Kandhamal : How Fourth Pillar dance with Sangha Parivar
Prof. Ashis Nandi wrote in Times of India (January, 2008) on Gujurat context, “the urban middle class has found in militant religious nationalism a new self-respect and a new virtual identity as a martial community. ….The middle class controls the media and education, which have become hate factories in recent times.” I saw approximately same in case of Orissa. Suddenly, after the killing of Laxmananda, leading media factories started spreading venom against Christian minority as if they were waiting for it. All started believing that Laxmananda was killed by ‘Christian fundamentalists’ or henchmen of them like Maoists who have taken money to kill him. What the role of media is, atleast to enquire into the incident and give a fact, did not happen in case of leading Oriya dallies. Had it been the communal hatred would not have spreaded so much.
The Samaj, the leading daily Oriya newspaper, having highest circulation in rural Orissa, wrote its editorial on 26th august, 2008 just after the killing of Laxmananda, “even if we be suspicious towards Maoists for the killing, some one must have used them in exchange of huge money. Those are spending lump some money in proselytizing tribal, it is natural that they could come under suspect.” Going one step ahead another leading Oriya news paper Dharitri wrote its editorial on 25th August “it is easy to blame Maoists for the killing of swamiji….. It is true that Graham Stain was killed for conversion where as Laxmananda was killed for checking conversion. It is sorry that people would forget Laxmananda’s contribution just after a bandh or a day.” Initially, just after the killing when some of government agencies were blaming Maoists (police DG and Home Secretary first blamed Maoists for the killing but later Naveen Patnaik, suppressing the fact, said some “miscreants” have done it) these media gave a saffron color of the incident and made the story that not the Maoists rather Christians have killed Laxmananda. This added more fuel to the fire and violence got spreaded into various parts of Orissa.
Whether any reader read the editorial or not but the correspondents and stringers of respective newspapers definitely read it to know what their respective editor wants on specific issue. Besides this, personal biasness of local media person matters a lot and they are not free from upper caste middle class biasness at least in Orissa. During this communal violence minimum constitutional rights are not respected by them. The local correspondents as a ‘martial community’ of religious nationalist forces went on reporting that Christian youths have killed Laxmananda. Later ‘Christian fundamentalists’ a category was floated ( Swamiji was in hit list of Christian fundamentalists and Maoists- Sambad, 26th August, 2008) to target the innocents. These media persons did not ask real existence of such a group.
The entire media turned a blind eye towards the plight of Christian victims. Rabindra Pradhan, whose paralysis brother was burnt alive near Chakapada ashram, could able to tell his story when he reached Bhubaneswar after a week of his brothers’ killing. He reached with his all other villagers after spending three nights in forest. Similarly, Puspanjali Panda whose husband was killed by the miscreants during the attack could able to say it after three weeks of his death. These were not the only incidents reported properly. Also Rajani Majhi, a Hindu girl who was burnt alive in Baragarh district was not reported by some of above newspapers when it was found that she was Hindu. Even infamous nun rape case got highlighted after a month of her reporting when an outside journalist came and reported it in national daily. It could have been brought by local media much earlier.
In no case the edit desk as well as local stringer showed any enthusiasm of reporting the grievous incident of communal attack and sufferings of Christian victims. They had a general reporting and were reporting how ‘communal tension spreaded into new areas’, ‘people burnt so many houses and vehicles out of anger’, ‘many people are leaving their houses and are coming to relief camps’, ‘Kandhamal violence in several districts’, ‘Kandhamal out of control’ etc as if media space was available to show the mardangi of the ‘Hindu miscreants’.
Often the state government announced sitting in Bhubaneswar “shoot-at-sight has been ordered”, “curfew has been imposed”, “law will takes its own course and no one will be spared” etc. But in reality these instructions at the village level were hardly carried out. The media did not say even after so much instructions and directions why the government agencies are failing. They did not report it that even if the violence is continuing then who are the perpetrators, how are they perpetrating, what are the slogans they are giving, how they are doing it when curfew and shoot-at-sight have been ordered etc. Rather, time and again media was trying to pinch the readers through out the violence , “violence due to killing of Laxmananda spreading”, “andolankari are moving towards villages” etc.
It never mentioned how “conversion” is taking place in name of “reconversion” in a terror state during those violence time in Kandhamal rather wrote “adivasis are coming back to Hindu religion” as if those Hindu miscreants were not doing any illegal work. The constitutional rights of a citizen was not respected.
In those tense hours several Hindu and tribal youths came in front to protect the Christian minority. Some of them were also attacked by the miscreants and some also succeeded in protecting the victim. Had it been covered by the media it would have checked the attack as well as blamed the role of miscreants involved.
Before the national minority commission comes the media was totally silent about the wretched condition in relief camps. We, as part of human rights organisations found during our visit, ‘people are forced to sit on the water logged ground. We found pigs and other animals roaming around the place where food was being cooked.’ We also warned through media that ‘there is every likelihood of infections breaking out any day’. But it was not properly covered by the media.
Where as the local media had never forgot to give front page coverage in reporting the version of Pravin Togadia, Ashok Singhal (President of VHP), Puri Hindu Maharaja and Puri Sankarachary attacking Christian minority. The media was covering it as if a mouth piece of Sangha Parivar. The local Oriya media were reporting each and every programe of RSS and Bajarang Dal condemning the killing of Laxmananda including the programe of “Laxmananda Sradhanjali committee”. But the fact finding visit report and condemnation of such attack by the secular forces were not given proper space (or a small space in a corner of any inside page) during those hours. National Human Rights commission chairman came after a month of initial attack and gave statement condemning the role of the government and its failure in checking the violence. This was covered by the media at the front page. So one can imagine well how these local media in those hours were affected by ‘militant religious nationalism’ and for a new ‘self-respect’ were bringing such story which could strengthen the hindutwa forces.
In conclusion, these prominent dailies kept on publishing reports and articles subscribing the views that (a) Maoists couldn’t have killed Laxmanananda; (b) Conversion to Christianity is at the root of Kandhamal problem; (c) Laxmananda was savior of tribal and he was involved with upliftment of tribal in truesense; (d) adivasis are Hindus and Christians are polluters in tribal land; (e) Panos (Christians) are outsiders and have taken away land from the tribal; (f) the Christians have fraudulently pocketed the benefits that are due to the tribal; (g) the tribal have become a minority in the district due to an overwhelming increase in Christian population; (g) the Christian leaders are out to give bad publicity to the State in Europe and America exaggerating the violence and even the allegation of rape of a nun is completely fabricated (g) Christian missionaries are taking lot of money from outside agencies and are engaged with proselytizing (h) ‘reconversion’ or ‘gharwapasi’ (how far it is ‘reconversion’ or conversion of Christian into Hindu religion with use of force) is essential. The media’s feeling that all Christians enemy. This was justifying the role of attackers more as if the innocent Christians in the district as well as in other parts were the master mind behind of the killing and should be punished severely.
(All these analysis are based on three Oriya news paper like Samaj, Sambad and Dharitri and their Bhubaneswar edition during August- September 2008.)
Thursday, September 17, 2009
Attack on Christians in Kandhamal
Attack on Christians in Kandhamal
Debaranjan
Swamy Laxmananda’s killing has raised many questions inside and outside Orissa. The flared-up communal violence after such killing is the basic ground for those questions. Suddenly, Christians, those comprise only 2.6% against 94% Hindus out of total population, became enemy of the majority. The poor state of economy, perennial caste conflict, regional imbalance, state repression, corporate globalization and forceful land acquisition were not the subjects of concerned rather conflict over religion - how far it is truly religion is- became the matter to be worried about for the time being in Orissa.
On 21st September, 2008 -after nearly a month of communal violence in Kandhamal- I went first time to the district and visited several affected areas where christians and their institutions were attacked. I was then part of a team comprised of various human rights organizations of different states like HRF and APCLC of Andhra Pradesh, PDF of Karnataka etc. I was interacting with the victims who took shelter in different relief camps of Tumudibandh, Baliguda, K. Nuagaon, and G.Udayagiri in Kandhamal. After that I visited the district once more and interacted with more sections of people. Then I met victims those who took shelter outside the district in Bhubaneswar, Cuttack and Brahmapur town.
Situation so volatile
Rabindra Pradhan, a dalit-christian of Rupagaon of Chakapada block was telling, “they came to our village with shouting slogans. We all went to the forest in fear but I left my younger brother Rasananda Pradhan who was a paralysis patient also. They burnt my houses and threw my brother alive into the fire and burnt him dead. I have seen them because my house was near to the forest. Most of them were of my own villagers.” Namita Digal, a dalit Christian woman of Pipudidei village of Tikabali block was telling “because of my pregnancy I could not run. All my family members ran into the forest. They were chasing us and I just hide myself inside a bush and saved myself. They burnt all our house belongings. Our own village people and nearby did this burning.” In fact, the tribals and dalits went to burn the houses of tribals and dalits of the same village or nearby in most of the cases in Kandhamal. Tribal-Christians were not spared from such attack by same tribals also. Galiyat Pradhan, a tribal- christians of Tiangia village near Raikia was telling “when they attacked our houses we ran away. I lost my son Sachinjit (8yrs) in the forest and got him after three days.”
Then can we say what happened in name of retaliation to killing of Swamy Laxmananda was just “spontaneous reaction” what often we heard from various sources? Or can we say it is just a conflict between Pano - dalit and kondh - tribals what government of Orissa has started saying? If it is really spontaneous then why no immediate violence did happen near Jaleshpeta ashram where Swamiji was killed, not much even in Kotagada block rather it happened more in northern part of the district, that is, between Baliguda to Chakapada block (Raikia, Tikabali, G. Udayagir, Paburia, K.Nuagaon, Barakhama, and Baliguda area) of the district? If it is just conflict between two communities like Dalit verses tribals then why tribals were attacked by tribals then?
Ranimati Digal, an anganwadi helper of Dolikia of Raikia; Sabita Prasad of Rudangia of G.Udayagiri and many others were telling “they were coming shouting slogans like ‘jay sri ram’, ‘jay bajarang bali’, ‘jay hindu rastra’, ‘kill christans’ etc. They had lathis, spade, petrol, diesel and few guns also. In this communal violence the northern part of the Kandhamal district was largely affected. The bigger relief camps were set up at Raikia, Tikabali, G. Udayagir, Paburia and Baliguda inside Kandhamal. At some places two relief camps were simultaneously running. Many Christian families left their houses when they were attacked or listened that they would be attacked and came to relief camps. Namita Digal was telling they spent two days and two nights before reaching the relief camps.
Manoj Digal, a dalit-christian of Raikia has an immediate answer of my question ‘why such violence happened more in northern part of the district’. He was telling “most of the Bajrang Dal/RSS chiefs of the district are belong to Baliguda, Raikia, G. Udayagir and Tikabali which happens to be the bigger trading center of the district.” After delimitation happened, Phulbani MP constituency has become general now. One trader, aspirant for the BJP ticket and was closer to Swamiji, organized such attack in some cases what he was telling me. But I was not convinced with his immediate reply. A group of traders happens to be the member of Sangha Parivar can not organize such attack on Christians with help of local tribal and dalits unless there is a similar voice in among them who went and destroyed the houses of same villagers.
Actually, the news of Swami Laxmananda’s killing by Maoists on 23rd August, 2008 at Jaleshpeta ashram near Kotagada (southern part of Kandhamal) spreaded like wildfire. In the same night just after the incident Naveen Patnaik, the chief minister said “some miscreants” have done this killing though he was aware of it that Maoists had done it. Earlier for every small incident in Orissa, Maoists were blamed by the government. Even when Jaswant Singh, IPS (then southern DIG of police) was killed by his own security men in 2007 initially Government of Orissa said “Maoists have done it’” and started combing operation in Rayagada district. But in this case knowing the fact that Maoists had left leaflet at the killing site and had faxed Press Release to various news offices claiming such killings, Government of Orissa did not accept it in public and media helped the government to spread. The way thing was organized against Christian minority it speaks about organized collusion of bureaucracy, police and media with ruling political bosses to do this attack.
This was immediately planned by the government and its partners including all its machineries, so that, the people’s anger could be directed towards minorities. Swamiji’s dead body was taken with much procession from Jaleshpeta ashram and traveled half of the district next day- 24th August- and covered the places like Baliguda, K Nuagaon, G. Udayagiri, Raikia, Paburia, Tikabali and Phulbani etc without any objection by the district administration and police in spite of section 144 in entire district and curfew in above towns were imposed since the day of killing. The district administration and police also permitted Pravin Togadia, self proclaimed international secretary of Viswa Hindu Parishad or VHP (VHP have not gone for election since its formation) to participate in the funeral procession. They were silent spectator of Togadia’s inflammatory speech against christian minority at the funeral site. All these callousness in part of district administration and police happened definitely in consent of the political bosses. (Naveen Patnaik, the chief minister also looks after the home ministry.) The communal assault on minority broke out from 25th August.
Swethu Nayak, a pastor of K.Nuagoan said “nearly 2000 people gathered at the K.Nuagoan market on 24th August noon time to receive Swamiji’s dead body. Suddenly news came that four Christian youths were caught by Raikia police with bible in their hands who have killed Swamiji. Then entire mob came towards our Christian pada and on that day burnt prayer halls. Then next day (on 25th August) again they came and burnt our houses”.
The armed police were telling to the victims, “we have guns but bullets are in hands of Naveen Patnaik”. The local victims of interior villages were praising before us the role of Rapid Action Forces (RAF) deployed in selected areas of the district but were condemning the role of state armed police. Dedhacharan Nayak, a dalit-christian of Baliguda town was telling “I phoned to the police station and immediately seven armed police men came to our pada. There was curfew in the town but 50-60 people came to attack us on 25th August. Only 10-12 women were with the mob who blocked the police and then police left the area”. Sajjit Nayak of Raikia town was telling a similar experience also when he approached the local police. He was telling how RAF came in rescue of them.
Just after two days of killing of the Swamiji - 25 August - the BJP gave a call of Orissa Bandh and communal assault on minority started in almost eight districts out of thirty districts of Orissa. It continued for some days in some parts of Subarnapur, Baragada, Koraput, Nabarangpur, Kalahandi, Gajapati, Bolangir and Rayagada districts but it continued up to end of November, 2008 in Kandhamal district only. The three months long communal violence took nearly 50 lives, destroyed 5000 houses and hundreds of religious institutions, made nearly 40,000 people displaced from their homes, out of this nearly 25000 people went to various relief camps and rest of the people went outside of the district. By the time I started visiting to the relief camps most of the landless Christian families had already left for Keral, Andhra Pradesh and Karnatak in search of work.
Motivation behind violence
It is said that conversion, fake certificates to dalit-christians in name of SCs and grabbing of tribal land by dalits are the reasons behind such attack. If it is true then why it happened on this occasion? Swami Laxmananda had never raised his voices against such issues except conversion. What is true is that in such areas of Baliguda, K Nuagaon, G. Udayagiri, Raikia, Paburia, Tikabali and Phulbani, Swami Laxmananda had largest followers. Sivaram Digal, a hindu-dalit of Katingia of G. Udayagiri was telling “before swamy Laxmananda came to our area we were poor. Under his guidance we improved a lot. I personally was a student of his Chakapada school and left after two years of study. But I was traveling with Swamiji and was telling our dalit and tribals brothers and sisters not to leave our religion. India is a hindu rastra and hindus only can stay here.” He was giving logic of recent violence, “christians killed our Swamiji and that became intolerable for most of the hindus (both dalits and tribals). So majority people came to the street and reacted”.
Swami Laxmananda came to Chakapada in northern part of Kandhamal district (then it was called as Phulbani) in 1969 and started an ashram and a school there. He was rather deputed by RSS to Phulbani with Raghunath Sethi, a Pracharak to check conversion and check missionary activities in the area. (1) From his beginning he was targeting tribals of the area. He was traveling each and every village of these areas and was participating in each and every function of the local community. Later he opened Jaleshpeta ashram in Kotagada area.
The tribal of the area were late entrants into hindutwa fold also like to Christianity. Bijay Pradhan, a tribal youth of Raikia who was earlier with RSS but left the organization was telling “RSS was organizing sakhas. I had helped to start some sakhas also. Swamiji with help of us were organizing satsang, yajna, and bhajan mandalis in tribal villages and was attracting tribals toward hindutwa. Tribals do say tribals when one asks about their caste and they say hindu when one asks them about their religion. Swamiji had taught this to them.” Ranimati Digal was alleging “ tribals in my village are now observing hindu festivals and have forgotten their own festivals. These tribals participated in looting of our houses”. On the other hand most of the tribal – christians to whom I met were telling “our fore-fathers were believing Dharanipenu ( tribal god) but now a days we have left our festivals and are doing X’mas or some of us are also observing hindu rituals like sankrati, ekadasi etc.”
Krushna Majhi, one of the tribal leaders of the area and who was also president of tribal forum ‘Kui Samaj’ said “untouchability was more in these communally affected northern part of Kandhamal areas. Dalits because of untouchability practices got attracted more towards christianity. Tribals of the same area also identified more with Hindu religion”. Not only Laxmananda but also Gayatri cult might have played a role behind such hinduisation. Gayatri cult, which is not critical about casteism rather speaks that a dalit and a tribal can be a Brahmin and perform yajna (but to leave drinking liquor and eating beef) is equally acceptable in the area. I saw few tribal devotees of gayatri who have been observing it for some decades.
Krushna Majhi also was telling “tribals on southern part of the district like Kotagada, Tumudibandh, Daringbadi and Brahmanigaon area were more taking beef as their age old practices and they did not find difficulty with Christianity. But tribal of the northern area are identified more with Hindu religion because beef eating was not a practice in those areas.” This is why communal assault on Christians was less in southern part than in the northern side of the district.
But why so much hatred of hindu community towards christians? Salunga Pradhan, the previous MLA of G Udayagiri when revealed this fact to me that Swamiji was provoking the audiences in dharma satsang such as, “Who can throw a stone on a church raise your hand”, “Who can burn a bible lift up your hand” and was propagating the idea that ‘only if one is part of VHP, then could be safe’, I was surprised. I crosschecked his allegation on Swamiji at every where and I got the same answer. I was surprised because it had never come in the media. Swamiji then started provoking ‘hindu-majority’ followers in Kandhamal to attack the minority. In Kandhamal and more particularly in those areas where he was frequently visiting, hatred against churches and christian minorities were growing more which came into culmination in August (2008) attack. I could understand the anger of Swamiji who feels powerful because he himself belongs to the brahmanic-hindu majority (he himself is a dalit from a dhobi or washer man community) but I could not understand why local tribal identified more with such powerful majority and came in hate against his own villagers unless and until there is a conflicting relationship between both the identification.
Manoj Digal of Raikia was giving a brief history of such attack in past on christians in the district. He was telling “whenever Swamiji was conducting a program in Kandhamal, there was bound to be some random stone pelting on churches around that area.” Such attacks on Christian religious institutions in Kandhamal district happened earlier like at Raikia (1986), Baliguda (1986), Daringbadi (1986), Simonbadi (1987), Baliguda (1989), G.Udayagiri (1999) where either church or Christian religious leader or both were attacked.(2) The hatred had been finely brewed by the Hindu right wing for almost two decades now. The death of the Swamiji only acted as the immediate spark in an already volatile Kandhamal and left many questions unanswered.
Kandhamal, why a soft target
Kandhamal comes under eastern hill range of India. Its demographic picture speaks, more than half of the population are tribals (52%) who are mainly of kondh tribe. Besides them, dalits are of 16% of the total population and among them Pano community are the majority. Rest of the population are trading community and upper caste people who migrated to the districts for trading and other purposes from the coastal area in recent past. Few of them are retired government officials who settled in Kandhamal.
By and large, dalits and tribals in Kandhamal stay together in interior villages of the district where as other castes like General caste and trading community (few Other Backward Castes also) in comparatively small number live with dalits and tribals in road side villages. Most upper caste trading people prefer to stay in small village towns like Raikia, G Udayagir, Baliguda, and Tikabali - local trading centers. Turmeric cultivation and sal-leaf collection are the prominent agriculture as well as forest economy of the district apart from rice and vegetables. The Tribal Development Cooperative Corporations (TDCC) in Baliguda, Tikabali towns for forest produces; Regional Marketing Centers (RMC) opened in Tikabali, Raikia, G. Udayagiri for agricultural products like turmeric to help local tribals became defunct and traders of the area took these businesses into their hands. That developed a nexus of hoarding, distress sale by traders in connivance with government officials.
Kandhamal is one of the most backward districts in terms of infrastructure, electricity and civic amenities. Human Development Report 2004, Government of Orissa speaks Kandhamal district ranks as 29 under Human Development Index (HDI), 30 under Health Index Rank and 23 under Education Index Rank. Orissa has thirty districts now. The intervention of christian missionaries for one hundred and fifty years and entry of hindutwa for fifty years ‘for upliftment of tribals and dalits’ did not do much change in the development atlas of the district. Rather traders, politicians and government officials are ruling the rust. The upper caste, upper and middle class hindu and their economic, political and cultural leaders, in fact with the active support of the state and administrative machinery and political parties are stimulating a cultural climate which encourages a value system which strengthens the prejudices against the lower classes and non-hindus. (3). They made non-hindus and lower class community into victims of their own value system. Swamiji’s main supporters in the areas were these local traders and government officials who belong to the upper caste and upper middle class. Their ‘value system’ of hindu-brahmanic ideology is to hide their won corrupt practices and to propagate religious hatredness (which we have been seeing for centuries together) against the religious minority. The role of these people behind this communal attack who have their link with higher echelons both in among political as well as in administrative and media circle, is definitely suspicious.
My assumption in Kandhamal would have been wrong had I not been enquiring about the last year’s (2007) incident. Communal riot happened during X’mas days (December) in 2007 when rumor spreaded that Swamiji was attacked by minority christians at Dasingbabdi near Bahmanigaon in Kandhamal. It was a pre-planned effort of Hindutwa forces to disturb the festival. Then, group classes happened at two places. Upper caste local traders who happened to be the supporter of Swamiji went and burnt Christian houses shouting slogans like “kill the Christians; destroy the churches” at Bahmanigaon. They burnt 30 houses at Bahmanigaon and in retaliation also Hindu traders’ houses were burnt (who did this burning is a matter of confusion now even today). Also in Barakhama near Baliguda, group clashes happened in the same reaction and nearly 60 houses were burnt. In both these incidents police came into picture and went on firing. Due to police firing four people died. At several places in Kandhamal churches were attacked but it was not much sever as like in August, 2008.
Maoists’ factor
It is learnt that the CPI (Maoists) group were not active in Kandhamal earlier to this incident but they were trying to expand their areas. But why they targeted Swamiji? Rajendra Bastaray of Tumudibandh was telling “there was no discussion about role of hindutwa forces by the Maoists in the district prior to the killing”. It must not have been Maoists apprehension that entire Christian minority people would be attacked for this killing. But it is also true that in reality they also failed to check such attack. It speaks their negligible presence in the district. But surprisingly, these ‘ultra Marxists’ like Maoists who till date were recognizing only ‘proletariat identity’ for ‘workers’ socialism’, now have come in support of ‘tribal identity’. (“Tribal are not hindus and not Christians. They have their own cultures which should be protected.”- Maoist’s Oriya magazine ‘inquilab’ speaks). Are they really interested for protection of ‘tribal identity’ for their ‘proletariat socialism’? Are they not killing tribal in name of police informer rather leaving it to the entire community to decide? One’s, respect to tribal identity and ignoring the role of tribal community, can not go together. Are not they using such for their own expansion?
In the mean time Maoists have killed another local VHP person Dhanu Pradhan at Daringbadi in December, 2008. He had a role behind such attack on christians what they are telling. But can such killing bring peace and harmony in the district? Can it water down the religious hatredness growing between both communities? Will it not force the paramilitary forces to be stationed permanently or to create another Salwa Judum like situation for the protection of these traders cum hindutwa forces? If this happens then there is no doubt that those tribal- sympathizers of Swamiji- would be the members of Salwa Judum and this would bring serious problem to the area.
I know the future of the district is very much uncertain but its present is not so much hopeless. Dandapani Mallick, a tribal leader of Damikia near Baliguda moved around four villages with village committee members and stopped the entry of hindutwa forces inside the villages. By this way he was able to save some christian families. He himself did not belong to Christians nor Hindus rather claims himself as tribal. Several tribal youths of Kotagada, Brahmanigaon and Tumudibandh area spontaneously came forward and moved around their own villages and stopped violence. They are the real hope of solving the tragedy.
References
1. RSS’s Tryst with Politics by Pralay Kanungo
2. Faith Under Fire by JPDC Bhubaneswar (2008)
3. Communal riots in post – independence India by Asghar Ali Engineer
**************
ADDRESS
DEBARANJAN
A-202
SONALI PALACE
SAILASHRI VIHAR, BHUBANESWAR- 751021, ORISSA
E mail : debasar11@yahoo.co.in
Debaranjan
Swamy Laxmananda’s killing has raised many questions inside and outside Orissa. The flared-up communal violence after such killing is the basic ground for those questions. Suddenly, Christians, those comprise only 2.6% against 94% Hindus out of total population, became enemy of the majority. The poor state of economy, perennial caste conflict, regional imbalance, state repression, corporate globalization and forceful land acquisition were not the subjects of concerned rather conflict over religion - how far it is truly religion is- became the matter to be worried about for the time being in Orissa.
On 21st September, 2008 -after nearly a month of communal violence in Kandhamal- I went first time to the district and visited several affected areas where christians and their institutions were attacked. I was then part of a team comprised of various human rights organizations of different states like HRF and APCLC of Andhra Pradesh, PDF of Karnataka etc. I was interacting with the victims who took shelter in different relief camps of Tumudibandh, Baliguda, K. Nuagaon, and G.Udayagiri in Kandhamal. After that I visited the district once more and interacted with more sections of people. Then I met victims those who took shelter outside the district in Bhubaneswar, Cuttack and Brahmapur town.
Situation so volatile
Rabindra Pradhan, a dalit-christian of Rupagaon of Chakapada block was telling, “they came to our village with shouting slogans. We all went to the forest in fear but I left my younger brother Rasananda Pradhan who was a paralysis patient also. They burnt my houses and threw my brother alive into the fire and burnt him dead. I have seen them because my house was near to the forest. Most of them were of my own villagers.” Namita Digal, a dalit Christian woman of Pipudidei village of Tikabali block was telling “because of my pregnancy I could not run. All my family members ran into the forest. They were chasing us and I just hide myself inside a bush and saved myself. They burnt all our house belongings. Our own village people and nearby did this burning.” In fact, the tribals and dalits went to burn the houses of tribals and dalits of the same village or nearby in most of the cases in Kandhamal. Tribal-Christians were not spared from such attack by same tribals also. Galiyat Pradhan, a tribal- christians of Tiangia village near Raikia was telling “when they attacked our houses we ran away. I lost my son Sachinjit (8yrs) in the forest and got him after three days.”
Then can we say what happened in name of retaliation to killing of Swamy Laxmananda was just “spontaneous reaction” what often we heard from various sources? Or can we say it is just a conflict between Pano - dalit and kondh - tribals what government of Orissa has started saying? If it is really spontaneous then why no immediate violence did happen near Jaleshpeta ashram where Swamiji was killed, not much even in Kotagada block rather it happened more in northern part of the district, that is, between Baliguda to Chakapada block (Raikia, Tikabali, G. Udayagir, Paburia, K.Nuagaon, Barakhama, and Baliguda area) of the district? If it is just conflict between two communities like Dalit verses tribals then why tribals were attacked by tribals then?
Ranimati Digal, an anganwadi helper of Dolikia of Raikia; Sabita Prasad of Rudangia of G.Udayagiri and many others were telling “they were coming shouting slogans like ‘jay sri ram’, ‘jay bajarang bali’, ‘jay hindu rastra’, ‘kill christans’ etc. They had lathis, spade, petrol, diesel and few guns also. In this communal violence the northern part of the Kandhamal district was largely affected. The bigger relief camps were set up at Raikia, Tikabali, G. Udayagir, Paburia and Baliguda inside Kandhamal. At some places two relief camps were simultaneously running. Many Christian families left their houses when they were attacked or listened that they would be attacked and came to relief camps. Namita Digal was telling they spent two days and two nights before reaching the relief camps.
Manoj Digal, a dalit-christian of Raikia has an immediate answer of my question ‘why such violence happened more in northern part of the district’. He was telling “most of the Bajrang Dal/RSS chiefs of the district are belong to Baliguda, Raikia, G. Udayagir and Tikabali which happens to be the bigger trading center of the district.” After delimitation happened, Phulbani MP constituency has become general now. One trader, aspirant for the BJP ticket and was closer to Swamiji, organized such attack in some cases what he was telling me. But I was not convinced with his immediate reply. A group of traders happens to be the member of Sangha Parivar can not organize such attack on Christians with help of local tribal and dalits unless there is a similar voice in among them who went and destroyed the houses of same villagers.
Actually, the news of Swami Laxmananda’s killing by Maoists on 23rd August, 2008 at Jaleshpeta ashram near Kotagada (southern part of Kandhamal) spreaded like wildfire. In the same night just after the incident Naveen Patnaik, the chief minister said “some miscreants” have done this killing though he was aware of it that Maoists had done it. Earlier for every small incident in Orissa, Maoists were blamed by the government. Even when Jaswant Singh, IPS (then southern DIG of police) was killed by his own security men in 2007 initially Government of Orissa said “Maoists have done it’” and started combing operation in Rayagada district. But in this case knowing the fact that Maoists had left leaflet at the killing site and had faxed Press Release to various news offices claiming such killings, Government of Orissa did not accept it in public and media helped the government to spread. The way thing was organized against Christian minority it speaks about organized collusion of bureaucracy, police and media with ruling political bosses to do this attack.
This was immediately planned by the government and its partners including all its machineries, so that, the people’s anger could be directed towards minorities. Swamiji’s dead body was taken with much procession from Jaleshpeta ashram and traveled half of the district next day- 24th August- and covered the places like Baliguda, K Nuagaon, G. Udayagiri, Raikia, Paburia, Tikabali and Phulbani etc without any objection by the district administration and police in spite of section 144 in entire district and curfew in above towns were imposed since the day of killing. The district administration and police also permitted Pravin Togadia, self proclaimed international secretary of Viswa Hindu Parishad or VHP (VHP have not gone for election since its formation) to participate in the funeral procession. They were silent spectator of Togadia’s inflammatory speech against christian minority at the funeral site. All these callousness in part of district administration and police happened definitely in consent of the political bosses. (Naveen Patnaik, the chief minister also looks after the home ministry.) The communal assault on minority broke out from 25th August.
Swethu Nayak, a pastor of K.Nuagoan said “nearly 2000 people gathered at the K.Nuagoan market on 24th August noon time to receive Swamiji’s dead body. Suddenly news came that four Christian youths were caught by Raikia police with bible in their hands who have killed Swamiji. Then entire mob came towards our Christian pada and on that day burnt prayer halls. Then next day (on 25th August) again they came and burnt our houses”.
The armed police were telling to the victims, “we have guns but bullets are in hands of Naveen Patnaik”. The local victims of interior villages were praising before us the role of Rapid Action Forces (RAF) deployed in selected areas of the district but were condemning the role of state armed police. Dedhacharan Nayak, a dalit-christian of Baliguda town was telling “I phoned to the police station and immediately seven armed police men came to our pada. There was curfew in the town but 50-60 people came to attack us on 25th August. Only 10-12 women were with the mob who blocked the police and then police left the area”. Sajjit Nayak of Raikia town was telling a similar experience also when he approached the local police. He was telling how RAF came in rescue of them.
Just after two days of killing of the Swamiji - 25 August - the BJP gave a call of Orissa Bandh and communal assault on minority started in almost eight districts out of thirty districts of Orissa. It continued for some days in some parts of Subarnapur, Baragada, Koraput, Nabarangpur, Kalahandi, Gajapati, Bolangir and Rayagada districts but it continued up to end of November, 2008 in Kandhamal district only. The three months long communal violence took nearly 50 lives, destroyed 5000 houses and hundreds of religious institutions, made nearly 40,000 people displaced from their homes, out of this nearly 25000 people went to various relief camps and rest of the people went outside of the district. By the time I started visiting to the relief camps most of the landless Christian families had already left for Keral, Andhra Pradesh and Karnatak in search of work.
Motivation behind violence
It is said that conversion, fake certificates to dalit-christians in name of SCs and grabbing of tribal land by dalits are the reasons behind such attack. If it is true then why it happened on this occasion? Swami Laxmananda had never raised his voices against such issues except conversion. What is true is that in such areas of Baliguda, K Nuagaon, G. Udayagiri, Raikia, Paburia, Tikabali and Phulbani, Swami Laxmananda had largest followers. Sivaram Digal, a hindu-dalit of Katingia of G. Udayagiri was telling “before swamy Laxmananda came to our area we were poor. Under his guidance we improved a lot. I personally was a student of his Chakapada school and left after two years of study. But I was traveling with Swamiji and was telling our dalit and tribals brothers and sisters not to leave our religion. India is a hindu rastra and hindus only can stay here.” He was giving logic of recent violence, “christians killed our Swamiji and that became intolerable for most of the hindus (both dalits and tribals). So majority people came to the street and reacted”.
Swami Laxmananda came to Chakapada in northern part of Kandhamal district (then it was called as Phulbani) in 1969 and started an ashram and a school there. He was rather deputed by RSS to Phulbani with Raghunath Sethi, a Pracharak to check conversion and check missionary activities in the area. (1) From his beginning he was targeting tribals of the area. He was traveling each and every village of these areas and was participating in each and every function of the local community. Later he opened Jaleshpeta ashram in Kotagada area.
The tribal of the area were late entrants into hindutwa fold also like to Christianity. Bijay Pradhan, a tribal youth of Raikia who was earlier with RSS but left the organization was telling “RSS was organizing sakhas. I had helped to start some sakhas also. Swamiji with help of us were organizing satsang, yajna, and bhajan mandalis in tribal villages and was attracting tribals toward hindutwa. Tribals do say tribals when one asks about their caste and they say hindu when one asks them about their religion. Swamiji had taught this to them.” Ranimati Digal was alleging “ tribals in my village are now observing hindu festivals and have forgotten their own festivals. These tribals participated in looting of our houses”. On the other hand most of the tribal – christians to whom I met were telling “our fore-fathers were believing Dharanipenu ( tribal god) but now a days we have left our festivals and are doing X’mas or some of us are also observing hindu rituals like sankrati, ekadasi etc.”
Krushna Majhi, one of the tribal leaders of the area and who was also president of tribal forum ‘Kui Samaj’ said “untouchability was more in these communally affected northern part of Kandhamal areas. Dalits because of untouchability practices got attracted more towards christianity. Tribals of the same area also identified more with Hindu religion”. Not only Laxmananda but also Gayatri cult might have played a role behind such hinduisation. Gayatri cult, which is not critical about casteism rather speaks that a dalit and a tribal can be a Brahmin and perform yajna (but to leave drinking liquor and eating beef) is equally acceptable in the area. I saw few tribal devotees of gayatri who have been observing it for some decades.
Krushna Majhi also was telling “tribals on southern part of the district like Kotagada, Tumudibandh, Daringbadi and Brahmanigaon area were more taking beef as their age old practices and they did not find difficulty with Christianity. But tribal of the northern area are identified more with Hindu religion because beef eating was not a practice in those areas.” This is why communal assault on Christians was less in southern part than in the northern side of the district.
But why so much hatred of hindu community towards christians? Salunga Pradhan, the previous MLA of G Udayagiri when revealed this fact to me that Swamiji was provoking the audiences in dharma satsang such as, “Who can throw a stone on a church raise your hand”, “Who can burn a bible lift up your hand” and was propagating the idea that ‘only if one is part of VHP, then could be safe’, I was surprised. I crosschecked his allegation on Swamiji at every where and I got the same answer. I was surprised because it had never come in the media. Swamiji then started provoking ‘hindu-majority’ followers in Kandhamal to attack the minority. In Kandhamal and more particularly in those areas where he was frequently visiting, hatred against churches and christian minorities were growing more which came into culmination in August (2008) attack. I could understand the anger of Swamiji who feels powerful because he himself belongs to the brahmanic-hindu majority (he himself is a dalit from a dhobi or washer man community) but I could not understand why local tribal identified more with such powerful majority and came in hate against his own villagers unless and until there is a conflicting relationship between both the identification.
Manoj Digal of Raikia was giving a brief history of such attack in past on christians in the district. He was telling “whenever Swamiji was conducting a program in Kandhamal, there was bound to be some random stone pelting on churches around that area.” Such attacks on Christian religious institutions in Kandhamal district happened earlier like at Raikia (1986), Baliguda (1986), Daringbadi (1986), Simonbadi (1987), Baliguda (1989), G.Udayagiri (1999) where either church or Christian religious leader or both were attacked.(2) The hatred had been finely brewed by the Hindu right wing for almost two decades now. The death of the Swamiji only acted as the immediate spark in an already volatile Kandhamal and left many questions unanswered.
Kandhamal, why a soft target
Kandhamal comes under eastern hill range of India. Its demographic picture speaks, more than half of the population are tribals (52%) who are mainly of kondh tribe. Besides them, dalits are of 16% of the total population and among them Pano community are the majority. Rest of the population are trading community and upper caste people who migrated to the districts for trading and other purposes from the coastal area in recent past. Few of them are retired government officials who settled in Kandhamal.
By and large, dalits and tribals in Kandhamal stay together in interior villages of the district where as other castes like General caste and trading community (few Other Backward Castes also) in comparatively small number live with dalits and tribals in road side villages. Most upper caste trading people prefer to stay in small village towns like Raikia, G Udayagir, Baliguda, and Tikabali - local trading centers. Turmeric cultivation and sal-leaf collection are the prominent agriculture as well as forest economy of the district apart from rice and vegetables. The Tribal Development Cooperative Corporations (TDCC) in Baliguda, Tikabali towns for forest produces; Regional Marketing Centers (RMC) opened in Tikabali, Raikia, G. Udayagiri for agricultural products like turmeric to help local tribals became defunct and traders of the area took these businesses into their hands. That developed a nexus of hoarding, distress sale by traders in connivance with government officials.
Kandhamal is one of the most backward districts in terms of infrastructure, electricity and civic amenities. Human Development Report 2004, Government of Orissa speaks Kandhamal district ranks as 29 under Human Development Index (HDI), 30 under Health Index Rank and 23 under Education Index Rank. Orissa has thirty districts now. The intervention of christian missionaries for one hundred and fifty years and entry of hindutwa for fifty years ‘for upliftment of tribals and dalits’ did not do much change in the development atlas of the district. Rather traders, politicians and government officials are ruling the rust. The upper caste, upper and middle class hindu and their economic, political and cultural leaders, in fact with the active support of the state and administrative machinery and political parties are stimulating a cultural climate which encourages a value system which strengthens the prejudices against the lower classes and non-hindus. (3). They made non-hindus and lower class community into victims of their own value system. Swamiji’s main supporters in the areas were these local traders and government officials who belong to the upper caste and upper middle class. Their ‘value system’ of hindu-brahmanic ideology is to hide their won corrupt practices and to propagate religious hatredness (which we have been seeing for centuries together) against the religious minority. The role of these people behind this communal attack who have their link with higher echelons both in among political as well as in administrative and media circle, is definitely suspicious.
My assumption in Kandhamal would have been wrong had I not been enquiring about the last year’s (2007) incident. Communal riot happened during X’mas days (December) in 2007 when rumor spreaded that Swamiji was attacked by minority christians at Dasingbabdi near Bahmanigaon in Kandhamal. It was a pre-planned effort of Hindutwa forces to disturb the festival. Then, group classes happened at two places. Upper caste local traders who happened to be the supporter of Swamiji went and burnt Christian houses shouting slogans like “kill the Christians; destroy the churches” at Bahmanigaon. They burnt 30 houses at Bahmanigaon and in retaliation also Hindu traders’ houses were burnt (who did this burning is a matter of confusion now even today). Also in Barakhama near Baliguda, group clashes happened in the same reaction and nearly 60 houses were burnt. In both these incidents police came into picture and went on firing. Due to police firing four people died. At several places in Kandhamal churches were attacked but it was not much sever as like in August, 2008.
Maoists’ factor
It is learnt that the CPI (Maoists) group were not active in Kandhamal earlier to this incident but they were trying to expand their areas. But why they targeted Swamiji? Rajendra Bastaray of Tumudibandh was telling “there was no discussion about role of hindutwa forces by the Maoists in the district prior to the killing”. It must not have been Maoists apprehension that entire Christian minority people would be attacked for this killing. But it is also true that in reality they also failed to check such attack. It speaks their negligible presence in the district. But surprisingly, these ‘ultra Marxists’ like Maoists who till date were recognizing only ‘proletariat identity’ for ‘workers’ socialism’, now have come in support of ‘tribal identity’. (“Tribal are not hindus and not Christians. They have their own cultures which should be protected.”- Maoist’s Oriya magazine ‘inquilab’ speaks). Are they really interested for protection of ‘tribal identity’ for their ‘proletariat socialism’? Are they not killing tribal in name of police informer rather leaving it to the entire community to decide? One’s, respect to tribal identity and ignoring the role of tribal community, can not go together. Are not they using such for their own expansion?
In the mean time Maoists have killed another local VHP person Dhanu Pradhan at Daringbadi in December, 2008. He had a role behind such attack on christians what they are telling. But can such killing bring peace and harmony in the district? Can it water down the religious hatredness growing between both communities? Will it not force the paramilitary forces to be stationed permanently or to create another Salwa Judum like situation for the protection of these traders cum hindutwa forces? If this happens then there is no doubt that those tribal- sympathizers of Swamiji- would be the members of Salwa Judum and this would bring serious problem to the area.
I know the future of the district is very much uncertain but its present is not so much hopeless. Dandapani Mallick, a tribal leader of Damikia near Baliguda moved around four villages with village committee members and stopped the entry of hindutwa forces inside the villages. By this way he was able to save some christian families. He himself did not belong to Christians nor Hindus rather claims himself as tribal. Several tribal youths of Kotagada, Brahmanigaon and Tumudibandh area spontaneously came forward and moved around their own villages and stopped violence. They are the real hope of solving the tragedy.
References
1. RSS’s Tryst with Politics by Pralay Kanungo
2. Faith Under Fire by JPDC Bhubaneswar (2008)
3. Communal riots in post – independence India by Asghar Ali Engineer
**************
ADDRESS
DEBARANJAN
A-202
SONALI PALACE
SAILASHRI VIHAR, BHUBANESWAR- 751021, ORISSA
E mail : debasar11@yahoo.co.in
Behind the Shining: Aluminum's Dark Side
Behind the Shining: Aluminum's Dark Side
An IPS/SEEN/TNI report
2001
I. Table of contents
II. Executive Summary
III. Aluminum production infrastructure
IV. Corporate control
V. Multilateral and bilateral financial institutions' support
VI. Human rights
1. Impact of bauxite mining on indigenous peoples
Sidebar: The impending death of Mulanje Mountain
2. Aluminum wars (Tajikistan, Sierra Leone, etc.)
3. Workers rights and dirty industry migration
VII. Environmental health
1. Cancer in beluga whales
2. Impact of emissions on workers and communities
a. Coal tar fumes and PAH
b. Fluoride
c. Red Mud
d. Other emissions
3. Global warming
a. Perfluorocarbons
b. Carbon dioxide
c. The industrial lobby
VIII. Energy
1. Hydro
a. Great dams
b. The Pacific Northwest power war
2. Coal
3. Gas
4. Geothermal
5. Nuclear
Appendices
I. World bauxite production tables
II. World alumina refinery tables
III. World aluminum smelter tables
IV. Maps and photos
II. Executive summary
Aluminum holds a pretty positive image in the global marketplace. The
metal's shiny exterior glimmers like an antidote to its heavyweight
competitor, steel, or its lightweight, cheap-feeling counterpart, plastic. It holds this image despite the earth- and bone-shattering reality of its production.
From the devastation of some of the planet's most wondrous features, like Mulanje Mountain in Malawi and the beluga whales of Canada's St. Lawrence River, to the uncommon death rates of its employees and neighbors, to the global climactic consequences of its emissions, the aluminum industry churns a dark existence behind its shining exterior.
This report examines the global structure and social and environmental
impacts of an industry that deserves great scrutiny. Corporations engage in the mining of bauxite, the refining of alumina, and the smelting of aluminum with a reckless abandon that rivals anything done by more-infamous chemical and fossil fuel industrial forces. The industry's impacts span the spectrum of human and environmental abuse.
Corporate control
A handful of companies -- Alcoa, Alcan, Billiton and Norsk Hydro --
orchestrate most of the industry's global activity. Transnational
corporations participate in more than 60 percent of the world's bauxite
production. Alcoa alone controls more than one-third of the world's alumina production. These companies hold large stakes in each crucial step of the production cycle. Alcoa and Alcan absorbed leading competitors in the year 2000, awakening historic fears of monopolism.
Corruption and struggles (fiscal and physical) run rampant in the other
concentrated sphere of production, the countries carved from the former
Soviet Union.
Dirty Industry Migration
As with many dirty industries, production is increasingly concentrated in the global South. With energy and labor prices escalating in the
industrialized West, new capacity almost always is proposed in the
developing world.
Bilateral and multilateral development banks are helping to fuel this
industrial flight. The World Bank and national lenders have financed, or plan to back, aluminum industry infrastructure privatization or
construction projects in Armenia, Azerbaijan, Brazil, Cameroon, China,
Egypt, Ghana, Guinea, Guyana, Indonesia, India, Kazakhstan, Malawi,
Mozambique, Oman, Russia, Tajikistan, and Turkmenistan. These institutions' $4.4 billion in financial aid to developing countries mainly benefits western transnational corporations.
One multilateral government arm, the European Bank for Reconstruction and Development, even financed the export of the dirtiest type of aluminum technology -- a Soderberg smelter -- from an aging smelter in Slovakia to a new one in Iran.
Resettlement
The extraction of natural resources, aluminum's fodder, begins the
industry's ecological and human toll. While mining bauxite, lignite, and coal, and damming rivers, aluminum corporations have erased villages where tens of thousands of people once lived. Long-time residents of countless communities have been forced to move and make way for aluminum giants' new strip mines, dams and water courses.
Most bauxite mining occurs in tropical regions peopled by indigenous
communities, from northern Australia to South America to west Africa.
In the eastern Indian state of Orissa, indigenous communiities have been trying to stop the construction of the world's largest new bauxite mine and alumina refinery complex. In December 2000, police allegedly shot and killed three men who lived in a village where people refused to move out for Norsk Hydro and Alcan's Utkal project.
In Brazil, the construction of the Tucurui dam displaced more than 25,000 people. More than half of the power generated by Tucurui goes to aluminum smelters in northern Brazil. The new reservoir impacted an estimated 100,000 people who drank and fished the river and farmed along the riverbed. After the reservoir was filled in 1984, a prolific outbreak of mosquitoes forced farm families close to the new reservoir to leave their homes. The reservoir also helped to concentrate mercury discharges from upstream gold mining operations in fish tissues.
In Surinam, 6,000 people were forced to move from their ancestral
communities in the tropical rainforest to make way for an Alcoa/Billiton dam and smelter. A proposed new dam for a smelter in Sarawak, Malaysia, could force the resettlement of 10,000 indigenous people.
Dr. Kua Kia Soong, head of a non-governmental coalition in Sarawak,
wondered, "Why do we want toxic and energy-hungry industries such as
aluminum smelters? Aluminum smelting is one industry that the developed
countries want to dump on suckers like us because it is environmentally
toxic and it consumes voracious amounts of energy."
Power Hunger
Smelters aggregate around sources of cheap energy, because 45% of the cost of aluminum smelting is electricity. These factories have concentrated around the world's vastest sources of energy: massive power-producing dams, rich seams of coal, gas fields in the Middle East, and geothermal fields in Iceland.
The industry's hunger for power produces engineering marvels, tragic
disparities and ecological devastation. In places like Surinam, powerlines en route to smelters tower over new communities inhabited by indigenous people forced to move from homelands flooded by new hydroelectric dams. In small countries like Tajikistan, Bahrain, and Ghana, smelters consume a third or more of the national power supply.
Some aluminum companies have threatened to close their smelters in regions where energy prices are skyrocketing, like the Pacific Northwest. Alcan and Alcoa idled smelters in Oregon and British Columbia as prices soared in 2000 and 2001. Where aluminum producers own electricity, they have cut aluminum production to sell power to the grid when prices are high.
"More jobs will be eliminated... if the price of power is right," predicted a Canadian Auto Workers local union in December 2000.
Cheap Labor
Labor is the industry's second most costly expense. Many of the biggest
companies simultaneously increase profits and lock out restless workers. Transnationals replace lost production from shuttered smelters in the West by maximizing production at cheaper factories in places like Mozambique, where Billiton pays most workers less than 30 cents per hour. Shortly before the Mozambique smelter began production, Billiton announced plans to lay off 5,000 workers from its older and better organized smelters in South Africa.
Aluminum industry laborers, wherever they work, face severe on-the-job
health risks. Smelter potrooms are a particularly hazardous workspace. At an Alcan smelter in British Columbia, Canada, over 20 workers have been disabled by or died from on-site exposures to cancerous emissions.
Since the late 1970s, scientists have correlated elevated bladder cancer rates in smelter potroom workers. In 1989, Alcoa told an Australia newspaper that it "emphatically rejects" any such risk for smelter workers. In 1999, Alcoa finally sent warnings to thousands of its workers worldwide that "a small increase in cancer could be expected at lower levels of exposure than had previously been expected."
Ecological Toll
The industry also exacts steep tolls from surrounding communities and
ecosystems. Fluoride emissions from the Nalco smelter in India plague local villagers with brittle bones, tooth and gum diseases, and lumps of dead skin. Their cattle, more prone to fluoride contamination, commonly suffer from bone deformities and rising death rates. In one village within a kilometer of the plant, the local herd of cattle dropped from 3,000 to 100 head in a ten year period. Similar symptoms of fluorosis are apparent in villages around the world's fourth largest smelter, in Tursunzade, Tajikistan.
A Quebec, Canada, region that hosts four Alcan smelters has the highest
birth defect rate in the country. It leads the province in deaths caused by malignant tumors. Biologists have connected emissions from these smelters with cancers in beluga whales downstream in the Saint Lawrence Estuary.
Global Warming
Aluminum smelters' emissions have a truly global impact. A recent study
found that the industry emits about 1 percent of global emissions of
man-made greenhouse gases. The industry is a significant contributor to
global climate change for two reasons: (1) it consumes enormous amounts of energy, much of it fossil fuels such as coal, that release carbon dioxide when burned and (2) smelters produce small quantities of extremely potent greenhouse gases.
The aluminum production cycle generates an estimated 12 tons of carbon
dioxide per ton aluminum produced. Total carbon dioxide emissions are
predicted to rise from about 2 billion tons in 1985 to about 3 billion tons by the year 2003.
Roughly one-third of aluminum's electricity is generated by burning coal. In addition to producing carbon dioxide emissions from captive fossil fuel-fired power plants, the industry further contributes to global warming through its heavy usage of hydroelectric power. In tropical countries, where smelters have congregated around great dams, massive amounts of vegetation decay in flooded forest. Carbon dioxide and methane emissions from the new tropical reservoirs may contribute as much greenhouse gas as would a fossil fuel plant that would produce the same amount of energy, according to a recent World Commission on Dams study. Dams fuel 57% of global aluminum production.
Smelter potrooms produce the industry's other main contribution to climate change: perfluorocarbons (PFCs). Smelters are responsible for 90 percent of all tetrafluromethane, and 65 percent of all hexafluoroethane emissions worldwide. These PFCs have global warming potentials that are 6,500 to 9,200 times higher than carbon dioxide.
These and other realities did not deter the fiscal optimism of Alcoa
chairman Paul O'Neill in 1999. "I don't see environmental issues as a
negative for aluminum or Alcoa," he said. "As long as legislatures and
governing bodies don't do stupid things, we'll be fine." Mr. O'Neill is now the U.S. Secretary of Treasury under President George W. Bush.
III. Aluminum production infrastructure
The aluminum industry begins with bauxite mining. About 85 percent of all the bauxite mined worldwide is refined into alumina. More than 90 percent of refined alumina is then consumed in aluminum smelters. (Patricia Plunkert, "Bauxite and Alumina-1999," U.S. Geological Survey, 2000)
Bauxite mining is the only step in aluminum production that can not shift: the subsequent steps, refining bauxite into alumina, and turning alumina into aluminum, can and do bound across the world in search of the cheapest costs.
After the bauxite is mined at a handful of mines, aluminum oxide --
commonly called alumina - [is added] at a few dozen plants. Then, production moves on to scores of aluminum smelters, where an electrolytic process ("reduction") removes oxygen from the alumina. The resultant molten primary aluminum is then cast and shipped to fabricating plants. Generally, one ton of aluminum is produced from two tons of alumina, which is produced from five tons of bauxite.
Reduction demands enormous amounts of electricity. And so, these smelters are congregated around some of the world's vastest sources of energy: massive power-producing dams, rich seams of coal, and the gas fields of the Arabian Peninsula (see Energy chapter).
A. Bauxite
Proven and probable bauxite reserves stood at 25 billion tons at the end of 1995, according to the U.S. Bureau of Mines. The actual amount of reserves may be as high as 75 billion tons. Most of the bauxite reserves are in tropical regions, led by South America (33%), Africa (27%), Asia (17%), and Oceania (13%). According to the U.S. Geological Survey, "the sheer magnitude of these reserves is sufficient to ensure a readily accessible supply for the future." ("Bauxite and alumina," U.S. Geological Survey, Sept. 3, 1996; also, Plunkert, 2000)
Bauxite production grew by 13 percent (112 to 127 million tons) from 1994 to 1999. Australia is the largest producer (38%), followed by Guinea (12%). Brazil's share of production grew from 7% in 1994 to 10% in 1999, overtaking Jamaica (9%) for third in global production. Production is also growing rapidly in China and India. (See tables for further details) (European Association of Mining Industries; U.S. Geological Survey)
Most bauxite that is mined is of metallurgical grade, in the trihydrate
form. Non-metallurgical, monohydrate, grade bauxite is used in
refractories. Bauxite is also consumed in the production of abrasives,
cement, aluminum sulfates for water purification, sizing agents for paper manufacture, and other applications. (Africa Resources Corp.)
Although bauxite is almost always the raw material used to produce alumina, other materials are technically-feasible sources. "Clay, anorthosite, alunite, coal wastes, and oil shales, offer additional potential alumina sources. Although it would require new plants using new technology, alumina from these nonbauxitic materials could satisfy the demand for primary metal, refractories," according to the U.S. Geological Survey. (USGS, Sept. 3, 1996)
Labor (34%) and energy (21%) account for more than half of the cost of
bauxite mining. (Africa Resources Corp.)
Alumina and aluminum producers dominate bauxite mining. In 1993,
transnational aluminum companies participated in more than 62% of the
world's bauxite production.
Many bauxite mines are owned by partnerships of transnational aluminum
corporations and the host government. Guinea, Brazil, Venezuela, India,
Indonesia, Turkey, and Ghana hold bauxite mine ownership stakes. (Africa Resources Corp.) Host governments took many of these stakes in a wave of nationalizations in the 1970s. Seven producing countries -- Australia, Guinea, Guyana, Jamaica, Sierra Leone, and Yugoslavia -- banded together to form the International Bauxite Association in 1974. However, Australia's unilateral efforts prevented the IBA from becoming an OPEC-like cartel. (Samir Amin, "Mining in Africa today - Strategies and prospects," The United Nations University, 1988)
Transnational corporate investments in these and new bauxite mines surged in subsequent years.
The Alcoa World Alumina and Chemicals group (AWAC) produces and sells
bauxite and alumina. This joint venture between Alcoa (60%) and Western
Mining Corp. (WMC, 40%) produces more alumina than any other company in the world.
Australia
Australia leads the world in bauxite production, producing about 40 percent of the global total. The main mines, all of which are open pits, are located in Queensland (Weipa), Northern Territory (Gove) and Western Australia (Worsley). Unexploited but vast bauxite deposits are also located in the Mitchell Plateau and Cape Bougainville regions of Western Australia. ("Australian Resources and Deposits," Australian Bureau of Resource Sciences, 2000)
- Weipa (Comalco/Rio Tinto)
The world's largest bauxite mine is located in far north Queensland, in the village of Weipa. Comalco mines about 10 million tons of bauxite a year from this open pit. It has proven ore reserves of 296 million tons, probable ore reserves of 109 million tons. According to Comalco, another 3.8 billion tons of bauxite may be available. Most of the mined bauxite goes to the company's refinery in Gladstone. One-fifth of the bauxite goes to a refinery in Italy. (Rio Tinto website, "Comalco," at
http://aboriginalrelations.riotinto.com/nde/sites/comalco/)
- Worseley (Billiton)
Billiton gained control over the bauxite and alumina complex in Worsley, Western Australia, in late 2000. Benefiting from a U.S. Dept. of Justice-ordered sale of Alcoa/Reynolds alumina production capacity,
Billiton added Reynolds' 56% controlling stake to its 30% existing share in Worsley. The $1.2 billion acquisition gave Billiton a mine with over 50 years of bauxite reserves. Mining has expanded to accommodate an expansion at the accompanying alumina refinery.(Commerzbank Securities, "Billiton company report," August 30, 2000)
- Gove (Alcan/Billiton)
Algroup (now a part of the Alcan conglomerate) holds a 70 percent share
that controls the Gove bauxite and alumina complex in the Northern
Territory of Australia. Billiton owns a minority stake, which it purchased from CSR Ltd. in March 2000. AMP Ltd. owns a small share of the complex.
The alumina refinery is being expanded from 1.8 million tons of annual
capacity to 2 million tons. Two million tons of bauxite are exported rather than refined in Gove. (Billiton, "Billiton and CSR sign heads of agreement on Gove Aluminum Ltd.," press release, March 16, 2000)
-Ely (Alcan)
Alcan and Comalco plan to develop a bauxite mine in Queensland. In 1998, the two companies agreed to exploit the Ely mine owned by Alcan in Cape York, in conjunction with Comalco's adjacent operations, beginning in 2000. (Alcan 10-K, FY1999)
Brazil
In Brazil, the world's biggest aluminum companies are partners in the main producing company, Mineracao Rio do Norte. MRN's main operation is the Trombetas mine in the Amazon.
MRN is owned by CVRD/Aluvale of Brazil, 40%, Alcoa/Reynolds, 18.2%,
Billiton. 14.8%, Alcan, 12%, Companhia Brasileira de Aluminio, 10%, and
Norsk Hydro 5%. The Brazilian National Development Bank is planning to sell its 20% stake in CVRD (Companhia Vale do Rio Doce). MRN is planning to expand bauxite production from 11 million to 14.5 million tons per year. (Mining Annual Review, March 2000; Alcoa 10-K, FY1999; Alcan 10-K, FY1999)
Alcoa also owns an interest in an undeveloped bauxite reserve in Brazil
(Reynolds 10-K, FY1999)
Ghana
Alcan owns 80% of Ghana Bauxite Co., which shipped 400,000 tons of bauxite to Alcan's Burntisland (Scotland) and Jonquiere (Quebec) alumina refineries in 1999. (Alcan 10-K, FY1999)
Greece
Greece is the largest bauxite producer in Europe, and the 12th largest in the world, accounting for 2% of global production. The country holds 150 million tons of reserves and mined 2.45 million tons in 1996. Most is mined by Pechiney subsidiary, Aluminum of Greece. Most bauxite is consumed by Aluminum of Greece's alumina refinery. The company, which also operates an aluminum smelter, is the largest heavy industrial firm in Greece. ("Bauxite," Athens News Agency, Feb. 1998)
Guinea
Guinea, which trails only Australia in bauxite production, holds an
estimated 20 billion tons of bauxite, or about one-third of the world's
reserves. Mining takes place through three companies: Compagnie des
Bauxites de Guinee (CBG), Friguia, and Societe des Bauxites de Kindia
(SBK). ("Guinea: Africa Review," Africa Review World of Information, March 1998)
- CGB
CGB mined an estimated 12.15 million tons of bauxite in 1999. It is a joint venture between the government (49%) and the Halco consortium (51%). CGB holds a 10,000 square mile concession to develop and mine bauxite in northwestern Guinea, through the year 2038.
Halco investors include Alcoa (which now manages CGB), Alcan, Pechiney,
Comalco, Reynolds, and VAW. Open pit mines include Boke, Sangaredi,
Bidikoum, and Silidarou. Materials flow from the pits to the massive Kamsar crushing and drying plant. CGB started mining bauxite in 1973. (Leslie Wright and Morcire Sylla, "Guinea," Mining Annual Review, March 2000; Reynolds 10-K, FY1999)
Bauxite from CGB supplies Alcoa's refineries in Pt. Comfort, Texas, and San Ciprian, Spain, Alcan's refinery in Jonquiere, Quebec, the Sherwin, Texas, refinery formerly owned by Reynolds, and a refinery in Stadt, Germany, owned by VAW. (Alcoa 10-K, FY1999; Alcan 10-K, FY1999)
- Friguia
Friguia, the second largest producer (2.3 million tons of bauxite mined in 1999), has operated as a 49% government/51% private joint venture named Frialco. Pechiney, Noranda, Alcan, and Hydro have been investors in Frialco. The company name is changing to Alumina Co. of Guinea (ACG).
Friguia owns the only alumina refinery in West Africa. (Mining Annual
Review, March 2000; "Bauxite boost for Guinea," Mining Journal, Feb. 25, 2000 )
In 1999, Reynolds reportedly attempted to purchase a 100% stake in Friguia. According to African Mining Monitor, "the sale would be in the form of a lease of management scheme, enabling the investor to manage and modernize the assets without getting involved with the social concerns of the place."
Reynolds reportedly wanted to secure Friguia bauxite for the Alscon smelter in Nigeria and Volta smelter in Ghana, in which Reynolds holds 10% stakes. ("Reynolds Metals negotiating with Guinean government," African Mining Monitor, April 6, 1999)
In July 1999, Reynolds and the government reached a memorandum of
understanding in which Reynolds would manage the Friguia refinery. (Mining Annual Review, March 2000)
Friguia of Guinea also operates a bauxite mine in neighboring
Guinea-Bissau. It is planning to double production at this mine to 710,000 tons per year, at a cost of $70 million. ("MBendi Profile: Friguia," at http://www.mbendi.com/proj/p0d6.htm)
- SBK
The third largest Guinean producer, SBK, mined about 1.5 million tons of bauxite in 1999. It is studying granting control to Africa Mining Services (a project of Eltin-Ausdrill) and Shell. (Mining Annual Review, March 2000)
In 2000, SBK formed a partnership with Siberian Aluminium to develop the Bolondugu bauxite mine. Siberian Aluminum (Russwia) holds a large stake in the Nikolayev Alumina Plant in Ukraine, which is a long-time importer of Guinean bauxite. ("Siberian Aluminum to mine bauxite in Guinea," Interfax Russian News, March 22, 2000; "Siberian Aluminium to develop Guinean bauxite deposit," African Mining Monitor, April 3, 2000)
Guyana
Guyana's government is planning to privatize its two bauxite companies,
Berbice Mining Enterprises (Bermine) and Linden Mining Enterprise
(Linmine). The privatization would open 60% majority stakes to help fund capital improvements at both facilities. (Plunkert, 2000)
Reynolds, now owned by Alcoa, holds a 50% stake in the Bermine operation, and purchased 2 million tons of bauxite from the enterprise in 2000. (Reynolds 10-K, FY1999)
Hungary
A new bauxite mine is planned in Bakoyoszlop, Hungary. The open pit mine, operated by Bakony Bauxite Mines, could produce more than 650,000 tons per year from reserves of 4.4 million tons. (Plunkert, 2000)
India
India, particularly the state of Orissa, is poised to become one of the
world's leading producers of bauxite and alumina. The largest pending
project, the Utkal partnership, is discussed in depth in the human rights chapter of this report. Utkal is a $1 billion venture between Norsk Hydro (45%), Alcan (35%) and Alcan's subsidiary, Indal (20%), in the state of Orissa.
Indal, the Alcan subsidiary, also owns and operates bauxite mines in
Chandgad and Lohardaga. (Alcan 10K, FY1999)
Nalco plans to double its bauxite mining to 4.8 million tons per year.
(Mining Annual Review, March 2000)
Jamaica
Transnational corporations have long dug bauxite out of this Caribbean
country.
In Jan. 2000, Kaiser, Hydro, Alcoa and the Jamaican government agreed to share costs and production at the Alpart and Clarendon operations.
Kaiser and Hydro held 65 and 35 percent shares in Alumina Partners of
Jamaica (Alpart), which mined 3.6 million tpy from the Discovery
Bay/Manchester Plateau region. Alcoa and the government were in a 50/50
joint venture, called Jamalco, that runs a 2 million tpy mine in Clarendon Parish. (Plunkert, 2000; Alcoa 10-K, FY1999)
A 1999 explosion at Kaiser's alumina refinery in Louisiana led Alpart to severely curtail production at Alpart's Discovery Bay operations. About 3.3 million tons of bauxite per year from this mine were destined for the Louisiana refinery.
In early 2000, Alcoa contracted the Jamaican government to produce 400,000 tons of bauxite per year for its Point Comfort, Texas, refinery. ("Govt. secures bauxite deal," Caribbean Update, Feb. 1, 2000)
Russia
Severalboksitruda is the largest bauxite producer in Russia, accounting for 70 percent of the country's production. It started digging an open pit in Olkhovskoye in 1999 and announced plans to start production from a new deep mine, in Novo-Kalinskaya, in 2003. Bauxite mined by this company is mainly sold to the Bogoslovsk aluminum works. (Plunkert, 2000)
Suriname
Alcoa mines bauxite in Suriname through its subsidiary, Suriname Aluminum Company (Suralco). Alcoa also owns a 24% share in a separate mining operation, in Moengo, controlled by Billiton. According to Alcoa's 1999 annual report, "Suralco expects to deplete the current mine reserves at both operations in the period 2005-2010." (Alcoa 10-K, FY1999)
Alcoa first mined bauxite in Suriname in 1917. Billiton began mining there in 1942. Through the 1960s, the country ranked as the world's largest bauxite producer. Alcoa (through its Suralco subsidiary) and Billiton have focused on reserves in eastern Suriname.
Now that the two older mines are being depleted, the companies are looking to the west, where they have launched a joint venture to mine the Bakhuis deposit. This deposit is one of the world's largest. ("Maroon Community Petitions Suriname Government about the Operations of a US-owned Bauxite Mining Company," Forest Peoples Programme, September 17, 1998)
United States
Almost all of the bauxite consumed in the United States is mined outside the country. Three companies operated small surface bauxite mines in Alabama and Georgia in 1995, almost all of which was consumed in the production of nonmetallurgical products. Alumina refiners in the United States import about 10 million tons of bauxite annually. The major supplying countries from 1991 to 1994 were Guinea (34%), Jamaica (30%), Brazil (14%), and Guyana (13%). ("Bauxite and Alumina," U.S. Geological Survey, Mineral Commodity Summaries, January 1996)
Vietnam
According to Mining Annual Review (March 2000), in 1999 Pechiney held talks with the Vietnam government about conducting a "prefeasibility study on a bauxite and a one million ton per year alumina joint venture."
Venezuela
The Venezuelan Corporation of Guayana (CVG)'s Bauxilum subsidiary mines
bauxite (4 to 5 million tons per year). (Venezuela Commercial Office,
presentation to Expo 2000 - Hannover at www.venezuelaexpo2000.com/oficina/english/expo_opo_mineria_actores_guayana_en.html)
B. Alumina
Using the Bayer process, trihydrate bauxite is heated and aluminum oxide, a white powdery substance, is formed. The refining process extracts one ton of alumina from about 2.23 tons of bauxite. (Africa Resources Corp.)
Since the 1970s, many alumina refineries have moved from the Western world to the bauxite mines. "This is especially true for the major bauxite production centers of Australia, Brazil, Venezuela and India. In each case, bauxite mines have been developed by one or more of the major integrated aluminum producers. They have found it more economical to convert the bauxite to alumina on-site (or close by) rather than incurring high transport costs," according to Africa Resources Corp.
The global capacity of smelter grade alumina refineries was 49 million
metric tons in 2000. (USA v. Alcoa and Reynolds, complaint filed in U.S. District Court, Washington, D.C., May 3, 2000)
Four countries -- Australia (33%), the U.S., China, and Jamaica -- produced more than 55 percent of the world's alumina in 1999. (Plunkert, 2000)
As with bauxite, aluminum transnational corporations produce most of the
world's alumina. Aluminum producers hold ownership stakes in alumina
refineries that consume about 85 percent of mined metallurgical grade
bauxite. The rest of the bauxite (about 5 million tons) is sold to
refineries in the former Soviet Union or third party companies who pass the material along to Western producers. Kaiser, Pechiney, the new Middle East producers, and refineries in the former Soviet Union are more dependent on bauxite purchases than companies like Alcoa, Alcan, and Billiton. (Africa Resources Corp.)
Before Alcoa and Reynolds merged, Alcoa and Reynolds owned or controlled
14.5 million and 4.4 million tons of this capacity, respectively, or a
combined 38 percent of the global market. (USA v. Alcoa and Reynolds)
Alcoa, the world's leading producer of alumina, owns alumina refineries in Kwinana, Pinjarra and Wagerup, Western Australia; Pocos de Caldas, Brazil; San Ciprian, Spain; St. Croix, Virgin Islands; and Pt. Comfort, Texas.
Alcoa also manages the operations of three alumina refinery joint ventures in which it has an ownership interest: Paranam, Suriname (55 percent Alcoa ownership); Sao Luis, Brazil (54 percent Alcoa ownership); and Clarendon, Jamaica (50 percent Alcoa ownership).
All but the Brazil operations are operated under Alcoa's AWAC partnership with WMC. About 47% of AWAC's production in 1999 was consumed by Alcoa; the rest was sold to third parties. (USA v. Alcoa and Reynolds; Alcoa 10-K FY1999)
Prior to the merger, Reynolds owned an alumina refinery in Corpus Christi, Texas; 56 percent and control of the management of a joint venture alumina refinery in Worsley, Western Australia; 50 percent of a joint venture alumina refinery in Stade, Germany; and managed and was entitled to 10 percent of the production of the Friguia, Guinea alumina refinery. (USA v. Alcoa and Reynolds)
The U.S. Department of Justice has noted the potential for the corporate
giants to fix prices. In its anti-trust complaint that forced Alcoa to sell off some of its alumina refineries last year, it said the market for smelter grade alumina "has certain characteristics conducive to
anticompetitive coordination." The DOJ said the sales were needed to
"ensure that competition will continue." (USA v. Alcoa and Reynolds,
complaint filed in U.S. District Court, Washington, D.C., May 3, 2000; USA v. Alcoa and Reynolds, proposed final judgment, U.S. District Court,
Washington, D.C., May 3, 2000)
Australia
Australia produces more than double the amount of alumina made in the USA, which ranks second. Unlike the USA, most of Australia's refineries consume locally-mined bauxite. The country hosts the world's largest group of refineries (Alcoa's three Western Australia refineries), the largest recent refinery expansion project (Billiton's Worsely refinery), and the largest individual refinery (Comalco/Rio Tinto's Gladstone refinery).
- Alcoa (Kwinana, Pinjarra, and Wagerup)
AWAC's three mining-refinery operations in Western Australia -- Kwinana
(south of Perth) and Pinjarra and Wagerup (in the southwest) -- form the
world's largest source of bauxite and alumina. At the end of 1999, these
operations had a combined alumina production capacity of 7.3 million tons per year. (Alcoa 10-K, FY1999)
The Alcoa/Western Mining operators plan a $550 million project to expand
Wagerup's capacity from 2.2 million to 3.3 million tons.. At Pinjarra, a
retrofitting project is expected to boost production by 165,000 tpy in
2001. (Plunkert, 2000; Bob Regan, "Alcoa mulling 50% capacity expansion at Wagerup refinery," American Metal Market, Jan. 26, 2001; Alcoa 10-K, FY1999)
- Billiton (Worsely)
In October 2000, Billiton took control of the Reynolds alumina refinery in Worsely, Australia, which the U.S. Dept. of Justice ordered sold in the Alcoa/Reynolds merger. It bought Alcoa's 56 percent stake in Worsley for $1.49 billion in cash. ("Billiton scoops giant Australian alumina miner," Financial Post, Aug. 30, 2000)
Billiton now owns an 86% stake in the refinery and nearby bauxite mine in Western Australia. Japan-based Kobe (10%) and Nissho Iwai Corp. (4%) own the balance of the operation.
In the world's largest recent alumina refinery expansion, capacity at
Worsley expanded from 1.9 to 3.1 million tons in mid-2000. According to
Mining Annual Review (March 2000), "the project has been plagued by labor problems and is well over budget.") Another 300,000 tons of capacity may be added. (Commerzbank Securities, "Billiton company report," August 30, 2000)
- Comalco (Gladstone)
In Gladstone, Queensland, Rio Tinto subsidiary Comalco owns and operates
the world's largest alumina refinery. This 3.5 million ton refinery
processes bauxite that Comalco mines at Weipa in northern Queensland. Alcan holds a 21.4% stake in the Gladstone alumina plant. Its share of production is shipped to the Alcan smelter in Kitimat, British Columbia. (Alcan 10-K, FY1999; Rio Tinto website)
Throughout 1999, Comalco deliberated on the sitting of a new Aus$1.4
billion refinery in either Gladstone in Australia, or Sarawak in Malaysia. [See Human Rights chapter] In April 2000, the company decided to focus its feasibility study on adding capacity in Gladstone. ("Comalco Chooses Gladstone as Site for Alumina Refinery Feasibility Study," company press release, April 3, 2000)
Brazil
Alumina production has increased steadily in Brazil, from 2.1 million tons in 1995 to 3.5 million tons in 1999. Further expansion is planned.
- Alumar (Sao Luis)
Alcoa Aluminio (of which Alcoa Inc. owns 59%), manages and owns 35% of the Alumar cost- and production-sharing refining and smelting venture near Sao Luis, in the northeastern state of Maranhao. Other investors in the Alumar venture include Billiton (36%), Alcoa/WMC subsidiary Abalco (19%), and Alcan (10%).
The Alumar refinery's capacity stood a 1.25 million metric tons, most of which was consumed in its smelter. In addition, Alcoa Aluminio operates a 275,000 tpy refinery in Pocos de Caldas, which also supplies the Alumar smelter. (Alcoa 10-K, FY1999)
- Aluvale
In 1999, Hydro of Norway signed a memorandum of understanding to take a 25% interest in Brazilian alumina producer Vale do Rio Doce Aluminio (Aluvale). Aluvale is a subsidiary of Companhia Vale do Rio Doce (CVRD). The deal would guarantee the delivery of 378,000 tons per year of alumina to Hydro. The plant in the state of Para' is slated for an 800,000 metric ton expansion to 2.3 million tons in 2002. (Plunkert, 2000; Stephen Johnston, "Aluminium," Mining Annual Review, March 2000)
Canada
Alcan owns and operates a 1.2 million ton alumina refinery in Jonquiere,
Quebec. It imports bauxite mainly from Brazil and Guinea. Alumina produced in Jonquiere mainly supplies Alcan's several smelters in Quebec. (Alcan 10-K, FY1999)
China
China was the world's third largest producer of alumina in 1999, up from
fifth place in 1995. Production grew by 57 percent, from 2.2 to 3.8 million tons, in five years. Most alumina produced in China is consumed
domestically. (Plunkert, 2000)
Alumina refining is continuing to grow. Pogguo Aluminium Co. is planning to boost capacity at its Guangxi refinery from 350,000 to 950,000 tons per year (tpy). French transnational Pechiney is working with the Guizhou Aluimium Works on an upgrade at a 400,000 tpy refinery that would boost production by 100,000 tpy. The Shandong Aluminum Plant is expanding production at its refinery from 620,000 to 770,000 tpy. (Plunkert, 2000)
Guinea
The Friguia alumina plant has a capacity of about 640,000 tons per year. Friguia is 49% government/51% private joint venture, with Pechiney, Noranda, Alcan, and Hydro as private investors. (Mining Journal, Jan. 2, 1998)
India
Alcan's subsidiary, Indal, owns and operates alumina refineries in Belgaum (Karnataka) and Muri (Bihar) with a combined capacity of 390,000 tons. It is planning to expand capacities at Belgaum to 365,000 tons and at Muri to 101,000 tons. (Alcan 10-K, FY1999; Mining Annual Review March 2000)
State-controlled National Aluminium Company (Nalco) plans to expand its
alumina refining capacity in India to 1.58 million tons. (Mining Annual
Review, March 2000)
Iran
Czech company Technoiomport has developed a mine and 100,000 ton per year alumina refinery around bauxite reserves in Jajarm, northern Iran. The government also wants investment in a proposed two million ton per year alumina refinery on Qeshm Island, which would serve domestic smelters, Alba and other Gulf region producers. ("Iran," Mining Annual Review, June 1992)
Ireland
Alcan owned a 1.4 million ton per year alumina refinery in Aughinish, which it sold to Glencore AG in 1999. (Plunkert, 2000; Alcan 10-K, FY1999)
Jamaica
Alcoa and Alcan drive alumina refining in Jamaica, the world's fourth
largest alumina refiner.
Alcoa and the Jamaican government are 50/50 partners in an alumina refinery in Clarendon Parish. Alcoa manages the 1 million tpy refinery. (Alcoa 10-K, FY1999)
Alcan owns (93% share; government 7%) and operates alumina refineries in
Kirkwine and Ewarton. Alcan's Kirkvine and Ewarton plants had a combined
capacity of 1.175 million tons in 1999. Most of this alumina supplies
Alcan's smelters in Canada and the U.S. (Alcan 10-K, FY1999)
Russia
The three largest alumina refineries in Russia are located in Bogoslovsky (1.05 million tons capacity), in the Ural Mountains (950,000 tons), and Achinsk (900,000).
The Achinsk refinery is in dire straits. In 1999 according to Mining Annual Review (March 2000), "the struggle got physical at financially-troubled Achinsk." In September 1999, workers forced a court-appointed manager to leave. "Police and the governor came but the workers refused to allow them into the plant." (Mining Annual Review, March 2000)
Spain
Alcoa runs a 1.11 million ton refinery in San Ciprian. It planned to boost production there by 220,000 tons per year by March 2001. (Plunkert, 2000; Alcoa 10-K, FY1999)
Suriname
The U.S. State Department calls alumina exports "the backbone of Suriname's economy." Alcoa began producing alumina there in 1941. "The preeminence of bauxite and Alcoa's continued presence in Suriname is a key element in the U.S.-Suriname economic relationship," reads a 1998 State Dept. briefing. (Bureau of Inter-American Affairs, "Background Notes: Suriname," U.S. Department of State, March 1998)
Alcoa and Billiton share operations at the Suralco alumina refinery in
Paranam, on the Atlantic coast. The 1.7 million ton Paranam refinery
processes all of the bauxite mined at the two company's mining operations. Alcoa owns 55% of the Paranam refinery. Billiton owns the other 45%. (Alcoa 10-K, FY1999)
Ukraine
In March 2000, the Ukrainian government privatized 30 percent of Nikolaev, a 1.05 million ton per year alumina refinery, against the wishes of the country's parliament. A company linked to Sibirsky of Russia won the 30% share at auction. (Mining Annual Review, March 2000)
United States
The USA holds more alumina refining capacity than any country outside
Australia. Almost all of the bauxite consumed at these refineries is
imported.
In 1995, the U.S. had an annual alumina refining capacity of 5.6 million
tons. Four Bayer refineries were in operation at the end of the year.
Operational capacity grew to 6.2 million tons in 1998, then fell to 5.1
million tons after Kaiser's Gramercy alumina refinery suffered a
catastrophic explosion in 1999.
At the end of 1999, operational alumina plants in the U.S. included:
Alcoa's 2.3 million ton refinery in Point Comfort, Texas, and 600,000 ton refinery in St. Croix, Virgin Islands; Ormet's 600,000 ton refinery in Burnside, Louisiana; and Reynolds' 1.6 million ton plant in Sherwin, Texas. Smelters in North America consume almost all of these plants' production.
On Dec. 31, 2000, an investment group purchased the Sherwin, Texas,
refinery -- the ninth largest in the world -- from Alcoa/Reynolds. The
group includes Meriwether Capital Corp. and BPU Reynolds. Meriwether's
founder, George O'Neill, is chairman of BPU Reynolds. ("Meriwether Capital,
BPU Reynolds Group Purchases Sherwin Alumina
Refinery From Alcoa," Business Wire, Jan. 3, 2001)
Twenty-three U.S. smelters consumed 7.34 million metric tons of alumina in
1999.
U.S. aluminum producers imported about 3.9 million tons of alumina each
year from 1991 to 1994, mainly from Australia (73%). Jamaica (10%), and
Suriname (6%). Imports remained around 3.9 million tons in 1998 and 1999.
Again, Australia (62%), Suriname (15%), and Jamaica (9%) were the leading
alumina sources. (Plunkert, 2000; "Bauxite and Alumina," U.S. Geological
Survey, Mineral Commodity Summaries, January 1996)
Venezuela
Bauxilum is a subsidiary of Corporación Aluminios de Venezuela S.A..
(CAVSA) that produces bauxite and alumina. In August 2000, Pechiney and
Billiton were the finalists in a $260 million bid to boost production by
15% at Bauxilum. Alusuisse (now part of Alcan) owns a 1% stake in Bauxilum.
("CVG delays decision," VHeadline.com, Aug. 2, 2000)
C. Aluminum
Aluminum smelting technique has not changed much over the past century. The
basic process -- Hall-Heroult electrolysis -- has been around for many
decades. The first step in smelters is the dissolving of alumina in a
molten cryolite bath. Electric current passes through the solution,
separating alumina into aluminum and oxygen.
Four kinds of technology execute this process. Many plants, especially
those in developing countries, employ the Soderberg method of turning
alumina into aluminum. There are two basic types of Soderberg aluminum
reduction technology: horizontal stud (HSS) and vertical stud (VSS). The
other two technological groups are prebaked: centerwork prebaked (CWPB) and
sidework prebaked (SWPB).
CWPB technology is generally cleaner, more efficient, and more automated
than the others. However, as a MIT team noted, "due to the large size of
capital investments required for modernization of smelter technology, all
four technologies are still in use." These scientists estimated global
production in the four technological categories, as follows, in 1995: CWPB:
11.3 million tons/year; VSS: 3.7 million; HSS: 2.0 million; SWPB: 1.9
million. (Harnisch et al)
Of the 67 operational smelters for which the employed technology could be
determined during this study's research, 36 employed the Soderberg
technology, while
29 used the more modern pre-bake method. Of the 36 Soderberg plants, only
five were located outside Latin America, Africa, Eastern Europe and Asia.
Soderberg plants are notorious polluters. They demand more energy and emit more fluorine, carbon dioxide and perfluorocarbons (highly potent
greenhouse
gases) than smelters employing pre-bake technology.
"Cheap power is the key to low-cost smelting," offers the Financial Times.
"So smelters are often built in seemingly odd places, such as Siberia,
Iceland and Dubai, purely because of their access to cheap energy.
Amazingly, it can make economic sense to import bauxite or alumina to
Siberia, smelt it and then export the aluminum again. (From an engineer's
point of view, Zaire offers the world's best site for a new smelter.
Political risk is a different question, of course.)" (Gillian O'Conner,
"Financial Times - 2000 industrial survey: Why the aluminium business works
differently," on FT.com)
In the 1980s, as tariffs lowered in the developing world, aluminum smelting
began to proliferate in Latin America, Asia and the Middle East. "With the
relaxation of tariff barriers, strongly supported by the U.S. Aluminum
Industry, the location of new manufacturing resources will be increasingly
determined by access to new markets and favorable labor and energy costs,
as well as regional tax benefits," read a brief by the Aluminum Association
in March 1996 that predicted increasing investment in Asian aluminum
smelting capacity.
Early in the 1990s, shortly after the breakup of the former Soviet Union
and the 50% decline of its military-industrial economy, Russian aluminum
producers began flooding Western markets with cheap aluminum, and the
resulting global glut, temporarily halted this trend.
"We cannot ignore the fact that, with minimal demand at home, the Soviet
smelters may continue putting substantial amounts of aluminum on the world
market and the rest of the industry will have to adjust to this reality.
Obviously, anyone with a smelter project on the drawing boards will do well
to take a second look and re-think the project," said Bill Bourke,
then-chairman of Reynolds Metals, in 1991. (Financial Times (London), Nov.
22, 1991).
In the mid-1990s, the end of the Western recession, growing demand in
emerging market economies, and the privatization of national-owned aluminum
companies sparked another wave of transnational corporate investment in
developing countries. Global aluminum consumption reached a record 18.9
million metric tons in 1997, a 5.4% increase over 1996 levels (Mining
Journal, June 5, 1998)
After another hiccup -- the Asian economic crisis -- aluminum consumption
is growing steadily again and exceeded 27 million tons in 1999. Consumption
grew by an annual rate of 3% from 1990 to 1998, and 3.9% from 1998 to 1999.
The transportation industry has the heaviest aluminum appetite (6.9 million
tons in 1998), which is growing at a rate over 5 percent per year. (FT.com;
Mining Annual Review, March 2000)
In 2000, the U.S. Geological Survey predicted that "aluminum demand in the
United States and the rest of the world should remain strong with the major
growth area continuing to be the transportation industry, especially the
automotive market." (Plunkert, 2000)
Industry shift As energy and other capital costs rise, old smelters are being shut down . Aluminum smelting is shifting steadily to developing countries in Africa, Latin America, the Middle East, and Asia. In the late 1980s, the industrialized western world became a net importer of aluminum from developing countries. The trend of increasing production concentration in developing countries is "likely to continue well into the (21st) century," predict Harnisch et al. An agreement that commits the industrialized west to greenhouse gas emissions reductions could enhance this dynamic. "At present it is unclear whether the Kyoto Protocol will accelerate or mitigate these global trends.
The outcome greatly depends on whether innovative financing mechanisms can be developed that help to abate greenhouse gas emissions in the (developing) countries, while at the same time preserving the competitiveness of their aluminum industry." (Jochen Harnisch, Ian Sue Wing, Henry Jacoby, Ronald Prins, "Primary aluminium production: climate policy, emissions and costs," paper presented at the Kyoto and Montreal
Protocols' Joint Expert Meeting, Petten, May 1999)
Growth regions
Africa
In 2000, with aid from the International Finance Corp., a consortium led by
Billiton completed construction of a 250,000 ton per year smelter, named
Mozal, in Mozambique. The owners plan to double the plant's capacity in
future years. (See Banks chapter for more details).
In Richards Bay, South Africa, Billiton owns two smelters that produce more
than 3% of the world's aluminum. Billiton newer 466,000 ton Hillside
smelter, and its older Bayside smelter, have a combined capacity of 690,000
tons per year. The two smelters form one of the world's largest smelter
complexes. (Billiton website,
www.billiton.com/newsite/html/investor/aboutus/Hillside&Bayside.htm;
"Industry Overview," www.isa.org.za/industry_overview/sectors/metals.htm)
Elsewhere in Africa, Kaiser controls the 200,000 ton Valco smelter in
Ghana; Pechiney built a 90,000 ton smelter (Alucam) in Cameroon; and
Bechtel has conducted a feasibility study for a new aluminum smelter in
Guinea, with Alusuisse's backing. (Roger Moody, "The Gulliver File - Mines,
people and land: a global battleground," published by Minewatch, 1992;
Kaiser 10-K, FY1999)
Asia
- China
In China, aluminum production grew by 9.7 percent from 1998 to 1999,
reaching a record total of 2.6 million tons. Most Chinese smelters are
small-scale. The largest, Guizhou, produced 227,000 tons in 1999. The other
four largest smelters are Qinghai (205,000 tons in 1999), Baotou (117,000),
Pingguo (110,000), and Qingtonxia (102,000). More than 90 other smelters
produce less than 100,000 tons. (Mining Annual Review, March 2000)
Expansion projects are planned at Baotou (105,000 ton additional capacity
by 2002), Pingguo (200,000 ton possible expansion), Qingtongxia (100,000
ton expansion planned for 2001), and 12 other smelters. (Mining Annual
Review, March 2000)
In Nov. 1999, Alcoa entered into a 30 year agreement to sell at least
400,000 metric tons of alumina to the China State Nonferrous Metals
Industry Administration. (Alcoa 10-K, FY1999)
- India
With abundant bauxite reserves, and cheap energy and labor, aluminum
smelting is on the rise in India.
Aluminum plants in India include the Nalco smelter in Angul, Orissa, a
100,000 ton smelter in Korba owned by Bharat Aluminium, three smelters
owned by Alcan subsidiary Indian Aluminium Company (Indal), and a smelter
owned by Hindalco Industries.
Nalco and Bharat are controlled by the Indian government. Nalco plans to
expand its Angul smelter's capacity from 230,000 to 348,000 tons. The
government has announced that it would sell minority stakes in Nalco and
Balco, but union opposition has stalled the privatization plan.
Indal's 60,000 ton Belgaum smelter has been closed since 1992. The company
closed one potline at its 20,000 ton plant in Alpuram (Kerala). Indal
shifted production to its Hirakud smelter in coal- and bauxite-rich Orissa,
where capacity doubled from 30,000 to 60,000 tons in 1999.
In 2000, Hindalco announced plans to add 100,000 tons of capacity to its
242,000 ton smelter in Renukoot, Uttar Pradesh.
(Stephen Johnston, "Aluminium," Mining Annual Review, March 2000; Business
Today, March 7, 1998; Ashok Sharma, "Nalco production up in April-August,"
Financial Express, Nov. 1, 1999; "Hindalco board okays expansion,"
Financial Express, Jan. 30, 2000; "Production capacities in India," at
www.mitsui.co.jp/alm/statistics/india.html; "Disinvestment Likely To Be Put
On Hold - NALCO May Push Through With Equity Restructuring," Hindu
Business, May 9, 1997)
- Indonesia
A consortium of 12 Japanese companies, backed by $3.1 billion in Japanese
government financial aid, holds a majority stake in the 225,000 ton Inalum
smelter in North Sumatra. (Indonesian Commercial Newsletter, Nov. 25, 1991)
Latin America
- Argentina
Argentine company Aluar boosted its capacity from 176,000 to 260,000 tons
in 1999. Most of this production is shipped to Japan, the U.S., and Europe.
(Reuters, Feb. 3, 2000)
- Brazil
Large smelters in Brazil include Alumar (350,000 tpy capacity), Albras
(340,000), and CBA (225,000).
- Chile
Noranda has proposed building a 440,000 ton aluminum smelter in Chile. This
plan awaits commitments from financial partners and the Chilean government.
(Stephen Johnston, "Aluminum," Mining Annual Review, March 2000)
- Venezuela
Venezuela is seeking investors in its aluminum industry, which is fueled by
vast bauxite reserves and cheap hydroelectric power. (Venezuelan Commercial
Office)
The Venezuelan Corporation of Guayana (CVG) is installing a new 250,000 ton
potline at the Alcasa smelter in Bolivar State, which would more than
double its 210,000 tpy capacity. CVG is trying to attract foreign investors
in the $800 million project. Reynolds (now part of Alcoa) owns a 7.3% stake
in Alcasa. (Venezuelan Commercial Office)
CVG's Venalum subsidiary operates a 430,000 tpy smelter. Six Japanese
partners (Showa Denko, Kobe Steel, Sumitomo Chemical, Mitsubishi Aluminum,
Mitsubishi Metal, and Marubeni Corp.) own a 20% stake in the Venalum
smelter, the ninth largest in the world. (Venezulean Commercial Office)
Middle East
"Cheap fuel, labor, and locational advantage" help the region compete in
the global aluminum market, reported Gulf Business Online in November 2000.
"The aluminium industry in the Arabian Gulf region has never had it so
good."
In the year 2000, the region's two main smelters, Alba of Bahrain and Dubal
of the United Arab Emirates, exceeded one million tons of production
capacity, and accounted for 8% of global production. Alba and Dubal rank
among the five largest smelters in the world.
Planned smelters in Kuwait, Qatar, Abu Dhabi, and Oman might be taken off
the shelf, as European capacity shrinks and global consumption rises.
(Roger Jacobson, "Future looks bright for the GCC aluminium industry," Gulf
Business Online (Dubai), Nov. 9, 2000)
- Bahrain
The Aluminium Bahrain (Alba) smelter is a dominant economic force in this
tiny country of 635,000 people squeezed into land one-fifth the size of
Luxembourg. Oil production is the only industry that is bigger. Dubal is
slated to expand from 496,000 to 750,000 tons per year of capacity.. The
company started producing 120,000 tpy in 1971.(European Institute for
Research on Mediterranean and Euro-Arab Cooperation, October 2000, on
website: http://www.medea.be/en/index023.htm; Middle East Business
Intelligence, Jan. 5, 1996; AFP, Aug 27, 1995; Moneyclips, Nov. 21, 1996)
- Egypt
The Egyptalum 200,000 ton smelter is targeted for an expansion to 300,000
tons per year of capacity.
- Iran
Iran hosts a long-time producer, Iralco (120,000 tons per year), and a new
and troubled plant, Al-Mahdi. Another smelter has been proposed on Qeshm
Island, using discarded technology from a retrofitted plant in Slovakia
(see Banks chapter for more details).
Dubal of the UAE provides technical services to the 200,000 tpy Al-Mahdi
smelter. The government of Iran owns a majority share of Al-Mahdi, with the
rest owned by International Development Corp. of Dubai. International
Development Corp.'s investors included fugitive billionaire Marc Rich (see
Corporations chapter), U.K. construction company George Wimpey, Caradel
Investments, and former UAE ambassador to London, Mahdi Al-Tajir. (Mining
Annual Review, June 1992)
- Oman
Dubal is pondering the construction of a new $2.5 billion, 480,000 ton
smelter in Oman.
(Rasha Owais, "Dubal studies Oman smelter project," Gulf News, April 10,
1999)
- U.A.E.
Dubal Aluminum (Dubal) opened in 1979 and expanded from 375,000 to 536,000
tons of capacity in 1999, making it the third largest smelter in the world.
(Bricad Associates website, http://www.bricad.com/aluminium/dub/index.html;
Dubal website, www.dubal.co.ae)
III. Corporate Control
"Historically, the main agents of the mining developments in the Third
World in general and Africa in particular have been private companies from
the major capitalist countries, even though they were constantly supported
by their respective states. Mineral specialization in the Third World thus
developed within the framework of an international extension of the
oligopolistic structure of the advanced capitalist economies of Western
Europe and North America," observed Samir Amin of The United Nations
University in 1988. (Samir Amin, "Mining in Africa today - Strategies and
prospects," The United Nations University, 1988)
Six companies -- Alcoa, Kaiser, Reynolds of the U.S., Alcan of Canada,
Pechiney of France, and Alusuisse of Switzerland -- long dominated the
aluminum production cycle. These six majors controlled half of the bauxite
mining, two-third of the alumina refining, and seven-tenths of the aluminum
smelting operations of the capitalist world in 1988. (Amin)
Compared to other industries, notes the Financial Times, the aluminum
industry has an "unusual structure, with many of the larger companies
vertically integrated -- operating right through the production chain,
starting with digging up the bauxite and finishihng by producing metal..."
(Gillian O'Connor, "Hyperactivity in a strong market," Financial Times,
2000 on FT.com website)
In the year 2000, merger-mania struck the aluminum corporate sector,
reinvoking historic fears of monopolism.
When aluminum production developed in the late 1800s, two companies --
Alcoa and Pechiney -- dominated the industry. The firms controlled patents
on Bayer technology for alumina refining and Hall-Heroult technology for
aluminum smelting. (Amin) Alcoa also controlled patents on bauxite mining
and hydroelectric technologies (www.endgame.org). "A long period of
technological monopoly enabled these enterprises to acquire hydroelectric
facilities and bauxite deposits while increasing their production scale.
When their monopoly of the technology ended, they found themselves in a
position of economic monopoly, based on increasing returns to scale," wrote
Amin.
Alcoa's monopolistic grip in the U.S. loosened a bit by the second World
War. In 1945, a U.S. appeals court declared the corporation to be a
monopoly, and forced it to spin off its Canadian sister, the Aluminium
Company of Canada (Alcan). The courts also ordered the sale of smelters
that the government built during the war, using Alcoa technology, at a low
price to Reynolds and Kaiser. (www.endgame.org/primer-history.html;
www.clt.astate.edu/crbrown/alcoa.htm; "Alcoa's actions may catch Justice's
eye," Purchasing Online, Oct. 10, 1999)
Now, Reynolds, the third largest producer, has returned to the Alcan fold.
(see below) Also in 2000, the second largest producer -- Alcan -- attempted
to merge with the fifth and 14th largest firms, Pechiney and algroup (a
division of Alusuisse Lonza). Pechiney withdrew from the proposed combine
early in the year. This reduced the conglomeration's rise against the new
Alcoa/Reynolds force.
Alcoa now hold over 4.7 million tons of aluminum production capacity
dwarfing Alcan's 1.9 million. The third largest transnational producer,
Billiton, holds 0.9 million in poroduction capacity. (Financial Times,
"Aluminum/Current Trends," on FT.com)
As in the primary aluminum sector, Alcoa, Alcan, and Billiton dominate the
alumina refining component of the industry. Last year, Billiton gained
Reynolds' majority hold on the massive Worsley refinery in western
Australia. The U.S. Dept. of Justice mandated this sale in the resolution
of its anti-trust complaint against Alcoa and Reynolds' merger.
Revneues are up for the biggest producers. Billiton earned $577 million in
the fiscal year ending June 30, 2000, up 51 percent from the previous year.
(Commerzbank Securities, "Billiton company report," August 30, 2000) In the
first three quarters of 2000, Alcoa's earnings rose 65% from 1999. Income
rose from $853 million to $1.3 billion. (Alcoa 8-Q, FY1999)
The largest companies, reported the Financial Times, benefit from vertical
integration that enhances their ability to stablize prices and dictate
growth. "Although concerted action by the industry is anathema to
competition authorities, particularly in the US, self interest means that
some of the larger companies have been willing to act as 'swing producers':
cutting output when prices are falling, increasing it when they are
rising," the FT reported in 2000. "Some smelters that were mothballed in
the 1990s remain out of action... But the existence of those mothballed
smelters puts an effective cap on prices. Meanwhile, capacity is being
steadily increased, in line with growth expectations." (Gillian O'Connor,
"Hyperactivity in a strong market," Financial Times, 2000 on FT.com
website)
Table. Transnational Giants
Corporate aluminum production in 1999
(metric tons per year)
Company Capacity Primary production
Alcoa/Reynolds 4,256,000 3,800,000
Alcan/Alusuisse 1,372,000 1,744,000
Billiton 886,000 890,000
Pechiney 828,000 827,000
Hydro 745,000 749,000
Comalco 659,000 654,000
Aluminum Bahrain 537,000 515,000
CVG (Venezuela) 520,000 482,000
Kaiser 510,000 413,000
Dubal 424,000 433,000
VAW 421,000 421,000
Ormet 256,000 256,000
Source: CRU International, as reported in "Who's Who: Mergers, takeovers in
high summer," Financial Times at FT.com website.
Some less traditional transnational corporations have assumed significant
roles in the aluminum production cycle:
* Marc Rich, the former U.S. citizen and tax evader pardoned by President
Bill Clinton (known to some as "Aluminium Finger"), has invested in an
Iranian smelter, traded in aluminum exports from Russia, owned alumina
refineries in the Caribbean, and is hoping to benefit from a World
Bank-backed bauxite/alumina complex sale in Guinea.
* xxxxx
#1 Alcoa (including Reynolds)
ALCOA INC.
(a/k/a Aluminum Company of America)
201 Isabella Street
Pittsburgh, PA 15219
1999 revenues: >$16 billion
Chairman, President, and CEO
Alain J. P. Belda
www.alcoa.com
REYNOLDS METALS COMPANY
6601 West Broad Street
P.O. Box 27003
Richmond, VA 23261
1999 revenues: >$4.6 billion
In 1886, an Ohio chemist named Charles Martin Hall discovered the process
of electrolyzing alumina into aluminum, the same year that Paul Heroult
made the same discovery in France. In 1888, Hall, with backing from the
Mellon Bank, helped to found the Pittsburgh Reduction Company and built a
pilot plant and soon launched a global and revolutionary expansion. In
1907, the company name was changed to the Aluminum Company of America.
("Biography, Charles Martin Hall," on Oberlin College Archives website,
www.oberlin.edu/~archive/WWW_files/hall_cm_b.html. Oberlin maintains many
of Hall's records, including extensive filings from lawsuits, from this
early era of the aluminum industry.)
The company maintained a monopolistic position in the industry through
World War II, after which the U.S. government ordered the company to sell
several smelters and sever its ties to Alcan.
In 1943, George Seldes wrote in Facts & Fascism (published by In Fact) that
"By its cartel agreement with I.G. Farben, controlled by Hitler, Alcoa
sabotaged the aluminum program of the U.S. air force. The Truman Committee
[on National Defense, chaired by then-Senator Harry S. Truman in 1942]
heard testimony that Alcoa's representative, A.H. Bunker... prevented work
on our $600,000,000 aluminum expansion program.
"Thurman Arnold, as assistant district attorney of the United States, his
assistant, Norman Littell, and several Congressional investigations, have
produced incontrovertible evidence that some of our biggest monopolies
entered into secret agreements with the Nazi cartels and divided the world
up among them. Most notorious of all was Alcoa, the Mellon-Davis-Duke
monopoly which is largely responsible for the fact America did not have the
aluminum with which to build airplanes before and after Pearl Harbor, while
Germany had an unlimited supply."
"If America loses this war," said Secretary of the Interior Harold Ickes in
1941, "it can thank the Aluminum Corporation of America." (George Seldes,
Facts & Fascism (In Fact, 1943), pp. 68, 140-144.
Alcoa Inc. remains the world's largest producer of alumina and aluminum,
positions that it solidified with the acquisiton of Reynolds Metals in
2000. Reynolds was the third largest aluminum producer in the world, and
the biggest aluminum foil maker. (Reynolds Metals Co., Form 10-K (FY1999),
annual report to Securities and Exchange Commission, March 3, 2000)
More than half of Alcoa's revenues are generated in the United States
($10.4 billion of $16.2 billion in 1999) (Alcoa Inc., Form 10-K (Fiscal
Year 1999) filed with Securities and Exchange Commssion, Feb. 28, 2000)
On August 18, 1999, Alcoa announced plans to acquire Reynolds Metals
Company (Richmond, Va.), in a $5 billion stock purchase. Reynolds was the
second largest aluminum company in the United States, and third largest in
the world. The U.S. Department of Justice forced Alcoa to sell off
Reynold's alumina refinery stakes before allowing the merger to conclude in
May 2000.
The Justice Dept. charged that the merger "threatens substantial and
serious harm to (alumina) consumers." It asserted that it "will
substantially lessen competition in the refining and sale (of alumina)....
substantially increases the likelihood that Alcoa can unilaterally control
prices and also increases the likelihood that the remaining (alumina)
producers will be able to coordinate to raise prices, harming consumers. As
a result of the proposed merger, higher prices are likely for aluminum and
other products containing alumina." (United States of America, Department
of Justice, Antitrust Division v. Alcoa Inc. and Reynolds Metals Company,
complaint, May 3, 2000)
In its May 3, 2000, settlement with the Justice Department, Alcoa agreed to
sell Reynolds' stakes in alumina refineries in Worsley, Australia (56
percent stake); Stade, Germany (50%); and Sherwin, Texas (100%). It also
agreed to sell one-quarter of Reynolds' interest in an aluminum smelter in
Longview, Washington. On Aug. 29, 2000, Billiton plc agreed to purchase
Alcoa/Reynolds' 56% stake in the Worsley alumina refinery for $1.49
billion. (Alcoa, Form 10-Q, submitted to U.S. Securities and Exchange
Commission, Oct. 20, 2000)
Alcoa's latest merger follows its $3.8 billion takeover of Alumax in 1998.
