Saturday, May 25, 2024
HomeU.SSeeking Access to Congo’s Metals, White House Aims to Ease Sanctions

Seeking Access to Congo’s Metals, White House Aims to Ease Sanctions


Three years after Biden administration officials tightened sanctions on a billionaire Israeli mining executive for corrupt business practices in the Democratic Republic of Congo, they have reversed themselves and are offering the executive a deal they hope will bolster the supply of a metal vital to electric vehicles.

The plan would allow the executive, Dan Gertler, to sell off his remaining stakes in three giant copper and cobalt mining operations in Congo.

Once Mr. Gertler sells his positions, the Biden administration hopes Western-leaning companies will be more willing to invest in Congo, perhaps delivering a greater supply of cobalt to the United States as automakers race to increase domestic production of batteries.

But certain State and Treasury Department officials strongly opposed the effort, saying that Mr. Gertler should not be allowed to profit from his deal-making, which the Biden administration earlier argued had cheated the citizens of Congo out of more than $1 billion in mining revenues.

The son of one of Israel’s biggest diamond dealers, Mr. Gertler started to invest in Congo nearly three decades ago. He eventually became one of the biggest holders of mining rights in the central African nation and the target of accusations that he had enriched himself at the expense of a population that is among the world’s poorest.

Mr. Gertler did not respond to a request for comment through his lawyer. However, Mr. Gertler has long disputed corruption allegations, arguing that his Congo investments were above board, providing the country billions in taxes and creating thousands of jobs.

Those in the Biden administration pushing for the settlement deal see it as a solution to a competitive disadvantage for the United States, one that could only grow as automotive manufacturers continue to expand their production of electric vehicles. And it is in keeping with the administration’s policy positions that embrace alternative energy solutions to fossil fuels.

But it also illustrates the compromises that world leaders often acquiesce to when efforts to hold individuals accountable for their actions collide with the political and economic interests of their countries.

As it now stands, Chinese-based mining companies own or have a major stake in most cobalt-producing sites in Congo, which produced 76 percent of the world’s supply of the metal last year. The last large American-owned mining company pulled out of Congo in 2020, just as the electric vehicle revolution was taking off.

Two senior Biden administration officials, who were not authorized to speak on the record, said they believed that Western firms would continue to avoid investing in the Congo mining sector as long as Mr. Gertler remained involved, given the continuing concerns about corruption in the industry there. The proposed deal, they said, would give a “clean slate” to Congo.

But human rights activists are openly challenging the plan.

“To ease sanctions now seems ludicrous, giving Gertler a free pass to profit from ill-gotten gains,” said Anneke Van Woudenberg, the executive director of RAID, a nonprofit that monitors mining transactions in Congo and other countries. “The deal leaves Gertler enriched, unscathed and unaccountable — with little regard for those who matter most: the people of the D.R.C.”

The proposed deal comes as the Biden administration is planning tariffs on an array of Chinese imports, including electric vehicles and advanced batteries, part of a recent wave of protectionist positioning by both Republicans and Democrats.

The State Department did not respond to a request for comment, but officials involved in the negotiations and on Capitol Hill confirmed to The New York Times that objections have been raised from inside the department.

For now, according to senior Biden administration officials, a “framework” has been presented to Mr. Gertler’s lawyers in the past week that would allow him to cash out of his stakes in Kamoto Copper Company and Mutanda Mining, both primarily owned by Switzerland-based Glencore, and Metalkol RTR, which is owned in part by the government of Kazakhstan.

Mr. Gertler no longer has a formal ownership in the Glencore mines; the company bought him out in 2017, but he is still paid royalties on copper and cobalt production at these facilities. Cumulatively, Mr. Gertler’s business entities now earn about $110 million a year in royalty payments from Congo, a Biden administration official estimated, even though he is under U.S. sanctions that prevent global banks from doing business with him and limit his ability to buy or sell business ventures.

These three mining operations alone produce nearly 30 percent of the world’s supply of cobalt, which is important in longer-range electric vehicles because it helps give the batteries the ability to hold more of a charge. They are also major global sources of copper, a metal increasingly in demand as the revolution in artificial intelligence is prompting the construction of new data centers filled with copper wiring.

As a condition to allowing the asset sales, Mr. Gertler would be required to release a detailed statement of any remaining holdings in Congo, which would then be examined by an independent auditor. While this review is underway, half of the proceeds of the asset sale would be held in escrow. Any remaining assets Mr. Gertler tries to hide could be seized by the government there.

