Thursday, February 23, 2006

Freeport Politics

As ExxonMobil's Indonesia unit is just inches away from a deal with Pertamina to immediately operate the giant Cepu oil and gas field in Java, PT Freeport Indonesia---a subsidiary of Freeport McMoRan (FCX)---is closing both its plants and offices in the country.
Both ExxonMobil and Freeport are politically sensitive companies with long-history of allegation of their indictments in various abuse of military power. ExxonMobil in Aceh, the north-western part of Indonesia and Freeport in Papua, the most eastern part of the archipelagic nation.
The difference lies in the settlement of conflicts in both companies' area of operations. Indonesia government had signed a peace deal with Free Aceh Movement in Aceh last August, while Papua might have to face a longer period of conflicts and no immediate sign of a long-lasting peace.
In the last few months, both Exxon and Freeport, have to deal with political upheavals. I wrote the political journey of Cepu dispute already. Now I'm focusing on Freeport.
Let's take a look at recent developments in Papua as a whole and Freeport in specific.
On Wednesday, Freeport stopped operations at its Papua mine after hundreds (some reported 500) of illegal miners, demanding to meet company representatives after a clash with security personel Tuesday, blocked a road to the site.
About 500 miners set up barricades and demanded permission to sift through waste pumped from Grasberg mine, the largest copper and gold mine in the world, which is owned by Freeport.
Early this morning, up to 20 Papuan angry students attacked the Plaza 89, the building housing Freeport's offices in Jakarta. They broke windows and damaged facilities in the lobby of the building in the pre-dawn attack, said National Police chief Gen. Sutanto, adding that 13 people have since been arrested over the violence.
The Grasberg mine has produced 16.1 billion pounds of copper and 23.3 million ounces of gold net since it began production in 1988. The mine's estimated reserves of more than 40 billion pounds of copper and 46 million ounces of gold give it "decades" of future production, the Freeport-McMoRan 2004 annual report said.
While Freeport said it's just premature to calculate the losses due to the mining shutdown, Indonesia government quickly came up with numbers.
Director General for Mining at the Energy Ministry, Simon Sembiring, said Indonesia's potential losses were estimated at Rp27 billion (US$3 million) per day, calculated from last year's revenue from Freeport at US$1 billion.
Actually copper concentrate shipments from Papua province are continuing despite a suspension of production at the Grasberg mine, a spokesman for Freeport said on Thursday as quoted by Reuters.
"The disruptions happened in the mining area and the processing factory," spokesman Siddharta Moersjid said, not in the area from which concentrate shipments are made.
Why Freeport bothers those small-time illegal miners?
Energy Minister Purnomo Yusgiantoro said on Wednesday that there were illegal miners in almost all mining areas in the country and they usually collected mining products that had been discarded by the mining companies operating in the areas.
Late last month, minister for environmental affairs Rachmat Witoelar said that damage to the environment caused by Freeport's operation has reached a serious level.
In its operation, PT Freeport produces tailings of poisonous and dangerous subtances which reach the Arafura sea. Its tailings have execeeded the total suspended solid as allowed by the Indonesian law.
Early this month Purnomo said the government would set up a inter-ministry team to study mining activities of PT Freeport Indonesia in Papua. On February 10, Vice President Jusuf Kalla said Freeport should increase the revenue it shares with the government from its Papua mines amid lucrative prices of copper and gold.
Some politicians jumps on the wagon calling Freeport's arogance was behind the recent violence in Papua.
They seems to echoing former chairman of the People`s Consultative Assembly (MPR) Amien Rais that called on the government to close PT Freeport`s mining activities in the country`s easternmost province of Papua as it has committed three big crimes, namely plundering natural resources, destroying the ecology, and evading taxes during its operation in Indonesia.
Cabinet members met on Thursday, among others, to discuss the situation confronted by Freeport. National Police chief, Military Commander, Coordinating Minister for The Economy, Coordinating Minister for Politic and Security Affairs, and Internal Affairs Minister attended the meeting.
Thousands miles away from Jakarta, local leaders including the Trikora military commander and Papua Police Chief trying to calm down the situation.
But all of these are short-term measures.
No words, so far, from president Susilo Bambang Yudhoyono. Back in 1999-2000 when he was energy minister under Abdurrahman Wahid administration, SBY once made Freeport had to cut ore output following an accident at Freeport's Lake Wanagon waste dump which killed four workers and raised concerns about possible environmental damage.
He was also supportive of the idea to divest more Freeport Indonesia shares to Indonesian companies and review the II working contract.
But on February 28, 2000, Henry Kissinger, a commissioner of Freeport, met then president Abdurrahman Wahid (photo above, courtesy of Kompas) in Jakarta asking Indonesia government to honor the contract.
Oops...early last year, president SBY met Kissinger in Singapore (I was in the city-state) and ask the latter to help reduce negative views on Indonesia in the US.
President made the request when he met Kissinger on the sidelines of his two-day state visit to Singapore. SBY considered Kissinger to be "still in a position to influence US leaders" to help the US government and people to look at Indonesia in its totality and not in parts
While Kissinger no longer serve as member of the board at Freeport, his firm Kissinger McLarty Associates is reportedly acts as Freeport's consultant and lobbyist.
The firm was formed in 1999 by the merger of two organizations headed by former Secretary of State Henry Kissinger and Mr. McLarty, who served as President William Jefferson Clinton's chief of staff ... In addition, Mr. McLarty and some business associates that include Mr. Kimball are involved in a separate partnership that advises large corporate clients and a handful of private equity firms.
But like many mining operations around the world, Freeport's Grasberg operation has been both a benefit and a source of controversy. Similar to the political history of Papua itself, Freeport's more than 32 years resource-extraction always attracts political maneuvers, at local, national, and global levels.
That's why it is important to understand the political history of Papua first.
On december 27, 1949, following a prolonged struggle, the Netherlands ceded independence to its former territories, except West New Guinea (then named Irian Jaya and now called Papua). The agreement specifies that "the question of the political status of New Guinea be determined through negotiations" between Netherlands and Indonesia within a year of the transfer of sovereignty.
For more than a decade after the agrement, Papua's legal status remained in limbo until the United States (during Kennedy Administration) placed heavy pressure on the Netherland and brokered an agreement transfering administrative authority for West New Guinea from the Dutch to the United Nations (UN) in what popularly known as New York Agreement.
Abigail Abrash from Harvard Law Shool Human Rights Program) in Papua: Another East Timor? called the US central role in brokering New York Agreement as the start of Washington's complicity with Indonesia's domination of Papua. That complicity, Abrash wrote, continues through an effective disregard for Indonesia's massive human rights violations and by direct support for US corporate ventures in Papua that degrade the environment and undermine Papuans' livelihoods.
On the other side, Papuans widely view Freeport as a foothold of Indonesian (Jakarta) control over their lands.


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Anonymous Anonymous said...

Great article. I'll keep following your commentary....thanks.


March 01, 2006 9:45 PM  

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