Letter to EBRD

August 31, 2010

To: Mr. Valeriu Razlog
Head of Yerevan Office
European Bank for Reconstruction and Development (EBRD)
Citadel Business Center
105/1, Teryan Street
Yerevan 009 Armenia



Dear Mr. Razlog,

We are writing on behalf of the environmental movement embracing thousands of individuals and dozens of non-governmental organizations to express our concern related to the possible funding of the controversial mining project in Teghut forest in Armenia by VTB bank - the loan beneficiary of the European Bank for Reconstruction and Development.

The EBRD has been the first multilateral development bank with an explicit environmental mandate to promote environmentally sound and sustainable development in the full range of its activities. We appreciate the course and activities of the EBRD in this respect and assume that in its turn it shall demand high standards from its partners and beneficiaries. Unfortunately, such standards are not always strictly required by the lender and/or met adequately by respective partners and, hence, the EBRD appears in a position to indirectly finance environmentally unsound and risky projects and endanger its reputation.

One of the partners of the EBRD is the VTB Bank Armenia, which, in accordance with the agreement signed in January 2009, will receive 10mln credit from the EBRD for the funding of small and medium-sized enterprises in Armenia. We would like to draw your attention to the fact that the same bank intends to give a loan of almost 250 million dollars to the Armenian Copper Program for a 12-year development of the Teghut copper-molybdenum mine in the northeastern region in Armenia. This contract was signed in May 2008, but only limited amount was transferred to ACP due to the global financial crisis. According to recent statements by ACP and the bank's leadership, VTB will be ready to continue to provide the loan to ACP in September 2010.

Teghut copper-molybdenum deposit is located in a picturesque and complex landscape covered with forests and engraved by gorges of the Shnogh River and its tributaries - Krunk, Pakasajur (Kharatadzor) and Duqanadzor, which are the main water sources for the Shnogh and Teghut villages. Teghut forest is one of the best-preserved forest areas in the country with rich biodiversity, including about 200 species of plants, 55 species of mammals, 86 species of birds, 10 species of vermigrades and 4 species of amphibians. Many of these species are rare and endangered. There are about 20 historical and cultural sites from antiquity and the middle ages.

Allocated land for exploitation of the mine is 1,490.820 hectares (ha), 82% (or 1,231.648 ha) of which is covered with forests. The project plans clear-cutting 357 ha of the forest. As a result of resource extraction, one of the forested mountains will be replaced by a 600 meter deep pit. Dumping tails will be disposed in the gorge of one of the above-mentioned rivers. Exploitation of the mine will produce about 500 million tones of tailings and 600 million tones of various other wastes.

The expediency of the Teghut mining project has been challenged by international as well as local experts. Strathcona Mineral Services Ltd., commissioned in 2001 by ACP, questioned the environmental safety as well as the economic viability of the project. According to their scoping review, “given the mountainous terrain around the deposit, and the location in an area prone to severe earthquakes, there is a considerable technical and, therefore, financial challenge to deposit 500 million tones of tailings and 600 million tones of various waste categories in a safe and environmentally acceptable manner.”

Local experts in their turn analyzed the project’s impacts and revealed that the clear cutting of the planned 357 hectares of forest will likely be accompanied by drying of water sources, soil erosion, and destruction of forest area 3 times larger than the planned territory. Entire ecosystems, including habitats of endangered plants and animals will be jeopardized. Dumping tails containing silver, rhenium, lead, arsenic, copper, molybdenum, zinc, sulfurous compounds, and various chemicals used in extraction and ore processing will contaminate the rivers and valleys, affecting food safety and human health. Likelihood of landslides will be increased. There is a risk of failure of the enormous tailing reservoir, in which case the entire region will be affected, including the valley of the Debed River that crosses into the neighboring Republic of Georgia.

Environmental impact assessment (EIA), which served as a basis for permitting decisions, failed to calculate the ecosystem and biodiversity losses, disregarded risks for human health and emergencies. Costs of mining were undervalued against the benefits and exploitation of Teghut copper-molybdenum project was presented as an economically viable one. Authorities in charge of the review of EIA ignored the miscalculations and false data provided by ACP. The Armenian government refused the environmental NGOs’ proposal to arrange for an independent EIA with participation of international experts/organizations. The affected communities were not adequately informed about the potential environmental impacts on their livelihoods.

Decisions related to operation of Teghut mine violated provisions of national and international legislation, including RA Constitution, RA Land Code, RA Water Code, RA Mineral Code, RA Law on Environmental Impact Expertise, RA Law on Allocation of Mineral Resources for Exploration and Exploitation (RA Law on Concession), RA Law on Plants, and RA Law on Animals as well as UNECE Convention on Environmental Impact Assessment in a Transboundary Context (Espoo Convention) and UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters (Aarhus Convention).

For more than four years the environmental NGOs and experts in Armenia are engaged in the campaign against the Teghut mining project. Some NGOs challenge legal infringements in the courts of Armenia. The issue of failure to ensure public participation and access to justice is additionally raised in front of the Compliance Committee on the Aarhus Convention. Local residents have applied to the European Court of Human Rights as their property was taken by ACP with miserable compensation.

We have applied to the leadership of VTB several times since 2008 and raised our concerns regarding the devastating consequences of Teghut mining project. Nevertheless, the bank disregarded the public’s voice and refused to enter into dialogue. Such a position of the bank has forced us to hold several demonstrations in front of the headquarters. The last rally on June 28, 2010 was dispersed by the police with the use of force.

We would like to note that we are determined to continue using our rights and freedoms and continue our fight against the mining of copper-molybdenum reservoir in Teghut as it violates the rights of local residents to leave in a healthy and safe environment and sacrifices the needs of future generations.

We also expect international financial institutions working in Armenia and, in particular, the EBRD to respect the mentioned rights of the Armenian people and to refrain from supporting activities that put under risk our nature, health and future.

We request EBRD to express a consistent standing in respect with the environmental and social performance of its partner bank and demand VTB to demonstrate adherence to high environmental and social standards, which will mean abandonment of financing ACP for exploitation of Teghut mine. In the opposite case, we request EBRD to suspend its lending to VTB as the continued support of this bank by EBRD will be regarded as “political backing” of an unlawful, environmentally devastating and socially irresponsible activity, and allegations addressed to VTB will be proportionately addressed to this prominent financial institution.

A more detailed bulletin on Teghut mining project is enclosed. For additional information please contact Sona Ayvazyan at teghut2009@gmail.com or +374 91 433278.

Sincerely TEGHUT GROUP