International Financial Institutions Assistance to Support Extractive Industries

General Policies 

This Administration remains committed to the important goal of promoting transparency and accountability in and through the International Financial Institutions (IFIs) including with respect to multilateral development bank (MDB) engagement in extractive industries projects.^[1]  Treasury takes the position that government revenues derived from extractive industries should be reported accurately and transparently. 

Since 2005, Treasury has advised the managements of the IFIs that it is U.S. policy that assistance to a country for the extraction and export of natural resources should not be provided unless the country has in place or is taking the necessary steps to establish functioning systems for accountability and reporting.  In early 2008, Treasury advised the managements of the IFIs of the new legislative guidance relating to functioning systems actually being in place.  The new legislative guidance was part of legislation that went into effect on December 26, 2007 and provides that: 

"Section 684(c)   EXTRACTION OF NATURAL RESOURCES-

(1) The Secretary of the Treasury shall inform the managements of the international financial institutions and the public that it is the policy of the United States that any assistance by such institutions (including but not limited to any loan, credit, grant, or guarantee) for the extraction and export of oil, gas, coal, timber, or other natural resource should not be provided unless the government of the country has in place functioning systems for: (A) accurately accounting for payments for companies involved in the extraction and export of natural resources; (B) the independent auditing of accounts receiving such payments and the widespread public dissemination of the findings of such audits; and (C) verifying government receipts against company payments including widespread dissemination of such payment information, and disclosing such documents as Host Government Agreements, Concession Agreements, and bidding documents, allowing in any such dissemination or disclosure for the redaction of, or exceptions for, information that is commercially proprietary or that would create competitive disadvantage."

The operations described below, which occurred during the period for this report, October 1, 2006 to March 31, 2008, were thus subject to different sets of legislative guidance.

In addition to advancing a strong transparency and accountability policy, Treasury stresses the importance of resource revenue transparency in Board consideration of MDB projects, country and sector strategies, International Monetary Fund (IMF) Article IV consultations, Poverty Reduction Strategy Papers (PRSPs), and diagnostic studies, and in bilateral meetings with country counterparts.  Treasury has also secured strong commitments on extractive industries transparency in G-8 declarations.

Treasury promotes resource revenue transparency when considering proposed MDB policies such as the forthcoming Inter-American Development Bank (IDB) and Asian Development Bank (AsDB) energy policies, and when overseeing their implementation in individual hydrocarbon and mining sector operations.  In 2007, a U.S. Government team visited the Peru LNG hydrocarbon project, financed by the IDB and International Finance Corporation (IFC), to examine environmental issues and issues on management of the Government of Peru's revenues from the project.

We have also encouraged the IFIs to make fiscal transparency a central part of their analytical work, including through application of the updated IMF Guide on Resource Revenue Transparency; revised IMF Code and Manual of Good Practices on Fiscal Transparency; IMF Code of Good Practices on Transparency in Monetary and Financial Policies:  Declaration of Principles; World Bank Country Financial Accountability Assessments; and the joint Public Expenditure and Financial Accountability (PEFA) indicators.  The African Development Bank (AfDB) commissioned a briefing note on "Revenue and Tax Levels:  Mineral Taxation in Africa" that was presented to the Board in March 2008; one objective was to ensure transparency in the reporting of revenues.

Following strong U.S. leadership during negotiation of the fifteenth replenishment of the International Development Association (IDA) in 2007, the World Bank expressed a continued commitment to enhance transparency of revenue flows to governments from extractive industry projects.  IDA's financial assistance to a project with significant impact on revenues would continue to be predicated upon the recipient government having in place, or being in the process of establishing, a system for accounting for revenues and their use.  The government should also have in place, or be in the process of establishing, a system of independent auditing of such revenue receipts and the public dissemination of results.  IDA is monitoring the implementation of these systems and will take appropriate actions if they are not implemented.  Although these systems are especially relevant to extractive industry projects with significant revenue impacts, they are also applicable to all budget support operations, such as those set out in the World Bank's operational policy on Development Policy Lending.  We are actively working to establish these standards and policies at all of the MDBs.