Alumax was a joint venture between Amax, Mitsui and Nippon Steel. During
the Alumax merger, the Justice Dept. forced Alcoa to sell its aluminum cast
plate operations. The two companies, before the merger, controlled 90
percent of the global market for the manufacture and sale of cast plate.
(U.S. Dept. of Justice, "Justice Department clears Alcoa's proposed
acqusition of Alumax after Alcoa agrees to sell its cast plate operations,"
press release, June 15, 1998; Roger Moody, "Gulliver PUK
(Pechiney-Ugine-Kuhlmann) Dossier" in The Gulliver File - Mines, people and
land: a global battleground, Minewatch, 1992.)
In 1999, Alcoa objected to a U.S. Court of Appeals (Eleventh District)
affirmation of a decision that Alumax owed $411 million in taxes, including
interest, from fiscal years 1984-1986. (Alcoa 10-K, FY1999)
Also in 1999, the DOJ forced Alcoa to sell one of two aluminum sheet
manufucturing plants that it obtained in its $41 million takover of Golden
Aluminum Company from ACX Technologies Inc. (Department of Justice,
"Justice Department requires divestiture in Alcoa's Acquisition of Golden
Aluminum Company," press release, Nov. 5, 1999)
With the Alumax merger, Alcoa's U.S. aluminum smelting capacity surged
from a 31 percent national share (1.3 million metric tons) to 46 percent
(1.9 million). The addition of Reynolds' capacity gives Alcoa a 57 percent
share (2.4 million) of U.S. production capacity. Including Reynolds'
Canadian operations, Alcoa now holds more capacity (3.3 million tons) in
North America than exists in Russia. ("Alcoa's actions may catch Justice's
eye," Purchasing Online, Oct. 10, 1999)
- Alcoa and Bush
In late December 2000, President-elect George W. Bush added Alcoa chairman
Paul H. O'Neill to his stable of corporate cabinet members. He nominated
O'Neill to be the new Treasury Secretary. O'Neill, a former International
Paper president, became an Alcoa director in 1986, and chaired the
company's board from 1987 to 2000. (Brian Knowlton, "Alcoa Chief Picked to
Head Treasury," International Herald Tribune, Dec. 21, 2000; Alcoa 10-K,
FY1999)
Alcoa operates a smelter in Rockdale, Texas. It also plans to strip mine
15,000 acres in two Central Texas counties for fueling the Rockdale
smelter. Bush, as governor of Texas, was criticized by environmentalists
and neighbors of Alcoa's central Texas lignite strip mines for not opposing
Alcoa's plans to stripmine their land and ship massive amounts of
underlying groundwater to San Antonio (see Human Rights chapter)
"We hope that Gov. Bush will recognize our struggle against Alcoa is the
perfect opportunity for him to demonstrate his willingness to protect the
rights of Texans against the wrongs of a few rich, corporate giants," said
Travis Brown of Neighbors for Neighbors, a local group of concerned
citizens. (Peggy Fikac, Express-News (Texas), Oct. 19, 1999)
No such luck. Bush punted all responsibility for the decision to the Texas
Railroad Commission.
On the environment, O'Neill has said, "I don't see environmental issues as
a negative for aluminium or Alcoa, they are our friend. As long as
legislatures and governing bodies don't do stupid things, we'll be fine."
(Aluminium Today, 1999. [xxx need citation xxx])
On workers' health in Mexico, he has said "our plants are so clean they can
eat off the floor." The New York Times recently reported on conditions at
Alcoa's factory in Ciudad Acuna, Mexico. The article describes the working
conditions; employees earning $6 a day, being limited to three sheets of
toilet paper per work, and collapsing from gas leaks.In 1993, 179 workers
were hospitalized by a gas leak. Half of the city's 150,000 residents use
backyard latrines. Alcoa opened the auto parts plant in Acuna after the
signing of the North American Free Trade Agreement, sifting production from
San Antonio, Texas. (Sarah Anderson and John Cavanagh, Institute for Policy
Studies (U.S.), Karen Hansen-Kuhn, The Development GAP (U.S.). and Carlos
Heredia and Mary Purcell, Equipo PUEBLO (Mexico), "No Laughter in NAFTA:
Mexico and the United States Two Years After," 1996)
#2 Alcan/algroup
Alcan
1188 Sherbrooke St. West
Montreal, Quebec H3A 3G2, Canada Phone: 514-848-8000
Fax: 514-848-8115
http://www.alcan.com
Alcan Chairman
John R. Evans
Interim President and CEO
Bill Blundell
algroup (former division of Alusuisse Lonza)
Feldeggstrasse 4, Postfach 495
Zurich CH-8034, Switzerland Phone: +41-(0)1-386-22-22
Fax: +41-(0)1-386-25-85
http://www.algroup.ch:
Chairman Martin Ebner
CEO and Managing Director Sergio Marchionne
Alcan/algroup combined 1999 revenues: $12.3 billion
In 1902, Alcan opened as a Montreal, Canada,-based subsidiary of the
Pittsburgh Reduction Company (renamed Alcoa in 1907). It established its
first smelter and hydroelectric power plant in Shawinigan, Quebec. In
1928, Alcan began to splinter from Alcoa. During World War II, Alan opened
numerous new plants in Quebec, and in the 1950s, opened a plant in British,
Columbia. Later, it opened operations outside Canada. (Alcan 10-K, FY1999)
A three-way merger between Alcan, Pechiney, and algroup (the aluminum
divsiion of Alusuisse Lonza) fell apart in early 2000. Facing obstacles
from the European Union and the U.S. DOJ, in April 2000, the "A.P.A."
partners announced that Pechiney would wiithdraw from the three-way merger.
They decided that "divestments which would ultimately be required to meet
the objections of the European Commission would seriously undermine the
strategic viability of the combined company's rolled products business in
Europe." (Alcan-Pechiney-Algroup, "Merger will not proceed," joint press
release, April 13, 2000; also, Plunkert, 2000)
On Oct. 18, 2000, Alcan completed its merger with the Alusuisse Lonza's
algroup division. The algroup shareholders gained a 34 percent share in
Alcan. (Alcan press release, Oct. 18, 2000)
Alcan describes itself as "one of the most international aluminum companies
in the world." (Alcan press release, Aug. 21, 2000) The company's global
operations include:
* Bauxite mining: full or majjority stakes in Jamaican, Australian,
Brazilian, Ghanaian, and Indian mining companies, and minority shares in
Guinean (CBG) and Brazilian (MRN) producers.
* Alumina refineries: full stakes in Brazil (Ouro Preto in Sramenha, Minas
Gerais) and Canada (Vaudreuil in Jonquiere, Quebec); majority stakes in
India (Belguam in Karnataka and Muri in Bihar) and Jamaica (Kirkvine and
Ewarton); and minority stakes in Australia (Gladstone) and Brazil (Alumar).
* Full stakes in seven Canadian smelters with a combined capacity of 1.1
million tons; two small Brazilian smelters, three small U.K. smelters, and
a small U.S. smelter, and majority stakes in two small Indian smelters.
Alcan's share of smelting capacity outside of Canada totals 515,000 tons.
(Alcoa 10-K, FY1999)
Alcan's global operations include the Indian Aluminium Company (Indalco),
Alusuisse has numerous operatrions beyond aluminum production, including
pharmaceutical and cosmetics packaging (through its Wheaton subsidiary) and
food and tobacco packaging (through its Lawson Mardon subsidiary).
#3 - Billiton
Billiton Plc
1-3 Strand
London
WC2N 5HA
United Kingdom
Tel: 44 (0) 20 7747-3800
Fax: 44 (0) 20 7747-3900
Web: www.billiton.com
Revenues in 1999: $4.6 billion
CEO/Chairman: Brian P. Gilberton
In 1860, Billiton adopted articles of association in The Hague. The company
took its name from an island, also spelled Belitung, in the Dutch colony
that became Indonesia. In 1861, the company shipped laborers from China to
the island between Sumatra and Borneo and started digging its first
concession: a tin reserve. Billiton shipped the tin, and lead, to its
smelters in the Netherlands. ("History of Billiton," from www.billiton.com;
"Dutch imperialism, " from www.gimonca.com/sejarah/sejarah05.html)
The Royal Dutch/Shell Group bought Billiton in 1970. In 1994, Gencor of
South Africa bought a majority stake in the company from Royal Dutch/Shell.
In 1997, the non-precious metals assets of Gencor and the minerals
businesses of Royal/Dutch Shell spun off into an independent Billiton that
is now based in London. ("Billiton Plc, Hoover's Company Profile Database -
World Companies 2000; "History of Billiton")
The company moved into the bauxite mining business in the 1940s, when it
began mining bauxite in Indonesia and Surinam. It no longer mines bauxite
in Indonesia, but continues to do so in Surinam, where it runs a bauxite
mine and holds a 45% interest in an alumina refinery.
The company's aluminum interest span the globe. In October 2000, Billiton
took control of Reynolds alumina refinery in Worsely, Australia, which the
U.S. Dept. of Justice ordered sold in the Alcoa/Reynolds merger. Billiton
now owns an 86% stake in the reinery and nearby bauxite mine in Western
Australia. It also controls the Gove bauxite mine in the Northwest
Territories. (Commerzbank Securities, "Billiton company report," August 30,
2000)
Billiton also owns interests in mines, refineries and smelters in Brazil,
South Africa, Mozambique, and Australia. It holds a 15% interest in a
Brazilian company, Mineracao Rio do Norte S.A., which runs one of the
world's largest bauxite mines. It also is a part-owner of the Alumar
alumina refining and aluminum smelting complex in Brazil, and another
Brazilian smelter, Valesul. It owns two aluminum smelters in Richards Bay,
South Africa. Billiton owns 47% of a new smelter that opened in Mozambique
in 2000. Also in 2000, Billiton acquired Reynolds' share of the massive
Gladstone bauxite mine/alumina refinery complex. The company is bidding to
take-over the state-run Venezuelan aluming company, CVG, for $3 billion.
("Billiton background" at www.mbendi.co.za/orgs/cegi.htm; "History of
Billiton"; "Billiton scoops giant Australian alumina miner," Financial
Post, Aug. 30, 2000)
Billiton digs many other minerals. It mines copper and zinc in northern
Quebec, Canada. It operates open pit and underground coal mines in South
Africa through its Ingwe subsidiary. The company mines coal in Australia
and Colombia, and ranks as the world's leading exporter of thermal coal.
Also in South Africa, the company mines zinc from an open pit, and heavy
mineral sands from the coastline. Billiton subsidiary QNI is one of the
world's top five nickel and cobalt producers. Its operations in Colombia
and Australia produce 6% of the world's nickel and 7% of the world's
cobalt. Its chrome mining operations in South Africa and manganese mining
pits in Australia and South Africa rank as the world's largest. ("Billiton
background" at www.mbendi.co.za/orgs/cegi.htm; "History of Billiton";
Hoover's)
Through the $1.2 billion Rio Algom purchase, Billiton also acquired copper
mining companies in Chile (100% of Cerro Colorado), Argentina (25% of
Alumbrera), and Canada (33.6% of Highland Valley). Rio Algom also holds
development rights to a copper and zinc mining project in Peru and a copper
mining project in Chile. In addition to copper and zinc, Rio Algom
distributes uranium and coking coal. (Commerzbank Securities)
For the past 25 years, residents of the Mole Lake/Crandon region have
fought plans to develop a zinc-copper sulfide mine, citing potential toxic
discharges and groundwater depletion. Ojibwe people from the Mole Lake
Reservation farm nearby rice beds. Billiton acquired this proposed mining
site when it bought Rio Algom in October 2000. ("Nader calls on South
African company Billiton to drop Crandon mine plans in Wisconsin," press
release, October 30, 2000)
Billiton is exploring the possiblity of mining lead and zinc in LanPing,
China. This mine would be located near a new massive 958 foot-high dam on
the Mekong River. (www.prop1.org/nucnews/2000nn/0008nn/000804nn.htm)
"Billiton is ambitious," reported Financial Times in 2000. "It has been
keeping a close eye on both Venezuelan privatization prospects and possible
disposals by Brazil's CVRD." ("Who's Who: Mergers, takeovers in high
summer," Financial Times at FT.com website.)
#4 - Pechiney (France)
Pechiney
Headquarters:
7 Pl. du Chancelier Adenauer
Paris, 75116
Telephone: 33-1-5628-2000
Website: www.pechiney.com
CEO: Jean-Pierre Rodier
1999 revenues: $10.1 billion
Pechiney began producing aluminum in 1860. Its operations now span the
globe.
Aluminum accounted for 31.6% of Pechiney's net sales in 1999. It produces
bauxite, alumina, primary aluminum, and secondary aluminum in Australia,
Cameroon, Canada, France, Greece, Guinea, and the Netherlands. Relevant
subsidiaries and affiliates include Aluminium Pechiney, Affimet, Alucam,
Aluminerie de Bécancour, Aluminium Dunkerque, Aluminium de Grèce, ECL,
Friguia, Pechiney Nederland, QAL, and Tomago Aluminium. (Pechiney 1999
Annual Report on www.pechiney.com)
Pechiney's technology, which Heroult pioneed in the 1880s, is used in other
smelters around the world. Nalco in Orissa, India (the largest aluminum
smelter in southern Asia) utilizes Pechiney technology and engineering
servies for its bauxite mining, alumina refining and smelter operations.
(Department of Mines, Government of India, "Mining and Processing: Natioanl
Aluminium Company Ltd.," chapter in Annual Report 1999-2000; see:
www.nic.in/mines; Rajaram Satapathy, "NALCO expansion plan gets off the
ground," Times of India, July 3, 2000)
Other major Pechiney product lines include aluminum and steel beverage cans
(it is the world's largest producer), plastic packaging, and ferroalloys.
Pechiney also invests heavily in uranium mining; for example, in Niger, it
is in a joint venture to mine uranium from the Arlit mine. Arlit hold
estimated reserves of 34,500 tons. The French government, the mine's
primary customer, subsidizes the mining operation. ("Niger - Mining:
Uranium Mining," at www.mbendi.co.za/indy/ming/urnm/af/ni/p0005.htm)
Exerpts from...
Roger Moody's "Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier" (published
in 1992)
(Courtesy of The Sustainable Energy and Anti-Uranium Service Inc. Visit
http://www.sea-us.org.au)
"It is hardly surprising that, worldwide, Pechiney (formerly
Pechiney-Ugine-Kuhlmann or PUK) has run into more opposition for its
aluminium operations than its nuclear interests. It is the fourth largest
aluminium producer in the world. It is also France's only aluminium
producer (2), and the largest in Europe.
"Moreover, when it acquired American National Can for US$1bn in 1988, it
became the world's largest producer of metal drinks cans.
"Pechiney is owned 75% by French state interests (10% of which is in the
hands of Assurances Generales de France, acquired in 1990. Although plans
to privatise Pechiney were high on the agenda (after the group finished
restructuring in 1986, the French socialist government has so far applied a
brake to both privatisation and nationalisation.
"By 1988, the company saw an upturn in its fortunes, with the saving of two
domestic smelters planned for closure earlier in the decade and
construction of another in Normandy; its nuclear fuels activities proving
"highly profitable"; a JV under discussion with the USSR which would be the
first of its kind; and highly successful returns from its ventures in the
USA, especially Howmet Turbine.
"Pechiney was set up in 1855, began producing aluminium five years later,
and - with a spectacular rise in output prior to WW2 - took over several
companies on the way. In 1971 it merged with Ugine-Kuhlmann.
"Spurred by major losses in its aluminium sector and a downturn in
production of 6% in 1983, Pechiney expanded its two French smelters, but
was squeezing the rest. The same year, it acquired a stake in a
"hypothetical" French nuclear power station in return for cheap power to
run its remaining smelting capacity, drawn from any stations run by
Electricite de France. Under the chairmanship of Georges ("I hate to lose
money") Besse, the new, beaming, loud-talking, joke-cracking President
Directeur General of the company, Pechiney's fortunes were beginning to
turn by mid-1984.
"Pechiney's chemical assets were sold to Elf-Aquitaine, Rhone-Poulenc and
CdF Chemie after Giscard d'Estaing and Mitterand both blocked a potentially
lucrative sale to Occidental Petroleum. The loss-making steel interests
have also been hived off. Cash to finance the huge FFr 3,000,000,000
investment programme was to be found in an agreed sale of the Howmet
Aluminium Corp to Alumax (a JV between Amax, Mitsui and Nippon Steel). In
the event, Howmet remained under Pechiney's control, with Alumax gaining a
half interest each in Howmet's Maryland and Washington smelters.
"This half-sale of Howmet's smelter interests was part of a redeployment of
Pechiney's North American aluminium operations from the USA to Quebec.
"Environmentalists in New Zealand also fought hard against the siting of a
smelter in the beautiful valley of Aramoana, where Pechiney replaced
Alusuisse as the chief foreign partner in a consortium headed by Fletcher
Challenge and CRA in 1982 (14). But talks over the siting of a power plant
for cheap power broke down (15) and the project was shelved (2).
"Meanwhile the Spanish government was tussling with Pechiney over who would
pick up the bill for losses on the 67%-owned Alugasa aluminium subsidiary
(16), and it finally kicked Pechiney out in 1982 (2).
"Pechiney has a 35% interest (along with Gove Aluminium, 59% controlled by
CSR) in the Tomago smelter in New South Wales which came on stream in late
1983, exporting aluminium to Japan: plans to expand the smelter by 50% were
underway in 1990.
"The construction of the smelter was energetically opposed by local farmers
and environmentalists. The smelter is set in the wine-growing region of
Hunter Valley. A large plant producing 230,000 tonnes of aluminium a year
at about $1000/tonne - its ultimate capacity is more than 700,000 tonnes.
Pechiney is employing a new, secret smelting process, purportedly replete
with environmental controls to remove fluoride, and a new form of waste
containment using "excavated cells" covered in two metres of clay.
"In the Netherlands, Pechiney Nederland opened up a controversial smelter
in Vlissingen. (Passengers escaping from Olau ferries after collisions with
Comurhex nuclear cargoes in the Channel can catch a glimpse of it as they
rush to bright lights of Amsterdam). The smelter was the subject of intense
public debate, and opposition from environmental groups on health and
economic grounds
"Pechiney participates in Friguia, a holding company which has a 51 %
interest in alumina production in Guinea. The Frialco consortium is owned
30% by Pechiney, 30% by Noranda, with Alcan and Hydro Aluminium holding 20%
each. Pechiney also mines bauxite and produces alumina and aluminium in
Greece.
"India got Pechiney's technical advice in 1980 when it drew up plans for a
bauxite treatment and aluminium complex in Orissa.
"Soon after Bernard Pache took over the helm at Pechiney in 1985 from
Georges Besse (who had graduated into the company from Cogema), he began
soliciting atomic and other business in Japan, hoping to sell the whole
range of Pechiney's nuclear fuel facilities; fuel for light water reactors,
fabrication of zirconium products (through its Cezus subsidiary), the
production of uranium hexafluoride, and fabrication of fuel elements
themselves.
"Three years later, Uranium Pechiney, together with Cogema and Framatome,
took a 49% share in the US fuel supplier Babcock & Wilcox (B&W Fuel
Company). In 1991, Framatome was negotiating to take control over B&W
Fuel, as well as B&W Nuclear Service Company.
"But its most important nuclear role has probably been as the 50% holder of
Minatome, which - under the 1982 reorganisation - was bought out by
CFP/Total and merged with Total's subsidiary Total Compagnie Miniere.
"Until 1982, Minatome mined uranium inside France, notably at St
Pierre-de-Cantal, using its 94%-owned subsidiary Scumra and producing
100t/year U3O8. Outside of France, Minatome had shares in uranium mines in
Namibia (10% of Rossing), Niger (6.7% of the Somair consortium at Arlit),
and has been exploring for the deadly metal in the USA, Australia (at Ben
Lomond), Colombia, Brazil, Ireland, Britain and Mauritania, not to mention
Namibia.
"Uranium mining activities undertaken by Pechiney in its own name include
grabbing a share in the lucrative Cluff Lake project, managed by Amok as
the controlling partner in Cluff Mining Ltd; Amok itself is owned as to 25%
by Pechiney. Lower down the line, the wholly-owned subsidiary Uranium
Pechiney took a share in a uranium-from-phosphoric acid recovery plant
operated by Gardinier, planned for the early 1980s but which appears to
have closed by 1982. In Algeria the company was studying uranium reserves
in 1977; a contract that year for a feasibility study was awarded to
Pechiney and Minatome, Sogerem (a Pechiney subsidiary), and Stec.
"Five years later, Uranium Pechiney won a US$32M contract to provide
processing technology, engineering and equipment for
uranium-from-phosphates extraction in Tunisia, after Gardinier and PUK
conducted a feasibility study on the project. The unit was to be built at
Gabes on the Mediterranean coast, but plans for extraction had not
materialised by 1984.
"The company's most controversial deals have been with South Africa and in
South America. In the late '70s the French nuclear industry won a large
part of the apartheid republic's burgeoning nuclear power/weapons
programme. The contract for the first South African nuclear power station
(Koeberg 1) went to a consortium headed by Framatome (controlled by
Creusot-Loire which is itself part of the huge Empain-Schneider group that
controlled Pechiney). At roughly the same time, the South African
government announced an agreement with a consortium headed by PUK,
including Creusot-Loire and Westinghouse, to provide uranium enrichment and
fuel fabrication facilities. This arrangement was superseded with the
development of Nufcor's own Pelindaba enrichment plant.
"The Argentinian military dictatorship did, however, in the early '80s
select a consortium headed by PUK to cooperate with the Argentinian CNEA in
opening up the Sierra Pintada uranium deposits. The following year the USA
stopped its own shipments of uranium to Argentina because the military
state refused to sign the Nuclear Non-Proliferation Treaty and, within
another year, the Soviet Union was sending the country 20% enriched
supplies of U-235 in exchange for grain.
"Also, at the beginning of 1981, Pechiney announced it had won a contract
to build Brazil's first uranium hexafluoride plant for Nuclebras. The
plant, to be constructed at Resende near Rio de Janeiro, would employ
Pechiney's own technology and start up in 1985, with an initial production
of 450 or 500 tonnes. The deal completed Brazil's attempts for a decade (in
fact since the West German-Brazilian nuclear pact) to complete the nuclear
fuel chain on its own territory.
"At the same time PUK was assisting Nuclebras to construct the Pocos de
Caldas uranium mining complex, specifically the Otsamu Utsumi mine in Minas
Gerais which officially opened in May 1982, although production started in
December 1981. PUK participated in the actual construction of the mine and
provided technical expertise.
"Although the West German government built Brazil's uranium enrichment
plant in late 1983, the Brazilian regime asked Alsthom-Atlantique, another
French-state-controlled engineering company, to supply vital compressors
for the plant. The Brazilian Minister of Mines and Energy, Cesar Gais, also
visited France to discuss with Pechiney the possibility of using a new
uranium mining procedure developed by Pechiney.
"Uranium Pechiney developed this process to treat high clay ores and
dispersed clays containing uranium, gold and other materials not previously
economically recoverable. This 'physico-chemical' process purportedly
transforms clay into porous granular material ready for solid-liquid
separation.
"It was later reported that both Pechiney and Cogema were trying to
implement a plan to extract uranium and phosphoric acid from openpit ore at
Itataia in Brazil - an "innovative" development since the two are not
chemically bound together. The US$300M project was agreed in April 1984 and
was intended to process up to 20,000 tonnes a day of ore, producing some
2600 tonnes a year uranium, thus making it one of the more important new
uranium ventures.
"The deposit, 200km south-west of Fortelaza in Ceara state, has an
estimated 80,000 tonnes of contained uranium. Pechiney would be responsible
for the project engineering and Cogema for the purchase of any of the
Itataia uranium (46).
"An irony, not lost on anti-nuclear groups concerned with weapons
proliferation, is that both the West German and French governments have
enormously assisted Argentina and Brazil to acquire nuclear weapons
although (one might say because) the two countries, despite a recent
nuclear pact, have long considered the other capable of launching an atomic
attack on "their" soil.
"By the turn of the eighties, Pechiney had established itself as one of the
world's most important aluminium producers, its most significant
manufacturer of metal cans, and one of the few diversified conglomerates
not to have reduced its commitment to nuclear fuel production and
processing.
"In 1991, it saw its plans to start up a smelter at Nasiriva, in Iraq,
dashed by the horrendous conflict between the Saddam Hussein regime and the
Bush administration for control of Kuwait, and had to shelve plans (formed
with Austria Metall, Alumined Beheer and RTZ) to build the Atlantal smelter
in Iceland.
"In Venezuela, an agreement with Aluminium del Caroni SA, the state-owned
company, to construct a smelter on the Orinoco river, was shelved for
financial reasons. But, in 1990, Pechiney agreed to a new project with
Alisa (Aleaciones Ligeras SA) to operate a Venezuelan smelter, to be
constructed by Davy McKee.
(Above from Roger Moody, "Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier"
in The Gulliver File - Mines, people and land: a global battleground,
Minewatch, 1992. Courtesy of The Sustainable Energy and Anti-Uranium
Service Inc. Visit http://www.sea-us.org.au)
#5 - Norsk Hydro (Norway)
Norsk Hydro
Hydro Aluminium Metal Products
Bygd¿y Allé 2
Oslo, 0240
Telephone: 47-22-43-21-00
Fax: +47 22 73 79 30
Website: www.hydro.com
1999 revenues: $13.1 billion
CEO: Egil Myklebust
In 1905, Norsk Hydro ASA opened shop, harnessing hydro-electric power in
Norway for the first industrial-scale nitrogen fertilizer plant in the
world. While Norsk Hydro is still in the "plant nutrition" (ammonia, urea,
and other fertilizers) business, it is now a diversified and global
company, the largest publicly-owned firm in Norway.
The aluminum sector, which it entered in 1967, is a major piece of Norsk
Hydro's operations. In 1998, Hydro produced 747,000 tons of primary
aluminum, mostly at its four smelters in Norway (Karmøy, Høyanger, Sunndal
and Årdal). Hydro generates its own hydroelectric power for these smelters.
"Energy, in the form of hydroelectric power, natural gas and petroleum, has
been the basis for Hydro's growth and is the common link among its core
business activities," reads the company's 1999 annual report. (Norsk Hydro
ASA, Form 20-F (FY-1999), filed with the United States Securities and
Exchange Commission).
he company also owns a 49.9 percent stake in Sør-Norge Aluminium A/S
(Søral), which operates another smelter in Norway. Hydro is in a
partnership with Goldendale Aluminum in the United States in the production
of 159,000 tons of aluminum per year. It also an collaboration with Talum,
a small Slovenian smelter, and is a 10% investor in Slovalco, a smelter in
Slovakia heavily backed by the European Bank for Reconstruction and
Development (see Banks chapter).
In 2000, Hydro started a 10-year agreement to purchase a total of one
million tons of aluminum from Companhia Vale do Rio Doce's Albras smelter
in Brazil. The company is studying a possible new 474,000 ton per year
smelter in Trinidad and Tobago. (www.hydro.com)
Hydro's aluminum business is growing, geographically and fiscally. Hydro
realized 50 percent growth in its light metals sector operating income from
1999 to 2000. ("Preliminary results 2000: Strong growth and record
results," Norsk Hydro press release, Feb. 12, 2001)
Hydro supplied only 60 percent of its alumina requirements internally, low
compared to giants like Alcoa. It holds a 35 percent interest in the
Alpart, Jamaica, alumina refinery controlled by Kaiser, and a 25 percent
share in the Alunorte refinery consortium in Brazil. These supply a
combined 905,000 tons of alumina to Hydro's smelters. (Norsk Hydro, Form
20-F)
In a high stakes quest for a captive supply of alumina, Hydro is engaged in
a tense battle with indigenous peoples over its planned joint venture (with
Alcan) to mine and refine bauxite in Orissa, India (see Human Rights
chapter).
Norsk Hydro's other major corporate segments include oil and gas
exploration and development (mainly on the Norweagian continental shelf,
Canada, Libya, Angola, Russia and soon, Iran), industrial insurance,
pharmaceuticals, and petrochemicals such as polyvinyl chloride. Hydro spun
off its agricultural operations, including the world's largest fish farming
company, in 2000. (www.hydro.com)
#6 - Rio Tinto / Comalco
Rio Tinto
6 St. James's Square
London SW1Y 4LD
United Kingdom
Phone: 44 (0) 20 7930 2399
Fax: 44 (0) 20 7930 3249
2000 revenues: $10.0 billion
Website: www.riotinto.com
Chairman: Sir Robert Wilson
Comalco Limited
ACN 004 502 694
Level 25, 12 Creek Street
Brisbane, Queensland 4000
Australia
Telephone: +61 7 3867 1711
Facsimile: +61 7 3867 1775
1999 revenues: A$2.3 billion (Comalco only)
Website: www.comalco.com.au
The sole business of Comalco, a wholly-owned subsidiary of Rio Tinto, is
bauxite mining, alumina refining, and aluminum smelting. The Weipa bauxite
mine in Queensland, Australia, is Comalco's cash cow. In 1957, Commonwealth
Aluminium Corporation and British Aluminium Company formed a partnership
named Comalco, which signed an 84 year lease with the Queensland Government
to mine the Weipa bauxite. (www.comalco.com.au) Comalco owns 100% of the
massive Weipa pit, which produced over 11 million tons of bauxite in 2000.
The Weipa bauxite is processed two refineries. Comalco owns a majority
stake (56% stake) in the Sardinia, Italy, alumina refinery Eurallumina,
which produced 575,000 tons of alumina from Weipa bauxite for Comalco in
2000. It owns a 30% stake in Queensland Alumina Ltd. (Australia), which
refines almost one million tons of Weipa bauxite for Comalco annually. Last
year, the company decided to add site a new 1 million ton per year alumina
refinery in Queensland, ruling out a possible location in Sarawak,
Malaysia. (see Human Rights chapter)
Comalco also owns a 4% production share of the Boké, Guinea, bauxite mining
operation.
In 2000, it produced 701,000 tons of primary aluminum from three smelters
its 100%-owned smelter in Bell Bay, Tasmania, its 54%-owned smelter on
Boyne Island, Queensland, and its 79%-owned smelter on Tiwai Point, New
Zealand.
In 1999, Rio Tinto increased its interest in Comalco to 72%. Rio Tinto
continued to increase its majority stake in Comalco through 1999 and in
February 2000 made an offer for all the outstanding shares.(Stephen
Johnston, "Aluminium," Mining Annual Review, March 2000)
The company is now a wholly-owned subsidiary of Rio Tinto, an infamous
global metals producer. Aluminum accounted for 16 percent of Rio Tinto's
turnover in 2000. Its other mining operations, which span the globe,
include industrial minerals (590,000 tons of borate, 1.4 million tons of
titanium dioxide, 21% of turnover), iron ore (64 million tons, 11% of Rio
Tinto turnover), copper (865,000 tons mined, 15% of turnover), gold (2.7
million ounces mined, 15% of turnover), coal and uranium oxide (combined
17% of turnover, 132 million tons of coal, 2,195 tons of uranium oxide).
("Rio Tinto Earnings Grow 18 per cent to US$1,507 million," Rio Tinto press
release, Feb. 5, 2001)
Since the start of 2000, in addition to the Comalco sublimination, Rio
Tinto took control of an iron ore, copper, and uranium oxide producer named
North for $2 billion, diamond and gold producer Ashton for $400 million,
the Lemington coal mine for $134 million, and the Australian coal assets of
Peabody for over $500 million. (ibid)
#7 - Aluminium Bahrain (Alba)
Aluminium Bahrain
P.O. Box 570
Bahrain
Tel. 973 833448
Fax 973 833833
Website: www.aluminiumbahrain.com
Chief Executive: Karim Salimi
Revenues: not available
The government-controlled Aluminium Bahrain (Alba) smelter is a dominant
economic force in the Persian Gulf emirate .Oil production is the only
industry that is bigger in Bahrain. The company started producing 120,000
ton of aluminum per year in 1971.
The smelter started as a joint venture between the Bahrainian government
(18%), General Cable (17%), British Metal (17%), Kaiser (17%),
Electrokopper (17%), Breton Investments (9.5%), and Western Metals (8.5%).
The government of Bahrain now owns 77% of Alba's shares. The balance is
held by the Saudi Public Investment Fund (20%) and Breton Investments (3%).
(www.aluminiumbahrain.com/intro/share.htm)
Alba is slated to expand from 496,000 to 750,000 tons per year of capacity.
Five engineering companies (SNC Lavalin of Canada, Sofresid of France, and
U.S. firms ICF Kaiser, Bechtel, and Fluor Daniel) are bidding to draw up a
feasibility study and master plan for the $1 billion expansion project.
(European Institute for Research on Mediterranean and Euro-Arab
Cooperation, October 2000, on website: http://www.medea.be/en/index023.htm;
Middle East Business Intelligence, Jan. 5, 1996; AFP, Aug 27, 1995;
Moneyclips, Nov. 21, 1996; "Bahrain Country Profile" at
worldinformation.com)
#8 - CVG
Corporación Venezolana de Guayana
Avenida Guayana con Carrera Cuchivero
Edificio Sede CVG
Altavista, Puerto Ordaz,
Estado Bolívar, Venezuela.
Phone: 58 (86) 661735
Fax:: 58 (86) 614161
Website: www.cvg.com
The governement launched the Venezuelan Corporation of Guayana (CVG) in
1960 to promote industrial development in the Guayana region. Its Bauxilum
subsidiary mines over 4 million tons of bauxite a year.
It is installing a new 250,000 ton potline at the Alcasa smelter in Bolivar
State, which would more than double its 210,000 tpy capacity. CVG is trying
to attract foreign investors in the $800 million project. Reynolds (now
part of Alcoa) owns a 7.3% stake in Alcasa. (Venezuelan Commercial Office)
CVG's Venalum subsidiary operates a 430,000 tpy smelter. Six Japanese
partners (Showa Denko, Kobe Steel, Sumitomo Chemical, Mitsubishi Aluminum,
Mitsubishi Metal, and Marubeni Corp.) own a 20% stake in the Venalum
smelter, the ninth largest in the world. (Venezulean Commercial Office)
The state corporation also produces steel, hydroelectric power, and power,
engages in industrial agriculture and forestry, and promotes tourism.
(www.cvg.com)
#9 - Kaiser / Maxxam
Kaiser Aluminum
Maxxam Group Holdings
5847 San Felipe, Suite 2600
Houston, Texas 77057
Phone: 1-713-975-7600
Kasier president: Ray Milchovich
Maxxam CEO: Charles Hurwitz
2000 Kaiser revenues: $2 billion
Website: none
Kaiser is a subsidiary of Maxxam Inc., which owns 63% of Kaiser's common
stock. The balance of Kaiser's stock is publicly held. (Maxxam Group
Holdings Inc., Form 10-K (Annual Report, FY1999), filed with Securities and
Exchange Commission, March 13, 2000)
While giants like Alcoa, Alcan, and Billiton thrive through mergers,
expansion, and acquisitions, Kaiser has struggled. It lost $39 million in
the third quarter of 1999, and $17 million in the third quarter of 2000.
(ibid)
In the midst of the Alcoa and Alcan mergers, Kaiser president Ray
Milchovich said it was like "dancing with elephants" 10 times your own
size. Financial Times reported that "he added - admittedly in the context
of the company's protracted steelworkers' lockout - that Kaiser needed to
display agility, flexibility, and behavior appropriate to its size and
complexion.... Kaiser, which has suffered an explosion at its Gramercy
refinery, on top of its labor dispute, is respected for its tough
management style and its ability to keep ancient plants running. Its
alumina operations are low cost and it is also one of the five companies
that have signed an exclusive 10-year supply deal with Boeing." Boeing's
other corporate suppliers are Alcoa, Kaiser, Hoogovens and Pechiney.
(Gillian O'Connor, "Hyperactivity in a strong market," Financial Times,
2000, and "Who's Who: Mergers, takeovers in high summer," Financial Times
at FT.com website)
Beginning in January 1999, Kaiser locked out United Steelworkers union
members from working at its U.S. operations, including two aluminum
smelters (the 200,000 ton per year Mead and 73,000 ton per year Tacoma,
Wash. plants) and the Gramercy, La., alumina refinery. In April 2000, the
National Labor Relations Board's general council said the federal
government would charge Kaiser violated labor laws by initiating the
lockout.
(Institutional Shareholder Services, "ISS supports dissident director
nominees at Maxxam," filed by the Committtee of Concerned Maxxam
Shareholders with the SEC, May 22, 2000)
A July 5, 1999, explosion at its alumina refinery in Gramercy also
contributed to the drop in revenues. Replacement workers were injured in
the explosion in the digester area of Kaiser's 1.075 million ton alumina
refinery in Gramercy, Louisiana. Twenty workers were injured, and three
sustained severe disabling injuries. The explosion closed the plant,
sprayed bauxite up to two kilometers away, and severely curtailed bauxite
production in Jamaica. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
According to the Mine Safety and Health Administration of the U.S. Labor
Departmetn, "the immediate cause of the explosion was an excessive pressure
build up in pressure vessels in the digestion process area of the facility,
following an electrical fault causing a power distribution failure... MSHA
found deficiciencies in the pressure relief safety systems, which MSHA
concluded were violations of the regulations." Kaiser agreed to pay
$513,000 in penalties to resolve the agency's complaint. (Secretary of
Labor, "Secretary's revised motion to approve settlement and motion to
dismiss," Kaiser Aluminum & Chemical Corp. v. Secreatary of Labor et al,
penalty proceedings, Office of Administrative Law Judges, Federal Mine
Safety and Health Review Commission, 2000; "Alcoa, Alcan increase earnings
in third quarter," New Steel, Dec. 1999)
While Kaiser's U.S. operations remain in turmoil, it is expanding its
aluminum operations overseas. International operations include a 90 percent
stake in the 200,000 tpy Valco smelter in Ghana; a 49% stake in the 135,000
ton per year Anglesey smelter in Wales, U.K., a 65% stake in the Alpart
baxuite mining/alumina refining venture in Jamaica, a 49% stake in the KJBC
bauxite mining venture in Jamaica, and a 28% stake in the Queensland
Alumina refining company in Australia. (Maxxam 10-K) In 1996,
Kaiser/Maxxam reported that it had a pending collaboration with the huge,
749,000 ton, Krasnoyarsk smelter in Russa and a pending project, named
Kyril, to collaborate with smelter developments in Lanhzou and Lianhai,
China. (Maxxam Inc., Amendment No. 2 to Form S-3 filed with SEC on April
12, 1996)
After 718 days, Kaiser and the Steelworkers reached a settlement in Sept.
2000, and the lockout finally ended. (Karen Dorn Steele, "Analysts call
aluminium company's settlement a win for solidarity," Spokesman-Review,
Sept. 24, 2000)
Then, Kaiser used a novel approach to turn a profit in the fourth quarter
of 2000. Instead of reopening its Washington state smelters, the company
decided to sell its allotment of federally-produced power on the open
market, thereby benefitting from the growing energy crisis in the western
USA (see Energy chapter). It reported net income of $10.9 million in the
fourth quarter of 2000. "In the fourth quarter, the company sold power
provided by its existing contract with the Bonneville Power Administration
amounting to approximately $135 million," a Kaiser press release reported.
(Kaiser Aluminum Corp., "Kaiser Aluminum Reports Results for Fourth
Quarter, Full Year of 2000," press release, Feb. 7, 2001)
Kaiser's corporate parent, Maxxam, is run by chairman/CEO/president Charles
Hurwitz, who is the target of many union and environmental activists. (See,
for example, www.jailhurwitz.com and www.uswa329.org) Fortune Magazine
recently ranked Maxxam's board as one of the 10 worst in the United States,
citing Hurwitz' dominance. (Spoekesman-Review, Sept. 24, 2000)
Maxxam and Hurwitz took control of Kaiser in 1988, allegedly with the
backing of Marc "Aluminum Finger" Rich (see below). The corporate parent's
main business is logging, particularly cutting down redwoods and Douglas
Firs in California, through its Pacific Lumber subsidiary. Maxxam also
develops real estate in Puerto Rico, Arizona, and California, owns a horse
racing park in Houston, and a greyhound racing track in Harlingen, Texas.
"Hurwitz started out a crook and he hasn't stopped since," wrote Darryl
Cherney, a California redwoods activist. In the early 1980s, Hurwitz was
found guilty of illegal stock market
dealings.(www.jailhurwitz.com/sevensins.html)
In 1995, the U.S. Treasury Department's Office of Thrift Supervision (OTS)
initiated an action that alleges midsconduct by Hurwitz and Maxxam in the
failure of United Savings Association of Texas, a savings and loan company.
This failure forced a federal bailout totalling $1.6 billion. The OTS is
seeking either $821 million in resititution, or reimbursement of $362
million for "unjust enrichment." (ibid; Maxxam 10-K, FY1999)
#10 - VAW (Germany)
VAW aluminium AG (Vereinigte Aluminium Werk)
Georg-von-Boeselager-Str. 25
53117 Bonn / Germany
Tel: + 49 / 228 - 552 2312
Fax: + 49 / 228 - 552 213
Website: www.vaw.com
Annual revenues: DM6 billion
VAW is an independently-run subsidiary of a German electricity congolmerate
formed by the merger of Veba and Viag, which merged in 1999. ("Who's Who:
Mergers, takeovers in high summer," Financial Times at FT.com website.)
In the 1970s, VAW established its two smelters, both in Germany (Elbewerk
in Stade and Rheinwerk near Neuss) in the 1970s, when it also build the AOS
alumina plant in Stade. Beginning in the 1990s, VAW began exporting
technical support and engineering collaborations at smelters like Alusaf in
South Africa, Novokuznetsk in Russia, and Boyne Island in Australia. (VAW
Aluminium-Technologie GmbH, "Company information," at
http://www.vaw-atg.de/company.html)
VAW's alumina refinery in Stade imports bauxite from the CGB consortium in
Guinea, in which VAW is an investor. (see Basics chapter) VAW also owns
several rolling mills in Europe, and owns a 24% world share in the high
purity aluminum business. It acquired high purity aluminum market leader
Mitsubishi in 1999. (Stephen Johnston, "Aluminium," Mining Annual Review,
March 2000
The company boasts that "from beverage cans and peel-off lids for yoghurt
pots to toothpaste tubes, from packaging for tablets through engine
castings and car body components to roller blinds and printing machines -
in nearly all areas of life, aluminium products made by VAW play a key
role. VAW produces flexible packaging for the food and pharmaceutical
industries, strip and foil mainly go into packaging, automotive,
applications and offset printing or are used as façade cladding.
Furthermore, VAW is the world's leading supplier of aluminium engine blocks
and cylinder heads." ("VAW aluminium AG at
http://www.sovereign-publications.com/vaw.htm)
In October 2000, the Financial Times reported that "VAW is heading for the
auction block, following Viag's merger with Veba, to form energy group Eon,
which is now
getting rid of non-core interests.... VAW, whose most attractive assets are
probably its half-share in the Norf rolling mill and its auto engine block
casting business, is estimated to be worth Dollars 2.5bn-Dollars 3bn. Norf
is the largest rolling mill in the world, while VAW is the world leader in
aluminium engine blocks." (Gillian O'Connor: VAW continues to attract much
attention," Financial Times, October 25, 2000)
#11 - Dubal (U.A.E.)
Dubai Aluminium Company Limited
P.O.Box : 3627 Dubai
Tel : 04-8846666/8022926
Fax : 04-8846919
CEO: Ian Rugeroni
Website: www.dubal.co.ae
1998 revenues: Dh2.46 billion
"The starting point for us was indubitably the vision of Dubai's Ruler, His
Highness the late Sheikh Rashid bin Saeed Al Maktoum who decreed that a
smelter should be built," asserts Dubal CEO Rugeroni. "With the leadership
of HH Sheikh Hamdan bin Rashid Al Maktoum, Chairman of Dubal, and our Vice
Chairman, H.E. Mohammed Al Abbar, supported by a dedicated management team
and a workforce of over 2000 employees, we have been able achieve much of
what was originally planned." ("Productivity in Partnership at
http://www.sids.com/update/april98/dubai.htm)
Dubal Aluminium (Dubal) opened in 1979 and expanded from 375,000 to 536,000
tons of capacity in 1999, making it the third largest smelter in the world.
(Bricad Associates website, http://www.bricad.com/aluminium/dub/index.html;
Dubal website, www.dubal.co.ae; "Dubal Sales, Output Break Records," May
25, 1999 at www.useinteract.com)
The company's reach is transnational. Dubal is pondering the construction
of a new $2.5 billion, 480,000 ton smelter in Oman and provides technical
services to the 200,000 tpy Al-Mahdi smelter in Iran. The government of
Iran owns a majority share of Al-Mahdi, with the rest owned by
International Development Corp. of Dubai. International Development Corp.'s
investors included fugitive billionaire Marc Rich, U.K. construction
company George Wimpey, Caradel Investments, and former UAE ambassador to
London, Mahdi Al-Tajir. (Mining Annual Review, June 1992; Rasha Owais,
"Dubal studies Oman smelter project," Gulf News, April 10, 1999)
It imports 60,000 tonnes of alumina every three weeks from Alcoa's Kwinana
refinery in Western Australia. Australian Trade Minister Mark Vaile met
with Dubal's Rugeroni last year, after the CEO expressed concerns over
labor unrest at Kwinana. A ministry press release reported that "meeting in
Dubai with senior managers of Dubal, Mr Vaile said Australia was fully
committed to meeting its alumina supply obligations to the company with a
contracted value of $1.4 billion over the next eight years."
"All our export customers, especially a smelting operation such as Dubal,
must have reliability of supply. We simply cannot afford to have our
reputation as a reliable supplier damaged. The jobs of Australians in vital
export industries must not be put at risk by the selfish action of others,"
said Mr. Vaile. (Australian Minister for Trade, "Reassurance on alumina
supplies," media release, March 3, 2000)
#12 - Ormet (USA)
Ormet Primary Aluminum Corporation
1233 Main Street, Suite 4000
Wheeling, WV 26003
Phone: (304) 234-3900
Toll Free: (800) 331-6950
Fax: (304) 234-3929
Phone: 304-234-3900
CEO/Chairman: R. Emmett Boyle
1998 revenues: $780 million
Website: www.ormet.com
R. Emmett Boyle owns 100% of Ormet, which was established in 1956 by Olin
Corporation and Revere Copper and Brass, Inc. "to produce primary aluminum
for sale in equal measure to the parent companies." In 1986, Boyle bought
out the company from its then-owner, Alusuisse, and restarted its shuttered
Burnside, La., alumina refinery.
. (http://www.ormet.com/ormet/history.html)
Since 1957, Ormet has operated an alumina refinery in Burnside, La., and a
smelter in Hannibal, Ohio. Production capacity at Burnside could reach 1
million tons under a modernization program launched in 1999.
(www.ormet.com; Plunkert, 2000)
According to the United Steelworkers of America, Boyle secretly funneled
money in a 2000 campaign against the re-election of an Ohio judge that he
views as pro-union.
"The Ohio Elections Commission is investigating charges that a committee,
which includes the leaders of two companies that have a history of locking
out Steelworkers, violated campaign financing laws in the November state
supreme court races," reported the USWA in November 2000.
"The smear campaign against an Ohio Supreme Court justice who has sided
with labor's causes was financed by a secret $3 million slush fund that
included solicitations by Emmett Boyle, who locked out Steelworkers at
Ravenswood Aluminum in 1990. Boyle is now heard of Ormet Corp., where
Steelworkers have been working without a contract since May 31, 1999.
"Resnick won reelection handily and many observers feel the campaign
spearheaded by the Ohio Chamber of Commerce did her more good than harm.
Steelworkers joined with other unions in Ohio to raise money to help
Resnick overcome the Chamber's onslaught.
In that campaign, television ads suggested that Justice Resnick took bribes
from special interests.
"The Ohio Chamber was able to raise that amount of money ($3 million) in
part because donors were assured that their contributions would be kept
secret. Some Ohio businesses also received calls from Republican Gov. Bob
Taft soliciting money for the smear campaign.
"Shortly after the election, the Ohio Elections Commission found 'probable
cause' that the chamber committee violated the state's election laws by
refusing to release the names of contributors to the anti-Resnick campaign
and for suggesting Resnick made decisions based on campaign contributions.
A hearing will be held sometime after the first of the year to investigate
the charges further. ("Enemies of Labor under investigation," Steelabor,
Nov-Dec. 2000 at http://www.uswa.com/steelabor/NovDec00/aksmear.htm)
Other Notables
Hoogovens / Corus Group
Corus Group plc
15 Marylebone Road
London, NW1 5JD
England
Tel.: 020 7 314 5500
Fax: 020 7 314 5600
Chairman: Brian Moffat
Hoogovens Aluminium BV
Postbus 10000, 1970 CA,
IJmuiden Vondellaan 10
1942 LJ Beverwijk
Netherlands
Tel: 0251-499108
Fax: 0251-470220
Giant British Steel and Hoogovens, a Dutch aluminum and steel producer,
merged in 1999 and created the largest steel company in Europe, named
Corus. According to the Financial Times, "Most industry observers expect
the British Steel-Hoogovens merger eventually to prompt the disposal of
Hoogovens' aluminium interest." ("Who's Who: Mergers, takeovers in high
summer," Financial Times at FT.com website; Stephen Johnston, "Aluminium,"
Mining Annual Review, March 2000)
Hoogovens imports alumina from Suriname, owns a 97,000 ton smelter in
Delfzijl, Netherlands, and a 80,000 ton smelter in Voerde, Germany, and has
aluminum divisions in Belgium and Quebec. (Tom Stunza, "Aluminum merger and
acquisition activity accelerates," Purchasing Magazine, Oct. 7, 1999)
WMC Ltd.
WMC Ltd.
(formerly named Western Mining Corporation)
360 Collins St. 31st Floor
Melbourne, Victoria 3000
Australia
Phone: 61-3-602-300
CEO: Hugh Morgan
WMC holds an interest in the Suralco bauxite mining joint venture, with
Alcoa and Billiton, in Surinam. In 1994, WMC entered into a global alumina
refining joint venture with Alcoa, and owns 40% of the venture, Alcoa World
Alumina & Chemicals. When the two companies combined alumina operations,
the venture had anual revenues of close to $3 billion a year.("Alcoa
Acquires Discovery Alumina Chemicals Business," Industrial Specialties
News, July 10, 1995)
Prior to Alcoa's purchase of Reynolds, the WMC/Alcoa venture controlled
more than 30 percent of global alumina capacity. (American Metal Market,
January 26, 2001)
In October 2000, when asked about the implications of the Alcoa-Reynolds
combine, WMC's chief executive officer, Hugh Morgan replied , "The direct
implication is AWAC acquired some additional bauxite resources in Africa
and South America. Under the AWAC agreement between Alcoa and WMC,
anything involving the acquisition of bauxite, alumina or alumina chemicals
goes in the AWAC pot. Also, the justice department ruling means AWAC cant
purchase additional alumina capacity thats sold to the traded marketplace
(i.e. the material thats not vertically integrated). But this doesn't limit
internal expansions. AWAC has tremendous growth opportunities." ("Open
Briefing WMC CEO Morgan on Record Profit," Australian Associated Press
Company News, Aug. 15, 2000)
WMC is also a major miner of uranium, gold, and nickle. ("The Bechtel
Truth - Notes for the Alternative AGM of WMC," Roxby Action Collective,
Nov. 20, 1997 at http://www.sea-us.org.au/roxby/bechteltalk.html)
Marc Rich
Marc Rich & Co. Holding
Baarerstrasse 53
6304 Zug
Switzerland
Phone: 041/709.08.44
Fax: 041/709.08.29
Billionaire Marc Rich lives in Zug, Switzerland, where he moved in 1983
just before the U.S. government gained an indictment against him for
evading corporate taxes of $48 million, fraud, and circumventing the U.S.
oil embargo against Iran. He renounced his U.S. citizenship, paid a $113
million settlement check, but remained a fugitive until President Bill
Clinton pardoned him in a controversial last-hour order in January 2001.
Rich is a secretive tycoon who holds the nickname "Aluminum Finger."
("Aluminium Finger" reference from untitled article, Evening Standard, Jan.
30, 1996)
In addition to his aluminum interests, Rich "also has been accused of
smuggling oil to South Africa during apartheid and of selling embargoed
Iraqi oil," reported The Nation (Feb. 12, 2001). The New York Daily News
(Jan. 28, 2001) said Rich "went from New York University dropout to
mailroom clerk to modern-day alchemist, turning lead and aluminum - and
smuggled oil - into pots of gold.... (Although there is) no conclusive
proof, Rich and his shadowy companies are said to have looted gold from the
collapsing Soviet Union, sold Korean weapons to Iran, illegally cornered
the tin and aluminum markets, made off with chunks of the Gross Domestic
Product of Finland and Romania and jumped into bed with the Russian mafia."
(Helen Kennedy, "Ruthlessness is Rich's game," New York Daily News, Jan.
28, 2001)
"With a potent combination of trading genius, nerves of steel and
tissue-thin morals, Rich became a billionaire, buying and selling oil and
metals in fiendishly complicated maneuvers," the Daily News explained.
(ibid).
Rich pressed his case to President Clinton in fear of possible retribution
from former Alcoa president O'Neill. O'Neill is President Bush's new
Treasury Secretary. According to the Wall Street Journal (Jan. 23, 2001),
"People close to Mr. Rich said the need for a pardon took on an added sense
of urgency with the impending change of an administration. Of particular
concern to Mr. Rich was the appointment of Paul O'Neill as Treasury
secretary... One of Mr. Rich's metal-trading company's scooped up Alcoa's
bauxite and alumina production in Jamaica. 'Rich was frightened O'Neill
would get the government to come after him again,' a person familiar with
the federal manhunt for Mr. Rich said. Treasury officials said they
wouldn't comment on the matter."
In the mid-1980s, when demand for aluminum dropped, Alcoa closed the
Jamalco bauxite mining/alumina refining complex in Clarendon Parish. In
response, the Jamaican government signed a 10 year suply contract with Rich
and assumed responsibility for production at Jamalco. In the 1990s, with
alumina markets tightening, Alcoa resumed its role as managing partner of
Jamalco. (Canute James, "Jamaica metals market improves - Bauxite,"
Financial Times, Feb. 12, 1990; "Discover Mandeville" at
http://discoverjamaica.com/gleaner/discover/tour_ja/tour7.htm)
Rich shipped bauxite to his alumina refinery, Vialco, on St. Croix, U.S.
Virgin Islands. Vialco was sold to Alcoa in 1995. (Bob Regan, "Alcoa
refinery spared by Hurricane Lenny," American Metal Market, Nov. 19, 1999)
In 1983, Rich opened an office in Moscow. Soon, he supplied the Soviet
Union with grain in contrvention of U.N. embargo over the Afghanistan war,
and heavily traded in aluminum.. By 1992, Marc Rich engaged in an estimated
$3 billion of trade in the countries of the former Soviet Union. Former
Russian Trade Minister Oleg Davydov attributed the rising corruption in his
country in part to people like Marc Rich. When "legal channels became
inconvenient [for Russia's new businessmen], there appeared a huge mass of
foreign entrepreneurs, mostly crooks like Marc Rich, who began to teach
us various ways of taking the money out through offshore companies. That
is what bred our whole system of corruption and criminality," he told
Forbes magazine in 1998. (Kirill Vishnepolsky, "Glencore International
strikes root in Russia," RusData DiaLine - BizEkon News, April 30, 1996;
Oleg Davydov, "Tomorrow they will take up arms: A chat with Russia's former
trade minister," Forbes, Sept. 7, 1998; "El drama en el sector del
aluminio," June 27, 1998, on eluniversal.com,
http://noticias.eluniversal.com/1998/06/27/OP15.shtml)
Rich bought Kaiser's smelter and rolling mill in Ravenswood, West Virginia,
in 1988; two years later, he locked out the plant's unionized workers. In
one of labor's shining moments of the early 1990s, Steelworkers picketed
Rich's home in Zug, chased him with a puppet of West Virginia labor icon
Mother Jones, and blocked his purchase of a smelter in Czechoslovakia.
("Pardon draws protests; Rich fled after indictment, was involved in Kaiser
deal," Spokesman Review, Jan. 26, 2001)
Rich helped to leverage Hurwitz' takeover of Kaiser Aluminum in 1988 when
he agreed to purchase $400 million worth of Kaiser's aluminum. (Cherney)
He was an investor in the International Development Corporation (IDC) of
Dubai, United Arab Emirates, which built the Al-Mahdi smelter in the
mid-1990s. In 1990, IDC proposed a smelter in Algeria, named Medial.
Rich divested himself of many of his aluminum holdings in March 1993, when
he agreed to sell his shares in Marc Rich & Co., which became Glencore
International. In 1994, Rich sold his last 25% stake in Glencore. ("Market
news," The Mining Journal, Nov. 11, 1994)
In 1996, Rich returned to commodities trading, operating out of a company
named Marc Rich & Co. Holding. According to the Financial Times, "Rich said
he had no doubt that there was room for another commodity trading business,
despite the rise of other physical giants in the intervening period,
including AIOC, Trans-World Metals, the Balli Group and Glencore, most of
which have developed strong business links with the aluminium industry -
the metal he was famed for trading in. 'We plan to be active in aluminium,
copper, zinc, lead, nickel, metal and concentrates, in addition to crude
oil, petroleum products, grain and coal. Obviously, I feel the prospects
for a company trading in commodities is good,' he said. (Rachel Carnac,
"Rich return sets the markets buzzing," Financial Times, February 9, 1996)
In 1998, Rich expressed an interest in aquiring Noranda's share of the
Friguia bauxite/alumina operation in Guinea, according to Mining Annual
Review (Dec. 1999). Noranda and the other foreign partners, Alcan and
Hydro, sold their 51% stake to the Guinean govenrment in late 1998. The
government, prompted by the World Bank (see Banks chapter), opened bids for
an 85% strake in Friguia. It pre-selected Marc Rich, Anglo American,
Comalco, and Kaiser to bid. In February 1999, however, the government put
the bidding on indefinite hold. Friguia's managers have also been courting
investment from Iran. Iran is seeking bauxite and alumina for its two
smelters, one of which Marc Rich helped to develop. ("New delay in Friguia
privatization," Africa Energy & Mining, Feb. 17, 1999; "Four pre-qualified
for Friguia," Africa Energy & Mining, Dec. 2, 1998)
Chapter IV. Multilateral and bilateral financial institutions
As we have seen with other energy-intensive industries (see EBRD, two WB
reports), multilateral development banks and agencies funded by industrial
governments are helping to finance the aluminum industry’s global
expansion.
Not coincidentally, this industry, worldwide, is dominated by transnational
corporations based in the countries that are financing their power plants,
mines, refineries and smelters. National development banks help
corporations based in their country sell equipment to foreign aluminum
operations and gain ownership stakes in old and new infrastructure.
These institutions have poured over $3 billion into dams and other power
plants that fuel aluminum smelters, into structural adjustment and other
programs designed to open bauxite mines, alumina refineries, and smelters
to foreign investors, and into feasibility studies and equipment sales by
Western corporations.
Focus on Slovak Rep./ Iran smelters
The European Bank for Reconstruction and Development, a multilateral aid
agency funded and managed by Western governments, agreed to finance an
aluminum smelter refurbishment and privatization in the Slovak Republic in
1994. The Slovalco, or ZSNP, operation doubled its capacity to 132,000
tons. The old smelter, in turn, may be shipped to Iran.
The EBRD loaned Slovalco $110 million in three parts beginning in July
1994. Part of the loan financed an investment agreement in which Hydro
Aluminium and EBRD control 10 percent ($15 million each) of Slovalco’s
equity. It was EBRD’s biggest private sector loan to date. The German and
Dutch governments, and the European Union’s PHARE program, financed
environmental studies and community outreach programs.
The EBRD hailed the agreement as "the centerpiece of the overall
restructuring and privatization of ZSNP in which two inefficient and
polluting smelters will be closed down and other major facilities will also
be closed down or upgraded to meet Slovakian and EU environmental
standards. The new smelter, which will provide employment opportunities for
over 500 people in Ziar, will be one of the most efficient in the world."
(EBRD press release, "EBRD and Slovakian Aluminium smelter sign loan
agreements, July 12, 1994)
The old Slovalco smelter had a poisoned past. In 1996, the Financial Times
reported that a "mountain of red and brown bauxite waste still dominates
the valley approach to the [Slovalco] aluminum works… the legacy of decades
of environmental neglect. Inside the old, inefficient and polluting
smelters have been closed down… [replaced by] the gleaming white and gray
buildings of one of Europe’s most modern aluminum smelters." (Financial
Times, Oct. 23, 1996)
"The new plant will be energy efficient and safe, and will meet good
international environmental standards," boasted the EBRD. "The shut-down of
the existing smelters, together with the start-up of the new smelter, will
have a major beneficial effect on occupational health and external air
quality." ("EBRD industrial projects with significant environmental
benefits: some examples" at
http://www.ebrd.ro/english/enviro/envpub/envfacts.htm/indproj.htm)
But while the EBRD investment replaced chronically-polluting Soderberg
potlines
at the notorious plant with modern pre-bake cells, the old cells may move
to a proposed new smelter on Iran’s Qeshm Island. (Aluminium Today, August
1997)
In 1994, the Center for International Environmental Law (CIEL)termed the
EBRD loan "an especially disturbing example (of) funding of a major
polluter... ZSNP will remain a significant source of pollution in the
region, even though the Bank loan will finance improvements in the
smelter's environmental performance.
"The ZSNP plant, utilizing approximately 10 percent of the total energy
produced in Slovakia, also puts a severe strain on Slovakia's overburdened
electricity generating capacity, supporting the government's contention
that the nuclear power plant at Bohunice, one of the most dangerous in
Central and Eastern Europe, cannot be closed until its capacity can be
replaced....
"The (EBRD) environmental staff submitted a document to the Directors just
prior to the Board's decision to approve the controversial ZSNP loan. CIEL
discovered that the document had been altered to downplay the environmental
impacts of the project. Later communication with Bank staff revealed that
while some alterations were unintentional, others were deliberate. It is
impossible to know whether the misrepresentations in the document
influenced the Board's decision to approve the project. Nevertheless, such
alterations breach the trust placed in Bank staff by the Directors."
(Donald M. Goldberg and David B. Hunter, "EBRD's Environmental Promise: A
Bounced Check?," Center for International Environmental Law, December 1994)
In a 1995 follow-up report, CIEL said called the Slovalco smelter "one of
the region's largest polluters. A bauxite waste site leaches heavy metals
into the soil and groundwater, and the existing factory emits dust, SO2,
NOx, CO, and fluorides far in excess of Slovak and EC air emissions
standards. Off-site testing has revealed high concentrations of
benzopyrene, arsenic, molybdenum, copper, nickel and chromium. Health
problems, including congenital defects, allergies, and thyroid and lung
diseases, are on the rise throughout the region.
"Due to the highly polluting and energy-intensive nature of primary
aluminum production, Slovak environmentalists favored either converting the
plant to secondary aluminum production or closing the plant altogether.
They also argued that the plant made no economic sense. Ideally, for
aluminum production to be economically competitive, a cheap source of
energy, labor, and raw materials should be available. With the exception of
cheap labor, Slovakia has little competitive advantage on the international
aluminum market.
"Nevertheless, the EBRD decided to pursue the project, which already had
been rejected by the World Bank and a number of private investors. Despite
strenuous objections from environmentalists, it was given fast track
status, a protocol that is not provided for in the Bank's Environmental
Procedures. Most of the procedures for public participation were curtailed:
formal notification to the public about the ZSNP project, public scoping,
and public meetings were dispensed with. Bank staff did conduct a pro forma
meeting with a small number of environmentalists a few days before the
project was submitted to the Board, but by that time it was not likely the
project would be altered.
"The ZSNP project demonstrates that, when faced with financial pressures,
the Bank is willing to forego at least some of its environmental due
diligence. A sustainable development policy and stronger environmental
procedures are urgently needed to help the EBRD withstand such pressures
and ensure that each project receives the appropriate level of
environmental analysis and public consultation." (CIEL, "The European Bank
for Reconstruction and Development: An Environmental Progress Report,"
1995, at www.ciel.org)
Focus on former Soviet Union, aluminum, and corruption
Since the fall of the "Iron Curtain," aluminum has flooded Western markets
from the former Soviet Union. Commodities traders Marc Rich and Trans-World
Metals fueled this flood. Foreign governments also got into the act.
As a 2000 U.S. Department of Commerce study noted, "IBRD (the World Bank),
EBRD, the U.S. Export-Import Bank and other countries’ export credit
agencies have been active in attempting to support foreign equipment sales
to Russian aluminum producers." (Nick Mikhailov, "Russia: Production
equipment for the aluminum industry," Business Information Service for the
Newly Independent States (BISNIS), U.S. Department of Commerce, July 31,
2000, at http://bisnis.doc.gov/bisnis/000817rsalum.htm)
The involvement of these government agencies in former CIS states’ smelters
thrusts these officials shoulder-to-shoulder with dangerous company. The
Russia aluminum industry is rife with tales of corruption, the black
market, and even killings.
"Over the years, the Russian media, in particular, has pursued telltale
trails leading to connections with the Russian Mafia, bribery, and unsolved
cases of assassination of journalists and people related to the aluminum
industry," reported American Metal Market in January 2001 ( Christian Kohl,
"Trans-World probe deepens," American Metal Market, Jan. 19, 2001)
- Globalization and Corruption
The globalization of the former Soviet Union’s aluminum industry can be
traced to the year 1983, when fugitive commodities trader Marc Rich (see
Corporate chapter) opened an office in Moscow. Soon, he supplied the Soviet
Union with grain in contravention of U.N. embargo over the Afghanistan war,
and heavily traded in aluminum.
By 1992, Marc Rich engaged in an estimated $3 billion of trade in the
countries of the former Soviet Union. Former Russian Trade Minister Oleg
Davydov attributed the rising corruption in his country in part to people
like Marc Rich. When "legal channels became inconvenient [for Russia's new
businessmen], there appeared a huge mass of foreign entrepreneurs, mostly
crooks like Marc Rich, who began to teach us various ways of taking the
money out through offshore companies. That is what bred our whole system of
corruption and criminality," he told Forbes magazine in 1998. (Kirill
Vishnepolsky, "Glencore International strikes root in Russia," RusData
DiaLine - BizEkon News, April 30, 1996; Paul Klebnikov, "Tomorrow they will
take up arms: A chat with Russia's former trade minister," Forbes, Sept. 7,
1998; "El drama en el sector del aluminio," June 27, 1998, on
eluniversal.com, http://noticias.eluniversal.com/1998/06/27/OP15.shtml)
By 1994, when Rich sold his stake in the trading business that was renamed
Glencore, his company was eastern Europe’s largest Western supplier of
grain, which he obtained mainly by bartering aluminum from smelters in the
former Soviet Union. (Stuart Penson, "Marc Rich & Co. name changed for
'morale,’" American Metal Market, Sept. 2, 1994)
As Rich’s inference transferred to the Glencore group, then faded in the
mid-1990s, two brothers in London filled the gap. David and Simon Reuben
founded Trans-World Group (a/k/a Trans-World Metals) in 1977. After the
disintegration of the Soviet Union, Trans-World forged an alliance with
another set of brothers, Lev and Mikhail Chernyi (also spelled Chernoi and
Chernoy), whose Moscow-based Trans-Seas Commodities came to control Russian
aluminum exports.
The Chernyi brothers, said Minister Davydov, "gained control of aluminum
exports at a time when aluminum cost $ 2,000/ton on world markets but could
be bought at $ 500/ton
inside Russia. All the producers became deeply indebted to the brothers,
who made deals with the plant directors to acquire aluminum at the Russian
price. Which they then sold at the world price. The tragedy is that if the
privatized companies were state enterprises today, they would be recording
good profits, they would be paying taxes, paying workers' wages, investing
in their plant and equipment. But these so-called owners arrived, and what
happened? There are no profits. No tax payments. The plant and equipment
are getting worn out. And the money goes abroad." (Forbes, Sept. 7, 1998)
In 1995, Trans World took control over the Gyndzha alumina plant and
Sumgait aluminum plant in Azerbaijan from Glencore. The shifting business
climate brought this thought from a Glencore executive, according to
BizEkon News: "One of Glencore Moscow office executives recently pulled no
punches in contending that his company would still be doing deals in Russia
even if a Hitler or someone came to rule it, given Glencore's prodigious
track record of business collaboration with regimes of any stripes and
shades. (Kirill Vishnepolsky, "Glencore International Strikes Root in
Russia," RusData DiaLine - BizEkon News, April 30, 1996)
By early 1998, Trans World controlled between 40% and 70% of Russia’s
aluminum industry. Its estimated global sales of $6 billion per year made
the small firm, fleetingly, the third largest aluminum company in the
world. Then, the Chernyi brothers severed ties with their London partners.
By 2001, Trans World had exited from most of its business in the former
Soviet Union. (Matthew Brzezinski, "Kiev’s dreary hotels offer microcosm of
reform failures," Wall Street Journal, April 16, 1998; American Metal
Market, Jan. 19, 2001)
As Trans World faded, other so-called "aluminum barons" rose, including
politicians Anatoly Bykov and his Krasnoyarsk Enterprise and Anatoly
Chubais and his Russian Joint (or Unified) Energy Systems. (Mining Annual
Review, March 2000)
Other players in Russia’s newly-privatized aluminum industry included Trans
CIS Commodities, Renova, Rial, Al-Invest, Mikom, AIOC, Hunter Douglas,
Metall-Gesellshaft, Pechiney, Gerald Trade, and Daewoo. (Delovoy Mir, April
13, 1995)
The aluminum industry remained a collection of feudal-like enterprises
until the late 1990s, when Siberian Aluminium (Sibersky) began to battle
the Chernyis, and seized control of many smelters.
The battle for control of the former CIS’ aluminum industry took many
forms. Government officials began accusing Trans-World of misconduct
beginning in 1997, when Russian officials investigated allegations that
Trans-World Metals defrauded the central bank and sponsored violence.
Russian Interior Minister Anatolii Kulikov raised the specter of "the
current criminal situation in the non-ferrous industry" when he told the
country’s Parliament about the need to curb western corporations’
influence. He said gang leaders controlled the Krasnoyarsk and Bratsk
smelters. (Mining Journal, June 5, 1998; "Russia Mining," Cambridge
International Forecasts Country Report, December 1, 1999)
Also during 1997, Russian officials alleged that the general director of
the world’s second-largest smelter, the 749,000 ton Krasnoyarsk smelter,
failed to repatriate $20 million from an alumina deal. (Mining Journal,
June 5, 1998)
In 1998, the government of Kazakstan ousted Trans-World from its management
position at the 1.1 million ton Pavlodar alumina refinery, accusing the
company of "irregularities, tax evasion and failing to act in the best
interests of shareholders."
As the charges intensified, Trans-World reportedly offered to sell some of
its interests to transnational giant Billiton. (Mining Journal, June 5,
1998)
Violence has ripped at the region’s aluminum industry. In Tajikistan,
government and rebel forces based in Uzbekistan have battled for control
over the Taduz smelter, one of the world’s largest. (see Human Rights
chapter). In Russia, explosives blew outside the Bogoslovsk smelter’s
administrative offices in September 1997. An official called it "an act of
routine revenge." (Mining Journal, June 5, 1998)
"The 1994-1998 period in the Krasnoyarsk region has been dubbed the "Great
Patriotic Aluminium War", in which local mafia and factory directors were
sucked into a bloody battle for control of the smelter," reported the
Financial Times in 2000. "Dozens died in a series of murders, including
local bankers, crime bosses and factory officials. The victims included
both allies and competitors of Trans-World, though David (Reuben) angrily
denies any hint that they or their partners had any role in the violence.
‘There is absolutely no truth to any of the allegations that Trans-World
has been involved in any illegal activity in Russia,’ he says. (Charles
Clover and William Hall, "Aluminium ‘risk-taker’ changes tack in Russia,"
Financial Times, April 12, 2000)
Russian authorities invaded the offices of Bykov and Krasnoyarsk in April
1999. In court, they accused Bykov of "laundering money obtained by illegal
means." (Mining Annual Review, March 2000)
In June 1999, Bykov, Chernoy/Trans-World, and Visaly Anisimov’s
TrustConsult fought for control over the Kransoyarsk smelter. While Bykov
faced prosecution from Russia, Chernyi had his own troubles. According to
the Mining Annual Review, "Swiss, US and British police were also
reportedly investigating Lev Chernoy over money laundering and organized
crime activities."
In the winter of 1999-2000, oil magnate Roman Abramovich led a group that
took control of the two largest smelters in the world: the 870,000 ton
Bratsk and 835,000 ton Krasnoyarsk plants. He bought the controlling shares
from Chernoy and Trans-World. (Mining Annual Review March 2000)
That season, car dealer Boris Berezovsky reportedly purchased the fifth
largest smelter in the country, the 284,000 ton Novokuznesk plant.
(Mikhailov; Mining Annual Review, March 2000)
At the same time, Sibirsky Aluminum, led by Oleg Deripaska, built a holding
company around the 400,000 ton per year Sayan aluminum smelter. Reynolds
(now part of Alcoa) has held a 3% stake in Sibersky.
Berezovsky and Abramovich formed an alliance that, within a month, absorbed
Deripaska’s Sibirsky Aluminum. The new umbrella group, named Russian
Aluminum (or Russky Aluminum) dominates the country’s industry. Its five
smelters, with a combined capacity of over 2.1 million tons of production,
generate annual sales of $3.4 billion, according to the U.S. Department of
Commerce. (Mikhailov)
A Russian newspaper tied the buyout to a power struggle between the
aluminum barons and politicos Chubais and Vladamir Putin. "These purposeful
and even aggressive aluminum market deals indicate that Berezovsky,
Abramovich and Chernyi have gone on the attack: they have united in order
to concentrate the ownership of vast strategically-significant assets. They
are doing this in order to kill several birds with one stone," claimed the
Moskovskie Vedomosti in February 2000.
"Firstly, they want to diminish the influence on the GDP of groups
controlled by their main opponent, Chubais; thus also reducing his chances
of heading the government or
getting one of his people into that post. Secondly, they want to control
the aluminum sector as well as the oil sector, which would give them
influence over the fundamental natural resources sectors of the Russian
economy. Thirdly, of course, it's a question of personal security.
"Having despaired of reaching an agreement with the acting president now,
and fearing that after the election Putin will initiate a new
redistribution of property, Berezovsky, Abramovich, and the Chernyi
brothers want guarantees of their own security and the security of their
business interests. They figure that Putin will have no choice; he will be
forced to provide guarantees (and concessions) for a single favor: he will
not have to sit down at the negotiation table with several odious
oligarchs, as Boris Yeltsin once had to do. Neither would this be
acceptable to Putin himself; the head of state is unlikely to meet with the
Trans-World Group boss, who has a very shady reputation. Berezovsky would
be a different matter - he is, after all, a member of parliament...
Basically, this is blackmail. Ordinary, blatant blackmail. They are showing
Putin that they aren't afraid of him." ("Behind the aluminum deal,"
Moskovskie Vedomosti, February 2000)
Russian Aluminum wants to grow transnationally, particularly into
infrastructure developed by the former USSR. Its targets included the
refineries in Ukraine, Kazakhstan and Romania, and coal mines in Ukraine
and Kazakhstan. (Mikhailov)
Two other large holding companies, SUAL-Trustconsult and NorthWest
Aluminum, were forged out of the on-going industry-wide restructuring in
2000.
SUAL-Transconsult is the product of a three-way merger, in early 2000,
between the Siberian-Urals Aluminum Company, TrustConsult, and Renova. The
new combine owns three bauxite mining companies and four smelters including
the 158,000 ton Bogoslovsk, 252,000 ton Irkutsk, 80,000 ton Urals, and
68,000 ton Kandalaksha plants. (Mikhailov)
NorthWest Aluminum is a holding company proposed by eight aluminum
companies in the Leningrad region. The nascent firm includes the 24,000 ton
Volkhov and 129,000 ton Volgograd aluminum plants and two alumina producers
(Boksitogorsk Alumina and Pikalyobskoye Alumina). Alutech of the U.S. hopes
to set up a 200,000 ton smelter in the region. (Mikhailov)
A recent Dept. of Commerce report said the reorganization held promise for
more Western equipment sales, but added that "the circumstances surrounding
these mergers were highly non-transparent and the identity, objectives and
financial structure of the new management is not sufficiently clear to
reach a judgment about their plans for the new conglomerate." (Mikhailov)
U.S. companies supply about one-quarter of the equipment imported by the
Russian aluminum industry. Suppliers include Alcoa, Alutec, Kaiser (two
potroom cell upgrades to Krasnoyarsk), Loma Machine Mfg., Pyrotec Inc. and
Wagstaff Inc. According to the U.S. Dept. of Commerce, "the most
aggressive non-American players in the Russian aluminum equipment market"
are: Germany’s Mannesmann, Schloemann, Wagner, and VAW (designed an upgrade
at Novokuznetsk); France’s Pechiney and Clecim; Italy’s Hunter Midia,
Continuus Properzi, and Mino; Britain’s Megatherm and JMC; Japan’s Itochu
and Mitsubishi Heavy Industry (they want to finance an expansion at Sayan);
and, Austria’s Ebner. (Mikhailov)
- Still in turmoil
The aluminum industry in Russia remains tumultuous after the
consolidations. Men who shaped the post-Soviet industry have been charged
with murder, money laundering, and collusion with the Mafia.
On Oct. 4, 2000, Agence France Presse reported that Russian police arrested
Bykov, "once known as Russia's ‘aluminum baron,’ in the Siberian city of
Krasnoyarsk on Wednesday while investigating the murder of a local
underworld figure... Bykov is accused of several crimes, including fraud,
money laundering and being implicated in another murder. Bykov was arrested
at his home Wednesday on suspicion of involvement in the September 29
murder in Moscow of Pavel Struganov... Struganov, suspected of being a
leading figure in Krasnoyarsk criminal circles, was killed along with
another man in broad daylight in central Moscow." ("Russia's former
‘Aluminum baron’ returns to prison, Agence France Presse, Oct. 4, 2000)
Earlier in the year, Bykov was extradited from Hungary to face the other
charges, and was released on bail in September. ("Two businessmen killed in
central Moscow," Agence France Presse, Sept. 29, 2000)
An April 25, 2000, article in Noviye Izvestia asked, ". Who is he, Anatoly
Bykov: the godfather of the aluminum mafia, or just another victim of
political showdowns and property redistribution? And most importantly, what
will happen when Bykov starts talking? His testimony is expected to be a
real blow to many people in high places: Anatoly Bykov's personal friends
and enemies, partners and competitors include quite a few politicians in
the top echelon of power, as well as important government officials,
businessmen, financiers and even officials of various security and
law-enforcement agencies. Hence the speculations that there will be an
attempt to get Bykov "out of the way" now that he's back in Russia. If that
is really so, we can expect surprises not so much from his enemies as from
his "friends," since Bykov undoubtedly has suitcases full of "exclusive
dirt" on them. The criminal world, which lives by its own laws, also has
grievances against Anatoly Bykov.
"Here's a quotation from a letter to him from crime kingpin Vladimir
Tatarenkov, a.k.a. the Tatar, who was recently arrested in Greece and is
now giving testimony in a Russian prison: ‘Dear Anatoly Petrovich! I have
recorded numerous videocassettes telling about the way you have been living
for the past few years, and about how much blood was shed so that you could
become what you are now. Don't you have nightmares about the people who
died at your orders, though not by your hand? . . . The people who elected
you would be awfully surprised to find out who they voted for. Russia has
never been fond
of murderers.’" (Yevgeny Latyshev, "Who has an interest in seeing Bykov
eliminated?," Noviye Izvestia, April 25, 2000)
In Dec. 2000, two trading companies, Base Metal Trading of Switzerland and
Alucoal of Cyprus, filed a $2.7 billion suit in U.S. District Court against
Russian Aluminum, Sibersky Aluminum, Deripaska, and Mikhail Chernyi.. The
companies claimed that the Russian aluminum giants "joined with the
Izmailovo Mafia to illegally monopolize the metals market left vulnerable
after the collapse of the Soviet Union. They allege abuses that violate
Racketeer Influenced and Corrupt Organizations Act, and they claim to have
suffered $ 900 million in losses," according to the National Law Journal.
("3-nation aluminum suit," National Law Journal, Jan. 8, 2001)
"The complaint enumerates specific allegations of murder, extortion, and
mail and wire fraud, among other criminal acts allegedly orchestrated by
the defendants and carried out in some instances by the
Izmallovo-Russian-American mafia," reported Mining Journal. "The core of
the claim is that, when the defendants were unable to negotiate a legal
purchase of NKAZ, they resorted to extortion to seize control of the
smelter and a greater portion of its trading profits. Amongst other
tactics, the complaint says that the defendants enlisted the assistance of
government and judicial officials in pursuing and winning falsified
bankruptcy proceedings" ("Russian Aluminium named in RICO suit," Mining
Journal, Dec. 22, 2000)
"Criminal elements have besieged Russian industry with illegal payoffs,
threats and acts of violence. This case will demonstrate how U.S. financial
institutions are used by criminal, elements to accomplish their purposes.
U.S. courts have the power and opportunity to prevent Russian oligarchs
from using the U.S. banking and commercial systems to facilitate criminal
conduct in other countries," claimed the plaintiffs’ attorney, Robert
Abrams. (Base Metal Trading: Russia's Largest Aluminum Company Named in
US$2.7 Billion RICO Suit," Canadian Corporate Newswire, Dec. 20, 2000)
***** SIDEBAR ******
Forbes on Trans World
The Reuben brothers spoke to Fortune magazine in late 1999. As the Reubens’
Trans World aluminum empire collapsed, Fortune reported on the rise and
fall. The following are excerpts from the Richard Behar’s June 12, 2000,
article headlined "Capitalism in a Cold Climate: The story of Trans World's
aluminum empire is filled with bribes, shell companies, profiteers, and
more than a few corpses. Then again, in today's Russia, that's pretty much
par for the course."
"’Very often the most likely to succeed in these stormy oceans are not the
picture-perfect, clean-shaved, deep-tanned, well-built, and fashionably
attired yachtsmen under the immaculate white sails,’ says Lev Chernoy,
reading from a prepared statement, ‘but unpleasant-looking ugly skippers in
command of a pirate ship. One should not be appalled. These are the laws of
initial capital acquisition’...
"This is the story of how those laws were applied by Trans World, an
enterprise launched by the Reuben brothers, David of London and Simon of
Monaco, in the early 1990s. With the help of two Russians--Lev Chernoy and
his brother Michael--the Reubens built a Rockefeller-style vertical empire
in the former Soviet Union in a few short years. In 1996, Trans World was
hailed as the world's third-largest producer of aluminum, after Alcoa and
Alcan...
.
"Trans World's scope was so vast yet so invisible that it was called ‘a
state within a state,’ with hundreds of constantly shifting shell companies
and tentacles reaching from the Siberian steppe to the shores of Cyprus,
the Bahamas, the Cayman Islands, and ultimately
the U.S., where 30% of the empire's aluminum was sold...
"The Reubens' time in the sun was brief. By 1998 they had lost control of
nearly half their kingdom to former partners. Government investigations in
at least seven nations--along with hundreds of mostly foreign media stories
critical of Trans World--were threatening to take away the rest. Cutting
their losses, the Reubens sold most of their remaining Russian assets a few
months ago....
"In the course of nearly 100 hours of interviews, the Reubens and the
Chernoys contradicted one another so often as to be nearly unintelligible.
Ironically, their attempt at
glasnost, while it generated no smoking gun, has ultimately only
underscored the dirtiness of the world they moved in--and will likely spur
law enforcement agencies to redouble efforts to finish them off. At least
that's FORTUNE's conclusion, especially after our investigation traced
large sums moving from Trans World to firms at the heart of three big
money-laundering scandals that have dominated headlines in recent months:
the Bank of New York case, the Kremlin-Mabetex kickback probe, and the
collapse of YBM Magnex, a Pennsylvania public company launched by Russian
mobsters that was shut down by the feds last year."
The full, lengthy investigative piece on Trans World and the Chernoys can
be found in the June 12, 2000 edition of Fortune magazine.
- Foreign aid and investment in the former USSR
The U.S. Trade and Development Agency was an early backer of foreign
investment in the former Soviet Union’s aluminum infrastructure. In 1994,
the agency gave aluminum industry officials from the former Soviet Union
$24,000 to spend on a visit to the Alumitech 94 convention in Atlanta.
(TDA)
Since then, foreign government bank financing has been proposed or extended
toward many operations in which the aluminum barons have operated.
- Armenia
In 1988, the French government pledged 1 billion francs in financing toward
the modernization and expansion of the 100,000 tpy Kanaker aluminum smelter
in Armenia by the French firm Pechiney. The venture would have given
Pechiney 25% ownership of the plant. The break-up of the Soviet Union, war
in Armenia, and severe pollution caused by the smelter, however, have
conspired to keep it closed in the 1990s. (Ecotass, November 20, 1989;
Financial Times, November 25, 1988; Chemical Business News Base,
January 12, 1989)
- Azerbaijan
A smelter in Sumgait has helped that city obtain the dubious status of "one
of the most polluted cities" in the former Soviet Union. (Mining Journal,
November 14, 1997) "Row upon row of tiny headstones in a children’s
cemetery bear silent testimony to the pollution that has poisoned the
sprawling industrial town of Sumgait, reported Agence
France-Presse last year. (AFP, June 16, 1997) At its operational peak in
the 1980s, a local documentary charged, the Sumgait refinery "poisons
Sumgait’s air basin with 70,000 tons of toxic discharges each year."
(Soviet television, May 11, 1989)
Trans-World Group assumed management of the smelter and an associated
alumina refinery (Gyndzha Alumina) in 1997. Previously, Kaiser (U.S.) and
Interchem (U.K.) planned to invest in the plant, with possible backing from
the EBRD, but backed out in 1996, when they determined that high energy
costs would make their investment unprofitable. (Euromoney Trade Finance
and Banker International, July 31, 1995; Reuter, June 21, 1995)
In April 2000, the Azeri government created the Azerbaijan Aluminum holding
company, which included the Gyndzha alumina plant and Sumgait and Zeiliksky
aluminum plants. In October, it selected Netherlands-based Fondal Metals
over Russian Aluminum and an offshore company named Ansol in bids to
develop the aluminum company. Two other bidders -- Iralco of Iran and
Trans-World -- withdrew their bids, according to Azer-Press.
According to Kommersant, officials of Russian Aluminum and Dutch producer
Hoogovens had never heard about Fondal Metal. "There are two main
versions," reported the newspaper. "First: Fondal Metal represents
interests of British Trans World Group, which used to manage the Gyandzha
alumina plant until 1997. Second: MetallsRussia concern, a metal trading
subdivision of Thai group Sahaviria, is behind Fondal Metal. The group has
substantial industrial assets in Ukraine." ("Azerbaidjan aluminum will
become Dutch" by D.Butrin, Kommersant, October 13, 2000)
- Kazakstan
Trans-World Metals was active in Kazakhstan until it was ousted in 1998. In
1996 and 1997, Trans-World planned to build a 200,000 ton smelter there,
and had Bechtel produce a feasibility study for the smelter’s construction.
According to the Russian news agency Interfax, in 1997 the EBRD was
considering helping to finance a proposed aluminum smelter in Kazakstan,
along with Bechtel, Intec and Alumax. A spokesman said the companies were
attracted by Kazakstan’s cheap electricity, alumina and labor. (Interfax
news agency, Sept. 29, 1997)
,
In December 1997, according to Mining Journal (June 5, 1998), Trans-World
Metals "filed a lawsuit against three of that country’s citizens for
allegedly trying to subvert its operations there, including Pavlodar [an
alumina refinery]. In January 1998, the government ousted all T-WM
appointed management from its metals plants, accusing them of
rregulatiries, tax evasion and failing to act in the best interests of
shareholders."
The Energy and Aluminum newsletter reported in 1998 that "although
Trans-World Group said last June that it would build Kazakhstan's first
smelter, late last year Trans-World lost control over its investments in
northern Kazakhstan, including the Pavlodar alumina plant that was to
supply the smelter with raw material.... The future of Trans-World and of
this project remains questionable. The current situation is somewhat
confusing." (http://www.enalnewsletter.com/enalnl07.htm)
- Russia
Russia is the world’s largest exporter of primary aluminum, and the second
largest producer (3.15 million tons in 1999) after the United States.
(Mikhailov)
In 1997, according to Euromoney, Trans-World sought to raise funds for
smelter
upgrades in Russia from "multilaterals such as the EBRD… although the bank
has to date kept a distance from the Russian aluminum industries."
In 1994, the EBRD and Scandanavian financial institutions, including
Finland, were "expected" to grant credits toward the overhaul of the
Kandalaksh aluminum plant in northern Russia, although no such deal appears
to have been finalized. The bank also has considered financing the
Novokuznetsk smelter (CIS Economics & Foreign Trade, June 14, 1994;
Euromoney, April 30, 1997)
The U.S. Trade and Development Agency (TDA) has financed studies at two
smelters. It paid $850,000 toward a study by I.S. Consulting on
modernization at the Bratsk smelter, and $500,000 toward an Alumax (now
Alcoa) study of the Volgograd smelter. (U.S. Trade and Development Agency
(TDA) website, http://www.tda.gov/region/nis.html)
In Leningrad Oblast, the U.S. consulting firm Alutec is negotiating with
the government to build a planned aluminum smelter that would draw power
from the Leningrad Nuclear Power Station. The $650 million, 220,000 ton
plant, would be located close to the Gulf of Finland, in easy reach of
Western markets.
"Because of its location and cheap power, the Leningrad Oblast is a very
advantageous spot for aluminum production," Grigori Dvas, Oblast deputy
governor in charge of industry and economic policy, told the St. Petersburg
Times in 2000. "And even if Alutec doesn't go ahead with its project, we
will find other investors." (John Varoli, "Aluminum Interest Considering
Oblast," St. Petersburg Times, Sept. 26, 2000)
Alutec said it would collaborate with unnamed large transnational
producers, and possibly the World Bank, International Finance Corp., and
EBRD, for financing the new smelter.
"How Alutec will find its niche among these giants is not clear, and
certainly a task filled with great risk, if not danger," reported the St.
Petersburg Times. "Indeed, Alutec understands it will have to cultivate the
good will of Russia's oligarchs and aluminum kings -- the likes of Roman
Abramovich and Oleg Deripaski -- if its project is to succeed." (ibid)
- Tajikistan
The Tajikistan government is planning to privatize the plant to meet
conditions set by the International Monetary Fund. The plant imports
alumina from Russia’s Russky Aluminy and ships ingot to Russia. (Bakhtior
Islamov, "Aral Sea Catastrophe: Case for National, Regional and
International Cooperation," Slavic Research Center, 1998; also,
Globalsilicon news at www.globalsilicon.com/english/e12.htm)
In 1997, the EBRD opened talks with corporations interested in taking
shares in the Taduz smelter, according to the Energy and Aluminum
newsletter. (www.enalnewsletter.com/enalnl06.htm)
In 1999, the International Finance Corporation and the government of
Switzerland provided $400,000 toward an international audit of the smelter.
According to the IFC, the assessment "identifies viable privatization
options for the company." ("Tadaz: Production of aluminum must increase to
300,000 tons by 2000, Asia Pulse, June 14, 1999; International Finance
Corp., "Annex: TA Projects Approved for Support by Donors in FY99," in IFC
1999 annual report)
According to Radio Free Europe, Turkey’s EximBank is considering an $8
million loan to the Tursunzade Aluminum Plant. ("Tajikistan, Turkey seek to
expand economic ties," Radio Free Europe/Radio Liberty Newsline, Sept. 27,
2000)
Sayan, now part of Russian Aluminum, has also been interested in investing
in Tadaz. (www.enalnewsletter.com/enalnl07.htm)
In 1999, TDA paid $450,000 toward a Bechtel Corp. feasibility study of a
possible new 165,000 ton, $575 million smelter at Mery, Turkmenistan. (TDA;
Mining Annual Review, March, 2000; WWP-Business Opportunities in Eastern
Europe & the CIS, Dec. 8, 1999)
- Ukraine
In Ukraine, the U.S. TDA paid $500,000 toward a Technalum study of the
Zaporozhye smelter, and $240,900 toward a Kaiser study of the ZALK smelter.
(TDA)
Other intertwining of banks and aluminum
- Argentina
Aluar (Argentina) installed a new 120MW gas-fired power plant as part of a
program to expand its aluminum production capacity from 175,000 to 258,000
tons by 1999. (Aluminium Today, April 1997; Reuters, Dec. 24, 1996)
Existing infrastructure includes a 448MW plant in Fataleufu, southern
Patagonia, and a reserve 54MW thermal plant imported from Italy. During the
smelter’s construction, company officials noted the "great advantage
involved in cheap electric power to be generated by the State," which was
four-tenths of one center per kilowatt in 1975. In 1971, the Argentine
government requested$80 million in credit from the Inter-American
Development Bank to build the $90 million dam. (Latin America Newsletter,
Aug. 20, 1971; May 3, 1974).
- Brazil
The World Bank helped to finance the construction of the massive Tucurui
dam, which fueled the proliferation of aluminum infrastructure in Amazonia.
(See Energy chapter for more details) (Latin American
Newsletters, Nov. 23, 1984)
The Japan Export-Import Bank financed the development of a second set of
transmission lines from the Tucurui hydroelectric dam to the Albras 340,000
tpy smelter at the mouth of the Amazon River, at a cost of $130 million.
Albras is 49% owned by a consortium of Japanese corporations, including
Showa Denko, Kobe Steel, Marubeni and Sumitomo, which import the plant’s
aluminum.
The Tucurui dam also supplies energy to the 350,000 tpy Alumar smelter,
which is 60% owned by Alcoa and 40% by Shell. Tucurui produces 3,000 MW of
power, with 1,400 MW dedicated to supply Albras, Alumar, and the 1.1
million tpy Alunorte alumina refinery. The companies are considering
participation in a $1.8 billion, 900MW
expansion of Tucurui’s capacity to 6,000 MW. Alumar is the largest private
aluminum project. (Gazeta Mercantil Online, October 22, 1996, Nov. 21,
1996; American Metal Market, July 25, 1996; Financial Times, Nov. 16, 1996)
- Cameroon
The 90,000 tpy Soderburg technology-driven Alucam smelter in Cameroon is
majority owned by Pechiney of France. In 1987, the French government aid
agency, Caisse Centrale de Cooperation Economique, loaned Alucam $1.4
million toward the purchase of new equipment. At least three other
multilateral loans have benefitted Pechiney’s Alucam smelter: In 1985, the
European Investment Bank loaned Cameroon $21.2 million, and the government
of Kuwait’s Development fund loaned 3 billion CFA francs for the Song
Loulou power station which helps to power the Alucam smelter and in 1986,
the CCCE
loaned Cameroon $12.2 million for installing two 48MW turbines at the dam.
(African Economic Digest, July 12, 1986; Oct. 30, 1987, Feb. 8, 1986)
In 1979, the International Finance Corp. committed $7.9 million toward
Alucam. Twenty years later, the IFC still held equity of $0.9 million in
the aluminum smelter. (IFC annual report 1999)
- China
International finance has keyed the surge in aluminum production in China,
where aluminum production grew by 9.7 percent from 1998 to 1999, reaching a
record total of 2.6 million tons. Most Chinese smelters are small-scale.
The largest, Guizhou, produced 227,000 tons in 1999. The other four largest
smelters are Qinghai (205,000 tons in 1999), Baotou (117,000), Pingguo
(110,000), and Qingtonxia (102,000). More than 90 other smelters produce
less than 100,000 tons. Expansion projects are planned at Baotou (105,000
ton additional capacity by 2002), Pingguo (200,000 ton possible expansion),
Qingtongxia (100,000 ton expansion planned for 2001), and 12 other
smelters. (Mining Annual Review, March 2000)
IFC and OPIC have been, or may become, involved in a smelter projects in
Heijin City, Guangxi Pingguo, and an electrode paste plant that supplies
Chinese aluminum smelters.
In June 2000, the IFC agreed to invest $14 million in a Soderberg paste
plant, owned by Elkem of Norway, in the northwestern China region of
Ningxia. Elkem bought the shuttered plant from the state in April 2000. The
Elkem Carbon China plant supplies paste and anthracite to the aluminum and
ferroalloy industries. The IFC described this new plant as "the largest
single foreign investment to date in Ningxia." The Norwegian government
financed an environmental assessment of the Elkem project. Even though the
plant produces a paste for an antequated technology (Soderberg smelting),
the IFC called the project "an example for the industry through the use of
modern, efficient, less-polluting technology." (International Finance
Corp., "IFC invests US$14 million to develop China’s Northwestern Region,"
press release, June 7, 2000; "IFC invests US$14 million in western China,"
China Online, at
www.chinaonline.com/industry/chemicals/NewsArchive/Secure/2000/June/B1000613
12.asp))
Alcan (Canada) has reached a memorandum of understanding with the Chinese
government’s China Non-Ferrous Metals Industry Corp. to build a new 240,000
tpy smelter in Heijin City, Shanxi province, with possible expansion to
400,000 tpy. A feasibility study was due to be completed by mid-1999.
(ESP-Business Opportunities in Asia & the Pacific, Jan. 1, 1998) It would
be one of Alcan’s largest smelters and would have a captive coal-fired
power plant. IFC and OPIC involvement is possible. (Aluminium Today, June
1997; China Economic Review, Dec. 1995)
The governments of Denmark, France, Netherlands and Sweden, in 1991,
extended loans totaling $90 million to supply equipment to the new 300,000
tpy Guangxi Pingguo aluminum smelter. According to the Mining Journal (Oct.
4, 1991), the loans funded the importation of alumina refining equipment
from French firms Pechiney, Kestner and KHD ($63 million), power plant
equipment from ABB ($10.5 million), alumina pumping technology from the
Dutch Geho Pump Corp. ($7.7 milion), and an alumina sintering furnace from
F.L. Smidth of Denmark ($4.7 million).
- Egypt:
In 1988, Alcoa considered buying "a substantial stake in Egyptalum," a
180,000 tpy smelter, according to Middle East Economic Digest (July 10,
1998). Egyptalum is planning to boost output by 120,000 tpy, and convert
its existing Soderburg anodes to pre-baked cells. In 1995, the European
Union-funded European Investment Bank loaned $92 million toward
modernization at Egyptalum. (African Economic Digest, Nov. 6, 1996)
- Costa Rica
In 1971, Costa Rica President Jose Figueres signed a pact with Alcoa, the
World Bank, and the Soviet Union "to construct a $400 million alumina
refinery and hydroelectric generating plant in the northwestern province of
Guanacaste. Electrical power from the new dam was to be transmitted to the
Alcoa mining site. In exchange for purchasing Costa Rica's excess coffee,
Soviet hydroelectric generating equipment was to be purchased for the
500,000 kw dam. The combination of public opposition to Soviet involvement
and ALCOA's decision to cease bauxite mining due to poor ore quality caused
the negotiations to fail," according to the National Congress of American
Indians.
"Through the World Council of Indigenous Peoples the Boruca people became
informed about the experience of Indians in Surinam, the aboriginals in
Australia and the Yanomamo of Brazil as they confronted similar bank and
state initiated development projects. It was the discovery that
Multilateral Development Banks, state government economic pressures and
multinational corporations had combined to promote developments in
territories of least political resistance that caused the Boruca people to
increase their resistance to the planned Boruca Dam and the aluminum
processing plant. Indeed, the Boruca people sought to expose the actual
intent of the Multilateral Development Bank, the aluminum industry and the
Costa Rican government to the
national citizens of Costa Rica in an effort to prevent the further
advancement of the project.
"What had been revealed by the Borucas was that the Alcoa aluminum company
was interested in locating its processing facilities in Costa Rica because
of the increased political and military tensions in Surinam. The company
was not particularly interested in using Costa Rican labor, nor was it
interested in Costa Rican bauxite. Furthermore, it was revealed that the
actual beneficiaries of the planned Boruca project would be the
Multilateral Development Banks and private banks which would receive
interest payments on past Costa Rican loans; and the Alcoa company would
benefit from a "safe haven", low or nonexistent taxes and tariffs, low
labor costs and "free zone" ports from which to import and export raw and
processed bauxite and aluminum. And, of course, the aluminum industry would
be assured inexpensive electrical power." (Ralph Eluska, vice president of
the National Congress of American Indians, "Tribal populations and
international banking practices: a fundamental conflict over development
goals," Testimony before the House Banking Committee's Subcommittee on
International Development Institutions and Finance, June 29, 1983 at
www.cwis.org/fwdp/International/bankpoly.txt)
- Ghana
Sixty percent of the bauxite mined by the Ghana Bauxite Co. is exported to
Alcan’s alumina refinery in the U.K. The U.K.’s Commonwealth Development
Corporation loaned the GBC 3.1 million sterling to install a new conveyor,
completed in 1992, to haul load bauxite onto awaiting ships in Takoradi.
(Reuter, Sept. 23, 1994)
Bilateral and multilateral financial institutions have also financed the
development of energy consumed by the aluminum industry in Ghana. The Valco
aluminum smelter (90% owned by Kaiser) draws over about 45% of the power
generated by the Volta
River Authority’s Akosombo and Kpong dams. (Peter Owu, "Energy Crisis in
Ghana," Africtech, vol8, no.1, at African Technology Forum website:
web.mit.edu/afs/athena.mit.edu/activity/a/africantech/www/articles/GhanaCris
is.htm)
In 1961, OPIC and the World Bank financed the construction of the Akosombo
Dam on the Volta River. Valco, then the largest smelter in Africa, was
developed to consume power from Akosombo. This dam, according to the
International Rivers Network, "flooded more land than any other dam in the
world, 8,500 square kilometers, around four percent of the area of Ghana."
(International Rivers Network, "When the Rivers Run Dry - The World Bank,
Dams and the Quest for Reparations," at
www.irn.org/programs/finance/damfacts.html; OPIC, "OPIC in Ghana," March
1999, at www.opic.gov)
The IDA ($100 million), EIB ($45 million), African Development Bank, CDC
(U.K.) , CFD (France) and others have helped to construct a new Aboadse
power project and connections to the national grid. National power
shortages caused by drought and excessive demand forced Valco to curtail
production in the mid-1990s. (Africa Energy & Mining, Jan. 25, 1995, Dec.
21, 1994).
Eight bilateral and multilateral institutions provided over $300 million in
financing toward the development of the new Takorade oil-fired power plant,
built to provide more reliable power. Financing instittuions include the
IDA, EIB, CDC, Kuwait Fund for Arab Economic Development, Arab Bank for
Economic Development in Africa, African Development Bank, and the Caisse
Francaise de Developpement. This plant was seen as necessary to maintain
Valco’s presence in Ghana. (Owu)
OPIC has also provided insurance for Valco. ("OPIC in Ghana")
- Guinea
Numerous aid agencies have directly supported the mining of bauxite and
alumina refining in Guinea.
