Sunday Review

New York Times

Thayer Scudder, the world’s leading authority on the impact of dams on poor people, has changed his mind about dams.

A frequent consultant on large dam projects, Mr. Scudder held out hope through most of his 58-year career that the poverty relief delivered by a properly constructed and managed dam would outweigh the social and environmental damage it caused. Now, at age 84, he has concluded that large dams not only aren’t worth their cost, but that many currently under construction “will have disastrous environmental and socio-economic consequences,” as he wrote in a recent email.

Mr. Scudder, an emeritus anthropology professor at the California Institute of Technology, describes his disillusionment with dams as gradual. He was a dam proponent when he began his first research project in 1956, documenting the impact of forced resettlement on 57,000 Tonga people in the Gwembe Valley of present-day Zambia and Zimbabwe. Construction of the Kariba Dam, which relied on what was then the largest loan in the World Bank’s history, required the Tonga to move from their ancestral homes along the Zambezi River to infertile land downstream. Mr. Scudder has been tracking their disintegration ever since.

Once cohesive and self-sufficient, the Tonga are troubled by intermittent hunger, rampant alcoholism and astronomical unemployment. Desperate for income, some have resorted to illegal drug cultivation and smuggling, elephant poaching, pimping and prostitution. Villagers still lack electricity.

Mr. Scudder’s most recent stint as a consultant, on the Nam Theun 2 Dam in Laos, delivered his final disappointment. He and two fellow advisers supported the project because it required the dam’s funders to carry out programs that would leave people displaced by the dam in better shape than before the project started. But the dam was finished in 2010, and the programs’ goals remain unmet. Meanwhile, the dam’s three owners are considering turning over all responsibilities to the Laotian government — “too soon,” Mr. Scudder said in an interview. “The government wants to build 60 dams over the next 20 or 30 years, and at the moment it doesn’t have the capacity to deal with environmental and social impacts for any single one of them.

“Nam Theun 2 confirmed my longstanding suspicion that the task of building a large dam is just too complex and too damaging to priceless natural resources,” he said. He now thinks his most significant accomplishment was not improving a dam, but stopping one: He led a 1992 study that helped prevent construction of a dam that would have harmed Botswana’s Okavango Delta, one of the world’s last great wetlands.

Part of what moved Mr. Scudder to go public with his revised assessment was the corroboration he found in a stunning Oxford University study published in March in Energy Policy. The study, by Atif Ansar, Bent Flyvbjerg, Alexander Budzier and Daniel Lunn, draws upon cost statistics for 245 large dams built between 1934 and 2007. Without even taking into account social and environmental impacts, which are almost invariably negative and frequently vast, the study finds that “the actual construction costs of large dams are too high to yield a positive return.”

The study’s authors — three management scholars and a statistician — say planners are systematically biased toward excessive optimism, which dam promoters exploit with deception or blatant corruption. The study finds that actual dam expenses on average were nearly double pre-building estimates, and several times greater than overruns of other kinds of infrastructure construction, including roads, railroads, bridges and tunnels. On average, dam construction took 8.6 years, 44 percent longer than predicted — so much time, the authors say, that large dams are “ineffective in resolving urgent energy crises.”

DAMS typically consume large chunks of developing countries’ financial resources, as dam planners underestimate the impact of inflation and currency depreciation. Many of the funds that support large dams arrive as loans to the host countries, and must eventually be paid off in hard currency. But most dam revenue comes from electricity sales in local currencies. When local currencies fall against the dollar, as often happens, the burden of those loans grows.

One reason this dynamic has been overlooked is that earlier studies evaluated dams’ economic performance by considering whether international lenders like the World Bank recovered their loans — and in most cases, they did. But the economic impact on host countries was often debilitating. Dam projects are so huge that beginning in the 1980s, dam overruns became major components of debt crises in Turkey, Brazil, Mexico and the former Yugoslavia. “For many countries, the national economy is so fragile that the debt from just one mega-dam can completely negatively affect the national economy,” Mr. Flyvbjerg, the study’s lead investigator, told me.

To underline its point, the study singles out the massive Diamer-Bhasha Dam, now under construction in Pakistan across the Indus River. It is projected to cost $12.7 billion (in 2008 dollars) and finish construction by 2021. But the study suggests that it won’t be completed until 2027, by which time it could cost $35 billion (again, in 2008 dollars) — a quarter of Pakistan’s gross domestic product that year.