Individual MDB Projects That Support Extractive Industries

1.  African Development Bank (AfDB)

Democratic Republic of Congo (DRC) – Tenke Fungurume Mining SARL (TFM); $100 million loan; October 3, 2007:  The AfDB approved this private sector loan to TFM for mining and processing copper and cobalt in the Katanga Province.  TFM is owned by U.S.-based Freeport-McMoRan Copper & Gold Inc., Canada-based Lundin Mining Corporation, and DRC-owned Gecamines.  OPIC and Canada's Export Development Canada are also lending to TFM.  The Bank's proposal contains several features which address the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resources, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The DRC subscribed to the Extractive Industries Transparency Initiative (EITI) principles in March 2005 and is currently implementing them.  Furthermore, as required in the legal agreements between the sponsor and the lenders, the project company must comply with all requirements of the EITI Principles and Criteria to the extent that these have been enacted into legislation in Congo.  All revenues to the Government from the project will be audited by an international auditing firm.  The United States abstained on the project consistent with legislative mandates on copper mining and environmental assessment disclosure requirements set out in the Pelosi Amendment, and consistent with Congressional guidance on extractive industry projects.

Madagascar – Ambatovy Nickel; $150 million loan; May 2, 2007:  The AfDB approved the private sector loan to Ambatovy Minerals Societe Anonyme (AMSA) and Dynatec Madagascar Societe Anonyme (DMSA) for the development of an open pit mine, an ore slurry preparation plant at the mine site, a 220 km pipeline to move the ore slurry to the coast, a pressure acid leach processing plant, a metals refinery, and all the necessary infrastructure.  The project will produce approximately 60,000 tons per annum (TPA) of London Metal exchange deliverable nickel, 5,300 TPA of cobalt, and 186,000 TPA of fertilizer-grade ammonium sulphate.  The estimated operating life of the project is 27 years.  The Bank's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  However, AfDB provided EITI implementation support to the government in 2007 – 08, and consequently, Madagascar's candidacy status was approved at the EITI Board meeting in February 2008.  The United States abstained on the project consistent with the legislative mandate on environmental assessment disclosure requirements set out in the Pelosi Amendment, and on policy grounds because there had been a sudden change of ownership which merited additional due diligence.

2.  Asian Development Bank (AsDB)

Indonesia – Technical Assistance for Preparing a Regional Road Development Project; $1.3 million Preparatory Technical Assistance Grant; Initial Project Scheduled for February 14, 2008, and Revised Project Approved May 28, 2008:  The AsDB proposed this preparatory technical assistance grant for approval in February 2008 to examine options to improve roads in Northern Kalimantan and Southern Java.  The United States expressed concern to the Bank and other shareholders that a proposed road bisected the Kayan Mentarang National Park and the Betung Kerihan National Park, and that, consequently, the proposed road would likely increase the extraction and export of illegal logging as well as increase wildlife poaching, degradation of natural forests, and forest fires.  The AsDB indicated that the government has in place functioning systems to track company payments but audits are not always made public, nor are the verification of government receipts with company payments disseminated.  In response to the strong concerns raised by the United States and other shareholders, the AsDB withdrew and revised the proposal.  The revised proposal did not contain the road component through these national parks, and therefore the United States supported the revised proposal for the preparatory technical assistance grant on May 28, 2008. 