In 1992, the EIB extended an $18.5 million loan, and the CCCE a $20 million
loan to
financing a modernization project at the Friguia refinery, in which French
firm Pechiney, British Aluminium, Noranda, VAW (Germany), and Alusuisse
have a 51% controlling interest. Previously, the EIB loaned Friguia about
$5 million in 1980, $7 million in 1984, and $15 million in 1988. Also in
1988, the European Development Fund approved a $40 million loan toward
Friguia. (Euromoney Trade Finance Report, Jan. 1992; Africa Energy &
Mining, Feb. 22, 1995; Europe Energy, Nov. 6, 1992; European Report, Nov.
23, 1991; Mining Journal, Dec. 9, 1988; Mining Annual Review, June 1992)
In 1996, the World Bank’s IDA approved a $12.2 million credit toward the
privatization of Guinea’s mining sector. "The project objectives are to
strengthen the Government’s capacity to act as facilitator and regulator of
mining activities, and to attract private investment for mining sector
development," according to the agency. (World Bank Project Information
Document, "Guinea-Mining Sector Investment Promotion Project," PID:
GNPA1077, June 29, 1995)
In October 1997, the World Bank put the "privatization of the alumina firm
Friguia back on track," according to Africa Energy & Mining (Nov. 18, 1998)
The IMF has also played a big role in the restructuring of Guinea’s mining
operations, including bauxite, through a structural adjustment loan. In
1999, the IMF reported that "the government has decided to divest itself of
its mining companies and thus reduce its role as owner and operator in the
sector, while strengthening its role as regulator and intermediary....
Through privatization it is intending also to reduce its shareholding in
the aluminum company, Friguia, to a minority without veto power. Should the
privatization operation not succeed because of the absence of a credible
buyer, the government will resort to a private concession. The government
will continue its restructuring of the bauxite company, SBK, and is
committed to reducing its share of the company's capital to a minority. The
government will continue its efforts in connection with reducing operating
costs and strengthening the management of another bauxite company, CBG, and
will design a strategy for encouraging new private investment in the
bauxite and aluminum sectors in the Boké region which may include a share
in the CBG." (International Monetary Fund, "Guinea Enhanced Structural
Adjustment Facility
Policy Framework Paper, 1999-2001," December 8, 1999)
- Guyana
The U.S. Overseas Private Investment Corp. has insured bauxite mining by
Reynolds (U.S.) in Guyana to the tune of $14.5 million in the 1970s, and
$14 million in 1991. The U.K. CDC has also provided $6.5 million in funding
toward bauxite mining in Guyana. Most of Guyana’s bauxite is shipped to the
U.S. and the E.U.
The World Bank, European Investment Bank ($14 million), and the European
Union provided $20 million toward restructuring Guyana’s bauxite industry
in the early 1990s.
(American Metal Market, Dec., 1991; Chemical Business News Base, May 15,
1991; Inter Press Service, July 19, 1994; Caribbean News Agency, Oct. 19,
1993; Agence Europe, Feb. 20, 1993)
In 1991, the Guyanese government dissolved the state-owned Guymine
operation. Green Mining of the U.S., which strip-mined the Linden bauxite
reserve for Guymine, had held insurance from OPIC in 1989 and 1990, and
requested reimbursement for unpaid work. After Green Mining filed the
claims, OPIC suspended its coverage for U.S. projects in Guyana. On July
28, 2000, Green dropped its claims against OPIC, and its lawsuits against
the Guyana government, in exchange for payment. The settlement reopened
OPIC insurance operations in Guyana. ("OPIC Restores Support for American
Investments in Guyana," Guyana Monthly Update, August 2000; U.S. Embassy in
Guyana, "Investment Climate (Guyana)," 1995 Commercial Guide to Guyana,
U.S. Dept. of Commerce, August 21, 1996)
Guyana’s government is planning to privatize its two bauxite companies,
Berbice Mining Enterprises (Bermine) and Linden Mining Enterprise
(Linmine). The privatization would open 60% majority stakes to help fund
capital improvements at both facilities. (Plunkert, 2000) Reynolds, now
owned by Alcoa, holds a 50% stake in the Bermine operation, and purchased 2
million tons of bauxite from the enterprise in 2000. (Reynolds 10-K,
FY1999)
The IMF has imposed a $70 million structural adjustment program in Guyana
which has targeted nationalized companies. In November 2000, IMF’s
directors "encouraged the authorities to persevere with efforts to
restructure the remaining public enterprises, especially the modernization
of the sugar company, and welcomed their intention to privatize the bauxite
companies." (IMF, "IMF Concludes Article IV Consultation with Guyana,"
Public Information Notice No. 00/102, Nov. 30, 2000)
- India
Italy’s SACE (State Export Credit Guarantee Corp.) and Mediocredito
have financed $15 millionts toward Bharat Aluminium Co. (Balco)’s purchase
of equipment from FATA Group of Italy. The government of Norway funded a
study of Balco by Hydro Aluminum (Nor) in 1989. In 1984, the U.K. Export
Credit Guarantee Department guaranteed a 25 million pound loan toward the
purchase of four power generators by Balco. The four 67.5 MW units were
provided by GEC of the U.K. (Business Line, August 5, 1998; Mining Journal,
Feb. 17, 1989; Financial Times, July 31,
1984)
The export-oriented NALCO aluminum complex in Talcher-Angul, Orissa, was
built using Pechiney (France) technology, with financing from the French
government (1.05 billion francs). (Aluminium Today, May 1993). The U.S.
Trade and Development Agency recently granted Indalco funds to study the
doubling of production at its Hirakud, Orissa, aluminum plant. Kaiser will
conduct the study and "supply technology for the project,"
according to International Market Insights (March 30, 1998).
In 1995, the IFC approved $25 million in financing toward a coke and power
plant in Andhra Pradesh. The Rain Calcining coke plant in Visakhapatnam,
partially owned by U.S. transnationals Houston Industries Energy and
Applied Industrial Materials Corp., produces 250,000 tons of calcined
petroleum coke for the aluminum industry in India and elsewhere in Asia.
(IFC Annual Report FY1995; The Hindu (India), Feb. 25, 1997, Deutsche
Press-Agentur, Aug. 28, 1995; Ogrin Universal News Services Ltd., Aug. 28,
1995)
- Middle East
According to a Nov. 2000 report by Gulf Business Online, "both Bahrain and
the UAE (United Arab Emirates) have been proactive in encouraging more
downstream industries as a means of adding more value to their latent
industrial sector. The Bahrain Development Bank (BDB), Bahrain's Ministry
of Finance and National Economy, the Ministry of Oil and Industry and the
United Nations Industrial Development Organisation (UNIDO), have joined
hands to promote the budding aluminium industry in the Gulf region by
drafting product and financing strategy. A string of projects with joint
ventures and some buy-back arrangements are now in the pipeline." (Roger
Jacobson, "Future looks bright for the GCC aluminium industrry," Gulf
Business Online (Dubai), Nov. 9, 2000)
- Indonesia
In one of the most infamous boondoggles of bilateral aid, the Japanese
government loaned billions of dollars [CHECK] toward the development of the
225,000 ton Inalum smelter in North Sumatra, Indonesia. The Inalum smelter
is controlled by Nippon Asahan Aluminium Co., a consortium of 12 Japanese
companies (including Hitachi, Toshiba, and Mitsubishi) and the government’s
Overseas Cooperation Fund.
In 1992, the Los Angeles Times reported that ), "critics of the Asahan
project say it is a classic example of the kind of commercially oriented
foreign aid that serves the strategic interests of Japan, the donor, far
more than the recipients of official assistance. A potent symbol of skewed
priorities… is the nine-hole golf course carved out of the jungle in
Paritohan, built with aid money for Inalum employees and used most
enthusiastically by Japanese visitors and expatriate engineers. Profitable
or not at this end, Inalum provides a cheap and secure supply of aluminum
to the cartel of Japanese aluminum makers who invested in a majority stake
of the project, using low-interest Tokyo government financing.
"[A] pattern has emerged, analysts say: The bulk of the aid [to Asia] has
gone into large infrastructure projects that provide lucrative contracts
for Japanese construction firms and equipment supplier," the report added.
(Los Angeles Times, June 9, 1992)
See energy section for more details on this project.
- Oman
In May 1998, the Omani government signed a $250 million loan from the
Import-Export Bank of Japan to build a new port which will serve
petrochemical plants and an aluminum smelter planned in Sohar, according to
Agence France Presse (June 1, 1998) Dubal is pondering the construction of
a new $2.5 billion, 480,000 ton smelter in Oman. (Rasha Owais, "Dubal
studies Oman smelter project," Gulf News, April 10, 1999)
- Mozambique and Malawi
In the industry’s largest recent multilateral and bilateral bank financing
scheme, foreign institutions including the World Bank, European Investment
Bank, and national agencies have poured over $820 million into the new
Billiton/Mitsubishi smelter in Mozambique.
The smelter development is the largest-ever private investment project in
the country. Its projected cost of $1.3 billion almost equal’s Mozambique’s
Gross National Product. (Leon Pretorius, "Regional integration and
development in Southern Africa: A case study of the MOZAL Project and its
implications for workers," International Labour Resource and Information
Group, March 2000)
The Mozal consortium -- Billiton (47%), Mitsubishi (25%), South Africa’s
Industrial Development Corp. (24%), and the government of Mozambique (4%)
-- completed the 250,000 ton per year smelter in 2000. About $820 million
of the $1.34 billion in project costs are being financed by the foreign
multilateral and bilateral agencies, including World Bank’s IFC ($120
million in loans) and IDA, the European Investment Bank ($46 million), and
national agencies in the U.K. (Commonwealth Development Corp.), Germany
(DEG) , South Africa (Credit Guarantee Insurance Corp.), and France ($26
million from the Caisse Francaise de Developpement). (American Metal
Market, May 19, 1998; Mozal press release, "International Financing for
Mozal smelter concluded," Oct. 30, 1998, at www.mozal.com; International
Finance Corp., "Mozambique: Mozal Aluminum Company," at www.ifc.org;
European Investment Bank, "EIB financing for regional power project in
Southern Africa," press release, June 29, 1999)
The consortium is conducting a feasibility study for the possible doubling
of Mozal’s capacity. (Stephen Johnston, "Aluminium," Mining Annual Review,
March 2000)
The possible gutting of Mulanje Mountain in Malawi to supply bauxite for
Mozal also has multilateral bank ties. In the mid-1990s, a study financed
by the African Development Bank has uncovered the reserves at Mulanje. The
study, according to African Economic Digest (June 10, 1996) study indicated
that the project could produce 540,000 tons of bauxite a year… 200,000 tons
of alumina and 100,000 tons of aluminum. About $880 million is needed to
develop the project." (African Economic Digest, June 10, 1996).
(See Environment chapter for more details on Mulanje Mountain, the Human
Rights chapter for more on the worker rights at Mozal, and the Energy
chapter for more on the impact of Mozal’s energy consumption on the Zambezi
River delta)
- Venezuela
The IMF is encouraging the Venezuelan government to privatize its aluminum
industry. In 1998, IMF managing director Michel Camdessus met with
Venezualan officials and pushed "the privatization of companies in the
aluminum and electricity sector," according to an IMF release. (IMF news
brief No. 98/13, May 19, 1998)
- Vietnam
The Vietnamese government is seeking support from France’s Overseas
Development Agency to devleop a bauxite mine/refinery/smelter operation in
the Tan Rai District of Lam Dong Province. The government hopes to have the
complex producing one million tons of bauxite and 200,000 tons of aluminum
per year by 2003. The complex would be owned by a joint venture of the
government and Pechiney. ("Bauxite Joint Venture Approved," Dau Tu, April
22, 1999, www.mekongresearch.com/May1999energy.htm)
Pechiney is expected to complete a feasibility study on the $800 million
project in 2001. The Central Highlands (Taây Nguyeân) region of Vietnam
holds reserves of over 3.4 billion tons of bauxite. ("Industry Ministry has
seen the future, and it’s made of aluminium," Vietnam News Agency, March
22, 2000 at vietnamnews.vnagency.com.vn/2000-03/21/Stories/14.htm;
www.vneconomy.com.vn/en/ext_economic/bilateral/fra001.htm)
VI. Human rights
Focus:
Aluminum industrialization and repression in India's state of Orissa
(footnote: This updates part of a chapter in an Institute of Policy Studies
1998 report, "The World Bank's Juggernaut: The Coal-Fired Industrial
Colonization of India's State of Orissa.)
The Indian state of Orissa's vast bauxite reserves are among the world's
largest. More bauxite is mined here than in all but seven countries. The
state holds about 10 percent of global bauxite reserves. Coal and hydro
power provide cheap sources for existing and proposed smelters. Labor is
also inexpensive; thus, foreign corporations have rushed to proliferate
bauxite mining, alumina refining, and aluminum smelting in India.
("Canadian ambition for Indian bauxite," Mining Journal, March 12, 1999)
In the name of the "upliftment of backwards tribes" -- or perhaps just
corporate profits -- Orissa has entered the list of transnational
corporations' favorite sources of bauxite and alumina. In short time, the
aluminum industry's blasting, refining, smelting, and coal-fired power
operations already have created a legacy of forced removals of people from
their villages, ruined temples, destroyed forests, poisoned rivers, brittle
bones, and dirty air.
Orissa's early experiences with this industry have compelled many people to
campaign for a halt to bauxite mining and smelting. Protests have
surrounded the NALCO aluminum smelter in Angul, the Utkal bauxite/alumina
project, and several other new or planned bauxite mines and alumina
smelters.
Corporate investors and the state and national governments have ignored or
squashed the dissident voices. As Ranjit Dev Raj of Inter Press Service
reported in 1999, "Mining transnationals have found an easy way to grab
bauxite-laden land from 'adivasis' (aboriginals) in the mineral-rich state
of Orissa, eastern India - get them arrested on trumped up criminal
charges." (Ranjit Dev Raj, "Bauxite TNCs Grab Tribal Land With Impunity,"
Inter Press Service, June 2, 1999)
Orissa's cheap labor, energy, and land have provided companies like Alcan,
Pechiney, Alcoa, and Alusuisse with the potential to build the lowest-cost
bauxite mining and alumina refining operations in the world. This
export-oriented industry is heavily subsidized by the Indian government,
which is eager to move big industries into regions it has labeled as
"backward areas." India offers 100% export-oriented industries exemption
from paying income taxes. It also drops import tariffs for equipment used
in these plants.
Companies utilizing these loopholes defend them as a means to uplift the
poor. In 1993, for example, Alutec of the U.S. defended a proposed bauxite
mine and alumina refinery venture in a 1993 study. "The state of Orissa and
the Indian Government have a commitment to develop the backward districts
of Kalahandi and the adjoining regions. A project of this type will lead to
infrastructure development, creation of modern townships, schools, medical
facilities and direct employment to approximately 1,000 persons." (Alutec
Inc., "RPGE Alumina Refinery Project, State of Orissa: Desk Study for
United States Trade and Development Agency," September 1993.)
But these same plants are tearing at the social fabric of life in many
parts of Orissa, according to the growing number of people campaigning
against them. Opponents of the new mines, refineries and smelters are
trying to protect their history and their communities in order to secure
their future. They argue that while the industry is there, riches may flow
to some people in the region, but when the bauxite deposits are gone, the
modern townships, schools and hospitals will almost certainly disappear
with them. Only a legacy of environmental and social destruction will
remain.
According to Inter Press Service, "Far from protecting the 'adivasis' and
their land, as it is constitutionally and legally bound to do, the Orissa
state government has openly pitched in on behalf of the TNCs which see no
need to negotiate with the 'adivasis'." (IPS, June 2, 1999)
''So far we have only received threats from policemen, district officials
and goons hired by the companies,'' Bidu Lata Huika, convenor of the
Orissa Adivasi Manch (Orissa Aboriginals Forum) said in 1999. "'These
companies hire goons to demolish our homes and attack us and then file
criminal cases on the basis of which the police arrest us. In any case we
are not interested in the compensation offered by the bauxite companies -
we want to continue as farmers on this land which has sustained us for
centuries." (ibid)
One bauxite mining/alumina refining scheme, Utkal Alumina, has drawn
increasing fire from indigenous people and others in Orissa's Raigada
district. Hydro of Norway and Alcan of Canada hold 45 and 35 percent
shares in the project, respectively. Indian Aluminium Co. holds the
balance. Alcan owned a 55% stake in Indal at the end of 1999. The companies
plan to complete financing by the end of 2001 and start producing one
million tons per year of alumina by 2005. (Plunkert, 2000; Alcan 10-K,
FY1999) ]
The Utkal consortium asserted in 1995 that it is "totally committed towards
the socio-economic upliftment of a backward tribal area." Utkal opponents
claim that 3,500 people will lose their land. Hydro of Norway said that 500
to 700 people would have to move from 2,400 acres of land. ("Hydro of
Norway has problems with alumina plant," Dagens Naeringsliv, March 28,
1996)
Local peoples' efforts to halt the Utkal project date almost to its
inception in 1991. Their protests have intensified in recent years. In
August 1997, according to Norwegian NGO NorWatch, Kucheipadar villagers
"smashed a prototype house that Utkal had erected in the neighborhood to
show the people who will be forced to relocate what kind of houses they
would be offered." All of the villagers' cultivated land would be wiped out
by the Utkal development. (Morten Rønning, "The fight against Utkal is
coming to a head," NorWatch newsletter, No. 4, Feb. 1998)
NorWatch interviewed some of the people who were in the blockade. Lochma
Mahji, a 42 year old woman, told the NGO that after four days of blocking
the road, many of the villagers "went back to work on our fields, and the
village was almost empty. At four a.m. on January 5, the few of us who were
left in the village were told that a truck and four jeeps were on their
way, and that the police were removing the roadblock. I immediately went
there, and stood in front of it. Representatives of the local authorities
and the police were there. We asked, 'Why are you removing the roadblock?
If you remove it, we'll lose our land and our homes. The authority you have
doesn't come from the womb of our motherland. You have your authority from
us, and you're obliged to help us.'"
The police responded with violence, she said. "The police grabbed the other
women present by their hands and threw them down on the ground. I objected,
saying that one cannot take a woman's hand unless one is married to her.
The police used the butts of their rifles to push me back. I said, 'Are you
going to shoot me - are you going to kill me? I'm not scared. I stand for
what I fight for, and I'm willing to die for that.' The police gathered
around me and hit me three times on my legs with sticks. I collapsed and
fainted. At the same time the police attacked the others, and threw
tear-gas grenades. Seven police officers came over to me, tried to lift me
up, and said they wanted to help me get home...
They stabbed me with iron pipes to get me up. A police officer pulled at my
leg. I tried to stand up, and felt an excruciating pain in my legs when I
stretched them out. I kicked the police officer who held my leg in his
face. When I managed to get up, two police officers grabbed my hair and
pulled me over to the roadblock. I was dragged there practically on my
knees."
Mahji said 17 women, 6 children and 7 or 8 men were injured in the police
action. Afterwards, the villagers sent a notice to the chief of police.
"He immediately tore it apart, and said that if we stirred up more trouble,
they would kill us," she said.
A boy told NorWatch that at the blockade, "I was beaten by the police once.
I asked why they hit me, but they didn't answer. The roadblock is there
only to control representatives of the authorities and the company. It's
our land; that's why we put it up. We cut trees, carry rocks and stand
guard at the roadblock." (Rønning)
Krushna Saunta, an aboriginal landowner and social worker, said in 1999
that, ''I was held in jail for a week along with five others, beaten, and
then released on bail. Everybody in my village of Kucheipadar have been
arrested at one time or another." Saunta's Organization for Protection of
Nature's Wealth (Sampada Sangrakshan Parishad or PSSP) conducted a poll of
local villagers in November 1998. He said 96 percent people in the district
opposed the projects. (IPS, June 2, 1999)
A five-person team of members of the Council for Social Development visited
the region in 1999. ''We were told by officials at the highest level in
Bhubaneshwar, Orissa's capital that the government would not countenance
any opposition to Raigada's industrialization," said team member, D.
Bandhyopadhyay. According to IPS, the team members were told that the
government was determined to 'teach a lesson' to NGOs which they accused of
inciting and organizing tribals against land acquisition for the 'public
good.'" (IPS, June 2, 1999)
Four NGOs in the area have been threatened with bans against receiving
government funds. A member of one of those NGOs, Vidhya Das of Agragamee,
said "This is just colonialism in another garb but the people here are not
going to give up so easily - they have learnt from the mistakes of their
brethren. Mines and factories have reduced self-reliant, self respecting
aboriginal families to live like refugees in ill- planned rehabilitation
colonies - but most of them are still homeless." (IPS, June 2, 1999)
In June 1998, Agragamee and people from Kucheipadar set up another road
block. According to NorWatch, around 3 a.m. on June 16, 1998, "armed police
raided one of Agragamee's local offices, and an hour later they raided the
organization's main office. The operation has been described as very rough,
and some of the employees were beaten. Eight staff members were arrested,
and five of them were imprisoned for several days before they were released
on bail. The charges, which Agragamee strongly rejects, were use of
violence, rebellious behavior, and suspicion of incitement to riot against
the mining companies." (Tarjei Leer-Salvesen, "Armed police clears the way
for Utkal, NorWatch newsletter No. 14, July 1998)
The troubled Utkal project has drawn the attention of many in Norway, home
to the consortium's lead corporation, Norsk Hydro. In January 2000,
Minister of Foreign Affairs Knut Vollebæk met with Norsk Hydro and three
NGO representatives in Delhi to discuss the project. According to Norwegian
NGO NorWatch, during the meeting Norsk Hydro "allegedly admitted that the
dialogue with the affected local population is not as good as it should be,
and then claimed that the local population supports them. When they were
confronted with the fact that the company is taking some of the local
population to court, one of the company's representatives replied that
Norsk Hydro does not deal with violent groups." (Tarjei Leer-Salvesen,
"Utkal Alumina discussed at top political level," NorWatch newsletter, No.
2, 2000)
Conflict over the Utkal project continued in 2000. On February 13, more
than 5,000 people organized by the PSSP demonstrated outside the
consortium's office in Tikiri. They demanded the end of the project,
Utkal's aid program, and police harassment. The demonstrators also demanded
the return of land acquired by Utkal to rightful owners. (NorWatch
newsletter, No. 2, 2000)
In April, according to the Norwegian paper, Dagens Naeringsliv, "Two
thousand demonstrators armed with bamboo canes and bows and arrows
destroyed two wooden bridges and trampled down 50,000 cuttings that were
part of a forest planting project. The next day armed police made arrests.
On April 22, protesters built a barricade to stop contract workers from
traveling to the site of the proposed bauxite mine." ("More conflict over
Norsk Hydro's Utkal project," Dagens Naeringsliv, as reported by Chemical
Business Newsbase, June 19, 2000)
The struggle took an even more violent turn in December.
On Dec. 7, Hydro issued a press release asserting that "most of the
inhabitants in Utkal are in favor of the bauxite and alumina project.
Having adopted an attitude of wait-and-see for several years, the political
parties in the area have now gathered support for the project. It quoted
K.C. Mohapatra, leader of the All Parties Committee, as saying "We welcome
the project and are united in our support." (www.hydro.com)
This propaganda washed away in a bloodbath nine days later. On Dec. 16,
police shot and killed three local villagers in the town of Kaikanch, where
people have refused to move out for Utkal. Political leaders of the CPI
[ck] demanded a judicial inquiry into the incident. According to The Hindu,
politicians "said the killings of the tribals was a pre-planned one to
terrorize them to give into their demands and vacate their village for
enabling them to set up the project."
Hydro issued a press release two days later. "Three people were killed on
Dec. 16 when police opened fire on an aggressive crowd in the village of
Maikanch... Hydro profoundly regrets the incident, emphasizes Hydro
Aluminum information manager Thomas Knutzen." Knutsen said, "No
representatives from Hydro or Utkal Alumina were in the vicinity when the
incident occurred. Therefore we don't know any details."
Biswanath Sahoo, a party representative who visited the village after the
killings, said two platoons of police entered the village and brutally
attacked a woman. He said that men who heard the woman's cry were fired at
as they neared. Police shot and killed three of the men. They also shot
four cattle grazing nearby. ("Probe into Rayagada incident sought," The
Hindu, Dec. 22, 2000)
[Box]
A 16 year old boy from Kucheipadar has written songs about the Utkal
struggle. Here is one of them:
Wind! wind, Oh company wind,
People! flowing in whole of Orissa.
Come fight for our rights, Come, let us struggle.
We are struggling, we are struggling.
Come, we have to release our mother land,
Come my mother and sister, become a unity.
Come forward without fear.
We should not leave our motherland in the hands of the company,
In the hands of the companies.
Come together for struggle.
Don't watch and keep quiet, my struggling group.
Danger coming toward us, to give us tragedy and sorrow.
Send back this foreign company;
We may die without fearing the company,
Look my friends, to the company and to the government,
Coming toward us to destroy and demolish us.
We don't need Tata, Hydro, Indal.
We don't need, we don't need.
We fight for our land,
We may die, have no fear, come forward.
By liquor the company has tied our mouths,
With created fears, booked cases, and gun point money distributing;
Taking our land illegally,
Land alienation, land alienation.
Hey company and government!
We are aware;
Don't try anymore to cheat us.
Hear, hear, in our own village we are the government.
In our village we will judge;
Our land, our water cannot be traded,
The earth is ours, the earth is ours.
Come, come mother and sister,
Become unity, roar our united voice.
Send back to Indal, Tata, Hydro.
To save Orissa, save Adivasi and Dalit.
The earth is ours, it is our right.
(Source: "Folk songs against the Utkal project," NorWatch newsletter No. 4,
Feb. 1998)
While Utkal is the most prominent bauxite/alumina development, it is not
the only one in Orissa. NALCO plans to operate the world's third largest
alumina refinery in Damanjodi. In the Gadhamardan hills near the Hirakud
reservoir, Bharat Aluminium Cmpany (BALCO) tried to start mining bauxite in
the late 1980s. After blasting at BALCO's mines badly damaged the famous
Nrusinghanath Temple, people in the region had seen enough, and forced a
halt to the project.
Forced relocations and indigenous rights in other countries
The struggle in Orissa echoes similar contests between aluminum
transnationals and indigenous peoples around the world.
Australia
Bauxite mining in the Australian province of Queensland occurs on native
land. In Dec. 1996, the Australian high court ruled that Wik and Thayorre
aborigines hold legal Native Title claims on land that Comalco mines in the
town of Weipa. Billiton's bauxite mines in Gove are also on Aboriginal
land. (Suganthi Singarayar, "For Aborigines, Racial Discrimination Act is
Sacred," Inter Press Service, Jan. 27, 1997; Dr. Richard Howitt,
"Exploration, Mining and Indigenous Futures: What does it mean? Why does it
matter?," Macquarie University School of Earth Sciences, 1990)
Next to the Weipa mine, Alcan hopes to develop the Ely bauxite deposit. The
company holds a mining lease dating from 1965. In 1997, it was negotiating
with the local Aboriginal community to obtain access to land where it wants
to build a port. Australian Institute of Aboriginal and Torres Strait
Islander Studies, Native Title Research Unit archives)
Roger Moody called Weipa a "region flagrantly robbed by Comalco from its
Aboriginal inhabitants in the '60s, and which continues to be one of the
major disgraces of northern Queensland...No less controversial is
Pechiney's acquisition in 1981 - along with Billiton Aluminium - of a 40%
interest in the Arukun bauxite prospect in the same area, an aboriginal
reserve whose occupants are firmly against bauxite mining ." (Roger Moody,
"Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier" in The Gulliver File -
Mines, people and land: a global battleground, Minewatch, 1992.)
In the 1980s, Alcoa's planned to build a $1.5 billion smelter in Portland,
Victoria, Austria. According to Moody, "the site is part of the
traditional land of the Aboriginal Gunditj-Mara people, who strenuously
fought - using court claims, direct action, occupations and sabotage of
Alcoa's machinery - to stop the smelter being built. Under such pressure
and because of the high electricity price charged by the Victorian state
government, the project was mothballed in 1982. The Labour government in
the state - despite token gestures towards Aboriginal land rights - revived
the project soon after coming to power in 1983, and will in fact take a 25%
stake in it." (ibid).
Brazil
In Brazil, the construction of Tucurui dam displaced more than 25,000
people. More than half of the power generated by the dam goes to aluminum
smelters in northern Brazil. According to the World Commission on Dams,
"subsistence farmers, fisherfolk, pastoralists, and riverbank cultivators"
all had to move out of the way for the new reservoir. In addition, 100,000
people were "affected by reduced water quality, loss of riverbed
cultivation, and decreased downstream fish populations."
"In the case of Tucurui, of the indigenous groups displaced only the
Parakana people were resettled; the other indigenous group that lost land
to the dam was not considered for resettlement benefits," reported the WCD.
The erection of transmission lines also impacts indigenous communities.
According to the WCD, "the Gavaio de Montanha indigenous people, whose
lands were affected by the transmission lines in the Tucurui project, were
initially not considered eligible for compensation but were later given
cash compensation."
After the reservoir was filled in 1984, the WCD reported, "an unusual
proliferation of Mansonia mosquitoes in rural areas close to the reservoir
forced farm families to leave their homes." Another post-construction
impact was the concentration of mercury from gold mining activities
upstream. Fish caught in the reservoir had more than double the maximum
safety level. (World Commission on Dams, "The Report of the World
Commission on Dams; Dams and Development: A New Framework for
Decision-Making," 2000, p. 106, 107, 119, 124)
Guinea
According to NorWatch, the Friguia bauxite and alumina project in Guinea
"has forcibly moved several villages, but the number of affected people is
unknown. It has been impossible to have details on how much is paid as
compensation when someone is forcibly moved, or how this has been carried
out. In the future even more people will have to move as the mine is being
extended. 16-18,000 people are still living within the concession area. The
local population complains of their cattle being run down by the company's
cars, and dying from eating remainders of explosive charges which originate
from the mining. They are not paid any compensation." (Tarjei Leer-Salvesen
and Morten Rønning, "Profits on arms, forced relocation, and environmental
scandals," NorWatch newsletter, June 1998).
Friguia's failure to compensate local villagers was reiterated in a local
newspaper report in 1998. According to Africa Energy and Mining, the
newspaper reported that Friguia managers "have been accused of dubious
financial dealings involving over-billing in favor of its suppliers. The
Conakry-based newspaper L'Independant cited a garage, security companies
and real estate owners in connection with the over-billing. It also said
the company had failed to pay village dwellers compensation for having to
re-locate, even
though it claimed to have sent the money to the local authorities." ("Four
pre-qualified for Friguia," Africa Energy & Mining, Dec. 2, 1998)
Malawi
**** DAPHNE -- This is actually more appropriate in the environment
chapter, within the bauxite section *****
In August 2000, the governments and Malawi and Mozambique discussed a plan
to mine bauxite from Mulanje Mountain, refine it, and ship alumina to
Billiton's Mozal smelter in Mozambique.
Malawi Vice President Justin Malewezi touted the deal. "This will be of
great benefit to both countries since Mozambique will cut expenses of
importing alumina from Australia while Malawi will benefit from job
creation." ("Talks on bauxite venture," ANN/IRIN, August 29, 2000)
A local conglomerate, Press Corporation Ltd., is seeking international
partners to build and operate the mine. In Sept. 2000, Malawi president Dr.
Bakili Muluzi said his government would send a delegation to the United
Kingdom to discuss a possible collaboration on mining the bauxite.
("President Muluzi promises to sack corrupt ministers," MBC radio, Sept.
23, 2000; "Outlet hope for bauxite," Africa Energy & Mining, Oct. 11, 2000)
The government estimates that the mountain holds over 50 million tons of
bauxite. Charles Kaphwiyo, Malawi's geological survey director, said the
bauxite would be dug out from a depth of 14 to 16 meters, and sent down the
mountain by rope and buckets. He estimated that "less than one-tenth" of
the mountain would be mined. ("Environmentalists Concerned Over Bauxite
Project," Africa News, Nov. 26, 2000)
"We have huge untapped mineral resources in Mulanje while our neighbor
(Mozal) is importing alumina from far away like Australia," said Leonard
Kalindekafe, mining director of the Ministry of Natural Resources. "This
is an opportunity the country cannot afford to lose."..(Brian Ligomeka,
"Malawi Mines Peak For Mozambique Factory," Africa News, Nov. 17, 2000)
Others, though, hold a different view. "While many people are just pegging
their thoughts on the economic aspect of mining bauxite on Mulanje,
consideration should be given to the devastation that the project would
have on natural resources and the people who live around the mountain,"
said Jones Njala, head of the Mulanje Mountain Conservation Trust, in Nov.
2000. (Africa News, Nov. 17, 2000)
Mulanje Mountain rises 3,000 meters above sea level and is the highest peak
in Centarl Africa. It spawns nine rivers upon which over 2 million people
depend. In 2000, UNESCO designated Mulanje Mountain as a biosphere reserve.
("Four new biosphere reserves designated in Africa," Africa News, Nov. 9,
2000; Africa News, Nov. 17, 2000)
Wildlife Society of Malawi director Daulosi Mauambeta said pollution from
the operation could impact water resources, small-scale farms, and tea
estates around the mountain. (Africa News, Nov. 26, 2000)
"The benefits in the form of job creation and the general creation of
wealth
from the mine are greater, so the mine will go ahead," said President
Muluzi. ("Malawi's Proposed Bauxite Mine Scales Environmental Hurdle,"
Africa News, Nov. 22, 2000)
Malaysia
For the time being, the Malaysian government has shelved a plan to build a
new 2,400 megawatt dam in Bakun, Sarawak. The dam would have fueled a
planned aluminum smelter and steel mill.
The Bakun dam, according to the head of the Coalition of Concerned NGOs,
could force the resettlement of 10,000 indigenous peoples.
"Why do we want toxic and energy-hungry industries such as Aluminium
smelters?," asked Dr. Kua Kia Soong, head of the coalition. "The earliest
justification for the Bakun dam during the Eighties was the need for energy
to fuel an Aluminium smelter in Bintulu. Aluminium smelting is one industry
that the developed countries want to dump on suckers like us because it is
environmentally toxic and it consumes voracious amounts of energy."
(Dr. Kua Kia Soong, Coalition of Concerned NGOs, press statement, June 10,
1996)
Sierra Leone
In 1995, civil war forced the closure of the Sieromco bauxite mine (owned
by Alcan subsidiary Alusuisse) in Sierra Leone. (Richard Carver, "Sierra
Leone after the ECOMOG intervention," Feb. 1997-April 1998, Writenet, April
1998)
"The tragedy unfolding in Sierra Leone may have its roots - literally -
embedded in a treasure trove of valuable underground minerals," wrote Kathy
Close in May 2000. The country hosts considerable natural resources,
including iron ore, gold, diamonds, and bauxite. (Kathy Close, "The Tragic
Treasure of Sierra Leone," May 23, 2000, on
http://www.oasistv.com/news/5-23-00-story-1.asp)
Suriname
A joint plan by Alcoa and Billiton to develop bauxite reserves in western
Suriname has raised fears among the indigenous community.
Alcoa and Billiton have mined bauxite in eastern Suriname for more than 50
years. Time and again, indigenous villages have vanished to make way for
bauxite mining. "The Government must help us if it is to respect our human
rights as defined by international human rights treaties," pleaded
villagers in one community surrounded by a new Alcoa operation.
Alcoa also operates an aluminum smelter in Suriname. The construction of a
dam to power the smelter flooded tropical rainforest and forced 6,000
people to move.
Now the companies want to mine one of the world's largest bauxite reserves,
the Bakhuis deposit, in western Suriname. In 1998, the Forest Peoples
Programme reported on the track record and possible future impacts of Alcoa
and Billiton.
The FPP raised and relayed fears of the impact of the new mining operation
in western Surinam. "Although the Indigenous population (Carib and Arawak)
of this area is sparse, mining operations will undoubtedly affect them and
will require clearing of vast areas of pristine tropical rainforest...
"Bauxite mining operations," added the FPP, "have historically taken place
with little or no regard for the rights and well-being of Indigenous
peoples and Maroons and the environment. In 1963-63, Alcoa constructed the
Afobaka dam to provide power for a smelter at Paranam. This dam inundated
some 600 square miles of tropical forest and forced the relocation of
approximately 6000 Saramacca and Aucaner Maroons from their ancestral
territories. These territories had been ceded to the Maroons in treaties
concluded with the Dutch colonial administration in the 18th and 19th
centuries. The communities were moved to so-called 'transmigration
villages,' where most remain today. These communities lack basic
facilities, including electricity, even though the power lines to Alcoa's
smelter run nearby. The communities were paid the equivalent of US$3 in
compensation and were not provided with secure land rights in their new
areas....
"Maroon communities near Moengo in east Suriname, like Adjoemakondre, have
also experienced serious problems caused by bauxite mining operations.
These communities have never been compensated for the loss of their lands
and livelihoods and for severe environmental degradation caused by
Suralco's activities.
"These once forested communities now live in a moonscape, surrounded by
blasted rock, covered in dust and debris from blasting and are subjected to
high intensity lights that allow mining to take place 24 hours a day, seven
days a week.
"Adjoemakondre is an extreme example of the impact of Suralco's activities.
It is presently surrounded by three active concessions and mining is taking
place less than 200 meters from the village itself. Much of the community's
agricultural and hunting lands, and in some cases houses, have been
destroyed and the river that runs through the village has turned
brown-orange due to run off from the mining areas. Community members also
allege that their health has suffered as a consequence of environmental
contamination caused by Suralco's activities.
"Suralco commenced operations near Adjoemakondre in 1991 and shortly
thereafter informed the community that they would be relocated as Suralco
wanted to mine under the village. The community objected and sought help
from the government. Negotiations between Suralco and the government
ensued, resulting in an agreement to relocate the village. The community
was not accorded a meaningful role in the negotiations. They did, however,
accept relocation at this point as they saw it as inevitable. Suralco
identified a site, which had already been mined out near the village, and
bulldozed it flat to build a new village. At this point, Suralco changed
its mind and, pointing to its contract with the government, stated that the
government alone was solely responsible for ensuring the welfare of local
communities. The government took no action and relocation did not take
place. Seven years and numerous requests to the government and Suralco
later, the community's position has worsened." ("Maroon Community Petitions
Suriname Government about the Operations of a US-owned Bauxite Mining
Company," Forest Peoples Programme, September 17, 1998)
Villagers from Adjoemakondre petitioned the Surinam government in 1998 to
give them "respect for our rights, especially our land rights that are not
presently recognized by the state of Suriname and are affected by the
mining activities of NV Suralco, a foreign-owned company. This company has
destroyed our environment and our ability to feed our families. We also
seek compensation for the expropriation of our property and interference
with our rights to hunt, fish and farm on our ancestral lands. The
preceding, which was authorized by the Government of Suriname, was caused
by the operations of Suralco. These operations are on-going and remain a
threat to our existence and well-being. To ensure that violations of our
rights cease immediately, we request in the strongest possible terms, that
the government of Suriname take prompt and decisive action to investigate
and remedy these violations of our rights.
"The village was established by our ancestors over 200 years ago... Suralco
arrived in our territory in 1991 and began mining operations in the
immediate surroundings of our village. At that time, we protested against
this and requested that the Government intervened to find a solution. The
Government and Suralco then entered into negotiations, which resulted in
Suralco promising to relocate the village and provide adequate housing and
other facilities for us. Suralco did not honor this promise, stating that
their activities were authorized by the Government when it gave them
concessions and that it was the Government's responsibility to relocate and
provide for the village. Since that time, negotiations have ceased and we
are left with a worse situation than we had in 1991." (Wilma Prika,
Captain, Adjoemakondre, Petition to the Suriname Government Concerning the
Situation in Adjoemakondre, 1998)
Tajikistan
The aluminum smelter in Tursunzade has been a focal point of civil war
combatants. In 1997, up to 25 casualties were reported in a battle between
two army units "apparently over control of the aluminum plant there,"
according to the United Nations. ("Report of the Secretary-General on the
Situation in Tajikistan," United Nations, S/1997/415, May 30, 1997)
United States
Alcoa digs lignite reserves in the central Texas counties of Bastrop and
Lee. This lignite, a kind of coal, fuels an Alcoa smelter in Rockdale,
Texas. County residents are fighting the company's plans to expand
strip-mining to 15,000 acres of land owned by San Antonio's City Public
Service. In the deal, Alcoa would pump aquifer water that would be
extracted as part of the mining operations. (Peggy Fikac, article in
Express-News, Oct. 19, 1999)
Local residents formed the organization Neighbors to Neighbors to fight
resettlement and water depletion that could result from the pact.
According to Bastrop County resident David Houghtling, the Alcoa/San
Antonio "water deal will affect scores of families in Bastrop and Lee
counties. Some of this property has been in families for generations. It
appears that Alcoa intends to use the condemnation powers of San Antonio to
push people off their property."
He said that Alcoa officials in 1999 contacted "an 85-year-old widowed
family member of mine and told her that she would have to sell her land and
house to them. When she asked what Alcoa was going to do with her house,
she was told that they were going to tear it down. This home has afforded
her a sense of independence and freedom in her later years and Alcoa has no
legal right to condemn property. They have made similar threats to other
neighbors." (Statement by David Houghtling, on the website
neighborsforneighbors.com, March 8, 1999)
Workers Rights
Labor is the biggest cost in bauxite mining and the second biggest cost,
after energy, in aluminum smelters. Most of the large producers have tried
to quell efforts by their workers to organize and raise benefits.
In North America, aluminum smelter operators are at war with unionized
workers, represented by the United Steelworkers of America and the Canadian
Auto Workers. Aluminum corporations' battles with its workers have
frequented other facilities across the globe. In 1999 and 2000, workers
were locked out at smelters operated by Kaiser, Southwire in the U.S.
Unrest also struck smelters in Germany, France, Australia, Romania,
Venezuela, and South Africa. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
Alba
In October 1974, according to Human Rights Watch, strikes at the Aluminium
Bahrain plant led the country's leader, Amir Isa, to impose a state
security law that would allow the government to arrest and imprison for up
to three years without trial any person suspected of having 'perpetrated
acts, delivered statements, exercised activities or... been involved in
contacts inside or outside the country, which are of a nature considered to
be in violation of the internal or external security of the country.'"
(Human Rights Watch/Middle East, "Routine Abuse, Routine Denial Civil
Rights and the Political Crisis in Bahrain," June 1997)
More recently, human rights groups have sought protections for a 30 year
old Alba employee, Ahmed Khalil Ibrahim Hubail al-Kattab. On July 1, 1996,
Bahrain's State Security Court sentenced him and two other men to death.
The men had pled not guilty to setting a fire that killed seven Bangladeshi
workers at a restaurant earlier in the year. Their attorneys produced more
than 50 witnesses who asserted that the men were innocent
Amnesty International issued an urgent appeal to the government. Amnesty
said the trial "fell far short of international standards for fair trial"
and feared "that their execution is imminent." It said that prosecutors
relied "solely on written confessions they had made during the
interrogation. The organization fears that the defendants may have been
convicted on the basis of confessions extracted under torture." ("Security
forces kill a women, the people of Bahrain practice their right of peaceful
civil resistance," Voice of Bahrain homepage,
www.vob.org/english/news7.htm, July 1996; Amnesty International, press
release, July 23, 1996)
Billiton
Billiton, wrote Leon Pretorius of the International Labour Resource and
Information Group, "has a history of conflict with worker organizations."
(Leon Pretorius, "Regional integration and development in Southern Africa:
A case study of the MOZAL Project and its implications for workers,"
International Labour Resource and Information Group, March 2000)
In Nov. 1999, Billiton announced plans to lay off 5,000 workers from its
aluminum smelters in Richards Bay, South Africa. A month earlier, the
company successfully petitioned a court to ban a strike by the National
Union of Metalworkers of South Africa (NUMSA). The union previously struck
in August 1999 after wage negotiations disintegrated. NUMSA threatened a
"massive strike" against Billiton's "unilateral wage policy implementation"
("Numsa plans strike over Billiton layoffs," Business Day, Sept. 13, 2000;.
Mining Annual Review, March 2000)
Several times in 1998, workers at the Billiton-run Mozal smelter in
neighboring Mozambique staged strikes.("Background on South African company
Billiton," Midwest Treaty Network website)
"Although multinational corporations such as Billiton and Mitsubishi are
investing in other developing countries they keep their technology and
knowledge intensive activities in the more industrialized countries," wrote
Pretorius, referring to the two corporate owners of the Mozal project.
"Very few if any of the skills and technology of producing Aluminium will
be transferred to Mozambicans. It appears that (these) companies have been
merely using Mozambique as a way of gaining access to tax benefits, cheap
infrastructure and low cost labor."
The chairman of Mozal, Bob Barbour, claims that the consortium awarded 67
of its 110 contracts to Mozambican companies. Pretorius and others have
asserted that other companies are securing the most lucrative contracts,
including almost all of the infrastructure projects.
"Mozambique offers more flexible labor markets than South Africa," observed
Pretorius. "There are less labor regulations, weaker and less militant
trade unions, as well as much lower wages. The promise for Mozal is that it
will lead to industrial development and create jobs in Mozambique. But many
people have asked what type of industrial development and for whose
benefit? An important part of development concerns the ownership and power
to access resources. How do the unemployed and women agricultural workers
who comprise the majority of the Mozambican workforce benefit from this
project?"
Pretorius noted that "the birth pangs of the ... Mozal project have been
accompanied by worker strikes and protest action by indigenous women
entrepreneurs prevented from benefiting from the project."
About 800 workers building the smelter went on strike from Sept. 28 to Oct.
1, 1998, demanding a 600 percent pay hike. They were earning about 24 U.S.
cents per hour. After the strike ended, the company agreed to only a
two-step, 20 percent raise for unskilled workers. (Pretorius)
Kaiser
Kaiser workers, members of the Steelworkers, walked out at the Alpart
bauxite facility in Jamaica and five U.S. locations for five days in 1996.
In Sept. 1998, 3,000 workers on strike again. The Steelworkers union
offered to return to work in Jan. 1999; however, Kaiser locked them out.
(Maxxam, Amendment No. 2 to Form S-3 filed with SEC, April 12, 1996; Mining
Annual Review, March 2000)
The union and the company finally reached a settlement in September 2000.
The new labor contract cut 540 jobs (out of 2,800) at five Kaiser
facilities. Shortly thereafter, Kaiser opted to keep its Washington state
smelters closed and profited from selling its power allocation on the open
market. (Kaiser press release, Feb. 7, 2001; Kaiser Aluminum & Chemical
Corp., Form 10-Q, filed with the Securities and Exchange Commission, Nov.
9, 2000)
VII. Environmental Health
"I don't see environmental issues as a negative for aluminum or Alcoa, they
are our friend. As long as legislatures and governing bodies don't do
stupid things, we'll be fine," - Paul H. O'Neill, then-chairman of Alcoa
(now U.S. Secretary of the Treasury), as quoted in Aluminium Today, 1999.
("O'Neill's Alcoa: Big group with a big appetite," Aluminium Today, Jan. 1,
1999)
Bauxite mining
According to the International Aluminium Institute, "of the land disturbed
each year by bauxite mining, 76% is forested, 19% agricultural and pasture
and 2% shrubland." The IAI said that of the 1,591 hectares mined in 1998,
80% was wildlife habitat; 175 hectares was tropical rainforest."
(International Aluminium Institute, "Bauxite mine rehabilitation," on its
website, world-aluminium.org, 2000)
* Adjoemakondre, Surinam (Alcoa)
In a 1998 petition to the Surinam government, people of the village of
Adjoemakondre detailed the impacts of Alcoa's bauxite mining operations
that began in 1991. "Our agricultural plots and houses have been destroyed,
without any compensation," they wrote. "Our river has been polluted so
badly that we can no longer use it - wastes from the mining operation run
down hill through the village into the river, turning it an orange-brown
color; health problems have occurred from villagers using the river water;
use of dynamite by the company causes noise pollution and has contributed
to the loss of game animals we use for food; (and) destruction of the
forest and pollution of the river has also substantially limited our
ability to hunt and fish on our lands." (Wilma Prika, Captain,
Adjoemakondre, Petition to the Suriname Government Concerning the Situation
in Adjoemakondre, 1998)
* Guinea
The Friguia mining/refining operation in Guinea, according to NorWatch, has
generated "an enormous red mud deposit, which covers an entire valley. In
this valley there were previously several villages, which are now drowned
in industrial waste. Hydro admits that this deposit is not 'state of the
art', for example it is not secured with a protective membrane to prevent
leakage of caustic soda and other effluents into the subsoil water. The
subsoil water has not been tested." (Tarjei Leer-Salvesen and Morten
Rønning, "Profits on arms, forced relocation, and environmental scandals,"
NorWatch newsletter, June 1998).
Alumina refineries
The Bayer Process of refining bauxite into alumina generates red mud, also
known as bauxite residue. Depending on the grade of bauxite used, from 0.3
to 2.5 tons of red mud are generated per ton of alumina produced.
(International Aluminium Institute, "Bauxite residue," on
world-aluminium.org)
Red mud contains iron oxides, silica, titanium, zinc, phosphorous, nickel,
vanadium, and compound formed by the adding of lime into the refining
process. It is usually dumped on land near the refinery.
Liquor burning plants at refineries are a source of air pollution.
* Yirrkata, Queensland
Red mud residue and caustic soda from the alumina refinery in Yirrkata,
Queensland was found poisonous to fish. (See Aluminum and Our Environment,
International Development Action, 1976, pp. 93-96)
* Port Allen, Louisiana (Alcoa)
Federal agents executed two search warrants at Alcoa's Port Allen,
Louisiana, alumina plant in March 1999. Alcoa's subsidiary, Discovery
Aluminas, also supplied a federal grand jury with wastewater discharge and
toxic waste management records.
The refinery produces specialty alumina powders and other products consumed
in the petrochemical industry.
A month later, the grand jury indicted the Port Allen plant manager on a
charge of violating the Clean Water Act. Discovery reached a plea agreement
in October 2000, in which the company and four employees agreed to plea
guilty a felony count of violating the federal Clean Water Act and the
state enforcing regulations, pay a $700,000 fine to the U.S. government,
pay $50,000 in community restitution, and $50,000 in community restitution.
(Alcoa, Form 10-Q, submitted to U.S. Securities and Exchange Commission,
Oct. 20, 2000)
Alcoa agreed that it had poured ammonia-laden slurry into a stream that
drains into the Intracoastal Waterway, south of Port Allen, in violation of
the Clean Water Act. The discharges turned the ground white. The employees
-- two supervisors, the environmental compliance officer, and director of
management -- face possible sentences of up to one year in prison, and
fines of up to $100,000. (Mike Dunne, "Discovery Aluminas pleads guilty to
polluting Port Allen waterway," The Advocate (La.), Dec. 12, 2000)
* Western Australia (Alcoa)
The installation of a liquor burning plant at Alcoa's Wagurup refinery in
1996 brought over 300 complaints from the plant's workers and residents of
the southwestern towns of Yarloop and Waroona. Alcoa's other liquor burning
plant in Western Australia, at the Kwinana refinery south of Perth, has
generated similar concern.
The equipment burns off carbon from bauxite. Dust emitted from liquor
burning plants irritates eyes and the respiratory system. Highly
carcinogenic benzene and more than 200 other chemicals are emitted from
liquor burning plants.
According to a report commissioned jointly by The Wagerup Community Health
Awareness Group and the Australian Manufacturers Workers Union asserted in
a report that symptoms range from irritation to the eyes and respiratory
tract, to insomnia and diarrhea, to constant flue-like symptoms.
According to Ian Grant, a maintenance contractor at the Wagurup plant, Ian
Grant, said that "we were never given proper breathing apparatus. When we
complained about the conditions we were told to keep our mouths shut as the
contractor (Asea Brown Boveri)."
Grant said that he started feeling sick in Sept. 1997. His illness
continued and worsened through December. "I developed a mouthful of ulcers.
I was getting sicker every day," he said. Early the next year, "I collapsed
in a big heap and that was the end of me. My kidneys gave up. I went to a
doctor twice early in January 1998 after my lungs started bleeding again."
He said he was diagnosed with Goodpastures disease, which attacks the
body's auto immune system.
Another worker, Bill Van Der Pal, said he and many others got sick. "Only
after the workforce threatened to close down the plant did Alcoa spend $5
million to deal with the emissions from the liquor burner," he said. "They
installed a catalytic thermal oxidizer (CTO)."
(Joe Lopez, "Workers and residents in Western Australia suffer health
problems from Alcoa's alumina plant," World Socialist Website, Nov. 11,
1999)
* Bintulu, Sarawak, Malaysia and Gladstone, Queensland, Australia (Comalco)
On April 3, 2000, Comalco decided to shift the location of a proposed
alumina refinery from Bintulu, Sarawak, to Gladstone in the Austrialian
state of Queensland. Rather than draw power from a new dam in Sarawak,
Comalco will draw from Chevron new gas pipeline from Papua New Guinea (PNG)
to Queensland.
People in Sarawak had vigorously protested the planned alumina plant. More
than 100 million tons of red mud would have been dumped there. A national
park is three kilometers from the planned alumina site.
The 1,020-hectare Bintulu alumina project was projected to import generate
more than 3.3 million tons of waste each year from processing Weipa,
Australia, bauxite. New Straits Times reported in 1999 that "there have
been accusations that the company is only using Malaysia for the 'dirty
process.'" (Esther Tan, "Alumina refinery will be a really big waste
producer," New Straits Times, Oct. 9, 1999)
Prior to Comalco's decision, a Sarawak environmentalist accused the company
of a "Pollution Haven Here, Conservation Elsewhere" mentality. "The choice
of Similajau (Sarawak) 2,000 nautical miles further than Gladstone, would
only prove the Pollution Haven hypothesis. The hypothesis suggests cheaper
labour and looser environmental measures in developing country," wrote Wong
Meng Chuo.
Villagers from the nearby towns of Kg. Kuala Nyalau, Kg. Nyalau Tengah and
Kg. Ulu Nyalau wrote a letter of protect to the Chief Minister of Sarawak.
They worried that the alumina refinery would involve the acquisition of
much of their agricultural land, on which they depend. (Letter of protest
from villagers to the Chief Minister of Sarawak, April 4, 1999, as
summarized by Rengah Sarawak)
"The end product, alumina, is not an item of consumption to be enjoyed by
the majority of local people. Sarawak's environment and natural access
should be traded off with short term economic benefit for some people,"
noted Mr. Wong. (Wong Meng Chuo, "A Review of the Detailed Environmental
Impact Assessment (DEIA) of the Proposed Alumina Refinery in Similajau,
Bintulu, Sarawak," IDEAL, Sibu, Sarawak, Oct. 4, 1999)
After Comalco decided to build in Queensland, a Sarawak group warned about
"equal concerns of similar and other negative impacts at Gladstone and
PNG... The impacts of the gas pipeline connecting the two countries over
land and sea coral reef areas are of great concern. Equally of concern is
also the environmental impact of the proposed plant would inevitably bring
upon should the project go ahead eventually. The social-economic effects on
the affected communities should be attended to too. The fate of human
beings is globally linked, and shifting the problems is not a solution at
all." (MC Wong, "Bintulu Alumina Project Scrapped: A Matter of Shifting the
Problems?," Rengah Sarawak, April 7, 2000)
Aluminum smelters
On Belugas and Cancer
Belugas, like canaries in a coal mine, speak to a particular poison spewed
by aluminum smelters. In Quebec, where the Saint Lawrence River meets the
North Atlantic's frigid Labrador Current, upstream industry is devastating
a population of these small white whales. Pollution is the greatest threat
to the St. Lawrence beluga population, whose numbers dropped from 5,000 to
about 650 in the past century.
Alcan is a dominant industrial force in Quebec. It has installed a network
of dams in the Lac-Saint-Jean/Saguenay River region, with a combined
capacity of 2,687 megawatts, to fuel nearby smelters with a combined
capacity of 700,000 tons per year. (www.alcan.ca)
These smelters, like all that burn coal tar, emit chemicals called
polycyclic aromatic hydrocarbons (PAHs). In these plants, coal tar pitch
and petroleum coke are combined and baked to make anodes and cathodes for
smelting aluminum. Anode forming, baking and rodding, potlining and pot
starting activities all release toxic emissions from coal tar.
Veterinary pathologists from the University of Montreal have fingered PAHs
discharged from the upstream aluminum smelters as a contributor to a cancer
epidemic among the belugas.
According to these researchers, one out of five adults belugas suffer from
cancer, comparable to the 23% cancer rate among humans in the western
world. "Such a high percentage had never been observed in any wild animal
species, terrestrial or aquatic (with the important exception of fish). To
our knowledge, this is the first population of wild mammals that can be
compared to humans in this regard," University of Montreal researcher
Daniel Martineau observes in the website "Diseases and Causes of Death of
Beluga from The St. Lawrence Estruary, Quebec, Canada."
(www.medvet.umontreal.ca/services/beluga/beluga_homepage.html)
Some cancers in belugas have been fuelled by other toxic substances,
particularly PCBs and the pesticides Mirex and DDT. But researchers have
also found high levels of PAHs in the whales' tissues.
Dr. Lee Shugart of the Oak Ridge National Laboratory (Tennessee, USA)
examined brain tissue from three dead whales and found the PAH compound
benzo-a-pyrene. The observed concentrations of this carcinogen in the
tissue, he concluded, "would produce cancer in other laboratory animals
under similar conditions." ("Research: St. Lawrence River Belugas," The
Scientist 14[19]: 19, Oct. 2, 2000)
Dr. Martineau surmises that the belugas' diet transports PAHs from the
sediment to their tissues. "Invertebrates living in sediments contaminated
by PAH accumulate these compounds.. In summer, beluga are known to feed in
significant amounts on bottom invertebrates," he writes. The pathologist
surmises that this exposure could be the reason why he has observed seven
cases of rare small intestine cancer among the population of 650 belugas
since 1983.
According to Dr. Martineau, extraordinary levels of up to 4,500 parts per
billion of total PAH has been found in the sediment of the Saguenay River,
which is part of the belugas' habitat. The PAH originates "for the most
part from the aluminum factories located upstream."
Around the beluga's habitat lie Alcan's 206,000 ton smelter in Laterriere,
232,000 ton smelter in Jonquiere, 415,000 ton smelter in Baie Comeau, and
its new 385,000 ton smelter in Alma. Throughout the Lac-Saint-Jean/Saguenay
region, humans also suffer from unusually high cancers. According to a
Canadian government survey, the region leads the county in rates of birth
defects. It also leads the province of Quebec in deaths caused by caused by
cardiovascular and cerbrovascular diseases and malignant tumors, according
to a separate study by the Quebec Department of Health (The Scientist)
A study of Jonquierre smelter workers in the late 1970s found that 73
workers had bladder cancer, 60 percent more than was statistically likely.
The number of workers with bladder cancer rose to 130 by 1990. (ibid).
Similar horrors have visited workers at an Alcan smelter on the other side
of Canada, in the province of British Columbia. Here, in Kitimat, Alcan
operates a 279,000 ton smelter.
In October 1989, NCI Cancer Weekly reported that "Alcan... says a study has
shown that workers at its Kitimat aluminum smelter in northwestern British
Columbia have had a slightly higher risk of bladder cancer." ("Bladder
cancer risk noted; Canada," NCI Cancer Weekly, Oct. 9, 1989)
Between 1986 and 1995, the Canadian Board of Occupational Health ruled that
23 workers were disabled by or died from cancers created by on-site
exposures. Tar fumes, pitch/coke dust, PAHs and other materials caused
mesothelioma, skin cancer, bladder cancer, and lung cancer in millwrights,
potroom workers, poliners, and other operators and servicemen. (Canadian
Auto Workers Local 2301-Kitimat Smelter and Kemano Power Operaions Workers,
"WCB cancer registry data," on www.sno.net/caw2301/april98data.htm)
Medical scientists at the University of Montreal, analyzed workers health
records at Alcan's Arvida Works in Jonquierre, Quebec. In a study published
in March 1995, the doctors confirmed the "relationship between exposure to
coal tar pitch volatiles and bladder cancer among primary aluminum
production workers." (Tremblay C, Armstrong B, Theriault G, Brodeur J,
Departement de medecine du travail et hygiene du milieu, Universite de
Montreal, "Estimation of risk of developing bladder cancer among workers
exposed to coal tar pitch volatiles in the primary aluminum industry,"
American Journal of Industrial Medicine, March 1995 (27(3):335-48.)
Despite the long known correlation between coal tar pitch exposure to
cancer in workers, it was not until December 1999 that Alcoa warned 3,000
workers at its Australia smelters about the danger. The company also
ordered new measures at its smelters worldwide to reduce coal tar exposure.
"The letter did not explain why the company had waited five years before
informing workers of the results of the 1995 study of Alcan employees at
the Arvida smelter in Quebec," noted Margeret Rees of Australia. (Margaret
Rees, "Alcoa Australia admits cancer dangers," World Socialist Web Site,
January 15, 2000.)
In fact, according to an article in the Herald Sun of Australia, Alcoa knew
of potential cancer risks in its Portland and Point Henry smelters since at
least 1989. "A medical specialist at Melbourne's respected Peter MacCallum
cancer hospital sounded alarm bells over potential cancer and chronic
asthma dangers in 1989. Cancer expert Dr. Cyril Minty warned pot room and
other workers at the Portland and Point Henry smelters could develop the
diseases if they continued to work in the same conditions for a long time."
When the newspaper reported the doctor's warning, Alcoa demanded a printed
retraction and said that it "emphatically rejects" any cancer risk among
smelter workers. (Karen Collier and Mark Dunn, "10 years of warnings,"
Herald Sun, Dec. 16, 1999)
Alcoa sent similar warnings to thousands of its current and former
employees worldwide. Recent studies, said Alcoa spokesman David Neurohr,
found "a small increase in cancer could be expected at lower levels of
exposure than had previously been expected... We are just being responsible
in keeping our employees informed." ("Alcoa health warning," Mining
Journal, Dec. 17, 1999; "Alcoa warns employees of possible cancer risk,"
Chicago Tribune, Dec. 20, 1999)
Spent pot lining
Every 6 or 7 years, carbon linings are replaced in pots used in aluminum
smelters. This lining (or cathode) is made of refractory bricks and carbon.
It also contains material from the electrolytic bath: heavy metals and
cyanide. (International Aluminium Institute, "Cathode waste," on its
website world-aluminium.org)
Around the world, most spent potlining is landfilled. Some is stored above
ground in a dry chamber. In the United States, the Environmental Protection
Agency first listed spent potliners as a hazardous waste (code K088). It
prohibits the landfilling of spent potlining unless it has been treated to
reduce the amount of hazardous constituents: 25 in all, including cyanide,
fluoride, toxic metals (including lead and mercury), and PAHs. (U.S.
Environmental Protection Agency, "Land Disposal Restrictions; Treatment
Standards for Spent Potliners From Primary Aluminum Reduction (K088) and
Regulatory Classification of K088 Vitrification Units," Federal Register,
July 12, 2000 (Vol 65, No. 134), pp. 42937-42959)
According to a June 20, 1998, report in the main newspaper of Surinam, De
Ware Tijd, Alcoa's subsidiary might bury toxic waste not only from its
Suralco smelter but also waste from abroad. "Suralco is planning to bury
its chemical waste, the so-called 'spent pot lining' (SPL), just as it did
in 1993. It will not only bury waste from the aluminum smelter at Paranam,
but also chemical waste from the parent company Alcoa in Pittsburgh," the
Forest Peoples Project quoted the newspaper as reporting. ("Maroon
Community Petitions Suriname Government about the Operations of a US-owned
Bauxite Mining Company," Forest Peoples Programme, September 17, 1998)
Illegal wastewater discharges
In March 2000, Alcoa agreed to pay $8.8 million to settle environmental
claims filed by the federal Justice Department and the Environmental
Protection Agency. The agencies charged Alcoa with violating the Clean
Water and Clean Air Acts at its Warrick, Indiana, sheet production plant.
The payout included a $2.4 million fine; the balance will be spent to
reduce hazardous waste generation and study air pollution reduction
technology.
The Justice Department alleged that Alcoa "illegally discharged
inadequately-treated wastewater to the Ohio River from 1994 until 1999,
while company-sponsored tests showed that the mixture of pollutants in the
wastewater was deadly toxic to fish and invertebrates." (U.S. Department of
Justice, "Alcoa to pay $8.8 million to settle environmental claims," press
release March 13, 2000)
Asthma
In 1999, the Comalco/Rio Tinto-controlled Boyne Smelters Ltd of Australia
settled a ten-year lawsuit filed by 18 pot room workers. Boyne paid over
A$1 million to settle claims that they contracted asthma working at the
smelter. (Stephen Johnston, "Aluminium," Mining Annual Review, March 2000)
Flouride emissions
Flourides are produced during the reduction of alumina, during "anode
effects." Small quantities of these emissions have big impacts.
The contributions of these emissions are discussed in the Global Warming
chapter of this report. The principal kinds of fluorides emitted,
tetrafluoromethane and hexafluoroethane, also have significant local health
impacts.
In India, the NALCO aluminum smelter in Angul, Orissa, is widely believed
to be the source of severe fluoride contamination among people and animals
living nearby. This plant discharges more than 220 tons of fluoride into
the groundwater and surface water, according to 1992 tests run by the
Orissa State Prevention and Control of Pollution Board. ("TTPS releases SPM
into Nandira," Nandira, March 1993)
Many villagers have reported brittle bones, tooth and gum diseases, lumps
of dead skin, and a host of other symptoms of fluorosis. Cattle, more prone
to fluoride contamination, commonly suffer from bone deformities, the loss
of teeth, a sharp drop in birth rates and a sharp rise in death rates. In
one village, one kilometer from the Angul plant, the number of cattle
declined from 3,000 to less than 100 head over a ten year period. ("The
Spectre of Industrial Pollution in Angul-Talcher Area," Nandira newsletter
of District Industrial Pollution Control and Citizens' Action Project,
Dhenkanal, Angul, late 1993, p. 16)
Although state regulators have demanded that NALCO provide piped water to
local villages, company officials have denied that they are responsible for
the fluorosis outbreak, and the resultant decimation of the local cattle
herds. The smelter's discharge canal, which flows into the Nandira river,
is used by people for bathing, washing clothes, and drinking. (Nandira,
1993)
In the same Indian state, the Indalco smelter caused widespread fluorosis
among local villagers. In 1990, scientists from G.M. College of Sambalpur
examined villagers and found that an astounding 67 percent of men and 64
percent of women suffered from fluorosis. People aged 12 to 19 were most
severely impacted. The researchers also found that the water and vegetation
in the areas were "highly contaminated by fluorides." (U.N. Samal and B.N.
Naik, "Dental fluorisis in human beings around an aluminium factory of
Orissa," Journal of Environmental Biology, V. 11, No. 4, Oct. 1990)
Despite this track record, in 2000 and 2001 Nalco is expanding its capacity
from 230,000 to 345,000 tons. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
In British Columbia, Alcan's Kitimat smelter is Canada's largest emitter of
hydrogen fluoride. In 1997, the plant released over 485 tons of hydrogen
fluoride, accounting for 9% of the province's on-site releases. (Burkhard
Mausberg, Canadian Environmental Defense Fund in Toronto)
The 514,000 ton per year aluminum smelter in Tursunzade, Tajikistan, has
been "the source of significant adverse health effects, both to the
residents of Tursunzade in Tajikistan and the bordering communities in
Uzbekistan. Livestock were losing their teeth and dying, and the teeth of
local children have been found to be discolored," according to the Slavic
Research Center. The plant emitted, at peak operating capacity, 193 tons of
fluorides annually. (Bakhtior Islamov, "Aral Sea Catastrophe: Case for
National, Regional and International Cooperation," Slavic Research Center,
1998)
Sulfur Dioxide
The aluminum industry generates sulfur dioxide emissions through the
burning of fossil fuels at its captive power plants, the generation of
steam at alumina refineries, and the consumption of anodes in smelter pots.
Point Comfort, Texas (Alcoa)
Alcoa's refinery and smelter complex in Point Comfort, Texas, is a federal
Superfund site. According to the National Oceanic and Atmospheric
Administration, "between 1948 and the present, Alcoa has constructed and
operated several types of manufacturing processes at this facility,
including aluminum smelting, carbon paste and briquette manufacturing,
gas processing, chlor-alkali processing, and alumina refining. Past
operations at the facility have resulted in the release of hazardous
substances into the environment, including through the discharge of
mercury-containing wastewater into Lavaca Bay from 1966 to 1970 and
releases of mercury into the bay through a groundwater pathway. In
April 1988, the Texas Department of Health issued a 'closure order'
prohibiting the taking of finfish and crabs for consumption from a
specified area of Lavaca Bay near the facility due to elevated mercury
concentrations found in these species." (National Oceanic and Atmospheric
Administration, "Alcoa Point Comfort/Lavaca Bay NPL Site, Point Comfort,
Texas: Notice of Availability and Request for Comments on a Draft Damage
Assessment and Restoration Plan/Environmental Assessment for Ecological
Injuries and Service Losses," Federal Register, July 14, 2000 (Volume 65,
Number 136), pp. 43739-43740)
IX. Aluminum and global warming
[see old chapter nine]
The aluminum industry is a significant contributor to global climate change
for two reasons: (1) it consumes enormous amounts of energy, much of it
fossil fuels such as coal that release carbon dioxide when burned and (2)
aluminum smelters produce small quantities of extremely potent greenhouse
gases.
An MIT study found that the industry emits the equivalent of over 3 billion
tons of carbon dioxide per year, or about 1 percent of global emissions of
anthropogenic greenhouse gas emissions. This study further predicts a rise
in total emissions to around 4 billion tons of carbon dioxide equivalent by
the year 2030.
In 1999, The Australia Institute, an environmental group, reported that
shutting down the country's smelters would be a net economic benefit for
Australia. It claimed that subsidies of A$410 million for inexpensive
energy and A$430 million for "unpaid" greenhouse gas emissions outweigh the
smelters' economic contributions. (Stephen Johnston, "Aluminium," Mining
Annual Review, March 2000)
Carbon dioxide
The industry emits carbon dioxide at each stage of production, from the
mining and processing of bauxite, to the electrolytic refining of alumina,
and the casting of aluminum.
A quintet of Massachusetts Institute of Technology scientists, led by
Jochen Harnish, in a 1999 study titled "Primary Aluminum Production:
Climate Policy, Emissions, and Costs," found that "the source of electric
energy used for the electrolytic reduction is the single most important
factor influencing total carbon dioxide emissions from primary aluminum
production. The specific emissions of CO-2 vary by a factor of five
depending on whether coal or hydroelectricity is used as a source of power
for the reduction cells." (Jochen Harnisch, Ian Sue Wing, Henry Jacoby,
Ronald Prins, "Primary aluminium production: climate policy, emissions and
costs," paper presented at the Kyoto and Montreal Protocols' Joint Expert
Meeting, Petten, May 1999)
Another study has calculated that the aluminum production cycle, including
mining, processing, refining, and casting, produces about 12 tons of carbon
dioxide per ton of aluminum produced. (R. Huglen and H. Kvande, "Global
considerations of aluminium electrolysis on energy and the environment,
Light Metals 1994, pp. 373-380)
The industry's International Aluminium Institute has lower carbon dioxide
estimates of 7.4 tons of carbon dioxide per ton of aluminum production
(including 5.8 tons from energy and 1.6 from the electrolytic process).
(IAI, "Aluminium's Life Cycle," on website world-aluminium.org, 2000)
The MIT study predicts that CO-2 emissions from the industry will rise from
about 2 billion tons in 1985 to about 3 billion tons in the year 2030. The
more coal that is consumed to power new capacity, the more emissions will
occur. If 75% of new capacity is fueled by coal, then the amount of CO-2
generated per ton of aluminum cast would increase from 12 to 18.3 tons.
PFCs
In 1991, Dr. Dean Abrahamson of the University of Minnesota discovered that
primary aluminum smelters produce two extremely potent greenhouse gases:
tetrafluoromethane and hexafluoroethane.
With atmospheric lifetimes are at least 10,000 years, these are some of the
longest-lived atmospheric pollutants. The gases have global warming
potentials that are 6,500 to 9,200 times higher than carbon dioxide. The
emission of one kilogram of tetrafluoromethane would have the same climate
change effect, over the subsequent 100 years, as 6.5 metric tons of carbon
dioxide. ("Greenhouse worries for the aluminum industry," Energy, Economics
and Climate Change, Jan. 1992; Harnisch et al.)
The MIT scientists suggested that "in view of the PFCs' atmospheric
stability and their large specific radiative forcing relative to most other
greenhouse gases, increased scientific focus on these compounds is
warranted." (Harnisch et al.)
These two gases are the unintentional byproduct of using fluorine in the
electrolytic reduction of alumina, formed during the "anode effect," when
the electrolyte is depleted.
Harnisch, et al, estimate that each of ton of aluminum production created
about 0.48 kilograms of tetrafluoromethane in 1995. Technological
improvements brought this level down 30 percent from emission rates in the
1980s. Still, the primary aluminum industry generated about 9,400 tons of
this PFC in 1995, or about 90 percent of all tetrafluoromethane emissions
worldwide. This is the global warming equivalent of 59.22 million metric
tons of carbon dioxide.
The MIT study further estimates that in 1992, aluminum smelters emitted
about 1,300 tons of hexafluoroethane, or the greenhouse gas equivalent of
11.96 million tons of CO-2. Primary aluminum production accounted for about
65 percent of this chemical's total emissions; plasma etching in the
semiconductor industry accounted for the balance of hexafluoroethane
emissions..
Proportionally, smelters employing Vertical Stud Soderberg and Sidework
Prebaked technology account for most of the industry's PFC emissions. The
MIT study estimated that in 1995, these two technologies generated 65
percent of emissions even though they accounted for only 30 percent of
production. (Harnisch et al)
The International Aluminium Institute uses a grouping of technologies.
First generation plants built between 1940 and 1955 emit between 12-15
kilograms of PFCs per ton of metal produced; those built between 1955-75
emit 2-6 kilograms per ton; and "third generation plants" (1975-today),
emit from 0.3 to 1 kilogram per ton. (Interantional Aluminium Institute,
"Smelter emissions," on its website, world-aluminium.org)
Hydro power
In addition to greenhouse gas emissions from smelters and captive fossil
fuel-fired power plants, the aluminum industry further contributes to
global warming through its heavy usage of hydroelectric power. In tropical
countries, where smelters have congregated around great dams, massive
amounts of vegetation decay in flooded forests. The decaying organic matter
produces huge amounts of methane and carbon dioxide. In Brazil, one
scientist calculated that a dam over a 50-year period would produce as much
greenhouse gas as a coal-fired plant producing the same amount of power.
(Pratap Chatterjee, "Dams a major source of global warming say scientists,"
Inter Press Service, Nov. 29, 1995)
Aluminum smelters consume over half of the power generated from the Tucurui
reservoir in northern Brazil. The reservoir demonstrated substantial, but
highly variable, greenhouse gas emissions in a recent two year period
studied by the World Commission on Dams. In 1998, it emitted 76.4 tons of
methane and 3,808 tons of carbons dioxide per square kilometer per year.
The next year, these figures dropped to 5.33 and 2,378 tons, respectively.
Estimated emissions for the 2,600 kilometer reservoir totaled 198,640 tons
of methane and 6,182,800 tons of carbon dioxide in 1998.
The WCD concluded that "there is no agreement on whether the net greenhouse
emissions from the reservoir, spillway, and turbines are offset by the
saving in emission from fossil fuel sources made possible by the large
amount of power produced by Tucurui." (World Commission on Dams, "The
Report of the World Commission on Dams," 2000, p. 77, 121, 122)
Aluminum industry lobbying
In 1997, 39 heavily industrialized countries, collectively called "Annex B"
countries, committed to reduce greenhouse gases under the terms of the
Kyoto Protocol to the United Nations Framework Convention on Climate
Change. The countries agreed to restrict their emissions over the period
2008-2012 to between 92-110 percent of 1990 levels. For emissions of PFCs,
hydrofluorocarbons (HFCs), and sulfur hexafluoride, countries may set the
baseline date at 1995.
The aluminum industry is fighting governmental actions to restrict their
greenhouse gas emissions. In 1999, the Aluminium Federation in the U.K.
worked against a Climate Change levy. According to Mining Annual Review,
"the primary smelting industry was exempted and some other modifications
were made, but the Aluminium Federation said that the bill would hurt
Britain's non-primary aluminium industry and that they would prefer a levy,
such as in the Netherlands, based on deviation from benchmarked best
practices." (Stephen Johnston, "Aluminium," Mining Annual Review, March
2000)
In Europe, seven producers -- Alcoa, Alcan, alusuisse (now part of Alcan),
Hoogovens (now part of Corus), Hydro, Pechiney, and VAW -- launched an
"Aluminium for Future Generations" initiative in 1998. In meetings with
government officials, parliamentarians, academic institutions, and
non-governmental organizations, the aluminum alliance emphasizes the need
for voluntary, not mandatory, action. "In many countries across Europe the
industry has entered into a range of national voluntary agreements to
reduce greenhouse gas emissions, since it believes that the reduction of
emissions can best be achieved through a combination of voluntary
agreements and market-based flexible mechanisms," reads the alliance's
website. "The aluminium industry is particularly concerned to adopt a
global approach to the issue of climate change and has therefore been
involved in discussions regarding implementation of the Kyoto Protocol at
international level, through the International Primary Aluminium
Institute." (Aluminium for Future Generations at
http://www.eaa.net/pages/fut_gen/fut_generat.html)
In the United States, aluminum companies are integral members of the Global
Climate Coalition, an industrial lobby credited with derailing U.S.
activism on the issue. Members include Kaiser and The Aluminum Association,
which is a U.S. lobbying group whose members include Alcoa, Alcan, Hydro,
Kaiser, Ormet, Pechiney, VAW, and dozens of other companies. (Boycott
Global Climate Coalition Companies (GCC) at
http://www.islandpress.org/earthday/gcc.html; The Aluminum Association at
http://www.aluminum.org/memberslist.cfm/1/7)
In Australia, David Coutts, executive director of the Australian Aluminium
Council outlined the industry's case at a government-sponsored conference
on climate change in 1999. "Greenhouse gas levels are still well within
historical boundaries and likely to remain there for a considerable time,"
he said. "The science of how these rising levels will effect the climate is
still far from clear and high priority needs to be given to improving that
knowledge so we can best judge how to act."
Coutts praised the government for standing by the industry during Kyoto
negotiations. To its great credit the Australian Government understood
these messages and took a firm position to Kyoto," he said. "Against all
the odds, a relatively sensible outcome was achieved at Kyoto. The
Australian negotiating team played a key role in this outcome and the
resources sector gave them the highest praise for this achievement. The
protocol is not going to immediately solve the problem of rising greenhouse
gas levels but at least it has put in place a process to start doing
something realistic about it."
He emphasized the importance of the aluminum industry to Australia's
economy. "If a favorable investment climate for Australia is maintained
then the alumina and aluminium metal sectors could easily grow by more than
30% in the period through to 2020," he predicted. "The aluminium industry
is already Australia's second largest export industry, with exports
predicted to be well over $5 billion in 1997/98. The industry is the world
leader in bauxite and alumina and the third largest metal exporter-after
Russia and Canada-and we are not all that far behind them with the latest
expansions at Boyne Island and Tomago.
"This expansion will be difficult to achieve if the competitiveness of
Australia is eroded. It depends on competitive supplies of raw materials
and world competitive energy, especially electricity. Australia is
currently at the lower end, on average, of the smelter cost curve and is
the world's most efficient region when it comes to converting electricity
into aluminium. These achievements have been hard won and could be all too
easily eroded," he continued.
"If we put the expansion of the aluminium industry at threat in Australia
by forcing energy costs up, then new investment will be in countries such
as India and China; probably operated less efficiently than in Australia;
and more than likely using Australian coal for electricity generation.
That won't help the greenhouse global problem but it surely will harm the
Australian economy," Coutts concluded. (David Coutts, "Greenhouse beyond
Kyoto issues, opportunities and challenges: The resources industries
perspective," March 31, 1998, at
http://www.brs.gov.au/social_sciences/kyoto/greenh.html)
Annex B countries host about 70 percent of world aluminum capacity, which
is not addressed at all under the current Protocol
In 1997, an article in The Guardian echoed Coutts' claim that the
Australian "government has presented industry lobby interests as synonymous
with the national interest. The green stance of the public has been
systematically eroded through a well-orchestrated campaign to portray
global warming as little more than a theory that scientists can't agree on.
Their strategy was aimed at crippling the impetus for government action to
solve these problems because such action might adversely affect corporate
profits." (Sharon Beder, Paul Brown and John Vidal, 'Who Killed Kyoto?',
The Guardian, Oct. 29, 1997)
VIII. Energy
Aluminum smelters congregate around sources of inexpensive energy. This is
the inevitable outcome of an industry that consumes enormous amounts of
power; on average, 45% of the cost of aluminum smelting is electricity. .
According to the Worldwatch Institute, the world's aluminum industry
consumed almost as much power in 1990 as the entire continent of Africa.
As energy resources become squeezed in the industry's cradles -- along the
great rivers of the northwestern United States and the depleted coal seams
of Western Europe -- production is shifting to the Third World. Powerful
rivers in South America and Africa, coal mines in eastern India, and oil
fields of the Middle East are beginning to fuel the increasing global
demand for aluminum.
The industry's hunger for power produces engineering marvels, tragic
disparities, and ecological devastation. In places like Suriname,
powerlines en route to smelters tower over new communities inhabited by
indigenous people forced to move from homelands flooded by new
hydroelectric dams. As seen in Chapter XXX, an industry that has built some
of the world's largest dams can not be bothered with compensating people
who were forced to move out of its way.
Power mix
The production of a ton of aluminum consumes between 14 and 18.5
megawatt-hours of power. (Alcan 10-K, FY1999) Harnisch et al estimate that
in 1985, the industry's power sources were 57% hydro-electric, 33% coal, 5%
nuclear, 4% gas, and 1% oil. Existing smelters are likely to continue with
the same power sources. The MIT scientists projected that coal could power
between 25 and 75% of new capacity built through 2030. (Harnisch et al,
1999)
The International Aluminium Institute asserts that "more than 55 percent of
the world's primary aluminum is produced using hydro-electric power" and
that this percentage "will be maintained for the foreseeable future." The
industry institute's survey of new smelters that are due to come on line in
the next eight years found that "at least 55% will be hydro powered, a
maximum of 30% coal fired and 15% gas." (IAI, "Energy Use" and "Future
Electricity Supply" at world-aluminium.org)
Focus: The Pacific Northwest Power War
Deregulation of the electricity industry in North America began wreaking
havoc in the western USA in 1999 and 2000. This chaos has ties to the
aluminum industry. The construction of massive dams corresponded with the
proliferation of aluminum smelters in the Pacific Northwest. Aluminum
companies own or hold purchasing contracts for many of these dams. Some
smelters have closed when corporations found it more profitable to sell
power earmarked for their operation on the open market.
Aluminum companies have long benefited from generous relationships with
Pacific Northwest power producers. Alcoa held a monopoly in the Pacific
Northwest in the early 20th century after it secured provisions in its
contracts with hydroelectric suppliers that "made power available to
(potential) rivals at entry-forestalling prices. This practice ceased under
the terms of a 1912 consent decree," according to Arkansas State University
economist Dr. Christopher Brown. (Dr., Christopher Brown, Department of
Economics & Decision Sciences, Arkansas State University, "Alcoa and
beyond: Toward a 'structural' approach to section 2," at
http://www.clt.astate.edu/crbrown/alcoa.htm)
More smelter operators rushed into the northwest U.S. in the 1930s and
1940s. "The aluminum plants are here because there was cheap power" said
James Wright of the Seattle Post-Intelligencer. "During the Depression, the
Works Progress Administration, the government, built a series of
hydroelectric dams -- Grand Coulee, the Columbia, the Bonneville Dam on the
lower Columbia -- and that brought the aluminum plants here during the war,
because none of the other materials used in the manufacture of aluminum are
found in the Northwest. It's all brought here. What we offer is cheap
electricity. If we can't offer that, there's no sense making aluminum
here." ("James Wright discusses how some northwest aluminum companies are
reselling contracted electricity and making profits," All Things
Considered, National Public Radio, Jan. 12, 2001)
Smelter operators are trying to maintain their advantageous arrangements
with the government-owned Bonneville Power Administration (BPA). The BPA
operates 29 dams in the Columbia and Snake river basins, and sells its
power to utilities and large industries in Idaho, Oregon, and Washington,
and parts of California, Montana, Nevada, Utah and Wyoming. (Lynda Mapes,
"BPA caught in a crunch, Energy crisis sours Northwest's sweet deal with
Bonneville," Seattle Times, Jan. 29, 2001)
In 1999, Alcoa, Kaiser, Reynolds, Vanalco, and Columbia Falls Aluminum sued
the BPA as a 20-year pact neared expiration. They disagreed with the BPA's
power allocations in new five-year contracts scheduled to begin in October
2001. Alcoa and Vanalco "took a novel approach, claiming first amendment
rights to redress grievances with the US Government," reported Mining
Annual Review (March 2000).
The suits failed. By January 2001, all of the producers reluctantly signed
new five-year contracts with the BPA. The agreement allocates 1,486
megawatts of BPA's hydroelectric power to the seven companies, roughly half
of their combined requirement. The contract charges the producers $23.50
per megawatt hour. ("Unhappy aluminum smelters ink BPA power deals,"
Purchasing, Jan. 11, 2001)
Reynolds said the contract would increase its BPA purchase rates by 13%
over the previous contract that covered the years 1981 to 2001. Kaiser said
its BPA energy prices would rise by 20%. (Reynolds 10-K, FY1999; Kaiser
8-Q, fourth quarter 2000)
The new contract still guarantees aluminum producers some of lowest-priced
power in the United States. The deal sets prices at about one-half the
average U.S. per-megawatt hour charge on the national market. (Seattle
Times, Jan. 29, 2001)
Some companies have the right to resell BPA power until the current
contract expires in September 2001. Beginning in the summer of 2000, as
energy prices soared in the Western U.S., these companies started to close
smelters and re-sell BPA power.
In June 2000, Alcoa announced that it was halting production at its
121,000 metric ton smelter in Troutdale, Oregon. It agreed to sell some
power back to the BPA at a reduced rate. (Alcoa, Form 10-Q, submitted to
U.S. SEC, Oct. 20, 2000; Susan Kelleher, "BPA wants Kaiser to share
millions," Seattle Times, Feb. 1, 2001)
In western Montana, Columbia Falls Aluminum closed its smelter, and is
reselling its power. It has agreed to forward 25% of the power sales
proceeds to the BPA. Six hundred workers are idle, but Columbia Falls has
agreed to maintain their salaries and benefits through 2001. (Kit
Miniclier, "Electric sellback in Mont. a model Factory will shut; workers
still paid," Denver Post, Jan. 25, 2001)
Golden Northwest is selling power from electricity designated for its
smelters in The Dalles, Oregon, and Kilimat County, Wash. It estimated the
sales would earn about $400 million through September 2001 Golden has said
that 25% of its revenues from the sales will be passed along to the BPA.
Another 25 to 50% of the revenue will develop a gas turbine and possibly a
wind power plant for a replacement secondary smelter. The moves earned the
support of the plant's union and the BPA. (Hal Bernton, "Jobs meltdown:
Goldendale smelter slashes aluminum production in order to resell its BPA
power," Seattle Times, Feb. 4, 2001)
Kaiser has made no such pledges to channel energy sales profits to the BPA,
its laid-off workers, or the development of alternative power plants.
Beginning in June 2000, the company curtailed production at its Tacoma and
Mead, Wash., smelters and sold power on the open market. The sales, which
could earn Kaiser $500 million until the contract expires in October, have
provoked outrage from the plant's workers and the BPA.
"It's difficult to conceive of a circumstance that would prevent them from
coming to terms with the region's other ratepayers and their employees,
given the amount of windfall profit," said BPA spokesman Ed Mosey in
January 2001. The agency is contemplating turning off its power supply to
Kaiser in October. (Seattle Times, Feb. 4, 2001)
"There's no way they should be profiteering from reselling federal power
and then ask us to draw unemployment," said Wayne Bentz, who represents
Kaiser Mead smelter workers as Steelworkers Local 329 steward. Over 900
workers are unemployed due to Kaisers' shutdown. (John Stucke, "Kaiser
denies idled workers' wage request," Spokesman-Review, Jan. 31, 2001;
Seattle Times, Feb. 1, 2001)
Kaiser Vice President Pete Forsyth called the BPA demands unreasonable and
"said the money is really a savings account that the company will have to
drain to buy a much more expensive supply of power starting this fall,"
according to the Spokesman-Review. (John Stucke, "Kaiser ponders asset
sale," Spokesman-Review (Spokane, Wash.), Feb. 2, 2001)
BPA was forced to buy back power for more than 20 times than it cost the
agency to produce it, according to the Seattle Times. Under the 1996-2001
contract, Kaiser pays BPA $22.50 per megawatt-hour. In late 2000, the open
market price in the western U.S. soared as high as $750 per megawatt-hour.
(Seattle Times, Jan. 29 and Feb. 1, 2001; Denver Post, Jan. 25, 2001)
Other shutdowns
Aluminum companies have shut down smelters to sell their electricity
allocations in other places. In the summer of 1999, skyrocketing
electricity prices in the midwestern U.S. led Alcan and Southwire to
curtail production at their Sebree and Hawesville smelters and sold their
captive power (105 and 90 megawatts, respectively) to the grid. (Stephen
Johnston, "Aluminium," Mining Annual Review, March 2000)
In May 2000, Ormet announced that it would limit production at its
Hannibal, Ohio, smelter during the summer and would lay-off, temporarily,
270 workers. "This is an endeavor that no other company in our industry has
been able to accomplish," said Emmett Boyle, chairman, president and CEO of
Ormet Corporation. "This will make us a more competitive force and will
strengthen our company's position in the future. We will continually review
the value of selling power to determine if it's a healthy business venture
for the company. We'll be looking for a proper balance of energy and metal
sales that will ultimately strengthen the company's portfolio."
"The decision to curtail aluminum production at this time ultimately came
down to three economic factors which include extremely low aluminum prices,
higher than usual alumina prices and higher electrical energy prices in the
peak summer months," explained a company press release. (Ormet, "Ormet
Announces Plans to Curtail Aluminum Production, Sell Power and Alumina,"
company press release, May 18, 2000)
Ramifications of electricity deregulation in the U.S. reaches across the
border into the Canadian province of British Columbia. In late 2000, Alcan
announced plans to shut down three potrooms in its Kitimat Works. The
plant's union, Canadian Auto Workers Local 2301, said the shutdown is the
result of provincial and corporate "greed."
"This whole situation stems from the government's 'greed' of making huge
profits by selling power across the border and Alcan's never ending
'Corporate Greed' of maximum profits no matter who or what it affects," the
CAW local asserted in a Dec. 14, 2000, statement. "The sad part is that our
members are being used as pawns in this battle. The closing of these lines
would have a huge impact on the community and is a direct attack on the
integrity of our local union 'Alcan must be stopped' for the sake of our
union brothers and sisters whose jobs will be affected. If we don't stop
this now who knows, maybe next year more jobs will be eliminated. If the
price of power is right! ("Union Says "No" to Line One Shutdown," CAW Local
2301, Dec. 14, 2000)
"If Alcan committed to a bad power deal they should pay the price. Our
members, and our community should not have to be the ones that pay the
ultimate cost. When times were good, Alcan didn't mind reaping all the
additional profits for the last few decades on the surplus power. Yet now
when fortunes turn temporarily around, they don't want to put any of that
'surplus' back into Kitimat Works to save jobs. We remind Alcan that it
also has a commitment to our community as well. Not just their profitable
power commitment with BC Hydro," added the CAW local. (ibid)
The situation marked a quick turnaround by the BC government. As recently
as December 1997, BC's premier "invited producers to build smelters in the
province with an offer of cheap electricity," according to the Mining
Journal (June 5, 1998)
Hydro
Hydroelectric dams have fueled the proliferation of aluminum smelters in
other parts of the world, often at the expense of local communities. As
Joji Carino of the World Commission on Dams reported in 2000, "The
experience of indigenous peoples and ethnic minorities with dam projects is
rife with alienation, dispossession both from their land and other
resources, lack of compensation or inadequate compensation, human rights
abuse and lowering of living standards." (Joji Carino, "Review of
Hydroelectric Projects and the Impact on Indigenous Peoples and Ethnic
Minorities," World Commission on Dams, 2000)
Details on the relationships of smelters to some massive hydroelectric
projects follow.
Brazil
The Brazilian aluminum industry tripled in size from 1978 to 1985, when the
Tucurui dam was completed in the Amazon. The dam, created a 2,500 square
kilometer lake and spawned the Albras, Alumar, and Alunorte alumina
refinery and aluminum smelters owned by Alcoa, Alcan, Billiton, and a
consortium of Japanese companies. These aluminum operations consume over
half of the dam's power. (Latin American Newsletters, Nov. 23, 1984;
Financial Times, Nov. 16, 1995)
The Brazilian government,
An IPS/SEEN/TNI report
2001
I. Table of contents
II. Executive Summary
III. Aluminum production infrastructure
IV. Corporate control
V. Multilateral and bilateral financial institutions' support
VI. Human rights
1. Impact of bauxite mining on indigenous peoples
Sidebar: The impending death of Mulanje Mountain
2. Aluminum wars (Tajikistan, Sierra Leone, etc.)
3. Workers rights and dirty industry migration
VII. Environmental health
1. Cancer in beluga whales
2. Impact of emissions on workers and communities
a. Coal tar fumes and PAH
b. Fluoride
c. Red Mud
d. Other emissions
3. Global warming
a. Perfluorocarbons
b. Carbon dioxide
c. The industrial lobby
VIII. Energy
1. Hydro
a. Great dams
b. The Pacific Northwest power war
2. Coal
3. Gas
4. Geothermal
5. Nuclear
Appendices
I. World bauxite production tables
II. World alumina refinery tables
III. World aluminum smelter tables
IV. Maps and photos
II. Executive summary
Aluminum holds a pretty positive image in the global marketplace. The
metal's shiny exterior glimmers like an antidote to its heavyweight
competitor, steel, or its lightweight, cheap-feeling counterpart, plastic. It holds this image despite the earth- and bone-shattering reality of its production.
From the devastation of some of the planet's most wondrous features, like Mulanje Mountain in Malawi and the beluga whales of Canada's St. Lawrence River, to the uncommon death rates of its employees and neighbors, to the global climactic consequences of its emissions, the aluminum industry churns a dark existence behind its shining exterior.
This report examines the global structure and social and environmental
impacts of an industry that deserves great scrutiny. Corporations engage in the mining of bauxite, the refining of alumina, and the smelting of aluminum with a reckless abandon that rivals anything done by more-infamous chemical and fossil fuel industrial forces. The industry's impacts span the spectrum of human and environmental abuse.
Corporate control
A handful of companies -- Alcoa, Alcan, Billiton and Norsk Hydro --
orchestrate most of the industry's global activity. Transnational
corporations participate in more than 60 percent of the world's bauxite
production. Alcoa alone controls more than one-third of the world's alumina production. These companies hold large stakes in each crucial step of the production cycle. Alcoa and Alcan absorbed leading competitors in the year 2000, awakening historic fears of monopolism.
Corruption and struggles (fiscal and physical) run rampant in the other
concentrated sphere of production, the countries carved from the former
Soviet Union.
Dirty Industry Migration
As with many dirty industries, production is increasingly concentrated in the global South. With energy and labor prices escalating in the
industrialized West, new capacity almost always is proposed in the
developing world.
Bilateral and multilateral development banks are helping to fuel this
industrial flight. The World Bank and national lenders have financed, or plan to back, aluminum industry infrastructure privatization or
construction projects in Armenia, Azerbaijan, Brazil, Cameroon, China,
Egypt, Ghana, Guinea, Guyana, Indonesia, India, Kazakhstan, Malawi,
Mozambique, Oman, Russia, Tajikistan, and Turkmenistan. These institutions' $4.4 billion in financial aid to developing countries mainly benefits western transnational corporations.
One multilateral government arm, the European Bank for Reconstruction and Development, even financed the export of the dirtiest type of aluminum technology -- a Soderberg smelter -- from an aging smelter in Slovakia to a new one in Iran.
Resettlement
The extraction of natural resources, aluminum's fodder, begins the
industry's ecological and human toll. While mining bauxite, lignite, and coal, and damming rivers, aluminum corporations have erased villages where tens of thousands of people once lived. Long-time residents of countless communities have been forced to move and make way for aluminum giants' new strip mines, dams and water courses.
Most bauxite mining occurs in tropical regions peopled by indigenous
communities, from northern Australia to South America to west Africa.
In the eastern Indian state of Orissa, indigenous communiities have been trying to stop the construction of the world's largest new bauxite mine and alumina refinery complex. In December 2000, police allegedly shot and killed three men who lived in a village where people refused to move out for Norsk Hydro and Alcan's Utkal project.
In Brazil, the construction of the Tucurui dam displaced more than 25,000 people. More than half of the power generated by Tucurui goes to aluminum smelters in northern Brazil. The new reservoir impacted an estimated 100,000 people who drank and fished the river and farmed along the riverbed. After the reservoir was filled in 1984, a prolific outbreak of mosquitoes forced farm families close to the new reservoir to leave their homes. The reservoir also helped to concentrate mercury discharges from upstream gold mining operations in fish tissues.
In Surinam, 6,000 people were forced to move from their ancestral
communities in the tropical rainforest to make way for an Alcoa/Billiton dam and smelter. A proposed new dam for a smelter in Sarawak, Malaysia, could force the resettlement of 10,000 indigenous people.
Dr. Kua Kia Soong, head of a non-governmental coalition in Sarawak,
wondered, "Why do we want toxic and energy-hungry industries such as
aluminum smelters? Aluminum smelting is one industry that the developed
countries want to dump on suckers like us because it is environmentally
toxic and it consumes voracious amounts of energy."
Power Hunger
Smelters aggregate around sources of cheap energy, because 45% of the cost of aluminum smelting is electricity. These factories have concentrated around the world's vastest sources of energy: massive power-producing dams, rich seams of coal, gas fields in the Middle East, and geothermal fields in Iceland.
The industry's hunger for power produces engineering marvels, tragic
disparities and ecological devastation. In places like Surinam, powerlines en route to smelters tower over new communities inhabited by indigenous people forced to move from homelands flooded by new hydroelectric dams. In small countries like Tajikistan, Bahrain, and Ghana, smelters consume a third or more of the national power supply.
Some aluminum companies have threatened to close their smelters in regions where energy prices are skyrocketing, like the Pacific Northwest. Alcan and Alcoa idled smelters in Oregon and British Columbia as prices soared in 2000 and 2001. Where aluminum producers own electricity, they have cut aluminum production to sell power to the grid when prices are high.
"More jobs will be eliminated... if the price of power is right," predicted a Canadian Auto Workers local union in December 2000.
Cheap Labor
Labor is the industry's second most costly expense. Many of the biggest
companies simultaneously increase profits and lock out restless workers. Transnationals replace lost production from shuttered smelters in the West by maximizing production at cheaper factories in places like Mozambique, where Billiton pays most workers less than 30 cents per hour. Shortly before the Mozambique smelter began production, Billiton announced plans to lay off 5,000 workers from its older and better organized smelters in South Africa.
Aluminum industry laborers, wherever they work, face severe on-the-job
health risks. Smelter potrooms are a particularly hazardous workspace. At an Alcan smelter in British Columbia, Canada, over 20 workers have been disabled by or died from on-site exposures to cancerous emissions.
Since the late 1970s, scientists have correlated elevated bladder cancer rates in smelter potroom workers. In 1989, Alcoa told an Australia newspaper that it "emphatically rejects" any such risk for smelter workers. In 1999, Alcoa finally sent warnings to thousands of its workers worldwide that "a small increase in cancer could be expected at lower levels of exposure than had previously been expected."
Ecological Toll
The industry also exacts steep tolls from surrounding communities and
ecosystems. Fluoride emissions from the Nalco smelter in India plague local villagers with brittle bones, tooth and gum diseases, and lumps of dead skin. Their cattle, more prone to fluoride contamination, commonly suffer from bone deformities and rising death rates. In one village within a kilometer of the plant, the local herd of cattle dropped from 3,000 to 100 head in a ten year period. Similar symptoms of fluorosis are apparent in villages around the world's fourth largest smelter, in Tursunzade, Tajikistan.
A Quebec, Canada, region that hosts four Alcan smelters has the highest
birth defect rate in the country. It leads the province in deaths caused by malignant tumors. Biologists have connected emissions from these smelters with cancers in beluga whales downstream in the Saint Lawrence Estuary.
Global Warming
Aluminum smelters' emissions have a truly global impact. A recent study
found that the industry emits about 1 percent of global emissions of
man-made greenhouse gases. The industry is a significant contributor to
global climate change for two reasons: (1) it consumes enormous amounts of energy, much of it fossil fuels such as coal, that release carbon dioxide when burned and (2) smelters produce small quantities of extremely potent greenhouse gases.
The aluminum production cycle generates an estimated 12 tons of carbon
dioxide per ton aluminum produced. Total carbon dioxide emissions are
predicted to rise from about 2 billion tons in 1985 to about 3 billion tons by the year 2003.
Roughly one-third of aluminum's electricity is generated by burning coal. In addition to producing carbon dioxide emissions from captive fossil fuel-fired power plants, the industry further contributes to global warming through its heavy usage of hydroelectric power. In tropical countries, where smelters have congregated around great dams, massive amounts of vegetation decay in flooded forest. Carbon dioxide and methane emissions from the new tropical reservoirs may contribute as much greenhouse gas as would a fossil fuel plant that would produce the same amount of energy, according to a recent World Commission on Dams study. Dams fuel 57% of global aluminum production.
Smelter potrooms produce the industry's other main contribution to climate change: perfluorocarbons (PFCs). Smelters are responsible for 90 percent of all tetrafluromethane, and 65 percent of all hexafluoroethane emissions worldwide. These PFCs have global warming potentials that are 6,500 to 9,200 times higher than carbon dioxide.
These and other realities did not deter the fiscal optimism of Alcoa
chairman Paul O'Neill in 1999. "I don't see environmental issues as a
negative for aluminum or Alcoa," he said. "As long as legislatures and
governing bodies don't do stupid things, we'll be fine." Mr. O'Neill is now the U.S. Secretary of Treasury under President George W. Bush.
III. Aluminum production infrastructure
The aluminum industry begins with bauxite mining. About 85 percent of all the bauxite mined worldwide is refined into alumina. More than 90 percent of refined alumina is then consumed in aluminum smelters. (Patricia Plunkert, "Bauxite and Alumina-1999," U.S. Geological Survey, 2000)
Bauxite mining is the only step in aluminum production that can not shift: the subsequent steps, refining bauxite into alumina, and turning alumina into aluminum, can and do bound across the world in search of the cheapest costs.
After the bauxite is mined at a handful of mines, aluminum oxide --
commonly called alumina - [is added] at a few dozen plants. Then, production moves on to scores of aluminum smelters, where an electrolytic process ("reduction") removes oxygen from the alumina. The resultant molten primary aluminum is then cast and shipped to fabricating plants. Generally, one ton of aluminum is produced from two tons of alumina, which is produced from five tons of bauxite.
Reduction demands enormous amounts of electricity. And so, these smelters are congregated around some of the world's vastest sources of energy: massive power-producing dams, rich seams of coal, and the gas fields of the Arabian Peninsula (see Energy chapter).