Mr. Gertler also would have to withdraw lawsuits against human rights leaders in Congo who have been critical of his role in the mining industry there, such as Jean Claude Mputu, a spokesman for Congo Is Not for Sale, which opposes the deal.

Eventually, under the plan, Mr. Gertler could get a “general license” from the United States that would broadly reopen international financial markets to him worldwide. If he was accused of corruption violations again, the full sanctions could be reimposed, the officials said.

The Biden officials acknowledged that the deal was motivated by a desire to find ways to strengthen economic ties with Congo as well as aid the country, which has been plagued by a history of corrupt mine deals and child-labor abuses at makeshift mines.

The Biden administration already has committed to help finance the expansion of a rail network that will link Congo and neighboring Zambia to Angola, on the South Atlantic Ocean. The link could allow the massive mines in Congo and Zambia to more directly supply battery manufacturing plants in the United States or allied countries.

But so far, no major American mining company has publicly disclosed a plan to reinvest in Congo.

The deal with Mr. Gertler has been pushed most aggressively by Amos Hochstein, an adviser to President Biden on energy security issues. Mr. Hochstein has also been working closely with other nations to expand access by Western-leaning players to cobalt and copper mines in Africa.

“When we said we’d go to the moon, nobody knew ‘how do we get there?’” Mr. Hochstein said in January while in Saudi Arabia at a mining industry event that included discussions with mining industry representatives from Congo. “We just said we would. And we made it happen. So that is how we have to approach this energy transition.”

Two U.S. government officials involved in the negotiations objected to the role that Mr. Hochstein has played, suggesting that he has tried to force others in the foreign policy and human rights divisions of the government to bend to his will. But senior Biden administration officials noted that the White House always played a coordinating role in major sanctions cases.

Questions have also come from Capitol Hill. “The Biden administration has refused to be transparent about any framework for a deal on this issue or about who is guiding the policy,” Senator Jim Risch, Republican of Idaho, said in a statement to The Times. “The critical question is: What prevents Gertler definitively from just returning to Congo either now or in a future administration?”

Mr. Gertler’s dealings with Congo have been a source of tension with Washington for decades after he built close ties with a previous president, Laurent Kabila, and his son, Joseph Kabila, who became president after his father was killed.

Mr. Gertler was targeted with sanctions in December 2017 — during the first year of the Trump administration — as the Treasury Department claimed Congo had been cheated as a result of “opaque and corrupt mining and oil deals” involving the billionaire, which he secured at discounted prices because of his ties with the Kabila family.

Mr. Gertler almost immediately began to fight back. He hired a legal and lobbying team that at one point included both Alan Dershowitz, the former Harvard law professor, and Louis J. Freeh, the former F.B.I. director, with appeals reaching directly to Treasury Secretary Steven T. Mnuchin, among others in the Trump administration.

Shortly before Mr. Trump left office, the Treasury Department moved to ease the sanctions with no public notice, after Mr. Gertler through his lawyers and associates in Israel argued to American officials that there was some kind of “national security interest” served by allowing him to do global deals again.

By March 2021, the Biden administration reimposed the full sanctions, asserting that granting Mr. Gertler relief was “inconsistent with America’s strong foreign policy interests in combating corruption around the world.”

Mr. Gertler kept battling. This time, he enlisted Félix Tshisekedi, Congo’s president, who wrote a letter to Mr. Biden in 2022 urging the United States to revoke the sanctions.

“If sanctions are perceived by foreign investors as a dead end to the liquidation of their entities and the cessation of their activities, this anxiety will surely lead to the disappearance of foreign direct investment in Congo,” Mr. Tshisekedi wrote.

Last year, Mr. Gertler wrote a series of letters to human rights leaders in Congo, Europe and the United States telling them that the sanctions had been “crippling” and that he was ready to sell his remaining Congo assets to get the punishment lifted.

“The essence of the sanctions is not merely to punish,” he wrote in one letter. “It is equally envisaged that for the sanctions regime to work they should promote positive change.”

The human rights groups say they do not object to allowing Mr. Gertler to dispose of his remaining financial stakes in mines and other holdings in Congo. But they say he should be forced to simply forfeit them.

“There is extensive documentary evidence of Mr. Gertler’s corrupt activities in the D.R.C.,” said a statement issued by Congo Is Not for Sale, which was provided to the Biden administration to object to the proposed deal. The group demanded that Mr. Gertler receive “no further financial gains from illicitly acquired assets.”

But the Biden administration officials said this expectation was unrealistic: Mr. Gertler is already earning royalty payments and would not be willing to simply walk away from his investments.





Source link

RELATED ARTICLES

Most Popular

Recent Comments