3.  International Finance Corporation (IFC)

IFC's Social and Environmental Sustainability Policy promotes transparency of revenue payments from extractive industries projects to host governments.  Accordingly, IFC requires that: 1) for significant new extractive industries projects, clients publicly disclose their material project payments to the host government (such as royalties, taxes, and profit sharing) and the relevant terms of key agreements that are of public concern, such as host government agreements (HGAs) and intergovernmental agreements (IGAs); and 2) from January 1, 2007, clients of all IFC-financed extractive industry projects publicly disclose their material payments from those projects to the host government(s).  This policy applies to the following IFC projects: 

Brazil – QCOG Rigs; $50 million loan; June 25, 2007:  The IFC approved this investment in QCOG Rigs, a company awarded contracts by Petrobras, the Brazilian state-owned oil company, to build and operate two semi-submersible offshore drilling rigs.  The contracts are service contracts that include the purchase and ownership of the drilling rigs and local-currency service contracts to cover rig operations.  Since QCOG provides services to oilfield operators, this project does not provide natural resource revenues to the government.  As such, the IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The United States supported this services project in an extractive industry sector because the project will increase participation of domestic service companies in Brazil's oil and gas sector, domestic employment, and local skills development in the industry. 

Brazil – Schahin Rigs; $50 million loan; September 26, 2007:  The IFC approved this investment in Schahin Rigs, a company awarded contracts by Petrobras, the Brazilian state-owned oil company, to build and operate two semi-submersible offshore drilling rigs most likely to be used in the Bacia de Campos off-shore field.  The contracts are charter and service contracts that include the purchase and ownership of the drilling rigs and local-currency service contracts to cover rig operations.  Since Schahin Rigs provides services to oilfield operators, this project does not provide natural resource revenues to the government.  As such, the IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The United States supported this services project in an extractive industry sector because the project will increase participation of domestic service companies in Brazil's oil and gas sector, domestic employment, and local skills development in the industry. 

Democratic Republic of Congo (DRC) – Kalukundi Equity – August 29, 2007:  The IFC approved this equity investment of $15 million for an 11 percent stake in Africo Resources Ltd, a junior mining company focusing on cobalt and copper exploration activities in the Kolwezi District of Katanga Province in the south east of the Democratic Republic of Congo.  The project will finance Africo's on-going exploration and feasibility study work at Kalukundi.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  According to the IFC, despite the DRC's endorsement of EITI, EITI implementation in the Congolese mining sector is expected to be difficult.  Africo has indicated that it would commit to supporting the implementation of the initiative as well as to declaring on an annual basis all payments made to the DRC Government and Gecamines, the Congolese national mining company which owns 25 percent of the project.  Disclosure of all payments to the Government by the Company will also assist in efforts to ensure that 15 percent of the royalties are mobilized to the districts and provinces impacted by the project, further broadening the project's positive impacts.  Because Africo is listed on the Toronto Stock Exchange (TSE), there is a requirement to conduct all activities of the company in accordance with the transparency and disclosure rules of the TSE including disclosure of payments made by the project to third parties.  The United States supported the project because the development of the DRC's mining sector is vital to the country's economic recovery from the recent military conflict. 

Egypt – IPR Egypt – February 6, 2007:  The IFC approved this loan for up to $25 million to IPR Egypt (IPR), an oil and gas exploration company based in Dallas, Texas.  IPR is engaged primarily in two lines of business:  oil and gas exploration and production and oil services and consulting.  Its assets are located primarily in Egypt, and to a lesser extent in Pakistan, Syria, and the United States.  The loan proceeds were used to finance the on-going development, appraisal and exploration of four oil fields in the remote western desert of Egypt and to finance two fields in the Gulf of Suez.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  In coming to a view of whether to support this project, IFC considered the value of the project's benefits, governance, and risks.  It considered a range of indicators of governance, including but not limited to Transparency International's Corruption Perceptions Index and the World Bank Institute's Governance Indicators, as well as the current relationship between Egypt, the World Bank, and the IMF.  The Government of Egypt's share of revenues partly accrues to the Ministry of Petroleum and to the Ministry of Finance (income taxes).  The GOE manages these revenues for reinvestment in the oil and gas sector and provision of affordable petroleum products to the country's population.  IPR has agreed to publish its annual payments to the wholly-government owned Egyptian General Petroleum Corporation on their website.  The United States abstained on this investment because the project did not sufficiently promote economic development.

