Kolubara mine "mired in crime and corruption"

At a press conference in January, Serbia’s energy minister Zorana Mihajlović spoke out strongly against the Kolubara mining complex, describing it as being “mired in crime and corruption” while also announcing that a thorough investigation is ongoing into corrupt practices by the Kolubara management. Bankwatch believes that this latest confirmed scandal at Kolubara should be giving the EBRD serious pause for reflection as it considers yet another loan to the Serbian electricity company EPS, heavily implicated in these latest revelations.

This article is from Issue 55 of our quarterly newsletter Bankwatch Mail

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The investigations, being carried out by a department within Serbia’s energy ministry, concern abuses related to the expropriation of properties neighbouring the mining complex. Mihajlović claimed that financial abuses committed by the managers responsible for the Kolubara complex involve millions of euros. As reported by Serbian news agency b92, a range of underhand practices have taken place in recent years, from the payment of high salaries to non-existent employees, to buying over-priced equipment, as well as using resettlement compensation to pass bloated sums of money to people close to the management.

On this latter point, Mihajlović detailed that the board managing EPS, which manages the exploitation of the Kolubara basin, paid EUR 1.2 million in compensation to one of its own members, Radoslav Savatijević, whose house was apparently one of those properties in the Vreoci municipality that needed to be relocated to make space for the expansion of mining operations.

EBRD added value at the Kolubara lignite mine

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It has emerged, though, that Savatijević’s property – not even registered in his name, a basic fact that should have disqualified him from receiving any resettlement compensation – was hugely overvalued in order to qualify for such a big payout. The house in question was somehow estimated to have the same value as dwellings of a thousand square metres in the Serbian capital Belgrade. Moreover, the EPS board member received this money while numerous other families, whose homes had been prioritised on resettlement lists, were still waiting to be offered fair alternatives and compensation.

A huge corruption scandal at Kolubara is not exactly news any more. What is new now, though, is that a government minister has opted to speak out so strongly in this case. Equally significant is the spotlighting of how corrupt practices are impacting the resettlement of communities on the mining perimeter – indeed for many years local people have been complaining about abuses and mistreatment from EPS management.

In spite of all this, the EBRD appears to be determined to continue its long-standing support for EPS.

Last summer, the EBRD approved a EUR 80 million loan to EPS for ‘environmental improvements’ at the Kolubara mining basin, a major financial commitment that will contribute to the expansion of extractive operations – and, in turn, to the burning of more lignite. This was the fourth EBRD loan to EPS since 2001, with a fifth approved subsequently and a sixth currently in the bank’s project pipeline.

Confronted last year by corruption investigations opened against numerous former EPS managers, the EBRD declared itself satisfied that the company is doing the best it can to clean up its act. In the same vein, the EBRD appears to be persuaded that EPS is trying to handle the resettlements as best it can.

Yet the strong position adopted by Serbia’s energy minister in this latest instance suggests that Kolubara’s corruption problems are far from being resolved and that the real victims of the EBRD’s support for Serbian coal have been ignored.

The EBRD often argues that even when corruption allegations descend on its clients in central and eastern Europe, it prefers to stay involved in order to exercise pressure and ensure that any such clients clean up their act.

The fact remains, however, that in all these years of EBRD loans to EPS, the company’s practices remain highly dubious. Abuses regarding resettlement continue. And there remains too the nagging suspicion that some of the uncovered financial abuses may have involved the very public development money provided by the EBRD. The EBRD should cut its losses and withdraw from Kolubara at the earliest opportunity.

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Background information on the Kolubara mine and the EBRD’s role in it is available at:
http://bankwatch.org/our-work/projects/kolubara-lignite-mine-serbia