Police.I can just see it now the NAN Financial Police with their AK47s raiding De Beers
offices in Toronto and demanding the records on IBA implementation at
Attawapiskat.
Power Putsch; After an armed seizure, years of criminal investigations
and millions of dollars in suspicious fines, U.S. power company AES
Corp. is retreating from Kazakhstan--the latest victim of cronyism in
poor, resource-rich countries.
Nathan Vardi
2639 words
2 June 2008
Forbes
84
Volume 181 Issue 11
English
(c) 2008 Forbes Inc.
After an armed seizure, years of criminal investigations and millions
of dollars in suspicious fines, U.S. power company AES Corp. is
retreating from Kazakhstan--the latest American victim of cronyism in
poor, resource-rich nations. Without warning, 24 foot soldiers of the
Pavlodar Oblast Financial Police showed up, carrying AK-47 Kalashnikov
automatic rifles. Their target: the Maikuben coal mine in northern
Kazakhstan, owned by the American firm AES Corp. Demanding documents
connected to a tax case in Kazakh courts, the troops brandished their
weapons to remove AES employees and seize the mine's administration
building, according to internal AES e-mails. With no cellular service
in the area, AES managers in the country struggled to communicate with
their staff as the occupation dragged into a second day.
They negotiated an end to the standoff with regional officials, who
persuaded the goons to pull back. AES never told investors or the press
about the armed takeover.
Operations at the open coal pit continued, and the company got slapped
with a tax fine.
. . .
Three AES executives who had already left the country for routine
career changes--two citizens of the U.K., one from New Zealand--were
placed under investigation in connection with the tax probe. Kazakh
authorities said they were wanted for questioning and threatened to
alert Interpol, according to an internal AES e-mail. Ten Kazakh workers
at AES were interrogated for eight hours a day over several days. They
were grilled about the political affiliations of AES employees, says an
internal company e-mail, and accused of being unpatriotic. "Why do you
work for Americans who steal from us?" they were asked.
. ..
But that official policy hasn't kept authorities from hassling foreign
operations. In November a regional Kazakh environmental regulator fined
Chevron's Tengiz oilfield project $310 million for alleged violations
involving the improper storage of sulfur. Chevron insists it has dealt
with the sulfur safely and legally, and is contesting the fine.
The Tengiz problem is a mere puddle next to the troubles at Kashagan in
the remote North Caspian Sea, the world's largest oilfield discovery in
the last three decades. Citing production delays and cost overruns, and
threatening new laws and fines to protect the wilderness, the Kazakh
government has extracted critical concessions from Western companies
developing the field. In January the chief executives of Exxon, Shell,
France's Total and Eni of Italy flew to Astana, the new northern
capital decreed in 1997 and built almost from scratch. There, in a
nine-hour meeting at La Rivière restaurant, the oil giants agreed to
fork over $5 billion to compensate Kazakhstan for delays and potential
lost revenue, and let KazMunayGas, the state oil company, double its
stake in Kashagan to 17% for the bargain price of $1.8 billion.
It doesn't stop there. Foreign firms in Kazakhstan, which pay a maximum
tax rate of 30%, plus value added taxes, have come to expect frequent
visits from the regional taxman. ArcelorMittal, the world's biggest
steel company, has been fighting $2.5 billion of tax claims associated
with its coal- and steel-producing assets in the country. The Ministry
of Finance claimed that ArcelorMittal should, among other things, be
paying Kazakh taxes on the income of a subsidiary in the United Arab
Emirates. ArcelorMittal says it has paid taxes in accordance with the
original privatization agreement and recently won court victories in
the case. (Unrelated to the tax cases, ArcelorMittal has had serious
safety issues: 71 Kazakh miners have died in two accidents in the last
three years.)
. . .
As AES packs it in, other American companies in Kazakhstan brace for
more hits. Not long ago President Nazarbayev declared that his
government would take greater control of energy resources. Soon after,
the environmental protection minister announced new taxes on foreign
oil companies.
