U.S.-ENVIRONMENT: U.S. agency cancels insurance for Indonesia mining project

By Pratap Chatterjee Reprint | | Print |

Pratap Chatterjee

WASHINGTON, Nov 3 1995 (IPS) - A U.S. federal agency has canceled insurance for the U.S. operator of the world’s biggest gold mine, located in Indonesia, after several reports confirmed major environmental destruction and killings of local people.

The decision has prompted calls for the World Bank to do likewise.

The Overseas Private Investment Corporation (OPIC) canceled the 100- million-dollar “political risk insurance” policy for the Grasberg mine on the western half of New Guinea operated by Freeport McMoRan, a Louisiana-based company, effective midnight on Tuesday.

The OPIC coverage was issued in 1990 for a 20-year period. It guaranteed the company’s assets against terrorism, sabotage or political volatility.

The mine was also insured under a 50-million-dollar policy executed in 1990 by the The World Bank’s Multilateral Investment Guarantee Agency (MIGA).

Freeport said Thursday OPIC had terminated the policy “because the mining operations expanded beyond the original scope.” It said the agency also “… expressed concerns about new environmental issues associated with the expansion.”

“Freeport believes that OPIC lacks a legal basis for canceling this coverage and, therefore, the coverage remains in effect. Resolution of this dispute has been submitted to arbitration,” said Greg Probst, Freeport’s official spokesman.

OPIC declined comment. “This is not the first time that we have canceled political risk insurance. We cannot comment on why we canceled the insurance,” said Alison Rosen, an OPIC spokeswoman.

Rosen told IPS that OPIC periodically reviews projects in its portfolio and contracts consultants to check up on its clients. “All the projects we insure must show that they do not negatively affect the U.S. economy, respect workers rights and meet environmental protection standards in addition to being economically viable,” she said.

The OPIC decision, which had been rumoured for two weeks, was fought by powerful lobbyists in Washington. Former Secretary of State Henry Kissinger, called the State Department to stop the cancellation, according to the Los Angeles Times. The newspaper reported that Kissinger and his consulting firm received 600,000 dollars from Freeport in 1994.

Last week, Indonesian president Suharto made a personal appeal to U.S. President Bill Clinton, when they met at the White House. While in Washington, Suharto was also feted at a dinner hosted by James Moffett, Freeport’s chief executive.

“OPIC has done the right thing. We are calling on the World Bank, which has also guaranteed Freeport’s mine, to follow their example immediately,” said Danny Kennedy, an activist with Action for Solidarity, Equality, Environment and Development (A SEED) Australia.

Kennedy’s call was backed by Andrea Durbin of Friends of the Earth USA. Others, like Lori Udall of the California-based International Rivers Network (IRN), say that this decision should act as a “wake-up call” to the company.

“We have communicated with OPIC and we are awaiting a response from them,” said Gerald West, senior adviser to MIGA, who refused to speculate on the possibility of MIGA canceling its insurance.

The Indonesian government was recently sued in Jakarta by WALHI, an Indonesian environmental group, for failing to follow national environmental laws when it issued mining permits to Freeport.

“The dumping of tailings (mining waste) into the river has caused flooding, re-routing of the rivers, destruction of the sago forests and indigenous hunting grounds,” said Emmy Hafield of WALHI at the time.

Freeport responded by sending a letter to the U.S. Agency for International Development (US AID), which funds WALHI. The letter, written by Paul Murphy of Freeport, complains about the lawsuit and the fact that WALHI is affiliated with radical environmental groups like Earth First! and Friends of the Earth.

USAID, however, approved a new grant to the group for 250,000 dollars. The agency has given about 1.1 million dollars to WALHI over the last 11 years, according to sources.

Three reports have also been issued this year on human rights abuses at the Grasberg mine. The first two were issued in April and September by the Australian Council for Overseas Aid (ACFOA). The third report, by the Indonesian government’s own human rights commission, confirmed many of the incidents cited in the ACFOA reports.

ACFOA’s first report charged that the army opened fire on a group of indigenous Amungme people who were on their way to church last Christmas day.

The September report was compiled by Herman Munninghof, the Catholic bishop of Jayapura in Irian Jaya. He found that Freeport vehicles and offices were used by the Indonesian military to transport and torture tribal leaders accused of fomenting a rebellion against Indonesia.

Freeport officials in this country say that none of their officials were involved in either incident. They refused to comment on the allegations of torture by the Indonesian military.

The area around the Freeport mine has been heavily policed by the Indonesian military and company security forces since a Freeport copper slurry pipe was blown up in 1977 by a group called Organasi Papua Merdeka (Papuan Independence Movement).

The Indonesian military allegedly retaliated by killing several thousand local people. Last year, however, the rebels renewed their protests in response to news that Freeport had signed a new agreement with the government to expand its search for gold and copper on the island.

After a peaceful demonstration last Christmas, tribal elders were summoned and then taken aboard a Freeport vehicle and tortured by soldiers in a Freeport “security cell,” according to the reports. They quote one survivor as witnessing the torture- killings of three men from Waa.

The torture and murder of indigenous villagers is allegedly still continuing. The ACFOA report says that on May 31 this year, the police surrounded and shot a group of people praying in the forest after they had tried to fell from fighting between the OPM and the army.

After interviewing 40 people, the Indonesian National Commission on Human Rights concluded last month that the killings occurred “in the framework of providing security for the mining project.”