, Alaska and Canada and extends far out under the seabed of the Arctic Ocean. If the permafrost melts and methane escapes into the atmosphere on a large scale, it would cause a rapid rise in temperature — which would melt more permafrost, releasing more methane, which would cause more warming, and so on.

Climate scientists call this a feedback mechanism. So long as it is our emissions that are causing the warming, we can stop it if we reduce the emissions fast enough. Once feedbacks like methane release start to drive the warming, it’s out of our hands: we might even cut our emissions to zero, only to find that the temperature is still rising.

Fear of this runaway feedback is why most climate scientists (and the European Union) have set a rise of two degrees Celsius in the average global temperature as the limit which we must never exceed. Somewhere between two and three degrees Celsius, they fear, massive feedbacks like methane release would kick in and take the situation out of our hands.

Unfortunately, the heating is much more intense in the Arctic region. The average global temperate has only risen 0.6 degree Celsius so far, but the average temperature in the Arctic is up by four degrees Celsius. So the permafrost is starting to melt, and the trapped methane is escaping.

That is what the research ship Jakob Smirnitskyi has just found: areas of the Arctic Ocean off the Russian coast where ‘chimneys’ of methane gas are bubbling to the surface. What this may mean is that we have no time left if we hope to avoid runaway global warming — and yet it will obviously take many years to get our own greenhouse gas emissions down. So what can we do?

There is a way to cheat, for a while. Several techniques have been proposed for holding the global temperature down temporarily in order to avoid running into the feedbacks. They do not release us from the duty of getting our emissions down, but they could win us some time to work on that task without running into disaster.

The leading candidate, suggested by Nobel Prize-winning atmospheric chemist Paul Crutzen in 2006, is to inject sulphur dioxide into the stratosphere in order to reflect some incoming sunlight. (This mimics the action of large volcanic eruptions, which also lower the global temperature temporarily by putting huge amounts of sulphur dioxide into the upper atmosphere.)

Another, less intrusive approach, proposed by John Latham of the National Centre for Atmospheric Research in Boulder, Colorado and Prof Stephen Salter of Edinburgh University, is to launch fleets of unmanned, wind-powered vessels, controlled by satellite, that would spray seawater up into low-lying marine clouds in order to increase the amount of sunlight that they reflect. The great attraction of this technique is that if there are unwelcome side effects, you can turn it off right away.

These techniques are known as geo-engineering, and discussing them has been taboo in most scientific circles because of the ‘moral hazard’: the fear that if the public knows you can hold the global temperature down by direct intervention, people will not do the harder job of cutting their emissions. But if large-scale methane releases are getting underway, the time for such subtle calculations is past.

Starting now, we need a crash programme to investigate the feasibility of these and other techniques for geo-engineering the climate. Once the thawing starts, it is hard to stop, and we may need them very soon.

— Copyright Gwynne Dyer