Analysis & Opinion

PT Freeport deal: a background of struggle

Written by Chris Chancellor

Buried beneath troubled negotiations over the Grasberg mine, there is a background of struggle that has so far evaded the eyes of the world.

The Grasberg mine is one of the largest gold and copper deposits on the planet. Located on the Indonesian-controlled island of Papua, it is operated by an Indonesian subsidiary of US mining firm Freeport-McMoRan. This month, it seems that an extension of current permits has finally been agreed upon with the Indonesian government.

 

Despite its enormous resources, the Grasberg site is relatively unheard of internationally. This is no happy accident; international journalists have long been banned from the western half of the island of Papua, which is now composed of the Indonesian provinces of Papua and West Papua. Behind this media block lies a background of struggle intimately linked with the Grasberg mine and the region’s rich natural resource wealth.

A turbulent history

As part of the Netherlands New Guinea, West Papua (modern day Papua and West Papua) was being prepared for independence in the late 50s. It was set to become a state of its own, separate from the newly formed Indonesian nation. Yet this process was short-lived, with a convergence of powerful political interests in the early 60s conspiring to terminate West Papuan independence.

In short, Indonesia wanted the territory, which sat well with Australian and US interest in the region’s resources, as well as with the strategic geopolitical interests of the US during the Cold War. After Indonesia’s founding father, Sukarno, had initially attempted to annex the region by force, control of the territory was handed to the United Nations (UN) in 1962 as part of the New York agreement. A year later, control was transferred to Indonesia, on the condition that an ‘Act of Free Choice’ be held on whether to integrate with Indonesia or become an independent state. When it was finally held in 1969, Suharto had already risen to power in a US backed military coup. In what is now widely regarded to have been a fraudulent and doctored referendum, around one thousand carefully selected West Papuan leaders voted for integration. Many testimonies insist that votes were metaphorically cast at gunpoint, with the event locally referred to as the ‘Act of No Choice’. It is during this period that Freeport entered into negotiations with Suharto, with talks thought to have been held even prior to his rise to power.

Post-integration protests were brutally suppressed, with over 500,000 West Papuans estimated to have been killed and many more raped and tortured as part of a military crackdown on pro-independence activities across Papua. Regular reports of brutality and imprisonment of independence activists continue to this day.

It is within this wider context that the Grasberg mine sits.

 The national development veil

State justifications for the deal depict the mine as key for national development. Indeed, Freeport is one of the largest taxpayers in the country, and the new deal will see the state enjoying a greater share of the revenues. Yet this discourse holds little legitimacy with Papuans living in the vicinity of the mine, or indeed with wider Papuan society.

Firstly, the promises of the development rhetoric have not been delivered; locals have not seen the material benefits that might mute opposition and anti-mine mobilisation. By contrast, local Amungme and Kamoro tribes have been stripped of their lands and livelihoods, either directly due to development of the mine, or indirectly through pollution of soils and water systems. West Papua remains one of the poorest regions in Indonesia today and is fraught with poverty and political suppression. The Indonesian military, or regional factions of it, have retaliated against protests and acts of vandalism on the mine site with extreme and indiscriminate brutality.

More fundamentally, the mine has become a symbol of Indonesian imperialism for West Papuan activists who still demand to have a free and fair independence referendum held. The local injustices wraught by the mine are deeply intwined with wider aspirations of statehood. This makes the legitimacy of an extractive development regime run from Jakarta unattainable, even if it were to re-invest revenues with a view to achieving regional socio-economic benefits.

In addition, the inability to achieve local legitimacy points to deeper inherent problems with the national development justification, which underpins extractive projects across the globe. The mining of valuable natural resources is not only extractive literally, but also in terms of flows of wealth. Degradation is not only environmental, but in turn socio-economic and cultural. The focus on numbers rolling into state coffers veils the creation of poverty, malnutrition and social unrest, the prevention of which should surely be the end goal of state funds in the first place.

More of the same

Despite the severity and longevity of this conflict, it remains far removed from international scrutiny and thus an issue absent from the agendas of state and Freeport negotiators. Whilst some are hailing the new deal as a victory for resource sovereignty over foreign corporate power, this distinction holds little relevance in the eyes of the Papuans. Both entities extract the profits and carry them off elsewhere.

In this sense the Papuan struggle connects with the trajectory of recent anti-extractivist struggles across the globe. In Latin America for example, protests that once centred around securing national natural resource autonomy have shifted focus again in response to the siphoning off of profits by the state. The state itself has come to represent an illigitimate ‘foreign’ agent, guilty of draining indigenous territories for far-off gains.

The new deal brings the prospect of 20 additional years of gold and copper extraction under the banner of national economic development. But be it a foreign enterprise or a far-removed central government ministry in control, activities at Grasberg will continue to be fought by a people that have yet to yield in their quest for independence and autonomy from external powers.

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Indonesia agrees new Grasberg mine deal with PT Freeport

Written by Chris Chancellor

Permit extension until 2041 in the pipeline for one of largest gold and copper reserves in the world.

The Indonesian government seems to have settled negotiations with PT Freeport Indonesia over the extension of permits for exploitation of the Grasberg mine site, located in the province of Papua. The company, a subsidiary of US mining giants Freeport-McMoRan, have conducted mining operations in the area since the 1960s, when they negotiated a highly controversial deal with the dictatorial government led by President Suharto. The current deal was set to end in 2021, although it seems that an extension until 2041 has now been hammered out.

Negotiations had faltered at various stages, with contrasting information emerging from the various entities involved. At one point it appeared that an agreement was not likely at all, with Indonesia demanding that PT Freeport divest 51% of its shares to Indonesian state-owned enterprises (SOEs). However, the company has agreed to compromise due to the value it sees in underground mining operations on the site.

The willingness of corporate giants Freeport, based in Arizona, to compromise on the divestment regulation might be seen as a victory for Indonesian resource sovereignty and national development. Indeed SOEs will now enjoy a significantly larger slice of the pie. But to what extent will local peoples see the benefits?

 

The agreement comes after a lengthy dispute between the Indonesian state and the corporation over revised mining rules in the country. Amongst other new criterion, the new rules stipulate that mining companies must divest 51% of their shares to Indonesian SOEs. PT Freeport contested the new terms and demanded that the rights of their previous agreement be upheld.

The argument led to a 4 month hiatus in PT Freeport’s copper concentrate exports from the site. It is estimated that up to 10% of the work force was laid off during this period, prompting mass strikes by mine labourers and other employees.

However, the new deal, once made official, will essentially mean that two more 10 year extensions are granted. This will hand PT Freeport extraction and export rights until 2041, when it is thought the mine will be fully depleted. It is not known what will become of the the ongoing labour issue on site as a result of this agreement.