Using the study’s criteria, most of the world’s planned mega-dams would be deemed cost-ineffective. That’s unquestionably true of the gargantuan Inga complex of eight dams intended to span the Congo River — its first two projects have produced huge cost overruns — and Brazil’s purported $14 billion Belo Monte Dam, which will replace a swath of Amazonian rain forest with the world’s third-largest hydroelectric dam.

Instead of building enormous, one-of-a-kind edifices like large dams, the study’s authors recommend “agile energy alternatives” like wind, solar and mini-hydropower facilities. “We’re stuck in a 1950s mode where everything was done in a very bespoke, manual way,” Mr. Ansar said over the phone. “We need things that are more easily standardized, things that fit inside a container and can be easily transported.”

All this runs directly contrary to the current international dam-building boom. Chinese, Brazilian and Indian construction companies are building hundreds of dams around the world, and the World Bank announced a year ago that it was reviving a moribund strategy to fund mega-dams. The biggest ones look so seductive, so dazzling, that it has taken us generations to notice: They’re brute-force, Industrial Age artifacts that rarely deliver what they promise.

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First published in Grapevine. Based on a 2010 article entitled “Í landi hinna klikkuðu karlmanna.” (“In the Land of the Mad Men”). Translated in part by Haukur S. Magnússon.

After the election, we see the old parties of economic mass destruction are coming back to power. Giving enormous promises of easy money to be wrestled from evil vulture funds, debt relief and tax reduction, The Progressive Party doubled in size after a few years of hardship. There is a jolly good feeling between the two young new leaders of a brave new Iceland, and when a radio host called them up and offered to play them a request, they asked for Duran Duran’s ‘Wild Boys.’ I Googled the lyrics, not quite remembering the lines, and got a nice chill down my back:

Wild boys fallen far from glory
Reckless and so hungered
On the razors edge you trail
Because there’s murder by the roadside
In a sore afraid new world

They tried to break us,
Looks like they’ll try again

Sounds quite grim. This, coupled with the new government’s announcement that it would be effectively dismantling the Ministry for the Environment and Natural Resources and that there will be no Minister for the Environment, gave me a strange flashback feeling. I decided to revisit the state of mind that we used to call normal in 2006. When the economic policy, the energy policy, the expansion of our towns, the mortgages on our homes—almost all aspects of our daily life had become totally mad. This is not my own diagnosis; if you search the homepage of the IMF for the phrase “Collective Madness,” you’ll find this:

“’Iceland, in the decade and a half leading up to the crisis, was an example of collective madness,’ said Willem Buiter, chief economist at Citigroup, a remark that elicited spontaneous applause from the more than 300 participants, many of them Icelandic policymakers, academics, and members of the public.”

In our daily lives, we usually sense what is normal and what is over the top. Sometimes the discourse will blind us; PR and propaganda can create a kind of newspeak. It can be a good exercise to try to talk about things in a foreign language, to view them in a new light. As an Icelander, you could for instance try to tell someone from another country that Iceland’s government sold one state bank and received payment in the form of a loan from another state bank—and vice versa. That the state banks were thereby handed to men that were closely connected to the then-reigning political parties. The manager of one of the parties became head of one of the banks’ board of directors, while the other party’s former Minister of Trade belonged to the group that was given the other bank. That man had access to every bit of inside information about the bank’s standing.

In the meantime, this former Minister of Trade became Central Bank Manager. He went to the US and made Alcoa an offer that the company could not refuse. He had thus set in motion the largest-scale construction project in Icelandic history, greatly increasing economic activity in Iceland—a grand boon for the bank he just finished selling to himself.

If you tell this story in a foreign language, people shake their heads. They gape in disbelief. They use words like “corruption” and “mafia.” They exclaim, full of disbelief and even disappointment, “no, not in Scandinavia!”

THE ACCEPTED INSANITY

It is insane to expand a banking system by tenfold in eight years. We know that now. It isn’t technically possible to grow all the knowledge and experience needed to build up and manage such a contraption in such a short time. Not even by shoving an entire generation through business school. It is impossible.