Oman – MB Holding Company; $100 million partial credit guarantee; January 23, 2007:  The IFC Board approved this partial credit guarantee for 50-65 percent of a bond issued by MB Holding Company LLC, a privately-owned Omani company with subsidiaries engaged in oilfield services, exploration and production of oil and gas, mining, trading and investments.  More than 50 percent of the bond proceeds are expected to be used to expand in countries such as Yemen and India the operations of the company's oilfield services subsidiary, MB Petroleum Services LLC's (MBPS.)  The remaining bond proceeds are expected to be used to improve MBPS' financial structure by refinancing its short-term debt and replacing it with long-term debt at the holding company level.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The United States abstained on this guarantee because of lack of additionality and development impact.  It should also be noted that none of the countries where MBPS is expected to expand its operations is a proponent of the EITI. 

Peru – Peru LNG; $300 million loan; February 5, 2008:  The IFC approved this loan to the Peru LNG project and its consortium of sponsors.  The consortium was led by Hunt Oil and included SKE (Korea's largest energy and chemical company); Repsol (a Spanish oil company); and Marubeni (a Japanese trading firm).  The project supported the transportation and export of natural gas originating in the Camisea fields through the existing and a new dedicated pipeline, liquefaction of the gas in facilities at Pampa Melchorita on the Peruvian coast, and off-loading to tankers under contract with Repsol.  Most of the LNG is expected to be used in Mexico; some may be used in the United States and some may be sent to South America and Asia.  The project is the first Peruvian LNG liquefaction facility and the largest foreign direct investment in Peru's history. 

The IFC and IDB both financed the Peru LNG project.  There were several issues associated with environmental and social risks of the project, including residual safeguard issues from the earlier Camisea project, governance capacity of the Government of Peru, and development outcomes.  In their project proposals for Peru LNG, the IFC and IDB did not explicitly consider the extent to which Peru has the transparency systems in place as described in section 684(c).  However, the IDB and the IFC both have been heavily involved in improving the transparency regime for extractive industries projects in Peru.  At the IFC's request, Peru LNG will disclose all payments made to the Government in the form of taxes, bonuses or otherwise.  Furthermore, a number of related contracts involving the Government of Peru (GoP) are disclosed and accessible to the public.  In parallel, IFC will help support the process of revenue distribution and use by increasing transparency and knowledge about these revenues through the development of an independent monitoring mechanism at the regional level in the provinces of Ayacucho and Huancavelica, the two poorest regions along the Peru LNG pipeline route.  This mechanism will be administered by civil society and will promote public disclosure and accountability related to the use of revenues accruing from the extractive industries sector.   

With respect to the World Bank Group's extractive industry-related commitments, under a grant agreement between the World Bank and the GoP, a pilot project to enhance revenue transparency will be started by the World Bank in the Cusco region.  The IFC and Peru LNG are also developing programs to assist municipalities in developing investment plans and engagement of civil society in monitoring such investments.  In addition, USAID established a partnership with IFC to strengthen local revenue management of payments from extractive industries in Peru.  Considering the project characteristics and IFC's additionality, the United States supported IFC financing of this project.  At the same time, the United States encouraged IFC Management to devote significant attention to post-Board monitoring and reporting to IFC's Board as well as to civil society.   

Russian Federation – Aricom PLC; $20 million equity investment; May 23, 2007:  The IFC Board approved this investment in Aricom PLC, a mining company.  Aricom PLC was spun off from the gold company, Peter Hambro Mining PLC, in 2003 to develop iron ore, ilmenite and titanium deposits in the Amurskaya and Evreyskaya Avtonomnaya Oblasts in Far East Russia.  The IFC investment supported the development of key iron ore properties in these areas.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  Aricom complies with International Standards on Auditing issued by the Auditing Practices Board and discloses its tax payments.  It also plans to disclose payments to the government on its website and has set up independent audit committees.  The U.S. abstained on this investment due to the lack of development impact.  In addition, this investment did not meet the environmental assessment disclosure requirements set out in the Pelosi Amendment. 