A. Bauxite
Proven and probable bauxite reserves stood at 25 billion tons at the end of 1995, according to the U.S. Bureau of Mines. The actual amount of reserves may be as high as 75 billion tons. Most of the bauxite reserves are in tropical regions, led by South America (33%), Africa (27%), Asia (17%), and Oceania (13%). According to the U.S. Geological Survey, "the sheer magnitude of these reserves is sufficient to ensure a readily accessible supply for the future." ("Bauxite and alumina," U.S. Geological Survey, Sept. 3, 1996; also, Plunkert, 2000)
Bauxite production grew by 13 percent (112 to 127 million tons) from 1994 to 1999. Australia is the largest producer (38%), followed by Guinea (12%). Brazil's share of production grew from 7% in 1994 to 10% in 1999, overtaking Jamaica (9%) for third in global production. Production is also growing rapidly in China and India. (See tables for further details) (European Association of Mining Industries; U.S. Geological Survey)
Most bauxite that is mined is of metallurgical grade, in the trihydrate
form. Non-metallurgical, monohydrate, grade bauxite is used in
refractories. Bauxite is also consumed in the production of abrasives,
cement, aluminum sulfates for water purification, sizing agents for paper manufacture, and other applications. (Africa Resources Corp.)
Although bauxite is almost always the raw material used to produce alumina, other materials are technically-feasible sources. "Clay, anorthosite, alunite, coal wastes, and oil shales, offer additional potential alumina sources. Although it would require new plants using new technology, alumina from these nonbauxitic materials could satisfy the demand for primary metal, refractories," according to the U.S. Geological Survey. (USGS, Sept. 3, 1996)
Labor (34%) and energy (21%) account for more than half of the cost of
bauxite mining. (Africa Resources Corp.)
Alumina and aluminum producers dominate bauxite mining. In 1993,
transnational aluminum companies participated in more than 62% of the
world's bauxite production.
Many bauxite mines are owned by partnerships of transnational aluminum
corporations and the host government. Guinea, Brazil, Venezuela, India,
Indonesia, Turkey, and Ghana hold bauxite mine ownership stakes. (Africa Resources Corp.) Host governments took many of these stakes in a wave of nationalizations in the 1970s. Seven producing countries -- Australia, Guinea, Guyana, Jamaica, Sierra Leone, and Yugoslavia -- banded together to form the International Bauxite Association in 1974. However, Australia's unilateral efforts prevented the IBA from becoming an OPEC-like cartel. (Samir Amin, "Mining in Africa today - Strategies and prospects," The United Nations University, 1988)
Transnational corporate investments in these and new bauxite mines surged in subsequent years.
The Alcoa World Alumina and Chemicals group (AWAC) produces and sells
bauxite and alumina. This joint venture between Alcoa (60%) and Western
Mining Corp. (WMC, 40%) produces more alumina than any other company in the world.
Australia
Australia leads the world in bauxite production, producing about 40 percent of the global total. The main mines, all of which are open pits, are located in Queensland (Weipa), Northern Territory (Gove) and Western Australia (Worsley). Unexploited but vast bauxite deposits are also located in the Mitchell Plateau and Cape Bougainville regions of Western Australia. ("Australian Resources and Deposits," Australian Bureau of Resource Sciences, 2000)
- Weipa (Comalco/Rio Tinto)
The world's largest bauxite mine is located in far north Queensland, in the village of Weipa. Comalco mines about 10 million tons of bauxite a year from this open pit. It has proven ore reserves of 296 million tons, probable ore reserves of 109 million tons. According to Comalco, another 3.8 billion tons of bauxite may be available. Most of the mined bauxite goes to the company's refinery in Gladstone. One-fifth of the bauxite goes to a refinery in Italy. (Rio Tinto website, "Comalco," at
http://aboriginalrelations.riotinto.com/nde/sites/comalco/)
- Worseley (Billiton)
Billiton gained control over the bauxite and alumina complex in Worsley, Western Australia, in late 2000. Benefiting from a U.S. Dept. of Justice-ordered sale of Alcoa/Reynolds alumina production capacity,
Billiton added Reynolds' 56% controlling stake to its 30% existing share in Worsley. The $1.2 billion acquisition gave Billiton a mine with over 50 years of bauxite reserves. Mining has expanded to accommodate an expansion at the accompanying alumina refinery.(Commerzbank Securities, "Billiton company report," August 30, 2000)
- Gove (Alcan/Billiton)
Algroup (now a part of the Alcan conglomerate) holds a 70 percent share
that controls the Gove bauxite and alumina complex in the Northern
Territory of Australia. Billiton owns a minority stake, which it purchased from CSR Ltd. in March 2000. AMP Ltd. owns a small share of the complex.
The alumina refinery is being expanded from 1.8 million tons of annual
capacity to 2 million tons. Two million tons of bauxite are exported rather than refined in Gove. (Billiton, "Billiton and CSR sign heads of agreement on Gove Aluminum Ltd.," press release, March 16, 2000)
-Ely (Alcan)
Alcan and Comalco plan to develop a bauxite mine in Queensland. In 1998, the two companies agreed to exploit the Ely mine owned by Alcan in Cape York, in conjunction with Comalco's adjacent operations, beginning in 2000. (Alcan 10-K, FY1999)
Brazil
In Brazil, the world's biggest aluminum companies are partners in the main producing company, Mineracao Rio do Norte. MRN's main operation is the Trombetas mine in the Amazon.
MRN is owned by CVRD/Aluvale of Brazil, 40%, Alcoa/Reynolds, 18.2%,
Billiton. 14.8%, Alcan, 12%, Companhia Brasileira de Aluminio, 10%, and
Norsk Hydro 5%. The Brazilian National Development Bank is planning to sell its 20% stake in CVRD (Companhia Vale do Rio Doce). MRN is planning to expand bauxite production from 11 million to 14.5 million tons per year. (Mining Annual Review, March 2000; Alcoa 10-K, FY1999; Alcan 10-K, FY1999)
Alcoa also owns an interest in an undeveloped bauxite reserve in Brazil
(Reynolds 10-K, FY1999)
Ghana
Alcan owns 80% of Ghana Bauxite Co., which shipped 400,000 tons of bauxite to Alcan's Burntisland (Scotland) and Jonquiere (Quebec) alumina refineries in 1999. (Alcan 10-K, FY1999)
Greece
Greece is the largest bauxite producer in Europe, and the 12th largest in the world, accounting for 2% of global production. The country holds 150 million tons of reserves and mined 2.45 million tons in 1996. Most is mined by Pechiney subsidiary, Aluminum of Greece. Most bauxite is consumed by Aluminum of Greece's alumina refinery. The company, which also operates an aluminum smelter, is the largest heavy industrial firm in Greece. ("Bauxite," Athens News Agency, Feb. 1998)
Guinea
Guinea, which trails only Australia in bauxite production, holds an
estimated 20 billion tons of bauxite, or about one-third of the world's
reserves. Mining takes place through three companies: Compagnie des
Bauxites de Guinee (CBG), Friguia, and Societe des Bauxites de Kindia
(SBK). ("Guinea: Africa Review," Africa Review World of Information, March 1998)
- CGB
CGB mined an estimated 12.15 million tons of bauxite in 1999. It is a joint venture between the government (49%) and the Halco consortium (51%). CGB holds a 10,000 square mile concession to develop and mine bauxite in northwestern Guinea, through the year 2038.
Halco investors include Alcoa (which now manages CGB), Alcan, Pechiney,
Comalco, Reynolds, and VAW. Open pit mines include Boke, Sangaredi,
Bidikoum, and Silidarou. Materials flow from the pits to the massive Kamsar crushing and drying plant. CGB started mining bauxite in 1973. (Leslie Wright and Morcire Sylla, "Guinea," Mining Annual Review, March 2000; Reynolds 10-K, FY1999)
Bauxite from CGB supplies Alcoa's refineries in Pt. Comfort, Texas, and San Ciprian, Spain, Alcan's refinery in Jonquiere, Quebec, the Sherwin, Texas, refinery formerly owned by Reynolds, and a refinery in Stadt, Germany, owned by VAW. (Alcoa 10-K, FY1999; Alcan 10-K, FY1999)
- Friguia
Friguia, the second largest producer (2.3 million tons of bauxite mined in 1999), has operated as a 49% government/51% private joint venture named Frialco. Pechiney, Noranda, Alcan, and Hydro have been investors in Frialco. The company name is changing to Alumina Co. of Guinea (ACG).
Friguia owns the only alumina refinery in West Africa. (Mining Annual
Review, March 2000; "Bauxite boost for Guinea," Mining Journal, Feb. 25, 2000 )
In 1999, Reynolds reportedly attempted to purchase a 100% stake in Friguia. According to African Mining Monitor, "the sale would be in the form of a lease of management scheme, enabling the investor to manage and modernize the assets without getting involved with the social concerns of the place."
Reynolds reportedly wanted to secure Friguia bauxite for the Alscon smelter in Nigeria and Volta smelter in Ghana, in which Reynolds holds 10% stakes. ("Reynolds Metals negotiating with Guinean government," African Mining Monitor, April 6, 1999)
In July 1999, Reynolds and the government reached a memorandum of
understanding in which Reynolds would manage the Friguia refinery. (Mining Annual Review, March 2000)
Friguia of Guinea also operates a bauxite mine in neighboring
Guinea-Bissau. It is planning to double production at this mine to 710,000 tons per year, at a cost of $70 million. ("MBendi Profile: Friguia," at http://www.mbendi.com/proj/p0d6.htm)
- SBK
The third largest Guinean producer, SBK, mined about 1.5 million tons of bauxite in 1999. It is studying granting control to Africa Mining Services (a project of Eltin-Ausdrill) and Shell. (Mining Annual Review, March 2000)
In 2000, SBK formed a partnership with Siberian Aluminium to develop the Bolondugu bauxite mine. Siberian Aluminum (Russwia) holds a large stake in the Nikolayev Alumina Plant in Ukraine, which is a long-time importer of Guinean bauxite. ("Siberian Aluminum to mine bauxite in Guinea," Interfax Russian News, March 22, 2000; "Siberian Aluminium to develop Guinean bauxite deposit," African Mining Monitor, April 3, 2000)
Guyana
Guyana's government is planning to privatize its two bauxite companies,
Berbice Mining Enterprises (Bermine) and Linden Mining Enterprise
(Linmine). The privatization would open 60% majority stakes to help fund capital improvements at both facilities. (Plunkert, 2000)
Reynolds, now owned by Alcoa, holds a 50% stake in the Bermine operation, and purchased 2 million tons of bauxite from the enterprise in 2000. (Reynolds 10-K, FY1999)
Hungary
A new bauxite mine is planned in Bakoyoszlop, Hungary. The open pit mine, operated by Bakony Bauxite Mines, could produce more than 650,000 tons per year from reserves of 4.4 million tons. (Plunkert, 2000)
India
India, particularly the state of Orissa, is poised to become one of the
world's leading producers of bauxite and alumina. The largest pending
project, the Utkal partnership, is discussed in depth in the human rights chapter of this report. Utkal is a $1 billion venture between Norsk Hydro (45%), Alcan (35%) and Alcan's subsidiary, Indal (20%), in the state of Orissa.
Indal, the Alcan subsidiary, also owns and operates bauxite mines in
Chandgad and Lohardaga. (Alcan 10K, FY1999)
Nalco plans to double its bauxite mining to 4.8 million tons per year.
(Mining Annual Review, March 2000)
Jamaica
Transnational corporations have long dug bauxite out of this Caribbean
country.
In Jan. 2000, Kaiser, Hydro, Alcoa and the Jamaican government agreed to share costs and production at the Alpart and Clarendon operations.
Kaiser and Hydro held 65 and 35 percent shares in Alumina Partners of
Jamaica (Alpart), which mined 3.6 million tpy from the Discovery
Bay/Manchester Plateau region. Alcoa and the government were in a 50/50
joint venture, called Jamalco, that runs a 2 million tpy mine in Clarendon Parish. (Plunkert, 2000; Alcoa 10-K, FY1999)
A 1999 explosion at Kaiser's alumina refinery in Louisiana led Alpart to severely curtail production at Alpart's Discovery Bay operations. About 3.3 million tons of bauxite per year from this mine were destined for the Louisiana refinery.
In early 2000, Alcoa contracted the Jamaican government to produce 400,000 tons of bauxite per year for its Point Comfort, Texas, refinery. ("Govt. secures bauxite deal," Caribbean Update, Feb. 1, 2000)
Russia
Severalboksitruda is the largest bauxite producer in Russia, accounting for 70 percent of the country's production. It started digging an open pit in Olkhovskoye in 1999 and announced plans to start production from a new deep mine, in Novo-Kalinskaya, in 2003. Bauxite mined by this company is mainly sold to the Bogoslovsk aluminum works. (Plunkert, 2000)
Suriname
Alcoa mines bauxite in Suriname through its subsidiary, Suriname Aluminum Company (Suralco). Alcoa also owns a 24% share in a separate mining operation, in Moengo, controlled by Billiton. According to Alcoa's 1999 annual report, "Suralco expects to deplete the current mine reserves at both operations in the period 2005-2010." (Alcoa 10-K, FY1999)
Alcoa first mined bauxite in Suriname in 1917. Billiton began mining there in 1942. Through the 1960s, the country ranked as the world's largest bauxite producer. Alcoa (through its Suralco subsidiary) and Billiton have focused on reserves in eastern Suriname.
Now that the two older mines are being depleted, the companies are looking to the west, where they have launched a joint venture to mine the Bakhuis deposit. This deposit is one of the world's largest. ("Maroon Community Petitions Suriname Government about the Operations of a US-owned Bauxite Mining Company," Forest Peoples Programme, September 17, 1998)
United States
Almost all of the bauxite consumed in the United States is mined outside the country. Three companies operated small surface bauxite mines in Alabama and Georgia in 1995, almost all of which was consumed in the production of nonmetallurgical products. Alumina refiners in the United States import about 10 million tons of bauxite annually. The major supplying countries from 1991 to 1994 were Guinea (34%), Jamaica (30%), Brazil (14%), and Guyana (13%). ("Bauxite and Alumina," U.S. Geological Survey, Mineral Commodity Summaries, January 1996)
Vietnam
According to Mining Annual Review (March 2000), in 1999 Pechiney held talks with the Vietnam government about conducting a "prefeasibility study on a bauxite and a one million ton per year alumina joint venture."
Venezuela
The Venezuelan Corporation of Guayana (CVG)'s Bauxilum subsidiary mines
bauxite (4 to 5 million tons per year). (Venezuela Commercial Office,
presentation to Expo 2000 - Hannover at www.venezuelaexpo2000.com/oficina/english/expo_opo_mineria_actores_guayana_en.html)
B. Alumina
Using the Bayer process, trihydrate bauxite is heated and aluminum oxide, a white powdery substance, is formed. The refining process extracts one ton of alumina from about 2.23 tons of bauxite. (Africa Resources Corp.)
Since the 1970s, many alumina refineries have moved from the Western world to the bauxite mines. "This is especially true for the major bauxite production centers of Australia, Brazil, Venezuela and India. In each case, bauxite mines have been developed by one or more of the major integrated aluminum producers. They have found it more economical to convert the bauxite to alumina on-site (or close by) rather than incurring high transport costs," according to Africa Resources Corp.
The global capacity of smelter grade alumina refineries was 49 million
metric tons in 2000. (USA v. Alcoa and Reynolds, complaint filed in U.S. District Court, Washington, D.C., May 3, 2000)
Four countries -- Australia (33%), the U.S., China, and Jamaica -- produced more than 55 percent of the world's alumina in 1999. (Plunkert, 2000)
As with bauxite, aluminum transnational corporations produce most of the
world's alumina. Aluminum producers hold ownership stakes in alumina
refineries that consume about 85 percent of mined metallurgical grade
bauxite. The rest of the bauxite (about 5 million tons) is sold to
refineries in the former Soviet Union or third party companies who pass the material along to Western producers. Kaiser, Pechiney, the new Middle East producers, and refineries in the former Soviet Union are more dependent on bauxite purchases than companies like Alcoa, Alcan, and Billiton. (Africa Resources Corp.)
Before Alcoa and Reynolds merged, Alcoa and Reynolds owned or controlled
14.5 million and 4.4 million tons of this capacity, respectively, or a
combined 38 percent of the global market. (USA v. Alcoa and Reynolds)
Alcoa, the world's leading producer of alumina, owns alumina refineries in Kwinana, Pinjarra and Wagerup, Western Australia; Pocos de Caldas, Brazil; San Ciprian, Spain; St. Croix, Virgin Islands; and Pt. Comfort, Texas.
Alcoa also manages the operations of three alumina refinery joint ventures in which it has an ownership interest: Paranam, Suriname (55 percent Alcoa ownership); Sao Luis, Brazil (54 percent Alcoa ownership); and Clarendon, Jamaica (50 percent Alcoa ownership).
All but the Brazil operations are operated under Alcoa's AWAC partnership with WMC. About 47% of AWAC's production in 1999 was consumed by Alcoa; the rest was sold to third parties. (USA v. Alcoa and Reynolds; Alcoa 10-K FY1999)
Prior to the merger, Reynolds owned an alumina refinery in Corpus Christi, Texas; 56 percent and control of the management of a joint venture alumina refinery in Worsley, Western Australia; 50 percent of a joint venture alumina refinery in Stade, Germany; and managed and was entitled to 10 percent of the production of the Friguia, Guinea alumina refinery. (USA v. Alcoa and Reynolds)
The U.S. Department of Justice has noted the potential for the corporate
giants to fix prices. In its anti-trust complaint that forced Alcoa to sell off some of its alumina refineries last year, it said the market for smelter grade alumina "has certain characteristics conducive to
anticompetitive coordination." The DOJ said the sales were needed to
"ensure that competition will continue." (USA v. Alcoa and Reynolds,
complaint filed in U.S. District Court, Washington, D.C., May 3, 2000; USA v. Alcoa and Reynolds, proposed final judgment, U.S. District Court,
Washington, D.C., May 3, 2000)
Australia
Australia produces more than double the amount of alumina made in the USA, which ranks second. Unlike the USA, most of Australia's refineries consume locally-mined bauxite. The country hosts the world's largest group of refineries (Alcoa's three Western Australia refineries), the largest recent refinery expansion project (Billiton's Worsely refinery), and the largest individual refinery (Comalco/Rio Tinto's Gladstone refinery).
- Alcoa (Kwinana, Pinjarra, and Wagerup)
AWAC's three mining-refinery operations in Western Australia -- Kwinana
(south of Perth) and Pinjarra and Wagerup (in the southwest) -- form the
world's largest source of bauxite and alumina. At the end of 1999, these
operations had a combined alumina production capacity of 7.3 million tons per year. (Alcoa 10-K, FY1999)
The Alcoa/Western Mining operators plan a $550 million project to expand
Wagerup's capacity from 2.2 million to 3.3 million tons.. At Pinjarra, a
retrofitting project is expected to boost production by 165,000 tpy in
2001. (Plunkert, 2000; Bob Regan, "Alcoa mulling 50% capacity expansion at Wagerup refinery," American Metal Market, Jan. 26, 2001; Alcoa 10-K, FY1999)
- Billiton (Worsely)
In October 2000, Billiton took control of the Reynolds alumina refinery in Worsely, Australia, which the U.S. Dept. of Justice ordered sold in the Alcoa/Reynolds merger. It bought Alcoa's 56 percent stake in Worsley for $1.49 billion in cash. ("Billiton scoops giant Australian alumina miner," Financial Post, Aug. 30, 2000)
Billiton now owns an 86% stake in the refinery and nearby bauxite mine in Western Australia. Japan-based Kobe (10%) and Nissho Iwai Corp. (4%) own the balance of the operation.
In the world's largest recent alumina refinery expansion, capacity at
Worsley expanded from 1.9 to 3.1 million tons in mid-2000. According to
Mining Annual Review (March 2000), "the project has been plagued by labor problems and is well over budget.") Another 300,000 tons of capacity may be added. (Commerzbank Securities, "Billiton company report," August 30, 2000)
- Comalco (Gladstone)
In Gladstone, Queensland, Rio Tinto subsidiary Comalco owns and operates
the world's largest alumina refinery. This 3.5 million ton refinery
processes bauxite that Comalco mines at Weipa in northern Queensland. Alcan holds a 21.4% stake in the Gladstone alumina plant. Its share of production is shipped to the Alcan smelter in Kitimat, British Columbia. (Alcan 10-K, FY1999; Rio Tinto website)
Throughout 1999, Comalco deliberated on the sitting of a new Aus$1.4
billion refinery in either Gladstone in Australia, or Sarawak in Malaysia. [See Human Rights chapter] In April 2000, the company decided to focus its feasibility study on adding capacity in Gladstone. ("Comalco Chooses Gladstone as Site for Alumina Refinery Feasibility Study," company press release, April 3, 2000)
Brazil
Alumina production has increased steadily in Brazil, from 2.1 million tons in 1995 to 3.5 million tons in 1999. Further expansion is planned.
- Alumar (Sao Luis)
Alcoa Aluminio (of which Alcoa Inc. owns 59%), manages and owns 35% of the Alumar cost- and production-sharing refining and smelting venture near Sao Luis, in the northeastern state of Maranhao. Other investors in the Alumar venture include Billiton (36%), Alcoa/WMC subsidiary Abalco (19%), and Alcan (10%).
The Alumar refinery's capacity stood a 1.25 million metric tons, most of which was consumed in its smelter. In addition, Alcoa Aluminio operates a 275,000 tpy refinery in Pocos de Caldas, which also supplies the Alumar smelter. (Alcoa 10-K, FY1999)
- Aluvale
In 1999, Hydro of Norway signed a memorandum of understanding to take a 25% interest in Brazilian alumina producer Vale do Rio Doce Aluminio (Aluvale). Aluvale is a subsidiary of Companhia Vale do Rio Doce (CVRD). The deal would guarantee the delivery of 378,000 tons per year of alumina to Hydro. The plant in the state of Para' is slated for an 800,000 metric ton expansion to 2.3 million tons in 2002. (Plunkert, 2000; Stephen Johnston, "Aluminium," Mining Annual Review, March 2000)
Canada
Alcan owns and operates a 1.2 million ton alumina refinery in Jonquiere,
Quebec. It imports bauxite mainly from Brazil and Guinea. Alumina produced in Jonquiere mainly supplies Alcan's several smelters in Quebec. (Alcan 10-K, FY1999)
China
China was the world's third largest producer of alumina in 1999, up from
fifth place in 1995. Production grew by 57 percent, from 2.2 to 3.8 million tons, in five years. Most alumina produced in China is consumed
domestically. (Plunkert, 2000)
Alumina refining is continuing to grow. Pogguo Aluminium Co. is planning to boost capacity at its Guangxi refinery from 350,000 to 950,000 tons per year (tpy). French transnational Pechiney is working with the Guizhou Aluimium Works on an upgrade at a 400,000 tpy refinery that would boost production by 100,000 tpy. The Shandong Aluminum Plant is expanding production at its refinery from 620,000 to 770,000 tpy. (Plunkert, 2000)
Guinea
The Friguia alumina plant has a capacity of about 640,000 tons per year. Friguia is 49% government/51% private joint venture, with Pechiney, Noranda, Alcan, and Hydro as private investors. (Mining Journal, Jan. 2, 1998)
India
Alcan's subsidiary, Indal, owns and operates alumina refineries in Belgaum (Karnataka) and Muri (Bihar) with a combined capacity of 390,000 tons. It is planning to expand capacities at Belgaum to 365,000 tons and at Muri to 101,000 tons. (Alcan 10-K, FY1999; Mining Annual Review March 2000)
State-controlled National Aluminium Company (Nalco) plans to expand its
alumina refining capacity in India to 1.58 million tons. (Mining Annual
Review, March 2000)
Iran
Czech company Technoiomport has developed a mine and 100,000 ton per year alumina refinery around bauxite reserves in Jajarm, northern Iran. The government also wants investment in a proposed two million ton per year alumina refinery on Qeshm Island, which would serve domestic smelters, Alba and other Gulf region producers. ("Iran," Mining Annual Review, June 1992)
Ireland
Alcan owned a 1.4 million ton per year alumina refinery in Aughinish, which it sold to Glencore AG in 1999. (Plunkert, 2000; Alcan 10-K, FY1999)
Jamaica
Alcoa and Alcan drive alumina refining in Jamaica, the world's fourth
largest alumina refiner.
Alcoa and the Jamaican government are 50/50 partners in an alumina refinery in Clarendon Parish. Alcoa manages the 1 million tpy refinery. (Alcoa 10-K, FY1999)
Alcan owns (93% share; government 7%) and operates alumina refineries in
Kirkwine and Ewarton. Alcan's Kirkvine and Ewarton plants had a combined
capacity of 1.175 million tons in 1999. Most of this alumina supplies
Alcan's smelters in Canada and the U.S. (Alcan 10-K, FY1999)
Russia
The three largest alumina refineries in Russia are located in Bogoslovsky (1.05 million tons capacity), in the Ural Mountains (950,000 tons), and Achinsk (900,000).
The Achinsk refinery is in dire straits. In 1999 according to Mining Annual Review (March 2000), "the struggle got physical at financially-troubled Achinsk." In September 1999, workers forced a court-appointed manager to leave. "Police and the governor came but the workers refused to allow them into the plant." (Mining Annual Review, March 2000)
Spain
Alcoa runs a 1.11 million ton refinery in San Ciprian. It planned to boost production there by 220,000 tons per year by March 2001. (Plunkert, 2000; Alcoa 10-K, FY1999)
Suriname
The U.S. State Department calls alumina exports "the backbone of Suriname's economy." Alcoa began producing alumina there in 1941. "The preeminence of bauxite and Alcoa's continued presence in Suriname is a key element in the U.S.-Suriname economic relationship," reads a 1998 State Dept. briefing. (Bureau of Inter-American Affairs, "Background Notes: Suriname," U.S. Department of State, March 1998)
Alcoa and Billiton share operations at the Suralco alumina refinery in
Paranam, on the Atlantic coast. The 1.7 million ton Paranam refinery
processes all of the bauxite mined at the two company's mining operations. Alcoa owns 55% of the Paranam refinery. Billiton owns the other 45%. (Alcoa 10-K, FY1999)
Ukraine
In March 2000, the Ukrainian government privatized 30 percent of Nikolaev, a 1.05 million ton per year alumina refinery, against the wishes of the country's parliament. A company linked to Sibirsky of Russia won the 30% share at auction. (Mining Annual Review, March 2000)
United States
The USA holds more alumina refining capacity than any country outside
Australia. Almost all of the bauxite consumed at these refineries is
imported.
In 1995, the U.S. had an annual alumina refining capacity of 5.6 million
tons. Four Bayer refineries were in operation at the end of the year.
Operational capacity grew to 6.2 million tons in 1998, then fell to 5.1
million tons after Kaiser's Gramercy alumina refinery suffered a
catastrophic explosion in 1999.
At the end of 1999, operational alumina plants in the U.S. included:
Alcoa's 2.3 million ton refinery in Point Comfort, Texas, and 600,000 ton refinery in St. Croix, Virgin Islands; Ormet's 600,000 ton refinery in Burnside, Louisiana; and Reynolds' 1.6 million ton plant in Sherwin, Texas. Smelters in North America consume almost all of these plants' production.
On Dec. 31, 2000, an investment group purchased the Sherwin, Texas,
refinery -- the ninth largest in the world -- from Alcoa/Reynolds. The
group includes Meriwether Capital Corp. and BPU Reynolds. Meriwether's
founder, George O'Neill, is chairman of BPU Reynolds. ("Meriwether Capital,
BPU Reynolds Group Purchases Sherwin Alumina
Refinery From Alcoa," Business Wire, Jan. 3, 2001)
Twenty-three U.S. smelters consumed 7.34 million metric tons of alumina in
1999.
U.S. aluminum producers imported about 3.9 million tons of alumina each
year from 1991 to 1994, mainly from Australia (73%). Jamaica (10%), and
Suriname (6%). Imports remained around 3.9 million tons in 1998 and 1999.
Again, Australia (62%), Suriname (15%), and Jamaica (9%) were the leading
alumina sources. (Plunkert, 2000; "Bauxite and Alumina," U.S. Geological
Survey, Mineral Commodity Summaries, January 1996)
Venezuela
Bauxilum is a subsidiary of Corporación Aluminios de Venezuela S.A..
(CAVSA) that produces bauxite and alumina. In August 2000, Pechiney and
Billiton were the finalists in a $260 million bid to boost production by
15% at Bauxilum. Alusuisse (now part of Alcan) owns a 1% stake in Bauxilum.
("CVG delays decision," VHeadline.com, Aug. 2, 2000)
C. Aluminum
Aluminum smelting technique has not changed much over the past century. The
basic process -- Hall-Heroult electrolysis -- has been around for many
decades. The first step in smelters is the dissolving of alumina in a
molten cryolite bath. Electric current passes through the solution,
separating alumina into aluminum and oxygen.
Four kinds of technology execute this process. Many plants, especially
those in developing countries, employ the Soderberg method of turning
alumina into aluminum. There are two basic types of Soderberg aluminum
reduction technology: horizontal stud (HSS) and vertical stud (VSS). The
other two technological groups are prebaked: centerwork prebaked (CWPB) and
sidework prebaked (SWPB).
CWPB technology is generally cleaner, more efficient, and more automated
than the others. However, as a MIT team noted, "due to the large size of
capital investments required for modernization of smelter technology, all
four technologies are still in use." These scientists estimated global
production in the four technological categories, as follows, in 1995: CWPB:
11.3 million tons/year; VSS: 3.7 million; HSS: 2.0 million; SWPB: 1.9
million. (Harnisch et al)
Of the 67 operational smelters for which the employed technology could be
determined during this study's research, 36 employed the Soderberg
technology, while
29 used the more modern pre-bake method. Of the 36 Soderberg plants, only
five were located outside Latin America, Africa, Eastern Europe and Asia.
Soderberg plants are notorious polluters. They demand more energy and emit more fluorine, carbon dioxide and perfluorocarbons (highly potent
greenhouse
gases) than smelters employing pre-bake technology.
"Cheap power is the key to low-cost smelting," offers the Financial Times.
"So smelters are often built in seemingly odd places, such as Siberia,
Iceland and Dubai, purely because of their access to cheap energy.
Amazingly, it can make economic sense to import bauxite or alumina to
Siberia, smelt it and then export the aluminum again. (From an engineer's
point of view, Zaire offers the world's best site for a new smelter.
Political risk is a different question, of course.)" (Gillian O'Conner,
"Financial Times - 2000 industrial survey: Why the aluminium business works
differently," on FT.com)
In the 1980s, as tariffs lowered in the developing world, aluminum smelting
began to proliferate in Latin America, Asia and the Middle East. "With the
relaxation of tariff barriers, strongly supported by the U.S. Aluminum
Industry, the location of new manufacturing resources will be increasingly
determined by access to new markets and favorable labor and energy costs,
as well as regional tax benefits," read a brief by the Aluminum Association
in March 1996 that predicted increasing investment in Asian aluminum
smelting capacity.
Early in the 1990s, shortly after the breakup of the former Soviet Union
and the 50% decline of its military-industrial economy, Russian aluminum
producers began flooding Western markets with cheap aluminum, and the
resulting global glut, temporarily halted this trend.
"We cannot ignore the fact that, with minimal demand at home, the Soviet
smelters may continue putting substantial amounts of aluminum on the world
market and the rest of the industry will have to adjust to this reality.
Obviously, anyone with a smelter project on the drawing boards will do well
to take a second look and re-think the project," said Bill Bourke,
then-chairman of Reynolds Metals, in 1991. (Financial Times (London), Nov.
22, 1991).
In the mid-1990s, the end of the Western recession, growing demand in
emerging market economies, and the privatization of national-owned aluminum
companies sparked another wave of transnational corporate investment in
developing countries. Global aluminum consumption reached a record 18.9
million metric tons in 1997, a 5.4% increase over 1996 levels (Mining
Journal, June 5, 1998)
After another hiccup -- the Asian economic crisis -- aluminum consumption
is growing steadily again and exceeded 27 million tons in 1999. Consumption
grew by an annual rate of 3% from 1990 to 1998, and 3.9% from 1998 to 1999.
The transportation industry has the heaviest aluminum appetite (6.9 million
tons in 1998), which is growing at a rate over 5 percent per year. (FT.com;
Mining Annual Review, March 2000)
In 2000, the U.S. Geological Survey predicted that "aluminum demand in the
United States and the rest of the world should remain strong with the major
growth area continuing to be the transportation industry, especially the
automotive market." (Plunkert, 2000)
Industry shift As energy and other capital costs rise, old smelters are being shut down . Aluminum smelting is shifting steadily to developing countries in Africa, Latin America, the Middle East, and Asia. In the late 1980s, the industrialized western world became a net importer of aluminum from developing countries. The trend of increasing production concentration in developing countries is "likely to continue well into the (21st) century," predict Harnisch et al. An agreement that commits the industrialized west to greenhouse gas emissions reductions could enhance this dynamic. "At present it is unclear whether the Kyoto Protocol will accelerate or mitigate these global trends.
The outcome greatly depends on whether innovative financing mechanisms can be developed that help to abate greenhouse gas emissions in the (developing) countries, while at the same time preserving the competitiveness of their aluminum industry." (Jochen Harnisch, Ian Sue Wing, Henry Jacoby, Ronald Prins, "Primary aluminium production: climate policy, emissions and costs," paper presented at the Kyoto and Montreal
Protocols' Joint Expert Meeting, Petten, May 1999)
Growth regions
Africa
In 2000, with aid from the International Finance Corp., a consortium led by
Billiton completed construction of a 250,000 ton per year smelter, named
Mozal, in Mozambique. The owners plan to double the plant's capacity in
future years. (See Banks chapter for more details).
In Richards Bay, South Africa, Billiton owns two smelters that produce more
than 3% of the world's aluminum. Billiton newer 466,000 ton Hillside
smelter, and its older Bayside smelter, have a combined capacity of 690,000
tons per year. The two smelters form one of the world's largest smelter
complexes. (Billiton website,
www.billiton.com/newsite/html/investor/aboutus/Hillside&Bayside.htm;
"Industry Overview," www.isa.org.za/industry_overview/sectors/metals.htm)
Elsewhere in Africa, Kaiser controls the 200,000 ton Valco smelter in
Ghana; Pechiney built a 90,000 ton smelter (Alucam) in Cameroon; and
Bechtel has conducted a feasibility study for a new aluminum smelter in
Guinea, with Alusuisse's backing. (Roger Moody, "The Gulliver File - Mines,
people and land: a global battleground," published by Minewatch, 1992;
Kaiser 10-K, FY1999)
Asia
- China
In China, aluminum production grew by 9.7 percent from 1998 to 1999,
reaching a record total of 2.6 million tons. Most Chinese smelters are
small-scale. The largest, Guizhou, produced 227,000 tons in 1999. The other
four largest smelters are Qinghai (205,000 tons in 1999), Baotou (117,000),
Pingguo (110,000), and Qingtonxia (102,000). More than 90 other smelters
produce less than 100,000 tons. (Mining Annual Review, March 2000)
Expansion projects are planned at Baotou (105,000 ton additional capacity
by 2002), Pingguo (200,000 ton possible expansion), Qingtongxia (100,000
ton expansion planned for 2001), and 12 other smelters. (Mining Annual
Review, March 2000)
In Nov. 1999, Alcoa entered into a 30 year agreement to sell at least
400,000 metric tons of alumina to the China State Nonferrous Metals
Industry Administration. (Alcoa 10-K, FY1999)
- India
With abundant bauxite reserves, and cheap energy and labor, aluminum
smelting is on the rise in India.
Aluminum plants in India include the Nalco smelter in Angul, Orissa, a
100,000 ton smelter in Korba owned by Bharat Aluminium, three smelters
owned by Alcan subsidiary Indian Aluminium Company (Indal), and a smelter
owned by Hindalco Industries.
Nalco and Bharat are controlled by the Indian government. Nalco plans to
expand its Angul smelter's capacity from 230,000 to 348,000 tons. The
government has announced that it would sell minority stakes in Nalco and
Balco, but union opposition has stalled the privatization plan.
Indal's 60,000 ton Belgaum smelter has been closed since 1992. The company
closed one potline at its 20,000 ton plant in Alpuram (Kerala). Indal
shifted production to its Hirakud smelter in coal- and bauxite-rich Orissa,
where capacity doubled from 30,000 to 60,000 tons in 1999.
In 2000, Hindalco announced plans to add 100,000 tons of capacity to its
242,000 ton smelter in Renukoot, Uttar Pradesh.
(Stephen Johnston, "Aluminium," Mining Annual Review, March 2000; Business
Today, March 7, 1998; Ashok Sharma, "Nalco production up in April-August,"
Financial Express, Nov. 1, 1999; "Hindalco board okays expansion,"
Financial Express, Jan. 30, 2000; "Production capacities in India," at
www.mitsui.co.jp/alm/statistics/india.html; "Disinvestment Likely To Be Put
On Hold - NALCO May Push Through With Equity Restructuring," Hindu
Business, May 9, 1997)
- Indonesia
A consortium of 12 Japanese companies, backed by $3.1 billion in Japanese
government financial aid, holds a majority stake in the 225,000 ton Inalum
smelter in North Sumatra. (Indonesian Commercial Newsletter, Nov. 25, 1991)
Latin America
- Argentina
Argentine company Aluar boosted its capacity from 176,000 to 260,000 tons
in 1999. Most of this production is shipped to Japan, the U.S., and Europe.
(Reuters, Feb. 3, 2000)
- Brazil
Large smelters in Brazil include Alumar (350,000 tpy capacity), Albras
(340,000), and CBA (225,000).
- Chile
Noranda has proposed building a 440,000 ton aluminum smelter in Chile. This
plan awaits commitments from financial partners and the Chilean government.
(Stephen Johnston, "Aluminum," Mining Annual Review, March 2000)
- Venezuela
Venezuela is seeking investors in its aluminum industry, which is fueled by
vast bauxite reserves and cheap hydroelectric power. (Venezuelan Commercial
Office)
The Venezuelan Corporation of Guayana (CVG) is installing a new 250,000 ton
potline at the Alcasa smelter in Bolivar State, which would more than
double its 210,000 tpy capacity. CVG is trying to attract foreign investors
in the $800 million project. Reynolds (now part of Alcoa) owns a 7.3% stake
in Alcasa. (Venezuelan Commercial Office)
CVG's Venalum subsidiary operates a 430,000 tpy smelter. Six Japanese
partners (Showa Denko, Kobe Steel, Sumitomo Chemical, Mitsubishi Aluminum,
Mitsubishi Metal, and Marubeni Corp.) own a 20% stake in the Venalum
smelter, the ninth largest in the world. (Venezulean Commercial Office)
Middle East
"Cheap fuel, labor, and locational advantage" help the region compete in
the global aluminum market, reported Gulf Business Online in November 2000.
"The aluminium industry in the Arabian Gulf region has never had it so
good."
In the year 2000, the region's two main smelters, Alba of Bahrain and Dubal
of the United Arab Emirates, exceeded one million tons of production
capacity, and accounted for 8% of global production. Alba and Dubal rank
among the five largest smelters in the world.
Planned smelters in Kuwait, Qatar, Abu Dhabi, and Oman might be taken off
the shelf, as European capacity shrinks and global consumption rises.
(Roger Jacobson, "Future looks bright for the GCC aluminium industry," Gulf
Business Online (Dubai), Nov. 9, 2000)
- Bahrain
The Aluminium Bahrain (Alba) smelter is a dominant economic force in this
tiny country of 635,000 people squeezed into land one-fifth the size of
Luxembourg. Oil production is the only industry that is bigger. Dubal is
slated to expand from 496,000 to 750,000 tons per year of capacity.. The
company started producing 120,000 tpy in 1971.(European Institute for
Research on Mediterranean and Euro-Arab Cooperation, October 2000, on
website: http://www.medea.be/en/index023.htm; Middle East Business
Intelligence, Jan. 5, 1996; AFP, Aug 27, 1995; Moneyclips, Nov. 21, 1996)
- Egypt
The Egyptalum 200,000 ton smelter is targeted for an expansion to 300,000
tons per year of capacity.
- Iran
Iran hosts a long-time producer, Iralco (120,000 tons per year), and a new
and troubled plant, Al-Mahdi. Another smelter has been proposed on Qeshm
Island, using discarded technology from a retrofitted plant in Slovakia
(see Banks chapter for more details).
Dubal of the UAE provides technical services to the 200,000 tpy Al-Mahdi
smelter. The government of Iran owns a majority share of Al-Mahdi, with the
rest owned by International Development Corp. of Dubai. International
Development Corp.'s investors included fugitive billionaire Marc Rich (see
Corporations chapter), U.K. construction company George Wimpey, Caradel
Investments, and former UAE ambassador to London, Mahdi Al-Tajir. (Mining
Annual Review, June 1992)
- Oman
Dubal is pondering the construction of a new $2.5 billion, 480,000 ton
smelter in Oman.
(Rasha Owais, "Dubal studies Oman smelter project," Gulf News, April 10,
1999)
- U.A.E.
Dubal Aluminum (Dubal) opened in 1979 and expanded from 375,000 to 536,000
tons of capacity in 1999, making it the third largest smelter in the world.
(Bricad Associates website, http://www.bricad.com/aluminium/dub/index.html;
Dubal website, www.dubal.co.ae)
III. Corporate Control
"Historically, the main agents of the mining developments in the Third
World in general and Africa in particular have been private companies from
the major capitalist countries, even though they were constantly supported
by their respective states. Mineral specialization in the Third World thus
developed within the framework of an international extension of the
oligopolistic structure of the advanced capitalist economies of Western
Europe and North America," observed Samir Amin of The United Nations
University in 1988. (Samir Amin, "Mining in Africa today - Strategies and
prospects," The United Nations University, 1988)
Six companies -- Alcoa, Kaiser, Reynolds of the U.S., Alcan of Canada,
Pechiney of France, and Alusuisse of Switzerland -- long dominated the
aluminum production cycle. These six majors controlled half of the bauxite
mining, two-third of the alumina refining, and seven-tenths of the aluminum
smelting operations of the capitalist world in 1988. (Amin)
Compared to other industries, notes the Financial Times, the aluminum
industry has an "unusual structure, with many of the larger companies
vertically integrated -- operating right through the production chain,
starting with digging up the bauxite and finishihng by producing metal..."
(Gillian O'Connor, "Hyperactivity in a strong market," Financial Times,
2000 on FT.com website)
In the year 2000, merger-mania struck the aluminum corporate sector,
reinvoking historic fears of monopolism.
When aluminum production developed in the late 1800s, two companies --
Alcoa and Pechiney -- dominated the industry. The firms controlled patents
on Bayer technology for alumina refining and Hall-Heroult technology for
aluminum smelting. (Amin) Alcoa also controlled patents on bauxite mining
and hydroelectric technologies (www.endgame.org). "A long period of
technological monopoly enabled these enterprises to acquire hydroelectric
facilities and bauxite deposits while increasing their production scale.
When their monopoly of the technology ended, they found themselves in a
position of economic monopoly, based on increasing returns to scale," wrote
Amin.
Alcoa's monopolistic grip in the U.S. loosened a bit by the second World
War. In 1945, a U.S. appeals court declared the corporation to be a
monopoly, and forced it to spin off its Canadian sister, the Aluminium
Company of Canada (Alcan). The courts also ordered the sale of smelters
that the government built during the war, using Alcoa technology, at a low
price to Reynolds and Kaiser. (www.endgame.org/primer-history.html;
www.clt.astate.edu/crbrown/alcoa.htm; "Alcoa's actions may catch Justice's
eye," Purchasing Online, Oct. 10, 1999)
Now, Reynolds, the third largest producer, has returned to the Alcan fold.
(see below) Also in 2000, the second largest producer -- Alcan -- attempted
to merge with the fifth and 14th largest firms, Pechiney and algroup (a
division of Alusuisse Lonza). Pechiney withdrew from the proposed combine
early in the year. This reduced the conglomeration's rise against the new
Alcoa/Reynolds force.
Alcoa now hold over 4.7 million tons of aluminum production capacity
dwarfing Alcan's 1.9 million. The third largest transnational producer,
Billiton, holds 0.9 million in poroduction capacity. (Financial Times,
"Aluminum/Current Trends," on FT.com)
As in the primary aluminum sector, Alcoa, Alcan, and Billiton dominate the
alumina refining component of the industry. Last year, Billiton gained
Reynolds' majority hold on the massive Worsley refinery in western
Australia. The U.S. Dept. of Justice mandated this sale in the resolution
of its anti-trust complaint against Alcoa and Reynolds' merger.
Revneues are up for the biggest producers. Billiton earned $577 million in
the fiscal year ending June 30, 2000, up 51 percent from the previous year.
(Commerzbank Securities, "Billiton company report," August 30, 2000) In the
first three quarters of 2000, Alcoa's earnings rose 65% from 1999. Income
rose from $853 million to $1.3 billion. (Alcoa 8-Q, FY1999)
The largest companies, reported the Financial Times, benefit from vertical
integration that enhances their ability to stablize prices and dictate
growth. "Although concerted action by the industry is anathema to
competition authorities, particularly in the US, self interest means that
some of the larger companies have been willing to act as 'swing producers':
cutting output when prices are falling, increasing it when they are
rising," the FT reported in 2000. "Some smelters that were mothballed in
the 1990s remain out of action... But the existence of those mothballed
smelters puts an effective cap on prices. Meanwhile, capacity is being
steadily increased, in line with growth expectations." (Gillian O'Connor,
"Hyperactivity in a strong market," Financial Times, 2000 on FT.com
website)
Table. Transnational Giants
Corporate aluminum production in 1999
(metric tons per year)
Company Capacity Primary production
Alcoa/Reynolds 4,256,000 3,800,000
Alcan/Alusuisse 1,372,000 1,744,000
Billiton 886,000 890,000
Pechiney 828,000 827,000
Hydro 745,000 749,000
Comalco 659,000 654,000
Aluminum Bahrain 537,000 515,000
CVG (Venezuela) 520,000 482,000
Kaiser 510,000 413,000
Dubal 424,000 433,000
VAW 421,000 421,000
Ormet 256,000 256,000
Source: CRU International, as reported in "Who's Who: Mergers, takeovers in
high summer," Financial Times at FT.com website.
Some less traditional transnational corporations have assumed significant
roles in the aluminum production cycle:
* Marc Rich, the former U.S. citizen and tax evader pardoned by President
Bill Clinton (known to some as "Aluminium Finger"), has invested in an
Iranian smelter, traded in aluminum exports from Russia, owned alumina
refineries in the Caribbean, and is hoping to benefit from a World
Bank-backed bauxite/alumina complex sale in Guinea.
* xxxxx
#1 Alcoa (including Reynolds)
ALCOA INC.
(a/k/a Aluminum Company of America)
201 Isabella Street
Pittsburgh, PA 15219
1999 revenues: >$16 billion
Chairman, President, and CEO
Alain J. P. Belda
www.alcoa.com
REYNOLDS METALS COMPANY
6601 West Broad Street
P.O. Box 27003
Richmond, VA 23261
1999 revenues: >$4.6 billion
In 1886, an Ohio chemist named Charles Martin Hall discovered the process
of electrolyzing alumina into aluminum, the same year that Paul Heroult
made the same discovery in France. In 1888, Hall, with backing from the
Mellon Bank, helped to found the Pittsburgh Reduction Company and built a
pilot plant and soon launched a global and revolutionary expansion. In
1907, the company name was changed to the Aluminum Company of America.
("Biography, Charles Martin Hall," on Oberlin College Archives website,
www.oberlin.edu/~archive/WWW_files/hall_cm_b.html. Oberlin maintains many
of Hall's records, including extensive filings from lawsuits, from this
early era of the aluminum industry.)
The company maintained a monopolistic position in the industry through
World War II, after which the U.S. government ordered the company to sell
several smelters and sever its ties to Alcan.
In 1943, George Seldes wrote in Facts & Fascism (published by In Fact) that
"By its cartel agreement with I.G. Farben, controlled by Hitler, Alcoa
sabotaged the aluminum program of the U.S. air force. The Truman Committee
[on National Defense, chaired by then-Senator Harry S. Truman in 1942]
heard testimony that Alcoa's representative, A.H. Bunker... prevented work
on our $600,000,000 aluminum expansion program.
"Thurman Arnold, as assistant district attorney of the United States, his
assistant, Norman Littell, and several Congressional investigations, have
produced incontrovertible evidence that some of our biggest monopolies
entered into secret agreements with the Nazi cartels and divided the world
up among them. Most notorious of all was Alcoa, the Mellon-Davis-Duke
monopoly which is largely responsible for the fact America did not have the
aluminum with which to build airplanes before and after Pearl Harbor, while
Germany had an unlimited supply."
"If America loses this war," said Secretary of the Interior Harold Ickes in
1941, "it can thank the Aluminum Corporation of America." (George Seldes,
Facts & Fascism (In Fact, 1943), pp. 68, 140-144.
Alcoa Inc. remains the world's largest producer of alumina and aluminum,
positions that it solidified with the acquisiton of Reynolds Metals in
2000. Reynolds was the third largest aluminum producer in the world, and
the biggest aluminum foil maker. (Reynolds Metals Co., Form 10-K (FY1999),
annual report to Securities and Exchange Commission, March 3, 2000)
More than half of Alcoa's revenues are generated in the United States
($10.4 billion of $16.2 billion in 1999) (Alcoa Inc., Form 10-K (Fiscal
Year 1999) filed with Securities and Exchange Commssion, Feb. 28, 2000)
On August 18, 1999, Alcoa announced plans to acquire Reynolds Metals
Company (Richmond, Va.), in a $5 billion stock purchase. Reynolds was the
second largest aluminum company in the United States, and third largest in
the world. The U.S. Department of Justice forced Alcoa to sell off
Reynold's alumina refinery stakes before allowing the merger to conclude in
May 2000.
The Justice Dept. charged that the merger "threatens substantial and
serious harm to (alumina) consumers." It asserted that it "will
substantially lessen competition in the refining and sale (of alumina)....
substantially increases the likelihood that Alcoa can unilaterally control
prices and also increases the likelihood that the remaining (alumina)
producers will be able to coordinate to raise prices, harming consumers. As
a result of the proposed merger, higher prices are likely for aluminum and
other products containing alumina." (United States of America, Department
of Justice, Antitrust Division v. Alcoa Inc. and Reynolds Metals Company,
complaint, May 3, 2000)
In its May 3, 2000, settlement with the Justice Department, Alcoa agreed to
sell Reynolds' stakes in alumina refineries in Worsley, Australia (56
percent stake); Stade, Germany (50%); and Sherwin, Texas (100%). It also
agreed to sell one-quarter of Reynolds' interest in an aluminum smelter in
Longview, Washington. On Aug. 29, 2000, Billiton plc agreed to purchase
Alcoa/Reynolds' 56% stake in the Worsley alumina refinery for $1.49
billion. (Alcoa, Form 10-Q, submitted to U.S. Securities and Exchange
Commission, Oct. 20, 2000)
Alcoa's latest merger follows its $3.8 billion takeover of Alumax in 1998.
Alumax was a joint venture between Amax, Mitsui and Nippon Steel. During
the Alumax merger, the Justice Dept. forced Alcoa to sell its aluminum cast
plate operations. The two companies, before the merger, controlled 90
percent of the global market for the manufacture and sale of cast plate.
(U.S. Dept. of Justice, "Justice Department clears Alcoa's proposed
acqusition of Alumax after Alcoa agrees to sell its cast plate operations,"
press release, June 15, 1998; Roger Moody, "Gulliver PUK
(Pechiney-Ugine-Kuhlmann) Dossier" in The Gulliver File - Mines, people and
land: a global battleground, Minewatch, 1992.)
In 1999, Alcoa objected to a U.S. Court of Appeals (Eleventh District)
affirmation of a decision that Alumax owed $411 million in taxes, including
interest, from fiscal years 1984-1986. (Alcoa 10-K, FY1999)
Also in 1999, the DOJ forced Alcoa to sell one of two aluminum sheet
manufucturing plants that it obtained in its $41 million takover of Golden
Aluminum Company from ACX Technologies Inc. (Department of Justice,
"Justice Department requires divestiture in Alcoa's Acquisition of Golden
Aluminum Company," press release, Nov. 5, 1999)
With the Alumax merger, Alcoa's U.S. aluminum smelting capacity surged
from a 31 percent national share (1.3 million metric tons) to 46 percent
(1.9 million). The addition of Reynolds' capacity gives Alcoa a 57 percent
share (2.4 million) of U.S. production capacity. Including Reynolds'
Canadian operations, Alcoa now holds more capacity (3.3 million tons) in
North America than exists in Russia. ("Alcoa's actions may catch Justice's
eye," Purchasing Online, Oct. 10, 1999)
- Alcoa and Bush
In late December 2000, President-elect George W. Bush added Alcoa chairman
Paul H. O'Neill to his stable of corporate cabinet members. He nominated
O'Neill to be the new Treasury Secretary. O'Neill, a former International
Paper president, became an Alcoa director in 1986, and chaired the
company's board from 1987 to 2000. (Brian Knowlton, "Alcoa Chief Picked to
Head Treasury," International Herald Tribune, Dec. 21, 2000; Alcoa 10-K,
FY1999)
Alcoa operates a smelter in Rockdale, Texas. It also plans to strip mine
15,000 acres in two Central Texas counties for fueling the Rockdale
smelter. Bush, as governor of Texas, was criticized by environmentalists
and neighbors of Alcoa's central Texas lignite strip mines for not opposing
Alcoa's plans to stripmine their land and ship massive amounts of
underlying groundwater to San Antonio (see Human Rights chapter)
"We hope that Gov. Bush will recognize our struggle against Alcoa is the
perfect opportunity for him to demonstrate his willingness to protect the
rights of Texans against the wrongs of a few rich, corporate giants," said
Travis Brown of Neighbors for Neighbors, a local group of concerned
citizens. (Peggy Fikac, Express-News (Texas), Oct. 19, 1999)
No such luck. Bush punted all responsibility for the decision to the Texas
Railroad Commission.
On the environment, O'Neill has said, "I don't see environmental issues as
a negative for aluminium or Alcoa, they are our friend. As long as
legislatures and governing bodies don't do stupid things, we'll be fine."
(Aluminium Today, 1999. [xxx need citation xxx])
On workers' health in Mexico, he has said "our plants are so clean they can
eat off the floor." The New York Times recently reported on conditions at
Alcoa's factory in Ciudad Acuna, Mexico. The article describes the working
conditions; employees earning $6 a day, being limited to three sheets of
toilet paper per work, and collapsing from gas leaks.In 1993, 179 workers
were hospitalized by a gas leak. Half of the city's 150,000 residents use
backyard latrines. Alcoa opened the auto parts plant in Acuna after the
signing of the North American Free Trade Agreement, sifting production from
San Antonio, Texas. (Sarah Anderson and John Cavanagh, Institute for Policy
Studies (U.S.), Karen Hansen-Kuhn, The Development GAP (U.S.). and Carlos
Heredia and Mary Purcell, Equipo PUEBLO (Mexico), "No Laughter in NAFTA:
Mexico and the United States Two Years After," 1996)
#2 Alcan/algroup
Alcan
1188 Sherbrooke St. West
Montreal, Quebec H3A 3G2, Canada Phone: 514-848-8000
Fax: 514-848-8115
http://www.alcan.com
Alcan Chairman
John R. Evans
Interim President and CEO
Bill Blundell
algroup (former division of Alusuisse Lonza)
Feldeggstrasse 4, Postfach 495
Zurich CH-8034, Switzerland Phone: +41-(0)1-386-22-22
Fax: +41-(0)1-386-25-85
http://www.algroup.ch:
Chairman Martin Ebner
CEO and Managing Director Sergio Marchionne
Alcan/algroup combined 1999 revenues: $12.3 billion
In 1902, Alcan opened as a Montreal, Canada,-based subsidiary of the
Pittsburgh Reduction Company (renamed Alcoa in 1907). It established its
first smelter and hydroelectric power plant in Shawinigan, Quebec. In
1928, Alcan began to splinter from Alcoa. During World War II, Alan opened
numerous new plants in Quebec, and in the 1950s, opened a plant in British,
Columbia. Later, it opened operations outside Canada. (Alcan 10-K, FY1999)
A three-way merger between Alcan, Pechiney, and algroup (the aluminum
divsiion of Alusuisse Lonza) fell apart in early 2000. Facing obstacles
from the European Union and the U.S. DOJ, in April 2000, the "A.P.A."
partners announced that Pechiney would wiithdraw from the three-way merger.
They decided that "divestments which would ultimately be required to meet
the objections of the European Commission would seriously undermine the
strategic viability of the combined company's rolled products business in
Europe." (Alcan-Pechiney-Algroup, "Merger will not proceed," joint press
release, April 13, 2000; also, Plunkert, 2000)
On Oct. 18, 2000, Alcan completed its merger with the Alusuisse Lonza's
algroup division. The algroup shareholders gained a 34 percent share in
Alcan. (Alcan press release, Oct. 18, 2000)
Alcan describes itself as "one of the most international aluminum companies
in the world." (Alcan press release, Aug. 21, 2000) The company's global
operations include:
* Bauxite mining: full or majjority stakes in Jamaican, Australian,
Brazilian, Ghanaian, and Indian mining companies, and minority shares in
Guinean (CBG) and Brazilian (MRN) producers.
* Alumina refineries: full stakes in Brazil (Ouro Preto in Sramenha, Minas
Gerais) and Canada (Vaudreuil in Jonquiere, Quebec); majority stakes in
India (Belguam in Karnataka and Muri in Bihar) and Jamaica (Kirkvine and
Ewarton); and minority stakes in Australia (Gladstone) and Brazil (Alumar).
* Full stakes in seven Canadian smelters with a combined capacity of 1.1
million tons; two small Brazilian smelters, three small U.K. smelters, and
a small U.S. smelter, and majority stakes in two small Indian smelters.
Alcan's share of smelting capacity outside of Canada totals 515,000 tons.
(Alcoa 10-K, FY1999)
Alcan's global operations include the Indian Aluminium Company (Indalco),
Alusuisse has numerous operatrions beyond aluminum production, including
pharmaceutical and cosmetics packaging (through its Wheaton subsidiary) and
food and tobacco packaging (through its Lawson Mardon subsidiary).
#3 - Billiton
Billiton Plc
1-3 Strand
London
WC2N 5HA
United Kingdom
Tel: 44 (0) 20 7747-3800
Fax: 44 (0) 20 7747-3900
Web: www.billiton.com
Revenues in 1999: $4.6 billion
CEO/Chairman: Brian P. Gilberton
In 1860, Billiton adopted articles of association in The Hague. The company
took its name from an island, also spelled Belitung, in the Dutch colony
that became Indonesia. In 1861, the company shipped laborers from China to
the island between Sumatra and Borneo and started digging its first
concession: a tin reserve. Billiton shipped the tin, and lead, to its
smelters in the Netherlands. ("History of Billiton," from www.billiton.com;
"Dutch imperialism, " from www.gimonca.com/sejarah/sejarah05.html)
The Royal Dutch/Shell Group bought Billiton in 1970. In 1994, Gencor of
South Africa bought a majority stake in the company from Royal Dutch/Shell.
In 1997, the non-precious metals assets of Gencor and the minerals
businesses of Royal/Dutch Shell spun off into an independent Billiton that
is now based in London. ("Billiton Plc, Hoover's Company Profile Database -
World Companies 2000; "History of Billiton")
The company moved into the bauxite mining business in the 1940s, when it
began mining bauxite in Indonesia and Surinam. It no longer mines bauxite
in Indonesia, but continues to do so in Surinam, where it runs a bauxite
mine and holds a 45% interest in an alumina refinery.
The company's aluminum interest span the globe. In October 2000, Billiton
took control of Reynolds alumina refinery in Worsely, Australia, which the
U.S. Dept. of Justice ordered sold in the Alcoa/Reynolds merger. Billiton
now owns an 86% stake in the reinery and nearby bauxite mine in Western
Australia. It also controls the Gove bauxite mine in the Northwest
Territories. (Commerzbank Securities, "Billiton company report," August 30,
2000)
Billiton also owns interests in mines, refineries and smelters in Brazil,
South Africa, Mozambique, and Australia. It holds a 15% interest in a
Brazilian company, Mineracao Rio do Norte S.A., which runs one of the
world's largest bauxite mines. It also is a part-owner of the Alumar
alumina refining and aluminum smelting complex in Brazil, and another
Brazilian smelter, Valesul. It owns two aluminum smelters in Richards Bay,
South Africa. Billiton owns 47% of a new smelter that opened in Mozambique
in 2000. Also in 2000, Billiton acquired Reynolds' share of the massive
Gladstone bauxite mine/alumina refinery complex. The company is bidding to
take-over the state-run Venezuelan aluming company, CVG, for $3 billion.
("Billiton background" at www.mbendi.co.za/orgs/cegi.htm; "History of
Billiton"; "Billiton scoops giant Australian alumina miner," Financial
Post, Aug. 30, 2000)
Billiton digs many other minerals. It mines copper and zinc in northern
Quebec, Canada. It operates open pit and underground coal mines in South
Africa through its Ingwe subsidiary. The company mines coal in Australia
and Colombia, and ranks as the world's leading exporter of thermal coal.
Also in South Africa, the company mines zinc from an open pit, and heavy
mineral sands from the coastline. Billiton subsidiary QNI is one of the
world's top five nickel and cobalt producers. Its operations in Colombia
and Australia produce 6% of the world's nickel and 7% of the world's
cobalt. Its chrome mining operations in South Africa and manganese mining
pits in Australia and South Africa rank as the world's largest. ("Billiton
background" at www.mbendi.co.za/orgs/cegi.htm; "History of Billiton";
Hoover's)
Through the $1.2 billion Rio Algom purchase, Billiton also acquired copper
mining companies in Chile (100% of Cerro Colorado), Argentina (25% of
Alumbrera), and Canada (33.6% of Highland Valley). Rio Algom also holds
development rights to a copper and zinc mining project in Peru and a copper
mining project in Chile. In addition to copper and zinc, Rio Algom
distributes uranium and coking coal. (Commerzbank Securities)
For the past 25 years, residents of the Mole Lake/Crandon region have
fought plans to develop a zinc-copper sulfide mine, citing potential toxic
discharges and groundwater depletion. Ojibwe people from the Mole Lake
Reservation farm nearby rice beds. Billiton acquired this proposed mining
site when it bought Rio Algom in October 2000. ("Nader calls on South
African company Billiton to drop Crandon mine plans in Wisconsin," press
release, October 30, 2000)
Billiton is exploring the possiblity of mining lead and zinc in LanPing,
China. This mine would be located near a new massive 958 foot-high dam on
the Mekong River. (www.prop1.org/nucnews/2000nn/0008nn/000804nn.htm)
"Billiton is ambitious," reported Financial Times in 2000. "It has been
keeping a close eye on both Venezuelan privatization prospects and possible
disposals by Brazil's CVRD." ("Who's Who: Mergers, takeovers in high
summer," Financial Times at FT.com website.)
#4 - Pechiney (France)
Pechiney
Headquarters:
7 Pl. du Chancelier Adenauer
Paris, 75116
Telephone: 33-1-5628-2000
Website: www.pechiney.com
CEO: Jean-Pierre Rodier
1999 revenues: $10.1 billion
Pechiney began producing aluminum in 1860. Its operations now span the
globe.
Aluminum accounted for 31.6% of Pechiney's net sales in 1999. It produces
bauxite, alumina, primary aluminum, and secondary aluminum in Australia,
Cameroon, Canada, France, Greece, Guinea, and the Netherlands. Relevant
subsidiaries and affiliates include Aluminium Pechiney, Affimet, Alucam,
Aluminerie de Bécancour, Aluminium Dunkerque, Aluminium de Grèce, ECL,
Friguia, Pechiney Nederland, QAL, and Tomago Aluminium. (Pechiney 1999
Annual Report on www.pechiney.com)
Pechiney's technology, which Heroult pioneed in the 1880s, is used in other
smelters around the world. Nalco in Orissa, India (the largest aluminum
smelter in southern Asia) utilizes Pechiney technology and engineering
servies for its bauxite mining, alumina refining and smelter operations.
(Department of Mines, Government of India, "Mining and Processing: Natioanl
Aluminium Company Ltd.," chapter in Annual Report 1999-2000; see:
www.nic.in/mines; Rajaram Satapathy, "NALCO expansion plan gets off the
ground," Times of India, July 3, 2000)
Other major Pechiney product lines include aluminum and steel beverage cans
(it is the world's largest producer), plastic packaging, and ferroalloys.
Pechiney also invests heavily in uranium mining; for example, in Niger, it
is in a joint venture to mine uranium from the Arlit mine. Arlit hold
estimated reserves of 34,500 tons. The French government, the mine's
primary customer, subsidizes the mining operation. ("Niger - Mining:
Uranium Mining," at www.mbendi.co.za/indy/ming/urnm/af/ni/p0005.htm)
Exerpts from...
Roger Moody's "Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier" (published
in 1992)
(Courtesy of The Sustainable Energy and Anti-Uranium Service Inc. Visit
http://www.sea-us.org.au)
"It is hardly surprising that, worldwide, Pechiney (formerly
Pechiney-Ugine-Kuhlmann or PUK) has run into more opposition for its
aluminium operations than its nuclear interests. It is the fourth largest
aluminium producer in the world. It is also France's only aluminium
producer (2), and the largest in Europe.
"Moreover, when it acquired American National Can for US$1bn in 1988, it
became the world's largest producer of metal drinks cans.
"Pechiney is owned 75% by French state interests (10% of which is in the
hands of Assurances Generales de France, acquired in 1990. Although plans
to privatise Pechiney were high on the agenda (after the group finished
restructuring in 1986, the French socialist government has so far applied a
brake to both privatisation and nationalisation.
"By 1988, the company saw an upturn in its fortunes, with the saving of two
domestic smelters planned for closure earlier in the decade and
construction of another in Normandy; its nuclear fuels activities proving
"highly profitable"; a JV under discussion with the USSR which would be the
first of its kind; and highly successful returns from its ventures in the
USA, especially Howmet Turbine.
"Pechiney was set up in 1855, began producing aluminium five years later,
and - with a spectacular rise in output prior to WW2 - took over several
companies on the way. In 1971 it merged with Ugine-Kuhlmann.
"Spurred by major losses in its aluminium sector and a downturn in
production of 6% in 1983, Pechiney expanded its two French smelters, but
was squeezing the rest. The same year, it acquired a stake in a
"hypothetical" French nuclear power station in return for cheap power to
run its remaining smelting capacity, drawn from any stations run by
Electricite de France. Under the chairmanship of Georges ("I hate to lose
money") Besse, the new, beaming, loud-talking, joke-cracking President
Directeur General of the company, Pechiney's fortunes were beginning to
turn by mid-1984.
"Pechiney's chemical assets were sold to Elf-Aquitaine, Rhone-Poulenc and
CdF Chemie after Giscard d'Estaing and Mitterand both blocked a potentially
lucrative sale to Occidental Petroleum. The loss-making steel interests
have also been hived off. Cash to finance the huge FFr 3,000,000,000
investment programme was to be found in an agreed sale of the Howmet
Aluminium Corp to Alumax (a JV between Amax, Mitsui and Nippon Steel). In
the event, Howmet remained under Pechiney's control, with Alumax gaining a
half interest each in Howmet's Maryland and Washington smelters.
"This half-sale of Howmet's smelter interests was part of a redeployment of
Pechiney's North American aluminium operations from the USA to Quebec.
"Environmentalists in New Zealand also fought hard against the siting of a
smelter in the beautiful valley of Aramoana, where Pechiney replaced
Alusuisse as the chief foreign partner in a consortium headed by Fletcher
Challenge and CRA in 1982 (14). But talks over the siting of a power plant
for cheap power broke down (15) and the project was shelved (2).
"Meanwhile the Spanish government was tussling with Pechiney over who would
pick up the bill for losses on the 67%-owned Alugasa aluminium subsidiary
(16), and it finally kicked Pechiney out in 1982 (2).
"Pechiney has a 35% interest (along with Gove Aluminium, 59% controlled by
CSR) in the Tomago smelter in New South Wales which came on stream in late
1983, exporting aluminium to Japan: plans to expand the smelter by 50% were
underway in 1990.
"The construction of the smelter was energetically opposed by local farmers
and environmentalists. The smelter is set in the wine-growing region of
Hunter Valley. A large plant producing 230,000 tonnes of aluminium a year
at about $1000/tonne - its ultimate capacity is more than 700,000 tonnes.
Pechiney is employing a new, secret smelting process, purportedly replete
with environmental controls to remove fluoride, and a new form of waste
containment using "excavated cells" covered in two metres of clay.
"In the Netherlands, Pechiney Nederland opened up a controversial smelter
in Vlissingen. (Passengers escaping from Olau ferries after collisions with
Comurhex nuclear cargoes in the Channel can catch a glimpse of it as they
rush to bright lights of Amsterdam). The smelter was the subject of intense
public debate, and opposition from environmental groups on health and
economic grounds
"Pechiney participates in Friguia, a holding company which has a 51 %
interest in alumina production in Guinea. The Frialco consortium is owned
30% by Pechiney, 30% by Noranda, with Alcan and Hydro Aluminium holding 20%
each. Pechiney also mines bauxite and produces alumina and aluminium in
Greece.
"India got Pechiney's technical advice in 1980 when it drew up plans for a
bauxite treatment and aluminium complex in Orissa.
"Soon after Bernard Pache took over the helm at Pechiney in 1985 from
Georges Besse (who had graduated into the company from Cogema), he began
soliciting atomic and other business in Japan, hoping to sell the whole
range of Pechiney's nuclear fuel facilities; fuel for light water reactors,
fabrication of zirconium products (through its Cezus subsidiary), the
production of uranium hexafluoride, and fabrication of fuel elements
themselves.
"Three years later, Uranium Pechiney, together with Cogema and Framatome,
took a 49% share in the US fuel supplier Babcock & Wilcox (B&W Fuel
Company). In 1991, Framatome was negotiating to take control over B&W
Fuel, as well as B&W Nuclear Service Company.
"But its most important nuclear role has probably been as the 50% holder of
Minatome, which - under the 1982 reorganisation - was bought out by
CFP/Total and merged with Total's subsidiary Total Compagnie Miniere.
"Until 1982, Minatome mined uranium inside France, notably at St
Pierre-de-Cantal, using its 94%-owned subsidiary Scumra and producing
100t/year U3O8. Outside of France, Minatome had shares in uranium mines in
Namibia (10% of Rossing), Niger (6.7% of the Somair consortium at Arlit),
and has been exploring for the deadly metal in the USA, Australia (at Ben
Lomond), Colombia, Brazil, Ireland, Britain and Mauritania, not to mention
Namibia.
"Uranium mining activities undertaken by Pechiney in its own name include
grabbing a share in the lucrative Cluff Lake project, managed by Amok as
the controlling partner in Cluff Mining Ltd; Amok itself is owned as to 25%
by Pechiney. Lower down the line, the wholly-owned subsidiary Uranium
Pechiney took a share in a uranium-from-phosphoric acid recovery plant
operated by Gardinier, planned for the early 1980s but which appears to
have closed by 1982. In Algeria the company was studying uranium reserves
in 1977; a contract that year for a feasibility study was awarded to
Pechiney and Minatome, Sogerem (a Pechiney subsidiary), and Stec.
"Five years later, Uranium Pechiney won a US$32M contract to provide
processing technology, engineering and equipment for
uranium-from-phosphates extraction in Tunisia, after Gardinier and PUK
conducted a feasibility study on the project. The unit was to be built at
Gabes on the Mediterranean coast, but plans for extraction had not
materialised by 1984.
"The company's most controversial deals have been with South Africa and in
South America. In the late '70s the French nuclear industry won a large
part of the apartheid republic's burgeoning nuclear power/weapons
programme. The contract for the first South African nuclear power station
(Koeberg 1) went to a consortium headed by Framatome (controlled by
Creusot-Loire which is itself part of the huge Empain-Schneider group that
controlled Pechiney). At roughly the same time, the South African
government announced an agreement with a consortium headed by PUK,
including Creusot-Loire and Westinghouse, to provide uranium enrichment and
fuel fabrication facilities. This arrangement was superseded with the
development of Nufcor's own Pelindaba enrichment plant.
"The Argentinian military dictatorship did, however, in the early '80s
select a consortium headed by PUK to cooperate with the Argentinian CNEA in
opening up the Sierra Pintada uranium deposits. The following year the USA
stopped its own shipments of uranium to Argentina because the military
state refused to sign the Nuclear Non-Proliferation Treaty and, within
another year, the Soviet Union was sending the country 20% enriched
supplies of U-235 in exchange for grain.
"Also, at the beginning of 1981, Pechiney announced it had won a contract
to build Brazil's first uranium hexafluoride plant for Nuclebras. The
plant, to be constructed at Resende near Rio de Janeiro, would employ
Pechiney's own technology and start up in 1985, with an initial production
of 450 or 500 tonnes. The deal completed Brazil's attempts for a decade (in
fact since the West German-Brazilian nuclear pact) to complete the nuclear
fuel chain on its own territory.
"At the same time PUK was assisting Nuclebras to construct the Pocos de
Caldas uranium mining complex, specifically the Otsamu Utsumi mine in Minas
Gerais which officially opened in May 1982, although production started in
December 1981. PUK participated in the actual construction of the mine and
provided technical expertise.
"Although the West German government built Brazil's uranium enrichment
plant in late 1983, the Brazilian regime asked Alsthom-Atlantique, another
French-state-controlled engineering company, to supply vital compressors
for the plant. The Brazilian Minister of Mines and Energy, Cesar Gais, also
visited France to discuss with Pechiney the possibility of using a new
uranium mining procedure developed by Pechiney.
"Uranium Pechiney developed this process to treat high clay ores and
dispersed clays containing uranium, gold and other materials not previously
economically recoverable. This 'physico-chemical' process purportedly
transforms clay into porous granular material ready for solid-liquid
separation.
"It was later reported that both Pechiney and Cogema were trying to
implement a plan to extract uranium and phosphoric acid from openpit ore at
Itataia in Brazil - an "innovative" development since the two are not
chemically bound together. The US$300M project was agreed in April 1984 and
was intended to process up to 20,000 tonnes a day of ore, producing some
2600 tonnes a year uranium, thus making it one of the more important new
uranium ventures.
"The deposit, 200km south-west of Fortelaza in Ceara state, has an
estimated 80,000 tonnes of contained uranium. Pechiney would be responsible
for the project engineering and Cogema for the purchase of any of the
Itataia uranium (46).
"An irony, not lost on anti-nuclear groups concerned with weapons
proliferation, is that both the West German and French governments have
enormously assisted Argentina and Brazil to acquire nuclear weapons
although (one might say because) the two countries, despite a recent
nuclear pact, have long considered the other capable of launching an atomic
attack on "their" soil.
"By the turn of the eighties, Pechiney had established itself as one of the
world's most important aluminium producers, its most significant
manufacturer of metal cans, and one of the few diversified conglomerates
not to have reduced its commitment to nuclear fuel production and
processing.
"In 1991, it saw its plans to start up a smelter at Nasiriva, in Iraq,
dashed by the horrendous conflict between the Saddam Hussein regime and the
Bush administration for control of Kuwait, and had to shelve plans (formed
with Austria Metall, Alumined Beheer and RTZ) to build the Atlantal smelter
in Iceland.
"In Venezuela, an agreement with Aluminium del Caroni SA, the state-owned
company, to construct a smelter on the Orinoco river, was shelved for
financial reasons. But, in 1990, Pechiney agreed to a new project with
Alisa (Aleaciones Ligeras SA) to operate a Venezuelan smelter, to be
constructed by Davy McKee.
(Above from Roger Moody, "Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier"
in The Gulliver File - Mines, people and land: a global battleground,
Minewatch, 1992. Courtesy of The Sustainable Energy and Anti-Uranium
Service Inc. Visit http://www.sea-us.org.au)
#5 - Norsk Hydro (Norway)
Norsk Hydro
Hydro Aluminium Metal Products
Bygd¿y Allé 2
Oslo, 0240
Telephone: 47-22-43-21-00
Fax: +47 22 73 79 30
Website: www.hydro.com
1999 revenues: $13.1 billion
CEO: Egil Myklebust
In 1905, Norsk Hydro ASA opened shop, harnessing hydro-electric power in
Norway for the first industrial-scale nitrogen fertilizer plant in the
world. While Norsk Hydro is still in the "plant nutrition" (ammonia, urea,
and other fertilizers) business, it is now a diversified and global
company, the largest publicly-owned firm in Norway.
The aluminum sector, which it entered in 1967, is a major piece of Norsk
Hydro's operations. In 1998, Hydro produced 747,000 tons of primary
aluminum, mostly at its four smelters in Norway (Karmøy, Høyanger, Sunndal
and Årdal). Hydro generates its own hydroelectric power for these smelters.
"Energy, in the form of hydroelectric power, natural gas and petroleum, has
been the basis for Hydro's growth and is the common link among its core
business activities," reads the company's 1999 annual report. (Norsk Hydro
ASA, Form 20-F (FY-1999), filed with the United States Securities and
Exchange Commission).
he company also owns a 49.9 percent stake in Sør-Norge Aluminium A/S
(Søral), which operates another smelter in Norway. Hydro is in a
partnership with Goldendale Aluminum in the United States in the production
of 159,000 tons of aluminum per year. It also an collaboration with Talum,
a small Slovenian smelter, and is a 10% investor in Slovalco, a smelter in
Slovakia heavily backed by the European Bank for Reconstruction and
Development (see Banks chapter).
In 2000, Hydro started a 10-year agreement to purchase a total of one
million tons of aluminum from Companhia Vale do Rio Doce's Albras smelter
in Brazil. The company is studying a possible new 474,000 ton per year
smelter in Trinidad and Tobago. (www.hydro.com)
Hydro's aluminum business is growing, geographically and fiscally. Hydro
realized 50 percent growth in its light metals sector operating income from
1999 to 2000. ("Preliminary results 2000: Strong growth and record
results," Norsk Hydro press release, Feb. 12, 2001)
Hydro supplied only 60 percent of its alumina requirements internally, low
compared to giants like Alcoa. It holds a 35 percent interest in the
Alpart, Jamaica, alumina refinery controlled by Kaiser, and a 25 percent
share in the Alunorte refinery consortium in Brazil. These supply a
combined 905,000 tons of alumina to Hydro's smelters. (Norsk Hydro, Form
20-F)
In a high stakes quest for a captive supply of alumina, Hydro is engaged in
a tense battle with indigenous peoples over its planned joint venture (with
Alcan) to mine and refine bauxite in Orissa, India (see Human Rights
chapter).
Norsk Hydro's other major corporate segments include oil and gas
exploration and development (mainly on the Norweagian continental shelf,
Canada, Libya, Angola, Russia and soon, Iran), industrial insurance,
pharmaceuticals, and petrochemicals such as polyvinyl chloride. Hydro spun
off its agricultural operations, including the world's largest fish farming
company, in 2000. (www.hydro.com)
#6 - Rio Tinto / Comalco
Rio Tinto
6 St. James's Square
London SW1Y 4LD
United Kingdom
Phone: 44 (0) 20 7930 2399
Fax: 44 (0) 20 7930 3249
2000 revenues: $10.0 billion
Website: www.riotinto.com
Chairman: Sir Robert Wilson
Comalco Limited
ACN 004 502 694
Level 25, 12 Creek Street
Brisbane, Queensland 4000
Australia
Telephone: +61 7 3867 1711
Facsimile: +61 7 3867 1775
1999 revenues: A$2.3 billion (Comalco only)
Website: www.comalco.com.au
The sole business of Comalco, a wholly-owned subsidiary of Rio Tinto, is
bauxite mining, alumina refining, and aluminum smelting. The Weipa bauxite
mine in Queensland, Australia, is Comalco's cash cow. In 1957, Commonwealth
Aluminium Corporation and British Aluminium Company formed a partnership
named Comalco, which signed an 84 year lease with the Queensland Government
to mine the Weipa bauxite. (www.comalco.com.au) Comalco owns 100% of the
massive Weipa pit, which produced over 11 million tons of bauxite in 2000.
The Weipa bauxite is processed two refineries. Comalco owns a majority
stake (56% stake) in the Sardinia, Italy, alumina refinery Eurallumina,
which produced 575,000 tons of alumina from Weipa bauxite for Comalco in
2000. It owns a 30% stake in Queensland Alumina Ltd. (Australia), which
refines almost one million tons of Weipa bauxite for Comalco annually. Last
year, the company decided to add site a new 1 million ton per year alumina
refinery in Queensland, ruling out a possible location in Sarawak,
Malaysia. (see Human Rights chapter)
Comalco also owns a 4% production share of the Boké, Guinea, bauxite mining
operation.
In 2000, it produced 701,000 tons of primary aluminum from three smelters
its 100%-owned smelter in Bell Bay, Tasmania, its 54%-owned smelter on
Boyne Island, Queensland, and its 79%-owned smelter on Tiwai Point, New
Zealand.
In 1999, Rio Tinto increased its interest in Comalco to 72%. Rio Tinto
continued to increase its majority stake in Comalco through 1999 and in
February 2000 made an offer for all the outstanding shares.(Stephen
Johnston, "Aluminium," Mining Annual Review, March 2000)
The company is now a wholly-owned subsidiary of Rio Tinto, an infamous
global metals producer. Aluminum accounted for 16 percent of Rio Tinto's
turnover in 2000. Its other mining operations, which span the globe,
include industrial minerals (590,000 tons of borate, 1.4 million tons of
titanium dioxide, 21% of turnover), iron ore (64 million tons, 11% of Rio
Tinto turnover), copper (865,000 tons mined, 15% of turnover), gold (2.7
million ounces mined, 15% of turnover), coal and uranium oxide (combined
17% of turnover, 132 million tons of coal, 2,195 tons of uranium oxide).
("Rio Tinto Earnings Grow 18 per cent to US$1,507 million," Rio Tinto press
release, Feb. 5, 2001)
Since the start of 2000, in addition to the Comalco sublimination, Rio
Tinto took control of an iron ore, copper, and uranium oxide producer named
North for $2 billion, diamond and gold producer Ashton for $400 million,
the Lemington coal mine for $134 million, and the Australian coal assets of
Peabody for over $500 million. (ibid)
#7 - Aluminium Bahrain (Alba)
Aluminium Bahrain
P.O. Box 570
Bahrain
Tel. 973 833448
Fax 973 833833
Website: www.aluminiumbahrain.com
Chief Executive: Karim Salimi
Revenues: not available
The government-controlled Aluminium Bahrain (Alba) smelter is a dominant
economic force in the Persian Gulf emirate .Oil production is the only
industry that is bigger in Bahrain. The company started producing 120,000
ton of aluminum per year in 1971.
The smelter started as a joint venture between the Bahrainian government
(18%), General Cable (17%), British Metal (17%), Kaiser (17%),
Electrokopper (17%), Breton Investments (9.5%), and Western Metals (8.5%).
The government of Bahrain now owns 77% of Alba's shares. The balance is
held by the Saudi Public Investment Fund (20%) and Breton Investments (3%).
(www.aluminiumbahrain.com/intro/share.htm)
Alba is slated to expand from 496,000 to 750,000 tons per year of capacity.
Five engineering companies (SNC Lavalin of Canada, Sofresid of France, and
U.S. firms ICF Kaiser, Bechtel, and Fluor Daniel) are bidding to draw up a
feasibility study and master plan for the $1 billion expansion project.
(European Institute for Research on Mediterranean and Euro-Arab
Cooperation, October 2000, on website: http://www.medea.be/en/index023.htm;
Middle East Business Intelligence, Jan. 5, 1996; AFP, Aug 27, 1995;
Moneyclips, Nov. 21, 1996; "Bahrain Country Profile" at
worldinformation.com)
#8 - CVG
Corporación Venezolana de Guayana
Avenida Guayana con Carrera Cuchivero
Edificio Sede CVG
Altavista, Puerto Ordaz,
Estado Bolívar, Venezuela.
Phone: 58 (86) 661735
Fax:: 58 (86) 614161
Website: www.cvg.com
The governement launched the Venezuelan Corporation of Guayana (CVG) in
1960 to promote industrial development in the Guayana region. Its Bauxilum
subsidiary mines over 4 million tons of bauxite a year.
It is installing a new 250,000 ton potline at the Alcasa smelter in Bolivar
State, which would more than double its 210,000 tpy capacity. CVG is trying
to attract foreign investors in the $800 million project. Reynolds (now
part of Alcoa) owns a 7.3% stake in Alcasa. (Venezuelan Commercial Office)
CVG's Venalum subsidiary operates a 430,000 tpy smelter. Six Japanese
partners (Showa Denko, Kobe Steel, Sumitomo Chemical, Mitsubishi Aluminum,
Mitsubishi Metal, and Marubeni Corp.) own a 20% stake in the Venalum
smelter, the ninth largest in the world. (Venezulean Commercial Office)
The state corporation also produces steel, hydroelectric power, and power,
engages in industrial agriculture and forestry, and promotes tourism.
(www.cvg.com)
#9 - Kaiser / Maxxam
Kaiser Aluminum
Maxxam Group Holdings
5847 San Felipe, Suite 2600
Houston, Texas 77057
Phone: 1-713-975-7600
Kasier president: Ray Milchovich
Maxxam CEO: Charles Hurwitz
2000 Kaiser revenues: $2 billion
Website: none
Kaiser is a subsidiary of Maxxam Inc., which owns 63% of Kaiser's common
stock. The balance of Kaiser's stock is publicly held. (Maxxam Group
Holdings Inc., Form 10-K (Annual Report, FY1999), filed with Securities and
Exchange Commission, March 13, 2000)
While giants like Alcoa, Alcan, and Billiton thrive through mergers,
expansion, and acquisitions, Kaiser has struggled. It lost $39 million in
the third quarter of 1999, and $17 million in the third quarter of 2000.
(ibid)
In the midst of the Alcoa and Alcan mergers, Kaiser president Ray
Milchovich said it was like "dancing with elephants" 10 times your own
size. Financial Times reported that "he added - admittedly in the context
of the company's protracted steelworkers' lockout - that Kaiser needed to
display agility, flexibility, and behavior appropriate to its size and
complexion.... Kaiser, which has suffered an explosion at its Gramercy
refinery, on top of its labor dispute, is respected for its tough
management style and its ability to keep ancient plants running. Its
alumina operations are low cost and it is also one of the five companies
that have signed an exclusive 10-year supply deal with Boeing." Boeing's
other corporate suppliers are Alcoa, Kaiser, Hoogovens and Pechiney.
(Gillian O'Connor, "Hyperactivity in a strong market," Financial Times,
2000, and "Who's Who: Mergers, takeovers in high summer," Financial Times
at FT.com website)
Beginning in January 1999, Kaiser locked out United Steelworkers union
members from working at its U.S. operations, including two aluminum
smelters (the 200,000 ton per year Mead and 73,000 ton per year Tacoma,
Wash. plants) and the Gramercy, La., alumina refinery. In April 2000, the
National Labor Relations Board's general council said the federal
government would charge Kaiser violated labor laws by initiating the
lockout.
(Institutional Shareholder Services, "ISS supports dissident director
nominees at Maxxam," filed by the Committtee of Concerned Maxxam
Shareholders with the SEC, May 22, 2000)
A July 5, 1999, explosion at its alumina refinery in Gramercy also
contributed to the drop in revenues. Replacement workers were injured in
the explosion in the digester area of Kaiser's 1.075 million ton alumina
refinery in Gramercy, Louisiana. Twenty workers were injured, and three
sustained severe disabling injuries. The explosion closed the plant,
sprayed bauxite up to two kilometers away, and severely curtailed bauxite
production in Jamaica. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
According to the Mine Safety and Health Administration of the U.S. Labor
Departmetn, "the immediate cause of the explosion was an excessive pressure
build up in pressure vessels in the digestion process area of the facility,
following an electrical fault causing a power distribution failure... MSHA
found deficiciencies in the pressure relief safety systems, which MSHA
concluded were violations of the regulations." Kaiser agreed to pay
$513,000 in penalties to resolve the agency's complaint. (Secretary of
Labor, "Secretary's revised motion to approve settlement and motion to
dismiss," Kaiser Aluminum & Chemical Corp. v. Secreatary of Labor et al,
penalty proceedings, Office of Administrative Law Judges, Federal Mine
Safety and Health Review Commission, 2000; "Alcoa, Alcan increase earnings
in third quarter," New Steel, Dec. 1999)
While Kaiser's U.S. operations remain in turmoil, it is expanding its
aluminum operations overseas. International operations include a 90 percent
stake in the 200,000 tpy Valco smelter in Ghana; a 49% stake in the 135,000
ton per year Anglesey smelter in Wales, U.K., a 65% stake in the Alpart
baxuite mining/alumina refining venture in Jamaica, a 49% stake in the KJBC
bauxite mining venture in Jamaica, and a 28% stake in the Queensland
Alumina refining company in Australia. (Maxxam 10-K) In 1996,
Kaiser/Maxxam reported that it had a pending collaboration with the huge,
749,000 ton, Krasnoyarsk smelter in Russa and a pending project, named
Kyril, to collaborate with smelter developments in Lanhzou and Lianhai,
China. (Maxxam Inc., Amendment No. 2 to Form S-3 filed with SEC on April
12, 1996)
After 718 days, Kaiser and the Steelworkers reached a settlement in Sept.
2000, and the lockout finally ended. (Karen Dorn Steele, "Analysts call
aluminium company's settlement a win for solidarity," Spokesman-Review,
Sept. 24, 2000)
Then, Kaiser used a novel approach to turn a profit in the fourth quarter
of 2000. Instead of reopening its Washington state smelters, the company
decided to sell its allotment of federally-produced power on the open
market, thereby benefitting from the growing energy crisis in the western
USA (see Energy chapter). It reported net income of $10.9 million in the
fourth quarter of 2000. "In the fourth quarter, the company sold power
provided by its existing contract with the Bonneville Power Administration
amounting to approximately $135 million," a Kaiser press release reported.
(Kaiser Aluminum Corp., "Kaiser Aluminum Reports Results for Fourth
Quarter, Full Year of 2000," press release, Feb. 7, 2001)
Kaiser's corporate parent, Maxxam, is run by chairman/CEO/president Charles
Hurwitz, who is the target of many union and environmental activists. (See,
for example, www.jailhurwitz.com and www.uswa329.org) Fortune Magazine
recently ranked Maxxam's board as one of the 10 worst in the United States,
citing Hurwitz' dominance. (Spoekesman-Review, Sept. 24, 2000)
Maxxam and Hurwitz took control of Kaiser in 1988, allegedly with the
backing of Marc "Aluminum Finger" Rich (see below). The corporate parent's
main business is logging, particularly cutting down redwoods and Douglas
Firs in California, through its Pacific Lumber subsidiary. Maxxam also
develops real estate in Puerto Rico, Arizona, and California, owns a horse
racing park in Houston, and a greyhound racing track in Harlingen, Texas.
"Hurwitz started out a crook and he hasn't stopped since," wrote Darryl
Cherney, a California redwoods activist. In the early 1980s, Hurwitz was
found guilty of illegal stock market
dealings.(www.jailhurwitz.com/sevensins.html)
In 1995, the U.S. Treasury Department's Office of Thrift Supervision (OTS)
initiated an action that alleges midsconduct by Hurwitz and Maxxam in the
failure of United Savings Association of Texas, a savings and loan company.
This failure forced a federal bailout totalling $1.6 billion. The OTS is
seeking either $821 million in resititution, or reimbursement of $362
million for "unjust enrichment." (ibid; Maxxam 10-K, FY1999)
#10 - VAW (Germany)
VAW aluminium AG (Vereinigte Aluminium Werk)
Georg-von-Boeselager-Str. 25
53117 Bonn / Germany
Tel: + 49 / 228 - 552 2312
Fax: + 49 / 228 - 552 213
Website: www.vaw.com
Annual revenues: DM6 billion
VAW is an independently-run subsidiary of a German electricity congolmerate
formed by the merger of Veba and Viag, which merged in 1999. ("Who's Who:
Mergers, takeovers in high summer," Financial Times at FT.com website.)
In the 1970s, VAW established its two smelters, both in Germany (Elbewerk
in Stade and Rheinwerk near Neuss) in the 1970s, when it also build the AOS
alumina plant in Stade. Beginning in the 1990s, VAW began exporting
technical support and engineering collaborations at smelters like Alusaf in
South Africa, Novokuznetsk in Russia, and Boyne Island in Australia. (VAW
Aluminium-Technologie GmbH, "Company information," at
http://www.vaw-atg.de/company.html)
VAW's alumina refinery in Stade imports bauxite from the CGB consortium in
Guinea, in which VAW is an investor. (see Basics chapter) VAW also owns
several rolling mills in Europe, and owns a 24% world share in the high
purity aluminum business. It acquired high purity aluminum market leader
Mitsubishi in 1999. (Stephen Johnston, "Aluminium," Mining Annual Review,
March 2000
The company boasts that "from beverage cans and peel-off lids for yoghurt
pots to toothpaste tubes, from packaging for tablets through engine
castings and car body components to roller blinds and printing machines -
in nearly all areas of life, aluminium products made by VAW play a key
role. VAW produces flexible packaging for the food and pharmaceutical
industries, strip and foil mainly go into packaging, automotive,
applications and offset printing or are used as façade cladding.
Furthermore, VAW is the world's leading supplier of aluminium engine blocks
and cylinder heads." ("VAW aluminium AG at
http://www.sovereign-publications.com/vaw.htm)
In October 2000, the Financial Times reported that "VAW is heading for the
auction block, following Viag's merger with Veba, to form energy group Eon,
which is now
getting rid of non-core interests.... VAW, whose most attractive assets are
probably its half-share in the Norf rolling mill and its auto engine block
casting business, is estimated to be worth Dollars 2.5bn-Dollars 3bn. Norf
is the largest rolling mill in the world, while VAW is the world leader in
aluminium engine blocks." (Gillian O'Connor: VAW continues to attract much
attention," Financial Times, October 25, 2000)
#11 - Dubal (U.A.E.)
Dubai Aluminium Company Limited
P.O.Box : 3627 Dubai
Tel : 04-8846666/8022926
Fax : 04-8846919
CEO: Ian Rugeroni
Website: www.dubal.co.ae
1998 revenues: Dh2.46 billion
"The starting point for us was indubitably the vision of Dubai's Ruler, His
Highness the late Sheikh Rashid bin Saeed Al Maktoum who decreed that a
smelter should be built," asserts Dubal CEO Rugeroni. "With the leadership
of HH Sheikh Hamdan bin Rashid Al Maktoum, Chairman of Dubal, and our Vice
Chairman, H.E. Mohammed Al Abbar, supported by a dedicated management team
and a workforce of over 2000 employees, we have been able achieve much of
what was originally planned." ("Productivity in Partnership at
http://www.sids.com/update/april98/dubai.htm)
Dubal Aluminium (Dubal) opened in 1979 and expanded from 375,000 to 536,000
tons of capacity in 1999, making it the third largest smelter in the world.
(Bricad Associates website, http://www.bricad.com/aluminium/dub/index.html;
Dubal website, www.dubal.co.ae; "Dubal Sales, Output Break Records," May
25, 1999 at www.useinteract.com)
The company's reach is transnational. Dubal is pondering the construction
of a new $2.5 billion, 480,000 ton smelter in Oman and provides technical
services to the 200,000 tpy Al-Mahdi smelter in Iran. The government of
Iran owns a majority share of Al-Mahdi, with the rest owned by
International Development Corp. of Dubai. International Development Corp.'s
investors included fugitive billionaire Marc Rich, U.K. construction
company George Wimpey, Caradel Investments, and former UAE ambassador to
London, Mahdi Al-Tajir. (Mining Annual Review, June 1992; Rasha Owais,
"Dubal studies Oman smelter project," Gulf News, April 10, 1999)
It imports 60,000 tonnes of alumina every three weeks from Alcoa's Kwinana
refinery in Western Australia. Australian Trade Minister Mark Vaile met
with Dubal's Rugeroni last year, after the CEO expressed concerns over
labor unrest at Kwinana. A ministry press release reported that "meeting in
Dubai with senior managers of Dubal, Mr Vaile said Australia was fully
committed to meeting its alumina supply obligations to the company with a
contracted value of $1.4 billion over the next eight years."
"All our export customers, especially a smelting operation such as Dubal,
must have reliability of supply. We simply cannot afford to have our
reputation as a reliable supplier damaged. The jobs of Australians in vital
export industries must not be put at risk by the selfish action of others,"
said Mr. Vaile. (Australian Minister for Trade, "Reassurance on alumina
supplies," media release, March 3, 2000)
#12 - Ormet (USA)
Ormet Primary Aluminum Corporation
1233 Main Street, Suite 4000
Wheeling, WV 26003
Phone: (304) 234-3900
Toll Free: (800) 331-6950
Fax: (304) 234-3929
Phone: 304-234-3900
CEO/Chairman: R. Emmett Boyle
1998 revenues: $780 million
Website: www.ormet.com
R. Emmett Boyle owns 100% of Ormet, which was established in 1956 by Olin
Corporation and Revere Copper and Brass, Inc. "to produce primary aluminum
for sale in equal measure to the parent companies." In 1986, Boyle bought
out the company from its then-owner, Alusuisse, and restarted its shuttered
Burnside, La., alumina refinery.
. (http://www.ormet.com/ormet/history.html)
Since 1957, Ormet has operated an alumina refinery in Burnside, La., and a
smelter in Hannibal, Ohio. Production capacity at Burnside could reach 1
million tons under a modernization program launched in 1999.
(www.ormet.com; Plunkert, 2000)
According to the United Steelworkers of America, Boyle secretly funneled
money in a 2000 campaign against the re-election of an Ohio judge that he
views as pro-union.
"The Ohio Elections Commission is investigating charges that a committee,
which includes the leaders of two companies that have a history of locking
out Steelworkers, violated campaign financing laws in the November state
supreme court races," reported the USWA in November 2000.
"The smear campaign against an Ohio Supreme Court justice who has sided
with labor's causes was financed by a secret $3 million slush fund that
included solicitations by Emmett Boyle, who locked out Steelworkers at
Ravenswood Aluminum in 1990. Boyle is now heard of Ormet Corp., where
Steelworkers have been working without a contract since May 31, 1999.
"Resnick won reelection handily and many observers feel the campaign
spearheaded by the Ohio Chamber of Commerce did her more good than harm.
Steelworkers joined with other unions in Ohio to raise money to help
Resnick overcome the Chamber's onslaught.
In that campaign, television ads suggested that Justice Resnick took bribes
from special interests.
"The Ohio Chamber was able to raise that amount of money ($3 million) in
part because donors were assured that their contributions would be kept
secret. Some Ohio businesses also received calls from Republican Gov. Bob
Taft soliciting money for the smear campaign.
"Shortly after the election, the Ohio Elections Commission found 'probable
cause' that the chamber committee violated the state's election laws by
refusing to release the names of contributors to the anti-Resnick campaign
and for suggesting Resnick made decisions based on campaign contributions.
A hearing will be held sometime after the first of the year to investigate
the charges further. ("Enemies of Labor under investigation," Steelabor,
Nov-Dec. 2000 at http://www.uswa.com/steelabor/NovDec00/aksmear.htm)
Other Notables
Hoogovens / Corus Group
Corus Group plc
15 Marylebone Road
London, NW1 5JD
England
Tel.: 020 7 314 5500
Fax: 020 7 314 5600
Chairman: Brian Moffat
Hoogovens Aluminium BV
Postbus 10000, 1970 CA,
IJmuiden Vondellaan 10
1942 LJ Beverwijk
Netherlands
Tel: 0251-499108
Fax: 0251-470220
Giant British Steel and Hoogovens, a Dutch aluminum and steel producer,
merged in 1999 and created the largest steel company in Europe, named
Corus. According to the Financial Times, "Most industry observers expect
the British Steel-Hoogovens merger eventually to prompt the disposal of
Hoogovens' aluminium interest." ("Who's Who: Mergers, takeovers in high
summer," Financial Times at FT.com website; Stephen Johnston, "Aluminium,"
Mining Annual Review, March 2000)
Hoogovens imports alumina from Suriname, owns a 97,000 ton smelter in
Delfzijl, Netherlands, and a 80,000 ton smelter in Voerde, Germany, and has
aluminum divisions in Belgium and Quebec. (Tom Stunza, "Aluminum merger and
acquisition activity accelerates," Purchasing Magazine, Oct. 7, 1999)
WMC Ltd.
WMC Ltd.
(formerly named Western Mining Corporation)
360 Collins St. 31st Floor
Melbourne, Victoria 3000
Australia
Phone: 61-3-602-300
CEO: Hugh Morgan
WMC holds an interest in the Suralco bauxite mining joint venture, with
Alcoa and Billiton, in Surinam. In 1994, WMC entered into a global alumina
refining joint venture with Alcoa, and owns 40% of the venture, Alcoa World
Alumina & Chemicals. When the two companies combined alumina operations,
the venture had anual revenues of close to $3 billion a year.("Alcoa
Acquires Discovery Alumina Chemicals Business," Industrial Specialties
News, July 10, 1995)
Prior to Alcoa's purchase of Reynolds, the WMC/Alcoa venture controlled
more than 30 percent of global alumina capacity. (American Metal Market,
January 26, 2001)
In October 2000, when asked about the implications of the Alcoa-Reynolds
combine, WMC's chief executive officer, Hugh Morgan replied , "The direct
implication is AWAC acquired some additional bauxite resources in Africa
and South America. Under the AWAC agreement between Alcoa and WMC,
anything involving the acquisition of bauxite, alumina or alumina chemicals
goes in the AWAC pot. Also, the justice department ruling means AWAC cant
purchase additional alumina capacity thats sold to the traded marketplace
(i.e. the material thats not vertically integrated). But this doesn't limit
internal expansions. AWAC has tremendous growth opportunities." ("Open
Briefing WMC CEO Morgan on Record Profit," Australian Associated Press
Company News, Aug. 15, 2000)
WMC is also a major miner of uranium, gold, and nickle. ("The Bechtel
Truth - Notes for the Alternative AGM of WMC," Roxby Action Collective,
Nov. 20, 1997 at http://www.sea-us.org.au/roxby/bechteltalk.html)
Marc Rich
Marc Rich & Co. Holding
Baarerstrasse 53
6304 Zug
Switzerland
Phone: 041/709.08.44
Fax: 041/709.08.29
Billionaire Marc Rich lives in Zug, Switzerland, where he moved in 1983
just before the U.S. government gained an indictment against him for
evading corporate taxes of $48 million, fraud, and circumventing the U.S.
oil embargo against Iran. He renounced his U.S. citizenship, paid a $113
million settlement check, but remained a fugitive until President Bill
Clinton pardoned him in a controversial last-hour order in January 2001.
Rich is a secretive tycoon who holds the nickname "Aluminum Finger."
("Aluminium Finger" reference from untitled article, Evening Standard, Jan.
30, 1996)
In addition to his aluminum interests, Rich "also has been accused of
smuggling oil to South Africa during apartheid and of selling embargoed
Iraqi oil," reported The Nation (Feb. 12, 2001). The New York Daily News
(Jan. 28, 2001) said Rich "went from New York University dropout to
mailroom clerk to modern-day alchemist, turning lead and aluminum - and
smuggled oil - into pots of gold.... (Although there is) no conclusive
proof, Rich and his shadowy companies are said to have looted gold from the
collapsing Soviet Union, sold Korean weapons to Iran, illegally cornered
the tin and aluminum markets, made off with chunks of the Gross Domestic
Product of Finland and Romania and jumped into bed with the Russian mafia."