But the megalomania was not just confined to the banking sector. Energy production in Iceland was doubled from 2002–2007, when the huge Kárahnjúkar dam was built in the eastern part of the highlands—to serve one single Alcoa smelting plant. The energy it produces, about 650MW annually, is enough to power a city of one million people. Doubling the energy production in a developed country over a five-year period is not only unheard of, but it would also be considered ridiculous in all of our neighbouring nations. Most industrialised states increase their energy production by around 2–3% annually. Doubling it would be unthinkable. It has been proven again and again that gargantuan investments generally destroy more than they create.

In Iceland, however, the goal was to double the nation’s energy production AGAIN by building aluminium smelters in Helguvík, Húsavík and enlarging the Straumsvík smelter by more than threefold. The period of insanity was to be succeeded by a total and complete madness. This was to be funded by 4–5 billion dollar 100% loans to Icelandic energy companies from foreign banks. Nearly 20,000 dollars for every single Icelander—every loan directly connected to aluminium prices and secret energy prices. The media reported this as your everyday act of government job-creation. It was regarded extremist to ask critical questions. Many regarded it unthinkable for the survival of the nation NOT to do this.

Now we know that we did not only sacrifice our nature for the economy, we sacrificed nature and the economy. Again, we do not have to seek out the websites of activists or environmental groups for this information. We just go to the IMF reports:

“Executive Directors observed that the Icelandic economy is at a difficult turning point. The long economic expansion, initiated by aluminium sector investments, sustained by a boom in private consumption, and fuelled by ready access to external financing, contributed to a build-up of macroeconomic imbalances and financial vulnerabilities.”

COCAINE IN THE HOT WATER?

The madness made itself clear in the business of geothermal energy, making itself known in the form of financial troubles and enormous debt of the energy companies. The geothermal field had enjoyed an even and stable development since it got started in the early twentieth century. During the great depression, the City of Reykjavík created the world’s largest geothermal heating system by pumping hot ground water into the homes in the city. Later they started producing a small amount of electricity by harnessing steam through turbines. But one day it seemed as if someone drilled into a cocaine vein. Out of the twenty high temperature geothermal areas in Iceland, plans suddenly emerged to harness sixteen right away, all for the sake of the aluminium industry. The energy companies applied for permits to do research drilling in most of the remaining ones. In an instant, the field went from a very slow, conservative development to becoming a geothermal wild west.

In the south, a major development of all the geothermal areas from the Reykjanes Peninsula to Þingvellir was planned—a chain of power plants in pristine and delicate areas—to serve a Century Aluminium smelter in Helguvík. But the geothermal plants would not have sufficed—the remaining power would be squeezed from hydro electricity in the Þjórsá river—potentially threatening the greatest stock of North Atlantic Salmon in Iceland—and up in the highlands—threatening the Pink-footed Geese of Þjórsárver.

So what was referred to as “moderate development” when the parties of The Wild Boys were last in charge of our energy sector? Their plans went like this: A new Alcoa smelter in the east, a new Alcoa smelter in Húsavík, a new Rio Tinto Straumsvík smelter beside the old one, an expansion of the Century smelter in Hvalfjörður and a new Century smelter in Helguvík. Amounting to a total of 1.4 million tons of aluminium. Each one of them needing energy that could serve one million people in their daily lives. Each one of them demanding sacrifice of great natural wonders, wild rivers and pristine geothermal areas.

How did they fare? The Alcoa Smelter in the East has been built, with the destruction of two glacial rivers, Lagarfljót and 50 km2 of highland beauty. The expansion of the Rio Tinto smelter was stopped and the Húsavík smelter did not go through, however, a skeleton of the Helguvík smelter is currently rising—with no power in sight.

The Alcoa smelter in the north would have required all the harnessable power in the northern part of Iceland, only excluding Jökulsá á Fjöllum. Close to Mývatn, we have the Krafla geothermal area. After a long and often struggling forty-year development period, the available power from the area reached about 60 MW. Now, the goal was suddenly to quadruple the area’s energy production—expanding it by 150 MW in just a few years, and harnessing the beautiful Þeistareykir area to its utmost capacity—up to 200 MW. They also had their eyes set on Bjarnarflag and Gjástykki, delicate areas that should be regarded as national heritage sites. All this was to serve a new Alcoa factory they wanted to build close to Húsavík, the famous whale watching and fishing village in North Iceland. Having done all that, however, the energy production would still not reach the 600 MW that Alcoa really needed—the harnessing of two more glacial rivers would have been necessary: Skjálfandafljót with the waterfall Aldeyjarfoss and the glacial rivers running from Hofsjökull.