South Africa – Lonmin Platinum Group Metals Equity; $50 million equity investment and $100 million loan; December 19, 2006:  The IFC Board approved this investment in Lonmin Platinum Group Metals.  The project supported:  (i) the development, expansion, and mechanization of Lonmin's South African mines; (ii) financing planned transactions regarding broader and more equitable ownership of South African business through Black Economic Empowerment (BEE) participation in Lonmin development programs; and (iii) the development of a comprehensive technical assistance program to strengthen the social sustainability of the client and maximize the development impact of the project and IFC's investment.  Lonmin will export the platinum, according to the IFC.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  Lonmin in its annual "Sustainable Development Report" discloses all payments with regard to government taxes, salaries, social capital, directors' remuneration and shareholder distributions.  These disclosure practices are consistent with the objective of increasing transparency in the extractive industries sector.  However, the United States abstained on this investment because it did not meet the environmental disclosure requirements set out in the Pelosi Amendment.   

Southeastern/Central Asia – Lydian Resource Company; $2 million equity investment; June 28, 2007:  The IFC approved this equity investment for a 15 percent ownership interest in Lydian Resource Company, a mining company focused on finding and acquiring deposits in Eastern Europe and Central Asia.  Lydian holds licenses for three exploration projects in Kosovo.  As part of a 50-50 joint venture with Newmont, the second largest gold producer worldwide and Lydian's largest shareholder, Lydian shares ownership of a gold property in Turkey as well as an undrilled gold property in Armenia.  IFC's assessment of governance in Kosovo, Armenia, and Turkey is based on available internal and external indicators, including the World Bank Institute's governance indicators, the World Bank's Country Policy and Institutional Assessment ranking, and Transparency International's corruption index, as well as discussions with regional staff, regional economists and the Mining Policy Division.  Mine development, if realized, would generate benefits for the host countries through payments made to the governments in the form of royalties and corporate income taxes.  The IFC's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  Lydian is committed to disclose publicly all payments made to host governments.  The United States supported the project because of the company's activities in Armenia and Kosovo, two frontier economies where the mining sectors have been identified as key sectors for economic development.  

4.  Multilateral Investment Guarantee Agency (MIGA) 

Mozambique – Guarantee to Standard Corporate and Merchant Bank for a Loan Guarantee and a Loan to Republic Mozambique Pipeline Investment Company; November 9, 2006:  The MIGA board approved a modification to an initial guarantee approved in 2002 which increased its net exposure from $60.5 million to $90.4 million.  The Sasol Natural Gas project involved the phased extraction, processing, transportation, and utilization of natural gas reserves in the Pande and Temane field reservoirs in Mozambique.  It has also entailed the conversion of the Sasol Gas pipeline network and customers in South Africa, the conversion of the Sasolburg factory to process gas to its hydrocarbon feedstock, and the conversion of Sasol's Secunda factory to process gas as a supplemental feedstock.  The U.S. supported this project because it was the first cross border initiative in sub-Saharan Africa in developing regional natural gas markets.  The export of natural gas is expected to enhance regional trade and stability by further linking the economies of Mozambique and South Africa.  The project will contribute towards developing the Mozambican economy through monetizing its gas reserves.  The MIGA's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The Government of Mozambique (GoM) will receive significant royalty payments as well as dividends, production bonuses, and corporate taxes in excess of $2 billion over the 25-year lifetime of the project.  The GoM has committed to account for the revenue proceeds from the Project through a line item in its budget.  In addition, the use of the revenues will be reported in the budget execution reports which are monitored by the Bank and other donors. 