(Helen Kennedy, "Ruthlessness is Rich's game," New York Daily News, Jan.
28, 2001)
"With a potent combination of trading genius, nerves of steel and
tissue-thin morals, Rich became a billionaire, buying and selling oil and
metals in fiendishly complicated maneuvers," the Daily News explained.
(ibid).
Rich pressed his case to President Clinton in fear of possible retribution
from former Alcoa president O'Neill. O'Neill is President Bush's new
Treasury Secretary. According to the Wall Street Journal (Jan. 23, 2001),
"People close to Mr. Rich said the need for a pardon took on an added sense
of urgency with the impending change of an administration. Of particular
concern to Mr. Rich was the appointment of Paul O'Neill as Treasury
secretary... One of Mr. Rich's metal-trading company's scooped up Alcoa's
bauxite and alumina production in Jamaica. 'Rich was frightened O'Neill
would get the government to come after him again,' a person familiar with
the federal manhunt for Mr. Rich said. Treasury officials said they
wouldn't comment on the matter."
In the mid-1980s, when demand for aluminum dropped, Alcoa closed the
Jamalco bauxite mining/alumina refining complex in Clarendon Parish. In
response, the Jamaican government signed a 10 year suply contract with Rich
and assumed responsibility for production at Jamalco. In the 1990s, with
alumina markets tightening, Alcoa resumed its role as managing partner of
Jamalco. (Canute James, "Jamaica metals market improves - Bauxite,"
Financial Times, Feb. 12, 1990; "Discover Mandeville" at
http://discoverjamaica.com/gleaner/discover/tour_ja/tour7.htm)
Rich shipped bauxite to his alumina refinery, Vialco, on St. Croix, U.S.
Virgin Islands. Vialco was sold to Alcoa in 1995. (Bob Regan, "Alcoa
refinery spared by Hurricane Lenny," American Metal Market, Nov. 19, 1999)
In 1983, Rich opened an office in Moscow. Soon, he supplied the Soviet
Union with grain in contrvention of U.N. embargo over the Afghanistan war,
and heavily traded in aluminum.. By 1992, Marc Rich engaged in an estimated
$3 billion of trade in the countries of the former Soviet Union. Former
Russian Trade Minister Oleg Davydov attributed the rising corruption in his
country in part to people like Marc Rich. When "legal channels became
inconvenient [for Russia's new businessmen], there appeared a huge mass of
foreign entrepreneurs, mostly crooks like Marc Rich, who began to teach
us various ways of taking the money out through offshore companies. That
is what bred our whole system of corruption and criminality," he told
Forbes magazine in 1998. (Kirill Vishnepolsky, "Glencore International
strikes root in Russia," RusData DiaLine - BizEkon News, April 30, 1996;
Oleg Davydov, "Tomorrow they will take up arms: A chat with Russia's former
trade minister," Forbes, Sept. 7, 1998; "El drama en el sector del
aluminio," June 27, 1998, on eluniversal.com,
http://noticias.eluniversal.com/1998/06/27/OP15.shtml)
Rich bought Kaiser's smelter and rolling mill in Ravenswood, West Virginia,
in 1988; two years later, he locked out the plant's unionized workers. In
one of labor's shining moments of the early 1990s, Steelworkers picketed
Rich's home in Zug, chased him with a puppet of West Virginia labor icon
Mother Jones, and blocked his purchase of a smelter in Czechoslovakia.
("Pardon draws protests; Rich fled after indictment, was involved in Kaiser
deal," Spokesman Review, Jan. 26, 2001)
Rich helped to leverage Hurwitz' takeover of Kaiser Aluminum in 1988 when
he agreed to purchase $400 million worth of Kaiser's aluminum. (Cherney)
He was an investor in the International Development Corporation (IDC) of
Dubai, United Arab Emirates, which built the Al-Mahdi smelter in the
mid-1990s. In 1990, IDC proposed a smelter in Algeria, named Medial.
Rich divested himself of many of his aluminum holdings in March 1993, when
he agreed to sell his shares in Marc Rich & Co., which became Glencore
International. In 1994, Rich sold his last 25% stake in Glencore. ("Market
news," The Mining Journal, Nov. 11, 1994)
In 1996, Rich returned to commodities trading, operating out of a company
named Marc Rich & Co. Holding. According to the Financial Times, "Rich said
he had no doubt that there was room for another commodity trading business,
despite the rise of other physical giants in the intervening period,
including AIOC, Trans-World Metals, the Balli Group and Glencore, most of
which have developed strong business links with the aluminium industry -
the metal he was famed for trading in. 'We plan to be active in aluminium,
copper, zinc, lead, nickel, metal and concentrates, in addition to crude
oil, petroleum products, grain and coal. Obviously, I feel the prospects
for a company trading in commodities is good,' he said. (Rachel Carnac,
"Rich return sets the markets buzzing," Financial Times, February 9, 1996)
In 1998, Rich expressed an interest in aquiring Noranda's share of the
Friguia bauxite/alumina operation in Guinea, according to Mining Annual
Review (Dec. 1999). Noranda and the other foreign partners, Alcan and
Hydro, sold their 51% stake to the Guinean govenrment in late 1998. The
government, prompted by the World Bank (see Banks chapter), opened bids for
an 85% strake in Friguia. It pre-selected Marc Rich, Anglo American,
Comalco, and Kaiser to bid. In February 1999, however, the government put
the bidding on indefinite hold. Friguia's managers have also been courting
investment from Iran. Iran is seeking bauxite and alumina for its two
smelters, one of which Marc Rich helped to develop. ("New delay in Friguia
privatization," Africa Energy & Mining, Feb. 17, 1999; "Four pre-qualified
for Friguia," Africa Energy & Mining, Dec. 2, 1998)
Chapter IV. Multilateral and bilateral financial institutions
As we have seen with other energy-intensive industries (see EBRD, two WB
reports), multilateral development banks and agencies funded by industrial
governments are helping to finance the aluminum industry’s global
expansion.
Not coincidentally, this industry, worldwide, is dominated by transnational
corporations based in the countries that are financing their power plants,
mines, refineries and smelters. National development banks help
corporations based in their country sell equipment to foreign aluminum
operations and gain ownership stakes in old and new infrastructure.
These institutions have poured over $3 billion into dams and other power
plants that fuel aluminum smelters, into structural adjustment and other
programs designed to open bauxite mines, alumina refineries, and smelters
to foreign investors, and into feasibility studies and equipment sales by
Western corporations.
Focus on Slovak Rep./ Iran smelters
The European Bank for Reconstruction and Development, a multilateral aid
agency funded and managed by Western governments, agreed to finance an
aluminum smelter refurbishment and privatization in the Slovak Republic in
1994. The Slovalco, or ZSNP, operation doubled its capacity to 132,000
tons. The old smelter, in turn, may be shipped to Iran.
The EBRD loaned Slovalco $110 million in three parts beginning in July
1994. Part of the loan financed an investment agreement in which Hydro
Aluminium and EBRD control 10 percent ($15 million each) of Slovalco’s
equity. It was EBRD’s biggest private sector loan to date. The German and
Dutch governments, and the European Union’s PHARE program, financed
environmental studies and community outreach programs.
The EBRD hailed the agreement as "the centerpiece of the overall
restructuring and privatization of ZSNP in which two inefficient and
polluting smelters will be closed down and other major facilities will also
be closed down or upgraded to meet Slovakian and EU environmental
standards. The new smelter, which will provide employment opportunities for
over 500 people in Ziar, will be one of the most efficient in the world."
(EBRD press release, "EBRD and Slovakian Aluminium smelter sign loan
agreements, July 12, 1994)
The old Slovalco smelter had a poisoned past. In 1996, the Financial Times
reported that a "mountain of red and brown bauxite waste still dominates
the valley approach to the [Slovalco] aluminum works… the legacy of decades
of environmental neglect. Inside the old, inefficient and polluting
smelters have been closed down… [replaced by] the gleaming white and gray
buildings of one of Europe’s most modern aluminum smelters." (Financial
Times, Oct. 23, 1996)
"The new plant will be energy efficient and safe, and will meet good
international environmental standards," boasted the EBRD. "The shut-down of
the existing smelters, together with the start-up of the new smelter, will
have a major beneficial effect on occupational health and external air
quality." ("EBRD industrial projects with significant environmental
benefits: some examples" at
http://www.ebrd.ro/english/enviro/envpub/envfacts.htm/indproj.htm)
But while the EBRD investment replaced chronically-polluting Soderberg
potlines
at the notorious plant with modern pre-bake cells, the old cells may move
to a proposed new smelter on Iran’s Qeshm Island. (Aluminium Today, August
1997)
In 1994, the Center for International Environmental Law (CIEL)termed the
EBRD loan "an especially disturbing example (of) funding of a major
polluter... ZSNP will remain a significant source of pollution in the
region, even though the Bank loan will finance improvements in the
smelter's environmental performance.
"The ZSNP plant, utilizing approximately 10 percent of the total energy
produced in Slovakia, also puts a severe strain on Slovakia's overburdened
electricity generating capacity, supporting the government's contention
that the nuclear power plant at Bohunice, one of the most dangerous in
Central and Eastern Europe, cannot be closed until its capacity can be
replaced....
"The (EBRD) environmental staff submitted a document to the Directors just
prior to the Board's decision to approve the controversial ZSNP loan. CIEL
discovered that the document had been altered to downplay the environmental
impacts of the project. Later communication with Bank staff revealed that
while some alterations were unintentional, others were deliberate. It is
impossible to know whether the misrepresentations in the document
influenced the Board's decision to approve the project. Nevertheless, such
alterations breach the trust placed in Bank staff by the Directors."
(Donald M. Goldberg and David B. Hunter, "EBRD's Environmental Promise: A
Bounced Check?," Center for International Environmental Law, December 1994)
In a 1995 follow-up report, CIEL said called the Slovalco smelter "one of
the region's largest polluters. A bauxite waste site leaches heavy metals
into the soil and groundwater, and the existing factory emits dust, SO2,
NOx, CO, and fluorides far in excess of Slovak and EC air emissions
standards. Off-site testing has revealed high concentrations of
benzopyrene, arsenic, molybdenum, copper, nickel and chromium. Health
problems, including congenital defects, allergies, and thyroid and lung
diseases, are on the rise throughout the region.
"Due to the highly polluting and energy-intensive nature of primary
aluminum production, Slovak environmentalists favored either converting the
plant to secondary aluminum production or closing the plant altogether.
They also argued that the plant made no economic sense. Ideally, for
aluminum production to be economically competitive, a cheap source of
energy, labor, and raw materials should be available. With the exception of
cheap labor, Slovakia has little competitive advantage on the international
aluminum market.
"Nevertheless, the EBRD decided to pursue the project, which already had
been rejected by the World Bank and a number of private investors. Despite
strenuous objections from environmentalists, it was given fast track
status, a protocol that is not provided for in the Bank's Environmental
Procedures. Most of the procedures for public participation were curtailed:
formal notification to the public about the ZSNP project, public scoping,
and public meetings were dispensed with. Bank staff did conduct a pro forma
meeting with a small number of environmentalists a few days before the
project was submitted to the Board, but by that time it was not likely the
project would be altered.
"The ZSNP project demonstrates that, when faced with financial pressures,
the Bank is willing to forego at least some of its environmental due
diligence. A sustainable development policy and stronger environmental
procedures are urgently needed to help the EBRD withstand such pressures
and ensure that each project receives the appropriate level of
environmental analysis and public consultation." (CIEL, "The European Bank
for Reconstruction and Development: An Environmental Progress Report,"
1995, at www.ciel.org)
Focus on former Soviet Union, aluminum, and corruption
Since the fall of the "Iron Curtain," aluminum has flooded Western markets
from the former Soviet Union. Commodities traders Marc Rich and Trans-World
Metals fueled this flood. Foreign governments also got into the act.
As a 2000 U.S. Department of Commerce study noted, "IBRD (the World Bank),
EBRD, the U.S. Export-Import Bank and other countries’ export credit
agencies have been active in attempting to support foreign equipment sales
to Russian aluminum producers." (Nick Mikhailov, "Russia: Production
equipment for the aluminum industry," Business Information Service for the
Newly Independent States (BISNIS), U.S. Department of Commerce, July 31,
2000, at http://bisnis.doc.gov/bisnis/000817rsalum.htm)
The involvement of these government agencies in former CIS states’ smelters
thrusts these officials shoulder-to-shoulder with dangerous company. The
Russia aluminum industry is rife with tales of corruption, the black
market, and even killings.
"Over the years, the Russian media, in particular, has pursued telltale
trails leading to connections with the Russian Mafia, bribery, and unsolved
cases of assassination of journalists and people related to the aluminum
industry," reported American Metal Market in January 2001 ( Christian Kohl,
"Trans-World probe deepens," American Metal Market, Jan. 19, 2001)
- Globalization and Corruption
The globalization of the former Soviet Union’s aluminum industry can be
traced to the year 1983, when fugitive commodities trader Marc Rich (see
Corporate chapter) opened an office in Moscow. Soon, he supplied the Soviet
Union with grain in contravention of U.N. embargo over the Afghanistan war,
and heavily traded in aluminum.
By 1992, Marc Rich engaged in an estimated $3 billion of trade in the
countries of the former Soviet Union. Former Russian Trade Minister Oleg
Davydov attributed the rising corruption in his country in part to people
like Marc Rich. When "legal channels became inconvenient [for Russia's new
businessmen], there appeared a huge mass of foreign entrepreneurs, mostly
crooks like Marc Rich, who began to teach us various ways of taking the
money out through offshore companies. That is what bred our whole system of
corruption and criminality," he told Forbes magazine in 1998. (Kirill
Vishnepolsky, "Glencore International strikes root in Russia," RusData
DiaLine - BizEkon News, April 30, 1996; Paul Klebnikov, "Tomorrow they will
take up arms: A chat with Russia's former trade minister," Forbes, Sept. 7,
1998; "El drama en el sector del aluminio," June 27, 1998, on
eluniversal.com, http://noticias.eluniversal.com/1998/06/27/OP15.shtml)
By 1994, when Rich sold his stake in the trading business that was renamed
Glencore, his company was eastern Europe’s largest Western supplier of
grain, which he obtained mainly by bartering aluminum from smelters in the
former Soviet Union. (Stuart Penson, "Marc Rich & Co. name changed for
'morale,’" American Metal Market, Sept. 2, 1994)
As Rich’s inference transferred to the Glencore group, then faded in the
mid-1990s, two brothers in London filled the gap. David and Simon Reuben
founded Trans-World Group (a/k/a Trans-World Metals) in 1977. After the
disintegration of the Soviet Union, Trans-World forged an alliance with
another set of brothers, Lev and Mikhail Chernyi (also spelled Chernoi and
Chernoy), whose Moscow-based Trans-Seas Commodities came to control Russian
aluminum exports.
The Chernyi brothers, said Minister Davydov, "gained control of aluminum
exports at a time when aluminum cost $ 2,000/ton on world markets but could
be bought at $ 500/ton
inside Russia. All the producers became deeply indebted to the brothers,
who made deals with the plant directors to acquire aluminum at the Russian
price. Which they then sold at the world price. The tragedy is that if the
privatized companies were state enterprises today, they would be recording
good profits, they would be paying taxes, paying workers' wages, investing
in their plant and equipment. But these so-called owners arrived, and what
happened? There are no profits. No tax payments. The plant and equipment
are getting worn out. And the money goes abroad." (Forbes, Sept. 7, 1998)
In 1995, Trans World took control over the Gyndzha alumina plant and
Sumgait aluminum plant in Azerbaijan from Glencore. The shifting business
climate brought this thought from a Glencore executive, according to
BizEkon News: "One of Glencore Moscow office executives recently pulled no
punches in contending that his company would still be doing deals in Russia
even if a Hitler or someone came to rule it, given Glencore's prodigious
track record of business collaboration with regimes of any stripes and
shades. (Kirill Vishnepolsky, "Glencore International Strikes Root in
Russia," RusData DiaLine - BizEkon News, April 30, 1996)
By early 1998, Trans World controlled between 40% and 70% of Russia’s
aluminum industry. Its estimated global sales of $6 billion per year made
the small firm, fleetingly, the third largest aluminum company in the
world. Then, the Chernyi brothers severed ties with their London partners.
By 2001, Trans World had exited from most of its business in the former
Soviet Union. (Matthew Brzezinski, "Kiev’s dreary hotels offer microcosm of
reform failures," Wall Street Journal, April 16, 1998; American Metal
Market, Jan. 19, 2001)
As Trans World faded, other so-called "aluminum barons" rose, including
politicians Anatoly Bykov and his Krasnoyarsk Enterprise and Anatoly
Chubais and his Russian Joint (or Unified) Energy Systems. (Mining Annual
Review, March 2000)
Other players in Russia’s newly-privatized aluminum industry included Trans
CIS Commodities, Renova, Rial, Al-Invest, Mikom, AIOC, Hunter Douglas,
Metall-Gesellshaft, Pechiney, Gerald Trade, and Daewoo. (Delovoy Mir, April
13, 1995)
The aluminum industry remained a collection of feudal-like enterprises
until the late 1990s, when Siberian Aluminium (Sibersky) began to battle
the Chernyis, and seized control of many smelters.
The battle for control of the former CIS’ aluminum industry took many
forms. Government officials began accusing Trans-World of misconduct
beginning in 1997, when Russian officials investigated allegations that
Trans-World Metals defrauded the central bank and sponsored violence.
Russian Interior Minister Anatolii Kulikov raised the specter of "the
current criminal situation in the non-ferrous industry" when he told the
country’s Parliament about the need to curb western corporations’
influence. He said gang leaders controlled the Krasnoyarsk and Bratsk
smelters. (Mining Journal, June 5, 1998; "Russia Mining," Cambridge
International Forecasts Country Report, December 1, 1999)
Also during 1997, Russian officials alleged that the general director of
the world’s second-largest smelter, the 749,000 ton Krasnoyarsk smelter,
failed to repatriate $20 million from an alumina deal. (Mining Journal,
June 5, 1998)
In 1998, the government of Kazakstan ousted Trans-World from its management
position at the 1.1 million ton Pavlodar alumina refinery, accusing the
company of "irregularities, tax evasion and failing to act in the best
interests of shareholders."
As the charges intensified, Trans-World reportedly offered to sell some of
its interests to transnational giant Billiton. (Mining Journal, June 5,
1998)
Violence has ripped at the region’s aluminum industry. In Tajikistan,
government and rebel forces based in Uzbekistan have battled for control
over the Taduz smelter, one of the world’s largest. (see Human Rights
chapter). In Russia, explosives blew outside the Bogoslovsk smelter’s
administrative offices in September 1997. An official called it "an act of
routine revenge." (Mining Journal, June 5, 1998)
"The 1994-1998 period in the Krasnoyarsk region has been dubbed the "Great
Patriotic Aluminium War", in which local mafia and factory directors were
sucked into a bloody battle for control of the smelter," reported the
Financial Times in 2000. "Dozens died in a series of murders, including
local bankers, crime bosses and factory officials. The victims included
both allies and competitors of Trans-World, though David (Reuben) angrily
denies any hint that they or their partners had any role in the violence.
‘There is absolutely no truth to any of the allegations that Trans-World
has been involved in any illegal activity in Russia,’ he says. (Charles
Clover and William Hall, "Aluminium ‘risk-taker’ changes tack in Russia,"
Financial Times, April 12, 2000)
Russian authorities invaded the offices of Bykov and Krasnoyarsk in April
1999. In court, they accused Bykov of "laundering money obtained by illegal
means." (Mining Annual Review, March 2000)
In June 1999, Bykov, Chernoy/Trans-World, and Visaly Anisimov’s
TrustConsult fought for control over the Kransoyarsk smelter. While Bykov
faced prosecution from Russia, Chernyi had his own troubles. According to
the Mining Annual Review, "Swiss, US and British police were also
reportedly investigating Lev Chernoy over money laundering and organized
crime activities."
In the winter of 1999-2000, oil magnate Roman Abramovich led a group that
took control of the two largest smelters in the world: the 870,000 ton
Bratsk and 835,000 ton Krasnoyarsk plants. He bought the controlling shares
from Chernoy and Trans-World. (Mining Annual Review March 2000)
That season, car dealer Boris Berezovsky reportedly purchased the fifth
largest smelter in the country, the 284,000 ton Novokuznesk plant.
(Mikhailov; Mining Annual Review, March 2000)
At the same time, Sibirsky Aluminum, led by Oleg Deripaska, built a holding
company around the 400,000 ton per year Sayan aluminum smelter. Reynolds
(now part of Alcoa) has held a 3% stake in Sibersky.
Berezovsky and Abramovich formed an alliance that, within a month, absorbed
Deripaska’s Sibirsky Aluminum. The new umbrella group, named Russian
Aluminum (or Russky Aluminum) dominates the country’s industry. Its five
smelters, with a combined capacity of over 2.1 million tons of production,
generate annual sales of $3.4 billion, according to the U.S. Department of
Commerce. (Mikhailov)
A Russian newspaper tied the buyout to a power struggle between the
aluminum barons and politicos Chubais and Vladamir Putin. "These purposeful
and even aggressive aluminum market deals indicate that Berezovsky,
Abramovich and Chernyi have gone on the attack: they have united in order
to concentrate the ownership of vast strategically-significant assets. They
are doing this in order to kill several birds with one stone," claimed the
Moskovskie Vedomosti in February 2000.
"Firstly, they want to diminish the influence on the GDP of groups
controlled by their main opponent, Chubais; thus also reducing his chances
of heading the government or
getting one of his people into that post. Secondly, they want to control
the aluminum sector as well as the oil sector, which would give them
influence over the fundamental natural resources sectors of the Russian
economy. Thirdly, of course, it's a question of personal security.
"Having despaired of reaching an agreement with the acting president now,
and fearing that after the election Putin will initiate a new
redistribution of property, Berezovsky, Abramovich, and the Chernyi
brothers want guarantees of their own security and the security of their
business interests. They figure that Putin will have no choice; he will be
forced to provide guarantees (and concessions) for a single favor: he will
not have to sit down at the negotiation table with several odious
oligarchs, as Boris Yeltsin once had to do. Neither would this be
acceptable to Putin himself; the head of state is unlikely to meet with the
Trans-World Group boss, who has a very shady reputation. Berezovsky would
be a different matter - he is, after all, a member of parliament...
Basically, this is blackmail. Ordinary, blatant blackmail. They are showing
Putin that they aren't afraid of him." ("Behind the aluminum deal,"
Moskovskie Vedomosti, February 2000)
Russian Aluminum wants to grow transnationally, particularly into
infrastructure developed by the former USSR. Its targets included the
refineries in Ukraine, Kazakhstan and Romania, and coal mines in Ukraine
and Kazakhstan. (Mikhailov)
Two other large holding companies, SUAL-Trustconsult and NorthWest
Aluminum, were forged out of the on-going industry-wide restructuring in
2000.
SUAL-Transconsult is the product of a three-way merger, in early 2000,
between the Siberian-Urals Aluminum Company, TrustConsult, and Renova. The
new combine owns three bauxite mining companies and four smelters including
the 158,000 ton Bogoslovsk, 252,000 ton Irkutsk, 80,000 ton Urals, and
68,000 ton Kandalaksha plants. (Mikhailov)
NorthWest Aluminum is a holding company proposed by eight aluminum
companies in the Leningrad region. The nascent firm includes the 24,000 ton
Volkhov and 129,000 ton Volgograd aluminum plants and two alumina producers
(Boksitogorsk Alumina and Pikalyobskoye Alumina). Alutech of the U.S. hopes
to set up a 200,000 ton smelter in the region. (Mikhailov)
A recent Dept. of Commerce report said the reorganization held promise for
more Western equipment sales, but added that "the circumstances surrounding
these mergers were highly non-transparent and the identity, objectives and
financial structure of the new management is not sufficiently clear to
reach a judgment about their plans for the new conglomerate." (Mikhailov)
U.S. companies supply about one-quarter of the equipment imported by the
Russian aluminum industry. Suppliers include Alcoa, Alutec, Kaiser (two
potroom cell upgrades to Krasnoyarsk), Loma Machine Mfg., Pyrotec Inc. and
Wagstaff Inc. According to the U.S. Dept. of Commerce, "the most
aggressive non-American players in the Russian aluminum equipment market"
are: Germany’s Mannesmann, Schloemann, Wagner, and VAW (designed an upgrade
at Novokuznetsk); France’s Pechiney and Clecim; Italy’s Hunter Midia,
Continuus Properzi, and Mino; Britain’s Megatherm and JMC; Japan’s Itochu
and Mitsubishi Heavy Industry (they want to finance an expansion at Sayan);
and, Austria’s Ebner. (Mikhailov)
- Still in turmoil
The aluminum industry in Russia remains tumultuous after the
consolidations. Men who shaped the post-Soviet industry have been charged
with murder, money laundering, and collusion with the Mafia.
On Oct. 4, 2000, Agence France Presse reported that Russian police arrested
Bykov, "once known as Russia's ‘aluminum baron,’ in the Siberian city of
Krasnoyarsk on Wednesday while investigating the murder of a local
underworld figure... Bykov is accused of several crimes, including fraud,
money laundering and being implicated in another murder. Bykov was arrested
at his home Wednesday on suspicion of involvement in the September 29
murder in Moscow of Pavel Struganov... Struganov, suspected of being a
leading figure in Krasnoyarsk criminal circles, was killed along with
another man in broad daylight in central Moscow." ("Russia's former
‘Aluminum baron’ returns to prison, Agence France Presse, Oct. 4, 2000)
Earlier in the year, Bykov was extradited from Hungary to face the other
charges, and was released on bail in September. ("Two businessmen killed in
central Moscow," Agence France Presse, Sept. 29, 2000)
An April 25, 2000, article in Noviye Izvestia asked, ". Who is he, Anatoly
Bykov: the godfather of the aluminum mafia, or just another victim of
political showdowns and property redistribution? And most importantly, what
will happen when Bykov starts talking? His testimony is expected to be a
real blow to many people in high places: Anatoly Bykov's personal friends
and enemies, partners and competitors include quite a few politicians in
the top echelon of power, as well as important government officials,
businessmen, financiers and even officials of various security and
law-enforcement agencies. Hence the speculations that there will be an
attempt to get Bykov "out of the way" now that he's back in Russia. If that
is really so, we can expect surprises not so much from his enemies as from
his "friends," since Bykov undoubtedly has suitcases full of "exclusive
dirt" on them. The criminal world, which lives by its own laws, also has
grievances against Anatoly Bykov.
"Here's a quotation from a letter to him from crime kingpin Vladimir
Tatarenkov, a.k.a. the Tatar, who was recently arrested in Greece and is
now giving testimony in a Russian prison: ‘Dear Anatoly Petrovich! I have
recorded numerous videocassettes telling about the way you have been living
for the past few years, and about how much blood was shed so that you could
become what you are now. Don't you have nightmares about the people who
died at your orders, though not by your hand? . . . The people who elected
you would be awfully surprised to find out who they voted for. Russia has
never been fond
of murderers.’" (Yevgeny Latyshev, "Who has an interest in seeing Bykov
eliminated?," Noviye Izvestia, April 25, 2000)
In Dec. 2000, two trading companies, Base Metal Trading of Switzerland and
Alucoal of Cyprus, filed a $2.7 billion suit in U.S. District Court against
Russian Aluminum, Sibersky Aluminum, Deripaska, and Mikhail Chernyi.. The
companies claimed that the Russian aluminum giants "joined with the
Izmailovo Mafia to illegally monopolize the metals market left vulnerable
after the collapse of the Soviet Union. They allege abuses that violate
Racketeer Influenced and Corrupt Organizations Act, and they claim to have
suffered $ 900 million in losses," according to the National Law Journal.
("3-nation aluminum suit," National Law Journal, Jan. 8, 2001)
"The complaint enumerates specific allegations of murder, extortion, and
mail and wire fraud, among other criminal acts allegedly orchestrated by
the defendants and carried out in some instances by the
Izmallovo-Russian-American mafia," reported Mining Journal. "The core of
the claim is that, when the defendants were unable to negotiate a legal
purchase of NKAZ, they resorted to extortion to seize control of the
smelter and a greater portion of its trading profits. Amongst other
tactics, the complaint says that the defendants enlisted the assistance of
government and judicial officials in pursuing and winning falsified
bankruptcy proceedings" ("Russian Aluminium named in RICO suit," Mining
Journal, Dec. 22, 2000)
"Criminal elements have besieged Russian industry with illegal payoffs,
threats and acts of violence. This case will demonstrate how U.S. financial
institutions are used by criminal, elements to accomplish their purposes.
U.S. courts have the power and opportunity to prevent Russian oligarchs
from using the U.S. banking and commercial systems to facilitate criminal
conduct in other countries," claimed the plaintiffs’ attorney, Robert
Abrams. (Base Metal Trading: Russia's Largest Aluminum Company Named in
US$2.7 Billion RICO Suit," Canadian Corporate Newswire, Dec. 20, 2000)
***** SIDEBAR ******
Forbes on Trans World
The Reuben brothers spoke to Fortune magazine in late 1999. As the Reubens’
Trans World aluminum empire collapsed, Fortune reported on the rise and
fall. The following are excerpts from the Richard Behar’s June 12, 2000,
article headlined "Capitalism in a Cold Climate: The story of Trans World's
aluminum empire is filled with bribes, shell companies, profiteers, and
more than a few corpses. Then again, in today's Russia, that's pretty much
par for the course."
"’Very often the most likely to succeed in these stormy oceans are not the
picture-perfect, clean-shaved, deep-tanned, well-built, and fashionably
attired yachtsmen under the immaculate white sails,’ says Lev Chernoy,
reading from a prepared statement, ‘but unpleasant-looking ugly skippers in
command of a pirate ship. One should not be appalled. These are the laws of
initial capital acquisition’...
"This is the story of how those laws were applied by Trans World, an
enterprise launched by the Reuben brothers, David of London and Simon of
Monaco, in the early 1990s. With the help of two Russians--Lev Chernoy and
his brother Michael--the Reubens built a Rockefeller-style vertical empire
in the former Soviet Union in a few short years. In 1996, Trans World was
hailed as the world's third-largest producer of aluminum, after Alcoa and
Alcan...
.
"Trans World's scope was so vast yet so invisible that it was called ‘a
state within a state,’ with hundreds of constantly shifting shell companies
and tentacles reaching from the Siberian steppe to the shores of Cyprus,
the Bahamas, the Cayman Islands, and ultimately
the U.S., where 30% of the empire's aluminum was sold...
"The Reubens' time in the sun was brief. By 1998 they had lost control of
nearly half their kingdom to former partners. Government investigations in
at least seven nations--along with hundreds of mostly foreign media stories
critical of Trans World--were threatening to take away the rest. Cutting
their losses, the Reubens sold most of their remaining Russian assets a few
months ago....
"In the course of nearly 100 hours of interviews, the Reubens and the
Chernoys contradicted one another so often as to be nearly unintelligible.
Ironically, their attempt at
glasnost, while it generated no smoking gun, has ultimately only
underscored the dirtiness of the world they moved in--and will likely spur
law enforcement agencies to redouble efforts to finish them off. At least
that's FORTUNE's conclusion, especially after our investigation traced
large sums moving from Trans World to firms at the heart of three big
money-laundering scandals that have dominated headlines in recent months:
the Bank of New York case, the Kremlin-Mabetex kickback probe, and the
collapse of YBM Magnex, a Pennsylvania public company launched by Russian
mobsters that was shut down by the feds last year."
The full, lengthy investigative piece on Trans World and the Chernoys can
be found in the June 12, 2000 edition of Fortune magazine.
- Foreign aid and investment in the former USSR
The U.S. Trade and Development Agency was an early backer of foreign
investment in the former Soviet Union’s aluminum infrastructure. In 1994,
the agency gave aluminum industry officials from the former Soviet Union
$24,000 to spend on a visit to the Alumitech 94 convention in Atlanta.
(TDA)
Since then, foreign government bank financing has been proposed or extended
toward many operations in which the aluminum barons have operated.
- Armenia
In 1988, the French government pledged 1 billion francs in financing toward
the modernization and expansion of the 100,000 tpy Kanaker aluminum smelter
in Armenia by the French firm Pechiney. The venture would have given
Pechiney 25% ownership of the plant. The break-up of the Soviet Union, war
in Armenia, and severe pollution caused by the smelter, however, have
conspired to keep it closed in the 1990s. (Ecotass, November 20, 1989;
Financial Times, November 25, 1988; Chemical Business News Base,
January 12, 1989)
- Azerbaijan
A smelter in Sumgait has helped that city obtain the dubious status of "one
of the most polluted cities" in the former Soviet Union. (Mining Journal,
November 14, 1997) "Row upon row of tiny headstones in a children’s
cemetery bear silent testimony to the pollution that has poisoned the
sprawling industrial town of Sumgait, reported Agence
France-Presse last year. (AFP, June 16, 1997) At its operational peak in
the 1980s, a local documentary charged, the Sumgait refinery "poisons
Sumgait’s air basin with 70,000 tons of toxic discharges each year."
(Soviet television, May 11, 1989)
Trans-World Group assumed management of the smelter and an associated
alumina refinery (Gyndzha Alumina) in 1997. Previously, Kaiser (U.S.) and
Interchem (U.K.) planned to invest in the plant, with possible backing from
the EBRD, but backed out in 1996, when they determined that high energy
costs would make their investment unprofitable. (Euromoney Trade Finance
and Banker International, July 31, 1995; Reuter, June 21, 1995)
In April 2000, the Azeri government created the Azerbaijan Aluminum holding
company, which included the Gyndzha alumina plant and Sumgait and Zeiliksky
aluminum plants. In October, it selected Netherlands-based Fondal Metals
over Russian Aluminum and an offshore company named Ansol in bids to
develop the aluminum company. Two other bidders -- Iralco of Iran and
Trans-World -- withdrew their bids, according to Azer-Press.
According to Kommersant, officials of Russian Aluminum and Dutch producer
Hoogovens had never heard about Fondal Metal. "There are two main
versions," reported the newspaper. "First: Fondal Metal represents
interests of British Trans World Group, which used to manage the Gyandzha
alumina plant until 1997. Second: MetallsRussia concern, a metal trading
subdivision of Thai group Sahaviria, is behind Fondal Metal. The group has
substantial industrial assets in Ukraine." ("Azerbaidjan aluminum will
become Dutch" by D.Butrin, Kommersant, October 13, 2000)
- Kazakstan
Trans-World Metals was active in Kazakhstan until it was ousted in 1998. In
1996 and 1997, Trans-World planned to build a 200,000 ton smelter there,
and had Bechtel produce a feasibility study for the smelter’s construction.
According to the Russian news agency Interfax, in 1997 the EBRD was
considering helping to finance a proposed aluminum smelter in Kazakstan,
along with Bechtel, Intec and Alumax. A spokesman said the companies were
attracted by Kazakstan’s cheap electricity, alumina and labor. (Interfax
news agency, Sept. 29, 1997)
,
In December 1997, according to Mining Journal (June 5, 1998), Trans-World
Metals "filed a lawsuit against three of that country’s citizens for
allegedly trying to subvert its operations there, including Pavlodar [an
alumina refinery]. In January 1998, the government ousted all T-WM
appointed management from its metals plants, accusing them of
rregulatiries, tax evasion and failing to act in the best interests of
shareholders."
The Energy and Aluminum newsletter reported in 1998 that "although
Trans-World Group said last June that it would build Kazakhstan's first
smelter, late last year Trans-World lost control over its investments in
northern Kazakhstan, including the Pavlodar alumina plant that was to
supply the smelter with raw material.... The future of Trans-World and of
this project remains questionable. The current situation is somewhat
confusing." (http://www.enalnewsletter.com/enalnl07.htm)
- Russia
Russia is the world’s largest exporter of primary aluminum, and the second
largest producer (3.15 million tons in 1999) after the United States.
(Mikhailov)
In 1997, according to Euromoney, Trans-World sought to raise funds for
smelter
upgrades in Russia from "multilaterals such as the EBRD… although the bank
has to date kept a distance from the Russian aluminum industries."
In 1994, the EBRD and Scandanavian financial institutions, including
Finland, were "expected" to grant credits toward the overhaul of the
Kandalaksh aluminum plant in northern Russia, although no such deal appears
to have been finalized. The bank also has considered financing the
Novokuznetsk smelter (CIS Economics & Foreign Trade, June 14, 1994;
Euromoney, April 30, 1997)
The U.S. Trade and Development Agency (TDA) has financed studies at two
smelters. It paid $850,000 toward a study by I.S. Consulting on
modernization at the Bratsk smelter, and $500,000 toward an Alumax (now
Alcoa) study of the Volgograd smelter. (U.S. Trade and Development Agency
(TDA) website, http://www.tda.gov/region/nis.html)
In Leningrad Oblast, the U.S. consulting firm Alutec is negotiating with
the government to build a planned aluminum smelter that would draw power
from the Leningrad Nuclear Power Station. The $650 million, 220,000 ton
plant, would be located close to the Gulf of Finland, in easy reach of
Western markets.
"Because of its location and cheap power, the Leningrad Oblast is a very
advantageous spot for aluminum production," Grigori Dvas, Oblast deputy
governor in charge of industry and economic policy, told the St. Petersburg
Times in 2000. "And even if Alutec doesn't go ahead with its project, we
will find other investors." (John Varoli, "Aluminum Interest Considering
Oblast," St. Petersburg Times, Sept. 26, 2000)
Alutec said it would collaborate with unnamed large transnational
producers, and possibly the World Bank, International Finance Corp., and
EBRD, for financing the new smelter.
"How Alutec will find its niche among these giants is not clear, and
certainly a task filled with great risk, if not danger," reported the St.
Petersburg Times. "Indeed, Alutec understands it will have to cultivate the
good will of Russia's oligarchs and aluminum kings -- the likes of Roman
Abramovich and Oleg Deripaski -- if its project is to succeed." (ibid)
- Tajikistan
The Tajikistan government is planning to privatize the plant to meet
conditions set by the International Monetary Fund. The plant imports
alumina from Russia’s Russky Aluminy and ships ingot to Russia. (Bakhtior
Islamov, "Aral Sea Catastrophe: Case for National, Regional and
International Cooperation," Slavic Research Center, 1998; also,
Globalsilicon news at www.globalsilicon.com/english/e12.htm)
In 1997, the EBRD opened talks with corporations interested in taking
shares in the Taduz smelter, according to the Energy and Aluminum
newsletter. (www.enalnewsletter.com/enalnl06.htm)
In 1999, the International Finance Corporation and the government of
Switzerland provided $400,000 toward an international audit of the smelter.
According to the IFC, the assessment "identifies viable privatization
options for the company." ("Tadaz: Production of aluminum must increase to
300,000 tons by 2000, Asia Pulse, June 14, 1999; International Finance
Corp., "Annex: TA Projects Approved for Support by Donors in FY99," in IFC
1999 annual report)
According to Radio Free Europe, Turkey’s EximBank is considering an $8
million loan to the Tursunzade Aluminum Plant. ("Tajikistan, Turkey seek to
expand economic ties," Radio Free Europe/Radio Liberty Newsline, Sept. 27,
2000)
Sayan, now part of Russian Aluminum, has also been interested in investing
in Tadaz. (www.enalnewsletter.com/enalnl07.htm)
In 1999, TDA paid $450,000 toward a Bechtel Corp. feasibility study of a
possible new 165,000 ton, $575 million smelter at Mery, Turkmenistan. (TDA;
Mining Annual Review, March, 2000; WWP-Business Opportunities in Eastern
Europe & the CIS, Dec. 8, 1999)
- Ukraine
In Ukraine, the U.S. TDA paid $500,000 toward a Technalum study of the
Zaporozhye smelter, and $240,900 toward a Kaiser study of the ZALK smelter.
(TDA)
Other intertwining of banks and aluminum
- Argentina
Aluar (Argentina) installed a new 120MW gas-fired power plant as part of a
program to expand its aluminum production capacity from 175,000 to 258,000
tons by 1999. (Aluminium Today, April 1997; Reuters, Dec. 24, 1996)
Existing infrastructure includes a 448MW plant in Fataleufu, southern
Patagonia, and a reserve 54MW thermal plant imported from Italy. During the
smelter’s construction, company officials noted the "great advantage
involved in cheap electric power to be generated by the State," which was
four-tenths of one center per kilowatt in 1975. In 1971, the Argentine
government requested$80 million in credit from the Inter-American
Development Bank to build the $90 million dam. (Latin America Newsletter,
Aug. 20, 1971; May 3, 1974).
- Brazil
The World Bank helped to finance the construction of the massive Tucurui
dam, which fueled the proliferation of aluminum infrastructure in Amazonia.
(See Energy chapter for more details) (Latin American
Newsletters, Nov. 23, 1984)
The Japan Export-Import Bank financed the development of a second set of
transmission lines from the Tucurui hydroelectric dam to the Albras 340,000
tpy smelter at the mouth of the Amazon River, at a cost of $130 million.
Albras is 49% owned by a consortium of Japanese corporations, including
Showa Denko, Kobe Steel, Marubeni and Sumitomo, which import the plant’s
aluminum.
The Tucurui dam also supplies energy to the 350,000 tpy Alumar smelter,
which is 60% owned by Alcoa and 40% by Shell. Tucurui produces 3,000 MW of
power, with 1,400 MW dedicated to supply Albras, Alumar, and the 1.1
million tpy Alunorte alumina refinery. The companies are considering
participation in a $1.8 billion, 900MW
expansion of Tucurui’s capacity to 6,000 MW. Alumar is the largest private
aluminum project. (Gazeta Mercantil Online, October 22, 1996, Nov. 21,
1996; American Metal Market, July 25, 1996; Financial Times, Nov. 16, 1996)
- Cameroon
The 90,000 tpy Soderburg technology-driven Alucam smelter in Cameroon is
majority owned by Pechiney of France. In 1987, the French government aid
agency, Caisse Centrale de Cooperation Economique, loaned Alucam $1.4
million toward the purchase of new equipment. At least three other
multilateral loans have benefitted Pechiney’s Alucam smelter: In 1985, the
European Investment Bank loaned Cameroon $21.2 million, and the government
of Kuwait’s Development fund loaned 3 billion CFA francs for the Song
Loulou power station which helps to power the Alucam smelter and in 1986,
the CCCE
loaned Cameroon $12.2 million for installing two 48MW turbines at the dam.
(African Economic Digest, July 12, 1986; Oct. 30, 1987, Feb. 8, 1986)
In 1979, the International Finance Corp. committed $7.9 million toward
Alucam. Twenty years later, the IFC still held equity of $0.9 million in
the aluminum smelter. (IFC annual report 1999)
- China
International finance has keyed the surge in aluminum production in China,
where aluminum production grew by 9.7 percent from 1998 to 1999, reaching a
record total of 2.6 million tons. Most Chinese smelters are small-scale.
The largest, Guizhou, produced 227,000 tons in 1999. The other four largest
smelters are Qinghai (205,000 tons in 1999), Baotou (117,000), Pingguo
(110,000), and Qingtonxia (102,000). More than 90 other smelters produce
less than 100,000 tons. Expansion projects are planned at Baotou (105,000
ton additional capacity by 2002), Pingguo (200,000 ton possible expansion),
Qingtongxia (100,000 ton expansion planned for 2001), and 12 other
smelters. (Mining Annual Review, March 2000)
IFC and OPIC have been, or may become, involved in a smelter projects in
Heijin City, Guangxi Pingguo, and an electrode paste plant that supplies
Chinese aluminum smelters.
In June 2000, the IFC agreed to invest $14 million in a Soderberg paste
plant, owned by Elkem of Norway, in the northwestern China region of
Ningxia. Elkem bought the shuttered plant from the state in April 2000. The
Elkem Carbon China plant supplies paste and anthracite to the aluminum and
ferroalloy industries. The IFC described this new plant as "the largest
single foreign investment to date in Ningxia." The Norwegian government
financed an environmental assessment of the Elkem project. Even though the
plant produces a paste for an antequated technology (Soderberg smelting),
the IFC called the project "an example for the industry through the use of
modern, efficient, less-polluting technology." (International Finance
Corp., "IFC invests US$14 million to develop China’s Northwestern Region,"
press release, June 7, 2000; "IFC invests US$14 million in western China,"
China Online, at
www.chinaonline.com/industry/chemicals/NewsArchive/Secure/2000/June/B1000613
12.asp))
Alcan (Canada) has reached a memorandum of understanding with the Chinese
government’s China Non-Ferrous Metals Industry Corp. to build a new 240,000
tpy smelter in Heijin City, Shanxi province, with possible expansion to
400,000 tpy. A feasibility study was due to be completed by mid-1999.
(ESP-Business Opportunities in Asia & the Pacific, Jan. 1, 1998) It would
be one of Alcan’s largest smelters and would have a captive coal-fired
power plant. IFC and OPIC involvement is possible. (Aluminium Today, June
1997; China Economic Review, Dec. 1995)
The governments of Denmark, France, Netherlands and Sweden, in 1991,
extended loans totaling $90 million to supply equipment to the new 300,000
tpy Guangxi Pingguo aluminum smelter. According to the Mining Journal (Oct.
4, 1991), the loans funded the importation of alumina refining equipment
from French firms Pechiney, Kestner and KHD ($63 million), power plant
equipment from ABB ($10.5 million), alumina pumping technology from the
Dutch Geho Pump Corp. ($7.7 milion), and an alumina sintering furnace from
F.L. Smidth of Denmark ($4.7 million).
- Egypt:
In 1988, Alcoa considered buying "a substantial stake in Egyptalum," a
180,000 tpy smelter, according to Middle East Economic Digest (July 10,
1998). Egyptalum is planning to boost output by 120,000 tpy, and convert
its existing Soderburg anodes to pre-baked cells. In 1995, the European
Union-funded European Investment Bank loaned $92 million toward
modernization at Egyptalum. (African Economic Digest, Nov. 6, 1996)
- Costa Rica
In 1971, Costa Rica President Jose Figueres signed a pact with Alcoa, the
World Bank, and the Soviet Union "to construct a $400 million alumina
refinery and hydroelectric generating plant in the northwestern province of
Guanacaste. Electrical power from the new dam was to be transmitted to the
Alcoa mining site. In exchange for purchasing Costa Rica's excess coffee,
Soviet hydroelectric generating equipment was to be purchased for the
500,000 kw dam. The combination of public opposition to Soviet involvement
and ALCOA's decision to cease bauxite mining due to poor ore quality caused
the negotiations to fail," according to the National Congress of American
Indians.
"Through the World Council of Indigenous Peoples the Boruca people became
informed about the experience of Indians in Surinam, the aboriginals in
Australia and the Yanomamo of Brazil as they confronted similar bank and
state initiated development projects. It was the discovery that
Multilateral Development Banks, state government economic pressures and
multinational corporations had combined to promote developments in
territories of least political resistance that caused the Boruca people to
increase their resistance to the planned Boruca Dam and the aluminum
processing plant. Indeed, the Boruca people sought to expose the actual
intent of the Multilateral Development Bank, the aluminum industry and the
Costa Rican government to the
national citizens of Costa Rica in an effort to prevent the further
advancement of the project.
"What had been revealed by the Borucas was that the Alcoa aluminum company
was interested in locating its processing facilities in Costa Rica because
of the increased political and military tensions in Surinam. The company
was not particularly interested in using Costa Rican labor, nor was it
interested in Costa Rican bauxite. Furthermore, it was revealed that the
actual beneficiaries of the planned Boruca project would be the
Multilateral Development Banks and private banks which would receive
interest payments on past Costa Rican loans; and the Alcoa company would
benefit from a "safe haven", low or nonexistent taxes and tariffs, low
labor costs and "free zone" ports from which to import and export raw and
processed bauxite and aluminum. And, of course, the aluminum industry would
be assured inexpensive electrical power." (Ralph Eluska, vice president of
the National Congress of American Indians, "Tribal populations and
international banking practices: a fundamental conflict over development
goals," Testimony before the House Banking Committee's Subcommittee on
International Development Institutions and Finance, June 29, 1983 at
www.cwis.org/fwdp/International/bankpoly.txt)
- Ghana
Sixty percent of the bauxite mined by the Ghana Bauxite Co. is exported to
Alcan’s alumina refinery in the U.K. The U.K.’s Commonwealth Development
Corporation loaned the GBC 3.1 million sterling to install a new conveyor,
completed in 1992, to haul load bauxite onto awaiting ships in Takoradi.
(Reuter, Sept. 23, 1994)
Bilateral and multilateral financial institutions have also financed the
development of energy consumed by the aluminum industry in Ghana. The Valco
aluminum smelter (90% owned by Kaiser) draws over about 45% of the power
generated by the Volta
River Authority’s Akosombo and Kpong dams. (Peter Owu, "Energy Crisis in
Ghana," Africtech, vol8, no.1, at African Technology Forum website:
web.mit.edu/afs/athena.mit.edu/activity/a/africantech/www/articles/GhanaCris
is.htm)
In 1961, OPIC and the World Bank financed the construction of the Akosombo
Dam on the Volta River. Valco, then the largest smelter in Africa, was
developed to consume power from Akosombo. This dam, according to the
International Rivers Network, "flooded more land than any other dam in the
world, 8,500 square kilometers, around four percent of the area of Ghana."
(International Rivers Network, "When the Rivers Run Dry - The World Bank,
Dams and the Quest for Reparations," at
www.irn.org/programs/finance/damfacts.html; OPIC, "OPIC in Ghana," March
1999, at www.opic.gov)
The IDA ($100 million), EIB ($45 million), African Development Bank, CDC
(U.K.) , CFD (France) and others have helped to construct a new Aboadse
power project and connections to the national grid. National power
shortages caused by drought and excessive demand forced Valco to curtail
production in the mid-1990s. (Africa Energy & Mining, Jan. 25, 1995, Dec.
21, 1994).
Eight bilateral and multilateral institutions provided over $300 million in
financing toward the development of the new Takorade oil-fired power plant,
built to provide more reliable power. Financing instittuions include the
IDA, EIB, CDC, Kuwait Fund for Arab Economic Development, Arab Bank for
Economic Development in Africa, African Development Bank, and the Caisse
Francaise de Developpement. This plant was seen as necessary to maintain
Valco’s presence in Ghana. (Owu)
OPIC has also provided insurance for Valco. ("OPIC in Ghana")
- Guinea
Numerous aid agencies have directly supported the mining of bauxite and
alumina refining in Guinea.
In 1992, the EIB extended an $18.5 million loan, and the CCCE a $20 million
loan to
financing a modernization project at the Friguia refinery, in which French
firm Pechiney, British Aluminium, Noranda, VAW (Germany), and Alusuisse
have a 51% controlling interest. Previously, the EIB loaned Friguia about
$5 million in 1980, $7 million in 1984, and $15 million in 1988. Also in
1988, the European Development Fund approved a $40 million loan toward
Friguia. (Euromoney Trade Finance Report, Jan. 1992; Africa Energy &
Mining, Feb. 22, 1995; Europe Energy, Nov. 6, 1992; European Report, Nov.
23, 1991; Mining Journal, Dec. 9, 1988; Mining Annual Review, June 1992)
In 1996, the World Bank’s IDA approved a $12.2 million credit toward the
privatization of Guinea’s mining sector. "The project objectives are to
strengthen the Government’s capacity to act as facilitator and regulator of
mining activities, and to attract private investment for mining sector
development," according to the agency. (World Bank Project Information
Document, "Guinea-Mining Sector Investment Promotion Project," PID:
GNPA1077, June 29, 1995)
In October 1997, the World Bank put the "privatization of the alumina firm
Friguia back on track," according to Africa Energy & Mining (Nov. 18, 1998)
The IMF has also played a big role in the restructuring of Guinea’s mining
operations, including bauxite, through a structural adjustment loan. In
1999, the IMF reported that "the government has decided to divest itself of
its mining companies and thus reduce its role as owner and operator in the
sector, while strengthening its role as regulator and intermediary....
Through privatization it is intending also to reduce its shareholding in
the aluminum company, Friguia, to a minority without veto power. Should the
privatization operation not succeed because of the absence of a credible
buyer, the government will resort to a private concession. The government
will continue its restructuring of the bauxite company, SBK, and is
committed to reducing its share of the company's capital to a minority. The
government will continue its efforts in connection with reducing operating
costs and strengthening the management of another bauxite company, CBG, and
will design a strategy for encouraging new private investment in the
bauxite and aluminum sectors in the Boké region which may include a share
in the CBG." (International Monetary Fund, "Guinea Enhanced Structural
Adjustment Facility
Policy Framework Paper, 1999-2001," December 8, 1999)
- Guyana
The U.S. Overseas Private Investment Corp. has insured bauxite mining by
Reynolds (U.S.) in Guyana to the tune of $14.5 million in the 1970s, and
$14 million in 1991. The U.K. CDC has also provided $6.5 million in funding
toward bauxite mining in Guyana. Most of Guyana’s bauxite is shipped to the
U.S. and the E.U.
The World Bank, European Investment Bank ($14 million), and the European
Union provided $20 million toward restructuring Guyana’s bauxite industry
in the early 1990s.
(American Metal Market, Dec., 1991; Chemical Business News Base, May 15,
1991; Inter Press Service, July 19, 1994; Caribbean News Agency, Oct. 19,
1993; Agence Europe, Feb. 20, 1993)
In 1991, the Guyanese government dissolved the state-owned Guymine
operation. Green Mining of the U.S., which strip-mined the Linden bauxite
reserve for Guymine, had held insurance from OPIC in 1989 and 1990, and
requested reimbursement for unpaid work. After Green Mining filed the
claims, OPIC suspended its coverage for U.S. projects in Guyana. On July
28, 2000, Green dropped its claims against OPIC, and its lawsuits against
the Guyana government, in exchange for payment. The settlement reopened
OPIC insurance operations in Guyana. ("OPIC Restores Support for American
Investments in Guyana," Guyana Monthly Update, August 2000; U.S. Embassy in
Guyana, "Investment Climate (Guyana)," 1995 Commercial Guide to Guyana,
U.S. Dept. of Commerce, August 21, 1996)
Guyana’s government is planning to privatize its two bauxite companies,
Berbice Mining Enterprises (Bermine) and Linden Mining Enterprise
(Linmine). The privatization would open 60% majority stakes to help fund
capital improvements at both facilities. (Plunkert, 2000) Reynolds, now
owned by Alcoa, holds a 50% stake in the Bermine operation, and purchased 2
million tons of bauxite from the enterprise in 2000. (Reynolds 10-K,
FY1999)
The IMF has imposed a $70 million structural adjustment program in Guyana
which has targeted nationalized companies. In November 2000, IMF’s
directors "encouraged the authorities to persevere with efforts to
restructure the remaining public enterprises, especially the modernization
of the sugar company, and welcomed their intention to privatize the bauxite
companies." (IMF, "IMF Concludes Article IV Consultation with Guyana,"
Public Information Notice No. 00/102, Nov. 30, 2000)
- India
Italy’s SACE (State Export Credit Guarantee Corp.) and Mediocredito
have financed $15 millionts toward Bharat Aluminium Co. (Balco)’s purchase
of equipment from FATA Group of Italy. The government of Norway funded a
study of Balco by Hydro Aluminum (Nor) in 1989. In 1984, the U.K. Export
Credit Guarantee Department guaranteed a 25 million pound loan toward the
purchase of four power generators by Balco. The four 67.5 MW units were
provided by GEC of the U.K. (Business Line, August 5, 1998; Mining Journal,
Feb. 17, 1989; Financial Times, July 31,
1984)
The export-oriented NALCO aluminum complex in Talcher-Angul, Orissa, was
built using Pechiney (France) technology, with financing from the French
government (1.05 billion francs). (Aluminium Today, May 1993). The U.S.
Trade and Development Agency recently granted Indalco funds to study the
doubling of production at its Hirakud, Orissa, aluminum plant. Kaiser will
conduct the study and "supply technology for the project,"
according to International Market Insights (March 30, 1998).
In 1995, the IFC approved $25 million in financing toward a coke and power
plant in Andhra Pradesh. The Rain Calcining coke plant in Visakhapatnam,
partially owned by U.S. transnationals Houston Industries Energy and
Applied Industrial Materials Corp., produces 250,000 tons of calcined
petroleum coke for the aluminum industry in India and elsewhere in Asia.
(IFC Annual Report FY1995; The Hindu (India), Feb. 25, 1997, Deutsche
Press-Agentur, Aug. 28, 1995; Ogrin Universal News Services Ltd., Aug. 28,
1995)
- Middle East
According to a Nov. 2000 report by Gulf Business Online, "both Bahrain and
the UAE (United Arab Emirates) have been proactive in encouraging more
downstream industries as a means of adding more value to their latent
industrial sector. The Bahrain Development Bank (BDB), Bahrain's Ministry
of Finance and National Economy, the Ministry of Oil and Industry and the
United Nations Industrial Development Organisation (UNIDO), have joined
hands to promote the budding aluminium industry in the Gulf region by
drafting product and financing strategy. A string of projects with joint
ventures and some buy-back arrangements are now in the pipeline." (Roger
Jacobson, "Future looks bright for the GCC aluminium industrry," Gulf
Business Online (Dubai), Nov. 9, 2000)
- Indonesia
In one of the most infamous boondoggles of bilateral aid, the Japanese
government loaned billions of dollars [CHECK] toward the development of the
225,000 ton Inalum smelter in North Sumatra, Indonesia. The Inalum smelter
is controlled by Nippon Asahan Aluminium Co., a consortium of 12 Japanese
companies (including Hitachi, Toshiba, and Mitsubishi) and the government’s
Overseas Cooperation Fund.
In 1992, the Los Angeles Times reported that ), "critics of the Asahan
project say it is a classic example of the kind of commercially oriented
foreign aid that serves the strategic interests of Japan, the donor, far
more than the recipients of official assistance. A potent symbol of skewed
priorities… is the nine-hole golf course carved out of the jungle in
Paritohan, built with aid money for Inalum employees and used most
enthusiastically by Japanese visitors and expatriate engineers. Profitable
or not at this end, Inalum provides a cheap and secure supply of aluminum
to the cartel of Japanese aluminum makers who invested in a majority stake
of the project, using low-interest Tokyo government financing.
"[A] pattern has emerged, analysts say: The bulk of the aid [to Asia] has
gone into large infrastructure projects that provide lucrative contracts
for Japanese construction firms and equipment supplier," the report added.
(Los Angeles Times, June 9, 1992)
See energy section for more details on this project.
- Oman
In May 1998, the Omani government signed a $250 million loan from the
Import-Export Bank of Japan to build a new port which will serve
petrochemical plants and an aluminum smelter planned in Sohar, according to
Agence France Presse (June 1, 1998) Dubal is pondering the construction of
a new $2.5 billion, 480,000 ton smelter in Oman. (Rasha Owais, "Dubal
studies Oman smelter project," Gulf News, April 10, 1999)
- Mozambique and Malawi
In the industry’s largest recent multilateral and bilateral bank financing
scheme, foreign institutions including the World Bank, European Investment
Bank, and national agencies have poured over $820 million into the new
Billiton/Mitsubishi smelter in Mozambique.
The smelter development is the largest-ever private investment project in
the country. Its projected cost of $1.3 billion almost equal’s Mozambique’s
Gross National Product. (Leon Pretorius, "Regional integration and
development in Southern Africa: A case study of the MOZAL Project and its
implications for workers," International Labour Resource and Information
Group, March 2000)
The Mozal consortium -- Billiton (47%), Mitsubishi (25%), South Africa’s
Industrial Development Corp. (24%), and the government of Mozambique (4%)
-- completed the 250,000 ton per year smelter in 2000. About $820 million
of the $1.34 billion in project costs are being financed by the foreign
multilateral and bilateral agencies, including World Bank’s IFC ($120
million in loans) and IDA, the European Investment Bank ($46 million), and
national agencies in the U.K. (Commonwealth Development Corp.), Germany
(DEG) , South Africa (Credit Guarantee Insurance Corp.), and France ($26
million from the Caisse Francaise de Developpement). (American Metal
Market, May 19, 1998; Mozal press release, "International Financing for
Mozal smelter concluded," Oct. 30, 1998, at www.mozal.com; International
Finance Corp., "Mozambique: Mozal Aluminum Company," at www.ifc.org;
European Investment Bank, "EIB financing for regional power project in
Southern Africa," press release, June 29, 1999)
The consortium is conducting a feasibility study for the possible doubling
of Mozal’s capacity. (Stephen Johnston, "Aluminium," Mining Annual Review,
March 2000)
The possible gutting of Mulanje Mountain in Malawi to supply bauxite for
Mozal also has multilateral bank ties. In the mid-1990s, a study financed
by the African Development Bank has uncovered the reserves at Mulanje. The
study, according to African Economic Digest (June 10, 1996) study indicated
that the project could produce 540,000 tons of bauxite a year… 200,000 tons
of alumina and 100,000 tons of aluminum. About $880 million is needed to
develop the project." (African Economic Digest, June 10, 1996).
(See Environment chapter for more details on Mulanje Mountain, the Human
Rights chapter for more on the worker rights at Mozal, and the Energy
chapter for more on the impact of Mozal’s energy consumption on the Zambezi
River delta)
- Venezuela
The IMF is encouraging the Venezuelan government to privatize its aluminum
industry. In 1998, IMF managing director Michel Camdessus met with
Venezualan officials and pushed "the privatization of companies in the
aluminum and electricity sector," according to an IMF release. (IMF news
brief No. 98/13, May 19, 1998)
- Vietnam
The Vietnamese government is seeking support from France’s Overseas
Development Agency to devleop a bauxite mine/refinery/smelter operation in
the Tan Rai District of Lam Dong Province. The government hopes to have the
complex producing one million tons of bauxite and 200,000 tons of aluminum
per year by 2003. The complex would be owned by a joint venture of the
government and Pechiney. ("Bauxite Joint Venture Approved," Dau Tu, April
22, 1999, www.mekongresearch.com/May1999energy.htm)
Pechiney is expected to complete a feasibility study on the $800 million
project in 2001. The Central Highlands (Taây Nguyeân) region of Vietnam
holds reserves of over 3.4 billion tons of bauxite. ("Industry Ministry has
seen the future, and it’s made of aluminium," Vietnam News Agency, March
22, 2000 at vietnamnews.vnagency.com.vn/2000-03/21/Stories/14.htm;
www.vneconomy.com.vn/en/ext_economic/bilateral/fra001.htm)
VI. Human rights
Focus:
Aluminum industrialization and repression in India's state of Orissa
(footnote: This updates part of a chapter in an Institute of Policy Studies
1998 report, "The World Bank's Juggernaut: The Coal-Fired Industrial
Colonization of India's State of Orissa.)
The Indian state of Orissa's vast bauxite reserves are among the world's
largest. More bauxite is mined here than in all but seven countries. The
state holds about 10 percent of global bauxite reserves. Coal and hydro
power provide cheap sources for existing and proposed smelters. Labor is
also inexpensive; thus, foreign corporations have rushed to proliferate
bauxite mining, alumina refining, and aluminum smelting in India.
("Canadian ambition for Indian bauxite," Mining Journal, March 12, 1999)
In the name of the "upliftment of backwards tribes" -- or perhaps just
corporate profits -- Orissa has entered the list of transnational
corporations' favorite sources of bauxite and alumina. In short time, the
aluminum industry's blasting, refining, smelting, and coal-fired power
operations already have created a legacy of forced removals of people from
their villages, ruined temples, destroyed forests, poisoned rivers, brittle
bones, and dirty air.
Orissa's early experiences with this industry have compelled many people to
campaign for a halt to bauxite mining and smelting. Protests have
surrounded the NALCO aluminum smelter in Angul, the Utkal bauxite/alumina
project, and several other new or planned bauxite mines and alumina
smelters.
Corporate investors and the state and national governments have ignored or
squashed the dissident voices. As Ranjit Dev Raj of Inter Press Service
reported in 1999, "Mining transnationals have found an easy way to grab
bauxite-laden land from 'adivasis' (aboriginals) in the mineral-rich state
of Orissa, eastern India - get them arrested on trumped up criminal
charges." (Ranjit Dev Raj, "Bauxite TNCs Grab Tribal Land With Impunity,"
Inter Press Service, June 2, 1999)
Orissa's cheap labor, energy, and land have provided companies like Alcan,
Pechiney, Alcoa, and Alusuisse with the potential to build the lowest-cost
bauxite mining and alumina refining operations in the world. This
export-oriented industry is heavily subsidized by the Indian government,
which is eager to move big industries into regions it has labeled as
"backward areas." India offers 100% export-oriented industries exemption
from paying income taxes. It also drops import tariffs for equipment used
in these plants.
Companies utilizing these loopholes defend them as a means to uplift the
poor. In 1993, for example, Alutec of the U.S. defended a proposed bauxite
mine and alumina refinery venture in a 1993 study. "The state of Orissa and
the Indian Government have a commitment to develop the backward districts
of Kalahandi and the adjoining regions. A project of this type will lead to
infrastructure development, creation of modern townships, schools, medical
facilities and direct employment to approximately 1,000 persons." (Alutec
Inc., "RPGE Alumina Refinery Project, State of Orissa: Desk Study for
United States Trade and Development Agency," September 1993.)
But these same plants are tearing at the social fabric of life in many
parts of Orissa, according to the growing number of people campaigning
against them. Opponents of the new mines, refineries and smelters are
trying to protect their history and their communities in order to secure
their future. They argue that while the industry is there, riches may flow
to some people in the region, but when the bauxite deposits are gone, the
modern townships, schools and hospitals will almost certainly disappear
with them. Only a legacy of environmental and social destruction will
remain.
According to Inter Press Service, "Far from protecting the 'adivasis' and
their land, as it is constitutionally and legally bound to do, the Orissa
state government has openly pitched in on behalf of the TNCs which see no
need to negotiate with the 'adivasis'." (IPS, June 2, 1999)
''So far we have only received threats from policemen, district officials
and goons hired by the companies,'' Bidu Lata Huika, convenor of the
Orissa Adivasi Manch (Orissa Aboriginals Forum) said in 1999. "'These
companies hire goons to demolish our homes and attack us and then file
criminal cases on the basis of which the police arrest us. In any case we
are not interested in the compensation offered by the bauxite companies -
we want to continue as farmers on this land which has sustained us for
centuries." (ibid)
One bauxite mining/alumina refining scheme, Utkal Alumina, has drawn
increasing fire from indigenous people and others in Orissa's Raigada
district. Hydro of Norway and Alcan of Canada hold 45 and 35 percent
shares in the project, respectively. Indian Aluminium Co. holds the
balance. Alcan owned a 55% stake in Indal at the end of 1999. The companies
plan to complete financing by the end of 2001 and start producing one
million tons per year of alumina by 2005. (Plunkert, 2000; Alcan 10-K,
FY1999) ]
The Utkal consortium asserted in 1995 that it is "totally committed towards
the socio-economic upliftment of a backward tribal area." Utkal opponents
claim that 3,500 people will lose their land. Hydro of Norway said that 500
to 700 people would have to move from 2,400 acres of land. ("Hydro of
Norway has problems with alumina plant," Dagens Naeringsliv, March 28,
1996)
Local peoples' efforts to halt the Utkal project date almost to its
inception in 1991. Their protests have intensified in recent years. In
August 1997, according to Norwegian NGO NorWatch, Kucheipadar villagers
"smashed a prototype house that Utkal had erected in the neighborhood to
show the people who will be forced to relocate what kind of houses they
would be offered." All of the villagers' cultivated land would be wiped out
by the Utkal development. (Morten Rønning, "The fight against Utkal is
coming to a head," NorWatch newsletter, No. 4, Feb. 1998)
NorWatch interviewed some of the people who were in the blockade. Lochma
Mahji, a 42 year old woman, told the NGO that after four days of blocking
the road, many of the villagers "went back to work on our fields, and the
village was almost empty. At four a.m. on January 5, the few of us who were
left in the village were told that a truck and four jeeps were on their
way, and that the police were removing the roadblock. I immediately went
there, and stood in front of it. Representatives of the local authorities
and the police were there. We asked, 'Why are you removing the roadblock?
If you remove it, we'll lose our land and our homes. The authority you have
doesn't come from the womb of our motherland. You have your authority from
us, and you're obliged to help us.'"
The police responded with violence, she said. "The police grabbed the other
women present by their hands and threw them down on the ground. I objected,
saying that one cannot take a woman's hand unless one is married to her.
The police used the butts of their rifles to push me back. I said, 'Are you
going to shoot me - are you going to kill me? I'm not scared. I stand for
what I fight for, and I'm willing to die for that.' The police gathered
around me and hit me three times on my legs with sticks. I collapsed and
fainted. At the same time the police attacked the others, and threw
tear-gas grenades. Seven police officers came over to me, tried to lift me
up, and said they wanted to help me get home...
They stabbed me with iron pipes to get me up. A police officer pulled at my
leg. I tried to stand up, and felt an excruciating pain in my legs when I
stretched them out. I kicked the police officer who held my leg in his
face. When I managed to get up, two police officers grabbed my hair and
pulled me over to the roadblock. I was dragged there practically on my
knees."
Mahji said 17 women, 6 children and 7 or 8 men were injured in the police
action. Afterwards, the villagers sent a notice to the chief of police.
"He immediately tore it apart, and said that if we stirred up more trouble,
they would kill us," she said.
A boy told NorWatch that at the blockade, "I was beaten by the police once.
I asked why they hit me, but they didn't answer. The roadblock is there
only to control representatives of the authorities and the company. It's
our land; that's why we put it up. We cut trees, carry rocks and stand
guard at the roadblock." (Rønning)
Krushna Saunta, an aboriginal landowner and social worker, said in 1999
that, ''I was held in jail for a week along with five others, beaten, and
then released on bail. Everybody in my village of Kucheipadar have been
arrested at one time or another." Saunta's Organization for Protection of
Nature's Wealth (Sampada Sangrakshan Parishad or PSSP) conducted a poll of
local villagers in November 1998. He said 96 percent people in the district
opposed the projects. (IPS, June 2, 1999)
A five-person team of members of the Council for Social Development visited
the region in 1999. ''We were told by officials at the highest level in
Bhubaneshwar, Orissa's capital that the government would not countenance
any opposition to Raigada's industrialization," said team member, D.
Bandhyopadhyay. According to IPS, the team members were told that the
government was determined to 'teach a lesson' to NGOs which they accused of
inciting and organizing tribals against land acquisition for the 'public
good.'" (IPS, June 2, 1999)
Four NGOs in the area have been threatened with bans against receiving
government funds. A member of one of those NGOs, Vidhya Das of Agragamee,
said "This is just colonialism in another garb but the people here are not
going to give up so easily - they have learnt from the mistakes of their
brethren. Mines and factories have reduced self-reliant, self respecting
aboriginal families to live like refugees in ill- planned rehabilitation
colonies - but most of them are still homeless." (IPS, June 2, 1999)
In June 1998, Agragamee and people from Kucheipadar set up another road
block. According to NorWatch, around 3 a.m. on June 16, 1998, "armed police
raided one of Agragamee's local offices, and an hour later they raided the
organization's main office. The operation has been described as very rough,
and some of the employees were beaten. Eight staff members were arrested,
and five of them were imprisoned for several days before they were released
on bail. The charges, which Agragamee strongly rejects, were use of
violence, rebellious behavior, and suspicion of incitement to riot against
the mining companies." (Tarjei Leer-Salvesen, "Armed police clears the way
for Utkal, NorWatch newsletter No. 14, July 1998)
The troubled Utkal project has drawn the attention of many in Norway, home
to the consortium's lead corporation, Norsk Hydro. In January 2000,
Minister of Foreign Affairs Knut Vollebæk met with Norsk Hydro and three
NGO representatives in Delhi to discuss the project. According to Norwegian
NGO NorWatch, during the meeting Norsk Hydro "allegedly admitted that the
dialogue with the affected local population is not as good as it should be,
and then claimed that the local population supports them. When they were
confronted with the fact that the company is taking some of the local
population to court, one of the company's representatives replied that
Norsk Hydro does not deal with violent groups." (Tarjei Leer-Salvesen,
"Utkal Alumina discussed at top political level," NorWatch newsletter, No.
2, 2000)
Conflict over the Utkal project continued in 2000. On February 13, more
than 5,000 people organized by the PSSP demonstrated outside the
consortium's office in Tikiri. They demanded the end of the project,
Utkal's aid program, and police harassment. The demonstrators also demanded
the return of land acquired by Utkal to rightful owners. (NorWatch
newsletter, No. 2, 2000)
In April, according to the Norwegian paper, Dagens Naeringsliv, "Two
thousand demonstrators armed with bamboo canes and bows and arrows
destroyed two wooden bridges and trampled down 50,000 cuttings that were
part of a forest planting project. The next day armed police made arrests.
On April 22, protesters built a barricade to stop contract workers from
traveling to the site of the proposed bauxite mine." ("More conflict over
Norsk Hydro's Utkal project," Dagens Naeringsliv, as reported by Chemical
Business Newsbase, June 19, 2000)
The struggle took an even more violent turn in December.
On Dec. 7, Hydro issued a press release asserting that "most of the
inhabitants in Utkal are in favor of the bauxite and alumina project.
Having adopted an attitude of wait-and-see for several years, the political
parties in the area have now gathered support for the project. It quoted
K.C. Mohapatra, leader of the All Parties Committee, as saying "We welcome
the project and are united in our support." (www.hydro.com)
This propaganda washed away in a bloodbath nine days later. On Dec. 16,
police shot and killed three local villagers in the town of Kaikanch, where
people have refused to move out for Utkal. Political leaders of the CPI
[ck] demanded a judicial inquiry into the incident. According to The Hindu,
politicians "said the killings of the tribals was a pre-planned one to
terrorize them to give into their demands and vacate their village for
enabling them to set up the project."
Hydro issued a press release two days later. "Three people were killed on
Dec. 16 when police opened fire on an aggressive crowd in the village of
Maikanch... Hydro profoundly regrets the incident, emphasizes Hydro
Aluminum information manager Thomas Knutzen." Knutsen said, "No
representatives from Hydro or Utkal Alumina were in the vicinity when the
incident occurred. Therefore we don't know any details."
Biswanath Sahoo, a party representative who visited the village after the
killings, said two platoons of police entered the village and brutally
attacked a woman. He said that men who heard the woman's cry were fired at
as they neared. Police shot and killed three of the men. They also shot
four cattle grazing nearby. ("Probe into Rayagada incident sought," The
Hindu, Dec. 22, 2000)
[Box]
A 16 year old boy from Kucheipadar has written songs about the Utkal
struggle. Here is one of them:
Wind! wind, Oh company wind,
People! flowing in whole of Orissa.
Come fight for our rights, Come, let us struggle.
We are struggling, we are struggling.
Come, we have to release our mother land,
Come my mother and sister, become a unity.
Come forward without fear.
We should not leave our motherland in the hands of the company,
In the hands of the companies.
Come together for struggle.
Don't watch and keep quiet, my struggling group.
Danger coming toward us, to give us tragedy and sorrow.
Send back this foreign company;
We may die without fearing the company,
Look my friends, to the company and to the government,
Coming toward us to destroy and demolish us.
We don't need Tata, Hydro, Indal.
We don't need, we don't need.
We fight for our land,
We may die, have no fear, come forward.
By liquor the company has tied our mouths,
With created fears, booked cases, and gun point money distributing;
Taking our land illegally,
Land alienation, land alienation.
Hey company and government!
We are aware;
Don't try anymore to cheat us.
Hear, hear, in our own village we are the government.
In our village we will judge;
Our land, our water cannot be traded,
The earth is ours, the earth is ours.
Come, come mother and sister,
Become unity, roar our united voice.
Send back to Indal, Tata, Hydro.
To save Orissa, save Adivasi and Dalit.
The earth is ours, it is our right.
(Source: "Folk songs against the Utkal project," NorWatch newsletter No. 4,
Feb. 1998)
While Utkal is the most prominent bauxite/alumina development, it is not
the only one in Orissa. NALCO plans to operate the world's third largest
alumina refinery in Damanjodi. In the Gadhamardan hills near the Hirakud
reservoir, Bharat Aluminium Cmpany (BALCO) tried to start mining bauxite in
the late 1980s. After blasting at BALCO's mines badly damaged the famous
Nrusinghanath Temple, people in the region had seen enough, and forced a
halt to the project.
Forced relocations and indigenous rights in other countries
The struggle in Orissa echoes similar contests between aluminum
transnationals and indigenous peoples around the world.
Australia
Bauxite mining in the Australian province of Queensland occurs on native
land. In Dec. 1996, the Australian high court ruled that Wik and Thayorre
aborigines hold legal Native Title claims on land that Comalco mines in the
town of Weipa. Billiton's bauxite mines in Gove are also on Aboriginal
land. (Suganthi Singarayar, "For Aborigines, Racial Discrimination Act is
Sacred," Inter Press Service, Jan. 27, 1997; Dr. Richard Howitt,
"Exploration, Mining and Indigenous Futures: What does it mean? Why does it
matter?," Macquarie University School of Earth Sciences, 1990)
Next to the Weipa mine, Alcan hopes to develop the Ely bauxite deposit. The
company holds a mining lease dating from 1965. In 1997, it was negotiating
with the local Aboriginal community to obtain access to land where it wants
to build a port. Australian Institute of Aboriginal and Torres Strait
Islander Studies, Native Title Research Unit archives)
Roger Moody called Weipa a "region flagrantly robbed by Comalco from its
Aboriginal inhabitants in the '60s, and which continues to be one of the
major disgraces of northern Queensland...No less controversial is
Pechiney's acquisition in 1981 - along with Billiton Aluminium - of a 40%
interest in the Arukun bauxite prospect in the same area, an aboriginal
reserve whose occupants are firmly against bauxite mining ." (Roger Moody,
"Gulliver PUK (Pechiney-Ugine-Kuhlmann) Dossier" in The Gulliver File -
Mines, people and land: a global battleground, Minewatch, 1992.)
In the 1980s, Alcoa's planned to build a $1.5 billion smelter in Portland,
Victoria, Austria. According to Moody, "the site is part of the
traditional land of the Aboriginal Gunditj-Mara people, who strenuously
fought - using court claims, direct action, occupations and sabotage of
Alcoa's machinery - to stop the smelter being built. Under such pressure
and because of the high electricity price charged by the Victorian state
government, the project was mothballed in 1982. The Labour government in
the state - despite token gestures towards Aboriginal land rights - revived
the project soon after coming to power in 1983, and will in fact take a 25%
stake in it." (ibid).
Brazil
In Brazil, the construction of Tucurui dam displaced more than 25,000
people. More than half of the power generated by the dam goes to aluminum
smelters in northern Brazil. According to the World Commission on Dams,
"subsistence farmers, fisherfolk, pastoralists, and riverbank cultivators"
all had to move out of the way for the new reservoir. In addition, 100,000
people were "affected by reduced water quality, loss of riverbed
cultivation, and decreased downstream fish populations."
"In the case of Tucurui, of the indigenous groups displaced only the
Parakana people were resettled; the other indigenous group that lost land
to the dam was not considered for resettlement benefits," reported the WCD.
The erection of transmission lines also impacts indigenous communities.
According to the WCD, "the Gavaio de Montanha indigenous people, whose
lands were affected by the transmission lines in the Tucurui project, were
initially not considered eligible for compensation but were later given
cash compensation."
After the reservoir was filled in 1984, the WCD reported, "an unusual
proliferation of Mansonia mosquitoes in rural areas close to the reservoir
forced farm families to leave their homes." Another post-construction
impact was the concentration of mercury from gold mining activities
upstream. Fish caught in the reservoir had more than double the maximum
safety level. (World Commission on Dams, "The Report of the World
Commission on Dams; Dams and Development: A New Framework for
Decision-Making," 2000, p. 106, 107, 119, 124)
Guinea
According to NorWatch, the Friguia bauxite and alumina project in Guinea
"has forcibly moved several villages, but the number of affected people is
unknown. It has been impossible to have details on how much is paid as
compensation when someone is forcibly moved, or how this has been carried
out. In the future even more people will have to move as the mine is being
extended. 16-18,000 people are still living within the concession area. The
local population complains of their cattle being run down by the company's
cars, and dying from eating remainders of explosive charges which originate
from the mining. They are not paid any compensation." (Tarjei Leer-Salvesen
and Morten Rønning, "Profits on arms, forced relocation, and environmental
scandals," NorWatch newsletter, June 1998).
Friguia's failure to compensate local villagers was reiterated in a local
newspaper report in 1998. According to Africa Energy and Mining, the
newspaper reported that Friguia managers "have been accused of dubious
financial dealings involving over-billing in favor of its suppliers. The
Conakry-based newspaper L'Independant cited a garage, security companies
and real estate owners in connection with the over-billing. It also said
the company had failed to pay village dwellers compensation for having to
re-locate, even
though it claimed to have sent the money to the local authorities." ("Four
pre-qualified for Friguia," Africa Energy & Mining, Dec. 2, 1998)
Malawi
**** DAPHNE -- This is actually more appropriate in the environment
chapter, within the bauxite section *****
In August 2000, the governments and Malawi and Mozambique discussed a plan
to mine bauxite from Mulanje Mountain, refine it, and ship alumina to
Billiton's Mozal smelter in Mozambique.
Malawi Vice President Justin Malewezi touted the deal. "This will be of
great benefit to both countries since Mozambique will cut expenses of
importing alumina from Australia while Malawi will benefit from job
creation." ("Talks on bauxite venture," ANN/IRIN, August 29, 2000)
A local conglomerate, Press Corporation Ltd., is seeking international
partners to build and operate the mine. In Sept. 2000, Malawi president Dr.
Bakili Muluzi said his government would send a delegation to the United
Kingdom to discuss a possible collaboration on mining the bauxite.
("President Muluzi promises to sack corrupt ministers," MBC radio, Sept.
23, 2000; "Outlet hope for bauxite," Africa Energy & Mining, Oct. 11, 2000)
The government estimates that the mountain holds over 50 million tons of
bauxite. Charles Kaphwiyo, Malawi's geological survey director, said the
bauxite would be dug out from a depth of 14 to 16 meters, and sent down the
mountain by rope and buckets. He estimated that "less than one-tenth" of
the mountain would be mined. ("Environmentalists Concerned Over Bauxite
Project," Africa News, Nov. 26, 2000)
"We have huge untapped mineral resources in Mulanje while our neighbor
(Mozal) is importing alumina from far away like Australia," said Leonard
Kalindekafe, mining director of the Ministry of Natural Resources. "This
is an opportunity the country cannot afford to lose."..(Brian Ligomeka,
"Malawi Mines Peak For Mozambique Factory," Africa News, Nov. 17, 2000)
Others, though, hold a different view. "While many people are just pegging
their thoughts on the economic aspect of mining bauxite on Mulanje,
consideration should be given to the devastation that the project would
have on natural resources and the people who live around the mountain,"
said Jones Njala, head of the Mulanje Mountain Conservation Trust, in Nov.
2000. (Africa News, Nov. 17, 2000)
Mulanje Mountain rises 3,000 meters above sea level and is the highest peak
in Centarl Africa. It spawns nine rivers upon which over 2 million people
depend. In 2000, UNESCO designated Mulanje Mountain as a biosphere reserve.
("Four new biosphere reserves designated in Africa," Africa News, Nov. 9,
2000; Africa News, Nov. 17, 2000)
Wildlife Society of Malawi director Daulosi Mauambeta said pollution from
the operation could impact water resources, small-scale farms, and tea
estates around the mountain. (Africa News, Nov. 26, 2000)
"The benefits in the form of job creation and the general creation of
wealth
from the mine are greater, so the mine will go ahead," said President
Muluzi. ("Malawi's Proposed Bauxite Mine Scales Environmental Hurdle,"
Africa News, Nov. 22, 2000)
Malaysia
For the time being, the Malaysian government has shelved a plan to build a
new 2,400 megawatt dam in Bakun, Sarawak. The dam would have fueled a
planned aluminum smelter and steel mill.
The Bakun dam, according to the head of the Coalition of Concerned NGOs,
could force the resettlement of 10,000 indigenous peoples.
"Why do we want toxic and energy-hungry industries such as Aluminium
smelters?," asked Dr. Kua Kia Soong, head of the coalition. "The earliest
justification for the Bakun dam during the Eighties was the need for energy
to fuel an Aluminium smelter in Bintulu. Aluminium smelting is one industry
that the developed countries want to dump on suckers like us because it is
environmentally toxic and it consumes voracious amounts of energy."
(Dr. Kua Kia Soong, Coalition of Concerned NGOs, press statement, June 10,
1996)
Sierra Leone
In 1995, civil war forced the closure of the Sieromco bauxite mine (owned
by Alcan subsidiary Alusuisse) in Sierra Leone. (Richard Carver, "Sierra
Leone after the ECOMOG intervention," Feb. 1997-April 1998, Writenet, April
1998)
"The tragedy unfolding in Sierra Leone may have its roots - literally -
embedded in a treasure trove of valuable underground minerals," wrote Kathy
Close in May 2000. The country hosts considerable natural resources,
including iron ore, gold, diamonds, and bauxite. (Kathy Close, "The Tragic
Treasure of Sierra Leone," May 23, 2000, on
http://www.oasistv.com/news/5-23-00-story-1.asp)
Suriname
A joint plan by Alcoa and Billiton to develop bauxite reserves in western
Suriname has raised fears among the indigenous community.
Alcoa and Billiton have mined bauxite in eastern Suriname for more than 50
years. Time and again, indigenous villages have vanished to make way for
bauxite mining. "The Government must help us if it is to respect our human
rights as defined by international human rights treaties," pleaded
villagers in one community surrounded by a new Alcoa operation.
Alcoa also operates an aluminum smelter in Suriname. The construction of a
dam to power the smelter flooded tropical rainforest and forced 6,000
people to move.
Now the companies want to mine one of the world's largest bauxite reserves,
the Bakhuis deposit, in western Suriname. In 1998, the Forest Peoples
Programme reported on the track record and possible future impacts of Alcoa
and Billiton.
The FPP raised and relayed fears of the impact of the new mining operation
in western Surinam. "Although the Indigenous population (Carib and Arawak)
of this area is sparse, mining operations will undoubtedly affect them and
will require clearing of vast areas of pristine tropical rainforest...
"Bauxite mining operations," added the FPP, "have historically taken place
with little or no regard for the rights and well-being of Indigenous
peoples and Maroons and the environment. In 1963-63, Alcoa constructed the
Afobaka dam to provide power for a smelter at Paranam. This dam inundated
some 600 square miles of tropical forest and forced the relocation of
approximately 6000 Saramacca and Aucaner Maroons from their ancestral
territories. These territories had been ceded to the Maroons in treaties
concluded with the Dutch colonial administration in the 18th and 19th
centuries. The communities were moved to so-called 'transmigration
villages,' where most remain today. These communities lack basic
facilities, including electricity, even though the power lines to Alcoa's
smelter run nearby. The communities were paid the equivalent of US$3 in
compensation and were not provided with secure land rights in their new
areas....
"Maroon communities near Moengo in east Suriname, like Adjoemakondre, have
also experienced serious problems caused by bauxite mining operations.
These communities have never been compensated for the loss of their lands
and livelihoods and for severe environmental degradation caused by
Suralco's activities.
"These once forested communities now live in a moonscape, surrounded by
blasted rock, covered in dust and debris from blasting and are subjected to
high intensity lights that allow mining to take place 24 hours a day, seven
days a week.
"Adjoemakondre is an extreme example of the impact of Suralco's activities.
It is presently surrounded by three active concessions and mining is taking
place less than 200 meters from the village itself. Much of the community's
agricultural and hunting lands, and in some cases houses, have been
destroyed and the river that runs through the village has turned
brown-orange due to run off from the mining areas. Community members also
allege that their health has suffered as a consequence of environmental
contamination caused by Suralco's activities.
"Suralco commenced operations near Adjoemakondre in 1991 and shortly
thereafter informed the community that they would be relocated as Suralco
wanted to mine under the village. The community objected and sought help
from the government. Negotiations between Suralco and the government
ensued, resulting in an agreement to relocate the village. The community
was not accorded a meaningful role in the negotiations. They did, however,
accept relocation at this point as they saw it as inevitable. Suralco
identified a site, which had already been mined out near the village, and
bulldozed it flat to build a new village. At this point, Suralco changed
its mind and, pointing to its contract with the government, stated that the
government alone was solely responsible for ensuring the welfare of local
communities. The government took no action and relocation did not take
place. Seven years and numerous requests to the government and Suralco
later, the community's position has worsened." ("Maroon Community Petitions
Suriname Government about the Operations of a US-owned Bauxite Mining
Company," Forest Peoples Programme, September 17, 1998)
Villagers from Adjoemakondre petitioned the Surinam government in 1998 to
give them "respect for our rights, especially our land rights that are not
presently recognized by the state of Suriname and are affected by the
mining activities of NV Suralco, a foreign-owned company. This company has
destroyed our environment and our ability to feed our families. We also
seek compensation for the expropriation of our property and interference
with our rights to hunt, fish and farm on our ancestral lands. The
preceding, which was authorized by the Government of Suriname, was caused
by the operations of Suralco. These operations are on-going and remain a
threat to our existence and well-being. To ensure that violations of our
rights cease immediately, we request in the strongest possible terms, that
the government of Suriname take prompt and decisive action to investigate
and remedy these violations of our rights.
"The village was established by our ancestors over 200 years ago... Suralco
arrived in our territory in 1991 and began mining operations in the
immediate surroundings of our village. At that time, we protested against
this and requested that the Government intervened to find a solution. The
Government and Suralco then entered into negotiations, which resulted in
Suralco promising to relocate the village and provide adequate housing and
other facilities for us. Suralco did not honor this promise, stating that
their activities were authorized by the Government when it gave them
concessions and that it was the Government's responsibility to relocate and
provide for the village. Since that time, negotiations have ceased and we
are left with a worse situation than we had in 1991." (Wilma Prika,
Captain, Adjoemakondre, Petition to the Suriname Government Concerning the
Situation in Adjoemakondre, 1998)
Tajikistan
The aluminum smelter in Tursunzade has been a focal point of civil war
combatants. In 1997, up to 25 casualties were reported in a battle between
two army units "apparently over control of the aluminum plant there,"
according to the United Nations. ("Report of the Secretary-General on the
Situation in Tajikistan," United Nations, S/1997/415, May 30, 1997)
United States
Alcoa digs lignite reserves in the central Texas counties of Bastrop and
Lee. This lignite, a kind of coal, fuels an Alcoa smelter in Rockdale,
Texas. County residents are fighting the company's plans to expand
strip-mining to 15,000 acres of land owned by San Antonio's City Public
Service. In the deal, Alcoa would pump aquifer water that would be
extracted as part of the mining operations. (Peggy Fikac, article in
Express-News, Oct. 19, 1999)
Local residents formed the organization Neighbors to Neighbors to fight
resettlement and water depletion that could result from the pact.
According to Bastrop County resident David Houghtling, the Alcoa/San
Antonio "water deal will affect scores of families in Bastrop and Lee
counties. Some of this property has been in families for generations. It
appears that Alcoa intends to use the condemnation powers of San Antonio to
push people off their property."
He said that Alcoa officials in 1999 contacted "an 85-year-old widowed
family member of mine and told her that she would have to sell her land and
house to them. When she asked what Alcoa was going to do with her house,
she was told that they were going to tear it down. This home has afforded
her a sense of independence and freedom in her later years and Alcoa has no
legal right to condemn property. They have made similar threats to other
neighbors." (Statement by David Houghtling, on the website
neighborsforneighbors.com, March 8, 1999)
Workers Rights
Labor is the biggest cost in bauxite mining and the second biggest cost,
after energy, in aluminum smelters. Most of the large producers have tried
to quell efforts by their workers to organize and raise benefits.
In North America, aluminum smelter operators are at war with unionized
workers, represented by the United Steelworkers of America and the Canadian
Auto Workers. Aluminum corporations' battles with its workers have
frequented other facilities across the globe. In 1999 and 2000, workers
were locked out at smelters operated by Kaiser, Southwire in the U.S.
Unrest also struck smelters in Germany, France, Australia, Romania,
Venezuela, and South Africa. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
Alba
In October 1974, according to Human Rights Watch, strikes at the Aluminium
Bahrain plant led the country's leader, Amir Isa, to impose a state
security law that would allow the government to arrest and imprison for up
to three years without trial any person suspected of having 'perpetrated
acts, delivered statements, exercised activities or... been involved in
contacts inside or outside the country, which are of a nature considered to
be in violation of the internal or external security of the country.'"
(Human Rights Watch/Middle East, "Routine Abuse, Routine Denial Civil
Rights and the Political Crisis in Bahrain," June 1997)
More recently, human rights groups have sought protections for a 30 year
old Alba employee, Ahmed Khalil Ibrahim Hubail al-Kattab. On July 1, 1996,
Bahrain's State Security Court sentenced him and two other men to death.
The men had pled not guilty to setting a fire that killed seven Bangladeshi
workers at a restaurant earlier in the year. Their attorneys produced more
than 50 witnesses who asserted that the men were innocent
Amnesty International issued an urgent appeal to the government. Amnesty
said the trial "fell far short of international standards for fair trial"
and feared "that their execution is imminent." It said that prosecutors
relied "solely on written confessions they had made during the
interrogation. The organization fears that the defendants may have been
convicted on the basis of confessions extracted under torture." ("Security
forces kill a women, the people of Bahrain practice their right of peaceful
civil resistance," Voice of Bahrain homepage,
www.vob.org/english/news7.htm, July 1996; Amnesty International, press
release, July 23, 1996)
Billiton
Billiton, wrote Leon Pretorius of the International Labour Resource and
Information Group, "has a history of conflict with worker organizations."
(Leon Pretorius, "Regional integration and development in Southern Africa:
A case study of the MOZAL Project and its implications for workers,"
International Labour Resource and Information Group, March 2000)
In Nov. 1999, Billiton announced plans to lay off 5,000 workers from its
aluminum smelters in Richards Bay, South Africa. A month earlier, the
company successfully petitioned a court to ban a strike by the National
Union of Metalworkers of South Africa (NUMSA). The union previously struck
in August 1999 after wage negotiations disintegrated. NUMSA threatened a
"massive strike" against Billiton's "unilateral wage policy implementation"
("Numsa plans strike over Billiton layoffs," Business Day, Sept. 13, 2000;.
Mining Annual Review, March 2000)
Several times in 1998, workers at the Billiton-run Mozal smelter in
neighboring Mozambique staged strikes.("Background on South African company
Billiton," Midwest Treaty Network website)
"Although multinational corporations such as Billiton and Mitsubishi are
investing in other developing countries they keep their technology and
knowledge intensive activities in the more industrialized countries," wrote
Pretorius, referring to the two corporate owners of the Mozal project.
"Very few if any of the skills and technology of producing Aluminium will
be transferred to Mozambicans. It appears that (these) companies have been
merely using Mozambique as a way of gaining access to tax benefits, cheap
infrastructure and low cost labor."
The chairman of Mozal, Bob Barbour, claims that the consortium awarded 67
of its 110 contracts to Mozambican companies. Pretorius and others have
asserted that other companies are securing the most lucrative contracts,
including almost all of the infrastructure projects.
"Mozambique offers more flexible labor markets than South Africa," observed
Pretorius. "There are less labor regulations, weaker and less militant
trade unions, as well as much lower wages. The promise for Mozal is that it
will lead to industrial development and create jobs in Mozambique. But many
people have asked what type of industrial development and for whose
benefit? An important part of development concerns the ownership and power
to access resources. How do the unemployed and women agricultural workers
who comprise the majority of the Mozambican workforce benefit from this
project?"
Pretorius noted that "the birth pangs of the ... Mozal project have been
accompanied by worker strikes and protest action by indigenous women
entrepreneurs prevented from benefiting from the project."
About 800 workers building the smelter went on strike from Sept. 28 to Oct.
1, 1998, demanding a 600 percent pay hike. They were earning about 24 U.S.
cents per hour. After the strike ended, the company agreed to only a
two-step, 20 percent raise for unskilled workers. (Pretorius)
Kaiser
Kaiser workers, members of the Steelworkers, walked out at the Alpart
bauxite facility in Jamaica and five U.S. locations for five days in 1996.
In Sept. 1998, 3,000 workers on strike again. The Steelworkers union
offered to return to work in Jan. 1999; however, Kaiser locked them out.
(Maxxam, Amendment No. 2 to Form S-3 filed with SEC, April 12, 1996; Mining
Annual Review, March 2000)
The union and the company finally reached a settlement in September 2000.
The new labor contract cut 540 jobs (out of 2,800) at five Kaiser
facilities. Shortly thereafter, Kaiser opted to keep its Washington state
smelters closed and profited from selling its power allocation on the open
market. (Kaiser press release, Feb. 7, 2001; Kaiser Aluminum & Chemical
Corp., Form 10-Q, filed with the Securities and Exchange Commission, Nov.
9, 2000)
VII. Environmental Health
"I don't see environmental issues as a negative for aluminum or Alcoa, they
are our friend. As long as legislatures and governing bodies don't do
stupid things, we'll be fine," - Paul H. O'Neill, then-chairman of Alcoa
(now U.S. Secretary of the Treasury), as quoted in Aluminium Today, 1999.
("O'Neill's Alcoa: Big group with a big appetite," Aluminium Today, Jan. 1,
1999)
Bauxite mining
According to the International Aluminium Institute, "of the land disturbed
each year by bauxite mining, 76% is forested, 19% agricultural and pasture
and 2% shrubland." The IAI said that of the 1,591 hectares mined in 1998,
80% was wildlife habitat; 175 hectares was tropical rainforest."
(International Aluminium Institute, "Bauxite mine rehabilitation," on its
website, world-aluminium.org, 2000)
* Adjoemakondre, Surinam (Alcoa)
In a 1998 petition to the Surinam government, people of the village of
Adjoemakondre detailed the impacts of Alcoa's bauxite mining operations
that began in 1991. "Our agricultural plots and houses have been destroyed,
without any compensation," they wrote. "Our river has been polluted so
badly that we can no longer use it - wastes from the mining operation run
down hill through the village into the river, turning it an orange-brown
color; health problems have occurred from villagers using the river water;
use of dynamite by the company causes noise pollution and has contributed
to the loss of game animals we use for food; (and) destruction of the
forest and pollution of the river has also substantially limited our
ability to hunt and fish on our lands." (Wilma Prika, Captain,
Adjoemakondre, Petition to the Suriname Government Concerning the Situation
in Adjoemakondre, 1998)
* Guinea
The Friguia mining/refining operation in Guinea, according to NorWatch, has
generated "an enormous red mud deposit, which covers an entire valley. In
this valley there were previously several villages, which are now drowned
in industrial waste. Hydro admits that this deposit is not 'state of the
art', for example it is not secured with a protective membrane to prevent
leakage of caustic soda and other effluents into the subsoil water. The
subsoil water has not been tested." (Tarjei Leer-Salvesen and Morten
Rønning, "Profits on arms, forced relocation, and environmental scandals,"
NorWatch newsletter, June 1998).
Alumina refineries
The Bayer Process of refining bauxite into alumina generates red mud, also
known as bauxite residue. Depending on the grade of bauxite used, from 0.3
to 2.5 tons of red mud are generated per ton of alumina produced.
(International Aluminium Institute, "Bauxite residue," on
world-aluminium.org)
Red mud contains iron oxides, silica, titanium, zinc, phosphorous, nickel,
vanadium, and compound formed by the adding of lime into the refining
process. It is usually dumped on land near the refinery.
Liquor burning plants at refineries are a source of air pollution.
* Yirrkata, Queensland
Red mud residue and caustic soda from the alumina refinery in Yirrkata,
Queensland was found poisonous to fish. (See Aluminum and Our Environment,
International Development Action, 1976, pp. 93-96)
* Port Allen, Louisiana (Alcoa)
Federal agents executed two search warrants at Alcoa's Port Allen,
Louisiana, alumina plant in March 1999. Alcoa's subsidiary, Discovery
Aluminas, also supplied a federal grand jury with wastewater discharge and
toxic waste management records.
The refinery produces specialty alumina powders and other products consumed
in the petrochemical industry.
A month later, the grand jury indicted the Port Allen plant manager on a
charge of violating the Clean Water Act. Discovery reached a plea agreement
in October 2000, in which the company and four employees agreed to plea
guilty a felony count of violating the federal Clean Water Act and the
state enforcing regulations, pay a $700,000 fine to the U.S. government,
pay $50,000 in community restitution, and $50,000 in community restitution.
(Alcoa, Form 10-Q, submitted to U.S. Securities and Exchange Commission,
Oct. 20, 2000)
Alcoa agreed that it had poured ammonia-laden slurry into a stream that
drains into the Intracoastal Waterway, south of Port Allen, in violation of
the Clean Water Act. The discharges turned the ground white. The employees
-- two supervisors, the environmental compliance officer, and director of
management -- face possible sentences of up to one year in prison, and
fines of up to $100,000. (Mike Dunne, "Discovery Aluminas pleads guilty to
polluting Port Allen waterway," The Advocate (La.), Dec. 12, 2000)
* Western Australia (Alcoa)
The installation of a liquor burning plant at Alcoa's Wagurup refinery in
1996 brought over 300 complaints from the plant's workers and residents of
the southwestern towns of Yarloop and Waroona. Alcoa's other liquor burning
plant in Western Australia, at the Kwinana refinery south of Perth, has
generated similar concern.
The equipment burns off carbon from bauxite. Dust emitted from liquor
burning plants irritates eyes and the respiratory system. Highly
carcinogenic benzene and more than 200 other chemicals are emitted from
liquor burning plants.
According to a report commissioned jointly by The Wagerup Community Health
Awareness Group and the Australian Manufacturers Workers Union asserted in
a report that symptoms range from irritation to the eyes and respiratory
tract, to insomnia and diarrhea, to constant flue-like symptoms.
According to Ian Grant, a maintenance contractor at the Wagurup plant, Ian
Grant, said that "we were never given proper breathing apparatus. When we
complained about the conditions we were told to keep our mouths shut as the
contractor (Asea Brown Boveri)."
Grant said that he started feeling sick in Sept. 1997. His illness
continued and worsened through December. "I developed a mouthful of ulcers.
I was getting sicker every day," he said. Early the next year, "I collapsed
in a big heap and that was the end of me. My kidneys gave up. I went to a
doctor twice early in January 1998 after my lungs started bleeding again."
He said he was diagnosed with Goodpastures disease, which attacks the
body's auto immune system.
Another worker, Bill Van Der Pal, said he and many others got sick. "Only
after the workforce threatened to close down the plant did Alcoa spend $5
million to deal with the emissions from the liquor burner," he said. "They
installed a catalytic thermal oxidizer (CTO)."
(Joe Lopez, "Workers and residents in Western Australia suffer health
problems from Alcoa's alumina plant," World Socialist Website, Nov. 11,
1999)
* Bintulu, Sarawak, Malaysia and Gladstone, Queensland, Australia (Comalco)
On April 3, 2000, Comalco decided to shift the location of a proposed
alumina refinery from Bintulu, Sarawak, to Gladstone in the Austrialian
state of Queensland. Rather than draw power from a new dam in Sarawak,
Comalco will draw from Chevron new gas pipeline from Papua New Guinea (PNG)
to Queensland.