The interesting thing is not how crazy this seems in hindsight, how extreme, how mad this reality was — but that outsiders did not see this plan as collective madness. The scheme was praised in international media as being a progressive plan for “clean” energy, and we still have members of parliament that regret that this did not happen. And the fact that our labour unions and politicians have referred to this when they say that “nothing is happening” in terms of business and job creation in Iceland. Or that they refer to this when they say “we have still only harnessed X% of our energy.” They are talking about this as a normal feasible future state of Iceland.

Why are people so crazy? Is it or was it a good idea to indebt the nation by a total of 5 billion dollars to place two Alcoa smelting plants in the same constituency? To surround the Faxaflói bay, where 70% of Iceland’s population resides, with three smelters? The answer is simple: The mad men still think so. One of the new Independence Party MPs, Brynjar Níelsson, has no regrets for the death of the river Lagarfljót in service of Alcoa. He said it was apparent that protectionists loved a few fish more than they did people.

But you can still ask like a fool: Did Iceland really have enough accumulated knowledge and manpower to multiply all our energy companies in the space of ten years? Was there never a doubt in the geologist’s mind when he found himself in a magical place such as the Torfajökull area above Landmannalaugar, Kerlingarfjöll or the steam areas around Reykjavík? Did they really want to do drill, pipe and harness EVERYTHING, right away? And do it all for the sake of a single industry—the aluminium industry. Did it have to be the role of a marginalised group of a few activists to use their spare time to criticise this?

OF “REYKJAVÍK” KNOWLEDGE

I was once at a meeting in Húsavík, where I screened my film, ‘Dreamland.’ At that meeting, the local geothermal plant manager claimed he could easily harness 1,000 MW out of geothermal areas north of Mývatn. I asked if it wasn’t correct that scientists are concerned about overexploitation of the country’s geothermal areas. The scientists’ criticisms were quickly blown off the table as “Reykjavík knowledge,” and in that instant every alarm bell went off.

Now we understand that power is not as plenty as the hype promised, and now most Icelanders understand that energy production on the banks of Lake Mývatn in Bjarnarflag might just jeopardise the ecosystem in that wonderful lake. But you wonder if the people developing our most delicate areas possess good enough judgement to work close to natural wonders. It seems like they are ready to take the risk, to see what happens.

I found an interview with the aforementioned plant manager from 2002. At that time, he had drilled a big hole for 170 million ISK because a Russian company potentially wanted to build an aluminium oxide factory and a giant aluminium plant in Húsavík.

If one sets aside minor ethical facts, such as the Russian aluminium industry being run by the mafia at that time, one is still left to ponder the fact that almost no industry in the world produces as much and as toxic waste as aluminium oxide production (or alumina, as it is called). Those that followed the horrible events when a red slush toxic lake in Hungary broke should know what comes with an alumina refinery. But this local hard-working man had spent more than one and a half million dollars looking into the feasibility of such a plant in Húsavík. Things have been so good here that people think they are untouchable.

Even though the companies engage in malevolent practices in other countries, they would never do that here. Sure.

THE HOLY LOCAL

It seems that for some reason the most unbelievable hogwash gets promulgated without any critical thought. We enter a boom after boom and never learn from mistakes. We can look further back in history to see how madness is mixed up with ambition, how extreme and unrealistic views of the future are presented and taken seriously.

In an edition of Morgunblaðið from March 1987, one can read a prediction of the impending evolution of local fur farming until 1996. At that time, thirty fur farms were operated in Iceland. Morgunblaðið cites a report that predicts Iceland will foster 600 mink farms by 1996. They assume a twenty-fold growth in ten years, as if nothing were more natural. A month later, this optimistic story ran: “The mink stock will double this year.” Only three years later, in April of 1990, we find this dramatic headline in a copy of Morgunblaðið: “Fur farming: The industry is on its last legs. Many farmers on the edge of despair.”

