“HAVE you heard of Reko Diq?” the man asked me in a hushed voice.
“No, what’s Reko Diq?” I replied.
“Very few have heard of it,” he said, “But soon, the whole country will know this name.”
This was back in 2007, and I had just made the acquaintance of a little known shady character whose name I cannot take because our conversations were not for attribution. Suffice it to say that in a few years time everybody knew his name.
We met on a couple of occasions, and talked on the phone a few times. I was working for Dawn News in those days, when it was an English channel. Meanwhile, the Musharraf regime was engulfed in multiple uncertainties including the lawyers movement, Lal Masjid, the May 12 violence in Karachi, Fazlullah’s militia in Swat, a financial crisis growing in the United States, and persistent talk of a ‘deal’ in the offing between Musharraf and Benazir Bhutto.
Those were epic days and, as an economic reporter, I was pulled in all directions to figure out the narrative arc of the big picture that was buffeting the economy. It was then that I was introduced to this fellow by a friend, and found him to be remarkably, in fact suspiciously, well informed about what was happening in Lal Masjid. That episode is what we had met to discuss when he suddenly popped this question on me.
####“But this is a scandal of historic proportions.” Then he elaborated, in a rambling diatribe, about the looting of “the richest gold mine in the world”.
There was no link between the two, he assured me. “But this is a scandal of historic proportions.” Then he elaborated, in a rambling diatribe, about a mining lease granted for a pittance (“a mere 25 per cent!”), about the looting of “the richest gold mine in the world”, about corruption so huge it would make the head spin. So overwrought was his telling that I lost all interest, telling myself that this guy was off his rocker.
“What do you have to substantiate any of this?” I asked him. “We can get you all the documents you need for your story,” came the reply. Fine, I told him. Send me the documents and I’ll take a look.
A few days later an email arrived from him, with a few attachments. When I opened them, they were nothing more than a few, anonymously written, blog entry type pieces, written in what we used to call stream-of-consciousness style. The key fact they hinged on was that the deal struck between the Pakistan government and a company called the Tethyan Copper Company (TCC) involved the latter keeping 75pc of the output, while the government itself got only 25pc.
So I did some quick checking to see how these proportions compare with international standards in mining leases, and it appeared to be a somewhat standard formula. After all, the company would be putting up all the upfront investment, $3.3 billion in this case.
A few days later the fellow called. “Have you had a chance to look at the documents” he asked. “Yes,” I replied, “There’s nothing there. They’re anonymous pieces of writing, nothing official and the deal they describe is, in fact, a rather standard one in the mining industry.”
“We have lots more to share,” he said, “including official documents.”
“Let’s see them,” I replied. And then he said something that caused me to do a double take.
“No. First you do something with this, and we’ll see what you are able to do. Then we’ll share more.” I told him there was nothing I could do with the documents and our conversation ended.
A few years later, the story did indeed blow up when the Supreme Court began hearing a case that had been defeated in the Balochistan High Court in 2007. In 2011, with the hearings as a backdrop, TCC submitted its feasibility for the mining project, and in 2013 the Supreme Court comprehensively killed the deal, saying that the entire joint venture agreement between the Balochistan government and TCC was illegal.
Shortly thereafter, TCC pulled out of the deal saying, “We will pursue our claims for monetary damages, including lost profits for the mining operations, in the international arbitration.” Last week, that pursuit passed its first milestone, as a tribunal of the International Centre for the Settlement of Investment Disputes, a World Bank arm, gave its first order saying that the Pakistan government does indeed have liability in the failure of the project.
Since then, Barrick Gold, the company that was part of the Joint Venture that formed TCC and which carried out the feasibility study of Reko Diq, appears to have spent $21 million in litigation charges stemming from Reko Diq. From the amount being spent on litigation, it appears they are out to recover far more than the $120m loss they acknowledge in their annual report from the deal’s failure.
Reko Diq is not the only large deal to fall apart in this manner. Its problems began in 2006, when the first case was filed against it in the Balochistan High Court. That was a year after the Steel Mills case shut down the country’s privatisation programme. Since then, the mill has accumulated debt of $3.5bn and losses of Rs177bn. The year after the Supreme Court hearings began on Reko Diq, the same court struck down the LNG deal with GDF Suez. For five years subsequently, our industry and power plants gasped for the precious fuel as gas shortages doubled from one to two billion cubic metres daily.
We can talk about the details of the Reko Diq case. There is a lot to be said either way, but one thing that is certain to me from my brief interaction with the shady character about a decade ago is that neither side in this affair is all that innocent, and this pattern of stirring controversies around every deal has not served the country well.
The writer is a member of staff.
Published in Dawn, March 30th, 2017