People in Sarawak had vigorously protested the planned alumina plant. More
than 100 million tons of red mud would have been dumped there. A national
park is three kilometers from the planned alumina site.
The 1,020-hectare Bintulu alumina project was projected to import generate
more than 3.3 million tons of waste each year from processing Weipa,
Australia, bauxite. New Straits Times reported in 1999 that "there have
been accusations that the company is only using Malaysia for the 'dirty
process.'" (Esther Tan, "Alumina refinery will be a really big waste
producer," New Straits Times, Oct. 9, 1999)
Prior to Comalco's decision, a Sarawak environmentalist accused the company
of a "Pollution Haven Here, Conservation Elsewhere" mentality. "The choice
of Similajau (Sarawak) 2,000 nautical miles further than Gladstone, would
only prove the Pollution Haven hypothesis. The hypothesis suggests cheaper
labour and looser environmental measures in developing country," wrote Wong
Meng Chuo.
Villagers from the nearby towns of Kg. Kuala Nyalau, Kg. Nyalau Tengah and
Kg. Ulu Nyalau wrote a letter of protect to the Chief Minister of Sarawak.
They worried that the alumina refinery would involve the acquisition of
much of their agricultural land, on which they depend. (Letter of protest
from villagers to the Chief Minister of Sarawak, April 4, 1999, as
summarized by Rengah Sarawak)
"The end product, alumina, is not an item of consumption to be enjoyed by
the majority of local people. Sarawak's environment and natural access
should be traded off with short term economic benefit for some people,"
noted Mr. Wong. (Wong Meng Chuo, "A Review of the Detailed Environmental
Impact Assessment (DEIA) of the Proposed Alumina Refinery in Similajau,
Bintulu, Sarawak," IDEAL, Sibu, Sarawak, Oct. 4, 1999)
After Comalco decided to build in Queensland, a Sarawak group warned about
"equal concerns of similar and other negative impacts at Gladstone and
PNG... The impacts of the gas pipeline connecting the two countries over
land and sea coral reef areas are of great concern. Equally of concern is
also the environmental impact of the proposed plant would inevitably bring
upon should the project go ahead eventually. The social-economic effects on
the affected communities should be attended to too. The fate of human
beings is globally linked, and shifting the problems is not a solution at
all." (MC Wong, "Bintulu Alumina Project Scrapped: A Matter of Shifting the
Problems?," Rengah Sarawak, April 7, 2000)
Aluminum smelters
On Belugas and Cancer
Belugas, like canaries in a coal mine, speak to a particular poison spewed
by aluminum smelters. In Quebec, where the Saint Lawrence River meets the
North Atlantic's frigid Labrador Current, upstream industry is devastating
a population of these small white whales. Pollution is the greatest threat
to the St. Lawrence beluga population, whose numbers dropped from 5,000 to
about 650 in the past century.
Alcan is a dominant industrial force in Quebec. It has installed a network
of dams in the Lac-Saint-Jean/Saguenay River region, with a combined
capacity of 2,687 megawatts, to fuel nearby smelters with a combined
capacity of 700,000 tons per year. (www.alcan.ca)
These smelters, like all that burn coal tar, emit chemicals called
polycyclic aromatic hydrocarbons (PAHs). In these plants, coal tar pitch
and petroleum coke are combined and baked to make anodes and cathodes for
smelting aluminum. Anode forming, baking and rodding, potlining and pot
starting activities all release toxic emissions from coal tar.
Veterinary pathologists from the University of Montreal have fingered PAHs
discharged from the upstream aluminum smelters as a contributor to a cancer
epidemic among the belugas.
According to these researchers, one out of five adults belugas suffer from
cancer, comparable to the 23% cancer rate among humans in the western
world. "Such a high percentage had never been observed in any wild animal
species, terrestrial or aquatic (with the important exception of fish). To
our knowledge, this is the first population of wild mammals that can be
compared to humans in this regard," University of Montreal researcher
Daniel Martineau observes in the website "Diseases and Causes of Death of
Beluga from The St. Lawrence Estruary, Quebec, Canada."
(www.medvet.umontreal.ca/services/beluga/beluga_homepage.html)
Some cancers in belugas have been fuelled by other toxic substances,
particularly PCBs and the pesticides Mirex and DDT. But researchers have
also found high levels of PAHs in the whales' tissues.
Dr. Lee Shugart of the Oak Ridge National Laboratory (Tennessee, USA)
examined brain tissue from three dead whales and found the PAH compound
benzo-a-pyrene. The observed concentrations of this carcinogen in the
tissue, he concluded, "would produce cancer in other laboratory animals
under similar conditions." ("Research: St. Lawrence River Belugas," The
Scientist 14[19]: 19, Oct. 2, 2000)
Dr. Martineau surmises that the belugas' diet transports PAHs from the
sediment to their tissues. "Invertebrates living in sediments contaminated
by PAH accumulate these compounds.. In summer, beluga are known to feed in
significant amounts on bottom invertebrates," he writes. The pathologist
surmises that this exposure could be the reason why he has observed seven
cases of rare small intestine cancer among the population of 650 belugas
since 1983.
According to Dr. Martineau, extraordinary levels of up to 4,500 parts per
billion of total PAH has been found in the sediment of the Saguenay River,
which is part of the belugas' habitat. The PAH originates "for the most
part from the aluminum factories located upstream."
Around the beluga's habitat lie Alcan's 206,000 ton smelter in Laterriere,
232,000 ton smelter in Jonquiere, 415,000 ton smelter in Baie Comeau, and
its new 385,000 ton smelter in Alma. Throughout the Lac-Saint-Jean/Saguenay
region, humans also suffer from unusually high cancers. According to a
Canadian government survey, the region leads the county in rates of birth
defects. It also leads the province of Quebec in deaths caused by caused by
cardiovascular and cerbrovascular diseases and malignant tumors, according
to a separate study by the Quebec Department of Health (The Scientist)
A study of Jonquierre smelter workers in the late 1970s found that 73
workers had bladder cancer, 60 percent more than was statistically likely.
The number of workers with bladder cancer rose to 130 by 1990. (ibid).
Similar horrors have visited workers at an Alcan smelter on the other side
of Canada, in the province of British Columbia. Here, in Kitimat, Alcan
operates a 279,000 ton smelter.
In October 1989, NCI Cancer Weekly reported that "Alcan... says a study has
shown that workers at its Kitimat aluminum smelter in northwestern British
Columbia have had a slightly higher risk of bladder cancer." ("Bladder
cancer risk noted; Canada," NCI Cancer Weekly, Oct. 9, 1989)
Between 1986 and 1995, the Canadian Board of Occupational Health ruled that
23 workers were disabled by or died from cancers created by on-site
exposures. Tar fumes, pitch/coke dust, PAHs and other materials caused
mesothelioma, skin cancer, bladder cancer, and lung cancer in millwrights,
potroom workers, poliners, and other operators and servicemen. (Canadian
Auto Workers Local 2301-Kitimat Smelter and Kemano Power Operaions Workers,
"WCB cancer registry data," on www.sno.net/caw2301/april98data.htm)
Medical scientists at the University of Montreal, analyzed workers health
records at Alcan's Arvida Works in Jonquierre, Quebec. In a study published
in March 1995, the doctors confirmed the "relationship between exposure to
coal tar pitch volatiles and bladder cancer among primary aluminum
production workers." (Tremblay C, Armstrong B, Theriault G, Brodeur J,
Departement de medecine du travail et hygiene du milieu, Universite de
Montreal, "Estimation of risk of developing bladder cancer among workers
exposed to coal tar pitch volatiles in the primary aluminum industry,"
American Journal of Industrial Medicine, March 1995 (27(3):335-48.)
Despite the long known correlation between coal tar pitch exposure to
cancer in workers, it was not until December 1999 that Alcoa warned 3,000
workers at its Australia smelters about the danger. The company also
ordered new measures at its smelters worldwide to reduce coal tar exposure.
"The letter did not explain why the company had waited five years before
informing workers of the results of the 1995 study of Alcan employees at
the Arvida smelter in Quebec," noted Margeret Rees of Australia. (Margaret
Rees, "Alcoa Australia admits cancer dangers," World Socialist Web Site,
January 15, 2000.)
In fact, according to an article in the Herald Sun of Australia, Alcoa knew
of potential cancer risks in its Portland and Point Henry smelters since at
least 1989. "A medical specialist at Melbourne's respected Peter MacCallum
cancer hospital sounded alarm bells over potential cancer and chronic
asthma dangers in 1989. Cancer expert Dr. Cyril Minty warned pot room and
other workers at the Portland and Point Henry smelters could develop the
diseases if they continued to work in the same conditions for a long time."
When the newspaper reported the doctor's warning, Alcoa demanded a printed
retraction and said that it "emphatically rejects" any cancer risk among
smelter workers. (Karen Collier and Mark Dunn, "10 years of warnings,"
Herald Sun, Dec. 16, 1999)
Alcoa sent similar warnings to thousands of its current and former
employees worldwide. Recent studies, said Alcoa spokesman David Neurohr,
found "a small increase in cancer could be expected at lower levels of
exposure than had previously been expected... We are just being responsible
in keeping our employees informed." ("Alcoa health warning," Mining
Journal, Dec. 17, 1999; "Alcoa warns employees of possible cancer risk,"
Chicago Tribune, Dec. 20, 1999)
Spent pot lining
Every 6 or 7 years, carbon linings are replaced in pots used in aluminum
smelters. This lining (or cathode) is made of refractory bricks and carbon.
It also contains material from the electrolytic bath: heavy metals and
cyanide. (International Aluminium Institute, "Cathode waste," on its
website world-aluminium.org)
Around the world, most spent potlining is landfilled. Some is stored above
ground in a dry chamber. In the United States, the Environmental Protection
Agency first listed spent potliners as a hazardous waste (code K088). It
prohibits the landfilling of spent potlining unless it has been treated to
reduce the amount of hazardous constituents: 25 in all, including cyanide,
fluoride, toxic metals (including lead and mercury), and PAHs. (U.S.
Environmental Protection Agency, "Land Disposal Restrictions; Treatment
Standards for Spent Potliners From Primary Aluminum Reduction (K088) and
Regulatory Classification of K088 Vitrification Units," Federal Register,
July 12, 2000 (Vol 65, No. 134), pp. 42937-42959)
According to a June 20, 1998, report in the main newspaper of Surinam, De
Ware Tijd, Alcoa's subsidiary might bury toxic waste not only from its
Suralco smelter but also waste from abroad. "Suralco is planning to bury
its chemical waste, the so-called 'spent pot lining' (SPL), just as it did
in 1993. It will not only bury waste from the aluminum smelter at Paranam,
but also chemical waste from the parent company Alcoa in Pittsburgh," the
Forest Peoples Project quoted the newspaper as reporting. ("Maroon
Community Petitions Suriname Government about the Operations of a US-owned
Bauxite Mining Company," Forest Peoples Programme, September 17, 1998)
Illegal wastewater discharges
In March 2000, Alcoa agreed to pay $8.8 million to settle environmental
claims filed by the federal Justice Department and the Environmental
Protection Agency. The agencies charged Alcoa with violating the Clean
Water and Clean Air Acts at its Warrick, Indiana, sheet production plant.
The payout included a $2.4 million fine; the balance will be spent to
reduce hazardous waste generation and study air pollution reduction
technology.
The Justice Department alleged that Alcoa "illegally discharged
inadequately-treated wastewater to the Ohio River from 1994 until 1999,
while company-sponsored tests showed that the mixture of pollutants in the
wastewater was deadly toxic to fish and invertebrates." (U.S. Department of
Justice, "Alcoa to pay $8.8 million to settle environmental claims," press
release March 13, 2000)
Asthma
In 1999, the Comalco/Rio Tinto-controlled Boyne Smelters Ltd of Australia
settled a ten-year lawsuit filed by 18 pot room workers. Boyne paid over
A$1 million to settle claims that they contracted asthma working at the
smelter. (Stephen Johnston, "Aluminium," Mining Annual Review, March 2000)
Flouride emissions
Flourides are produced during the reduction of alumina, during "anode
effects." Small quantities of these emissions have big impacts.
The contributions of these emissions are discussed in the Global Warming
chapter of this report. The principal kinds of fluorides emitted,
tetrafluoromethane and hexafluoroethane, also have significant local health
impacts.
In India, the NALCO aluminum smelter in Angul, Orissa, is widely believed
to be the source of severe fluoride contamination among people and animals
living nearby. This plant discharges more than 220 tons of fluoride into
the groundwater and surface water, according to 1992 tests run by the
Orissa State Prevention and Control of Pollution Board. ("TTPS releases SPM
into Nandira," Nandira, March 1993)
Many villagers have reported brittle bones, tooth and gum diseases, lumps
of dead skin, and a host of other symptoms of fluorosis. Cattle, more prone
to fluoride contamination, commonly suffer from bone deformities, the loss
of teeth, a sharp drop in birth rates and a sharp rise in death rates. In
one village, one kilometer from the Angul plant, the number of cattle
declined from 3,000 to less than 100 head over a ten year period. ("The
Spectre of Industrial Pollution in Angul-Talcher Area," Nandira newsletter
of District Industrial Pollution Control and Citizens' Action Project,
Dhenkanal, Angul, late 1993, p. 16)
Although state regulators have demanded that NALCO provide piped water to
local villages, company officials have denied that they are responsible for
the fluorosis outbreak, and the resultant decimation of the local cattle
herds. The smelter's discharge canal, which flows into the Nandira river,
is used by people for bathing, washing clothes, and drinking. (Nandira,
1993)
In the same Indian state, the Indalco smelter caused widespread fluorosis
among local villagers. In 1990, scientists from G.M. College of Sambalpur
examined villagers and found that an astounding 67 percent of men and 64
percent of women suffered from fluorosis. People aged 12 to 19 were most
severely impacted. The researchers also found that the water and vegetation
in the areas were "highly contaminated by fluorides." (U.N. Samal and B.N.
Naik, "Dental fluorisis in human beings around an aluminium factory of
Orissa," Journal of Environmental Biology, V. 11, No. 4, Oct. 1990)
Despite this track record, in 2000 and 2001 Nalco is expanding its capacity
from 230,000 to 345,000 tons. (Stephen Johnston, "Aluminium," Mining Annual
Review, March 2000)
In British Columbia, Alcan's Kitimat smelter is Canada's largest emitter of
hydrogen fluoride. In 1997, the plant released over 485 tons of hydrogen
fluoride, accounting for 9% of the province's on-site releases. (Burkhard
Mausberg, Canadian Environmental Defense Fund in Toronto)
The 514,000 ton per year aluminum smelter in Tursunzade, Tajikistan, has
been "the source of significant adverse health effects, both to the
residents of Tursunzade in Tajikistan and the bordering communities in
Uzbekistan. Livestock were losing their teeth and dying, and the teeth of
local children have been found to be discolored," according to the Slavic
Research Center. The plant emitted, at peak operating capacity, 193 tons of
fluorides annually. (Bakhtior Islamov, "Aral Sea Catastrophe: Case for
National, Regional and International Cooperation," Slavic Research Center,
1998)
Sulfur Dioxide
The aluminum industry generates sulfur dioxide emissions through the
burning of fossil fuels at its captive power plants, the generation of
steam at alumina refineries, and the consumption of anodes in smelter pots.
Point Comfort, Texas (Alcoa)
Alcoa's refinery and smelter complex in Point Comfort, Texas, is a federal
Superfund site. According to the National Oceanic and Atmospheric
Administration, "between 1948 and the present, Alcoa has constructed and
operated several types of manufacturing processes at this facility,
including aluminum smelting, carbon paste and briquette manufacturing,
gas processing, chlor-alkali processing, and alumina refining. Past
operations at the facility have resulted in the release of hazardous
substances into the environment, including through the discharge of
mercury-containing wastewater into Lavaca Bay from 1966 to 1970 and
releases of mercury into the bay through a groundwater pathway. In
April 1988, the Texas Department of Health issued a 'closure order'
prohibiting the taking of finfish and crabs for consumption from a
specified area of Lavaca Bay near the facility due to elevated mercury
concentrations found in these species." (National Oceanic and Atmospheric
Administration, "Alcoa Point Comfort/Lavaca Bay NPL Site, Point Comfort,
Texas: Notice of Availability and Request for Comments on a Draft Damage
Assessment and Restoration Plan/Environmental Assessment for Ecological
Injuries and Service Losses," Federal Register, July 14, 2000 (Volume 65,
Number 136), pp. 43739-43740)
IX. Aluminum and global warming
[see old chapter nine]
The aluminum industry is a significant contributor to global climate change
for two reasons: (1) it consumes enormous amounts of energy, much of it
fossil fuels such as coal that release carbon dioxide when burned and (2)
aluminum smelters produce small quantities of extremely potent greenhouse
gases.
An MIT study found that the industry emits the equivalent of over 3 billion
tons of carbon dioxide per year, or about 1 percent of global emissions of
anthropogenic greenhouse gas emissions. This study further predicts a rise
in total emissions to around 4 billion tons of carbon dioxide equivalent by
the year 2030.
In 1999, The Australia Institute, an environmental group, reported that
shutting down the country's smelters would be a net economic benefit for
Australia. It claimed that subsidies of A$410 million for inexpensive
energy and A$430 million for "unpaid" greenhouse gas emissions outweigh the
smelters' economic contributions. (Stephen Johnston, "Aluminium," Mining
Annual Review, March 2000)
Carbon dioxide
The industry emits carbon dioxide at each stage of production, from the
mining and processing of bauxite, to the electrolytic refining of alumina,
and the casting of aluminum.
A quintet of Massachusetts Institute of Technology scientists, led by
Jochen Harnish, in a 1999 study titled "Primary Aluminum Production:
Climate Policy, Emissions, and Costs," found that "the source of electric
energy used for the electrolytic reduction is the single most important
factor influencing total carbon dioxide emissions from primary aluminum
production. The specific emissions of CO-2 vary by a factor of five
depending on whether coal or hydroelectricity is used as a source of power
for the reduction cells." (Jochen Harnisch, Ian Sue Wing, Henry Jacoby,
Ronald Prins, "Primary aluminium production: climate policy, emissions and
costs," paper presented at the Kyoto and Montreal Protocols' Joint Expert
Meeting, Petten, May 1999)
Another study has calculated that the aluminum production cycle, including
mining, processing, refining, and casting, produces about 12 tons of carbon
dioxide per ton of aluminum produced. (R. Huglen and H. Kvande, "Global
considerations of aluminium electrolysis on energy and the environment,
Light Metals 1994, pp. 373-380)
The industry's International Aluminium Institute has lower carbon dioxide
estimates of 7.4 tons of carbon dioxide per ton of aluminum production
(including 5.8 tons from energy and 1.6 from the electrolytic process).
(IAI, "Aluminium's Life Cycle," on website world-aluminium.org, 2000)
The MIT study predicts that CO-2 emissions from the industry will rise from
about 2 billion tons in 1985 to about 3 billion tons in the year 2030. The
more coal that is consumed to power new capacity, the more emissions will
occur. If 75% of new capacity is fueled by coal, then the amount of CO-2
generated per ton of aluminum cast would increase from 12 to 18.3 tons.
PFCs
In 1991, Dr. Dean Abrahamson of the University of Minnesota discovered that
primary aluminum smelters produce two extremely potent greenhouse gases:
tetrafluoromethane and hexafluoroethane.
With atmospheric lifetimes are at least 10,000 years, these are some of the
longest-lived atmospheric pollutants. The gases have global warming
potentials that are 6,500 to 9,200 times higher than carbon dioxide. The
emission of one kilogram of tetrafluoromethane would have the same climate
change effect, over the subsequent 100 years, as 6.5 metric tons of carbon
dioxide. ("Greenhouse worries for the aluminum industry," Energy, Economics
and Climate Change, Jan. 1992; Harnisch et al.)
The MIT scientists suggested that "in view of the PFCs' atmospheric
stability and their large specific radiative forcing relative to most other
greenhouse gases, increased scientific focus on these compounds is
warranted." (Harnisch et al.)
These two gases are the unintentional byproduct of using fluorine in the
electrolytic reduction of alumina, formed during the "anode effect," when
the electrolyte is depleted.
Harnisch, et al, estimate that each of ton of aluminum production created
about 0.48 kilograms of tetrafluoromethane in 1995. Technological
improvements brought this level down 30 percent from emission rates in the
1980s. Still, the primary aluminum industry generated about 9,400 tons of
this PFC in 1995, or about 90 percent of all tetrafluoromethane emissions
worldwide. This is the global warming equivalent of 59.22 million metric
tons of carbon dioxide.
The MIT study further estimates that in 1992, aluminum smelters emitted
about 1,300 tons of hexafluoroethane, or the greenhouse gas equivalent of
11.96 million tons of CO-2. Primary aluminum production accounted for about
65 percent of this chemical's total emissions; plasma etching in the
semiconductor industry accounted for the balance of hexafluoroethane
emissions..
Proportionally, smelters employing Vertical Stud Soderberg and Sidework
Prebaked technology account for most of the industry's PFC emissions. The
MIT study estimated that in 1995, these two technologies generated 65
percent of emissions even though they accounted for only 30 percent of
production. (Harnisch et al)
The International Aluminium Institute uses a grouping of technologies.
First generation plants built between 1940 and 1955 emit between 12-15
kilograms of PFCs per ton of metal produced; those built between 1955-75
emit 2-6 kilograms per ton; and "third generation plants" (1975-today),
emit from 0.3 to 1 kilogram per ton. (Interantional Aluminium Institute,
"Smelter emissions," on its website, world-aluminium.org)
Hydro power
In addition to greenhouse gas emissions from smelters and captive fossil
fuel-fired power plants, the aluminum industry further contributes to
global warming through its heavy usage of hydroelectric power. In tropical
countries, where smelters have congregated around great dams, massive
amounts of vegetation decay in flooded forests. The decaying organic matter
produces huge amounts of methane and carbon dioxide. In Brazil, one
scientist calculated that a dam over a 50-year period would produce as much
greenhouse gas as a coal-fired plant producing the same amount of power.
(Pratap Chatterjee, "Dams a major source of global warming say scientists,"
Inter Press Service, Nov. 29, 1995)
Aluminum smelters consume over half of the power generated from the Tucurui
reservoir in northern Brazil. The reservoir demonstrated substantial, but
highly variable, greenhouse gas emissions in a recent two year period
studied by the World Commission on Dams. In 1998, it emitted 76.4 tons of
methane and 3,808 tons of carbons dioxide per square kilometer per year.
The next year, these figures dropped to 5.33 and 2,378 tons, respectively.
Estimated emissions for the 2,600 kilometer reservoir totaled 198,640 tons
of methane and 6,182,800 tons of carbon dioxide in 1998.
The WCD concluded that "there is no agreement on whether the net greenhouse
emissions from the reservoir, spillway, and turbines are offset by the
saving in emission from fossil fuel sources made possible by the large
amount of power produced by Tucurui." (World Commission on Dams, "The
Report of the World Commission on Dams," 2000, p. 77, 121, 122)
Aluminum industry lobbying
In 1997, 39 heavily industrialized countries, collectively called "Annex B"
countries, committed to reduce greenhouse gases under the terms of the
Kyoto Protocol to the United Nations Framework Convention on Climate
Change. The countries agreed to restrict their emissions over the period
2008-2012 to between 92-110 percent of 1990 levels. For emissions of PFCs,
hydrofluorocarbons (HFCs), and sulfur hexafluoride, countries may set the
baseline date at 1995.
The aluminum industry is fighting governmental actions to restrict their
greenhouse gas emissions. In 1999, the Aluminium Federation in the U.K.
worked against a Climate Change levy. According to Mining Annual Review,
"the primary smelting industry was exempted and some other modifications
were made, but the Aluminium Federation said that the bill would hurt
Britain's non-primary aluminium industry and that they would prefer a levy,
such as in the Netherlands, based on deviation from benchmarked best
practices." (Stephen Johnston, "Aluminium," Mining Annual Review, March
2000)
In Europe, seven producers -- Alcoa, Alcan, alusuisse (now part of Alcan),
Hoogovens (now part of Corus), Hydro, Pechiney, and VAW -- launched an
"Aluminium for Future Generations" initiative in 1998. In meetings with
government officials, parliamentarians, academic institutions, and
non-governmental organizations, the aluminum alliance emphasizes the need
for voluntary, not mandatory, action. "In many countries across Europe the
industry has entered into a range of national voluntary agreements to
reduce greenhouse gas emissions, since it believes that the reduction of
emissions can best be achieved through a combination of voluntary
agreements and market-based flexible mechanisms," reads the alliance's
website. "The aluminium industry is particularly concerned to adopt a
global approach to the issue of climate change and has therefore been
involved in discussions regarding implementation of the Kyoto Protocol at
international level, through the International Primary Aluminium
Institute." (Aluminium for Future Generations at
http://www.eaa.net/pages/fut_gen/fut_generat.html)
In the United States, aluminum companies are integral members of the Global
Climate Coalition, an industrial lobby credited with derailing U.S.
activism on the issue. Members include Kaiser and The Aluminum Association,
which is a U.S. lobbying group whose members include Alcoa, Alcan, Hydro,
Kaiser, Ormet, Pechiney, VAW, and dozens of other companies. (Boycott
Global Climate Coalition Companies (GCC) at
http://www.islandpress.org/earthday/gcc.html; The Aluminum Association at
http://www.aluminum.org/memberslist.cfm/1/7)
In Australia, David Coutts, executive director of the Australian Aluminium
Council outlined the industry's case at a government-sponsored conference
on climate change in 1999. "Greenhouse gas levels are still well within
historical boundaries and likely to remain there for a considerable time,"
he said. "The science of how these rising levels will effect the climate is
still far from clear and high priority needs to be given to improving that
knowledge so we can best judge how to act."
Coutts praised the government for standing by the industry during Kyoto
negotiations. To its great credit the Australian Government understood
these messages and took a firm position to Kyoto," he said. "Against all
the odds, a relatively sensible outcome was achieved at Kyoto. The
Australian negotiating team played a key role in this outcome and the
resources sector gave them the highest praise for this achievement. The
protocol is not going to immediately solve the problem of rising greenhouse
gas levels but at least it has put in place a process to start doing
something realistic about it."
He emphasized the importance of the aluminum industry to Australia's
economy. "If a favorable investment climate for Australia is maintained
then the alumina and aluminium metal sectors could easily grow by more than
30% in the period through to 2020," he predicted. "The aluminium industry
is already Australia's second largest export industry, with exports
predicted to be well over $5 billion in 1997/98. The industry is the world
leader in bauxite and alumina and the third largest metal exporter-after
Russia and Canada-and we are not all that far behind them with the latest
expansions at Boyne Island and Tomago.
"This expansion will be difficult to achieve if the competitiveness of
Australia is eroded. It depends on competitive supplies of raw materials
and world competitive energy, especially electricity. Australia is
currently at the lower end, on average, of the smelter cost curve and is
the world's most efficient region when it comes to converting electricity
into aluminium. These achievements have been hard won and could be all too
easily eroded," he continued.
"If we put the expansion of the aluminium industry at threat in Australia
by forcing energy costs up, then new investment will be in countries such
as India and China; probably operated less efficiently than in Australia;
and more than likely using Australian coal for electricity generation.
That won't help the greenhouse global problem but it surely will harm the
Australian economy," Coutts concluded. (David Coutts, "Greenhouse beyond
Kyoto issues, opportunities and challenges: The resources industries
perspective," March 31, 1998, at
http://www.brs.gov.au/social_sciences/kyoto/greenh.html)
Annex B countries host about 70 percent of world aluminum capacity, which
is not addressed at all under the current Protocol
In 1997, an article in The Guardian echoed Coutts' claim that the
Australian "government has presented industry lobby interests as synonymous
with the national interest. The green stance of the public has been
systematically eroded through a well-orchestrated campaign to portray
global warming as little more than a theory that scientists can't agree on.
Their strategy was aimed at crippling the impetus for government action to
solve these problems because such action might adversely affect corporate
profits." (Sharon Beder, Paul Brown and John Vidal, 'Who Killed Kyoto?',
The Guardian, Oct. 29, 1997)
VIII. Energy
Aluminum smelters congregate around sources of inexpensive energy. This is
the inevitable outcome of an industry that consumes enormous amounts of
power; on average, 45% of the cost of aluminum smelting is electricity. .
According to the Worldwatch Institute, the world's aluminum industry
consumed almost as much power in 1990 as the entire continent of Africa.
As energy resources become squeezed in the industry's cradles -- along the
great rivers of the northwestern United States and the depleted coal seams
of Western Europe -- production is shifting to the Third World. Powerful
rivers in South America and Africa, coal mines in eastern India, and oil
fields of the Middle East are beginning to fuel the increasing global
demand for aluminum.
The industry's hunger for power produces engineering marvels, tragic
disparities, and ecological devastation. In places like Suriname,
powerlines en route to smelters tower over new communities inhabited by
indigenous people forced to move from homelands flooded by new
hydroelectric dams. As seen in Chapter XXX, an industry that has built some
of the world's largest dams can not be bothered with compensating people
who were forced to move out of its way.
Power mix
The production of a ton of aluminum consumes between 14 and 18.5
megawatt-hours of power. (Alcan 10-K, FY1999) Harnisch et al estimate that
in 1985, the industry's power sources were 57% hydro-electric, 33% coal, 5%
nuclear, 4% gas, and 1% oil. Existing smelters are likely to continue with
the same power sources. The MIT scientists projected that coal could power
between 25 and 75% of new capacity built through 2030. (Harnisch et al,
1999)
The International Aluminium Institute asserts that "more than 55 percent of
the world's primary aluminum is produced using hydro-electric power" and
that this percentage "will be maintained for the foreseeable future." The
industry institute's survey of new smelters that are due to come on line in
the next eight years found that "at least 55% will be hydro powered, a
maximum of 30% coal fired and 15% gas." (IAI, "Energy Use" and "Future
Electricity Supply" at world-aluminium.org)
Focus: The Pacific Northwest Power War
Deregulation of the electricity industry in North America began wreaking
havoc in the western USA in 1999 and 2000. This chaos has ties to the
aluminum industry. The construction of massive dams corresponded with the
proliferation of aluminum smelters in the Pacific Northwest. Aluminum
companies own or hold purchasing contracts for many of these dams. Some
smelters have closed when corporations found it more profitable to sell
power earmarked for their operation on the open market.
Aluminum companies have long benefited from generous relationships with
Pacific Northwest power producers. Alcoa held a monopoly in the Pacific
Northwest in the early 20th century after it secured provisions in its
contracts with hydroelectric suppliers that "made power available to
(potential) rivals at entry-forestalling prices. This practice ceased under
the terms of a 1912 consent decree," according to Arkansas State University
economist Dr. Christopher Brown. (Dr., Christopher Brown, Department of
Economics & Decision Sciences, Arkansas State University, "Alcoa and
beyond: Toward a 'structural' approach to section 2," at
http://www.clt.astate.edu/crbrown/alcoa.htm)
More smelter operators rushed into the northwest U.S. in the 1930s and
1940s. "The aluminum plants are here because there was cheap power" said
James Wright of the Seattle Post-Intelligencer. "During the Depression, the
Works Progress Administration, the government, built a series of
hydroelectric dams -- Grand Coulee, the Columbia, the Bonneville Dam on the
lower Columbia -- and that brought the aluminum plants here during the war,
because none of the other materials used in the manufacture of aluminum are
found in the Northwest. It's all brought here. What we offer is cheap
electricity. If we can't offer that, there's no sense making aluminum
here." ("James Wright discusses how some northwest aluminum companies are
reselling contracted electricity and making profits," All Things
Considered, National Public Radio, Jan. 12, 2001)
Smelter operators are trying to maintain their advantageous arrangements
with the government-owned Bonneville Power Administration (BPA). The BPA
operates 29 dams in the Columbia and Snake river basins, and sells its
power to utilities and large industries in Idaho, Oregon, and Washington,
and parts of California, Montana, Nevada, Utah and Wyoming. (Lynda Mapes,
"BPA caught in a crunch, Energy crisis sours Northwest's sweet deal with
Bonneville," Seattle Times, Jan. 29, 2001)
In 1999, Alcoa, Kaiser, Reynolds, Vanalco, and Columbia Falls Aluminum sued
the BPA as a 20-year pact neared expiration. They disagreed with the BPA's
power allocations in new five-year contracts scheduled to begin in October
2001. Alcoa and Vanalco "took a novel approach, claiming first amendment
rights to redress grievances with the US Government," reported Mining
Annual Review (March 2000).
The suits failed. By January 2001, all of the producers reluctantly signed
new five-year contracts with the BPA. The agreement allocates 1,486
megawatts of BPA's hydroelectric power to the seven companies, roughly half
of their combined requirement. The contract charges the producers $23.50
per megawatt hour. ("Unhappy aluminum smelters ink BPA power deals,"
Purchasing, Jan. 11, 2001)
Reynolds said the contract would increase its BPA purchase rates by 13%
over the previous contract that covered the years 1981 to 2001. Kaiser said
its BPA energy prices would rise by 20%. (Reynolds 10-K, FY1999; Kaiser
8-Q, fourth quarter 2000)
The new contract still guarantees aluminum producers some of lowest-priced
power in the United States. The deal sets prices at about one-half the
average U.S. per-megawatt hour charge on the national market. (Seattle
Times, Jan. 29, 2001)
Some companies have the right to resell BPA power until the current
contract expires in September 2001. Beginning in the summer of 2000, as
energy prices soared in the Western U.S., these companies started to close
smelters and re-sell BPA power.
In June 2000, Alcoa announced that it was halting production at its
121,000 metric ton smelter in Troutdale, Oregon. It agreed to sell some
power back to the BPA at a reduced rate. (Alcoa, Form 10-Q, submitted to
U.S. SEC, Oct. 20, 2000; Susan Kelleher, "BPA wants Kaiser to share
millions," Seattle Times, Feb. 1, 2001)
In western Montana, Columbia Falls Aluminum closed its smelter, and is
reselling its power. It has agreed to forward 25% of the power sales
proceeds to the BPA. Six hundred workers are idle, but Columbia Falls has
agreed to maintain their salaries and benefits through 2001. (Kit
Miniclier, "Electric sellback in Mont. a model Factory will shut; workers
still paid," Denver Post, Jan. 25, 2001)
Golden Northwest is selling power from electricity designated for its
smelters in The Dalles, Oregon, and Kilimat County, Wash. It estimated the
sales would earn about $400 million through September 2001 Golden has said
that 25% of its revenues from the sales will be passed along to the BPA.
Another 25 to 50% of the revenue will develop a gas turbine and possibly a
wind power plant for a replacement secondary smelter. The moves earned the
support of the plant's union and the BPA. (Hal Bernton, "Jobs meltdown:
Goldendale smelter slashes aluminum production in order to resell its BPA
power," Seattle Times, Feb. 4, 2001)
Kaiser has made no such pledges to channel energy sales profits to the BPA,
its laid-off workers, or the development of alternative power plants.
Beginning in June 2000, the company curtailed production at its Tacoma and
Mead, Wash., smelters and sold power on the open market. The sales, which
could earn Kaiser $500 million until the contract expires in October, have
provoked outrage from the plant's workers and the BPA.
"It's difficult to conceive of a circumstance that would prevent them from
coming to terms with the region's other ratepayers and their employees,
given the amount of windfall profit," said BPA spokesman Ed Mosey in
January 2001. The agency is contemplating turning off its power supply to
Kaiser in October. (Seattle Times, Feb. 4, 2001)
"There's no way they should be profiteering from reselling federal power
and then ask us to draw unemployment," said Wayne Bentz, who represents
Kaiser Mead smelter workers as Steelworkers Local 329 steward. Over 900
workers are unemployed due to Kaisers' shutdown. (John Stucke, "Kaiser
denies idled workers' wage request," Spokesman-Review, Jan. 31, 2001;
Seattle Times, Feb. 1, 2001)
Kaiser Vice President Pete Forsyth called the BPA demands unreasonable and
"said the money is really a savings account that the company will have to
drain to buy a much more expensive supply of power starting this fall,"
according to the Spokesman-Review. (John Stucke, "Kaiser ponders asset
sale," Spokesman-Review (Spokane, Wash.), Feb. 2, 2001)
BPA was forced to buy back power for more than 20 times than it cost the
agency to produce it, according to the Seattle Times. Under the 1996-2001
contract, Kaiser pays BPA $22.50 per megawatt-hour. In late 2000, the open
market price in the western U.S. soared as high as $750 per megawatt-hour.
(Seattle Times, Jan. 29 and Feb. 1, 2001; Denver Post, Jan. 25, 2001)
Other shutdowns
Aluminum companies have shut down smelters to sell their electricity
allocations in other places. In the summer of 1999, skyrocketing
electricity prices in the midwestern U.S. led Alcan and Southwire to
curtail production at their Sebree and Hawesville smelters and sold their
captive power (105 and 90 megawatts, respectively) to the grid. (Stephen
Johnston, "Aluminium," Mining Annual Review, March 2000)
In May 2000, Ormet announced that it would limit production at its
Hannibal, Ohio, smelter during the summer and would lay-off, temporarily,
270 workers. "This is an endeavor that no other company in our industry has
been able to accomplish," said Emmett Boyle, chairman, president and CEO of
Ormet Corporation. "This will make us a more competitive force and will
strengthen our company's position in the future. We will continually review
the value of selling power to determine if it's a healthy business venture
for the company. We'll be looking for a proper balance of energy and metal
sales that will ultimately strengthen the company's portfolio."
"The decision to curtail aluminum production at this time ultimately came
down to three economic factors which include extremely low aluminum prices,
higher than usual alumina prices and higher electrical energy prices in the
peak summer months," explained a company press release. (Ormet, "Ormet
Announces Plans to Curtail Aluminum Production, Sell Power and Alumina,"
company press release, May 18, 2000)
Ramifications of electricity deregulation in the U.S. reaches across the
border into the Canadian province of British Columbia. In late 2000, Alcan
announced plans to shut down three potrooms in its Kitimat Works. The
plant's union, Canadian Auto Workers Local 2301, said the shutdown is the
result of provincial and corporate "greed."
"This whole situation stems from the government's 'greed' of making huge
profits by selling power across the border and Alcan's never ending
'Corporate Greed' of maximum profits no matter who or what it affects," the
CAW local asserted in a Dec. 14, 2000, statement. "The sad part is that our
members are being used as pawns in this battle. The closing of these lines
would have a huge impact on the community and is a direct attack on the
integrity of our local union 'Alcan must be stopped' for the sake of our
union brothers and sisters whose jobs will be affected. If we don't stop
this now who knows, maybe next year more jobs will be eliminated. If the
price of power is right! ("Union Says "No" to Line One Shutdown," CAW Local
2301, Dec. 14, 2000)
"If Alcan committed to a bad power deal they should pay the price. Our
members, and our community should not have to be the ones that pay the
ultimate cost. When times were good, Alcan didn't mind reaping all the
additional profits for the last few decades on the surplus power. Yet now
when fortunes turn temporarily around, they don't want to put any of that
'surplus' back into Kitimat Works to save jobs. We remind Alcan that it
also has a commitment to our community as well. Not just their profitable
power commitment with BC Hydro," added the CAW local. (ibid)
The situation marked a quick turnaround by the BC government. As recently
as December 1997, BC's premier "invited producers to build smelters in the
province with an offer of cheap electricity," according to the Mining
Journal (June 5, 1998)
Hydro
Hydroelectric dams have fueled the proliferation of aluminum smelters in
other parts of the world, often at the expense of local communities. As
Joji Carino of the World Commission on Dams reported in 2000, "The
experience of indigenous peoples and ethnic minorities with dam projects is
rife with alienation, dispossession both from their land and other
resources, lack of compensation or inadequate compensation, human rights
abuse and lowering of living standards." (Joji Carino, "Review of
Hydroelectric Projects and the Impact on Indigenous Peoples and Ethnic
Minorities," World Commission on Dams, 2000)
Details on the relationships of smelters to some massive hydroelectric
projects follow.
Brazil
The Brazilian aluminum industry tripled in size from 1978 to 1985, when the
Tucurui dam was completed in the Amazon. The dam, created a 2,500 square
kilometer lake and spawned the Albras, Alumar, and Alunorte alumina
refinery and aluminum smelters owned by Alcoa, Alcan, Billiton, and a
consortium of Japanese companies. These aluminum operations consume over
half of the dam's power. (Latin American Newsletters, Nov. 23, 1984;
Financial Times, Nov. 16, 1995)
The Brazilian government,
DARK SECRETS BEHIND ALUMINIUM
Dark secrets behind aluminium
1. Introduction
A GREAT debate is going on now a days in India on extraction of bauxite and use of aluminium. On the one hand tribals , dalits and peasants have stirred up a hornet’s nest against capitalist development projects of the democratic governments. On the other hand the same government is characterizing those unrest as ‘threat’ to democracy and is taking sever repressive methods to quell the opposition . why this unrest? Why aluminium is so precious? Is the government right? What the community wants to speak? There are innumerable questions come due to these conflict of interests. It is true that this attempt of bringing a booklet on aluminium’s dark side is in context of Kashipur, Lanjigada and many other struggle who have opened up this debate because of their resistance to these projects.
The purpose behind writing this booklet is to bring the debate against aluminium to more people and raise a support against more extraction of bauxite as well as more use of aluminium. As we know in this present capitalist society there could be no alternative of smelting aluminium from bauxite in an indigenous way because of lack of technology and its subsequent market. For any further production of aluminium, development of capitalism is essential which is equally oppressive.
On the one hand there are conglomeration of corporates who wants to make profit out of aluminium industry because it is precious. On the other bauxite has specificity that it has water, that is, where ever bauxite there is perennial streams. I saw it in kashipur, Lanjigada, Damanjodi and also in Paikamal area. As we know where is river there is civilization that means civilization ‘grow’ on the bank of the river. So like tribal society emerged on the bank of those streams. There are innumerable numbers of villages of tribals and dalits who reside on the bank of those rivers or streams in which water comes due to bauxite.
Here I have tried to highlight the consequences of mining bauxite without going to its technological side just from a human perspective. I hope I will get comments, their experiences, new ideas, specific plans and programes while reading this booklet. That will also help to carry this debate and struggle forward.
2. MNC’s Monopoly in aluminium sector
Presently few MNCs are ruling the rust in aluminium sector. They are like Alcoa (US), Alcan(Canada), BHP (UK), Kaiser and Reynolds (US), Alusuisse (Switzerland) and Pecheney (France). More recently Pecheney was merged with Alcan.
By 1949, 45% of the world aluminium capacity was under government control, 46% was controlled by these above few companies( with each being in monopoly control of its own industry in France, Canada, Switzerland, UK and US) with remining 9% being in hand of 17 small independent producers. By 2002, because of reform proposals the control of MNCs in above world market has increased from 46% to 70% with reduction of government control.
3. World of Bauxite
Nature must have taken thousands year to form bauxite beneath its earth. This bauxite is found mostly in tropical regions like South America , Africa, Asia and Oceanic countries. These locations are like Jamaica, Brazil, Surinam, Venezuela, Guyana, Guinea, India , China , Australia etc.
More than 100 million tonnes of bauxite mined each year. The major locations of deposit are found in a wide belt around the equator. Bauxite is currently being extracted in Australia (in excess of 40 million tones per year), central and south America ( Jamaica, Brazil , Surinam , Venezuela, Guyana) , Africa ( guinea) , Asia ( India and china) , Russia ,Kazakhistan and Europe ( Greece).
Actually, when A.H Hall in USA with P Herolt invented electrolytic process converting abundant of bauxite into alumina in 1888, he formed Alcoa in 1890 and did a monopoly business in US and outside with its ‘patent for 25 years under US rule’. Before that aluminium was costly in production for this was used as ornaments only. In early twentieth century Alcoa branched off into a Canadian North Aluminium Company Alcan with 100% owned subsidiary of former, just to avoid the strict regulation of US government and to continue ‘unfair trade practices’ outside US. The second world war created environment of rising other MNCs also
When alcoa was formed in late nineteenth century they got Arkansas mines in US for 25years. Due to availability of aluminium from bauxite and its proximity to war weapons (during first world war) world extraction of bauxite rose from 24000 ton per annum in 1908 to 1,20,000tpa in 1915 and then to 2,70,000 in 1917. Now nearly 1250lakh tons of bauxite is extracted at world level.
But when Alkansas mine in US started depleting just after first world war and similar situation happened in Europe (except France) these imperialist countries started searching bauxite in colonial countries. For this Guiyana, Jamaica, Ghana and Surinam were the target. When bauxite was discovered in Jamaica , Alcoa backed by US government monopolized the high- quality deposits. Bauxite was also being supplied almost tax-free to ALCAN from Surinam (another colony of UK) and then into aluminium to UK. Ghana was another supplier of bauxite in among African countries to imperialist countries more particularly to US.
The independence movement in African countries forced the developed countries to search for the alternative. The production of bauxite in Ghana in 1957 was 911973 Mt. and suddenly fell down in 1958 in post independence period to 180480 Mt. This continued another two decades. During this period these African countries gave a heavy price. From toppling Nkrumah from power in Ghana, threatening Manley in Jamaica and murder of Walter Rodney a political activist of Guyana in 1980 was part of the MNCs role in third world countries.
The recent Structural Adjustment Programs in third world countries in direction of World Bank and IMF opened more bauxite mining for developed countries. Philipines, Indonesia and India are examples of new age of mining by MNCs. The aluminium sector which was in strictly under state control in India first time went to relaxation to private sector with Foreign investment mainly from ALcan, Alcoa, Pechiney etc and a new player like BHP Billiton of UK and Australia also.
4. World of aluminium
Aluminium production consists of three process: mining the bauxite, refining the bauxite to alumina and smelting alumina to make aluminium. For producing a ton of aluminium needs two tons of alumina and each ton of alumina needs three tons of bauxite. In the bauxite soil presence of less silica more alumina content is accepted as best in quality. In India in most cases silica presence in 2-3% and alumina is 46-48%. This is why most of the MNCs are making queue to exploit. Another advantage is its cheap labour and low cost of electricity. This is why producing alumina in India is cheaper nearly 25-30% in comparison to any developed country as per the director of Vedanta (UK) limited.
But when one ton of alumina goes out of three tons of bauxite, it leaves two tons of red mud at the refinery plant site. Red mud contains iron oxide, silica, titanium zinc, phosophorous , nickel , vanadium and compound formed by adding lime to refining process. ( more on health and environment chapter).similar case happens when one ton of aluminium goes out of two tons of alumina leaving another ton of red mud at smelter site.
Aluminium production needs more energy. To produce a ton of aluminium a smelter consumes at least 13,500 kilo watt hours . it also produces very high emissions of carbon dioxide : an average of 13.1 tons per ton of aluminium produced.
USE of aluminium is varied. Because of its light weight and heat resistant it is used in electric , infrastructure, transportation sector etc. But most dangerous is its use in for military purposes including for bombs which should attract public attention. Secondly, the way world demand is rising on aluminium , that is in coming years a lot of aluminium will also be exported , its expected production would jump to six-fold but will it be replaced?
Mining is the worst sector for foreign investment since minerals are exhaustible. Once the mineral ore get exhausted the companies will go away leaving the area with no resources rather with pollutants. The MNCs would grow but the people would suffer.
5. Developed countries conspiracy
Samir Amin said “ A long period of technological monopoly enabled these enterprises to acquire hydroelectric facilities and bauxite deposits while increasing their production scale, when their monopoly of technology ended , they found themselves in a position of ecoanomic monopoly, based on increasing returns to scale”. The same thing happened in case of Alcoa who enjoyed 25 years patent as per US laws and total hegemony even after post first world war. But to save it from financial irregularities as well as to continue its clandestine operation Alcan was formed as a subsidiary of Alcoa in 1907. Then Alcoa did its outside business in Europe and Paul Heroult took his smelting process to Switzerland as hydro-power potuntial. This enabled corporates like Pechney, Alusuisse and Kaiser also to grow.
When Arkansas mines in US was finished and European nations faced crisis of bauxite many alumina refineries have moved from the western world to the bauxite mines –specifically for Australia, Brazil, Venejuela and India- found it more economical to convert the bauxite to alumina on site rather than incurring high transport costs- according to Africa resource group. Since then monopoly of technology is the determining factor even today. Other developing countries who opened up their bauxite mining and established the alumina plant were the worst sufferers. The price of bauxite was set by the parent company according to its own internal price situation, unlike the price for aluminium which was set cooperatively by all the producers.
The third world countries have not got yet the selling rights and fixation of price in the international market even though all most all bauxite comes from these companies. It is believed that now National Aluminium Company (NALCO) who got technological support from Pecheney ( France) is exporting its production to the later for selling in the international market. Interestingly more recently Alcan took over Pecheney in its submerger plan and in a way Alcan is enjoying the rights over Nalco’s production. The same Alcan’s subsidiary Indal was operating it alumina refinieries in Belguum (Karnataka) and Muri (Bihar ) and aluminium refinery in Sambalpur district or Orissa. This alcan is coming to Kashipur also.
6. Economic reforms for bauxite mining MNCs
Economic reforms in India created opportunity for growth of mining industry particularly for bauxite industries. The National Mineral Policy 1993 opened up bauxite mining to foreign companies with an investment upto 75% (from 25%). Earlier where public sector companies like Balco, Nalco, Malco were the major players of bauxite extraction and Indal and Hindalco were other players in refinery projects there Alcan, Hydro, Sterlite-Vedanta, Billiton etc have entered into the scene.
India has 2911million tons of bauxite against world deposit of 23200million tons. It is mainly in states like Orissa, Chhattishgarh, Jharkhand and Andhra Pradesh. Orissa only has 70% of total national deposit which is again 13% of world deposit. So in a sense Orissa is more rich in bauxite. This is found mainly in districts like Koraput, Bolangir and Kalahandi district. The present government in Orissa has invited Hindalco (Birla group), Alcan( Canada), Vedanta( UK), BHP Billiton (UK), Rio Tinto(UK) etc. with an investment of nearly 53,000 crores of rupees for extraction of a total deposit of 7330 lakh tons of bauxite deposited in these districts
In 2002, India has surplus of aluminium like its total production was 6.5million tons where as its domestic need was 5.5 mt and only Nalco then was producing 4.2mt(source: survey of Indian industry, 2004 the hindu publications). But most of the new projects except UAIL in Kashipur was signed in the same year.
In Chhattishgarh when Balco was disinvested to Sterlite with 49:51 share holding agreements it was apprehended that under valuation has made. Now CAG report has also vindicated the deal calling it as “big ticket”
Previously, East India Company, Hudson's Bay Company and many American companies chartered themselves as corporations and through these Europe and US’s industrialisation was built on the backs of colonies in Africa, Asia and Latin America. Now Developed countries want to pass their environmental burden to these countries. Japan has reduced its domestic aluminium smelting capacity from 12 lakh tonnes to 1,40,000 tonnes and now imports 90 per cent of its aluminium. US consumes 53 kg of aluminum per head in a year (Indian consumes 300gm ), while it has no bauxite mine.
Firstly the establishment of colony helped the developed countries to siphon off the resources under their condition. Now the structural adjustment programe is helping the same earlier colonial countries to extract bauxite and do alumina rather on more stringent conditions than earlier one.
Many alumina refieneries, in these years, have moved from western world to the bauxite mines –specifically for Australia, Brazil, Venezuela and India- found it more economical to convert the bauxite to alumina on site keeping the patent rights of technology as well as fixation of price in international market in their fold. The developing countries even after so many years of supply of bauxite and refinery plant lacks technological know how. Economic reforms in developing countries under guidance of world bank and IMF has made this extraction easier.
7. Resistance to big projects :
7.1 Kashipur : Utkal Alumina International Limited (UAIL) is a joint venture of Indian company Hindalco (55% shareholdings) and Canadian company Alcan (45% shareholding). Previously, TATA, Hydro (Norwegian company) and ALCOA (US company) were also a part of this project. These companies later withdrew in face of popular protests. The total cost of the project is estimated at 4,500 crores. 198.4 million tonne bauxite would be sourced through open cast mining from Baplimali of Maikanch Panchayat. Alumina would be extracted from the mineral in the alumina plant near Kucheipadar. It is a 100% export oriented joint venture Alumina Consortium. Besides under the project annually 8 million tonnes of bauxite would be extracted. Simple calculation suggests that within 24 to 25 years the entire hillock of Baplamali would be reduced to a flattened base, its very existence would be beyond recognition.
On the other hand UAIL company report says that more than 1500 persons would gain employment under this project. It further says that most of the recruitment would require personnel with technical, project specific skills. In this regard, Chief Managing Director of UAIL Sri SP Sawanta said addressing a government seminar (organised by UNDP), "the kind of people company requires would not be found in Kashipur. The non-technical staff recruitment would be made of 400 persons".
Acording to news reports from the company, the employment, in this case would be given to the evictees that include 147 families from the 3 villages of Kendukhunti, Ramibeda and Talakarol. UAIL is refraining from reaching an agreement with the potential evictees families even. It implies that 24 more villages that would lose their land owning to this proposed project would not get any employment opportunity.
It is certain that directly or indirectly nearly 22,000 people from 82 villages would be affected due to this project. According to PSSP (who is spearheading the movement) sources by this project nearly 2500 people around proposed plant site would be affected and for Baphlimali hill where bauxite mining take place would affect another 42 villages of three grampanchayats ( Kodipari, Maikanch and Chandragiri GP). But one reports collates the estimates of project affected people from various sources : 750 which is the company Norsok Hydro’s estimates, 3500 which is UAIL estimates and 60,000 which is estimated by the Norwegian Agency for Development Corporation speaks.
After UAIL (who would supply its all production to Alcoa of US), Vedanta – sterlite company who has direct negotiation with Alcoa speak in its project report that this mine in Niyamgiri , in Lanjigada of Kalahandi district,would continue for only 25 years. Larson and Tubro with Arab Aluminium Company was invited to invest 10,000 crores of money in another side of Kashipur. They will mine bauxite from Srunger area and will have alumina plant at Sikarpai area in Kashipur block. Next, in Laxmipur block in Koraput district (very near to Kucheipadar area) Hindalco- Birla company would invest 10,000 crores to mine bauxite from Kodinga mali, will establish alumina plant at Kansariguda, and will collect water from Barigaon area.
The same Birla Company will mine bauxite from Deomali area of Similiguda block of Koraput district. And after 30 – 40 years bauxite will be finished up and all of them will leave the area. But they will leave a number of dry streams, dry rivers, chemical red mud ponds and ash ponds. It will make the entire area poisonous. It is due to the bauxite that the local streams originating from the hills are perennial such as the the rivers Indravati, Bansadhara and Nagabali. Due to this, people in these areas get water round the year and it helps them in cultivation. This will go away from them.
Struggle against UAIL was started when people came to know about the project. People in the area physically were obstructing any construction work of the company and for which it could not able to start its work. More recently situation has been changed a lot. Kucheipadar, a small area in Kashipur block of Rayagada district came under terror by the state government in 2005. During the period the police fired blanks thrice; tear gas shelling, lathi-charge, random detaining of people from roads, weekly markets, river bank, and even their own farming land by local police were rampant. Fifty two people were arrested that year in and around Kucheipadar. The C.R.P.F., Indian Reserve Battalion, Orissa State Armed Police were all used to repress the people. The repression continues even today. This is a continuation of the repressive state actions of 16th December, 2000 when three adivasis from the region lost their lives to police firing.
Several human rights organizations including national tribal commissioner condemned such inhuman activities for a private project. The Interim report of the house committee on environment of the Orissa Assembly, 2005-2006 visited the area in September,2005 presented to the assembly on the 5th April, 2006 has highlighted some of the gray areas. As per the report ‘the environmental clearance of UAIL has expired in 2000. They have not received a renewal of the environmental clearance from the MOEF, GOI’. But even after UAIL is determined to start its work and has occupied a portion of land already
UAIL proposes to manage dry red mud and ash pond stacking them in large open ponds.this was cause nearly 150tonnes of sodium hydroxide to be leaked in the soil every day. This in turn would raise the PH level of soil in the region much beyond acceptable limit leading to sever environmental damage.
According to UAIL officials 17 0000 cubic litres of water needed daily for mining and processing. UAIL only has access to two streams the Sana nala for its water requirements and the Bada nala for its affluents discharge. Will it be sufficient ? what will happen to local people?
The power requirement of 80mw will require 2800-3000 tonnes of coal per day. This is expected to generate 900- 1000 tons of ash per day. The captive thermal power plant will produce waste in the form of ash to be disposed of in an ash pond located 4.5 km from the refinery. Ash ponds of thermal power plants are notorious for the pollution they generate. The promise to keep the pond wet is rarely kept as firmly as it is made and how many and which villages will be affected depend on wind direction and force. In fact, UAIL had request-ed that it be allowed to store the red mud and ash in dry form, rather than liquid form, which it argued was a more environmentally sound method; however, its request was rejected by the Ministry of Environment and Forest. In addition, the storage area for lime is very close to a stream, which increases the risk of contamination.
Finally, there is understandable concern that the 20 km of land allocated for the disposal of wastes is not even close to sufficient to store the amount that will be generated by the project. Dr. R.C. Das, Chairman of the OSPCB stated in a 1996 report that, "for any alumina refinery or substantial expansion of existing refinery, red mud will be allowed to be disposed in dry\semi solid form and minimum land of 200 hectors per million tons per annum of alumina produced must be made available." If UAIL is to comply with these guidelines, then 20 km falls far short of this minimum. UAIL has also not put forth a plan for waste disposal if the allocated waste disposal areas reach capacity, as they surely will. This has led to suspicions that they will resort to the unethical and dangerous. If this happens then this would drastically alter the pH balance of the soil, and result in a significant decrease in vegetative growth and land productivity. Formerly fertile lands that sustained local communities would become agriculturally unviable. And also this would damage the ecosystem of the area causing widespread devastation in the area.
According to the environmental clearance given by the government the company does not have to take care of overburden dumping for the past five years. It is expected that the overburden will be dumped on the slopes of the mined area leading to siltation of streams, damage of slopes and cultivable lands.
7.2 Vedanta in Lanjigada
Today Vedanta of UK in Lanjigada of Kalahandi district is the major player apart from UAIL. Vedanta is interested to invest 4500 crores in extracting bauxite and setting up of alumina plant in Lanjigada area. The Ministry of Environment and Forest of Government of India , in its letter dated 22/09/2004, has given environmental clearance to the 1.0 MTPA Alumina refinery and 75 MW Captive power plant of M/S Sterlite Industries (India) Ltd at Lanjigarh. The company is mobilizing fund through London Stock Exchange in name of Vedanta. Also Mauritian firm Twinstar Holdings plan to increase stake in Sterlite company violating its agreement with Government of India in case of transfer of BALCO. For plant 1789.54 hectares of land is required out of which 1109.41 hectares private land. It would employ 250 people directly and 500 people indirectly according to its project report. Because of plant it would displace nearly 60 families of two villages and would affect 302 families of 12 villages of two panchayats.
It would mine bauxite from Niyamgiri hill. The hill has 7.3 crores of tons of bauxite. The company agrees that the project would last for only 23 years. Niyamgiri hill range stretches up to 1073.4 hectares of 508.638 hectares are reserved forest area. The company project report speaks that mining would take place in the reserved forest area also. Because of intervention of Central Empowered Committee constituted by Supreme Court the mining lease to Vedanta- Sterlite has not yet given
According to the reports furnished by Vedanta Company of Sterlite only 750 persons will get employment. However, the project would affect more than a lakh people whose subsistence is crucially based on the Niyamgini, Nagavali and Bansadhara rivers. In company's parlance, the community's depending on forests and rivers for their survival are not even the least affected. To the extent, it maintains that those who lose their trees are also not affected.
The Central Empowered Committee's (CEC) report (constituted by Supreme Court ) on
Vedanta/Sterlite's bauxite-mining project in Niyamgiri hill in Lanjigarh broadly outlined its potential harmful effects. The finding of the CEC's report has weight and relevance for the UAIL project. The alumina plant and the mining project linked with it will have serious adverse effect on the flora and fauna due to mining, overburden dumping, construction of proposed road through the dense forests, liquid and gaseous effluents emissions, bright illumination, blasting with explosives, drilling and resultant vibration and dust, operation of heavy loading and unloading equipment, pollution, etc.
More recently in Lanjigada of Kalahandi district 34 tribals were arrested in April 2006 because they opposed forceful occupation of their land by Vedanta Alumina Company of UK. They were demanding either land or job against their land. Despite three adivasis having been killed by private security officials and drivers of Vedanta company in separate incidents over two years, no murder case has been registered by the local Lanjigada police station. In 2002 nearly 19 activists were arrested in a false case because they were opposing Vedanta.
FROM January 23 to January 31 2004 60 families of two villages Kinari and Borebhata and 8 families of Sindhibahali were evicted forcibly and their houses were bulldozed by sterlite.
7.3 Gandhamardan: Gandhamardan mines is situated in Paikamal area in newly Baragada district. In 1971 the government of India officially announced the existence of bauxite deposits in Gandhamardan and newly formed Bharat Aluminium Compnay (BALCO) a government undertaking got the mining lease in 1981. After four years that is on 1985 Balco started its work creating infrastructure facilities for mining. Balco has in mind to supply bauxite from Gandhamardan to its Korba ALuminium complex.
Gandhamardan hill range forms part of a rich evergreen forest. It is famous for medicinal plants, for two temples ; Harishankar and Nrushinghnath. Around the hill several streams are there including three major streams like Kapildhara, Khandiharan and Durgei Jharan are part of the local lifes. When mines was started it affected those streams and that sparked voice against the project. Capacity of the mali is 213million tons.
In 1986 people started opposing the project and during a year or 987 people including 479 women and 51 children have been arrested as per PUDR report. Later due to resistance Balco was forced to leave Gandhamardan. But now Nalco another public sector company is interested to take over the mining and against it struggle has been started.
8. Tips of the ice berg
8.1 Experience of Nalco:
The National Aluminium company limited is an integrated multi-locational aluminium company incorporated in 1981 as a public sector company to exploit bauxite from Panchputmali of Koraput district in Orissa with a capacity of 4.8mtpa to last for 75 years to finish entire deposit of 370million tons the hill has. The capital then was Rs.1300 crores. Technical know-how and basic engineering for the project were supplied by M/s ALuminium Pecheney of France with an agreement to supply more than half of its aluminium to the above company.
Nalco has two units; one is refinery plant at Damanjodi and another is aluminium smelter at Angul. A fully mechanized open cast bauxite mine has been operating since 1985. Nalco produced 28,22,464tonnes of bauxite ore during 1999-00. It produced 8,86,000tonnes of alumina powder during same year and out of which 4,79,620tonnes were exported. Nalco is very soon going for second expansion upto 15,75,000tonnes per annum for which wants to occupy Gandhamardan mines of Baragada district because presently panchputmali would be sort. The plant has a captive power plant with a capacity of 55.5MW now for which coal is supplied from Dhenkanal district of Orissa. To set up the mines and refinery complex , the company had acquired 7419.8 acres of land ,out of which 4352 acres were private lands. A total of only Rs. 1,48,73,474.52 were paid as compensation for patta land alone at a rate of Rs. 2000 per acre and Rs. 150 for each tree.
The Nalco operations in Damanjodi and Panchputmali hill have affected directly 26 villages and more than 690 villages indirectly. The project displaced 597 families ; 254 were adivasis, 56 dalits affecting nearly 5000 people. In 1995 after 10years of mining several villages around panchputmali like Bhitara Jholamuha are getting notice from the company to evacuate because of siltation.
Waste water is released into Kolab river by a drain passing through 9vilalges. Villages downstream to the plant have been severly affected by the pollution of plant effluents in the river and streams. Even though Nalco factory has an ash pond and red-mud pond, effluents are being discharged into the river regularly, causing cattle deaths and crop loss.
People compalained on a personal visit to the area in 2002 said that of 300 acres of cultivable land is affected due to the effluent discharge causing drop in harvest. Germination problem of miles, ginger and tumeric is perceived in the same year. Cattle and goat are dying of dysentery.
Out of 597 families displaced 441 of them have been rehabilitated in the Analabadi colony , for which Analabadi villages were deprived of their land. 156 more houses were built, 352 of these families have been given one job each viz. 35 dalits, 149 adivasis and 168 other casts. Eight of the employees were women.
When Nalco was started people had accepted their offer easily since they were promised jobs and good relocation, including money for their land. Joint families got 10’x6’houses with no facilities and no land. The people of Kalahandi, Lanjigada had been brought to the NALCO by Sterlite bauxite mining company in 2002 for a visit. Bhima Majhi of Niyamgiri Surakshya Samiti, Lanjigada, said the houses given by NALCO are suitable for pigs to stay not for human beings. Raily Gouda, an oustee who had a job in NALCO, Orissa, said to the people of Lanjigada, "It is the fault of our father and forefather who agreed to leave our land. Otherwise if it had been today we would not have left our land". Before Nalco , as per 1981 census 60% of the population there were adivasis. After Nalco less than 12% of the adivasis people remained (in Damanjodi area as per 2001 census) since most had to move out mostly to Nabarangpur district and adjacent Andhra Pradesh for other vocations.
WHEN the decision was taken to displace the people there was no definite commitment either to resettle them in a humanly acceptable manner or make them share in at least a few benefits of the project in the form of jobs and contracts. It was found that the people who have depended on forest for centuries are deprived of the sources of their livelihood with no alternative means of survival. In most cases compensation was low and it was inadequate for them to begin a new life. Particularly the landless mostly dalits lose their livelihood but are not entitled to compensation because land does not belong to them. Later Nalco did plantation of thousand of trees in community land under its environmental regeneration scheme but it is again the property of a few individuals or of the state. landless dalits are thus deprived of the infrastructure that was sustaining them
Later many men try to cope with the tension and disruption caused by displacement and a new economy grew up in the area. Modernization and cultural change imposed from outside did greater deterioration of the status of women. Wife beating , gambling which was rare in tribal society has become common site. Literacy is low in among tribals, dalits as well as women. A personal visit to the area in 2002 saw 66 widow whose husband were in job are managing their food working as made in others houses. Nalco is not interested to give job twice and these people left no land with them.
In NALCO open cast mining is changing nature water cycles by soil compressing and breaking up of top soil. Large scale removal of vegetation has a negative impact on the fragile eco system. This would lead to increased erosion and long lasting impact on local water resources.
Now the workers of NALCO have again come to the streets to protest against the privatisation plan of the government of India. The oustees who got jobs would be the first victims after privatisation because they still enjoy the lowest ranks in the company. The government proposes to reduce its holding in the 2,30,000 tons capacity Nalco to 26% from the current 87.15 % . it had earlier divested 12% of equity.
9. Will they bring development : True history of few corporates
9.1 Alcan is more recently part of Utkal Alumina Internaitonal limited with 45% share holding with another Hindalco with 55% in Kashipur Orissa. Since the MOU has been signed in 1993 Orissa government all the time has been saying that Alcan with Hindalco will bring development to starvation death prone Kashipur as well as Poor state Orissa. In this perspective it is essential to look into the past record of Alcan on which a democratic welfarist government relies more bringning in development.
Alcan was earlier a subsidiary of Alcoa which was formed in 1907 and became independent from later in 1928. The history speaks that Alcoa of US initially engaged with so much fraudulent activities that to avoid from US laws it went for division into ALcan into a Canadian company. The intention was also “to take advantage of that country’s cheap hydro-power potential.
Since then alcan is operating in 56 countries with an workforce of 73,000. In 1960’s it also tied up with Indal to establish aluminum smelter at Sambalpur, in Orissa.
Alcoa earlier after formation of Alcan, exerted pressure during first world war period on US government to threaten Britain with the cutting off much needed munition supplies unless leases taken up by Alcan in British Guinea (a caribbian country colony of UK) is approved. By this Alcan started its work and in 1928 it became independent. UK government tied up its aluminium requirement to be supplied from Alcan and production of Alcan shoot up and it emerged as second largest aluminium supplier after Alcoa with lowest operating cost, given cheap hydro power and cheap bauxite from British Guinea.
COMPANIES LIKE ALCAN are always looking for ways to avoid paying taxes. One way to do this is to incorporate subsidiaries inside countries where the company pays little or no taxes. Countries like this (LIKE INDIA) are known as ‘tax havens’. India is exempting income tax to any 100% export oriented projects and UAIL would be exempted from any type of income tax. By this hindalco (India) will not pay any tax so also alcan will not. But alcan will easily offshore its profit from India. And India will get zero income tax.
Leo-Paul Lauzon, who recently published a study on Alcan’s tax payment history, says that over 200 Alcan subsidiaries are incorporated in tax havens. He says that by incorporating subsidiaries in tax-havens Alcan is transferring its profits offshore where the company does not have to pay income taxes. If Alcan incorporates a subsidiary in a foreign country with little or no income taxes, the subsidiary does not have to pay taxes. Alcan is therefore legally allowed to become incorporated in a low-tax country and avoid paying taxes on foreign income. In a recent study Lauzon found that Alcan paid no income tax between 1999 and 2003. Instead, he says that the company received $140 million in income tax returns. In among it 200 subsidiaries in several countries world over in India alcan have two subisidaries like Utkal Alumina international limited (Kashipur) and Pechney alumina resources India private limited ( with now Hindalco again in Renukut, UP).
9.1.2 Alcan and weapon industry :
In 2004 Alcan’s Engineered Products Business group Aerospace business unit generated $1.15 billion in operating revenue. Sixteen percent of this total came from sales to customers in the military and space industries. This financial data is not insignificant, and given that Alcan claims to be a “key supplier to both European and North American military markets”, it is clear that the company is involved in the arms trade. Through a company acquired in 2003, Baltek, Alcan is supplying some of the world’s largest builders of military equipment. Some of Baltek’s main customers include:
Northrop Grumman – In 2004 Northrop Grumman selected Alcan-Baltek’s structural foam core material for use on its Multirole Electronically Scanned Array (MESA) radar. The radar is mounted on top of a Boeing 737 aircraft and is designed for Airborne Early Warning & Control (AEW&C).
Boeing – Alcan-Baltek’s lightweight balsa compound is used in the engine intake of Boeing's proposed X32 fighter jet.
Lockheed Martin – Alcan-Baltek supplies Lockheed Martin with structural foam core material for use in the construction of NASA’s next generation space shuttle. Alcan’s involvement with the arms industry is in contradiction of their image as a sustainable andcaring corporation.
9.1.3 Environmental track record :
Alcan has put an enormous amount of money and energy into constructing its image as an environmentally responsible, sustainable and green corporation. It has published sustainable development reports listing its philanthropic and environmental actions around the world. Through its affiliation with large international institutions, such as the United Nations Global Compact and the World Business Council for Sustainable Development, Alcan has been able to further paint its operations as environmentally friendly and socially responsible.
Alcan’s recent focus on sustainable development and Corporate Social Responsibility is a response to greater scrutiny of multinational corporations by civil society groups around the world. While Alcan has been able to position itself as a ‘leader’ in sustainability its operations around the world continue to be environmentally damaging.
Alcan operates huge smelters and refineries that release dangerous chemicals into the environment, their operations require incredible amounts of electricity from destructive hydro electric dams, and their bauxite mines employ the most damaging form of mining: strip mining. In addition, Alcan plans to expand its operations in the South where environmental regulations may be less stringent. Regardless of Alcan’s effort to convince the world that they are environmentally and socially responsible, they are a part of a very destructive industry. Apart from Alcan’s environmental impacts mentioned in the section above, other examples of the company’s track record are included below.
9.1.4 Toxic Pollution
Alcan’s Vaudreuil bauxite refining operation in Jonquière Quebec released 10,163,062 kg of toxins in 2001. This included more than 10 million kg of calcium fluoride to an onsite landfill. Calcium fluoride can irritate lungs and cause bone changes (referred to as skeletal fluorosis). The plant also released 3,236kg of benzo(a)pyrene to the landfill, a chemical known for causing cancer. In 2003 the Vaudreuil bauxite project was listed as the largest discharger of toxic chemicals by Environment Canada (as defined under the Canadian Environmental Protection Act).
In response to Alcan’s dumping of toxins Paul Muldoon, Executive Director of the Canadian Environmental Law Association said: “I take little comfort when I hear that dangerous chemicals are being buried in landfills. Sooner or later landfills leak, and people and the environment are exposed to contaminants”. Alcan’s Shawinigan factory, where the company produces aluminum cables, is Canada’s third largest source of toxic pollution. Between 1995 and 2001 the factory released 1 916 404 kg of calcium fluoride, most to an off-site landfill, 65,142 kg of hydrogen fluoride to air, and 4 929 kg of cancer-causing benzo(a)pyrene to the air”.
9.1.5 Alcan in Jamaica
Alcan opened its mining operations in Jamaica in 1953 and sold out to the private Swiss company Glencore in 2001. About one-third of Jamaica’s bauxite refining capacity changed hands during the transaction.
Prior to its acquisition of Switzerland’s Alusuisse in 2000 Alcan had plans to double the output of one of its Jamaican refineries. The purchase of the Swiss company, however, gave Alcan more bauxite and alumina than it needed. In 2001 a report on land use and forest cover determined that bauxite mining was the single largest cause of deforestation in Jamaica.
The study stated that the significant degradation of forests and watersheds occurred in mining areas in the parishes of Trelawny, St. Anne, St. Elizabeth, Manchester, Clarendon and St. Catherine. It went on to say that the most affected areas were in the parishes of St. Anne and Manchester. The parish of Manchester is where Alcan’s Kirkvine facilities were located (the site continues to be mined by Glencore and Windalco).
Porto Trombetas: bauxite mine Brazil
Alcan owns 12.5% of Mineracao Rio Do Norte along (MRN) with Alcoa (18.2%, U.S.), BHP Billinton Plc (14.8%, Australia), Companhia Brasileira de Aluminio (10%, Brazil), Companhia Vale do Rio Doce (40%, Brazil) and Norsk Hydro ASA (5%, Norway). MRN operates one of the world’s largest bauxite mines in Porto Trombetas in the State of Para 880 from the city of Belem. The region holds large reserves of bauxite. MRN’s exploitation of these reserves, which began when the mine began operations in 1979, represents one of the worst cases of aggression against the environment in this region of Brazil. Between 1979 and 1989, MRN dumped 24 million tonnes of bauxite waste (tailings) into neighbouring Batata lake. The dumping caused the destruction of a large part of Batata lake’s ecosystem. In some places the layer of bauxite at the bottom of the lake reaches a thickness of 4.5 metres.
On the hand Alcan in these 56 countries has made phenomenal growth in these years and if we go to one year of its profit. It is increase of 303% from 2003 to 2004 ( $64million to 258million ).
9.2 Vedanta :
Sterlite – Vedanta started life as a business delivering copper cables for telecommunication companies in India. From 1988, as IT became the subcontinents millennium mantra, so sterlite supreme opportunist was close behind.
He set a course from which he has never deviated except that , as his greed grew, so did the ambit of his ambitions and the scandals of his stock play. Privatization and foreign control promoted by government of India after 1993 helped sterlite to take except to take export business as primary and grew.
In 2000, agrawal tried to delist his company from Mumbai Stock Exchange then buy back its share at only half the book value. The Indian authorities told Agrawal where he could not go.
Sri Anil Agrawal, MD is perhaps the best example of a homegrown capitalist who later shifted its entire business because he found difficulty in operating its business with all unethical manner.
IN 1998 SEBI condemned Sterlite for insider trading – Praful Bidwai wrote in Frontline “the greatest indictment by any statutory body yet of corporate malfeasuance in the stock market” . sterlite was banned from accessing the market for two years ; another four brokers were found guilty.
Aggrawal had collaborated in the share price rigging with “promoter” called Harshad Mehta . Mehta offered hid dubious services to companies of precarious financial standing including sterlite.
The Indian version of “enron scam” was done by Harshad Mehta with market manipulation by creations artificial market boom and eventual implosion of the investments with help of three Indian companies like BPL, Videocon and Sterlite and barred from accessing capital market for four , three and two years respectfully.
Now Vedanta is ostensibly controlled by Sterlite industries of Anil Agrawal as NRI based in London.
In 2003, sterlite sales rose 14% its export turnover grew three fold (by 201%) , tax provisions tumbled by 84% became the increase in exports enabled the company to benefit from tax breaks on export profits.
The news paper “telegraph” claimed there were documents showing that Balco produced special light weight aluminium alloys used in India’s Prithvi and Agni series of intermediate nuclear missiles and rocket components. Balco allegedly supplied the casings for india’s nuclear test of 1998. The company was “bound by a supply –and- production agreements with the department of defence supplies to keep this technology secret” “the agreement ( s.no. 1(3)/90/T(SI)/CPO (VG)-1645 ) bound the secrecy. Butby selling to sterlite , details of the technology might be leaked to outsiders.
Opposing Balco deal nearly seven thousand workers came to the street in Chhattishgarh and Mr. AM Ansari working president of Bharat aluminium employees union (CITU) was dismissed by sterlite “for bad behaviour”.
9.3 Rio Tinto (RTZ)
RTZ : British company TRZ now controls a one thousand square miles (2590 sq km) mining lease over lands that were once the largest aboriginal reserve in eastern Australia – lnads where aboriginal people still live and were hunting and gathering.
The aboriginal people in the 1990s still hunt and gather on lands adjacent to the mine they still struggle to keep their culture to survive.
Albert charathun a wik tribe said “they never asked us for this land. This is our forefather’s land….we can not give away our land . it is not well for this country to be destrouyed and given away…we are tryng to save this country for our children to help them stand firm and strong”. Mabel Pamulkan “from generation to generation it will be our land. God has given it to us. We thank those that stand behind us for our land.
In January, 1996 the Australian federal court ruled that the wik people retained no native title rights that all their rights to there tribal to their thribal lands had been extinguished when the crown , the Australian authorities awarded mining or pastoral leases to white people. RTZ said “right to land depends on the ability t defend it.”
10. Aluminium and war :
In India , after Iraq war and Afghanistan war a number of bauxite mining and alumina MOUs have been signed with Orissa , Jharkhand, Chhatisgada states. The MNCs are like Alcan, Alcoa, BHP Billiton and its joint partners like Vedanta- Sterlite, Hindalco and L&T.
Since world war one the aluminium companies have felt that their future is very much linked with the war. ‘It was during the first world war that the aluminium companies came to realize that their fortunes were very closely linked to the production of military materials.
It was during the First World War that both Alcoa and Alcan companies came to realize that their fortunes were very closely linked to the production of military materials. US capacity, mainly supplied from Alcan and Alcoa , jumped from 40,000 tons per year (tpy) in 1915 to over 60,000 tpy in 1916. By the time US entered the War in 1917 over 90,000 tpy(tons per year) channeled into the aircraft industry alone. By 1918 the very strong relationship linking the aluminium industry to the arms industry had been well and truly established. Other European countries like German, France, Italy took interest in mining bauxite and establishing smelter plant. This era helped the major aluminium companies like Kaiser, Reynolds (in US), Alcan ( Canada) , Alusuisse and Pecheney ( Europe) to grow. Because UK has no such bauxite mine, it started relying more on Alcan.
“The war itself led to a dramatic expansion of capacity far in excess of normal peace time requirements. In German, in particular ‘the decision to enlarge the aluminium capacity….was part of Prussian military policy of autarchy. World war one brought the German aluminium industry into a significant world position .” The Tariff Commission report on “ war changes in industry series” in US observes the same. Since then the MNCs like Alusuisse and Pecheney, Alcoa and Alcan , Kaiser and Reynolds are ruling the roost in aluminium sector.
But when Alkansas mine in US started depleting just first world war and similar situation happened in Europe (except France) these imperialist countries started searching bauxite in colonial countries. The war situation gave further edge to the monopolistic tendencies inherent in the industry forcing companies to make resource accessibility as wide, and as exclusive, as possible. For this Guiyana, Jamaica, Ghana and Surinam were the target. When bauxite was discovered in Jamaica , within safe distance of the US, Alcoa backed by US government monopolized the high- quality deposits. Bauxite was also being supplied almost tax-free to ALCAN from Surinam (another colony of UK) and then into aluminium to UK. Ghana was another supplier of bauxite in among African countries to imperialist countries more particularly to US. US production of aluminium increased from 146,000 tons in 1939 to 693000 tons in 1944.
Dewey Anderson an US government aluminium expert just after second world war wrote “ Aluminium has become the most important single bulk material of modern warfare…..No war can be carried to a successful conclusion today without using and destroying vast quantities of aluminium …..We must plan the aluminium capacity available to the whole free world of nations strictly in terms of this awful prospect.”
This was during the Korean war, when the military demand for aluminium was soaring. During this period Anderson argued that the US must stockpile much more aluminium for war, particularly for its air-force; that the cost to the US economy and environment was too high to produce more within the country; and that more should be imported from Alcan, which was then constructing a huge new smelther on canada’s west coast.
Aluminium’s “strategic” value to the arms companies –to America’s “permanent war industry” in particularly, which Eisenhower called its “military-industrial complex” – is obviously a key reason that the real costs of producing aluminium are hidden and transferred. Britain too, while closing down most of its manufacturing industries during the Thatcher Era ,kept “aerospace” or “defence” as a cornerstone of its economy, as most lucrative and “strategic” sector. (Harold Wilson pushed for a new generation of smelters in Britain, among then the nuclear – powered smelther at Anglesay in Wales. Those in Scotland are run by ALcan.
One reason for aluminium’s strategic value is thermite , a little known invention at the dawn of the 20th century in 1901 , that virtually defined the violent course of the 20th century. While smelters require huge supplies of electricity in order to split aluminium from its bonding with oxygen in molecules of aluminium powder. When the fuse ignites, the aluminium leaps to the high temperature of its “heat of formation” to rebond with oxygen , making the exploision huge. This was the basis fo the first world war hand grenades, second war incendiary bombs and napalm, and the “daisy cutter” used by American plaes for ‘carpet bombing” from the Korean and Vietnam wars to iraq. Aluminium is also basic technology of nuclear missiles under fusion process.
Now the aluminium can spontaneously combust at the nano scale and could be used in rocket fuel ( Steve Jurnetson, “transcending Moore’s Law with molecular elecronics” Nano technology and business journal Vol 1 No 1).
As per the recent news in Washington post the pentagon has increased its aluminium requirement upto 17% from previous year from the developing countries.
“Guyana’s bauxite was the raw material base for the burgeoning power and position of Alcan …..especially during the period of world war two. Guyana’s bauxite , therefore, contributed markedly to the victory of the Anglo-American power system over the German-Japanese one’’ (source : N.Girvan wrote in his article, “Corporate imperialism : conflict and Expropriation,” published in Monthly review press , new york , 1976). Guyana presents perhaps the best documented example of how these multinational companies have undermined political independence in bauxite rich third world countries and subordinated these countries to the accumulation model of Western industrial capitalism.
Although the aluminium percentage in war-planes has diminished , the complexity of aluminium alloys used has increased, alongside a new range of composite fabrics blending oil or plastics with aluminium. These alloys and composite are crucial for aircraft, missile technology, and satellites, as well as war-ships and tanks. ( Natham Hodge in the Financial times 30 june 2005 “Pentagon studies China’s influence on the price of weapons metals” mentions aluminium with titanium and steel as today’s key weapons metals. Balco supplied aluminium to India’s nuclear weapons programe. (Details of Balco’s deal supplying lightweight aluminium alloys for india’s Agni and Prithvi nuclear missiles were published in the Telegraph on 2/3/2001.). alcan has long supplied to UK weapons industry. Graham gave the percentage of aluminium used in the arms industry at around 30%( 1982 page 250).
11. Aluminium and Environment
Hindalco smelter and refinery are in the IAI ranking of Best safety performances for the year 2000. in additions , Indal’s hirakud smelther has also been recognized by the IAI as one of the best in safety performance Benchmarking during 2000.
But Indalco in Sambalpur of orisa smelter caused widespread fluorosis among local villagers. In 1990, scientists from G.M. College of Sambalpur examined villagers and found that an astounding 67 percent of men and 64 percent of women suffered from fluorosis. People aged 12 to 19 were most severely impacted. The researchers also found that the water and vegetation in the areas were "highly contaminated by fluorides." (U.N. Samal and B.N. Naik, "Dental fluorisis in human beings around an aluminium factory of Orissa," Journal of Environmental Biology, V. 11, No. 4, Oct. 1990)( source : aluminium’ dark side)
As per centre for international environment law report “ a bauxite waste site leaches heavy metals into the soil and ground water and the existing factory emits dust, SO2, NOx , CO and flurides far in excess of plant area and EC air emission standards off side testing reveals high concentration of benzopyrene, arsenic, molybdenum, copper , nickel and chromium. Health problem including congential defects , allergies and thyroid and lung diseases are on the rise through out the region.
The Friguia mining operations in Guinea , according to Norwatch has generated “an enormous red mud deposit, which covers on entire valley.
Redmud residue and caustic soda from the alumina refinery in Yirrkata ( Queensland) was found poisonous to fish.
A study Jonquirre smelter workers in the late 1970s found that 73 workers had bladder cancer , 60% more than was statistically likely. It increased ;upto 130 by 1990.
Also according to International Aluminium institute of the land disturbed each year by bauxite mining 76% is forested, 19% agricultural nd pasture and 2% shrubland. IAI reports “of 1591 hectares mined in 1998 , 80% was wildlife habitat , 175 hectares was tropical rainforest”.
In 1998, villagers petitioned against Alcoa in Surinam that “ our agricultural land and houses have been destroyed without any compensation”. “our river has been polluted so badly that we can no longer use it- turning down it into orange brown colour , health problems have occurred destruction of the forest and pollution of the river has also substantially limited our ability to hunt and fish on our lands.
Nalco aluminium smelter in angul , Orissa is the source of sever fluoride contamination more than 220 tons of fluoride into ground water and surface water according to 1992 tests run by the Orissa state prevention and control of pollution board. Many villages have reported brittle bones, tooth and gum diseases , lumps of dead skin , cattle number decreased from 3000 to 100 in a decade.
An MIT study found that about 1% of global emissison of anthropogenic greenhouse gas emissions by this aluminium industry.
The aluminium production cycly , including mining processing refining and casting , produces about 12 tons of carbon dioxide per ton of aluminium producers.
In 1999 the Australian institute an environmental group reported that shutting down the country’s smelter would be a net economy benefit for Australia. It claimed that subsidies of A$410 million for inexpensive energy and A$ 430 million for “unpaid” green gas emissions outweigh the smelter’s economy contribution. A recent british govt report costs carbon emission at $ 56-225 per ton of CO2. so at an average $ 700 should be added with the cost of aluminium.
Conclusion
Reference:
1. Double Death : aluminium’s links with genocide by felix and samarendra das (unpublished article)
2. mining in Africa : samir amin
3. Gandhamardan mines : a report by PUDR 1986
4. Aluminium industry and third world countries by Graham…
5. ecology debt: by Sanjay Khatua
6. Taru report on UAIL on kashipur
7. Bauxite mining report : IPT report
8. Behind the shining : aluminium’s dark side
9. Great aluminium robbery : Rio Tinto
10. IMPACT OF MINING SECTOR INVESTMENT IN GHANA: A STUDY OF THE TARKWA MINING REGION (A DRAFT REPORT) PREPARED BY Thomas Akabzaa and Abdulai Darimani
1. Introduction
A GREAT debate is going on now a days in India on extraction of bauxite and use of aluminium. On the one hand tribals , dalits and peasants have stirred up a hornet’s nest against capitalist development projects of the democratic governments. On the other hand the same government is characterizing those unrest as ‘threat’ to democracy and is taking sever repressive methods to quell the opposition . why this unrest? Why aluminium is so precious? Is the government right? What the community wants to speak? There are innumerable questions come due to these conflict of interests. It is true that this attempt of bringing a booklet on aluminium’s dark side is in context of Kashipur, Lanjigada and many other struggle who have opened up this debate because of their resistance to these projects.
The purpose behind writing this booklet is to bring the debate against aluminium to more people and raise a support against more extraction of bauxite as well as more use of aluminium. As we know in this present capitalist society there could be no alternative of smelting aluminium from bauxite in an indigenous way because of lack of technology and its subsequent market. For any further production of aluminium, development of capitalism is essential which is equally oppressive.
On the one hand there are conglomeration of corporates who wants to make profit out of aluminium industry because it is precious. On the other bauxite has specificity that it has water, that is, where ever bauxite there is perennial streams. I saw it in kashipur, Lanjigada, Damanjodi and also in Paikamal area. As we know where is river there is civilization that means civilization ‘grow’ on the bank of the river. So like tribal society emerged on the bank of those streams. There are innumerable numbers of villages of tribals and dalits who reside on the bank of those rivers or streams in which water comes due to bauxite.
Here I have tried to highlight the consequences of mining bauxite without going to its technological side just from a human perspective. I hope I will get comments, their experiences, new ideas, specific plans and programes while reading this booklet. That will also help to carry this debate and struggle forward.
2. MNC’s Monopoly in aluminium sector
Presently few MNCs are ruling the rust in aluminium sector. They are like Alcoa (US), Alcan(Canada), BHP (UK), Kaiser and Reynolds (US), Alusuisse (Switzerland) and Pecheney (France). More recently Pecheney was merged with Alcan.
By 1949, 45% of the world aluminium capacity was under government control, 46% was controlled by these above few companies( with each being in monopoly control of its own industry in France, Canada, Switzerland, UK and US) with remining 9% being in hand of 17 small independent producers. By 2002, because of reform proposals the control of MNCs in above world market has increased from 46% to 70% with reduction of government control.
3. World of Bauxite
Nature must have taken thousands year to form bauxite beneath its earth. This bauxite is found mostly in tropical regions like South America , Africa, Asia and Oceanic countries. These locations are like Jamaica, Brazil, Surinam, Venezuela, Guyana, Guinea, India , China , Australia etc.
More than 100 million tonnes of bauxite mined each year. The major locations of deposit are found in a wide belt around the equator. Bauxite is currently being extracted in Australia (in excess of 40 million tones per year), central and south America ( Jamaica, Brazil , Surinam , Venezuela, Guyana) , Africa ( guinea) , Asia ( India and china) , Russia ,Kazakhistan and Europe ( Greece).
Actually, when A.H Hall in USA with P Herolt invented electrolytic process converting abundant of bauxite into alumina in 1888, he formed Alcoa in 1890 and did a monopoly business in US and outside with its ‘patent for 25 years under US rule’. Before that aluminium was costly in production for this was used as ornaments only. In early twentieth century Alcoa branched off into a Canadian North Aluminium Company Alcan with 100% owned subsidiary of former, just to avoid the strict regulation of US government and to continue ‘unfair trade practices’ outside US. The second world war created environment of rising other MNCs also
When alcoa was formed in late nineteenth century they got Arkansas mines in US for 25years. Due to availability of aluminium from bauxite and its proximity to war weapons (during first world war) world extraction of bauxite rose from 24000 ton per annum in 1908 to 1,20,000tpa in 1915 and then to 2,70,000 in 1917. Now nearly 1250lakh tons of bauxite is extracted at world level.
But when Alkansas mine in US started depleting just after first world war and similar situation happened in Europe (except France) these imperialist countries started searching bauxite in colonial countries. For this Guiyana, Jamaica, Ghana and Surinam were the target. When bauxite was discovered in Jamaica , Alcoa backed by US government monopolized the high- quality deposits. Bauxite was also being supplied almost tax-free to ALCAN from Surinam (another colony of UK) and then into aluminium to UK. Ghana was another supplier of bauxite in among African countries to imperialist countries more particularly to US.
The independence movement in African countries forced the developed countries to search for the alternative. The production of bauxite in Ghana in 1957 was 911973 Mt. and suddenly fell down in 1958 in post independence period to 180480 Mt. This continued another two decades. During this period these African countries gave a heavy price. From toppling Nkrumah from power in Ghana, threatening Manley in Jamaica and murder of Walter Rodney a political activist of Guyana in 1980 was part of the MNCs role in third world countries.
The recent Structural Adjustment Programs in third world countries in direction of World Bank and IMF opened more bauxite mining for developed countries. Philipines, Indonesia and India are examples of new age of mining by MNCs. The aluminium sector which was in strictly under state control in India first time went to relaxation to private sector with Foreign investment mainly from ALcan, Alcoa, Pechiney etc and a new player like BHP Billiton of UK and Australia also.
4. World of aluminium
Aluminium production consists of three process: mining the bauxite, refining the bauxite to alumina and smelting alumina to make aluminium. For producing a ton of aluminium needs two tons of alumina and each ton of alumina needs three tons of bauxite. In the bauxite soil presence of less silica more alumina content is accepted as best in quality. In India in most cases silica presence in 2-3% and alumina is 46-48%. This is why most of the MNCs are making queue to exploit. Another advantage is its cheap labour and low cost of electricity. This is why producing alumina in India is cheaper nearly 25-30% in comparison to any developed country as per the director of Vedanta (UK) limited.
But when one ton of alumina goes out of three tons of bauxite, it leaves two tons of red mud at the refinery plant site. Red mud contains iron oxide, silica, titanium zinc, phosophorous , nickel , vanadium and compound formed by adding lime to refining process. ( more on health and environment chapter).similar case happens when one ton of aluminium goes out of two tons of alumina leaving another ton of red mud at smelter site.
Aluminium production needs more energy. To produce a ton of aluminium a smelter consumes at least 13,500 kilo watt hours . it also produces very high emissions of carbon dioxide : an average of 13.1 tons per ton of aluminium produced.
USE of aluminium is varied. Because of its light weight and heat resistant it is used in electric , infrastructure, transportation sector etc. But most dangerous is its use in for military purposes including for bombs which should attract public attention. Secondly, the way world demand is rising on aluminium , that is in coming years a lot of aluminium will also be exported , its expected production would jump to six-fold but will it be replaced?
Mining is the worst sector for foreign investment since minerals are exhaustible. Once the mineral ore get exhausted the companies will go away leaving the area with no resources rather with pollutants. The MNCs would grow but the people would suffer.
5. Developed countries conspiracy
Samir Amin said “ A long period of technological monopoly enabled these enterprises to acquire hydroelectric facilities and bauxite deposits while increasing their production scale, when their monopoly of technology ended , they found themselves in a position of ecoanomic monopoly, based on increasing returns to scale”. The same thing happened in case of Alcoa who enjoyed 25 years patent as per US laws and total hegemony even after post first world war. But to save it from financial irregularities as well as to continue its clandestine operation Alcan was formed as a subsidiary of Alcoa in 1907. Then Alcoa did its outside business in Europe and Paul Heroult took his smelting process to Switzerland as hydro-power potuntial. This enabled corporates like Pechney, Alusuisse and Kaiser also to grow.
When Arkansas mines in US was finished and European nations faced crisis of bauxite many alumina refineries have moved from the western world to the bauxite mines –specifically for Australia, Brazil, Venejuela and India- found it more economical to convert the bauxite to alumina on site rather than incurring high transport costs- according to Africa resource group. Since then monopoly of technology is the determining factor even today. Other developing countries who opened up their bauxite mining and established the alumina plant were the worst sufferers. The price of bauxite was set by the parent company according to its own internal price situation, unlike the price for aluminium which was set cooperatively by all the producers.
The third world countries have not got yet the selling rights and fixation of price in the international market even though all most all bauxite comes from these companies. It is believed that now National Aluminium Company (NALCO) who got technological support from Pecheney ( France) is exporting its production to the later for selling in the international market. Interestingly more recently Alcan took over Pecheney in its submerger plan and in a way Alcan is enjoying the rights over Nalco’s production. The same Alcan’s subsidiary Indal was operating it alumina refinieries in Belguum (Karnataka) and Muri (Bihar ) and aluminium refinery in Sambalpur district or Orissa. This alcan is coming to Kashipur also.
6. Economic reforms for bauxite mining MNCs
Economic reforms in India created opportunity for growth of mining industry particularly for bauxite industries. The National Mineral Policy 1993 opened up bauxite mining to foreign companies with an investment upto 75% (from 25%). Earlier where public sector companies like Balco, Nalco, Malco were the major players of bauxite extraction and Indal and Hindalco were other players in refinery projects there Alcan, Hydro, Sterlite-Vedanta, Billiton etc have entered into the scene.
India has 2911million tons of bauxite against world deposit of 23200million tons. It is mainly in states like Orissa, Chhattishgarh, Jharkhand and Andhra Pradesh. Orissa only has 70% of total national deposit which is again 13% of world deposit. So in a sense Orissa is more rich in bauxite. This is found mainly in districts like Koraput, Bolangir and Kalahandi district. The present government in Orissa has invited Hindalco (Birla group), Alcan( Canada), Vedanta( UK), BHP Billiton (UK), Rio Tinto(UK) etc. with an investment of nearly 53,000 crores of rupees for extraction of a total deposit of 7330 lakh tons of bauxite deposited in these districts
In 2002, India has surplus of aluminium like its total production was 6.5million tons where as its domestic need was 5.5 mt and only Nalco then was producing 4.2mt(source: survey of Indian industry, 2004 the hindu publications). But most of the new projects except UAIL in Kashipur was signed in the same year.
In Chhattishgarh when Balco was disinvested to Sterlite with 49:51 share holding agreements it was apprehended that under valuation has made. Now CAG report has also vindicated the deal calling it as “big ticket”
Previously, East India Company, Hudson's Bay Company and many American companies chartered themselves as corporations and through these Europe and US’s industrialisation was built on the backs of colonies in Africa, Asia and Latin America. Now Developed countries want to pass their environmental burden to these countries. Japan has reduced its domestic aluminium smelting capacity from 12 lakh tonnes to 1,40,000 tonnes and now imports 90 per cent of its aluminium. US consumes 53 kg of aluminum per head in a year (Indian consumes 300gm ), while it has no bauxite mine.
Firstly the establishment of colony helped the developed countries to siphon off the resources under their condition. Now the structural adjustment programe is helping the same earlier colonial countries to extract bauxite and do alumina rather on more stringent conditions than earlier one.
Many alumina refieneries, in these years, have moved from western world to the bauxite mines –specifically for Australia, Brazil, Venezuela and India- found it more economical to convert the bauxite to alumina on site keeping the patent rights of technology as well as fixation of price in international market in their fold. The developing countries even after so many years of supply of bauxite and refinery plant lacks technological know how. Economic reforms in developing countries under guidance of world bank and IMF has made this extraction easier.
7. Resistance to big projects :
7.1 Kashipur : Utkal Alumina International Limited (UAIL) is a joint venture of Indian company Hindalco (55% shareholdings) and Canadian company Alcan (45% shareholding). Previously, TATA, Hydro (Norwegian company) and ALCOA (US company) were also a part of this project. These companies later withdrew in face of popular protests. The total cost of the project is estimated at 4,500 crores. 198.4 million tonne bauxite would be sourced through open cast mining from Baplimali of Maikanch Panchayat. Alumina would be extracted from the mineral in the alumina plant near Kucheipadar. It is a 100% export oriented joint venture Alumina Consortium. Besides under the project annually 8 million tonnes of bauxite would be extracted. Simple calculation suggests that within 24 to 25 years the entire hillock of Baplamali would be reduced to a flattened base, its very existence would be beyond recognition.
On the other hand UAIL company report says that more than 1500 persons would gain employment under this project. It further says that most of the recruitment would require personnel with technical, project specific skills. In this regard, Chief Managing Director of UAIL Sri SP Sawanta said addressing a government seminar (organised by UNDP), "the kind of people company requires would not be found in Kashipur. The non-technical staff recruitment would be made of 400 persons".
Acording to news reports from the company, the employment, in this case would be given to the evictees that include 147 families from the 3 villages of Kendukhunti, Ramibeda and Talakarol. UAIL is refraining from reaching an agreement with the potential evictees families even. It implies that 24 more villages that would lose their land owning to this proposed project would not get any employment opportunity.
It is certain that directly or indirectly nearly 22,000 people from 82 villages would be affected due to this project. According to PSSP (who is spearheading the movement) sources by this project nearly 2500 people around proposed plant site would be affected and for Baphlimali hill where bauxite mining take place would affect another 42 villages of three grampanchayats ( Kodipari, Maikanch and Chandragiri GP). But one reports collates the estimates of project affected people from various sources : 750 which is the company Norsok Hydro’s estimates, 3500 which is UAIL estimates and 60,000 which is estimated by the Norwegian Agency for Development Corporation speaks.
After UAIL (who would supply its all production to Alcoa of US), Vedanta – sterlite company who has direct negotiation with Alcoa speak in its project report that this mine in Niyamgiri , in Lanjigada of Kalahandi district,would continue for only 25 years. Larson and Tubro with Arab Aluminium Company was invited to invest 10,000 crores of money in another side of Kashipur. They will mine bauxite from Srunger area and will have alumina plant at Sikarpai area in Kashipur block. Next, in Laxmipur block in Koraput district (very near to Kucheipadar area) Hindalco- Birla company would invest 10,000 crores to mine bauxite from Kodinga mali, will establish alumina plant at Kansariguda, and will collect water from Barigaon area.
The same Birla Company will mine bauxite from Deomali area of Similiguda block of Koraput district. And after 30 – 40 years bauxite will be finished up and all of them will leave the area. But they will leave a number of dry streams, dry rivers, chemical red mud ponds and ash ponds. It will make the entire area poisonous. It is due to the bauxite that the local streams originating from the hills are perennial such as the the rivers Indravati, Bansadhara and Nagabali. Due to this, people in these areas get water round the year and it helps them in cultivation. This will go away from them.
Struggle against UAIL was started when people came to know about the project. People in the area physically were obstructing any construction work of the company and for which it could not able to start its work. More recently situation has been changed a lot. Kucheipadar, a small area in Kashipur block of Rayagada district came under terror by the state government in 2005. During the period the police fired blanks thrice; tear gas shelling, lathi-charge, random detaining of people from roads, weekly markets, river bank, and even their own farming land by local police were rampant. Fifty two people were arrested that year in and around Kucheipadar. The C.R.P.F., Indian Reserve Battalion, Orissa State Armed Police were all used to repress the people. The repression continues even today. This is a continuation of the repressive state actions of 16th December, 2000 when three adivasis from the region lost their lives to police firing.
Several human rights organizations including national tribal commissioner condemned such inhuman activities for a private project. The Interim report of the house committee on environment of the Orissa Assembly, 2005-2006 visited the area in September,2005 presented to the assembly on the 5th April, 2006 has highlighted some of the gray areas. As per the report ‘the environmental clearance of UAIL has expired in 2000. They have not received a renewal of the environmental clearance from the MOEF, GOI’. But even after UAIL is determined to start its work and has occupied a portion of land already
UAIL proposes to manage dry red mud and ash pond stacking them in large open ponds.this was cause nearly 150tonnes of sodium hydroxide to be leaked in the soil every day. This in turn would raise the PH level of soil in the region much beyond acceptable limit leading to sever environmental damage.
According to UAIL officials 17 0000 cubic litres of water needed daily for mining and processing. UAIL only has access to two streams the Sana nala for its water requirements and the Bada nala for its affluents discharge. Will it be sufficient ? what will happen to local people?
The power requirement of 80mw will require 2800-3000 tonnes of coal per day. This is expected to generate 900- 1000 tons of ash per day. The captive thermal power plant will produce waste in the form of ash to be disposed of in an ash pond located 4.5 km from the refinery. Ash ponds of thermal power plants are notorious for the pollution they generate. The promise to keep the pond wet is rarely kept as firmly as it is made and how many and which villages will be affected depend on wind direction and force. In fact, UAIL had request-ed that it be allowed to store the red mud and ash in dry form, rather than liquid form, which it argued was a more environmentally sound method; however, its request was rejected by the Ministry of Environment and Forest. In addition, the storage area for lime is very close to a stream, which increases the risk of contamination.