In this country everything is considered normal if a “local” wants it. Nothing in Iceland is as crazy as the holy local is when he wants a smelter or an oil refinery, no matter how large or out of proportion. He has the sacred right to that, especially if he uses “job creation” as an argument. Numbers that would be considered sizeable in large nation’s economic statistics, energy resources and infrastructure that are earmarked by the world’s superpowers as being “strategically important” are subject to “the will of the locals.” The nation’s energy resources and nature are in the hands of a smattering of district councils that have no staff and no expertise while the majority of Icelanders that reside in the capital area seem by default “local” to nowhere.

So, the locals of the east destroyed their highlands, the locals of the south want to dam the wonders of the Skaftá area, the lower part of the Þjórsá river and the locals of the southwest are ready to harness almost every single geothermal area. And this seems to be a global problem—rural communities losing their youth and talents to the cities of the world are willing to sell off their forests, their mountains, their rivers and valleys for some hope of development and a future.

It is strange to see that one of the major driving forces behind this development resides within our labour leaders, who have been demanding extreme leverage and risk on behalf of public energy companies. If there should be a hesitation in the risk taking, the responsible parties are “dragging their feet.” The labour unions’ “stability agreement” with the former government entails that “every obstacle be removed” that somehow hinders the proposed Helguvík aluminium plant. It is exactly this kind of thinking that lead to almost 200 foreign workers being left disabled and unemployable as a result of working on building the Kárahnjúkar dam. Conditions of workers were severely compromised to make the dam construction process cheap enough. Every obstacle was removed to provide Alcoa with energy prices that save them 200 million USD annually. That amounts to the combined yearly wages of more than 10,000 teachers.

The noble cause of creating jobs becomes quite grim if it involves harming the work capacity of so many. The PR people talk about a ‘multiplication effect’ of every job in a smelter—but wouldn’t it be polite to subtract the disabled workers? People will go so far to satisfy their prince charming that they behave like the ugly stepsister in the fairy tale, cutting their toes off to fit the glass shoe.

HOUSE OF CARDS

The Helguvík aluminium smelter close to Keflavík Airport is a symbol of how poorly run Iceland can be; the Helguvík aluminium smelter is already being built, even though nobody knows where we can scramble together its required 600 MW of energy. The Helguvík smelter is a symbol of how weak the nation’s administration can be, of how shattered professionalism and long-term thinking can become, and how the media all but encourages unlawful activities in their headlines, if job creation is at stake. They started to build the smelter without access to power sources, and without the necessary power lines planned or agreed upon by landowners.

Why start building, then? Because in 2006, the Wild Boys were in power, showing their ambition and “competence” by signing long term sales agreements for cheap energy before the energy sites had been researched, planned or developed. Now Reykjavík Energy and HS Orka are bound by agreements that neither company wants to fulfil due to foreseeable losses from selling the energy below its production costs.

The sharks were very aware that they were taking advantage of a country with mad politicians in a rare period in our history. When they were willing to sell almost everything, anything, anywhere to anyone. In a remarkable investor report called: “Harnessing unlimited power and profit from the world’s most progressive energy program,” an analyst made this great comment:

“It works out great for Iceland, too. It is very cheap for Iceland to deliver power to Century. The Icelandic power companies will make extraordinary profits on that power if aluminium prices stay strong. And if aluminium prices weaken, Iceland is not biting the hand that feeds it.”

This is how politicians build an elaborate house of cards that combine risk, debt and commitment that collapses if only one of the cards falls. Thus, the hands of future city governments have been tied and an insane construction binge in important areas has been commenced, all to benefit one company that’s lacking most of the needed permits.

Could anyone recount the details of the Century Aluminium Helguvík Smelter project at an international conference without being booed off the stage as a fraud? At an aluminium conference, however, such a man would actually bring more lust than an exotic dancer.

Despite being in the hands of extreme capitalists, the labour movement has not called for professionalism or long-term thinking in energy affairs. It simply demands that “every obstacle be removed.” Get the trucks rolling immediately.

In 2006 we were in the middle of a revolution, but the Wild Boys did not call themselves “The Aluminium Revolutionary Front”—they defined themselves as the norm, even though their scale was insane. If they were criticised, they started thinking of themselves as persecuted. Warlords are always persecuted moderates when they’re merely conquering neighbouring nations in the name of peace.

