Mittal’s Business Still Under Risk in Kazakhstan
Business and Economics, KazakhstanNo Comment
As we reported earlier, Arcelor Mittal’s enterprise in Kazakhstan has been facing severe criticism for the conditions of work on the mines. Hundreds of miners perished in repeated accidents on Mittal Steel Temirtau, but only in last year the authorities of Kazakhstan took a firm stand in this issue after a series of workers’ strikes in Karaganda region, where the enterprise facilities are based. The Emergency Agency on behalf of the government even threatened to delicense Arcelor Mittal for repeated accidents and failure to address the safety problems. According to the Kazakh law, the authorities are eligible to abrogate contracts with the subsoil users if their activity hampers national security/interests.
The company’s management responded with another row of promises to improve the situation on mines, and changed the Kazakhstan entity’s top management. Since then Lakhsmi Mittal himself several times visited Kazakhstan to negotiate the relations with the higher officials and mitigate the standoff. Earlier this month, Arcelor Mittal Temirtau undertook a commitment to invest $4 billion in the nearest 5 - 7 years into expansion of production in Kazakhstan to almost double the production of steel up to 10 million ton per year and to create 5,000 new workplaces. The government seems pleased with the plan of a “new Karmet”, but Mittal’s problems are far from being finally solved with the Kazakh authorities.
Yesterday Mittal’s company was named guilty for the recent blackout in a number of regions. The company was blamed for improper operational condition of the equipment on the company’s power facilities and unsanctioned exceeding of electricity consumption, which resulted in overcharge and blackout. Moreover, the state’s KEGOC (electric grid operating company) found violations in exploitation of the equipment - failure to ensure its readiness for the winter season, wrong setup of anti-accident automatic equipment.
Against the background of evolving resource nationalism trends in Kazakhstan and consolidation of major industries in hands of the state, the mining sector remains an attractive and lucrative piece of economy for the government. Most likely, Astana will continue to keep record of violations - environmental, safety, tax etc. - to be able to charge the company once the moment for nationalization should come.
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