Finally, there is understandable concern that the 20 km of land allocated for the disposal of wastes is not even close to sufficient to store the amount that will be generated by the project. Dr. R.C. Das, Chairman of the OSPCB stated in a 1996 report that, "for any alumina refinery or substantial expansion of existing refinery, red mud will be allowed to be disposed in dry\semi solid form and minimum land of 200 hectors per million tons per annum of alumina produced must be made available." If UAIL is to comply with these guidelines, then 20 km falls far short of this minimum. UAIL has also not put forth a plan for waste disposal if the allocated waste disposal areas reach capacity, as they surely will. This has led to suspicions that they will resort to the unethical and dangerous. If this happens then this would drastically alter the pH balance of the soil, and result in a significant decrease in vegetative growth and land productivity. Formerly fertile lands that sustained local communities would become agriculturally unviable. And also this would damage the ecosystem of the area causing widespread devastation in the area.
According to the environmental clearance given by the government the company does not have to take care of overburden dumping for the past five years. It is expected that the overburden will be dumped on the slopes of the mined area leading to siltation of streams, damage of slopes and cultivable lands.
7.2 Vedanta in Lanjigada
Today Vedanta of UK in Lanjigada of Kalahandi district is the major player apart from UAIL. Vedanta is interested to invest 4500 crores in extracting bauxite and setting up of alumina plant in Lanjigada area. The Ministry of Environment and Forest of Government of India , in its letter dated 22/09/2004, has given environmental clearance to the 1.0 MTPA Alumina refinery and 75 MW Captive power plant of M/S Sterlite Industries (India) Ltd at Lanjigarh. The company is mobilizing fund through London Stock Exchange in name of Vedanta. Also Mauritian firm Twinstar Holdings plan to increase stake in Sterlite company violating its agreement with Government of India in case of transfer of BALCO. For plant 1789.54 hectares of land is required out of which 1109.41 hectares private land. It would employ 250 people directly and 500 people indirectly according to its project report. Because of plant it would displace nearly 60 families of two villages and would affect 302 families of 12 villages of two panchayats.
It would mine bauxite from Niyamgiri hill. The hill has 7.3 crores of tons of bauxite. The company agrees that the project would last for only 23 years. Niyamgiri hill range stretches up to 1073.4 hectares of 508.638 hectares are reserved forest area. The company project report speaks that mining would take place in the reserved forest area also. Because of intervention of Central Empowered Committee constituted by Supreme Court the mining lease to Vedanta- Sterlite has not yet given
According to the reports furnished by Vedanta Company of Sterlite only 750 persons will get employment. However, the project would affect more than a lakh people whose subsistence is crucially based on the Niyamgini, Nagavali and Bansadhara rivers. In company's parlance, the community's depending on forests and rivers for their survival are not even the least affected. To the extent, it maintains that those who lose their trees are also not affected.
The Central Empowered Committee's (CEC) report (constituted by Supreme Court ) on
Vedanta/Sterlite's bauxite-mining project in Niyamgiri hill in Lanjigarh broadly outlined its potential harmful effects. The finding of the CEC's report has weight and relevance for the UAIL project. The alumina plant and the mining project linked with it will have serious adverse effect on the flora and fauna due to mining, overburden dumping, construction of proposed road through the dense forests, liquid and gaseous effluents emissions, bright illumination, blasting with explosives, drilling and resultant vibration and dust, operation of heavy loading and unloading equipment, pollution, etc.
More recently in Lanjigada of Kalahandi district 34 tribals were arrested in April 2006 because they opposed forceful occupation of their land by Vedanta Alumina Company of UK. They were demanding either land or job against their land. Despite three adivasis having been killed by private security officials and drivers of Vedanta company in separate incidents over two years, no murder case has been registered by the local Lanjigada police station. In 2002 nearly 19 activists were arrested in a false case because they were opposing Vedanta.
FROM January 23 to January 31 2004 60 families of two villages Kinari and Borebhata and 8 families of Sindhibahali were evicted forcibly and their houses were bulldozed by sterlite.
7.3 Gandhamardan: Gandhamardan mines is situated in Paikamal area in newly Baragada district. In 1971 the government of India officially announced the existence of bauxite deposits in Gandhamardan and newly formed Bharat Aluminium Compnay (BALCO) a government undertaking got the mining lease in 1981. After four years that is on 1985 Balco started its work creating infrastructure facilities for mining. Balco has in mind to supply bauxite from Gandhamardan to its Korba ALuminium complex.
Gandhamardan hill range forms part of a rich evergreen forest. It is famous for medicinal plants, for two temples ; Harishankar and Nrushinghnath. Around the hill several streams are there including three major streams like Kapildhara, Khandiharan and Durgei Jharan are part of the local lifes. When mines was started it affected those streams and that sparked voice against the project. Capacity of the mali is 213million tons.
In 1986 people started opposing the project and during a year or 987 people including 479 women and 51 children have been arrested as per PUDR report. Later due to resistance Balco was forced to leave Gandhamardan. But now Nalco another public sector company is interested to take over the mining and against it struggle has been started.
8. Tips of the ice berg
8.1 Experience of Nalco:
The National Aluminium company limited is an integrated multi-locational aluminium company incorporated in 1981 as a public sector company to exploit bauxite from Panchputmali of Koraput district in Orissa with a capacity of 4.8mtpa to last for 75 years to finish entire deposit of 370million tons the hill has. The capital then was Rs.1300 crores. Technical know-how and basic engineering for the project were supplied by M/s ALuminium Pecheney of France with an agreement to supply more than half of its aluminium to the above company.
Nalco has two units; one is refinery plant at Damanjodi and another is aluminium smelter at Angul. A fully mechanized open cast bauxite mine has been operating since 1985. Nalco produced 28,22,464tonnes of bauxite ore during 1999-00. It produced 8,86,000tonnes of alumina powder during same year and out of which 4,79,620tonnes were exported. Nalco is very soon going for second expansion upto 15,75,000tonnes per annum for which wants to occupy Gandhamardan mines of Baragada district because presently panchputmali would be sort. The plant has a captive power plant with a capacity of 55.5MW now for which coal is supplied from Dhenkanal district of Orissa. To set up the mines and refinery complex , the company had acquired 7419.8 acres of land ,out of which 4352 acres were private lands. A total of only Rs. 1,48,73,474.52 were paid as compensation for patta land alone at a rate of Rs. 2000 per acre and Rs. 150 for each tree.
The Nalco operations in Damanjodi and Panchputmali hill have affected directly 26 villages and more than 690 villages indirectly. The project displaced 597 families ; 254 were adivasis, 56 dalits affecting nearly 5000 people. In 1995 after 10years of mining several villages around panchputmali like Bhitara Jholamuha are getting notice from the company to evacuate because of siltation.
Waste water is released into Kolab river by a drain passing through 9vilalges. Villages downstream to the plant have been severly affected by the pollution of plant effluents in the river and streams. Even though Nalco factory has an ash pond and red-mud pond, effluents are being discharged into the river regularly, causing cattle deaths and crop loss.
People compalained on a personal visit to the area in 2002 said that of 300 acres of cultivable land is affected due to the effluent discharge causing drop in harvest. Germination problem of miles, ginger and tumeric is perceived in the same year. Cattle and goat are dying of dysentery.
Out of 597 families displaced 441 of them have been rehabilitated in the Analabadi colony , for which Analabadi villages were deprived of their land. 156 more houses were built, 352 of these families have been given one job each viz. 35 dalits, 149 adivasis and 168 other casts. Eight of the employees were women.
When Nalco was started people had accepted their offer easily since they were promised jobs and good relocation, including money for their land. Joint families got 10’x6’houses with no facilities and no land. The people of Kalahandi, Lanjigada had been brought to the NALCO by Sterlite bauxite mining company in 2002 for a visit. Bhima Majhi of Niyamgiri Surakshya Samiti, Lanjigada, said the houses given by NALCO are suitable for pigs to stay not for human beings. Raily Gouda, an oustee who had a job in NALCO, Orissa, said to the people of Lanjigada, "It is the fault of our father and forefather who agreed to leave our land. Otherwise if it had been today we would not have left our land". Before Nalco , as per 1981 census 60% of the population there were adivasis. After Nalco less than 12% of the adivasis people remained (in Damanjodi area as per 2001 census) since most had to move out mostly to Nabarangpur district and adjacent Andhra Pradesh for other vocations.
WHEN the decision was taken to displace the people there was no definite commitment either to resettle them in a humanly acceptable manner or make them share in at least a few benefits of the project in the form of jobs and contracts. It was found that the people who have depended on forest for centuries are deprived of the sources of their livelihood with no alternative means of survival. In most cases compensation was low and it was inadequate for them to begin a new life. Particularly the landless mostly dalits lose their livelihood but are not entitled to compensation because land does not belong to them. Later Nalco did plantation of thousand of trees in community land under its environmental regeneration scheme but it is again the property of a few individuals or of the state. landless dalits are thus deprived of the infrastructure that was sustaining them
Later many men try to cope with the tension and disruption caused by displacement and a new economy grew up in the area. Modernization and cultural change imposed from outside did greater deterioration of the status of women. Wife beating , gambling which was rare in tribal society has become common site. Literacy is low in among tribals, dalits as well as women. A personal visit to the area in 2002 saw 66 widow whose husband were in job are managing their food working as made in others houses. Nalco is not interested to give job twice and these people left no land with them.
In NALCO open cast mining is changing nature water cycles by soil compressing and breaking up of top soil. Large scale removal of vegetation has a negative impact on the fragile eco system. This would lead to increased erosion and long lasting impact on local water resources.
Now the workers of NALCO have again come to the streets to protest against the privatisation plan of the government of India. The oustees who got jobs would be the first victims after privatisation because they still enjoy the lowest ranks in the company. The government proposes to reduce its holding in the 2,30,000 tons capacity Nalco to 26% from the current 87.15 % . it had earlier divested 12% of equity.
9. Will they bring development : True history of few corporates
9.1 Alcan is more recently part of Utkal Alumina Internaitonal limited with 45% share holding with another Hindalco with 55% in Kashipur Orissa. Since the MOU has been signed in 1993 Orissa government all the time has been saying that Alcan with Hindalco will bring development to starvation death prone Kashipur as well as Poor state Orissa. In this perspective it is essential to look into the past record of Alcan on which a democratic welfarist government relies more bringning in development.
Alcan was earlier a subsidiary of Alcoa which was formed in 1907 and became independent from later in 1928. The history speaks that Alcoa of US initially engaged with so much fraudulent activities that to avoid from US laws it went for division into ALcan into a Canadian company. The intention was also “to take advantage of that country’s cheap hydro-power potential.
Since then alcan is operating in 56 countries with an workforce of 73,000. In 1960’s it also tied up with Indal to establish aluminum smelter at Sambalpur, in Orissa.
Alcoa earlier after formation of Alcan, exerted pressure during first world war period on US government to threaten Britain with the cutting off much needed munition supplies unless leases taken up by Alcan in British Guinea (a caribbian country colony of UK) is approved. By this Alcan started its work and in 1928 it became independent. UK government tied up its aluminium requirement to be supplied from Alcan and production of Alcan shoot up and it emerged as second largest aluminium supplier after Alcoa with lowest operating cost, given cheap hydro power and cheap bauxite from British Guinea.
COMPANIES LIKE ALCAN are always looking for ways to avoid paying taxes. One way to do this is to incorporate subsidiaries inside countries where the company pays little or no taxes. Countries like this (LIKE INDIA) are known as ‘tax havens’. India is exempting income tax to any 100% export oriented projects and UAIL would be exempted from any type of income tax. By this hindalco (India) will not pay any tax so also alcan will not. But alcan will easily offshore its profit from India. And India will get zero income tax.
Leo-Paul Lauzon, who recently published a study on Alcan’s tax payment history, says that over 200 Alcan subsidiaries are incorporated in tax havens. He says that by incorporating subsidiaries in tax-havens Alcan is transferring its profits offshore where the company does not have to pay income taxes. If Alcan incorporates a subsidiary in a foreign country with little or no income taxes, the subsidiary does not have to pay taxes. Alcan is therefore legally allowed to become incorporated in a low-tax country and avoid paying taxes on foreign income. In a recent study Lauzon found that Alcan paid no income tax between 1999 and 2003. Instead, he says that the company received $140 million in income tax returns. In among it 200 subsidiaries in several countries world over in India alcan have two subisidaries like Utkal Alumina international limited (Kashipur) and Pechney alumina resources India private limited ( with now Hindalco again in Renukut, UP).
9.1.2 Alcan and weapon industry :
In 2004 Alcan’s Engineered Products Business group Aerospace business unit generated $1.15 billion in operating revenue. Sixteen percent of this total came from sales to customers in the military and space industries. This financial data is not insignificant, and given that Alcan claims to be a “key supplier to both European and North American military markets”, it is clear that the company is involved in the arms trade. Through a company acquired in 2003, Baltek, Alcan is supplying some of the world’s largest builders of military equipment. Some of Baltek’s main customers include:
Northrop Grumman – In 2004 Northrop Grumman selected Alcan-Baltek’s structural foam core material for use on its Multirole Electronically Scanned Array (MESA) radar. The radar is mounted on top of a Boeing 737 aircraft and is designed for Airborne Early Warning & Control (AEW&C).
Boeing – Alcan-Baltek’s lightweight balsa compound is used in the engine intake of Boeing's proposed X32 fighter jet.
Lockheed Martin – Alcan-Baltek supplies Lockheed Martin with structural foam core material for use in the construction of NASA’s next generation space shuttle. Alcan’s involvement with the arms industry is in contradiction of their image as a sustainable andcaring corporation.
9.1.3 Environmental track record :
Alcan has put an enormous amount of money and energy into constructing its image as an environmentally responsible, sustainable and green corporation. It has published sustainable development reports listing its philanthropic and environmental actions around the world. Through its affiliation with large international institutions, such as the United Nations Global Compact and the World Business Council for Sustainable Development, Alcan has been able to further paint its operations as environmentally friendly and socially responsible.
Alcan’s recent focus on sustainable development and Corporate Social Responsibility is a response to greater scrutiny of multinational corporations by civil society groups around the world. While Alcan has been able to position itself as a ‘leader’ in sustainability its operations around the world continue to be environmentally damaging.
Alcan operates huge smelters and refineries that release dangerous chemicals into the environment, their operations require incredible amounts of electricity from destructive hydro electric dams, and their bauxite mines employ the most damaging form of mining: strip mining. In addition, Alcan plans to expand its operations in the South where environmental regulations may be less stringent. Regardless of Alcan’s effort to convince the world that they are environmentally and socially responsible, they are a part of a very destructive industry. Apart from Alcan’s environmental impacts mentioned in the section above, other examples of the company’s track record are included below.
9.1.4 Toxic Pollution
Alcan’s Vaudreuil bauxite refining operation in Jonquière Quebec released 10,163,062 kg of toxins in 2001. This included more than 10 million kg of calcium fluoride to an onsite landfill. Calcium fluoride can irritate lungs and cause bone changes (referred to as skeletal fluorosis). The plant also released 3,236kg of benzo(a)pyrene to the landfill, a chemical known for causing cancer. In 2003 the Vaudreuil bauxite project was listed as the largest discharger of toxic chemicals by Environment Canada (as defined under the Canadian Environmental Protection Act).
In response to Alcan’s dumping of toxins Paul Muldoon, Executive Director of the Canadian Environmental Law Association said: “I take little comfort when I hear that dangerous chemicals are being buried in landfills. Sooner or later landfills leak, and people and the environment are exposed to contaminants”. Alcan’s Shawinigan factory, where the company produces aluminum cables, is Canada’s third largest source of toxic pollution. Between 1995 and 2001 the factory released 1 916 404 kg of calcium fluoride, most to an off-site landfill, 65,142 kg of hydrogen fluoride to air, and 4 929 kg of cancer-causing benzo(a)pyrene to the air”.
9.1.5 Alcan in Jamaica
Alcan opened its mining operations in Jamaica in 1953 and sold out to the private Swiss company Glencore in 2001. About one-third of Jamaica’s bauxite refining capacity changed hands during the transaction.
Prior to its acquisition of Switzerland’s Alusuisse in 2000 Alcan had plans to double the output of one of its Jamaican refineries. The purchase of the Swiss company, however, gave Alcan more bauxite and alumina than it needed. In 2001 a report on land use and forest cover determined that bauxite mining was the single largest cause of deforestation in Jamaica.
The study stated that the significant degradation of forests and watersheds occurred in mining areas in the parishes of Trelawny, St. Anne, St. Elizabeth, Manchester, Clarendon and St. Catherine. It went on to say that the most affected areas were in the parishes of St. Anne and Manchester. The parish of Manchester is where Alcan’s Kirkvine facilities were located (the site continues to be mined by Glencore and Windalco).
Porto Trombetas: bauxite mine Brazil
Alcan owns 12.5% of Mineracao Rio Do Norte along (MRN) with Alcoa (18.2%, U.S.), BHP Billinton Plc (14.8%, Australia), Companhia Brasileira de Aluminio (10%, Brazil), Companhia Vale do Rio Doce (40%, Brazil) and Norsk Hydro ASA (5%, Norway). MRN operates one of the world’s largest bauxite mines in Porto Trombetas in the State of Para 880 from the city of Belem. The region holds large reserves of bauxite. MRN’s exploitation of these reserves, which began when the mine began operations in 1979, represents one of the worst cases of aggression against the environment in this region of Brazil. Between 1979 and 1989, MRN dumped 24 million tonnes of bauxite waste (tailings) into neighbouring Batata lake. The dumping caused the destruction of a large part of Batata lake’s ecosystem. In some places the layer of bauxite at the bottom of the lake reaches a thickness of 4.5 metres.
On the hand Alcan in these 56 countries has made phenomenal growth in these years and if we go to one year of its profit. It is increase of 303% from 2003 to 2004 ( $64million to 258million ).
9.2 Vedanta :
Sterlite – Vedanta started life as a business delivering copper cables for telecommunication companies in India. From 1988, as IT became the subcontinents millennium mantra, so sterlite supreme opportunist was close behind.
He set a course from which he has never deviated except that , as his greed grew, so did the ambit of his ambitions and the scandals of his stock play. Privatization and foreign control promoted by government of India after 1993 helped sterlite to take except to take export business as primary and grew.
In 2000, agrawal tried to delist his company from Mumbai Stock Exchange then buy back its share at only half the book value. The Indian authorities told Agrawal where he could not go.
Sri Anil Agrawal, MD is perhaps the best example of a homegrown capitalist who later shifted its entire business because he found difficulty in operating its business with all unethical manner.
IN 1998 SEBI condemned Sterlite for insider trading – Praful Bidwai wrote in Frontline “the greatest indictment by any statutory body yet of corporate malfeasuance in the stock market” . sterlite was banned from accessing the market for two years ; another four brokers were found guilty.
Aggrawal had collaborated in the share price rigging with “promoter” called Harshad Mehta . Mehta offered hid dubious services to companies of precarious financial standing including sterlite.
The Indian version of “enron scam” was done by Harshad Mehta with market manipulation by creations artificial market boom and eventual implosion of the investments with help of three Indian companies like BPL, Videocon and Sterlite and barred from accessing capital market for four , three and two years respectfully.
Now Vedanta is ostensibly controlled by Sterlite industries of Anil Agrawal as NRI based in London.
In 2003, sterlite sales rose 14% its export turnover grew three fold (by 201%) , tax provisions tumbled by 84% became the increase in exports enabled the company to benefit from tax breaks on export profits.
The news paper “telegraph” claimed there were documents showing that Balco produced special light weight aluminium alloys used in India’s Prithvi and Agni series of intermediate nuclear missiles and rocket components. Balco allegedly supplied the casings for india’s nuclear test of 1998. The company was “bound by a supply –and- production agreements with the department of defence supplies to keep this technology secret” “the agreement ( s.no. 1(3)/90/T(SI)/CPO (VG)-1645 ) bound the secrecy. Butby selling to sterlite , details of the technology might be leaked to outsiders.
Opposing Balco deal nearly seven thousand workers came to the street in Chhattishgarh and Mr. AM Ansari working president of Bharat aluminium employees union (CITU) was dismissed by sterlite “for bad behaviour”.
9.3 Rio Tinto (RTZ)
RTZ : British company TRZ now controls a one thousand square miles (2590 sq km) mining lease over lands that were once the largest aboriginal reserve in eastern Australia – lnads where aboriginal people still live and were hunting and gathering.
The aboriginal people in the 1990s still hunt and gather on lands adjacent to the mine they still struggle to keep their culture to survive.
Albert charathun a wik tribe said “they never asked us for this land. This is our forefather’s land….we can not give away our land . it is not well for this country to be destrouyed and given away…we are tryng to save this country for our children to help them stand firm and strong”. Mabel Pamulkan “from generation to generation it will be our land. God has given it to us. We thank those that stand behind us for our land.
In January, 1996 the Australian federal court ruled that the wik people retained no native title rights that all their rights to there tribal to their thribal lands had been extinguished when the crown , the Australian authorities awarded mining or pastoral leases to white people. RTZ said “right to land depends on the ability t defend it.”
10. Aluminium and war :
In India , after Iraq war and Afghanistan war a number of bauxite mining and alumina MOUs have been signed with Orissa , Jharkhand, Chhatisgada states. The MNCs are like Alcan, Alcoa, BHP Billiton and its joint partners like Vedanta- Sterlite, Hindalco and L&T.
Since world war one the aluminium companies have felt that their future is very much linked with the war. ‘It was during the first world war that the aluminium companies came to realize that their fortunes were very closely linked to the production of military materials.
It was during the First World War that both Alcoa and Alcan companies came to realize that their fortunes were very closely linked to the production of military materials. US capacity, mainly supplied from Alcan and Alcoa , jumped from 40,000 tons per year (tpy) in 1915 to over 60,000 tpy in 1916. By the time US entered the War in 1917 over 90,000 tpy(tons per year) channeled into the aircraft industry alone. By 1918 the very strong relationship linking the aluminium industry to the arms industry had been well and truly established. Other European countries like German, France, Italy took interest in mining bauxite and establishing smelter plant. This era helped the major aluminium companies like Kaiser, Reynolds (in US), Alcan ( Canada) , Alusuisse and Pecheney ( Europe) to grow. Because UK has no such bauxite mine, it started relying more on Alcan.
“The war itself led to a dramatic expansion of capacity far in excess of normal peace time requirements. In German, in particular ‘the decision to enlarge the aluminium capacity….was part of Prussian military policy of autarchy. World war one brought the German aluminium industry into a significant world position .” The Tariff Commission report on “ war changes in industry series” in US observes the same. Since then the MNCs like Alusuisse and Pecheney, Alcoa and Alcan , Kaiser and Reynolds are ruling the roost in aluminium sector.
But when Alkansas mine in US started depleting just first world war and similar situation happened in Europe (except France) these imperialist countries started searching bauxite in colonial countries. The war situation gave further edge to the monopolistic tendencies inherent in the industry forcing companies to make resource accessibility as wide, and as exclusive, as possible. For this Guiyana, Jamaica, Ghana and Surinam were the target. When bauxite was discovered in Jamaica , within safe distance of the US, Alcoa backed by US government monopolized the high- quality deposits. Bauxite was also being supplied almost tax-free to ALCAN from Surinam (another colony of UK) and then into aluminium to UK. Ghana was another supplier of bauxite in among African countries to imperialist countries more particularly to US. US production of aluminium increased from 146,000 tons in 1939 to 693000 tons in 1944.
Dewey Anderson an US government aluminium expert just after second world war wrote “ Aluminium has become the most important single bulk material of modern warfare…..No war can be carried to a successful conclusion today without using and destroying vast quantities of aluminium …..We must plan the aluminium capacity available to the whole free world of nations strictly in terms of this awful prospect.”
This was during the Korean war, when the military demand for aluminium was soaring. During this period Anderson argued that the US must stockpile much more aluminium for war, particularly for its air-force; that the cost to the US economy and environment was too high to produce more within the country; and that more should be imported from Alcan, which was then constructing a huge new smelther on canada’s west coast.
Aluminium’s “strategic” value to the arms companies –to America’s “permanent war industry” in particularly, which Eisenhower called its “military-industrial complex” – is obviously a key reason that the real costs of producing aluminium are hidden and transferred. Britain too, while closing down most of its manufacturing industries during the Thatcher Era ,kept “aerospace” or “defence” as a cornerstone of its economy, as most lucrative and “strategic” sector. (Harold Wilson pushed for a new generation of smelters in Britain, among then the nuclear – powered smelther at Anglesay in Wales. Those in Scotland are run by ALcan.
One reason for aluminium’s strategic value is thermite , a little known invention at the dawn of the 20th century in 1901 , that virtually defined the violent course of the 20th century. While smelters require huge supplies of electricity in order to split aluminium from its bonding with oxygen in molecules of aluminium powder. When the fuse ignites, the aluminium leaps to the high temperature of its “heat of formation” to rebond with oxygen , making the exploision huge. This was the basis fo the first world war hand grenades, second war incendiary bombs and napalm, and the “daisy cutter” used by American plaes for ‘carpet bombing” from the Korean and Vietnam wars to iraq. Aluminium is also basic technology of nuclear missiles under fusion process.
Now the aluminium can spontaneously combust at the nano scale and could be used in rocket fuel ( Steve Jurnetson, “transcending Moore’s Law with molecular elecronics” Nano technology and business journal Vol 1 No 1).
As per the recent news in Washington post the pentagon has increased its aluminium requirement upto 17% from previous year from the developing countries.
“Guyana’s bauxite was the raw material base for the burgeoning power and position of Alcan …..especially during the period of world war two. Guyana’s bauxite , therefore, contributed markedly to the victory of the Anglo-American power system over the German-Japanese one’’ (source : N.Girvan wrote in his article, “Corporate imperialism : conflict and Expropriation,” published in Monthly review press , new york , 1976). Guyana presents perhaps the best documented example of how these multinational companies have undermined political independence in bauxite rich third world countries and subordinated these countries to the accumulation model of Western industrial capitalism.
Although the aluminium percentage in war-planes has diminished , the complexity of aluminium alloys used has increased, alongside a new range of composite fabrics blending oil or plastics with aluminium. These alloys and composite are crucial for aircraft, missile technology, and satellites, as well as war-ships and tanks. ( Natham Hodge in the Financial times 30 june 2005 “Pentagon studies China’s influence on the price of weapons metals” mentions aluminium with titanium and steel as today’s key weapons metals. Balco supplied aluminium to India’s nuclear weapons programe. (Details of Balco’s deal supplying lightweight aluminium alloys for india’s Agni and Prithvi nuclear missiles were published in the Telegraph on 2/3/2001.). alcan has long supplied to UK weapons industry. Graham gave the percentage of aluminium used in the arms industry at around 30%( 1982 page 250).
11. Aluminium and Environment
Hindalco smelter and refinery are in the IAI ranking of Best safety performances for the year 2000. in additions , Indal’s hirakud smelther has also been recognized by the IAI as one of the best in safety performance Benchmarking during 2000.
But Indalco in Sambalpur of orisa smelter caused widespread fluorosis among local villagers. In 1990, scientists from G.M. College of Sambalpur examined villagers and found that an astounding 67 percent of men and 64 percent of women suffered from fluorosis. People aged 12 to 19 were most severely impacted. The researchers also found that the water and vegetation in the areas were "highly contaminated by fluorides." (U.N. Samal and B.N. Naik, "Dental fluorisis in human beings around an aluminium factory of Orissa," Journal of Environmental Biology, V. 11, No. 4, Oct. 1990)( source : aluminium’ dark side)
As per centre for international environment law report “ a bauxite waste site leaches heavy metals into the soil and ground water and the existing factory emits dust, SO2, NOx , CO and flurides far in excess of plant area and EC air emission standards off side testing reveals high concentration of benzopyrene, arsenic, molybdenum, copper , nickel and chromium. Health problem including congential defects , allergies and thyroid and lung diseases are on the rise through out the region.
The Friguia mining operations in Guinea , according to Norwatch has generated “an enormous red mud deposit, which covers on entire valley.
Redmud residue and caustic soda from the alumina refinery in Yirrkata ( Queensland) was found poisonous to fish.
A study Jonquirre smelter workers in the late 1970s found that 73 workers had bladder cancer , 60% more than was statistically likely. It increased ;upto 130 by 1990.
Also according to International Aluminium institute of the land disturbed each year by bauxite mining 76% is forested, 19% agricultural nd pasture and 2% shrubland. IAI reports “of 1591 hectares mined in 1998 , 80% was wildlife habitat , 175 hectares was tropical rainforest”.
In 1998, villagers petitioned against Alcoa in Surinam that “ our agricultural land and houses have been destroyed without any compensation”. “our river has been polluted so badly that we can no longer use it- turning down it into orange brown colour , health problems have occurred destruction of the forest and pollution of the river has also substantially limited our ability to hunt and fish on our lands.
Nalco aluminium smelter in angul , Orissa is the source of sever fluoride contamination more than 220 tons of fluoride into ground water and surface water according to 1992 tests run by the Orissa state prevention and control of pollution board. Many villages have reported brittle bones, tooth and gum diseases , lumps of dead skin , cattle number decreased from 3000 to 100 in a decade.
An MIT study found that about 1% of global emissison of anthropogenic greenhouse gas emissions by this aluminium industry.
The aluminium production cycly , including mining processing refining and casting , produces about 12 tons of carbon dioxide per ton of aluminium producers.
In 1999 the Australian institute an environmental group reported that shutting down the country’s smelter would be a net economy benefit for Australia. It claimed that subsidies of A$410 million for inexpensive energy and A$ 430 million for “unpaid” green gas emissions outweigh the smelter’s economy contribution. A recent british govt report costs carbon emission at $ 56-225 per ton of CO2. so at an average $ 700 should be added with the cost of aluminium.
Conclusion
Reference:
1. Double Death : aluminium’s links with genocide by felix and samarendra das (unpublished article)
2. mining in Africa : samir amin
3. Gandhamardan mines : a report by PUDR 1986
4. Aluminium industry and third world countries by Graham…
5. ecology debt: by Sanjay Khatua
6. Taru report on UAIL on kashipur
7. Bauxite mining report : IPT report
8. Behind the shining : aluminium’s dark side
9. Great aluminium robbery : Rio Tinto
10. IMPACT OF MINING SECTOR INVESTMENT IN GHANA: A STUDY OF THE TARKWA MINING REGION (A DRAFT REPORT) PREPARED BY Thomas Akabzaa and Abdulai Darimani
Wednesday, July 8, 2009
polyster prince dhirubhai ambani
NTRODUCTION:
AN INVITATION
TO BOMBAY
The envelope was hand-delivered to our house in Golf Links, Tan enclave in New Delhi
whose name captured the clubbable lifestyle of its leisured and propertied Indian resi-
dents, soon after we had arrived in the middle of a north Indian winter to begin a long
assignment. It contained a large card, with a picture embossed in red and gold of
the elephant-headed deity Ganesh, improbably carried on the back of a much smaller
mouse. Dhirubhai and Kokilaben Ambani invited us to the wedding of their son Anil to
Tina Munim in Bombay.
In January 1991, just prior to the explosion in car ownership that in later winters kept
the midday warmth trapped in a throat-tearing haze overnight, it was bitterly cold most
of the time in Delhi. Our furniture had still not arrived-a day of negotiations about the
duty payable lay ahead at the Delhi customs office where the container was broken
open and inspected-and we camped on office chairs and fold-up beds, wrapped in blan-
kets.
The Indian story was also in a state of suspension, waiting for something to happen.
The Gulf War, which we watched at a big hotel on this new thing called satellite televi-
sion, was under- cutting many of the assumptions on which the Congress Party’s family
dynasty, the Nehrus and Gandhis, had built up the Indian state. The Americans were
unleashing a new generation of weap- ons on a Third World regime to which New Delhi
had been close; its Soviet friends were standing by, even agreeing with the Americans.
The Iraqi invasion of Kuwalt had pushed up oil prices and forced the Indian Government
to evacuate some three million of its citizens working in the Gulf. The extra half-billion
dollars all this cost India was pushing the country close to default on its foreign debt.
Officials from the Ministry of Finance were already negotiating a bail-out from the IMF
in Washington; the IMF was setting stiff ‘conditionalities’-in effect a complete shift from
Nehru’s model of high external protection for the economy and government allocation
of savings. Even the CNN clips of Tomahawk cruise missiles zipping neatly down the
streets of Baghdad were in themselves part of another breach in India’s walls. The clites
who ran the national TV monopoly or the big newspapers no longer had India’s half-
illiterate population to
themselves.
Little of this was admitted in New Delhi. The coalition government of V P Singh, which
had swept out the glamorous Rajiv Gandhi on a battery of corruption scandals, had it-
self collapsed in November after less than a year in office. India was ruled by an even
smaller coalition of opportunists under a wily politico called Chandrashekhar, kept in
office at Rajiv’s pleasure for who knew how long. Everyone clung to the autarkic, Third
World verities. Politicians and journalists pounced on the slightest admission by their
fellows that perhaps India’s vision of the world had been flawed and it had better adjust
to the new order. At the Ministry of External Affairs, in the red sandstone majesty of Sir
Herbert Baker’s Secretariat buildings, a bright young official on a new economic desk
assured me that India’s finances were strong enough to take the strains. At a party
of intellectuals’ young academics and filmmakers in rough cotton kurta-payjama suits
scoffed at the prospects for satellite TV. How would the advertising payments get out to
the broadcaster through the maze of foreign exchange controls? Which foreign compa-
nies would want to plug products they could neither export to India nor make locally?
The wedding invitation was a good excuse to break away from this stalemate in New
Delhi, and make contact with the Indian commercial class in Bombay. There it looked as
if a raw entrepreneurial spirit was straining to break through the discouraging political
crust. Word of the Ambani family and their company Reliance Industries had spread to
Hong Kong as prime examples of this brash new India which might finally have its day,
courtesy of the changes the Gulf War symbolised.
Everything about the Ambanis, in fact, was a good magazine story The young couple’s
courtship had been a stormy one, ready-made for the Bombay show-biz magazines.
The bride, Tina Munim, was a girl with a past. She had been a film starlet, featur-
ing in several of the Hindi-language films churned out by the hundreds every year in
‘Bollywood’-most including improb- able violence, song-and-dance routines, and long
sequences with the female leads in wet, clingy clothes. Before meeting Anil, Tina had
had a heavy, well-publicised affair with a much older actor. The groom, Anil, was the
tearaway one of the two Ambani boys. His parents had frowned on the match. Bom-
bay’s magnates usually tried to arrange matches that cemented alliances with other
powerful business or political families. This one was not arranged, nor did it bring any
more than a certain popularity. Hired assailants had been sent with acid and knives to
scar Tina’s face, so went the gossip (apocryphal: Tina’s face turned out to be flawless).
Anil had threatened suicide if he could not marry Tina, went another rumour. Finally,
the parents had agreed.
The father, Dhirubhai, was no less colourful and even more controversial. He had first
worked in Aden in the 1950s. I recalled a stopover there in my childhood, aboard the
S. S. Oronsay, a buff-hulled Orient Line ship, en route to my father’s posting in London
with his Australian bank in 1958. The image was of grim, dark-brown peaks surround-
ing a harbour of brilliant blue, a host of merchant ships tied up to moorings, and a busy
traffic of launches and barges. The trip ashore was by launch, landing at Steamer Point,
where Arabs and Indians besieged the white faces, trying to sell us Ottoman-style
cushions or to drag us into their duty-free shops. Now someone like those desperate
salesmen in Aden was a tycoon in Bombay.
Ambani had got into polyester manufacturing in a big way, and got huge numbers of
Indians to invest in shares of his company, Reliance Industries. In India, the home of
fine cotton textiles, it seemed that people couldn’t get enough polyester. The only con-
straint on local producers like Reliance was the government’s licensing of their capacity,
or where they built their factories. To jack up his capacity, Ambani had become a big
political fixer. In the recent minority government formation, it was said, his executives
had been shuttling briefcases of cash to politicos all over Delhi. There had been epic
battles, with the press baron Ramnath Goenka of the Indian Express and with a tex-
tile rival from an old Parsi business house, Nusli Wadia. A year or so earlier, a Reliance
public relations manager had been arrested for plotting to murder Wadia. The man had
been released, and nothing was moving in the case. Was it genuine or a frame-up? In-
dian colleagues were not sure: no conspiracy was accepted at face value.
So we took our first trip inside India, making our way down to New Delhi Railway Sta-
tion in a yellow-and-black cab, one of the 1954 Morris Oxford design still being made
in Calcutta, in the rose-coloured haze of a winter afternoon; letting a red-shirted porter
heave our bags on his head and lead us to the train, establishing our rights to the cov-
eted two-berth compartment in the middle of the First Class Air-Conditioned carriage
from the list pasted by the door.
The train slid across the flat beige northern landscape of wheat-stubble and square
houses as night fell. In the morning we were trundling past palm trees and mangrove-
bordered creeks before humming into Bombay through suburban stations packed with
commuters.
If New Delhi was a city of books, discourse, seminars and not much action or precision,
Bombay was one where people made the most of the nine-to-five working day before
battling their way home to the distant suburbs. Most crucially, Bombay had accepted
the telephone as a medium of dialogue-not merely as a preliminary to an exchange of
letters setting up a meeting. It was also unashamedly concerned with money and num-
bers. New contacts like Pradip Shah, founder of India’s first rating agency for corporate
debt, with the slightly alarming acronym of CRISL, or Sucheta Dalal, a business jour-
nalist at The Times of India, or Manoj Murarka, partner of the old stockbroking firm of
Batlivala & Karani, rattled off the details of industrial processes, forward- trading in the
sharemarket or conversion dates of debentures at bewildering speed.
The wedding was going to be big, so big that it was to take place in a football stadium,
the same one where Dhirubhai Ainbani had held many of his shareholders’ meetings.
But it began in an oddly casual way. As instructed, we went mid-afternoon to the Wo-
dehouse Gymkhana Club, some distance from the stadium. There we found guests
milling in the street outside, the men dressed mostly in lavishly cut dark suits and
showy ties, moustaches trimmed and hair brilliantined. The women were heavily made
up, laden with heavy gold jewellery, and wearing lustrous gold-embroidered silk saris.
Anil Ambani appeared suddenly from the club grounds, dressed in a white satiny outfit
and sequinned turban, sitting on a white horse. A brass band in white frogged tunics
struck up a brash, repetitive march and we set off in separate phalanxes of men and
women around the groom towards the stadium. Every now and then, the process would
pause while the Indian guests broke into a pro- vocative whirling dance, some hold-
ing wads of money above their head. The stadium was transformed by tents, banks of
inarigolds and lights into a make-believe palace, and filled up with 2000 of the family’s
closest friends and business contacts. They networked furiously while a barechested
Hindu pundit put Anil and Tina through hours of Yedic marriage rites next to a smoul-
dering sandalwood fire on a small stage. Later, the guests descended on an elaborate
buffet on tables taking up an entire sideline of the football pitch, starting with all kinds
of samosas and other snacks, working through a selection of curries and breads, and
finishing with fruits and sweets wrapped in gold leaf. The next day, the Ambanis put on
the same spread-if not the wedding ceremony at another reception for 22000 of their
not-so-close. friends, employees and second-echelon contacts.
Retrospectively, by the standards of Bombay a few years later, it looks a modest and
traditional affair. Before their joint marriage of three children in 1996, the ingratiating
Hinduja family had an elaborately illustrated book prepared on the Hindu marriage and
sent to all invitees. Other business alliances were celebrated with elaborate stage-sets
based on the ancient epics; lines of elephants led the processions of the grooms and
diamonds were pasted to the foreheads of women guests. But at the time, the sheer
size of the wedding was seen as a sign that Dhirubhai Ambani had made it through the
political travails of 1989~90 and was unabashed-and certainly not strapped for cash or
friends.
It was flattering to be there and to have a Reliance public relations manager take me up
to meet the Ambanis-flattering, within a month of arriving in India, to meet the coun-
try’s fastest moving, most controversial tycoon. An interview was promised shortly,
once the festivities were over. An early cover story was clearly a possibility, an antidote
to the gloomy political news out of Delhi. It would help my standing at the Far Eastern
Economic Review if India was an upbeat business story and I was right on to it.
That of course was the desired effect. Reliance was desperate to raise funds for expan-
sion and was looking to foreign sources, so some image-building in a prestigious maga-
zine was highly useful. A newcomer to India would be more inclined to play down the
controversies and look at the company’s prospects.
The interview, when it took place a month or so later, was stimulating. Dhirubhai Am-
bani came limping around a huge desk when I was ushered to a sofa and greeted me
warmly. Despite the obvious effects of a stroke in a twisted right hand, his mahogany
skin was smooth and healthy, his hair plentiful and slicked back decisively in a duck’s
tail. His attention was unwa- vering. Disarmingly, Dhirubhai admitted to many of the
youthful episodes that were the subject of rumour, and responded evenly when I raised
some of the criticisms commonly levelled against him. He didn’t mind people calling him
an ‘upstart’ or even worse names. It just meant they were trapped in their complacency
while he was racing ahead. But the disputes were now ‘all history’ and the former critics
were now all his ‘good friends’ buying their polyester and raw materials from him.
‘The orbit goes on changing,’ he declared airily. ‘Nobody is a permanent friend, nobody
is a permanent enemy. Everybody has his own self-interest. Once you recognise that,
everybody would be better off.’
However, Ambani did point to an unfortunate trait in his countrymen. ‘You must know
that, in this country, people are very jealous.’ It was not like in Hong Kong or other
East Asian countries, where people applauded each other’s success, he claimed. In In-
dia success was seen as the prerogative of certain families. But he didn’t really mind.
‘Jealousy is a mark of respect,’ he said.
The interview resulted in a cover story for the Far Eastern Economic Review which por-
trayed Ambani as the business underdog trying to break through the government’s red
tape and the prejudices of a tired Bombay business establishment. Naturally enough,
Ambani and his PR men were pleased. His one quibble, I was told, had been my pointing
out some glossed-over problem areas in the Reliance annual reports, which had been
put in the notes to the accounts, fine-print areas that only the professional analysts re-
ally read. The comments were true enough, but they made it look as though Reliance
was unusual among Indian companies in these practices.
The Reliance public relations office continued to be attentive, supplying advance no-
tice of newsworthy events. At one point later in 1991, there was another glimpse of
Dhirubhai Ambani’s energetic mind. His Delhi office passed on a request for informa-
tion about Indonesia’s engagement in the late 1980s of the Swiss cargo clearance firm
Societe Generale de Surveillance (SGS) to administer its imports and exports, thereby
sidelining the country’s notoriously corrupt customs service for several years. I sent off
some clippings, intrigued that the man accused of smuggling whole factories through
the ports of India now seemed to be advocating Swiss efficiency in place of the lax adi-
ninistration of which he had supposedly taken advantage. The proposal got to a high
level in the government before being canned, but not before causing panic in the Indian
customs service-which may have been all Dhirubhai wanted to do anyway.
There were daily updates from the Reliance PR staff on an issue of convertible securi-
ties issued in the Eurornarket in May 1992, the first by an Indian company and tangible
proof of India’s reforms reconnecting it to the world economy. There was a company-
organised trip out of Bombay up to its new petro- chemicals plant at Hazira, involving a
bumpy flight in a chartered turboprop to the airfield at Surat, bare of airport terminals
or navigational aids as far as could be seen, and a drive through the old textile trad-
ing city, squalid despite its lucrative silk and diamond industries-and, a couple of years
later, notorious for an outbreak of bubonic plague. Across the Tapti River, a glittering
array of pipes and towers had indeed come up, and cryogenic tankers full of sub-zero
ethylene were tied up at the jetty. Reliance was clearly not just a paper empire.
But the history of political and corporate activity had put a sinister shadow across the
glearning success. M through the government changes of 1990 and 1991, the press
carried references to a certain ‘large industrial house’ supporting this or that party or
being behind certain politicians. Scores of party leaders, ex-ministers, senior bureau-
crats, and heads of the big government- owned banks and corporations were said to
be Ambani friends’ or Ambani critics’. Mostly it was the friends, it seemed, who got the
jobs.
People made bitter and cynical remarks about the Ambanis in private. The press cover-
age, especially in the Indian business magazines, had a repetitive quality. A myth was
being created and sustained. At a meeting of shareholders in a big Bornbay engineering
firm named Larsen & Toubro late in 1991, convened to approve a takeover by the Am-
banis, this undercurrent of hostility welled up into a physical melee. In the shouting and
jostling, the two Ambani sons had to flee the stage. The controversies kept continuing
right through the 1990s.
Dhirubhai Ambani attracted adulation or distrust. To his millions of investors, who had
seen their share prices multiply, he was a business messiah. To one writer, he was a
‘Frankenstein’s Monster’ created by India’s experiments with close government control
of the economy.
‘There are three Dhirubhai Ambanis,’ one of his fellow Gujaratis, a writer, told me. ‘One
is unique, larger than life, a brand name. He is one of the most talked about industrial-
ists., and for Gujarati people he has tremendous emotional and sentimental appeal. He
is their ultimate man, and has inspired many emulators. The second Dhirubhai Ambani,
is a schemer, a first-class liar, who regrets nothing and has no values in life. Then there
is the third Dhirubhai Ambani, who has a more sophisticated political brain, a dreamer
and a visionary, almost Napoleonic. People are always getting the three personalities
mistaken.’
In a legal chamber lined with vellum-bound case references, a senior lawyer took an
equally stark view. ‘Today the fact is that Ambani is bigger than government,’ said the
lawyer in all seri- ousness. ‘He can make or break prime ministers. In the United States
you can build up a supereorporation but the political system is still bigger than you.
In India the system is weak. If the stock exchange dares to expose Ambani, he tells
it: I will pull my company shares out and make you collapse. I am bigger than your
exchange. If the newspapers criticise, he can point out they are dependent on his ad-
vertising and he has his journalists in every one of their departments. If the political
parties take a stand against him, he has his men in every party who can pull down or
embarrass the leaders. He is a threat to the system. Today he is undefeatable.’
Surprisingly, the role played by Dhirubhai Ambani received only cautious side-refer-
ences in most books about contemporary Indian politics. No biography of him was in
the bookshops, although Indian journalists and conunentators had produced 1quickie’
biographies of other new celebrities in vast numbers. The work of the economic histori-
ans largely cut out in the 1960s. The few biographies of other Indian businessmen were
commissioned works, not very well written, and notable for a worshipful attitude to the
subjects. No one drank, cursed, cheated or philandered. Their workers were all part of
the family. Almost everyone lived an abstemious vegetarian life, accumulating wealth
only to give it away to temples, hospitals and schools.
By 1992, Reliance was tapping investors in Europe for fund- ing, and international in-
vestment funds were being allowed to play the Indian sharemarket directly. A few years
later, the company had started borrowing in New York on a large scale. The Ambani
story was becoming of greater interest outside India, at least to investors and perhaps
to a wider audience watching the explosive growth of capitalism across Asia.
The idea of this book occurred in 1992, and I put it to Dhirubhai Ambani later that year
at a second meeting in his Bombay office. Ambani seemed receptive, and agreed that
his life story could be ‘inspiring’ for a younger generation of Indians as well as interest-
ing to those thinking of dealing with India. I left the meeting with an understanding
that he had agreed to talk about his life at meetings to be arranged and that, if so,
I would show him the completed draft as a courtesy and listen to any objections-but
retain the final say on the content. The book would not be credible’ otherwise, Ambani
concurred.
A year slipped away without further progress, and then relations with Reliance took a
downturn. By the end of 1993, Reliance was in the bidding for several oilfields in the
Arabian Sea. The government oil search corporation had discovered the fields but did
not have the funds to build the huge production rigs, gas compressors and pipelines
that were needed. Several contacts among rival bidders were alleging that the tender
was being rigged in favour of Reliance. Indian politicians and bureau- crats are masters
at tilting an ‘open and transparent’ tender into a one-horse race, by techniques such
as keeping the weighting of bidding factors uncertain or secretly promising later con-
cessions to compensate for underbidding. In the event, Reliance swept the field, and a
director with one of the losers told me: ‘We were shafted, and for the wrong reasons.’
Writing about this would not advance my request for access to the Ambanis for the
book, but my duty was to the magazine that employed me. The first of two articles
in the Far Eastern Economic Review about the oilfields battle drew a bitter complaint
from Anil Ambani that the report was ‘defamatory’-a complaint not sent directly to me,
or to the magazine, but in a letter sent to the head of one of the rival companies, the
Australian resources giant BHP, and copied to the heads of theamerican and Australian
diplomatic missions in New Delhi.
Thereafter, I wrote occasionally about Reliance and, in July 1995, left my job with the
magazine to spend more time on the book. A letter to Dhirubhai Ambani informing him
of this move went unanswered. Over the following 18 months, the research led me into
all corners of Bombay life, from the slum homes of the senii-criminal underworld to the
offices of powerful business tycoons, to several cities and towns in Gujarat on crowded
country buses and trains, to converted churches in London and Leicester ringing with
the Hindu chants of the Gujarati diaspora.
The reception varied. Almost everyone wanted to know if the book was authorised or
sponsored. It was neither, I said, but Ambani had been told and so far had not ex-
pressed to me a view either way about it. Many of those people who knew Dhirubhai
Ambani in his early days in Junagadh and Aden and then starting his business in Bom-
bay were willing to talk. Some others-such as his former Aden colleague and Middle
East co-ordinator in Dubai, Bharat kumar Shah, asked for a letter of clearance from
Ambani himself, which again was not forthcoming. One Bombay journalist who agreed
to share his knowledge picked up the telephone immediately I arrived at his flat and
rang Anil, Ainbani’s office. ‘I have told him if you are wanting scandal you will lose the
whole story,’ he said down the phone to the executive who answered. The next day, I
was invited to lunch by a pair of Reliance public relations executives and quizzed closely
about my intentions.
Dhirubhai Ambani did respond to a birthday greeting sent at the end of December 1995,
but there was still no word about his attitude to the book. A month later, however, I
flew especially to Bombay for an interview arranged with his former export manager,
Rathibhai Muchhala, who according to numerous other sources ‘knew everything’ about
the early days. At the appointed time, Muchhala was not at his office in the industrial
belt behind Bombay’s airport. A secretary telephoned him: he was at the Reliance head
office. Muchhala was sorry, but Ambani’s office had advised him not to meet me.
Ambani’s personal assistant, Dinesh Sheth, then confirmed this: there were several
proposals for biographies and some months earlier Dhirubhai Ambani had indicated to
his staff that he did not want at that stage to encourage or co-operate with any of them.
Sheth professed ignorance of my previous letters, so I sent another the next day, offer-
ing to come at any time to discuss the book.
Ironically, the reception among those figures who had been critics or opponents of
Reliance was also wary. Phiroz Vakil, a senior advocate in tiny chambers in Bombay’s
old Fort, surveyed me intently while stuffing Erinmore Flake tobacco into his pipe and
warned that people would suspect I was being used by the Ambanis to draw out infor-
mation. Among some others, my earlier favourable write-ups of the Ambanis still told
against me. ‘I suppose you think he’s a hero,’ said the retired Finance Ministry official
and Cabinet Secretary Vinod Pande, down the phone.
Others just seemed too battle-weary When I rang the Orkay Silk Mills chairman Kapal
Mehra and asked to meet him, there was a long pause. ‘I’m afraid that won’t be pos-
sible,’ Mehra said. The former prime minister Viswanath Pratap Singh did not reply to a
letter and giggled nervously when I cornered him at a cocktail party in New Delhi. No,
he could not possibly talk about any one company, Singh said, easing away quickly.
Those who did agree to talk for the most part insisted on anonymity: they had to live
in India, they explained. Word of some of these meetings must have been passed back
to Reliance, for in January 1997 a stiff letter arrived from Kanga & Co in Bombay, law-
yers for Dhirubhai Ambani and the company, warn ing that their clients ‘understand
and apprehend that the pro- posed publication contains material which is defamatory
to our client’. It was claimed that ‘at no time’ had there been any attempt to verify the
material with the clients. Action for exem- plary damages and injunction against pub-
lication were threatened if the book was defamatory At this point it had not even been
completed, let alone delivered to the publishers.
Fortunately, the several controversies that hit Reliance in the second half of 1995 pro-
duced a deluge of paper from Indian Government agencies. The various reports opened
up many previously obscure and controversial aspects of the company’s operations. At
the same time, the controversies compelled Reli- ance to give its own explanations,
which became part of the public record.
Even so the overall result, unavoidably, has been a book that becomes progressively
less intimate to its subject as the story advances, drawing more on published reports,
available documentation, and anonymous interviews with those who had engaged with
Dhirubhai Ambani and Reliance Industries from the outside. The book is less satisfac-
tory and less sympathetic, perhaps, than it might have been with co-operation from the
Ambanis and access to them. As my research and writing progressed, however, word
came from several sources that the family was compiling its own record of Dhirubhai
Ambani’s life and his company’s growth, so a version of events from the inside may also
be put to the public soon.
A PERSUASIVE YOUNG BANIA
Among all the 550-odd princely rulers left, with British Residents at their shoulders, to
run their domains in the last years of the Raj, few were more eccentric than Mahabat-
khan, the Nawab of Junagadh.
The Nawab’s family had run this fiefdom, one of several in a political jigsaw covering the
Saurashtra peninsula in Gujarat, since a faujdar or military commander of the Mughal
Empire named Sher Khan Babi founded his own subordinate dynasty in 1690. Two and
a half centuries later, this warrior’s descendant was best known for his love of dogs. Ma-
habatkhan had 150 of them, with an equal number of dog-handlers on his payroll and
individual quarters for all the canine retinue. To celebrate the 1wedding’ of one canine
pair, the Nawab was reputed to have spent two million rupees (then worth about £150
000 sterling) and to have given his 700 000 subjects a public holiday.
The Nawab was the first political target to come into the sights of Dhirubhai Ambani,
although it is unlikely that he was ever specifically aware of it. It was during a move-
ment aimed at overthrowing the Nawab’s rule and securing Junagadh’s accession to
India during the Partition of British India in 1947 that Ambani, then a teenage high
school student, had his first experience of political organisation and his first brushes
with authority.
It was the only moment in modern times that junagadh has figured in the calculations
of nations and statesmen. Even in the 1990s, Junagadh and its surrounds, known as
the Kathiawar region, remains one of the quietest, most traditional regions of India,
and one of the least accessible in the otherwise busy northwest coastal area of the
country.
A few times a week, a turboprop flies into the simple airstrip at Keshod, unloading
people from Bombay or the Gujarati diaspora overseas coming to visit their relatives
and make offerings to family gods at local temples. In the town itself, clusters of 1940s
Ford Mercury taxis wait for groups of passengers or for hire at weddings. The railway
network was built to connect each of the several former principalities of Kathiawar to
the outside world rather than with each other. Once you are in Kathiawar, all now part
of Gujarat state, travelling between towns often means one or more changes of line and
extensive doglegs and backtracking in the journey. The last steam engine on regular
service in India, apart from scenic mountain railways, puffed between Junagadh and
the Gir sanctuary for the last Asiatic lions until 1996.
The land itself is dry, open and stony. The monsoon rains quickly run off down the short
rivers and nuilahs that radiate from the central rocky hinterland out to the sea. The
roads are lined with stunted pipul (fig) trees, and the stony fields are fenced with strag-
gling rows of cactus. The standard building material is a porous dun-coloured stone
cut by saws into ready-made blocks from pits near the seashore. There are few of the
modern ferro-cement extravagances built by the newly rich, hardly any of the industrial
plants and their residential ‘colonies’ seen extending out into farrnland in other Indian
regions, and only a few private cars.
But if the landscape is monotonous, Kathiawar’s people com- pensate for it with riot-
ous colour where they can. The women drape themselves with cotton scarves tie-dyed
in red and orange. The local scooter-taxi is the Enfield motorcycle grafted to a flat tray
resting on two wheels at the back, with the handlebars decked with coloured lights,
electric horns and whirling windmills. The homes of wealthy merchants are decorated
with mouldings of swans, peacocks, flamingos, parrots, elephants, lions and tigers.
Massive double doors, twelve-panelled, with heavy iron studs, open tantalisingly on to
huge inner courtyards.
A blood-drenched history and complicated mythology are attached to the landmarks
and constructions of Kathiawar. On the coast to its west, at Dwarka, is the place where
Lord Krishna died. To the south, the temple of the moon at Somnath is a centre for
Hindu pilgrims from all over India. In the steep Girnar hills above the city of junagadh,
long staircases take pilgrims to Jain temples dating back to the 3rd century BC.
Looming over Junagadh city, the fortified rock-citadel of Uparkot has inscriptions and
cave-sculptures from the time of the 3rd century BC ruler Ashoka. The city was an im-
portant centre for Hindu rulers of Gujarat in the first millennium. Then, starting with
the Afghan warlord Mahmud of Ghazni, who invaded in 1024 AD and pillaged Somnath,
Junagadh suffered four centuries of sackings. Mughal rule gave it some stability with
Muslim rulers controlling its largely Hindu population. Both its rulers and its people
were passive onlookers in the contest for India’s trade among the English, Dutch and
Portuguese, whose galleons fought vicious battles off the Gujarat coast. A five-metre
long cannon broods over the town from the ramparts, a relic of an unsuccessful attack
on the Portuguese trading post at Dlu, on the coast southeast of Junagadh, by the fleet
of Sultan Sulaiman the Magnificent of Turkey in the 15th century
At night, seen from the coastline at the south of Junagadh, processions of navigation
lights travel left and right along the horizon. The seaborne traffic between the west coast
of India and the Arabian ports goes on as it has for millennia, ever more intense.
Gujarat was the trading hub of ancient India, where Indian cottons and silks were
traded to Arabs and later the first English East India Company in return for silver, gold,
incense and coffee from the Red Sea port of Mocca. Up until the early 15th century,
Chinese junks had also come to western India. Later India and India-based European
traders became the trade intermediaries between the Arab and Chinese spheres. The
Gujaratis were prominent in this pre-colonial Indian Ocean trading network, with the
wealth of India in its cloths, indigo, opium and spices merchandise.
The small ports of Kathiawar took part in this trade. Dlu handled much of Gujarat’s
trade with Aden in the west and Malacca in the cast. Gold, silver, quicksilver, vermilion,
copper and woollen cloth would be exchanged for Indian gold and silver embroideries
and brocades and for cotton muslins of a fineness expressed by trade terms such as
abrawan (running water), baft hava (woven air) or shab-nam (evening dew).
Later of course the East India Company grabbed its monopolies in opium, tea, indigo
and spices in a three-way trade equation between China, India and Europe, topped up
later by the British Empire with gold bullion from Britain’s new colonies in South Africa
and Australia at the southern corners of the Indian Ocean. Indian entrepreneurs-in
Calcutta the Marwari traders and moneylenders originally from Raiasthan, in Bombay
the Parsis (Zoroastrians originally from Persia)-began moving into large-scale industrial
production late in the 19th century
Smaller traders also took advantage of Pax Britannica by taking steamer passages to
all corners of the Indian Ocean and Southeast Asia-no passports were needed-and
opening small stores and service stations. Most were from Gujarat; a large proportion
of these from Kathiawar. Two of the biggest commercial families in Uganda, the Mehtas
and the Madwhals, came from Porbander, and the thriving Chandarlas of Kenya came
from Jamnagar. Until 1938, the free port of Aden was part of the Bombay administra-
tion. The East African shilling, the currency of the Red Sea and Indian Ocean trade, was
virtually pegged to the Indian rupee in value.
The Guiaratis were stingy with their customers and stingy with themselves. Bhaskar
Bhattarcharya, a television broadcaster in New Delhi, spent his childhood years in
Uganda where his father was a British colonial official. The epicurean ways of the Bhat-
tarcharyas from Bengal contrasted sharply with those of the Patels or Shahs from Gu-
jarat. ‘When we first arrived, the women took my mother aside and said: this is the
way you do things,’ he remembers. ‘If you were invited for dinner, you got a couple of
vegetable dishes and rice. My parents liked to splash out, and serve meat and fish to
their guests. Of course, by the time we left, the Guiarati peon in my father’s office had
probably saved more than he had.’
The wealth was the result of rigorous saving, abstemious living, and endless hours of
work by unpaid family members-a migrant’s success story in many parts of the world.
In East Africa, it created a resentment that led to the expulsion of the Indian traders
and appropriation of their assets after the colonies became independent in the 1960s.
The effect was to fling the Gujarati diaspora worldwide, to start the process of capital
accumulation again.
Among the Gujaratis, the people of Kathiawar are renowned for their exuberance of
speech, inventiveness and commercial drive. ‘This is a place of have-nots,’ notes Shecia
Bhatt, a former editor of the magazine India Today’s Gujarati-language edition. ‘It is a
barren land, but out of stone they somehow draw out water. The people are so colour-
ful because the landscape is so colourless. They fill their heads with colour. Amongst
Gujaratis, the best language is among Kathiawaris: so many words. Even the trading
class will have extraordinary expressions. Kathiawari traders have more vibrant termi-
nology than other traders. They were the first to go out of India for better prospects.
Adventure is second nature to them. They have less hypocrisy. All of the other business
communities affect modesty to the point of hypocrisy. Dhirubhai Ambani is part of that
culture.’
In one sense, Ambani was born to be a trader, as his family belongs to a Bania caste, a
section of the Vaisya category (varna) in the traditional Hindu social order whose roles
are those of merchants and bankers. This instantly provided a whole network of rela-
tionships, a community and social expectations that made commerce-taking a profit
from buying and selling in markets, the accumulation of capital-an entirely natural and
honourable lifetime’s occupation.
Although socially below the Brahmins (priests and scholars) or the Kshatriya (warriors
and landowners) and rarely part of aristocratic clites, the Vaisya castes came to exercise
enormous power across India. They marshalled huge amounts of capital, which funded
the campaigns of maharajas and nawabs and at times the British trade and military ex-
pansion when the budget from London ran short of operational needs. Centuries before
the modern banking system, Vaisya shroffs or bankers were the conduits of a highly
rnonetised Indian economy, rernitting vast sums around India at short notice through
a sophisticated trust system based on hundi (promissory notes).
The commercial instincts of Gujarat’s Vaisya were encouraged by a convenient interpre-
tation of Hinduism preached by the holy man Vallabhacharya in his wanderings around
the region early in the 16th century Another widely followed religious school known
as Shaivism (from the god of creativity and destruction, Shiva) had preached that the
world was unreal and an impersonal abstract essence was the absolute reality and
truth. The Jain and Buddhist religions, which had sprung from Hinduism, also preached
privation, renunciation and destruction of the self. Vallabhacharya saw a personal god
who created and sustained life, for whom living life to the full was a form of devotion.
His school became known as Vaishnavism, as the focus of devotion was the god Vish-
nu’s playful avatar (incarnation) Krishna, per- haps the most widely adored and human
face of the divine among Hindus.
In his classic text on the Vaishnavas of Gujarat, the scholar N. A. Thoothi pointed out
that this naturally appealed to the people of a land richly endowed with opportunity like
the central parts of Gujarat. It was a philosophy that justified their way of life and gave
a divine purpose to their roles as providers and family members. It also fitted the rising
social status of the Banias in Gujarat, overriding the formal varna hierarchy.
As Vaishnavism grows, the Vamas decline. We have noticed, for example, how the
Vanias [Banias] have reached a social status as high as that of the Brahmins them-
selves. This upsetting of the balance of the Varnas has been greatly due to economic
causes. The merchant and the financier and the capitalist have, by sheer force of wealth
and power, for a while become dictators over all, even over the priestly class.
A justification of their way of living, a theory of life and a pathway suited and helpful to
the living of a life engrossed in work and duty as a man, husband, father, citizen and so
on, a hope that such a mode of life as they live is acceptable to the highest deity-the
Gujaratis naturally sought for all these.
Ambani’s particular caste is called the Modh Bania, from their original home in the town
of Modasa north of Ahmedabad before a migration many centuries ago to Saurashstra.
The Modh are one of three Bania castes in this part of Gujarat, who might eat meals
together but who would each marry within their own caste. They are strict vegetarians,
and only the men take alcohol. Their practice of Hinduism follows the Vaishnavite path.
But the main object of their pilgrimages, on marriage or the start of a new business
venture, is a black-faced idol with a diamond in his chin located in a temple at Nathd-
wara, a small town in the barren hills behind the lake city of Udaipur in Rajastban. This
idol represents Srinath, an avatar or incarnation of Lord Krishna, and was brought to
Nathdwara from Mathura (Krishna’s birthplace) by a holy man to escape the depreda-
tions of the fierce anti-Hindu Mughal emperor Aurangzeb. For reasons that are not clear,
Srinath has become the familiar god of the Modh and other Banias. Portraits based on
the Nathdwara idol are often seen in the offices of Bania businessmen.
In later years, Ambani and his family made frequent visits to the temple of Srinath,
flying into Udaipur airport in his company’s executive jet and driving straight up to
Nathdwara. In 1994, Ambani built a large ashrarn (pilgrim’s rest-house) in Nathdwara
for the use of visitors. The three-storey building, faced in a pink granite, is dedicated to
the memory of his parents.
If the Modh Bania practise piety in the temple, and abstemi- ous ways in their homes,
they are known as fiercely competitive and canny traders in the marketplace, with no
cornpunctions about taking advantage of opportunities for profit. A saying in Gujarat
goes: ‘Kapale hojo kadh, pan angane na hojo Modh’-rneaning: ‘It is better to have a
leucoderrna [a disfiguring skin pigment disorder] on your forehead than a Modh as
guest in your house.’
Like other Bania castes of the region, the Modh Bania looked far beyond their immedi-
ate patch. For centuries it has been a custom for young men to make trading voyages to
Arabian ports, building up personal capital over nine or ten years hard work and modest
living before returning to marry and take over the family business. Sons inherited fam-
ily property in equal proportions, with the oldest son assuming the authority of family
head.
But all this was a nebulous heritage for Dhirajlal Hirachand Ambani, born on 28 De-
cember 1932. His home-town was Chorwad, literally meaning ‘Settlement of Thieves’
though no one seems to remark on that. It is set a mile or so back from the flat Ara-
bian Sea coastline where the Nawab had a two-storey summer palace built of the dun-
coloured stone quarried from pits nearby. The railway from junagadh bypassed the
town to the cast, looping towards the old port of Veraval and Somnath.
His father, Hirachand Ambani, seems to have been a diffident trader when he tried his
hand at petty conunerce, as a wholesaler in ghee (clarified butter, a cooking medium in
India). He is recalled by many acquaintances as a ‘man of principle’-meaning perhaps
that he was too good-willed to be good at making money. He is better remembered as
a village schoolmaster in the administration of the Nawab of Junagadh. From 1934-36,
Arnbani senior was headmaster of the Chorwad primary school, whose classrooms with
their battered furniture remain little changed around a tree-lined yard across the road
from the town’s bus stand.
The industrialist and parliamentarian Viren Shah, whose family also comes from Chor-
wad, remembers Ambani senior as a stocky man with a dark-brown skin, normally
dressed in a white turban, long coat and dhoti (a piece of cloth draped into a rough
pantaloon). The village schoolmaster was private tutor for several years for another
member of the same family, Jayan Shah, who remembers him as a good teacher and
‘very strict’.
Hirachand Ambani made little money, and lived in extremely austere circumstances.
The family home still stands in a hamlet called Kukaswada, two or three miles outside
the main part of Chorwad. It is a two-roomed stone dwelling with a stamped carthern
floor, entered by a low doorway and dimly lit by openings under the caves. Ambani was
married twice, having a son from his first marriage (named Samadasbhai) before being
widowed. His second marriage gave him five more children, with Dhirajlal-or Dhirubhai
as his diminutive became-in the middle.
The family’s poverty did not keep the Ambanis from contact with better-off members
of their social peer group. The Bania occasionally got together for meals or picnics.
The Ambani children mixed freely with the Shahs, who were already prospering from a
move to the then hub of British commerce in Calcutta, where they set up India’s first
factory making aluminium cooking pots.
The two houses of the Shah family in Chorwad, Shanti Sadan and Anand Bhavan, were
big and rambling in the traditional style. As well as learning all the ways of business,
the children were expected to learn various sports including horse riding, swimming
and athletics, and to take their turn milking the 20 cows and 10 buffaloes kept in the
gardens. The Shah family had become early followers of Mahatma Gandhi-also a Bania
from Kathiawar-and often gave him accommodation in Calcutta. An uncle of Viren Shah
and Jayan Shah had even retired from business and become a Gandhian social activist
in Chorwad, carrying out upliftment work among its Harijans (the former Untouchables)
and running a fitness camp for youth.
Jayan Shah remembers Dhirubhai, who was about seven years younger than him, com-
ing to Anand Bhavan. Jayan Shah’s father took an interest in’other people’s children,
lending them books to read and asking them to do odd jobs around the house. Dhirub-
hai was welcomed with great affection, and returned it with respect. Later, when he
had gone away to work overseas, Shah remembers him dropping by to pay his respects
during a vacation back in Chorwad, arriving with ‘great gusto and a feeling of an old
relationship’.
The guild-like support of his merchant caste helped Dhirubhai continue his education
after finishing at his father’s old primary school. In 1945, he moved up to Junagadh
and enrolled at the Bahadur Kanji High School. This shared with a university college a
large yellow stucco edifice on the outskirts of the city that had been built in 1902 by
the nawab of the time and named after him. Because of his family’s poverty, Dhirubhai
was admitted as a free student. He found accommodation in a boarding house funded
by the Modh Bania for children of their caste.
The Second World War had largely passed by Kathiawar, save for overflights by military
transports and the occasional visit of the new army jeeps. The movement for Indian
independence had not. On returning from South Africa, Gandhi had established his
ashram in Ahmedabad, the main city of Gujarat, and carried out many of his agitations
against British rule in the same region, including the famous ‘salt march’ to the sea to
protest against the government monopoly of salt in 1930.
His activities were financed by Indian industrialists from the Hindu trading castes, fore-
most among them the Calcutta-based Marwari jute-miller G. D. Birla. His abstemious
lifestyle was an extension of their own ideals, more familiar to them than the Anglicised
manners of the Nehru family. But a real self-interest was also involved. The industrialists
also saw in the Bania-born Gandhi a counterforce within the Indian National Congress-
the main secular vehicle of the independence movement-to the socialist and communist
ideas that had taken a strong grip on the thinking of educated Indians. Gandhi’s ideas
of industrial devolution to the villages were intrinsically opposed to the pro- posals for
state capitalism and central planning of investment then being promoted by the Left in
India as elsewhere in the world.
In Junagadh, the ideas of Gandhi and Sardar Patel, the Hindu nationalist lieutenant of
Nehru who was also a Gujarati, cast a strong influence. The Nawab, with his Indian Po-
litical Service Resident Mr Monteith at his side, was automatically put in defence of the
status quo. His police force and its detective branch kept a close watch on the indepen-
dence movement, and carried out many arrests of agitators throughout the 1940s.
At the Bahadur Kanji school, Dhirubhai was quickly infected by the independence mood.
Krishnakant Vakharia, later a leading lawyer in Ahmedabad, was two years ahead of
Dhirubhai at the school and met him soon after his arrival in Junagadh. The two took
part in a gathering of students to discuss the freedom movement. Vakharia recalls that
all were inspired by the nationalist ideals of Gandhi, Nehru, Patel and most of all the
socialist Jayaprakash Narayan, then still in the Congress Party.
The Modh boarding house where Dhirubhai was staying became the headquarters of a
new group to push these ideals, which they called the Junagadh Vidyarti Sangh (Juna-
gadh Students’ League). The objective was to take part in the national independence
movement and Gandhi’s swadeshi (self-reliant) economic programme, which involved
boycotting imported factory made goods in favour of village craftwares such as home-
spun cotton (khadi). Activities were to include meetings to salute the proposed national
flag of India-the saffron, white and green tricolour with the ox-wagon wheel in the
middle, which was then the Congress flag-as well as motivation sessions and sports
meetings for the other students.
Vakharia became the president of the Sangh, with Dhirubhai and another student called
Praful Nanavati serving as secretaries. ‘We organised a lot of functions, like saluting the
national flag, and took a lot of risks,’ said Vakharia. At one time we printed pamphlets
with a photo of Gandhi, and with that we approached some leading citizens to be our
sponsors-but no one agreed. In Junagadh at that time no one was allowed to even utter
“Jai Hind” or “Vande Mataram”, or sing national songs. Even wearing khadi made you a
suspect in the eyes of the Nawab’s CID.’
In 1946, the students learned that Kaniala Munsi, a lawyer who was later a leading
Congress Party politican and a minister in Nehru’s first government, would be visiting
Junagadh. They decided to invite him to address their members in the compound of a
boarding house for lain students. The Nawab’s police summoned Vakharia, Dhirubhai
and Nanavati, and threatened the three with arrest, expulsion from school and trouble
from their parents unless they gave an undertaking that no political speech would be
given.
It is here that Dhirubhai shows a spark of his later genius at bringing apparently irrecon-
cilable demands into an accommodation, if through a dubious intellectualism. “We had
said that a literary figure would deliver a speech,’ said Vakharia. ‘Dhirubhai whispered
that there was nothing wrong in giving this undertaking. “We are not going to give the
speech. If there is any breach in the undertaking, it’s a problem between Munsi and the
police.”’ Munsi came and delivered a rousing speech in favour of early independence.
As 1947 wore on and partition of British India along Hindu Muslim communal lines be-
came more likely, the political position of the princely states came under great scrutiny.
By August, when the transfer of British power was due, all the rulers came under pres-
sure to accede to either India or Pakistan. In most of the more than 550 states, the
decision was clearcut because of geographical position, the religion of the ruling family,
and the predominant religion of the population.
Three difficult cases stood out after ‘freedom at midnight’ on 15 August. In Kashmir,
contiguous with both India and Pakistan and with a Muslim majority, the Hindu ruler
wavered. In the immensely wealthy and large central Indian state of Hyderabad, which
had a Hindu majority, the Muslim Nizam had dreams of independence from both India
and Pakistan. Then there was Junagadh, what the historian H. V Hodson called ‘the
joker in the pack’.
Junagadh was close to the western side of Pakistan, and had a Muslim ruler. But its
fragmented territory was interlocked with that of neighbouring Hindu-ruled states, and
its people were mostly Hindu. Moreover, it contained the great Hindu pilgrimage sites
of Somnath and Dwarka.
In 1946, the Nawab’s prime minister and closest adviser, the Diwan, had become sick
and gone into prolonged convalescence. Stepping into his shoes in May 1947 as act-
ing Diwan came Sir Shah Nawaz Bhutto, a politician from Sindh active in the Muslim
League of Mohammad Ali Jinnah, the father of Pakistan. (Bhutto himself was the father
and grandfather of two later prime ministers of Pakistan, Zulfikir Ali Bhutto and Benazir
Bhutto.)
Bhutto kept in close touch with Jinnah and had the Nawab obey his advice to ‘keep out
under all circumstances until 15th August’. Then, on the day of the transfer of British
power, the Government of Junagadh announced its accession to Pakistan. Hodson be-
lieves Jinnah never actually thought Junagadh would be allowed to join Pakistan. The
objective of the exercise was to set uncomfortable precedents for Nehru in the more
pressing contest for Kashmir and perhaps Hyderabad. If Nehru agreed to a plebiscite
in Junagadh, which he eventually did, it would help Pakistan’s case for a popular vote
in Muslim-majority Kashmir. If the Junagadh ruler’s decision was accepted, over the
wishes of his people, the same could apply in Hyderabad. If the Indians simply marched
into Junagadh, protests against a similar Pakistan!, use of force in Kashmir would be
greatly weakened.
Nehru adopted the course of negotiation while throwing a military noose around Juna-
gadh in the neighbouring Hindu-ruled states, which had all acceded to India. Two sub-
ordinate territories of Junagadh, the enclaves of Babariawad and Mangrol, were taken
by Indian troops on 1 November 1947 without bloodshed.
Meanwhile, Indian nationalists began agitating within and without Junagadh for the
overthrow of the Nawab. In Bombay on 25 September, they declared an Arazi Hakumat’
or Parallel Government under the presidency of Samaldas Gandhi, a relative of Gandhi
who was editor of the newspaper Vande Mataram. From a temporary base in Rajkot,
Gandhi kept in touch with supporters inside Junagadh by human couriers simply walk-
ing across the open frontiers of the isolated state. Other nationalist journalists, includ-
ing the editors of the Gujarati newspaper lanmabhoomi in Bombay, called for volunteers
to gather in Bhavnagar and other cities close to Junagadb for a non-violent invasion.
The students in the Junagadh Vidyarti Sangh threw their limited weight against the
Nawab also. ‘We were too scared to carry out physical sabotage like attacking power
stations,’ said Vakharia. ‘So our sabotage consisted of spreading false rumours to cause
panic, and supplying information back to the provisional government. We used to send
someone to Jetalsur or Jedpur in the Indian union to pass on the information.’
In Junagadh, as in many other parts of India, the partition steadily developed a mur-
derous communal nature. Two Muslim communities, called the Sodhana and Vadhana,
had taken a militant position in support of accession to Pakistan and mounted big pro-
cessions through Junagadh, threatening Hindus with ret- ribution if they opposed it. As
it became clear that Pakistan was in no position to support the Nawab, Hindus turned
on the Muslim minority and massacred whole communities in some outlying villages.
Food shortages developed, and the Nawab’s revenues dried up. As his administration
lost its grip, the Nawab decided the game was up and made a hasty departure for Ka-
rachi, taking with him all the cash and negotiable assets of the treasury, his family and
many of his dogs (though his consort, the Begum, forgot her youngest child in the royal
nursery and had to turn back to collect the infant). On 8 November, after an earlier
meeting of the State Council, Bhutto wrote to the Indian Government’s representative
at Rajkot asking India to take over the state to avoid a complete administrative break-
down, pending a honourable settlement of the accession issues.
The Indian Army moved into Junagadh without incident on 9 November, and the com-
munal tension quickly settled down. However, Vakharia recalls a small communal riot
breaking out in Junagadh soon after independence, when some shoe shops belonging
to Muslims at Panch Hatadi (Five Shops Area) were looted by Hindus. The students of
the Junagadh Vidyarti Sangh went to the area to protect the Muslim shops, but their
presence was misunderstood by the police.
One of the students was a fellow Modh Bania and boarding house companion of Dhirub-
hai named Krishna Kant Shah, who had been born in Kenya and sent back to Junagadh
for his education. He was arrested by the police as one of the looters and taken to the
lockup early in the evening. The leaders of the Sangh went to the police headquarters
and met the police commissioner, named Lahiri, to argue Shah’s innocence.
‘Dhirubhai [who was then 16] showed a lot of courage in arguing with the police com-
missioner to defend Shah,’ Vakharia said. ‘The arguments went on for two or three
hours, and all of us were threatened with arrest for obstruction of justice. But we were
determined we would not go until our colleagues were released. Eventually they de-
cided to let Shah go at midnight.’ It was a debt Dhirubbai was to collect from Shah in
controversial circumstances more than 30 years later.
The people of Junagadh voted overwhelmingly to join India when a plebiscite was held
in February 1948, though Pakistan never recognised it. Dhirubhai returned to his stud-
ies, and took his matriculation in 1949. Vakharia studied law and continued with his po-
litical activity, following Narayan out of the Congress Party into the new Socialist Party
in 1948. On graduating in 1951 he moved to practise in Rajkot and then Ahrnedabad,
and eventually came back into the Congress later in an active legal- political career.
With his family still extremely poor, Dhirubhai had no such option. On finishing high
school, he had to look for work. At the age of 16, Dhirubhai was physically strong, and
already possessed of the persuasiveness that was to mark his later business career.
It is tempting to look into the culture of the Modh Bania for an explanation of what his
critics see as his ruthless business ethics and ‘shamelessness’. But many other entre-
preneurs have also sprung from the same background in Kathiawar: most would shrink
from the manipulation of the government that became part and parcel of the Ambani
operation, even at the cost of less success.
The answer lies probably in the deep poverty that his family endured as the cost of
his father’s devotion to a teaching career. While he also learned that life is a web of
relationships and obligations, Dhirubhai was fired with an ambition never to become
dependent on anyone or to stay long in somebody else’s service.
LESSONS FROM THE SOUK
Early in the 1950s, officials in the treasury of the Arabian Ekingdom of Yemen noticed
something funny happening to their country’s currency. The main unit of money, a solid
silver coin called the Rial, was disappearing from circulation. They traced the disap-
pearing coins south to the trading port of Aden, then a British colony and military bas-
tion commanding the entrance to the Red Sea and southern approaches to the Suez
Canal.
Inquiries found that an Indian clerk named Dhirubhai Ambani, then barely into his
twenties, had an open order out in the souk (marketplace) of Aden for as many Rials as
were available. Ambani had noted that the value of the Rial’s silver content was higher
than its exchange value against the British pound and other foreign currencies. So he
began buying Rials, melting them down, and selling the silver ingots to bullion dealers
in London. ‘The margins were small, but it was money for jam,’ Dhirubhai later remi-
nisced. After three months it was stopped, but I made a few lakhs [one lakh = 100000
rupees] of rupees. I don’t believe in not taking opportunities.”
Dhirubhai had gone to Aden soon after finishing his studies in Junagadh at the age of
16, following the long tradition of boys from Bania families in Kathiawar heading for the
Arabian trading ports or the market towns of East Africa to gain commercial experience
and accumulate capital.
A network of personal contacts kept jobs within the same community. Dhirubhai’s elder
brother Ramniklal, known as is Ramnikbhai, had gone to Aden two years before, and
was working in the car sales division of A. Besse & Co. Founded by a Frenchman named
Antonin Besse, the company had developed from trading in animal hides and incense
between the world wars into the biggest commercial house in the Red Sea area, selling
cars, cameras, electrical goods, pharmaceuticals, oil products and food commodities to
both British and French territories in the Arab world and the Horn of Africa, as well as
to Ethiopia.
Another Gujarati, Maganbhai Patel, from the Porda district, joined Besse as a junior ac-
countant at the age of 18 in 1931 and was made a director in 1948. He estimates the
company controlled about 80 per cent of the region’s commerce soon after the Second
World War. It had 30 branches, and six to eight ships of its own in the subsidiary Halal
Shipping. It was indeed successful: shortly before his death at the age of 72 in 1948,
Antonin Besse made a donation of one million pounds to endow St Anthony’s College
in Oxford.
Thereafter, the company was run by two of his sons, Tony and Peter. It employed over
10 000 people, of whom about 3000 were Gujaratis hired as clerks, salesmen and
middle management. Susheel Kothari went to work for Besse in 1952 from Wallibhipur
in Saurashtra, in a group of 14 recruits hired after interviews in Rajkot. Besse trusted
Indians as honest and loyal, he recalled. While not paid nearly as much as European
expatriates, they enjoyed a standard of living that periodically drew complaints from
the British colonial administration for forcing up wages generally On one occasion, Tony
Besse had told the governor to his face that it was ‘None of your business what I pay’.
When Dhirubhai left school, his brother Ramnikbhal put in a word for him with Magan-
bhai Patel. On his next leave back in Porda, Patel invited Dhirubhai to come over for an
interview. ‘My first impression was his way of walking,’ recalled Patel, imitating a heavy,
decisive footstep. ‘It was as if time was short and he had to get ahead, to reach a goal.’
Patel asked him to read from The Times of India and then write a summary in English,
a test Dhirubhai passed satisfactorily.
He was hired, and soon after arrived by steamer in Aden. As Susheel Kothari notes:
‘The first sight of Aden is always a shock.’ The oil-filmed blue waters of the port are
backed by steep crags of dark-brown rock, remnants of an old volcano, with no sign of
vegetation.
Aden had flourished in Roman times as a way station on trading routes between Egypt
and India. The opening of the Suez Canal in 1869 revived its importance, and it became
a major coaling port for European shipping to Asia and Australasia. From its occupation
by a detachment of Indian sepoys sent by the East India Company in 1839, Aden had
been an important link in the ties of Britain to the Indian Raj. Until 1937, when it was
put under the Colonial Office in London, the territory was administered from India. The
Indian rupee circulated as its currency until it was replaced by the East African shilling
in 1951.
The outpost had been a punishment station for British regiments deemed to have shown
cowardice or other offences against discipline while in India. As one of its last gover-
nors, Charles Johnston, noted in a memoir, it had been ‘the dumping ground, even as
late as between the wars, to which regiments sent officers who had got themselves into
matrimonial difficulties’.
The colony also became the entrepot for the Red Sea and Horn of Africa, where deep-
water ports were few. Cargoes of cattle hides, coffee, aromatic gums and pearl shell
were brought to Aden by wooden sailing dhows, and bought by trading firms like Besse,
Cowasji Dinshaw, Luke Thomas and Cory’s. In return, basic commodities such as sugar,
rice and textiles were shipped back.
Between the world wars, the biplanes of the Royal Air Force kept the hinterland quiet
by machine-gunning the villages of any unruly Yemeni tribesmen. Behind this shield of
bullets, the middleman trade flourished. The definitive historian of British rule in Aden,
R. J. Gavin, noted:
Aden indeed consisted of a hierarchy of brokers from the heads of foreign firms to the
lowest workman or child who offered his labour or hawked in the street. Speculators,
hoarders and price rings frequently sent commodity and foodstuff prices rocketing up
and down, while moneylenders and dealers darnpened the effect of this for the rest of
the population at a price which included a claim to social leadership. Acquisitive individ-
ualism was mitigated only by ethnic and other local solidarities formed outside rather
than within the town.
Aden’s economy developed rapidly after the Second World War, but its business mi-
lieu still had some of this character when Dhirubhai learnt his basic techniques in the
1950s.
The spur to Aden’s growth was the decision of British Petro- leum to build a new oil
refinery in Little Aden, another crater jutting into the sea across the bay from the main
town. BP’s existing refinery in the Gulf port of Abadan had been nationalised by a new
Iranian government. The refinery employed up to 11000 workers at any one time dur-
ing its construction over 1952-54, and then had a permanent staff of 2500 housed in a
comfortable village. This sparked off a construction boom which saw Aden extend be-
yond the wastes and saltpans of the causeway which had been kept clear for defensive
reasons in earlier times.
Later in the 1950s, the British began concentrating strategic reserve forces in Aden
from other bases in the Gulf and East Africa. By 1964, Aden had some 8000 British
military personnel plus dependents-and their demand for housing kept the construction
activity going. Aden’s population grew from 80000 in 1946 to 138000 in 1955.
It became a more modern economy, and airconditioning ameliorated the hot humid
weather in the midsummer months. But it retained many exotic features, including
the daily inward flight by Aden Airways of the mild narcotic called qat. From a hedge-
like bush in the mountains of Ethiopia, the qat leaves had to be consumed fresh and
were delivered to consumers in Aden within a few hours of plucking at dawn. ‘It is not
medically harmful, so far as can be ascertained,’ noted Johnson, the former governor,
1although if taken in excess it lowers the appetite and produces a characteristic green-
faced, cadaverous appearances
Just before mass air travel arrived with the first passenger jets, Aden overtook New York
in 1958 to become the biggest ship- bunkering port in the world. As well as for cargo
shipping and tankers, it was a refuelling stop for elegant liners of the P &- 0 and Orient
Lines as well as crowded migrant ships taking Italians and Greeks out to Australia.
Disembarking tourists, brought ashore in launches from the ships moored out in the
roadstead, were immediately surrounded by desperate Arab and Indian salesmen and
touts, offering cheap cameras, fountain pens, transistor radios and tooled-leather items.
After making their purchases and taking a quick taxi tour around the arid town, most
were glad to get back to their P & O comfort and security. Aden had an air of menace, of
repressed resentment at its naked display of foreign military and commercial self-inter-
est. As Gavin observed: ‘For a thousand years or more Aden had essentially belonged
to the merchants of the world, be they South Yemeni or foreign, while the people of
its hinterland watched with jealousy and poverty-stricken eyes from beyond its gates.
But for the young Gujaratis hired by Besse & Co, Aden was a kind of paradise and most
recall their days there with great affection and nostalgia. ‘We felt it was heaven,’ said
Himatbhai Jagani, a former Besse employee who had been born in Aden, the fifth gen-
eration of his family to live there since their original migration from Gujarat early in the
19th century ‘It was tax free virtually, and we never saw an electricity bill or rent bill till
we left. For 14 of us in our mess we paid only 400 shillings a month for food. We could
save about half our salary It was very comfortable-we all missed that life.’
Home leave of three months came after 21 months straight work in Aden or at one of
the Besse outposts around the Red Sea. The Besse employees went home with their
savings to spend by P & 0 liners like the Chusan or Caledonian, sometimes by Flotte
Lauro of Italy, and if nothing else, India’s Moghul Lines.
While most of the British residents lived on the slopes above Steamer Point, socialising
at the Gold Mohar beach club nearby, the 15000 Indians clustered in a few streets of
the Crater district-Sabeel Street named after a refuge for stray and injured animals set
up by rains and Hindus, Danaraja Street, and Bencem Street, named for the prosper-
ous Jewish trading community that once thrived in Aden and Yemen. The Besse & Co
bachelor’s mess occupied four or five buildings nearby in Aidroos Valley.
The Crater had all the features of the Orientalist watercolours that adorned European
drawing rooms at the turn of the century, as described by Governor Johnston:
Indian merchant families, the women in saris, the men in their white jodhpurish get-
up, are taking the air, immaculate after the siesta. We drive around a market square
with fruit glowing on the stalls, and enter a narrow street fairly buzzing with exotic life-
pastrycooks, water-sellers, coffeernakers, carpet merchants, all the usual figures of the
Oriental bazaar-and pervading the whole thing a strong hot smell Of Spice.
The various expatriate communities lived in their own social circles, where, in the way
of ‘hardship posts’, attachments were strong and recalled with nostalgia in later life.
The Hindus from India were probably liked the least by the local Arabs-to whom Mus-
lims from India and Pakistan complained about India’s incorporation of Kashmir and
Hyderabad, but filled a need for white-collar staff that Aden’s schools could not meet,
and had their own social circle too.
While his brother Ramnikbhal worked in the automotive division, Dhirubhai was as-
signed to the Shell products division of Besse. As a newly arrived youngster he created
an early splash, literally, by taking a bet while out helping bunker a ship in the harbour
that he could not dive off and swim to shore. The prize was an ‘ice-cream party’-which
he won, by swimming through waters that had seen occasional shark attacks on swim-
mers outside the nets of its beaches.
As he developed more familiarity with the trade, Dhirubhai was sent to market Shell
and Burmah lubricants around the Besse network, visiting traders in French Somal-
iland, Berbera, Hargeysa, Assem, Asmara (Eritrea), Mogadishu (Italian Somaliland),
and Ethiopia. Some places were not accessible to steamers, so the Besse salesmen
would travel by dhow, the traditional wooden sailing vessels of Arabian waters. Lodg-
ings would be extremely rough, and the food difficult for the vegetarian Gujaratis.
Dhirubhai was outgoing, robust, and helpful to newcomers. He was physically strong
and proud of his physique. The other young men tended to be bashful about naked-
ness in their shared bathrooms, and a common prank was to whip away the towels
they wrapped around their waists while crossing the living space in the mess. Dhirub-
hai would walk around without hiding behind towels. His solid footsteps could be heard
from a distance, and his colleagues soon started calling him ‘Gama’ after a famous In-
dian pehelwan (wrestling champion) of the time. Navin Thakkar, a former colleague at
Besse, remembers that Dhirubhai taught him to swim by simply throwing him into the
sea, at the swimming place down near the Aden dockyard where they used to go on
Saturdays and Sundays.
Dhirubhai delighted in stirring up pandemonium. Old colleagues describe it as bichu
chordoa or ‘letting loose a scorpion’.
Despite his affability, some of his old colleagues describe Dhirubhai as a ‘dark charac-
ter’-not just because of the darkish skin he inherited from his father-but for the ambi-
tion and risk-taking he hardly concealed. ‘Ramnik was more or less a saintly man,’ said
one ex-Besse colleague who later went to work for Dhirubhai. ‘Dhirubhai was a daring
one. He was already advising me to go for business and not to remain in service.’
Dhirubhai’s career with Besse was progressing steadily, and the Shell Division was one
of the most rapidly expanding areas of company business. By 1956, when the Suez
War broke out after Egypt’s President Nasser nationalised the Suez Canal, Dhirubhai
was managing the Shell refuelling operation at the Aden military base. He was also able
to observe construction of the BP oil refinery in Aden, gaining an early insight into the
production linkages of the petroleum industry.
In March 1954, Dhirubhai married at the age of 22, in a match arranged by his mother
(his father had died in 1951) but which Dhirubhai himself had supervised. His partner
was Kokila Patel, the daughter of a postmaster in Jamnagar, the port on the western side
of Kathlawar. Her family was not particularly wealthy, so it was not a financially advan-
tageous match for Dhirubhai. But Kokilaben’ was also a Modh Bania, as the strict caste
endogamy of the time demanded and her character complemented that of Dhirubhai, a
solid home anchor very much, grounded in traditional values and religious piety.
Although he was doing well, Dhirubhai was far from happy with his position as an em-
ployee. ‘I saw in him he was somebody that was different than others,’ recalls M. N.
Sanghvi, who worked alongside Dhirubhai in the Shell division and later went to work
for him back in India. ‘I could see he wanted to make something of himself.’ His room-
mate Susheel Kothari also remembers the ambition. ‘Right from the beginning he was
determined to do something big,’ Kothari said. ‘He was never comfortable in service. He
was a born businessman.’
After office hours, which finished at 4.30 in the afternoon, Dhirubhai would invariably
head for the Aden souk. Initially he just watched the Arab, Indian and Jewish traders
in action. Later he began taking positions in all kinds of commodities, particularly rice
and sugar, in gambles against rises and falls in prices at time of delivery Doing business
on one’s own account was strictly forbidden to Besse employees by the terms of their
contract, and his older brother Ramnikbhai disapproved, so Dhirubhai would simply say
he was ‘studying the market’.
Dhirubhai made some profits, and learned the fundamentals of business and money.
But he also made some near disastrous mistakes, which almost wiped out his capital.
On one occasion he suffered a tight financial squeeze when an incoming cargo of sugar
was damaged by sea-water and his customer refused to accept delivery Pending settle-
ment of his insurance claim, Dhirubhai had to pass the hat among Besse colleagues for
loans to bail himself out.
One particular ally was a Besse employee named jamnadas Sakerchand Depala, a rela-
tive by marriage, who lent Dhirubhai 5000 shillings on this occasion. Depala was close
to Dhirubhai and the two usually had lunch together, even after Dhirubhai had married.
It was an odd relationship, another attraction of opposites. Depala was not a worldly
man and lent money again to Dhirubhai for his ‘market studies’, but had a strong influ-
ence nonetheless. ‘Jamnadas was morally in control of Dhirubhai,’ said Susheel Kothari,
who had been in the same bachelors mess with Dhirubhai. ‘If Dhirubhai was drinking
too much, no one else could stop him. He’d just swear at them. Kokilaben used to call
Jamnadas and Dhirubhai would listen to him.’
According to one version of events, Jamnadas made considerable sacrifices for Dhirub-
hai. One one occasion, so this story goes, Jamnadas and Dhirubhai were reported to
Besse management for their private deals, and got suspended from service. Jamnadas
took responsibility and resigned from service, allowing Dhirubhai to complete the seven
year’s service that earned him the right of residence in Aden.
Another story told by ex-Besse staff is that, after leaving the company, Jamnadas con-
tinued to invest in rice and sugar deals masterminded by Dhirubhai, and lost heavily,
to the point of losing most of his capital. Jagani remembers Jamnadas being ‘very de-
pressed’ around 1961. Whatever the truth of this, Dhirubhai continued to act as though
he was in debt to Jamnadas. Some years later, Jamnadas came back to India and was
given a shop selling textiles for Dhirubhai. After a while Jamnadas stopped coming to
work, but Dhirubhai saw that his salary was paid until his death in 1987.
Dhirubhai left Aden in 1958, with his seven years service and right of residency as a
failback, to try his hand in business back in India.
The house of Besse lasted only another nine years, as long as British rule in Aden, which
was being eroded by the sandblast of pan-Arabic nationalism. Some of the transistor
radios sold at Steamer Point found their way to the villagers of the Yemen hinterland,
who picked up President Nasser’s message of Arab nationalism through Radio Cairo.
Resulting hit-and-run attacks by rival liberation fronts made Aden unsafe for foreigners.
In the second half of 1967, British forces pulled back into an ever- tightening perimeter
until the rearguard was lifted out by heli- copter to a naval task force offshore on 29
November 1967.
The territory fell unconditionally to the National Liberation Front. It applied its harsh
version of Marxism-Leninism, abolishing private property and nationalising most foreign
companies. By then the closure of the Suez Canal in the 1967 Arab-Israel war had cut
Aden’s bunkering business. Racked by periodic coup attempts and wars with northern
Yemen, the new state of South Yemen became an economic back-water and haven for
international terrorists-a modern version of the pirates’ lair the British first subdued.
Besse &- Co was among the companies appropriated by the new regime. From retire-
ment in France, former director Peter Besse wrote in 1996 that the ‘vast trading empire
. . . of my father collapsed on the arrival of various “People’s Democratic Republic” gov-
ernments. Today nothing is left.
CATCHING LIVE SERPENTS
At the end of 1958, Dhirubbai returned to India with his wife Kokilaben and first child, a
son named Mukesh. They were expecting their second child (another son, Anil, born in
June 1959, to be followed by daughters Dipti, born in January 1961, and Nina, born in
July 1962). From all his years with Besse & Co and all his evenings ‘studying the mar-
ket’ he had accumulated savings of just 29000 East African shillings-then worth about
US$3000-which, as his Besse colleague Susheel Kothari had reminded him, would be
just ‘chutney’ back in his homeland.
Dhirubhai was determined to go into business on his own account. At first he looked
at Rajkot, the port city in his native Saurashtra facing the Rann of Kutch. Krishnakant
Vakharia, who was then practising law in Rajkot, remembers that Dhirubhai came to
visit. ‘He was toying with the idea of a dealership in automobile spare parts there,’
Vakharia said. ‘I had a friend who was doing just that, and who was not doing very well.
So I advised Dhirubhai that he should not go into this business, and instead of Rajkot
he should go to Bombay.’
At Dhirubhai’s request, Vakharia accompanied him down to Chorwad and stayed there a
few days while Dhirubhai sounded out friends and acquaintances about ideas and help.
He found support in the family of Chambakial Damani, a second cousin (Dhirubhai’s
grandfather and Damani’s grandmother were brother and sister) who had been work-
ing in Aden for family companies at about the same time that Dhirubhai was there.
One business, Madhavas Manikchand, had imported textiles and yarns from India, ran
a transit business into Ethiopia, and held the agency for Bridgestone Tyres. The other,
Anderjee Manekchand & Co, had imported textiles from India and Japan. When neces-
sary, Dhirubhai had used the names of these firms during his own after-hours trading.
Damani’s father, Madhaylal Manikehand, had closed his busi- nesses in Aden and Ethio-
pia on retiring in 1957, and decided to put Rupees (Rs) 100 000 into a trading business
for his son and Dhirubhai in Bombay. Vakharia saw the agreement concluded in his
presence, and returned to Rajkot.
Dhirubhai and Chambaklal called their new business Reliance Commercial Corp. The
first office was a room of about 350 square feet in Narsinathan Street, in the crowded
Masjid Bandar district of Bombay. It had a telephone, one table and three chairs. If the
two partners and their initial two employees were all present, someone had to stand.
At first, the business traded spices back to the partners’ contacts in the souk of Aden-
betel nut and curry ingredients- and shipped some cotton, nylon and viscose textiles to
Ethiopia, Somalia and Kenya. But local contacts led them quickly into the frenetic and
potentially profitable business of trading synthetic yarns - one of more than 60 com-
modity markets serving all of India that were located in Bombay, nearly all of them run
by Gujaratis. The Rajkot lawyer Vakharia had introduced Dhirubhai to a fellow activist in
the Socialist Party, a successful yarn trader called Mathura Das Mchta. And Dhirubhai’s
talented nephew Rasikbhai Meswani (the son of Dhirubhai’s older sister), had begun
trading in yarns a couple of years earlier.
At the tiny Masjid Bandar office, Dhirubhai began to assemble a team that stayed with
him for decades as Reliance grew. They included Meswani, older brother Ramnikbhai
who had also returned from Aden, younger brother Nathwarlal (Nathubhai) on complet-
ing his education, and two former schoolmates from Junagadh named Rathibhai Much-
hala and Narottambhai Doshi. Dhirubhai also enlisted the services of old acquaintances
from Aden, including Liladhar Golkaldas Sheth, who had been a dealer in textiles, coffee
and foreign exchange in Yemen, Burma and Aden (suffering several bankruptcies along
the way) before settling back as a foreign exchange dealer in Bombay in the 1950s.
Dhirubhai quickly became a familiar figure around the streets of Pydhonie, the synthetic
yarn trading district of Bombay where Gujarati merchants then did their business sit-
ting on spotless white canvas gaddi floor-coverings, entering trades in compendi- ous
ledgers, and consuming endless cups of tea thick with sugar, spices and hot milk. From
late morning until about 4 pm, Pydhonie was busy with trading as dealers made forward
trades, trying to guess the future price of yarn of this or that micron size.
If cotton and silk had been the materials of India’s textile industry right from the old
handloom days to the industrial looms of the early 20th century, by the 1950s the
industry and its consumers were hungry for the artificial threads created by modern
chemical science. Nylon, viscose and polyester were cheap, hardwearing, quick-drying
and creaseproof, and could imitate both cotton and silk.
The problem for yarn dealers at Pydhonie was not usually to find buyers but to secure
supplies. The tightening of industrial controls and import quotas since Independence
had choked supply of these ‘luxuries’ as the economic Brahmins of New Delhi chan-
nelled national resources towards new complexes making capital goods such as power
stations and steel mills-what Prime Minister Jawaharlal Nehru called the ‘temples of
modern industry’.
India had one viscose factory owned by the Birlas, and one government-owned nylon
plant. The first polyester fibre plant did not open until the 1970s. These domestic fac-
tories supplied only a small fraction of local demand from textile weavers. Smugglers
supplied some of the demand, bringing in yarn by either misdeciaring cargoes at regu-
lar ports or simply running small ships to the numerous creeks and beaches of India’s
west coast. Made-up textiles were also smuggled as well, via Dubai or Singapore. In-
dian visitors to Japan’s artificial textile industries, then in their great postwar expansion
phase, recall seeing vast production of sari-length material, for which officially there
was no open market in the subcontinent at all.
The other source came from the strictly controlled import licences given to registered
exporters of textiles, allowing import of raw materials worth a certain percentage of
their export earnings. Like many others, Dhirubhai realised that these import or ‘re-
plenishment’ licences (known as REPS) were as good as money, even though some of
them were officially not transferrable and imports had to be made by the ‘actual user’
of the materials. By paying higher margins than any other traders, Dhirubhai soon be-
came the main player in the market for REP licences. The margins were tiny in the trade
itself - but his dominance also put him in the position of being able to turn on and off
much of the supply of yarn into the Indian market.