THE CORE OF THE PROBLEM

Throughout the years, polls have shown that a large part of Icelandic males aged 40–70 have been in favour of the collective insanity seen in the energy policy of 2006. The biggest problem seems to be with male voters of The Independence Party, where a vast majority has even considered the most extreme energy policy as the sole basis for the continued survival of Icelanders. That explains the great emotional attachment they have to dams and smelters. To secure their survival, the majority of them wants to cut back on our environmental regulations, and they have no standards whatsoever on the ethical background of the corporations coming to Iceland.

Therein lies Iceland’s most serious political ill. If everything were normal, our males would be conservative, moderate, aversive to risk, frugal, orderly and even a bit boring. This is an important group of people in every society. It contains a lot of average household fathers; it contains pillars of society, company directors, influentials, MPs and even journalists and editors. These are men that have the power to define what is normal and what is abnormal and/or excessive.

OF RESPONSIBLE PUNKS AND SURREALISTS

It is harmful for communities when a critical mass of their important males starts adhering to revolutionary and completely reckless ideas, adopting a blind belief in them. This group is not fit for governing anything while the situation lasts, and it is therefore no coincidence that the city of Reykjavík is now governed by the punkers and surrealists of the Best Party. A moderate mixture of surrealism and punk rock is a down to Earth, conservative and responsible policy when compared to the delusions and anarchy of the crazed men. They have proved very moderate and responsible, and have now moved the policy of Reykjavík Energy, Reykjavík’s energy company, into a more sustainable and modest direction. And the Left Green Social Democrat government did the same with Landsvirkjun, the national energy company.

Those that are worst off in this group of mad men share a mutual admiration for Einar Benediktsson (1863-1945). The Icelandic National Myth is perhaps best embodied in the figure Einar Ben, our poet of progress. His most recent biography gives a good picture of the kind of man he was and the impulses that motivated his actions:

What drives Einar Benediktsson on to undertake this long journey […] is his unshakeable belief in his own abilities to be of use to his impoverished fatherland in countries abroad. His dream is to furnish the money that will transform Iceland into a modern country, with towns, factories, railways, roads, harbours and large-scale farms. He carries nothing with him except his belief in himself…

Einar Benediktsson had great dreams for the future of Iceland, replete with hydroelectric dams, factories and railways. While his generation on both sides of the Atlantic saw their dreams become a reality, and sometimes a nightmare, Einar was to be disappointed in all his great hopes and ambitions. Henry Ford was born a year before Einar Benediktsson, and Sam Eyde, the founder of Norway’s Norsk Hydro was born three years after him. But Iceland failed to industrialize in the way Einar envisaged. Whether Iceland was fortunate or unfortunate to have missed out on the Industrial Revolution is something we can argue over. But the failure of Einar’s dreams left an unfilled space in the Icelandic soul. Iceland’s wealth came from fishing, but Einar’s ideas still hovered in the air, leaving a sense of a task left unfulfilled—the unfinished Icelandic dream. The Americans could move on from Ford to Gates. The Icelanders were still lacking a Ford.

One of the first bubbles in Iceland happened when businesspeople travelled the country buying rights to harness waterfalls in the beginning of the 20th century. Einar Ben had the Norwegian engineer Sætersemoen draw up a row of power plants spanning the entirety of Þjórsá. The drawings of the proposed power plants look magnificent and enticing and would without doubt be considered among Iceland’s most beautiful buildings had they been constructed. But how realistic were the plans? They had planned for harnessing Þjórsá to produce 600–800 MW—in 1918, nota bene. This does not include the rest of the water rights these men had secured for themselves, including Dettifoss and Gullfoss. In comparison one could note that today, one hundred years later, the City of Reykjavík uses 200 MW—on Christmas Eve, with every electric appliance running at full steam.

What did Einar plan on doing with all this energy in 1918? Aluminium production was barely on the horizon as a feasible industry, and televisions and freezers were but distant dreams. What were they planning to do with all the power? Produce fertiliser? The Gufunes fertiliser plant used around 20 MW when it was running at its peak. Who was to use all the energy and pay for the series of power plants? The answer is likely simple: No one. No one in the world could have found use for this energy.