5.  Inter-American Development Bank (IDB) 

Brazil – Delba Vessel Project; $110 million "A" loan & $378 million "B" loan; October 17, 2007:  the IDB approved this loan to Delba Drilling Internacional Cooperatie, U.A.  This project is similar to the IFC projects in Brazil for Schahin Rigs and QCOG Rigs (projects described in IFC section above).  The project consists of the construction and the operation in offshore Brazil of a semi-submersible offshore mobile oil-drilling vessel.  Since Delba provides services to oilfield operators, this project does not provide natural resource revenues to the government.  As such, the IDB's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  The United States supported this services project in an extractive industries sector because large capital investments are required in this sector and the IDB will help address these investment needs with its loan and the private sector financing catalyzed via the B-loan.  Also, the Bank's prior engagement of providing technical cooperation to the Brazilian Government helped strengthen the government's environmental systems that will monitor and manage the impacts of this project and others in the Campos Basin. 

Peru – LNG Project; $400 million loan; December 19, 2007:  Project details are discussed in the IFC section above.  The IDB approved this loan to the project sponsors.  The project proposals for Peru LNG at the IFC and IDB did not explicitly consider the extent to which Peru has the transparency systems in place as described in section 684(c), the legislation that requires this Treasury report.  However, the IDB and the IFC both have been heavily involved in improving the transparency regime for extractive industries projects in Peru. The United States supported the IDB portion of the LNG project because the project sponsors committed to using industry best practices for the mitigation of environmental and social risks, the Peruvian Finance Ministry's efforts to simplify procedures for using gas royalties are enabling communities to benefit more directly and expeditiously from the hydrocarbon revenues, and the Peruvian Government signaled its willingness to address a number of concerns through a future policy based loan for a sustainable energy matrix.  The Peruvian Finance Ministry also committed to providing disaggregated data on the use of LNG project royalties that flow through the Camisea Fund. 

6.  European Bank for Reconstruction and Development (EBRD) 

In financing extractive industry projects, the EBRD aims to incorporate best practices with respect to transparency, revenue management, and lasting benefits for the local population.  The EBRD's energy operations policy states that "Natural resource projects need to be well managed to avoid the `resource curse' that has befallen many other resource-rich countries.  The EBRD will finance projects designed to yield a lasting benefit for the local population and adhere to best international transparency and revenue management standards.  Going forward, the Bank will require project sponsors to publicly disclose their material project payments to the host government as a minimum revenue transparency condition.  In countries where governments have signed up to the Extractive Industry Transparency Initiative (EITI), the Bank will continue to play an active role to support its implementation, requiring project sponsors to follow its applicable methodology principles and criteria." 

Kazakhstan – Bautino Atash Marine and Supply Base Project; $24.0 million senior loan, of which $12.0 million would be for the account of B lenders, and up to $10.0 million in equity split in two tranches; November 7, 2006:  An $8 million loan increase was approved on a no objection basis on May 2, 2007, to complete the financing, after negotiations broke down with a potential commercial bank lender.  The EBRD Board approved this investment in Balakshy, a limited liability company incorporated in Kazakhstan.  The project will involve the construction, equipment and placing into operation of the marine support and supply base of Bautino to be located in the Kazakh sector of the North Caspian Sea coast, near the village of Atash.  The project will respond to a wide range of off-shore oilfield operators' needs, such as fuel and water provision, support base infrastructure and services, and crew change facilities.  Since Balakshy merely provides services to oilfield operators, there are no natural resource revenues from this project.  The EBRD's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  Kazakhstan endorsed the Extractive Industries Transparency Initiative (EITI) in June 2005 and is taking steps to implement its principles.  For example, during April 2006, the World Bank, Government of Kazakhstan, and EITI National Stakeholders Council agreed on a procedure to select an audit firm to perform the collection and reconciliation of payments and revenues according to EITI criteria.  The United States supported the project due to its positive impact on the Kazakh economy and the positive influence it will have on Kazakhstan's transition to a market economy.   