Suresh Kothary, whose family business was importing agent for Du Pont products in-
cluding textile fibres, chemicals and dyes from 1958 to 1993, and also active in yarn
trading, remembers first meeting Dhirubbai in 1964 at the Masjid Bandar office. Dhirub-
hai would often drop by at Kothary’s shopfront at Pydhonie thereafter, lounging on the
white cotton mattress and drinking tea or coffee. They were in effect rivals, as Dhirub-
hai mostly imported his yarns from Asahi Chemicals in Japan or Ital Viscosa via a long-
resident Italian businessman in Bombay, a Dr Rossi, while Kothary handled only the
Du Pont product from the United States and elsewhere. Dhirubhai was a sporting rival,
Kothary said: ‘He would always say: “This is what I’m going to do, boy!” Whenever he
fights an enemy he goes in the open.’ Not everyone in the Bombay textile trade would
agree.
Kothary and many others in the Pydhonie market remember Dhirubhai’s intervention in
a market crisis in the mid-1960s when spiralling textile prices led government authori-
ties to crack down on ‘speculation’ in the yarn market by banning forward trading, and
then arresting traders found to be continuing the practice. ‘Consumers must have com-
plained to the government about fluctuations in prices-some people, about a dozen,
were arrested in the market,’ Kothary said.
The trading community was despondent as their colleagues languished all day in the
cells of the Picket Road Police Station. Approaches to officials by the Bombay Yarn
Markets and Exchange Association got nowhere. Then, late in the evening, Dhirubhai
arrived like a storm at the police station, shouting greetings to the senior officers, and
handing out snacks to everyone. Within an hour, all the arrested traders had been re-
leased, and the complaints against them shelved. Kothary can only guess at Dhirubhai’s
intervention. ‘The usual-India!’, he said.
Dhirubhai also emerged as saviour of the market when an even greater supply crisis
occurred in 1967, Kothary recalled. On a report that ‘actual user’ import licences had
been traded and misused, the Customs authorities in Bombay under the then Assistant
Collector, a Mr Ramchandani, impounded all incoming cargoes of artificial fibres. The
government insisted that whoever imported the yarn had to be the manufacturer who
wove it into cloth.
According to Kothary, about 40 million rupees (then about US$5.3 million) worth of
yarn was seized. Many traders then defaulted on loans taken out to cover the imports.
The entire artificial textile market was paralysed. ‘It could have made us all insolvent,’
Kothary said. ‘This is when I came very closely in touch with Dhirubhai. It was he who
saved us all. We fought for about six months. I used to go with him to lawyers day in
and day out. We went to Delhi to see Morarji Desai [then finance minister]. That was
the time I could see he was a wizard. He used all the ways and means.’
The crisis ended as quickly as it started, ostensibly after a one-day hearing of the
importers’ appeal in the Customs, Excise and Gold Appellate Tribunal under Justice
Oberoi, who found for the appeal. Kothary indicates that an agreement engineered by
Dhirubhai was behind the judicial settlement. The details are not revealed, but presum-
ably come under the category of ‘That’s India!’ also.
On their move to Bombay, Dhirubbal and his young family had moved into an apart-
ment on the 3rd floor of the Jal Hind Society building in Bhuleshwar, a very crowded
district of shops, markets and residential tenements in the central part of the city. The
building is what is known as a chawl in Bombay: numerous small apartments, often
just single rooms, opening on to open galleries around a central courtyard which is set
back from the street behind commercial premises. Quite often the toilets and washing
facilities are shared at ground level.
Later accounts of Dhirubhai’s early career often paint this home as Dickensian in the
extreme. The flat, since bought by a later tenant, had two small bedrooms, a living
room, kitchen and internal bathroom in 1995. Vakharia, who used to visit the Ainbanis
for a holiday each Christmas from 1959 to the late 1960s, remembers it being ‘quite
luxurious’ compared to the single rooms many Gujarati families had to occupy in Bom-
bay at that time.
Even so, Dhirubhai and his young family, eventually two boys and two girls, lived aus-
terely in surroundings that were crowded, noisy and dirty. The two sons, Mukesh and
Anil, who took over day-to-day management of Reliance in the late 1980s, may have
had engineering degrees and MBAs from American universities, but their lean early
years gave them a hungry ambition unusual in the second generation of a successful
Indian business family
As his confidence grew in his Bombay success, Dhirubhai developed his taste for ‘let-
ting loose a scorpion’ through practical jokes and whimsy. Vakharia recalls that when
he visited Bombay with his new wife for the first time in 1959, he and Dhirubhai were
invited home by their senior mentor Mathura Das Mehta. Mehta’s wife served the young
men mango juice, and kept insisting on refilling their glasses. ‘Dhirubhai whispered:
“Let’s do some mischief,”’ Vakharia said. The two asked for a fourth glass, and kept then
accepting more. After more than a dozen glasses each, the Mehta kitchen ran out of
mangoes and a servant had to be sent to the market to buy more, which were all duly
consumed. The Mehtas continued to be friends, ‘but they never invited us back for any
lunch or dinner at their house’, Vakharia said.
Each year, Dhirubhai would make it a point to play an April Fool’s joke upon an elderly
employee named Ghulabchand, an old associate from Aden. For all his experience,
Ghulabchand never failed to fall for it. On one occasion, Dhirubhai announced that
everyone was invited to dinner across town at an address at Mafatlal Bath. Ghulabe-
hand was sent in a taxi with Vakharia and another member of the office, Ramanbhal.
At Marine Drive they stopped outside a building, and Patel went in to look for a fourth
member of the group. After 15 minutes waiting, Vakharia also went in. Ghulabchand
eventually gave them all up and took the taxi to Mafatlal Bath, where he found no one.
On returning home, he found Dhirubhai and the others eating a dinner they had notified
Ghulabchand’s wife to prepare.
Vakharia recalls another prank in 1965. The India-Pakistan War was on, and a blackout
had been imposed on Bombay for fear of naval and air attacks by Pakistan. About 10
pm, Dhirubhai said: “Let’s go out and take a round of the city.”’ The two drove around
the dark Bombay, with Dhirubhai bluffing police at roadblocks that he was on official
business and handing out small tips of ten rupees or so. ‘He got saluted all the way,’
said Vakharia. ‘On the way back we saw some lights in the Japanese consulate, so
Dhirubhai went in and told them to douse the lights.’
On yet another occasion, around 11 pm on a cold winter night, Dhirubhai announced an
immediate picnic. The cook was told to assemble supplies, and Vakharia and the family
piled into Dhirubhai’s car. Another dozen friends were telephoned and told to rendez-
vous in their cars. ‘We were not told where we were going,’ Vakharia said. ‘We ended
up at Rajeswari, about 50 or 60 kilometres from Bombay at about 3 am. The cold was
very severe and we went to a dharamsala [pilgrim’s lodging] at a hot springs resort. It
was meant only for sadhus [ascetic Hindu holy men]. Dhirubhai said we would all sleep
there. After half an hour we were still shivering and Dhirubhai got up and lit a camp fire.
When the sun came up we had tea, and a bath in the hot springs, and cooked kedgeree
on the camp fire. We told jokes and sang songs, and didn’t get back home until late in
the afternoon.’
Dhirubhai’s fast pace caused a rift with his partner Chambaklal Damani in 1965. Ac-
cording to Vakharia, Damani preferred to trade with great caution, leading to constant
tension with Dhirubhai who was a risk-taker. The final rupture came after one clash
when, at Dhirubbai’s urging, Reliance built up a large holding of yarn in the expectation
of a price rise. Damani pressured Dhirubhai to cut back their exposure. So Dhirubhai
sold the yarn stockpile-to himself, in secret. Two or three weeks later the price of yarn
shot up and Dhirubhai made a killing. ‘Later Dhirubhai told Chambaklal: “I am prepared
to share profit with you,”’ Vakharia said. “’But in future if you do not know the business
do not intervene.”’
Many others among Dhirubhai’s ex-colleagues and trade associates also believe the
partners were incompatible.
‘He takes so much risk that people fear something will go wrong,’ said Vradial De-
pala, who knew Dhirubhai in Aden. ‘But the risks are all calculated. They are not blind
risks.’
‘You may be a co-passenger in a car with me, but if you don’t like my driving you might
be a little fearful,’ said Manubhai Kothary, a leading Bombay textile exporter and long-
time president of the Silk and Art Silk Mills Research Association.
‘Someone advised Dhirubhai’s partner that he had made sufficient money and now
should come out,’ said Susheel Kothari, the ex-colleague from Besse &- Co who later
worked for Reliance. ‘Dhirubhai’s business is catching live serpents.’
Chambakial Darnani himself will say only that ‘We agreed to separate willingly’ or that
‘We just became separate as friends’. But he agreed that the version given by Kothari
and others about differences over commercial risk were ‘to some extent true’. Damani
went into trading in a new company, while Dhirubhai and his brothers paid some Rs 600
000 to buy him out of Reliance. Soon after, Dhirubhai moved the office to bigger prem-
ises in the more central Court House building at Dhobi Talao, named for the laundrymen
who originally worked in the area.
After ten years at Bhuleshwar, in 1968, Dhirubhai moved his home out of the chawl to
a more comfortable flat in Altamount Road, one of the city’s elite areas on a hill over-
looking the Arabian Sea. Fond of driving fast, Dhirubhai had first bought a Fiat car, and
then moved on to a Mercedes-Benz. Later, in the 1970s, he indulged a taste for flashy
automobiles by acquiring a Cadillac, one of the very few in the country then or since.
Friends remember him as a dashing figure, the slightly dark skin inherited from his
father (the only such characteristic, some say) offset by a white safari suit, the hair
slicked back into a duck’s tail. For a while he put on weight, and then trimmed down by
taking vigorous dawn walks along the three-kilometre sweep of Bombay’s Marine Drive,
enlisting friends, colleagues and neighbours as companions.
Within a year of splitting with Damani, Dhirubhai took Reliance into textile manufactur-
ing for the first time. He decided to locate it in Gujarat rather than Bombay, because of
the cheaper land prices, and sent his older brother Ramnikbhal to select a site. Ram-
nikbhai enlisted Vakharia, then starting to get known as a lawyer in Ahmedabad, and
the two drove around the state in a small Fiat.
They settled on a 10000 square metre plot, the last going in a new industrial estate
developed by the Gujarat state govern- ment at Naroda, on the fringes of Ahmedabad.
Vakharia had got a contact, state minister for industries Jaswant Mehta, to approve the
purchase, and by a further stroke of luck the farmers owning some 100 000 square me-
tres of adjacent land were willing to sell. Dhirubhai had a simple factory built, installed
four knitting machines, and appointed his brother as plant manager.
Dhirubhai was again lucky in that, around this time, the British hold on Aden was be-
coming more tenuous. Even ahead of the British withdrawal in 1967, foreign nationals
felt threatened by the insurgency mounted by the People’s Liberation Front. Many of
the Indians working for Besse &- Co decided it was time to go home. So Dhirubhai had
a ready-made source of educated managers, accountants and salesmen, drilled to Eu-
ropean standards.
The word went around that Dhirubhai would find jobs for his old colleagues, and a dozen
old hands from Besse & Co accepted his offer. Most stayed for the rest of their working
careers, with the last few being retired from senior management positions in 1993 in a
deliberate move by Dhirubbai’s sons to rejuvenate the company’s leadership.
None of them knew very much about textile production, however, and it was a case of
learning by trial and error. All of us were new,’ recalled M. N. Sangvi, who left Aden in
1967 and immediately joined Reliance. ‘It was very small, only about 20 people in the
whole factory, about five or six from Aden. Nobody was familiar with textiles, and after
15 years in Aden I was not knowing anything about India either. The first two years,
1966- 67, was a very hard time. The product had to be established. We worked from
morning to late evening. Dhirubhai was very encouraging, and we had a family atmo-
sphere. The employer- employee relationship was not there. He put a lot of trust in
us’.
Susheel Kothari, who had returned from Aden in 1966, said that at one point in 1967
it appeared the mill would have to close down because Reliance could not sell the cloth
it was making. Dhirubhai told Kothari that if the factory had to shut down he should do
it gradually and see that no blame attached to his older brother Ramnikbhal. But the
Aden hands rallied. After putting in a full shift at the factory in Naroda, from 7 am to 3
pm, they would spend the afternoons and evenings touring markets around Ahmeda-
bad trying to persuade shopkeepers to stock Reliance fabrics. ‘We were determined we
should not fail,’ Kothari said.
Dhirubhai worked everyone hard, often calling his managers in Naroda at 6 am from
Bombay before they started out to work. They were expected to solve problems on their
own initiative. Dhirubhai himself set the example. Suresh Kothary recalled one incident
when spare parts were urgently needed for imported machines at Naroda. Dhirubhai
had the parts flown in from Germany, and then discovered that no trucks were available
for the haul up to Ahmedabad. He bought two trucks, one to carry the parts and one as
a backup, and sent up the consignment. The trucks were then sold in Ahmedabad.
But he was forgiving of honest mistakes, recalls Sangvi. In one case, Sangvi was over-
trusting of some merchants who had placed an order from Patna, the capital city of
Bihar state across in eastern India. Sangvi sent the consignment by rail, collectable on
presentation of a payment receipt at a Patna bank branch. The merchants forged the
receipt and took delivery from the railway yard. Reliance lost 900000 rupees, a consid-
erable sum at that stage, and it took months to recover it. Sangvi said: ‘Dhirubbai just
told me: “Nathu, nothing to worry-in business, anything can happen. I know you have
done it to increase the sales. I am with you and you just concentrate on the business.”’
Reflecting back on his career, as vice-president of the Reliance textile division, Sangvi
said: ‘I feel myself very fortunate that I have been working under such a legendary
figure.’
K. I. Patel, who had been recruited by his relative Maganbhai Patel to Besse and Co in
1953, returned to India in 1965. Soon after, Ramnikbhai Ambani, with whom he had
worked in the Besse automotive division, hired him for Naroda and put him in charge of
the knitting machines. Patel knew nothing about them, but was sent to West Germany
and japan later for formal training. He stayed with Reliance until retirement in 1993.
‘The years passed before we knew it, we were so busy,’ Patel recalled.
The result was steady growth in sales and profits for Reliance. In 1967, the first full
year of production at Naroda, the company recorded sales of Rs 9 million in 1967,
yielding a net profit of Rs 1.3 million. Dhirubhai and his family shareholders refused to
take dividends and kept ploughing earnings back into more machines. After a decade
of manufacturing, in 1977 Reliance had a turnover of Rs 680 million, and profits of Rs
105 million.
In an extensive write-up on the company in August 1979, the Indian Textile Journal re-
ported on a massive factory at Naroda occupying 230 000 square metres and employ-
ing 5000 staff. It had banks of machines for texturising or ‘crimping’ artificial fibres to
give particular sheens, machines for twisting the polyester and nylon fibres into yarns,
and machines for weaving the yarns into textiles. The yarns were sold to other Indian
textile manufacturers, or used in-house.
Most significantly perhaps, Dhirubhai established his own brand name, Vimal (named
after a son of his brother Ramnik), by dint of lavish advertising under the slogan ‘Only
Vimal’. This somewhat snobbish slogan, and some well-publicised fashion shows in
top-class hotels, added a touch of class to a product that basically appealed to the less
wealthy market sectors. In addition, Dhirubhai had got around the reluctance of estab-
lished wholesalers and shopkeepers to accept a new brand by creating his own network
of shops. Across India, some 400 shops were franchised to sell the Vimal brand of poly-
ester materials for saris, shirts, suits and dresses.
In one of the first of many eulogies to appear in the Indian press, the Textile Journal
noted how Dhirubhai was held in ‘high esteem’ by his staff, who attributed Vimal’s suc-
cess to his dynamic leadership. ‘When the construction of the factory was going on, it is
reported, many snakes were seen in the area. According to a popular belief, appearance
of snakes is
AN INVITATION
TO BOMBAY
The envelope was hand-delivered to our house in Golf Links, Tan enclave in New Delhi
whose name captured the clubbable lifestyle of its leisured and propertied Indian resi-
dents, soon after we had arrived in the middle of a north Indian winter to begin a long
assignment. It contained a large card, with a picture embossed in red and gold of
the elephant-headed deity Ganesh, improbably carried on the back of a much smaller
mouse. Dhirubhai and Kokilaben Ambani invited us to the wedding of their son Anil to
Tina Munim in Bombay.
In January 1991, just prior to the explosion in car ownership that in later winters kept
the midday warmth trapped in a throat-tearing haze overnight, it was bitterly cold most
of the time in Delhi. Our furniture had still not arrived-a day of negotiations about the
duty payable lay ahead at the Delhi customs office where the container was broken
open and inspected-and we camped on office chairs and fold-up beds, wrapped in blan-
kets.
The Indian story was also in a state of suspension, waiting for something to happen.
The Gulf War, which we watched at a big hotel on this new thing called satellite televi-
sion, was under- cutting many of the assumptions on which the Congress Party’s family
dynasty, the Nehrus and Gandhis, had built up the Indian state. The Americans were
unleashing a new generation of weap- ons on a Third World regime to which New Delhi
had been close; its Soviet friends were standing by, even agreeing with the Americans.
The Iraqi invasion of Kuwalt had pushed up oil prices and forced the Indian Government
to evacuate some three million of its citizens working in the Gulf. The extra half-billion
dollars all this cost India was pushing the country close to default on its foreign debt.
Officials from the Ministry of Finance were already negotiating a bail-out from the IMF
in Washington; the IMF was setting stiff ‘conditionalities’-in effect a complete shift from
Nehru’s model of high external protection for the economy and government allocation
of savings. Even the CNN clips of Tomahawk cruise missiles zipping neatly down the
streets of Baghdad were in themselves part of another breach in India’s walls. The clites
who ran the national TV monopoly or the big newspapers no longer had India’s half-
illiterate population to
themselves.
Little of this was admitted in New Delhi. The coalition government of V P Singh, which
had swept out the glamorous Rajiv Gandhi on a battery of corruption scandals, had it-
self collapsed in November after less than a year in office. India was ruled by an even
smaller coalition of opportunists under a wily politico called Chandrashekhar, kept in
office at Rajiv’s pleasure for who knew how long. Everyone clung to the autarkic, Third
World verities. Politicians and journalists pounced on the slightest admission by their
fellows that perhaps India’s vision of the world had been flawed and it had better adjust
to the new order. At the Ministry of External Affairs, in the red sandstone majesty of Sir
Herbert Baker’s Secretariat buildings, a bright young official on a new economic desk
assured me that India’s finances were strong enough to take the strains. At a party
of intellectuals’ young academics and filmmakers in rough cotton kurta-payjama suits
scoffed at the prospects for satellite TV. How would the advertising payments get out to
the broadcaster through the maze of foreign exchange controls? Which foreign compa-
nies would want to plug products they could neither export to India nor make locally?
The wedding invitation was a good excuse to break away from this stalemate in New
Delhi, and make contact with the Indian commercial class in Bombay. There it looked as
if a raw entrepreneurial spirit was straining to break through the discouraging political
crust. Word of the Ambani family and their company Reliance Industries had spread to
Hong Kong as prime examples of this brash new India which might finally have its day,
courtesy of the changes the Gulf War symbolised.
Everything about the Ambanis, in fact, was a good magazine story The young couple’s
courtship had been a stormy one, ready-made for the Bombay show-biz magazines.
The bride, Tina Munim, was a girl with a past. She had been a film starlet, featur-
ing in several of the Hindi-language films churned out by the hundreds every year in
‘Bollywood’-most including improb- able violence, song-and-dance routines, and long
sequences with the female leads in wet, clingy clothes. Before meeting Anil, Tina had
had a heavy, well-publicised affair with a much older actor. The groom, Anil, was the
tearaway one of the two Ambani boys. His parents had frowned on the match. Bom-
bay’s magnates usually tried to arrange matches that cemented alliances with other
powerful business or political families. This one was not arranged, nor did it bring any
more than a certain popularity. Hired assailants had been sent with acid and knives to
scar Tina’s face, so went the gossip (apocryphal: Tina’s face turned out to be flawless).
Anil had threatened suicide if he could not marry Tina, went another rumour. Finally,
the parents had agreed.
The father, Dhirubhai, was no less colourful and even more controversial. He had first
worked in Aden in the 1950s. I recalled a stopover there in my childhood, aboard the
S. S. Oronsay, a buff-hulled Orient Line ship, en route to my father’s posting in London
with his Australian bank in 1958. The image was of grim, dark-brown peaks surround-
ing a harbour of brilliant blue, a host of merchant ships tied up to moorings, and a busy
traffic of launches and barges. The trip ashore was by launch, landing at Steamer Point,
where Arabs and Indians besieged the white faces, trying to sell us Ottoman-style
cushions or to drag us into their duty-free shops. Now someone like those desperate
salesmen in Aden was a tycoon in Bombay.
Ambani had got into polyester manufacturing in a big way, and got huge numbers of
Indians to invest in shares of his company, Reliance Industries. In India, the home of
fine cotton textiles, it seemed that people couldn’t get enough polyester. The only con-
straint on local producers like Reliance was the government’s licensing of their capacity,
or where they built their factories. To jack up his capacity, Ambani had become a big
political fixer. In the recent minority government formation, it was said, his executives
had been shuttling briefcases of cash to politicos all over Delhi. There had been epic
battles, with the press baron Ramnath Goenka of the Indian Express and with a tex-
tile rival from an old Parsi business house, Nusli Wadia. A year or so earlier, a Reliance
public relations manager had been arrested for plotting to murder Wadia. The man had
been released, and nothing was moving in the case. Was it genuine or a frame-up? In-
dian colleagues were not sure: no conspiracy was accepted at face value.
So we took our first trip inside India, making our way down to New Delhi Railway Sta-
tion in a yellow-and-black cab, one of the 1954 Morris Oxford design still being made
in Calcutta, in the rose-coloured haze of a winter afternoon; letting a red-shirted porter
heave our bags on his head and lead us to the train, establishing our rights to the cov-
eted two-berth compartment in the middle of the First Class Air-Conditioned carriage
from the list pasted by the door.
The train slid across the flat beige northern landscape of wheat-stubble and square
houses as night fell. In the morning we were trundling past palm trees and mangrove-
bordered creeks before humming into Bombay through suburban stations packed with
commuters.
If New Delhi was a city of books, discourse, seminars and not much action or precision,
Bombay was one where people made the most of the nine-to-five working day before
battling their way home to the distant suburbs. Most crucially, Bombay had accepted
the telephone as a medium of dialogue-not merely as a preliminary to an exchange of
letters setting up a meeting. It was also unashamedly concerned with money and num-
bers. New contacts like Pradip Shah, founder of India’s first rating agency for corporate
debt, with the slightly alarming acronym of CRISL, or Sucheta Dalal, a business jour-
nalist at The Times of India, or Manoj Murarka, partner of the old stockbroking firm of
Batlivala & Karani, rattled off the details of industrial processes, forward- trading in the
sharemarket or conversion dates of debentures at bewildering speed.
The wedding was going to be big, so big that it was to take place in a football stadium,
the same one where Dhirubhai Ainbani had held many of his shareholders’ meetings.
But it began in an oddly casual way. As instructed, we went mid-afternoon to the Wo-
dehouse Gymkhana Club, some distance from the stadium. There we found guests
milling in the street outside, the men dressed mostly in lavishly cut dark suits and
showy ties, moustaches trimmed and hair brilliantined. The women were heavily made
up, laden with heavy gold jewellery, and wearing lustrous gold-embroidered silk saris.
Anil Ambani appeared suddenly from the club grounds, dressed in a white satiny outfit
and sequinned turban, sitting on a white horse. A brass band in white frogged tunics
struck up a brash, repetitive march and we set off in separate phalanxes of men and
women around the groom towards the stadium. Every now and then, the process would
pause while the Indian guests broke into a pro- vocative whirling dance, some hold-
ing wads of money above their head. The stadium was transformed by tents, banks of
inarigolds and lights into a make-believe palace, and filled up with 2000 of the family’s
closest friends and business contacts. They networked furiously while a barechested
Hindu pundit put Anil and Tina through hours of Yedic marriage rites next to a smoul-
dering sandalwood fire on a small stage. Later, the guests descended on an elaborate
buffet on tables taking up an entire sideline of the football pitch, starting with all kinds
of samosas and other snacks, working through a selection of curries and breads, and
finishing with fruits and sweets wrapped in gold leaf. The next day, the Ambanis put on
the same spread-if not the wedding ceremony at another reception for 22000 of their
not-so-close. friends, employees and second-echelon contacts.
Retrospectively, by the standards of Bombay a few years later, it looks a modest and
traditional affair. Before their joint marriage of three children in 1996, the ingratiating
Hinduja family had an elaborately illustrated book prepared on the Hindu marriage and
sent to all invitees. Other business alliances were celebrated with elaborate stage-sets
based on the ancient epics; lines of elephants led the processions of the grooms and
diamonds were pasted to the foreheads of women guests. But at the time, the sheer
size of the wedding was seen as a sign that Dhirubhai Ambani had made it through the
political travails of 1989~90 and was unabashed-and certainly not strapped for cash or
friends.
It was flattering to be there and to have a Reliance public relations manager take me up
to meet the Ambanis-flattering, within a month of arriving in India, to meet the coun-
try’s fastest moving, most controversial tycoon. An interview was promised shortly,
once the festivities were over. An early cover story was clearly a possibility, an antidote
to the gloomy political news out of Delhi. It would help my standing at the Far Eastern
Economic Review if India was an upbeat business story and I was right on to it.
That of course was the desired effect. Reliance was desperate to raise funds for expan-
sion and was looking to foreign sources, so some image-building in a prestigious maga-
zine was highly useful. A newcomer to India would be more inclined to play down the
controversies and look at the company’s prospects.
The interview, when it took place a month or so later, was stimulating. Dhirubhai Am-
bani came limping around a huge desk when I was ushered to a sofa and greeted me
warmly. Despite the obvious effects of a stroke in a twisted right hand, his mahogany
skin was smooth and healthy, his hair plentiful and slicked back decisively in a duck’s
tail. His attention was unwa- vering. Disarmingly, Dhirubhai admitted to many of the
youthful episodes that were the subject of rumour, and responded evenly when I raised
some of the criticisms commonly levelled against him. He didn’t mind people calling him
an ‘upstart’ or even worse names. It just meant they were trapped in their complacency
while he was racing ahead. But the disputes were now ‘all history’ and the former critics
were now all his ‘good friends’ buying their polyester and raw materials from him.
‘The orbit goes on changing,’ he declared airily. ‘Nobody is a permanent friend, nobody
is a permanent enemy. Everybody has his own self-interest. Once you recognise that,
everybody would be better off.’
However, Ambani did point to an unfortunate trait in his countrymen. ‘You must know
that, in this country, people are very jealous.’ It was not like in Hong Kong or other
East Asian countries, where people applauded each other’s success, he claimed. In In-
dia success was seen as the prerogative of certain families. But he didn’t really mind.
‘Jealousy is a mark of respect,’ he said.
The interview resulted in a cover story for the Far Eastern Economic Review which por-
trayed Ambani as the business underdog trying to break through the government’s red
tape and the prejudices of a tired Bombay business establishment. Naturally enough,
Ambani and his PR men were pleased. His one quibble, I was told, had been my pointing
out some glossed-over problem areas in the Reliance annual reports, which had been
put in the notes to the accounts, fine-print areas that only the professional analysts re-
ally read. The comments were true enough, but they made it look as though Reliance
was unusual among Indian companies in these practices.
The Reliance public relations office continued to be attentive, supplying advance no-
tice of newsworthy events. At one point later in 1991, there was another glimpse of
Dhirubhai Ambani’s energetic mind. His Delhi office passed on a request for informa-
tion about Indonesia’s engagement in the late 1980s of the Swiss cargo clearance firm
Societe Generale de Surveillance (SGS) to administer its imports and exports, thereby
sidelining the country’s notoriously corrupt customs service for several years. I sent off
some clippings, intrigued that the man accused of smuggling whole factories through
the ports of India now seemed to be advocating Swiss efficiency in place of the lax adi-
ninistration of which he had supposedly taken advantage. The proposal got to a high
level in the government before being canned, but not before causing panic in the Indian
customs service-which may have been all Dhirubhai wanted to do anyway.
There were daily updates from the Reliance PR staff on an issue of convertible securi-
ties issued in the Eurornarket in May 1992, the first by an Indian company and tangible
proof of India’s reforms reconnecting it to the world economy. There was a company-
organised trip out of Bombay up to its new petro- chemicals plant at Hazira, involving a
bumpy flight in a chartered turboprop to the airfield at Surat, bare of airport terminals
or navigational aids as far as could be seen, and a drive through the old textile trad-
ing city, squalid despite its lucrative silk and diamond industries-and, a couple of years
later, notorious for an outbreak of bubonic plague. Across the Tapti River, a glittering
array of pipes and towers had indeed come up, and cryogenic tankers full of sub-zero
ethylene were tied up at the jetty. Reliance was clearly not just a paper empire.
But the history of political and corporate activity had put a sinister shadow across the
glearning success. M through the government changes of 1990 and 1991, the press
carried references to a certain ‘large industrial house’ supporting this or that party or
being behind certain politicians. Scores of party leaders, ex-ministers, senior bureau-
crats, and heads of the big government- owned banks and corporations were said to
be Ambani friends’ or Ambani critics’. Mostly it was the friends, it seemed, who got the
jobs.
People made bitter and cynical remarks about the Ambanis in private. The press cover-
age, especially in the Indian business magazines, had a repetitive quality. A myth was
being created and sustained. At a meeting of shareholders in a big Bornbay engineering
firm named Larsen & Toubro late in 1991, convened to approve a takeover by the Am-
banis, this undercurrent of hostility welled up into a physical melee. In the shouting and
jostling, the two Ambani sons had to flee the stage. The controversies kept continuing
right through the 1990s.
Dhirubhai Ambani attracted adulation or distrust. To his millions of investors, who had
seen their share prices multiply, he was a business messiah. To one writer, he was a
‘Frankenstein’s Monster’ created by India’s experiments with close government control
of the economy.
‘There are three Dhirubhai Ambanis,’ one of his fellow Gujaratis, a writer, told me. ‘One
is unique, larger than life, a brand name. He is one of the most talked about industrial-
ists., and for Gujarati people he has tremendous emotional and sentimental appeal. He
is their ultimate man, and has inspired many emulators. The second Dhirubhai Ambani,
is a schemer, a first-class liar, who regrets nothing and has no values in life. Then there
is the third Dhirubhai Ambani, who has a more sophisticated political brain, a dreamer
and a visionary, almost Napoleonic. People are always getting the three personalities
mistaken.’
In a legal chamber lined with vellum-bound case references, a senior lawyer took an
equally stark view. ‘Today the fact is that Ambani is bigger than government,’ said the
lawyer in all seri- ousness. ‘He can make or break prime ministers. In the United States
you can build up a supereorporation but the political system is still bigger than you.
In India the system is weak. If the stock exchange dares to expose Ambani, he tells
it: I will pull my company shares out and make you collapse. I am bigger than your
exchange. If the newspapers criticise, he can point out they are dependent on his ad-
vertising and he has his journalists in every one of their departments. If the political
parties take a stand against him, he has his men in every party who can pull down or
embarrass the leaders. He is a threat to the system. Today he is undefeatable.’
Surprisingly, the role played by Dhirubhai Ambani received only cautious side-refer-
ences in most books about contemporary Indian politics. No biography of him was in
the bookshops, although Indian journalists and conunentators had produced 1quickie’
biographies of other new celebrities in vast numbers. The work of the economic histori-
ans largely cut out in the 1960s. The few biographies of other Indian businessmen were
commissioned works, not very well written, and notable for a worshipful attitude to the
subjects. No one drank, cursed, cheated or philandered. Their workers were all part of
the family. Almost everyone lived an abstemious vegetarian life, accumulating wealth
only to give it away to temples, hospitals and schools.
By 1992, Reliance was tapping investors in Europe for fund- ing, and international in-
vestment funds were being allowed to play the Indian sharemarket directly. A few years
later, the company had started borrowing in New York on a large scale. The Ambani
story was becoming of greater interest outside India, at least to investors and perhaps
to a wider audience watching the explosive growth of capitalism across Asia.
The idea of this book occurred in 1992, and I put it to Dhirubhai Ambani later that year
at a second meeting in his Bombay office. Ambani seemed receptive, and agreed that
his life story could be ‘inspiring’ for a younger generation of Indians as well as interest-
ing to those thinking of dealing with India. I left the meeting with an understanding
that he had agreed to talk about his life at meetings to be arranged and that, if so,
I would show him the completed draft as a courtesy and listen to any objections-but
retain the final say on the content. The book would not be credible’ otherwise, Ambani
concurred.
A year slipped away without further progress, and then relations with Reliance took a
downturn. By the end of 1993, Reliance was in the bidding for several oilfields in the
Arabian Sea. The government oil search corporation had discovered the fields but did
not have the funds to build the huge production rigs, gas compressors and pipelines
that were needed. Several contacts among rival bidders were alleging that the tender
was being rigged in favour of Reliance. Indian politicians and bureau- crats are masters
at tilting an ‘open and transparent’ tender into a one-horse race, by techniques such
as keeping the weighting of bidding factors uncertain or secretly promising later con-
cessions to compensate for underbidding. In the event, Reliance swept the field, and a
director with one of the losers told me: ‘We were shafted, and for the wrong reasons.’
Writing about this would not advance my request for access to the Ambanis for the
book, but my duty was to the magazine that employed me. The first of two articles
in the Far Eastern Economic Review about the oilfields battle drew a bitter complaint
from Anil Ambani that the report was ‘defamatory’-a complaint not sent directly to me,
or to the magazine, but in a letter sent to the head of one of the rival companies, the
Australian resources giant BHP, and copied to the heads of theamerican and Australian
diplomatic missions in New Delhi.
Thereafter, I wrote occasionally about Reliance and, in July 1995, left my job with the
magazine to spend more time on the book. A letter to Dhirubhai Ambani informing him
of this move went unanswered. Over the following 18 months, the research led me into
all corners of Bombay life, from the slum homes of the senii-criminal underworld to the
offices of powerful business tycoons, to several cities and towns in Gujarat on crowded
country buses and trains, to converted churches in London and Leicester ringing with
the Hindu chants of the Gujarati diaspora.
The reception varied. Almost everyone wanted to know if the book was authorised or
sponsored. It was neither, I said, but Ambani had been told and so far had not ex-
pressed to me a view either way about it. Many of those people who knew Dhirubhai
Ambani in his early days in Junagadh and Aden and then starting his business in Bom-
bay were willing to talk. Some others-such as his former Aden colleague and Middle
East co-ordinator in Dubai, Bharat kumar Shah, asked for a letter of clearance from
Ambani himself, which again was not forthcoming. One Bombay journalist who agreed
to share his knowledge picked up the telephone immediately I arrived at his flat and
rang Anil, Ainbani’s office. ‘I have told him if you are wanting scandal you will lose the
whole story,’ he said down the phone to the executive who answered. The next day, I
was invited to lunch by a pair of Reliance public relations executives and quizzed closely
about my intentions.
Dhirubhai Ambani did respond to a birthday greeting sent at the end of December 1995,
but there was still no word about his attitude to the book. A month later, however, I
flew especially to Bombay for an interview arranged with his former export manager,
Rathibhai Muchhala, who according to numerous other sources ‘knew everything’ about
the early days. At the appointed time, Muchhala was not at his office in the industrial
belt behind Bombay’s airport. A secretary telephoned him: he was at the Reliance head
office. Muchhala was sorry, but Ambani’s office had advised him not to meet me.
Ambani’s personal assistant, Dinesh Sheth, then confirmed this: there were several
proposals for biographies and some months earlier Dhirubhai Ambani had indicated to
his staff that he did not want at that stage to encourage or co-operate with any of them.
Sheth professed ignorance of my previous letters, so I sent another the next day, offer-
ing to come at any time to discuss the book.
Ironically, the reception among those figures who had been critics or opponents of
Reliance was also wary. Phiroz Vakil, a senior advocate in tiny chambers in Bombay’s
old Fort, surveyed me intently while stuffing Erinmore Flake tobacco into his pipe and
warned that people would suspect I was being used by the Ambanis to draw out infor-
mation. Among some others, my earlier favourable write-ups of the Ambanis still told
against me. ‘I suppose you think he’s a hero,’ said the retired Finance Ministry official
and Cabinet Secretary Vinod Pande, down the phone.
Others just seemed too battle-weary When I rang the Orkay Silk Mills chairman Kapal
Mehra and asked to meet him, there was a long pause. ‘I’m afraid that won’t be pos-
sible,’ Mehra said. The former prime minister Viswanath Pratap Singh did not reply to a
letter and giggled nervously when I cornered him at a cocktail party in New Delhi. No,
he could not possibly talk about any one company, Singh said, easing away quickly.
Those who did agree to talk for the most part insisted on anonymity: they had to live
in India, they explained. Word of some of these meetings must have been passed back
to Reliance, for in January 1997 a stiff letter arrived from Kanga & Co in Bombay, law-
yers for Dhirubhai Ambani and the company, warn ing that their clients ‘understand
and apprehend that the pro- posed publication contains material which is defamatory
to our client’. It was claimed that ‘at no time’ had there been any attempt to verify the
material with the clients. Action for exem- plary damages and injunction against pub-
lication were threatened if the book was defamatory At this point it had not even been
completed, let alone delivered to the publishers.
Fortunately, the several controversies that hit Reliance in the second half of 1995 pro-
duced a deluge of paper from Indian Government agencies. The various reports opened
up many previously obscure and controversial aspects of the company’s operations. At
the same time, the controversies compelled Reli- ance to give its own explanations,
which became part of the public record.
Even so the overall result, unavoidably, has been a book that becomes progressively
less intimate to its subject as the story advances, drawing more on published reports,
available documentation, and anonymous interviews with those who had engaged with
Dhirubhai Ambani and Reliance Industries from the outside. The book is less satisfac-
tory and less sympathetic, perhaps, than it might have been with co-operation from the
Ambanis and access to them. As my research and writing progressed, however, word
came from several sources that the family was compiling its own record of Dhirubhai
Ambani’s life and his company’s growth, so a version of events from the inside may also
be put to the public soon.
A PERSUASIVE YOUNG BANIA
Among all the 550-odd princely rulers left, with British Residents at their shoulders, to
run their domains in the last years of the Raj, few were more eccentric than Mahabat-
khan, the Nawab of Junagadh.
The Nawab’s family had run this fiefdom, one of several in a political jigsaw covering the
Saurashtra peninsula in Gujarat, since a faujdar or military commander of the Mughal
Empire named Sher Khan Babi founded his own subordinate dynasty in 1690. Two and
a half centuries later, this warrior’s descendant was best known for his love of dogs. Ma-
habatkhan had 150 of them, with an equal number of dog-handlers on his payroll and
individual quarters for all the canine retinue. To celebrate the 1wedding’ of one canine
pair, the Nawab was reputed to have spent two million rupees (then worth about £150
000 sterling) and to have given his 700 000 subjects a public holiday.
The Nawab was the first political target to come into the sights of Dhirubhai Ambani,
although it is unlikely that he was ever specifically aware of it. It was during a move-
ment aimed at overthrowing the Nawab’s rule and securing Junagadh’s accession to
India during the Partition of British India in 1947 that Ambani, then a teenage high
school student, had his first experience of political organisation and his first brushes
with authority.
It was the only moment in modern times that junagadh has figured in the calculations
of nations and statesmen. Even in the 1990s, Junagadh and its surrounds, known as
the Kathiawar region, remains one of the quietest, most traditional regions of India,
and one of the least accessible in the otherwise busy northwest coastal area of the
country.
A few times a week, a turboprop flies into the simple airstrip at Keshod, unloading
people from Bombay or the Gujarati diaspora overseas coming to visit their relatives
and make offerings to family gods at local temples. In the town itself, clusters of 1940s
Ford Mercury taxis wait for groups of passengers or for hire at weddings. The railway
network was built to connect each of the several former principalities of Kathiawar to
the outside world rather than with each other. Once you are in Kathiawar, all now part
of Gujarat state, travelling between towns often means one or more changes of line and
extensive doglegs and backtracking in the journey. The last steam engine on regular
service in India, apart from scenic mountain railways, puffed between Junagadh and
the Gir sanctuary for the last Asiatic lions until 1996.
The land itself is dry, open and stony. The monsoon rains quickly run off down the short
rivers and nuilahs that radiate from the central rocky hinterland out to the sea. The
roads are lined with stunted pipul (fig) trees, and the stony fields are fenced with strag-
gling rows of cactus. The standard building material is a porous dun-coloured stone
cut by saws into ready-made blocks from pits near the seashore. There are few of the
modern ferro-cement extravagances built by the newly rich, hardly any of the industrial
plants and their residential ‘colonies’ seen extending out into farrnland in other Indian
regions, and only a few private cars.
But if the landscape is monotonous, Kathiawar’s people com- pensate for it with riot-
ous colour where they can. The women drape themselves with cotton scarves tie-dyed
in red and orange. The local scooter-taxi is the Enfield motorcycle grafted to a flat tray
resting on two wheels at the back, with the handlebars decked with coloured lights,
electric horns and whirling windmills. The homes of wealthy merchants are decorated
with mouldings of swans, peacocks, flamingos, parrots, elephants, lions and tigers.
Massive double doors, twelve-panelled, with heavy iron studs, open tantalisingly on to
huge inner courtyards.
A blood-drenched history and complicated mythology are attached to the landmarks
and constructions of Kathiawar. On the coast to its west, at Dwarka, is the place where
Lord Krishna died. To the south, the temple of the moon at Somnath is a centre for
Hindu pilgrims from all over India. In the steep Girnar hills above the city of junagadh,
long staircases take pilgrims to Jain temples dating back to the 3rd century BC.
Looming over Junagadh city, the fortified rock-citadel of Uparkot has inscriptions and
cave-sculptures from the time of the 3rd century BC ruler Ashoka. The city was an im-
portant centre for Hindu rulers of Gujarat in the first millennium. Then, starting with
the Afghan warlord Mahmud of Ghazni, who invaded in 1024 AD and pillaged Somnath,
Junagadh suffered four centuries of sackings. Mughal rule gave it some stability with
Muslim rulers controlling its largely Hindu population. Both its rulers and its people
were passive onlookers in the contest for India’s trade among the English, Dutch and
Portuguese, whose galleons fought vicious battles off the Gujarat coast. A five-metre
long cannon broods over the town from the ramparts, a relic of an unsuccessful attack
on the Portuguese trading post at Dlu, on the coast southeast of Junagadh, by the fleet
of Sultan Sulaiman the Magnificent of Turkey in the 15th century
At night, seen from the coastline at the south of Junagadh, processions of navigation
lights travel left and right along the horizon. The seaborne traffic between the west coast
of India and the Arabian ports goes on as it has for millennia, ever more intense.
Gujarat was the trading hub of ancient India, where Indian cottons and silks were
traded to Arabs and later the first English East India Company in return for silver, gold,
incense and coffee from the Red Sea port of Mocca. Up until the early 15th century,
Chinese junks had also come to western India. Later India and India-based European
traders became the trade intermediaries between the Arab and Chinese spheres. The
Gujaratis were prominent in this pre-colonial Indian Ocean trading network, with the
wealth of India in its cloths, indigo, opium and spices merchandise.
The small ports of Kathiawar took part in this trade. Dlu handled much of Gujarat’s
trade with Aden in the west and Malacca in the cast. Gold, silver, quicksilver, vermilion,
copper and woollen cloth would be exchanged for Indian gold and silver embroideries
and brocades and for cotton muslins of a fineness expressed by trade terms such as
abrawan (running water), baft hava (woven air) or shab-nam (evening dew).
Later of course the East India Company grabbed its monopolies in opium, tea, indigo
and spices in a three-way trade equation between China, India and Europe, topped up
later by the British Empire with gold bullion from Britain’s new colonies in South Africa
and Australia at the southern corners of the Indian Ocean. Indian entrepreneurs-in
Calcutta the Marwari traders and moneylenders originally from Raiasthan, in Bombay
the Parsis (Zoroastrians originally from Persia)-began moving into large-scale industrial
production late in the 19th century
Smaller traders also took advantage of Pax Britannica by taking steamer passages to
all corners of the Indian Ocean and Southeast Asia-no passports were needed-and
opening small stores and service stations. Most were from Gujarat; a large proportion
of these from Kathiawar. Two of the biggest commercial families in Uganda, the Mehtas
and the Madwhals, came from Porbander, and the thriving Chandarlas of Kenya came
from Jamnagar. Until 1938, the free port of Aden was part of the Bombay administra-
tion. The East African shilling, the currency of the Red Sea and Indian Ocean trade, was
virtually pegged to the Indian rupee in value.
The Guiaratis were stingy with their customers and stingy with themselves. Bhaskar
Bhattarcharya, a television broadcaster in New Delhi, spent his childhood years in
Uganda where his father was a British colonial official. The epicurean ways of the Bhat-
tarcharyas from Bengal contrasted sharply with those of the Patels or Shahs from Gu-
jarat. ‘When we first arrived, the women took my mother aside and said: this is the
way you do things,’ he remembers. ‘If you were invited for dinner, you got a couple of
vegetable dishes and rice. My parents liked to splash out, and serve meat and fish to
their guests. Of course, by the time we left, the Guiarati peon in my father’s office had
probably saved more than he had.’
The wealth was the result of rigorous saving, abstemious living, and endless hours of
work by unpaid family members-a migrant’s success story in many parts of the world.
In East Africa, it created a resentment that led to the expulsion of the Indian traders
and appropriation of their assets after the colonies became independent in the 1960s.
The effect was to fling the Gujarati diaspora worldwide, to start the process of capital
accumulation again.
Among the Gujaratis, the people of Kathiawar are renowned for their exuberance of
speech, inventiveness and commercial drive. ‘This is a place of have-nots,’ notes Shecia
Bhatt, a former editor of the magazine India Today’s Gujarati-language edition. ‘It is a
barren land, but out of stone they somehow draw out water. The people are so colour-
ful because the landscape is so colourless. They fill their heads with colour. Amongst
Gujaratis, the best language is among Kathiawaris: so many words. Even the trading
class will have extraordinary expressions. Kathiawari traders have more vibrant termi-
nology than other traders. They were the first to go out of India for better prospects.
Adventure is second nature to them. They have less hypocrisy. All of the other business
communities affect modesty to the point of hypocrisy. Dhirubhai Ambani is part of that
culture.’
In one sense, Ambani was born to be a trader, as his family belongs to a Bania caste, a
section of the Vaisya category (varna) in the traditional Hindu social order whose roles
are those of merchants and bankers. This instantly provided a whole network of rela-
tionships, a community and social expectations that made commerce-taking a profit
from buying and selling in markets, the accumulation of capital-an entirely natural and
honourable lifetime’s occupation.
Although socially below the Brahmins (priests and scholars) or the Kshatriya (warriors
and landowners) and rarely part of aristocratic clites, the Vaisya castes came to exercise
enormous power across India. They marshalled huge amounts of capital, which funded
the campaigns of maharajas and nawabs and at times the British trade and military ex-
pansion when the budget from London ran short of operational needs. Centuries before
the modern banking system, Vaisya shroffs or bankers were the conduits of a highly
rnonetised Indian economy, rernitting vast sums around India at short notice through
a sophisticated trust system based on hundi (promissory notes).
The commercial instincts of Gujarat’s Vaisya were encouraged by a convenient interpre-
tation of Hinduism preached by the holy man Vallabhacharya in his wanderings around
the region early in the 16th century Another widely followed religious school known
as Shaivism (from the god of creativity and destruction, Shiva) had preached that the
world was unreal and an impersonal abstract essence was the absolute reality and
truth. The Jain and Buddhist religions, which had sprung from Hinduism, also preached
privation, renunciation and destruction of the self. Vallabhacharya saw a personal god
who created and sustained life, for whom living life to the full was a form of devotion.
His school became known as Vaishnavism, as the focus of devotion was the god Vish-
nu’s playful avatar (incarnation) Krishna, per- haps the most widely adored and human
face of the divine among Hindus.
In his classic text on the Vaishnavas of Gujarat, the scholar N. A. Thoothi pointed out
that this naturally appealed to the people of a land richly endowed with opportunity like
the central parts of Gujarat. It was a philosophy that justified their way of life and gave
a divine purpose to their roles as providers and family members. It also fitted the rising
social status of the Banias in Gujarat, overriding the formal varna hierarchy.
As Vaishnavism grows, the Vamas decline. We have noticed, for example, how the
Vanias [Banias] have reached a social status as high as that of the Brahmins them-
selves. This upsetting of the balance of the Varnas has been greatly due to economic
causes. The merchant and the financier and the capitalist have, by sheer force of wealth
and power, for a while become dictators over all, even over the priestly class.
A justification of their way of living, a theory of life and a pathway suited and helpful to
the living of a life engrossed in work and duty as a man, husband, father, citizen and so
on, a hope that such a mode of life as they live is acceptable to the highest deity-the
Gujaratis naturally sought for all these.
Ambani’s particular caste is called the Modh Bania, from their original home in the town
of Modasa north of Ahmedabad before a migration many centuries ago to Saurashstra.
The Modh are one of three Bania castes in this part of Gujarat, who might eat meals
together but who would each marry within their own caste. They are strict vegetarians,
and only the men take alcohol. Their practice of Hinduism follows the Vaishnavite path.
But the main object of their pilgrimages, on marriage or the start of a new business
venture, is a black-faced idol with a diamond in his chin located in a temple at Nathd-
wara, a small town in the barren hills behind the lake city of Udaipur in Rajastban. This
idol represents Srinath, an avatar or incarnation of Lord Krishna, and was brought to
Nathdwara from Mathura (Krishna’s birthplace) by a holy man to escape the depreda-
tions of the fierce anti-Hindu Mughal emperor Aurangzeb. For reasons that are not clear,
Srinath has become the familiar god of the Modh and other Banias. Portraits based on
the Nathdwara idol are often seen in the offices of Bania businessmen.
In later years, Ambani and his family made frequent visits to the temple of Srinath,
flying into Udaipur airport in his company’s executive jet and driving straight up to
Nathdwara. In 1994, Ambani built a large ashrarn (pilgrim’s rest-house) in Nathdwara
for the use of visitors. The three-storey building, faced in a pink granite, is dedicated to
the memory of his parents.
If the Modh Bania practise piety in the temple, and abstemi- ous ways in their homes,
they are known as fiercely competitive and canny traders in the marketplace, with no
cornpunctions about taking advantage of opportunities for profit. A saying in Gujarat
goes: ‘Kapale hojo kadh, pan angane na hojo Modh’-rneaning: ‘It is better to have a
leucoderrna [a disfiguring skin pigment disorder] on your forehead than a Modh as
guest in your house.’
Like other Bania castes of the region, the Modh Bania looked far beyond their immedi-
ate patch. For centuries it has been a custom for young men to make trading voyages to
Arabian ports, building up personal capital over nine or ten years hard work and modest
living before returning to marry and take over the family business. Sons inherited fam-
ily property in equal proportions, with the oldest son assuming the authority of family
head.
But all this was a nebulous heritage for Dhirajlal Hirachand Ambani, born on 28 De-
cember 1932. His home-town was Chorwad, literally meaning ‘Settlement of Thieves’
though no one seems to remark on that. It is set a mile or so back from the flat Ara-
bian Sea coastline where the Nawab had a two-storey summer palace built of the dun-
coloured stone quarried from pits nearby. The railway from junagadh bypassed the
town to the cast, looping towards the old port of Veraval and Somnath.
His father, Hirachand Ambani, seems to have been a diffident trader when he tried his
hand at petty conunerce, as a wholesaler in ghee (clarified butter, a cooking medium in
India). He is recalled by many acquaintances as a ‘man of principle’-meaning perhaps
that he was too good-willed to be good at making money. He is better remembered as
a village schoolmaster in the administration of the Nawab of Junagadh. From 1934-36,
Arnbani senior was headmaster of the Chorwad primary school, whose classrooms with
their battered furniture remain little changed around a tree-lined yard across the road
from the town’s bus stand.
The industrialist and parliamentarian Viren Shah, whose family also comes from Chor-
wad, remembers Ambani senior as a stocky man with a dark-brown skin, normally
dressed in a white turban, long coat and dhoti (a piece of cloth draped into a rough
pantaloon). The village schoolmaster was private tutor for several years for another
member of the same family, Jayan Shah, who remembers him as a good teacher and
‘very strict’.
Hirachand Ambani made little money, and lived in extremely austere circumstances.
The family home still stands in a hamlet called Kukaswada, two or three miles outside
the main part of Chorwad. It is a two-roomed stone dwelling with a stamped carthern
floor, entered by a low doorway and dimly lit by openings under the caves. Ambani was
married twice, having a son from his first marriage (named Samadasbhai) before being
widowed. His second marriage gave him five more children, with Dhirajlal-or Dhirubhai
as his diminutive became-in the middle.
The family’s poverty did not keep the Ambanis from contact with better-off members
of their social peer group. The Bania occasionally got together for meals or picnics.
The Ambani children mixed freely with the Shahs, who were already prospering from a
move to the then hub of British commerce in Calcutta, where they set up India’s first
factory making aluminium cooking pots.
The two houses of the Shah family in Chorwad, Shanti Sadan and Anand Bhavan, were
big and rambling in the traditional style. As well as learning all the ways of business,
the children were expected to learn various sports including horse riding, swimming
and athletics, and to take their turn milking the 20 cows and 10 buffaloes kept in the
gardens. The Shah family had become early followers of Mahatma Gandhi-also a Bania
from Kathiawar-and often gave him accommodation in Calcutta. An uncle of Viren Shah
and Jayan Shah had even retired from business and become a Gandhian social activist
in Chorwad, carrying out upliftment work among its Harijans (the former Untouchables)
and running a fitness camp for youth.
Jayan Shah remembers Dhirubhai, who was about seven years younger than him, com-
ing to Anand Bhavan. Jayan Shah’s father took an interest in’other people’s children,
lending them books to read and asking them to do odd jobs around the house. Dhirub-
hai was welcomed with great affection, and returned it with respect. Later, when he
had gone away to work overseas, Shah remembers him dropping by to pay his respects
during a vacation back in Chorwad, arriving with ‘great gusto and a feeling of an old
relationship’.
The guild-like support of his merchant caste helped Dhirubhai continue his education
after finishing at his father’s old primary school. In 1945, he moved up to Junagadh
and enrolled at the Bahadur Kanji High School. This shared with a university college a
large yellow stucco edifice on the outskirts of the city that had been built in 1902 by
the nawab of the time and named after him. Because of his family’s poverty, Dhirubhai
was admitted as a free student. He found accommodation in a boarding house funded
by the Modh Bania for children of their caste.
The Second World War had largely passed by Kathiawar, save for overflights by military
transports and the occasional visit of the new army jeeps. The movement for Indian
independence had not. On returning from South Africa, Gandhi had established his
ashram in Ahmedabad, the main city of Gujarat, and carried out many of his agitations
against British rule in the same region, including the famous ‘salt march’ to the sea to
protest against the government monopoly of salt in 1930.
His activities were financed by Indian industrialists from the Hindu trading castes, fore-
most among them the Calcutta-based Marwari jute-miller G. D. Birla. His abstemious
lifestyle was an extension of their own ideals, more familiar to them than the Anglicised
manners of the Nehru family. But a real self-interest was also involved. The industrialists
also saw in the Bania-born Gandhi a counterforce within the Indian National Congress-
the main secular vehicle of the independence movement-to the socialist and communist
ideas that had taken a strong grip on the thinking of educated Indians. Gandhi’s ideas
of industrial devolution to the villages were intrinsically opposed to the pro- posals for
state capitalism and central planning of investment then being promoted by the Left in
India as elsewhere in the world.
In Junagadh, the ideas of Gandhi and Sardar Patel, the Hindu nationalist lieutenant of
Nehru who was also a Gujarati, cast a strong influence. The Nawab, with his Indian Po-
litical Service Resident Mr Monteith at his side, was automatically put in defence of the
status quo. His police force and its detective branch kept a close watch on the indepen-
dence movement, and carried out many arrests of agitators throughout the 1940s.
At the Bahadur Kanji school, Dhirubhai was quickly infected by the independence mood.
Krishnakant Vakharia, later a leading lawyer in Ahmedabad, was two years ahead of
Dhirubhai at the school and met him soon after his arrival in Junagadh. The two took
part in a gathering of students to discuss the freedom movement. Vakharia recalls that
all were inspired by the nationalist ideals of Gandhi, Nehru, Patel and most of all the
socialist Jayaprakash Narayan, then still in the Congress Party.
The Modh boarding house where Dhirubhai was staying became the headquarters of a
new group to push these ideals, which they called the Junagadh Vidyarti Sangh (Juna-
gadh Students’ League). The objective was to take part in the national independence
movement and Gandhi’s swadeshi (self-reliant) economic programme, which involved
boycotting imported factory made goods in favour of village craftwares such as home-
spun cotton (khadi). Activities were to include meetings to salute the proposed national
flag of India-the saffron, white and green tricolour with the ox-wagon wheel in the
middle, which was then the Congress flag-as well as motivation sessions and sports
meetings for the other students.
Vakharia became the president of the Sangh, with Dhirubhai and another student called
Praful Nanavati serving as secretaries. ‘We organised a lot of functions, like saluting the
national flag, and took a lot of risks,’ said Vakharia. At one time we printed pamphlets
with a photo of Gandhi, and with that we approached some leading citizens to be our
sponsors-but no one agreed. In Junagadh at that time no one was allowed to even utter
“Jai Hind” or “Vande Mataram”, or sing national songs. Even wearing khadi made you a
suspect in the eyes of the Nawab’s CID.’
In 1946, the students learned that Kaniala Munsi, a lawyer who was later a leading
Congress Party politican and a minister in Nehru’s first government, would be visiting
Junagadh. They decided to invite him to address their members in the compound of a
boarding house for lain students. The Nawab’s police summoned Vakharia, Dhirubhai
and Nanavati, and threatened the three with arrest, expulsion from school and trouble
from their parents unless they gave an undertaking that no political speech would be
given.
It is here that Dhirubhai shows a spark of his later genius at bringing apparently irrecon-
cilable demands into an accommodation, if through a dubious intellectualism. “We had
said that a literary figure would deliver a speech,’ said Vakharia. ‘Dhirubhai whispered
that there was nothing wrong in giving this undertaking. “We are not going to give the
speech. If there is any breach in the undertaking, it’s a problem between Munsi and the
police.”’ Munsi came and delivered a rousing speech in favour of early independence.
As 1947 wore on and partition of British India along Hindu Muslim communal lines be-
came more likely, the political position of the princely states came under great scrutiny.
By August, when the transfer of British power was due, all the rulers came under pres-
sure to accede to either India or Pakistan. In most of the more than 550 states, the
decision was clearcut because of geographical position, the religion of the ruling family,
and the predominant religion of the population.
Three difficult cases stood out after ‘freedom at midnight’ on 15 August. In Kashmir,
contiguous with both India and Pakistan and with a Muslim majority, the Hindu ruler
wavered. In the immensely wealthy and large central Indian state of Hyderabad, which
had a Hindu majority, the Muslim Nizam had dreams of independence from both India
and Pakistan. Then there was Junagadh, what the historian H. V Hodson called ‘the
joker in the pack’.
Junagadh was close to the western side of Pakistan, and had a Muslim ruler. But its
fragmented territory was interlocked with that of neighbouring Hindu-ruled states, and
its people were mostly Hindu. Moreover, it contained the great Hindu pilgrimage sites
of Somnath and Dwarka.
In 1946, the Nawab’s prime minister and closest adviser, the Diwan, had become sick
and gone into prolonged convalescence. Stepping into his shoes in May 1947 as act-
ing Diwan came Sir Shah Nawaz Bhutto, a politician from Sindh active in the Muslim
League of Mohammad Ali Jinnah, the father of Pakistan. (Bhutto himself was the father
and grandfather of two later prime ministers of Pakistan, Zulfikir Ali Bhutto and Benazir
Bhutto.)
Bhutto kept in close touch with Jinnah and had the Nawab obey his advice to ‘keep out
under all circumstances until 15th August’. Then, on the day of the transfer of British
power, the Government of Junagadh announced its accession to Pakistan. Hodson be-
lieves Jinnah never actually thought Junagadh would be allowed to join Pakistan. The
objective of the exercise was to set uncomfortable precedents for Nehru in the more
pressing contest for Kashmir and perhaps Hyderabad. If Nehru agreed to a plebiscite
in Junagadh, which he eventually did, it would help Pakistan’s case for a popular vote
in Muslim-majority Kashmir. If the Junagadh ruler’s decision was accepted, over the
wishes of his people, the same could apply in Hyderabad. If the Indians simply marched
into Junagadh, protests against a similar Pakistan!, use of force in Kashmir would be
greatly weakened.
Nehru adopted the course of negotiation while throwing a military noose around Juna-
gadh in the neighbouring Hindu-ruled states, which had all acceded to India. Two sub-
ordinate territories of Junagadh, the enclaves of Babariawad and Mangrol, were taken
by Indian troops on 1 November 1947 without bloodshed.
Meanwhile, Indian nationalists began agitating within and without Junagadh for the
overthrow of the Nawab. In Bombay on 25 September, they declared an Arazi Hakumat’
or Parallel Government under the presidency of Samaldas Gandhi, a relative of Gandhi
who was editor of the newspaper Vande Mataram. From a temporary base in Rajkot,
Gandhi kept in touch with supporters inside Junagadh by human couriers simply walk-
ing across the open frontiers of the isolated state. Other nationalist journalists, includ-
ing the editors of the Gujarati newspaper lanmabhoomi in Bombay, called for volunteers
to gather in Bhavnagar and other cities close to Junagadb for a non-violent invasion.
The students in the Junagadh Vidyarti Sangh threw their limited weight against the
Nawab also. ‘We were too scared to carry out physical sabotage like attacking power
stations,’ said Vakharia. ‘So our sabotage consisted of spreading false rumours to cause
panic, and supplying information back to the provisional government. We used to send
someone to Jetalsur or Jedpur in the Indian union to pass on the information.’
In Junagadh, as in many other parts of India, the partition steadily developed a mur-
derous communal nature. Two Muslim communities, called the Sodhana and Vadhana,
had taken a militant position in support of accession to Pakistan and mounted big pro-
cessions through Junagadh, threatening Hindus with ret- ribution if they opposed it. As
it became clear that Pakistan was in no position to support the Nawab, Hindus turned
on the Muslim minority and massacred whole communities in some outlying villages.
Food shortages developed, and the Nawab’s revenues dried up. As his administration
lost its grip, the Nawab decided the game was up and made a hasty departure for Ka-
rachi, taking with him all the cash and negotiable assets of the treasury, his family and
many of his dogs (though his consort, the Begum, forgot her youngest child in the royal
nursery and had to turn back to collect the infant). On 8 November, after an earlier
meeting of the State Council, Bhutto wrote to the Indian Government’s representative
at Rajkot asking India to take over the state to avoid a complete administrative break-
down, pending a honourable settlement of the accession issues.
The Indian Army moved into Junagadh without incident on 9 November, and the com-
munal tension quickly settled down. However, Vakharia recalls a small communal riot
breaking out in Junagadh soon after independence, when some shoe shops belonging
to Muslims at Panch Hatadi (Five Shops Area) were looted by Hindus. The students of
the Junagadh Vidyarti Sangh went to the area to protect the Muslim shops, but their
presence was misunderstood by the police.
One of the students was a fellow Modh Bania and boarding house companion of Dhirub-
hai named Krishna Kant Shah, who had been born in Kenya and sent back to Junagadh
for his education. He was arrested by the police as one of the looters and taken to the
lockup early in the evening. The leaders of the Sangh went to the police headquarters
and met the police commissioner, named Lahiri, to argue Shah’s innocence.
‘Dhirubhai [who was then 16] showed a lot of courage in arguing with the police com-
missioner to defend Shah,’ Vakharia said. ‘The arguments went on for two or three
hours, and all of us were threatened with arrest for obstruction of justice. But we were
determined we would not go until our colleagues were released. Eventually they de-
cided to let Shah go at midnight.’ It was a debt Dhirubbai was to collect from Shah in
controversial circumstances more than 30 years later.
The people of Junagadh voted overwhelmingly to join India when a plebiscite was held
in February 1948, though Pakistan never recognised it. Dhirubhai returned to his stud-
ies, and took his matriculation in 1949. Vakharia studied law and continued with his po-
litical activity, following Narayan out of the Congress Party into the new Socialist Party
in 1948. On graduating in 1951 he moved to practise in Rajkot and then Ahrnedabad,
and eventually came back into the Congress later in an active legal- political career.
With his family still extremely poor, Dhirubhai had no such option. On finishing high
school, he had to look for work. At the age of 16, Dhirubhai was physically strong, and
already possessed of the persuasiveness that was to mark his later business career.
It is tempting to look into the culture of the Modh Bania for an explanation of what his
critics see as his ruthless business ethics and ‘shamelessness’. But many other entre-
preneurs have also sprung from the same background in Kathiawar: most would shrink
from the manipulation of the government that became part and parcel of the Ambani
operation, even at the cost of less success.
The answer lies probably in the deep poverty that his family endured as the cost of
his father’s devotion to a teaching career. While he also learned that life is a web of
relationships and obligations, Dhirubhai was fired with an ambition never to become
dependent on anyone or to stay long in somebody else’s service.
LESSONS FROM THE SOUK
Early in the 1950s, officials in the treasury of the Arabian Ekingdom of Yemen noticed
something funny happening to their country’s currency. The main unit of money, a solid
silver coin called the Rial, was disappearing from circulation. They traced the disap-
pearing coins south to the trading port of Aden, then a British colony and military bas-
tion commanding the entrance to the Red Sea and southern approaches to the Suez
Canal.
Inquiries found that an Indian clerk named Dhirubhai Ambani, then barely into his
twenties, had an open order out in the souk (marketplace) of Aden for as many Rials as
were available. Ambani had noted that the value of the Rial’s silver content was higher
than its exchange value against the British pound and other foreign currencies. So he
began buying Rials, melting them down, and selling the silver ingots to bullion dealers
in London. ‘The margins were small, but it was money for jam,’ Dhirubhai later remi-
nisced. After three months it was stopped, but I made a few lakhs [one lakh = 100000
rupees] of rupees. I don’t believe in not taking opportunities.”
Dhirubhai had gone to Aden soon after finishing his studies in Junagadh at the age of
16, following the long tradition of boys from Bania families in Kathiawar heading for the
Arabian trading ports or the market towns of East Africa to gain commercial experience
and accumulate capital.
A network of personal contacts kept jobs within the same community. Dhirubhai’s elder
brother Ramniklal, known as is Ramnikbhai, had gone to Aden two years before, and
was working in the car sales division of A. Besse & Co. Founded by a Frenchman named
Antonin Besse, the company had developed from trading in animal hides and incense
between the world wars into the biggest commercial house in the Red Sea area, selling
cars, cameras, electrical goods, pharmaceuticals, oil products and food commodities to
both British and French territories in the Arab world and the Horn of Africa, as well as
to Ethiopia.
Another Gujarati, Maganbhai Patel, from the Porda district, joined Besse as a junior ac-
countant at the age of 18 in 1931 and was made a director in 1948. He estimates the
company controlled about 80 per cent of the region’s commerce soon after the Second
World War. It had 30 branches, and six to eight ships of its own in the subsidiary Halal
Shipping. It was indeed successful: shortly before his death at the age of 72 in 1948,
Antonin Besse made a donation of one million pounds to endow St Anthony’s College
in Oxford.
Thereafter, the company was run by two of his sons, Tony and Peter. It employed over
10 000 people, of whom about 3000 were Gujaratis hired as clerks, salesmen and
middle management. Susheel Kothari went to work for Besse in 1952 from Wallibhipur
in Saurashtra, in a group of 14 recruits hired after interviews in Rajkot. Besse trusted
Indians as honest and loyal, he recalled. While not paid nearly as much as European
expatriates, they enjoyed a standard of living that periodically drew complaints from
the British colonial administration for forcing up wages generally On one occasion, Tony
Besse had told the governor to his face that it was ‘None of your business what I pay’.
When Dhirubhai left school, his brother Ramnikbhal put in a word for him with Magan-
bhai Patel. On his next leave back in Porda, Patel invited Dhirubhai to come over for an
interview. ‘My first impression was his way of walking,’ recalled Patel, imitating a heavy,
decisive footstep. ‘It was as if time was short and he had to get ahead, to reach a goal.’
Patel asked him to read from The Times of India and then write a summary in English,
a test Dhirubhai passed satisfactorily.
He was hired, and soon after arrived by steamer in Aden. As Susheel Kothari notes:
‘The first sight of Aden is always a shock.’ The oil-filmed blue waters of the port are
backed by steep crags of dark-brown rock, remnants of an old volcano, with no sign of
vegetation.
Aden had flourished in Roman times as a way station on trading routes between Egypt
and India. The opening of the Suez Canal in 1869 revived its importance, and it became
a major coaling port for European shipping to Asia and Australasia. From its occupation
by a detachment of Indian sepoys sent by the East India Company in 1839, Aden had
been an important link in the ties of Britain to the Indian Raj. Until 1937, when it was
put under the Colonial Office in London, the territory was administered from India. The
Indian rupee circulated as its currency until it was replaced by the East African shilling
in 1951.
The outpost had been a punishment station for British regiments deemed to have shown
cowardice or other offences against discipline while in India. As one of its last gover-
nors, Charles Johnston, noted in a memoir, it had been ‘the dumping ground, even as
late as between the wars, to which regiments sent officers who had got themselves into
matrimonial difficulties’.
The colony also became the entrepot for the Red Sea and Horn of Africa, where deep-
water ports were few. Cargoes of cattle hides, coffee, aromatic gums and pearl shell
were brought to Aden by wooden sailing dhows, and bought by trading firms like Besse,
Cowasji Dinshaw, Luke Thomas and Cory’s. In return, basic commodities such as sugar,
rice and textiles were shipped back.
Between the world wars, the biplanes of the Royal Air Force kept the hinterland quiet
by machine-gunning the villages of any unruly Yemeni tribesmen. Behind this shield of
bullets, the middleman trade flourished. The definitive historian of British rule in Aden,
R. J. Gavin, noted:
Aden indeed consisted of a hierarchy of brokers from the heads of foreign firms to the
lowest workman or child who offered his labour or hawked in the street. Speculators,
hoarders and price rings frequently sent commodity and foodstuff prices rocketing up
and down, while moneylenders and dealers darnpened the effect of this for the rest of
the population at a price which included a claim to social leadership. Acquisitive individ-
ualism was mitigated only by ethnic and other local solidarities formed outside rather
than within the town.
Aden’s economy developed rapidly after the Second World War, but its business mi-
lieu still had some of this character when Dhirubhai learnt his basic techniques in the
1950s.
The spur to Aden’s growth was the decision of British Petro- leum to build a new oil
refinery in Little Aden, another crater jutting into the sea across the bay from the main
town. BP’s existing refinery in the Gulf port of Abadan had been nationalised by a new
Iranian government. The refinery employed up to 11000 workers at any one time dur-
ing its construction over 1952-54, and then had a permanent staff of 2500 housed in a
comfortable village. This sparked off a construction boom which saw Aden extend be-
yond the wastes and saltpans of the causeway which had been kept clear for defensive
reasons in earlier times.
Later in the 1950s, the British began concentrating strategic reserve forces in Aden
from other bases in the Gulf and East Africa. By 1964, Aden had some 8000 British
military personnel plus dependents-and their demand for housing kept the construction
activity going. Aden’s population grew from 80000 in 1946 to 138000 in 1955.
It became a more modern economy, and airconditioning ameliorated the hot humid
weather in the midsummer months. But it retained many exotic features, including
the daily inward flight by Aden Airways of the mild narcotic called qat. From a hedge-
like bush in the mountains of Ethiopia, the qat leaves had to be consumed fresh and
were delivered to consumers in Aden within a few hours of plucking at dawn. ‘It is not
medically harmful, so far as can be ascertained,’ noted Johnson, the former governor,
1although if taken in excess it lowers the appetite and produces a characteristic green-
faced, cadaverous appearances
Just before mass air travel arrived with the first passenger jets, Aden overtook New York
in 1958 to become the biggest ship- bunkering port in the world. As well as for cargo
shipping and tankers, it was a refuelling stop for elegant liners of the P &- 0 and Orient
Lines as well as crowded migrant ships taking Italians and Greeks out to Australia.
Disembarking tourists, brought ashore in launches from the ships moored out in the
roadstead, were immediately surrounded by desperate Arab and Indian salesmen and
touts, offering cheap cameras, fountain pens, transistor radios and tooled-leather items.
After making their purchases and taking a quick taxi tour around the arid town, most
were glad to get back to their P & O comfort and security. Aden had an air of menace, of
repressed resentment at its naked display of foreign military and commercial self-inter-
est. As Gavin observed: ‘For a thousand years or more Aden had essentially belonged
to the merchants of the world, be they South Yemeni or foreign, while the people of
its hinterland watched with jealousy and poverty-stricken eyes from beyond its gates.
But for the young Gujaratis hired by Besse & Co, Aden was a kind of paradise and most
recall their days there with great affection and nostalgia. ‘We felt it was heaven,’ said
Himatbhai Jagani, a former Besse employee who had been born in Aden, the fifth gen-
eration of his family to live there since their original migration from Gujarat early in the
19th century ‘It was tax free virtually, and we never saw an electricity bill or rent bill till
we left. For 14 of us in our mess we paid only 400 shillings a month for food. We could
save about half our salary It was very comfortable-we all missed that life.’
Home leave of three months came after 21 months straight work in Aden or at one of
the Besse outposts around the Red Sea. The Besse employees went home with their
savings to spend by P & 0 liners like the Chusan or Caledonian, sometimes by Flotte
Lauro of Italy, and if nothing else, India’s Moghul Lines.
While most of the British residents lived on the slopes above Steamer Point, socialising
at the Gold Mohar beach club nearby, the 15000 Indians clustered in a few streets of
the Crater district-Sabeel Street named after a refuge for stray and injured animals set
up by rains and Hindus, Danaraja Street, and Bencem Street, named for the prosper-
ous Jewish trading community that once thrived in Aden and Yemen. The Besse & Co
bachelor’s mess occupied four or five buildings nearby in Aidroos Valley.
The Crater had all the features of the Orientalist watercolours that adorned European
drawing rooms at the turn of the century, as described by Governor Johnston:
Indian merchant families, the women in saris, the men in their white jodhpurish get-
up, are taking the air, immaculate after the siesta. We drive around a market square
with fruit glowing on the stalls, and enter a narrow street fairly buzzing with exotic life-
pastrycooks, water-sellers, coffeernakers, carpet merchants, all the usual figures of the
Oriental bazaar-and pervading the whole thing a strong hot smell Of Spice.
The various expatriate communities lived in their own social circles, where, in the way
of ‘hardship posts’, attachments were strong and recalled with nostalgia in later life.
The Hindus from India were probably liked the least by the local Arabs-to whom Mus-
lims from India and Pakistan complained about India’s incorporation of Kashmir and
Hyderabad, but filled a need for white-collar staff that Aden’s schools could not meet,
and had their own social circle too.
While his brother Ramnikbhal worked in the automotive division, Dhirubhai was as-
signed to the Shell products division of Besse. As a newly arrived youngster he created
an early splash, literally, by taking a bet while out helping bunker a ship in the harbour
that he could not dive off and swim to shore. The prize was an ‘ice-cream party’-which
he won, by swimming through waters that had seen occasional shark attacks on swim-
mers outside the nets of its beaches.
As he developed more familiarity with the trade, Dhirubhai was sent to market Shell
and Burmah lubricants around the Besse network, visiting traders in French Somal-
iland, Berbera, Hargeysa, Assem, Asmara (Eritrea), Mogadishu (Italian Somaliland),
and Ethiopia. Some places were not accessible to steamers, so the Besse salesmen
would travel by dhow, the traditional wooden sailing vessels of Arabian waters. Lodg-
ings would be extremely rough, and the food difficult for the vegetarian Gujaratis.
Dhirubhai was outgoing, robust, and helpful to newcomers. He was physically strong
and proud of his physique. The other young men tended to be bashful about naked-
ness in their shared bathrooms, and a common prank was to whip away the towels
they wrapped around their waists while crossing the living space in the mess. Dhirub-
hai would walk around without hiding behind towels. His solid footsteps could be heard
from a distance, and his colleagues soon started calling him ‘Gama’ after a famous In-
dian pehelwan (wrestling champion) of the time. Navin Thakkar, a former colleague at
Besse, remembers that Dhirubhai taught him to swim by simply throwing him into the
sea, at the swimming place down near the Aden dockyard where they used to go on
Saturdays and Sundays.
Dhirubhai delighted in stirring up pandemonium. Old colleagues describe it as bichu
chordoa or ‘letting loose a scorpion’.
Despite his affability, some of his old colleagues describe Dhirubhai as a ‘dark charac-
ter’-not just because of the darkish skin he inherited from his father-but for the ambi-
tion and risk-taking he hardly concealed. ‘Ramnik was more or less a saintly man,’ said
one ex-Besse colleague who later went to work for Dhirubhai. ‘Dhirubhai was a daring
one. He was already advising me to go for business and not to remain in service.’
Dhirubhai’s career with Besse was progressing steadily, and the Shell Division was one
of the most rapidly expanding areas of company business. By 1956, when the Suez
War broke out after Egypt’s President Nasser nationalised the Suez Canal, Dhirubhai
was managing the Shell refuelling operation at the Aden military base. He was also able
to observe construction of the BP oil refinery in Aden, gaining an early insight into the
production linkages of the petroleum industry.
In March 1954, Dhirubhai married at the age of 22, in a match arranged by his mother
(his father had died in 1951) but which Dhirubhai himself had supervised. His partner
was Kokila Patel, the daughter of a postmaster in Jamnagar, the port on the western side
of Kathlawar. Her family was not particularly wealthy, so it was not a financially advan-
tageous match for Dhirubhai. But Kokilaben’ was also a Modh Bania, as the strict caste
endogamy of the time demanded and her character complemented that of Dhirubhai, a
solid home anchor very much, grounded in traditional values and religious piety.
Although he was doing well, Dhirubhai was far from happy with his position as an em-
ployee. ‘I saw in him he was somebody that was different than others,’ recalls M. N.
Sanghvi, who worked alongside Dhirubhai in the Shell division and later went to work
for him back in India. ‘I could see he wanted to make something of himself.’ His room-
mate Susheel Kothari also remembers the ambition. ‘Right from the beginning he was
determined to do something big,’ Kothari said. ‘He was never comfortable in service. He
was a born businessman.’
After office hours, which finished at 4.30 in the afternoon, Dhirubhai would invariably
head for the Aden souk. Initially he just watched the Arab, Indian and Jewish traders
in action. Later he began taking positions in all kinds of commodities, particularly rice
and sugar, in gambles against rises and falls in prices at time of delivery Doing business
on one’s own account was strictly forbidden to Besse employees by the terms of their
contract, and his older brother Ramnikbhai disapproved, so Dhirubhai would simply say
he was ‘studying the market’.
Dhirubhai made some profits, and learned the fundamentals of business and money.
But he also made some near disastrous mistakes, which almost wiped out his capital.
On one occasion he suffered a tight financial squeeze when an incoming cargo of sugar
was damaged by sea-water and his customer refused to accept delivery Pending settle-
ment of his insurance claim, Dhirubhai had to pass the hat among Besse colleagues for
loans to bail himself out.
One particular ally was a Besse employee named jamnadas Sakerchand Depala, a rela-
tive by marriage, who lent Dhirubhai 5000 shillings on this occasion. Depala was close
to Dhirubhai and the two usually had lunch together, even after Dhirubhai had married.
It was an odd relationship, another attraction of opposites. Depala was not a worldly
man and lent money again to Dhirubhai for his ‘market studies’, but had a strong influ-
ence nonetheless. ‘Jamnadas was morally in control of Dhirubhai,’ said Susheel Kothari,
who had been in the same bachelors mess with Dhirubhai. ‘If Dhirubhai was drinking
too much, no one else could stop him. He’d just swear at them. Kokilaben used to call
Jamnadas and Dhirubhai would listen to him.’
According to one version of events, Jamnadas made considerable sacrifices for Dhirub-
hai. One one occasion, so this story goes, Jamnadas and Dhirubhai were reported to
Besse management for their private deals, and got suspended from service. Jamnadas
took responsibility and resigned from service, allowing Dhirubhai to complete the seven
year’s service that earned him the right of residence in Aden.
Another story told by ex-Besse staff is that, after leaving the company, Jamnadas con-
tinued to invest in rice and sugar deals masterminded by Dhirubhai, and lost heavily,
to the point of losing most of his capital. Jagani remembers Jamnadas being ‘very de-
pressed’ around 1961. Whatever the truth of this, Dhirubhai continued to act as though
he was in debt to Jamnadas. Some years later, Jamnadas came back to India and was
given a shop selling textiles for Dhirubhai. After a while Jamnadas stopped coming to
work, but Dhirubhai saw that his salary was paid until his death in 1987.
Dhirubhai left Aden in 1958, with his seven years service and right of residency as a
failback, to try his hand in business back in India.
The house of Besse lasted only another nine years, as long as British rule in Aden, which
was being eroded by the sandblast of pan-Arabic nationalism. Some of the transistor
radios sold at Steamer Point found their way to the villagers of the Yemen hinterland,
who picked up President Nasser’s message of Arab nationalism through Radio Cairo.
Resulting hit-and-run attacks by rival liberation fronts made Aden unsafe for foreigners.
In the second half of 1967, British forces pulled back into an ever- tightening perimeter
until the rearguard was lifted out by heli- copter to a naval task force offshore on 29
November 1967.
The territory fell unconditionally to the National Liberation Front. It applied its harsh
version of Marxism-Leninism, abolishing private property and nationalising most foreign
companies. By then the closure of the Suez Canal in the 1967 Arab-Israel war had cut
Aden’s bunkering business. Racked by periodic coup attempts and wars with northern
Yemen, the new state of South Yemen became an economic back-water and haven for
international terrorists-a modern version of the pirates’ lair the British first subdued.
Besse &- Co was among the companies appropriated by the new regime. From retire-
ment in France, former director Peter Besse wrote in 1996 that the ‘vast trading empire
. . . of my father collapsed on the arrival of various “People’s Democratic Republic” gov-
ernments. Today nothing is left.
CATCHING LIVE SERPENTS
At the end of 1958, Dhirubbai returned to India with his wife Kokilaben and first child, a
son named Mukesh. They were expecting their second child (another son, Anil, born in
June 1959, to be followed by daughters Dipti, born in January 1961, and Nina, born in
July 1962). From all his years with Besse & Co and all his evenings ‘studying the mar-
ket’ he had accumulated savings of just 29000 East African shillings-then worth about
US$3000-which, as his Besse colleague Susheel Kothari had reminded him, would be
just ‘chutney’ back in his homeland.
Dhirubhai was determined to go into business on his own account. At first he looked
at Rajkot, the port city in his native Saurashtra facing the Rann of Kutch. Krishnakant
Vakharia, who was then practising law in Rajkot, remembers that Dhirubhai came to
visit. ‘He was toying with the idea of a dealership in automobile spare parts there,’
Vakharia said. ‘I had a friend who was doing just that, and who was not doing very well.
So I advised Dhirubhai that he should not go into this business, and instead of Rajkot
he should go to Bombay.’
At Dhirubhai’s request, Vakharia accompanied him down to Chorwad and stayed there a
few days while Dhirubhai sounded out friends and acquaintances about ideas and help.
He found support in the family of Chambakial Damani, a second cousin (Dhirubhai’s
grandfather and Damani’s grandmother were brother and sister) who had been work-
ing in Aden for family companies at about the same time that Dhirubhai was there.
One business, Madhavas Manikchand, had imported textiles and yarns from India, ran
a transit business into Ethiopia, and held the agency for Bridgestone Tyres. The other,
Anderjee Manekchand & Co, had imported textiles from India and Japan. When neces-
sary, Dhirubhai had used the names of these firms during his own after-hours trading.
Damani’s father, Madhaylal Manikehand, had closed his busi- nesses in Aden and Ethio-
pia on retiring in 1957, and decided to put Rupees (Rs) 100 000 into a trading business
for his son and Dhirubhai in Bombay. Vakharia saw the agreement concluded in his
presence, and returned to Rajkot.
Dhirubhai and Chambaklal called their new business Reliance Commercial Corp. The
first office was a room of about 350 square feet in Narsinathan Street, in the crowded
Masjid Bandar district of Bombay. It had a telephone, one table and three chairs. If the
two partners and their initial two employees were all present, someone had to stand.
At first, the business traded spices back to the partners’ contacts in the souk of Aden-
betel nut and curry ingredients- and shipped some cotton, nylon and viscose textiles to
Ethiopia, Somalia and Kenya. But local contacts led them quickly into the frenetic and
potentially profitable business of trading synthetic yarns - one of more than 60 com-
modity markets serving all of India that were located in Bombay, nearly all of them run
by Gujaratis. The Rajkot lawyer Vakharia had introduced Dhirubhai to a fellow activist in
the Socialist Party, a successful yarn trader called Mathura Das Mchta. And Dhirubhai’s
talented nephew Rasikbhai Meswani (the son of Dhirubhai’s older sister), had begun
trading in yarns a couple of years earlier.
At the tiny Masjid Bandar office, Dhirubhai began to assemble a team that stayed with
him for decades as Reliance grew. They included Meswani, older brother Ramnikbhai
who had also returned from Aden, younger brother Nathwarlal (Nathubhai) on complet-
ing his education, and two former schoolmates from Junagadh named Rathibhai Much-
hala and Narottambhai Doshi. Dhirubhai also enlisted the services of old acquaintances
from Aden, including Liladhar Golkaldas Sheth, who had been a dealer in textiles, coffee
and foreign exchange in Yemen, Burma and Aden (suffering several bankruptcies along
the way) before settling back as a foreign exchange dealer in Bombay in the 1950s.
Dhirubhai quickly became a familiar figure around the streets of Pydhonie, the synthetic
yarn trading district of Bombay where Gujarati merchants then did their business sit-
ting on spotless white canvas gaddi floor-coverings, entering trades in compendi- ous
ledgers, and consuming endless cups of tea thick with sugar, spices and hot milk. From
late morning until about 4 pm, Pydhonie was busy with trading as dealers made forward
trades, trying to guess the future price of yarn of this or that micron size.
If cotton and silk had been the materials of India’s textile industry right from the old
handloom days to the industrial looms of the early 20th century, by the 1950s the
industry and its consumers were hungry for the artificial threads created by modern
chemical science. Nylon, viscose and polyester were cheap, hardwearing, quick-drying
and creaseproof, and could imitate both cotton and silk.
The problem for yarn dealers at Pydhonie was not usually to find buyers but to secure
supplies. The tightening of industrial controls and import quotas since Independence
had choked supply of these ‘luxuries’ as the economic Brahmins of New Delhi chan-
nelled national resources towards new complexes making capital goods such as power
stations and steel mills-what Prime Minister Jawaharlal Nehru called the ‘temples of
modern industry’.
India had one viscose factory owned by the Birlas, and one government-owned nylon
plant. The first polyester fibre plant did not open until the 1970s. These domestic fac-
tories supplied only a small fraction of local demand from textile weavers. Smugglers
supplied some of the demand, bringing in yarn by either misdeciaring cargoes at regu-
lar ports or simply running small ships to the numerous creeks and beaches of India’s
west coast. Made-up textiles were also smuggled as well, via Dubai or Singapore. In-
dian visitors to Japan’s artificial textile industries, then in their great postwar expansion
phase, recall seeing vast production of sari-length material, for which officially there
was no open market in the subcontinent at all.
The other source came from the strictly controlled import licences given to registered
exporters of textiles, allowing import of raw materials worth a certain percentage of
their export earnings. Like many others, Dhirubhai realised that these import or ‘re-
plenishment’ licences (known as REPS) were as good as money, even though some of
them were officially not transferrable and imports had to be made by the ‘actual user’
of the materials. By paying higher margins than any other traders, Dhirubhai soon be-
came the main player in the market for REP licences. The margins were tiny in the trade
itself - but his dominance also put him in the position of being able to turn on and off
much of the supply of yarn into the Indian market.
Suresh Kothary, whose family business was importing agent for Du Pont products in-
cluding textile fibres, chemicals and dyes from 1958 to 1993, and also active in yarn
trading, remembers first meeting Dhirubbai in 1964 at the Masjid Bandar office. Dhirub-
hai would often drop by at Kothary’s shopfront at Pydhonie thereafter, lounging on the
white cotton mattress and drinking tea or coffee. They were in effect rivals, as Dhirub-
hai mostly imported his yarns from Asahi Chemicals in Japan or Ital Viscosa via a long-
resident Italian businessman in Bombay, a Dr Rossi, while Kothary handled only the
Du Pont product from the United States and elsewhere. Dhirubhai was a sporting rival,
Kothary said: ‘He would always say: “This is what I’m going to do, boy!” Whenever he
fights an enemy he goes in the open.’ Not everyone in the Bombay textile trade would
agree.
Kothary and many others in the Pydhonie market remember Dhirubhai’s intervention in
a market crisis in the mid-1960s when spiralling textile prices led government authori-
ties to crack down on ‘speculation’ in the yarn market by banning forward trading, and
then arresting traders found to be continuing the practice. ‘Consumers must have com-
plained to the government about fluctuations in prices-some people, about a dozen,
were arrested in the market,’ Kothary said.
The trading community was despondent as their colleagues languished all day in the
cells of the Picket Road Police Station. Approaches to officials by the Bombay Yarn
Markets and Exchange Association got nowhere. Then, late in the evening, Dhirubhai
arrived like a storm at the police station, shouting greetings to the senior officers, and
handing out snacks to everyone. Within an hour, all the arrested traders had been re-
leased, and the complaints against them shelved. Kothary can only guess at Dhirubhai’s
intervention. ‘The usual-India!’, he said.
Dhirubhai also emerged as saviour of the market when an even greater supply crisis
occurred in 1967, Kothary recalled. On a report that ‘actual user’ import licences had
been traded and misused, the Customs authorities in Bombay under the then Assistant
Collector, a Mr Ramchandani, impounded all incoming cargoes of artificial fibres. The
government insisted that whoever imported the yarn had to be the manufacturer who
wove it into cloth.
According to Kothary, about 40 million rupees (then about US$5.3 million) worth of
yarn was seized. Many traders then defaulted on loans taken out to cover the imports.
The entire artificial textile market was paralysed. ‘It could have made us all insolvent,’
Kothary said. ‘This is when I came very closely in touch with Dhirubhai. It was he who
saved us all. We fought for about six months. I used to go with him to lawyers day in
and day out. We went to Delhi to see Morarji Desai [then finance minister]. That was
the time I could see he was a wizard. He used all the ways and means.’
The crisis ended as quickly as it started, ostensibly after a one-day hearing of the
importers’ appeal in the Customs, Excise and Gold Appellate Tribunal under Justice
Oberoi, who found for the appeal. Kothary indicates that an agreement engineered by
Dhirubhai was behind the judicial settlement. The details are not revealed, but presum-
ably come under the category of ‘That’s India!’ also.
On their move to Bombay, Dhirubbal and his young family had moved into an apart-
ment on the 3rd floor of the Jal Hind Society building in Bhuleshwar, a very crowded
district of shops, markets and residential tenements in the central part of the city. The
building is what is known as a chawl in Bombay: numerous small apartments, often
just single rooms, opening on to open galleries around a central courtyard which is set
back from the street behind commercial premises. Quite often the toilets and washing
facilities are shared at ground level.
Later accounts of Dhirubhai’s early career often paint this home as Dickensian in the
extreme. The flat, since bought by a later tenant, had two small bedrooms, a living
room, kitchen and internal bathroom in 1995. Vakharia, who used to visit the Ainbanis
for a holiday each Christmas from 1959 to the late 1960s, remembers it being ‘quite
luxurious’ compared to the single rooms many Gujarati families had to occupy in Bom-
bay at that time.
Even so, Dhirubhai and his young family, eventually two boys and two girls, lived aus-
terely in surroundings that were crowded, noisy and dirty. The two sons, Mukesh and
Anil, who took over day-to-day management of Reliance in the late 1980s, may have
had engineering degrees and MBAs from American universities, but their lean early
years gave them a hungry ambition unusual in the second generation of a successful
Indian business family
As his confidence grew in his Bombay success, Dhirubhai developed his taste for ‘let-
ting loose a scorpion’ through practical jokes and whimsy. Vakharia recalls that when
he visited Bombay with his new wife for the first time in 1959, he and Dhirubhai were
invited home by their senior mentor Mathura Das Mehta. Mehta’s wife served the young
men mango juice, and kept insisting on refilling their glasses. ‘Dhirubhai whispered:
“Let’s do some mischief,”’ Vakharia said. The two asked for a fourth glass, and kept then
accepting more. After more than a dozen glasses each, the Mehta kitchen ran out of
mangoes and a servant had to be sent to the market to buy more, which were all duly
consumed. The Mehtas continued to be friends, ‘but they never invited us back for any
lunch or dinner at their house’, Vakharia said.
Each year, Dhirubhai would make it a point to play an April Fool’s joke upon an elderly
employee named Ghulabchand, an old associate from Aden. For all his experience,
Ghulabchand never failed to fall for it. On one occasion, Dhirubhai announced that
everyone was invited to dinner across town at an address at Mafatlal Bath. Ghulabe-
hand was sent in a taxi with Vakharia and another member of the office, Ramanbhal.
At Marine Drive they stopped outside a building, and Patel went in to look for a fourth
member of the group. After 15 minutes waiting, Vakharia also went in. Ghulabchand
eventually gave them all up and took the taxi to Mafatlal Bath, where he found no one.
On returning home, he found Dhirubhai and the others eating a dinner they had notified
Ghulabchand’s wife to prepare.
Vakharia recalls another prank in 1965. The India-Pakistan War was on, and a blackout
had been imposed on Bombay for fear of naval and air attacks by Pakistan. About 10
pm, Dhirubhai said: “Let’s go out and take a round of the city.”’ The two drove around
the dark Bombay, with Dhirubhai bluffing police at roadblocks that he was on official
business and handing out small tips of ten rupees or so. ‘He got saluted all the way,’
said Vakharia. ‘On the way back we saw some lights in the Japanese consulate, so
Dhirubhai went in and told them to douse the lights.’
On yet another occasion, around 11 pm on a cold winter night, Dhirubhai announced an
immediate picnic. The cook was told to assemble supplies, and Vakharia and the family
piled into Dhirubhai’s car. Another dozen friends were telephoned and told to rendez-
vous in their cars. ‘We were not told where we were going,’ Vakharia said. ‘We ended
up at Rajeswari, about 50 or 60 kilometres from Bombay at about 3 am. The cold was
very severe and we went to a dharamsala [pilgrim’s lodging] at a hot springs resort. It
was meant only for sadhus [ascetic Hindu holy men]. Dhirubhai said we would all sleep
there. After half an hour we were still shivering and Dhirubhai got up and lit a camp fire.
When the sun came up we had tea, and a bath in the hot springs, and cooked kedgeree
on the camp fire. We told jokes and sang songs, and didn’t get back home until late in
the afternoon.’
Dhirubhai’s fast pace caused a rift with his partner Chambaklal Damani in 1965. Ac-
cording to Vakharia, Damani preferred to trade with great caution, leading to constant
tension with Dhirubhai who was a risk-taker. The final rupture came after one clash
when, at Dhirubbai’s urging, Reliance built up a large holding of yarn in the expectation
of a price rise. Damani pressured Dhirubhai to cut back their exposure. So Dhirubhai
sold the yarn stockpile-to himself, in secret. Two or three weeks later the price of yarn
shot up and Dhirubhai made a killing. ‘Later Dhirubhai told Chambaklal: “I am prepared
to share profit with you,”’ Vakharia said. “’But in future if you do not know the business
do not intervene.”’
Many others among Dhirubhai’s ex-colleagues and trade associates also believe the
partners were incompatible.
‘He takes so much risk that people fear something will go wrong,’ said Vradial De-
pala, who knew Dhirubhai in Aden. ‘But the risks are all calculated. They are not blind
risks.’
‘You may be a co-passenger in a car with me, but if you don’t like my driving you might
be a little fearful,’ said Manubhai Kothary, a leading Bombay textile exporter and long-
time president of the Silk and Art Silk Mills Research Association.
‘Someone advised Dhirubhai’s partner that he had made sufficient money and now
should come out,’ said Susheel Kothari, the ex-colleague from Besse &- Co who later
worked for Reliance. ‘Dhirubhai’s business is catching live serpents.’
Chambakial Darnani himself will say only that ‘We agreed to separate willingly’ or that
‘We just became separate as friends’. But he agreed that the version given by Kothari
and others about differences over commercial risk were ‘to some extent true’. Damani
went into trading in a new company, while Dhirubhai and his brothers paid some Rs 600
000 to buy him out of Reliance. Soon after, Dhirubhai moved the office to bigger prem-
ises in the more central Court House building at Dhobi Talao, named for the laundrymen
who originally worked in the area.
After ten years at Bhuleshwar, in 1968, Dhirubhai moved his home out of the chawl to
a more comfortable flat in Altamount Road, one of the city’s elite areas on a hill over-
looking the Arabian Sea. Fond of driving fast, Dhirubhai had first bought a Fiat car, and
then moved on to a Mercedes-Benz. Later, in the 1970s, he indulged a taste for flashy
automobiles by acquiring a Cadillac, one of the very few in the country then or since.
Friends remember him as a dashing figure, the slightly dark skin inherited from his
father (the only such characteristic, some say) offset by a white safari suit, the hair
slicked back into a duck’s tail. For a while he put on weight, and then trimmed down by
taking vigorous dawn walks along the three-kilometre sweep of Bombay’s Marine Drive,
enlisting friends, colleagues and neighbours as companions.
Within a year of splitting with Damani, Dhirubhai took Reliance into textile manufactur-
ing for the first time. He decided to locate it in Gujarat rather than Bombay, because of
the cheaper land prices, and sent his older brother Ramnikbhal to select a site. Ram-
nikbhai enlisted Vakharia, then starting to get known as a lawyer in Ahmedabad, and
the two drove around the state in a small Fiat.
They settled on a 10000 square metre plot, the last going in a new industrial estate
developed by the Gujarat state govern- ment at Naroda, on the fringes of Ahmedabad.
Vakharia had got a contact, state minister for industries Jaswant Mehta, to approve the
purchase, and by a further stroke of luck the farmers owning some 100 000 square me-
tres of adjacent land were willing to sell. Dhirubhai had a simple factory built, installed
four knitting machines, and appointed his brother as plant manager.
Dhirubhai was again lucky in that, around this time, the British hold on Aden was be-
coming more tenuous. Even ahead of the British withdrawal in 1967, foreign nationals
felt threatened by the insurgency mounted by the People’s Liberation Front. Many of
the Indians working for Besse &- Co decided it was time to go home. So Dhirubhai had
a ready-made source of educated managers, accountants and salesmen, drilled to Eu-
ropean standards.
The word went around that Dhirubhai would find jobs for his old colleagues, and a dozen
old hands from Besse & Co accepted his offer. Most stayed for the rest of their working
careers, with the last few being retired from senior management positions in 1993 in a
deliberate move by Dhirubbai’s sons to rejuvenate the company’s leadership.
None of them knew very much about textile production, however, and it was a case of
learning by trial and error. All of us were new,’ recalled M. N. Sangvi, who left Aden in
1967 and immediately joined Reliance. ‘It was very small, only about 20 people in the
whole factory, about five or six from Aden. Nobody was familiar with textiles, and after
15 years in Aden I was not knowing anything about India either. The first two years,
1966- 67, was a very hard time. The product had to be established. We worked from
morning to late evening. Dhirubhai was very encouraging, and we had a family atmo-
sphere. The employer- employee relationship was not there. He put a lot of trust in
us’.
Susheel Kothari, who had returned from Aden in 1966, said that at one point in 1967
it appeared the mill would have to close down because Reliance could not sell the cloth
it was making. Dhirubhai told Kothari that if the factory had to shut down he should do
it gradually and see that no blame attached to his older brother Ramnikbhal. But the
Aden hands rallied. After putting in a full shift at the factory in Naroda, from 7 am to 3
pm, they would spend the afternoons and evenings touring markets around Ahmeda-
bad trying to persuade shopkeepers to stock Reliance fabrics. ‘We were determined we
should not fail,’ Kothari said.
Dhirubhai worked everyone hard, often calling his managers in Naroda at 6 am from
Bombay before they started out to work. They were expected to solve problems on their
own initiative. Dhirubhai himself set the example. Suresh Kothary recalled one incident
when spare parts were urgently needed for imported machines at Naroda. Dhirubhai
had the parts flown in from Germany, and then discovered that no trucks were available
for the haul up to Ahmedabad. He bought two trucks, one to carry the parts and one as
a backup, and sent up the consignment. The trucks were then sold in Ahmedabad.
But he was forgiving of honest mistakes, recalls Sangvi. In one case, Sangvi was over-
trusting of some merchants who had placed an order from Patna, the capital city of
Bihar state across in eastern India. Sangvi sent the consignment by rail, collectable on
presentation of a payment receipt at a Patna bank branch. The merchants forged the
receipt and took delivery from the railway yard. Reliance lost 900000 rupees, a consid-
erable sum at that stage, and it took months to recover it. Sangvi said: ‘Dhirubbai just
told me: “Nathu, nothing to worry-in business, anything can happen. I know you have
done it to increase the sales. I am with you and you just concentrate on the business.”’
Reflecting back on his career, as vice-president of the Reliance textile division, Sangvi
said: ‘I feel myself very fortunate that I have been working under such a legendary
figure.’
K. I. Patel, who had been recruited by his relative Maganbhai Patel to Besse and Co in
1953, returned to India in 1965. Soon after, Ramnikbhai Ambani, with whom he had
worked in the Besse automotive division, hired him for Naroda and put him in charge of
the knitting machines. Patel knew nothing about them, but was sent to West Germany
and japan later for formal training. He stayed with Reliance until retirement in 1993.
‘The years passed before we knew it, we were so busy,’ Patel recalled.
The result was steady growth in sales and profits for Reliance. In 1967, the first full
year of production at Naroda, the company recorded sales of Rs 9 million in 1967,
yielding a net profit of Rs 1.3 million. Dhirubhai and his family shareholders refused to
take dividends and kept ploughing earnings back into more machines. After a decade
of manufacturing, in 1977 Reliance had a turnover of Rs 680 million, and profits of Rs
105 million.
In an extensive write-up on the company in August 1979, the Indian Textile Journal re-
ported on a massive factory at Naroda occupying 230 000 square metres and employ-
ing 5000 staff. It had banks of machines for texturising or ‘crimping’ artificial fibres to
give particular sheens, machines for twisting the polyester and nylon fibres into yarns,
and machines for weaving the yarns into textiles. The yarns were sold to other Indian
textile manufacturers, or used in-house.
Most significantly perhaps, Dhirubhai established his own brand name, Vimal (named
after a son of his brother Ramnik), by dint of lavish advertising under the slogan ‘Only
Vimal’. This somewhat snobbish slogan, and some well-publicised fashion shows in
top-class hotels, added a touch of class to a product that basically appealed to the less
wealthy market sectors. In addition, Dhirubhai had got around the reluctance of estab-
lished wholesalers and shopkeepers to accept a new brand by creating his own network
of shops. Across India, some 400 shops were franchised to sell the Vimal brand of poly-
ester materials for saris, shirts, suits and dresses.
In one of the first of many eulogies to appear in the Indian press, the Textile Journal
noted how Dhirubhai was held in ‘high esteem’ by his staff, who attributed Vimal’s suc-
cess to his dynamic leadership. ‘When the construction of the factory was going on, it is
reported, many snakes were seen in the area. According to a popular belief, appearance
of snakes is