EDITOR: | October 15th, 2014 | 5 Comments

Stans Energy can use the new geopolitical order in its quest for justice

| October 15, 2014 | 5 Comments

shanghai scoStans Energy Corp. (TSXV: HRE | OTCQX: HREEF) announced that the Ontario Superior Court of Justice has issued an order prohibiting the Kyrgyz Republic and Kyrgyzaltyn JSC  “from selling, disposing, exchanging, assigning, transferring, pledging or encumbering 47,000,000 shares  in the capital of Centerra Gold Inc. (which is operating the Kumtor Gold Mine near Bishkek). Stans obtained the order as part of its efforts to enforce an international arbitration award issued by the Arbitration Court at the Moscow Chamber of Commerce & Industry against Kyrgyz Republic for US$118,206,058.04. The Kyrgyz Republic has not paid the award nor are there any assurances that the Kyrgyz government will do so. However, by using Centerra, Stans can apply heavy pressure on the authorities in Bishkek. Centerra operates the Kumtor gold mine in Kyrgyzstan, Stans has the legal right to pursue any of the Kyrgyz State’s foreign assets including its 32.7% stake, worth about some USD$ 500 million, in Centerra.

Kyrgyzstan is a poor country and needs foreign investment to survive. To date, its most important asset is the Kumtor gold mine, which alone accounts for 5.5% of GDP. Gold exports serve as Kyrgyzstan’s main source of foreign currency. Centerra Gold, for its part, has always been able to keep the Kumtor mine up and running, no matter how difficult the political situation in Kyrgyzstan, even managing to receive the Government’s approval of its mine plan for 2014 – notwithstanding the five and a half months delay. Centerra had even threatened to close the Kumtor mine if it did not get the approval, after 17 years of activity, but it was able to exercise pressure because the Kyrgyz government needs the Canadian gold company’s expertise to operate Kumtor and that a closure would have had serious economic and social consequences.

Gold exports serve as Kyrgyzstan’s main source of foreign currency. Yet Kyrgyzstan is considered to be one of the most democratic states in Central Asia. Other than gold, Kyrgyzstan’s growing relationship with Russia might be the most effective lever to engage in Stan’s pursuit of justice – and rightful compensation, given that the Arbitration Court that has ruled in favor of Stans is in Moscow. Stan’s Kutessay-2 project itself has Soviet roots. The mine and processing plant supplied some 80% of the USSR’s rare earth needs including 15 rare-earth elements, as well as lead, zinc, silver, bismuth, molybdenum, thorium, tin, and copper. In addition, it contains niobium, tantalum and hafnium.

Russia, even as its involvement in the Ukraine crisis has alienated it from Western Europe, Canada and the United States, has been very active in cementing closer ties to the republics of Central Asia and China into something called the Eurasian Economic Union (EAU). Kyrgyzstan plans to enter the EAU by late 2014. Russia and Kazakhstan are already members. The EAU will pursue an ever more coordinated and common industrial and economic policy, which implies the adoption and enforcement of shared legal and regulatory systems.  Kyrgyzstan’s President Atambayev said that he expects the EAU to “more easily and quickly solve regional problems [while gaining] enormous geopolitical advantages.” Surely, the kind of geopolitical benefits Atambayev hopes to secure, implies equally important obligations, including those toward foreign owned companies operating in Kyrgyzstan’s crucial economic sectors. Centerra is clearly the most important of these and, by linking its arbitration claim to Centerra, Stans Energy has a higher probability of a successful outcome.

The Eurasian Union aims not only to strengthen economic ties between the members, but also to promote a future political integration and it represents an element of considerable significance in the international political scene. Moreover, the EAU will also bring Kyrgyzstan in the sphere of influence of the Shanghai Cooperation Organization (SCO), which was created in 2001 by Russia, China, Kazakhstan, Kyrgyzstan and Uzbekistan with the aim of ensuring regional security and fighting terrorism, separatism and extremism, defined the “three evil forces”. In the future, Iran, Pakistan and even India might join, even if these steps will be complex, given the dispute between India and Pakistan on their respective borders. The SCO plans to challenge to American leadership in a region where the superpower has seen ever diminishing influence. The organization orbits around China, as its name indicates, marking the consolidation of the alliance between Russia and China, with its geopolitical and geo-energy considerations (including a Russian gas pipeline to China).

The SCO is the Asian answer to Western encroachment in the region and it is predicated on the restoration of what was once known as the ‘Silk Road’, linking it directly with Western Europe through Russia.  The new Silk Road combines two powerful industrial centers in Chongqing in China with Duisburg in Germany, through Kazakhstan, Russia and Belarus, thus circumventing the more contentious areas south of the Caspian Sea as Afghanistan, Iran and Turkey. It could become the biggest ‘mall’ or ‘bazaar’ in the world, whose railroad cuts the time of shipping for five weeks only fifteen days. It might well lead to China becoming Germany’s largest trading partner, which implies a major geopolitical shift. This explains the energy agreement with Russia, which is the only way that China can ensure a safe supply. ‘The Economist’ considers the SCO as “a kind of NATO led by China.” This has also implications for the BRICS (Brazil, Russia, India, China and South Africa) economic bloc. Russian president Vladimir Putin has promised that he would lead BRICS to a new and closer level of alliance in 2015.  In 2015 Russia will have the rotating presidency of the two main emerging economy blocs: the SCO and the BRICS. It should be stressed that at present both structures are developing rapidly. SCO members have all backed the Russian position on the situation in Ukraine, endorsing the ceasefire agreement signed in Minsk and backing Putin’s peace plan.

Evidently, Stans has garnered some powerful allies and it could still play a very productive role within the emerging geopolitical and economic landscape.


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  • John Packer

    Alessandro Bruno’s post ” Stans Energy can use the new geopolitical order in its quest for justice ” is most enlightening and truly encouraging for Stans Energy’s investors.

    October 17, 2014 - 9:23 AM

  • David Mortimer

    Yes it is but we need to seize the shares from centerra as an assurance against corrupt members of the kyrg parliment who have brought these events about and stopped stans energy on the back of proven Chinese bribes also the kryg press have been spreading reports that stans energy got its license from the previous government through bribes which is rubbish because they bought the license in an auction the amount that they bought it for is irrelevant .

    October 18, 2014 - 9:19 AM

  • Edmund McCarty

    Interesting times ahead indeed. Once the arbitration award is at hand, which I believe will be sooner than most thinks, the SP will sky rocket back to its glory days. Of course, the backing of Russian announcements and joint ventures.

    October 21, 2014 - 9:23 AM

  • David Mortimer

    Yes it would be nice to seize the shares now there is a lot of negative noise coming from the kyryg authorities at the moment in the direction about us seizing Centerra shares we should act fast to seize them as a security against the kyrygs continued aggression towards us share holders.

    October 23, 2014 - 11:59 AM

  • Bill Keenes

    The Critical Investor – over on seeking alpha posted the following:-

    1. Just read: Stans just got Centerra shares blocked, nothing else, but 8 other parties are looking for settlements at the same time, for a longer period of time, some of them with bigger claims. It seems more and more far fetched to me that Stans comes in last for these foreign assets, and walks away with it first (actually second after Sistem). Just my 2 cents

    2. I have no reason to believe this well informed reporter is lying about the situation:

    3. I view all actions of Stans in this context, so I expect sooner or later Stans management to be set straight in one way or another. But for now, no direct relevance to the thesis.


    November 23, 2014 - 8:32 AM

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