Mongolia – MAK Project; $45 million loan in two tranches; November 6, 2007:  Mongolyn Alt Corporation (MAK) is a medium sized Mongolian mining company producing coal and gold.  Tranche 1 will enable MAK to: (a) introduce advanced mine management information systems, (b) restructure its balance sheet, and (c) expand operation at its Eldev mine, including the purchase of a unit for production of higher quality, cleaner coal.  Tranche 2 will enable the company to conduct the further development of the Naryn Sukhait coal mine.  Some of the coal will be exported to China.  The EBRD's proposal did not explicitly consider the extent to which the country has functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  This investment will introduce for the first time the requirement for a mining company to comply with EITI in Mongolia, which is one of the loan agreement covenants.  The United States supported this project because there is limited financing available for mining companies in Mongolia and because it would improve corporate governance and transparency.  

Regional – Imperial Mining; $30 million equity participation in two phases; January 8, 2008:  The investment would finance preparatory work for base metal and precious metal licenses in Russia and Mongolia. The proposed investment will enable Imperial Mining to conduct the full feasibility study for the Karakul cobalt and copper deposit in Russia (including a full environmental impact assessment), implement preparatory work for the development of Karakul cobalt-copper deposit in the Altai region of Russia and complete acquisition of nearby satellite deposits.  The cobalt and copper may be exported to Rotterdam in Europe and the Far East, and the company may pay taxes to Russia and Mongolia on such exports.  The EBRD's proposal did not explicitly consider the extent to which the countries have functioning systems for accurately accounting for payments to the government by companies involved in the extraction and export of the natural resource, independent auditing of accounts receiving such payments and widespread public dissemination of the findings of such audits, or the verification of government receipts against company payments.  However, the company committed to adopt the Equator Principles for assessing and managing social and environmental risk and implement Publish What You Pay/EITI principles, including publication on Imperial Mining's website of the payments made to the Russian and Mongolian authorities in relation to extractive operations (PWYP in Russia and EITI in Mongolia respectively) with text in Russian and Mongolian with an English translation.  The United States supported this project, in part, because of its contribution to improved corporate governance of a private, independent company in the Russian and Mongolian mining sectors and because we received assurances that, if early production activities are to be undertaken, they will be brought back to the Board for approval and an environmental and social impact assessment will be carried out as part of the feasibility study for the activities.  

State Department, Foreign Operations, and Related Programs Appropriations Act, 2008, found in the Consolidated Appropriations Act, 2008, Public Law 110-161 (December 26, 2007). 

Section 684(c) EXTRACTION OF NATURAL RESOURCES-

(1) The Secretary of the Treasury shall inform the managements of the international financial institutions and the public that it is the policy of the United States that any assistance by such institutions (including but not limited to any loan, credit, grant, or guarantee) for the extraction and export of oil, gas, coal, timber, or other natural resource should not be provided unless the government of the country has in place functioning systems for: (A) accurately accounting for payments for companies involved in the extraction and export of natural resources; (B) the independent auditing of accounts receiving such payments and the widespread public dissemination of the findings of such audits; and (C) verifying government receipts against company payments including widespread dissemination of such payment information, and disclosing such documents as Host Government Agreements, Concession Agreements, and bidding documents, allowing in any such dissemination or disclosure for the redaction of, or exceptions for, information that is commercially proprietary or that would create competitive disadvantage. 

(2) Not later than 180 days after the enactment of this Act, the Secretary of the Treasury shall submit a report to the Committees on Appropriations describing, for each international financial institution, the amount and type of assistance provided, by country, for the extraction and export of oil, gas, coal, timber, or other natural resources since September 30, 2006, and whether each institution considered, in its proposal for such assistance, the extent to which the country has functioning systems described in paragraph (c)(1).

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