Of course Einar could easily have harnessed a small stream to light up a small village, maybe even a cowshed or two. But there is no glory in that. The act would not appease the deranged men’s need for conquest and magnitude. There’s much more spunk, gusto and vigour in lining all of Þjórsá with power plants, even if the energy produced is way beyond what the nation can use one hundred years later. To this day, a lot of people think that Iceland’s government at that time was backwards, afraid of foreigners and somehow prevented the founding of a great and profitable company and “foreign investment.” But it’s enough to look at the numbers to see that the whole thing was a sham.

It’s so weird to think that, ever since, a certain group of Icelandic males have harboured a strange sort of national grief. It’s as if Einar’s unrealistic ideas have been haunting later generations of Icelanders. Not as fantasy, but as real, attainable goals or lost opportunities: “The dreams of our turn of the century poets have finally come true.” Remarked former PM Geir Haarde as he signed a deal with Alcoa in 2002. Yes, finally, the nation was dragged into a century old illusion.

THE MAD MEN VS. THE WISE GIRLS

The mob seems tolerate nothing worse than young, educated women who that use words like “professional” or “process.” Even if aluminium production in Iceland has been tripled over the last ten years, a lot of the crazy guys think that Iceland’s economic problems stem first and foremost from a lack of aluminium smelters.

Supporters of a new Century Aluminium smelter in Helguvík spent millions in advertisements campaigning against departing Minister for the Environment Svandís Svavarsdóttir, who delayed the building process with demands of a sober overview of the energy demand and environmental impact. The blogosphere went wild when Left-Green MP Kolbrún Halldórsdóttir spoke up against deep-sea oil drilling in Icelandic waters. One sensed a lynch mob in the making as former-Minister for the Environment Þórunn Sveinbjarnardóttir met with locals in Húsavík advocating for a full environmental impact assessment for a new Alcoa smelter—the audience was only lacking the pitchforks. The decline of The Independence Party is very evident in the fact that Katrín Fjeldsted lost her seat in parliament. She is a well-educated, intelligent and logical doctor and the only party MP who questioned the insanity. Every obstacle shall be pushed out of the way.

Icelanders harvest 1% of the world’s fish. We receive more tourists per capita than most nations. Iceland has harnessed five times the amount of energy that the nation needs to function, and we currently operate three aluminium smelters. But we have ALREADY harnessed five times more energy than our neighbouring countries. We are already an energy superpower—if everything were normal, such an investment should yield a fair bit of profit to the nation, if we don’t blow the proceeds and resources in another round of debt. But the discourse is so crazy. People act as if “NOTHING IS PERMITTED” when the energy production is already five times more than the nation can consume. Of the energy we produce, 90% already goes to smelters.

We already have everything a modern society needs. We just need to tend to what we have already built, to reap some profit from the power plants we have already constructed and take better care of what we’re currently fishing. People get insecure when interest groups moan: “Who will support us in the future?!?” as if Iceland is a country without foundations. The fear that is purposely spread is resulting in Iceland acting like a man that demands radiotherapy, chemotherapy and surgery to fix his headache. The truth is that the treatment will never cure him—but it might kill him. He will in the best-case scenario grow addicted to the drugs.

THEY TRIED TO BREAK US…

We are a small community and we need peace and room to work. That Björk should need to take time off work to fight the insanity is just a small example of the disturbance that thousands of Icelanders suffer every day because of this crazy nonsense. Living here will become unbearable if something like the reckless policy from 2006 goes full speed again. It is maddening that we cannot seem to leave our most beautiful areas alone. We are a small community where co-dependency is the norm and people are polite.

The new leaders are young and nice guys; Sigmundur Davíð loves old buildings and has good ideas for city planning. But behind them is a crowd of mad men, “fallen far from glory, reckless and so hungered.” Were four years from power enough to sober up the mentality in terms of the energy policy? What will come out of the “rethinking” of the Energy Master Plan? Will we be strapped up into another rollercoaster, just to take another ride of boom and bust? “They tried to break us. Will they try again?”

But who are the faces behind Alcoa? From big pharmaceutical chiefs, to Bilderberg attendees, Iraq profiteers and a Mexican president, Alcoa’s board remains one of the most influential and shadowy of the mining and metals companies. Use the links to Powerbase’s profiles in this article to find out more.

Current Alcoa CEO Klaus Kleinfeld has been an Alcoa board member since 2003. He is also a director of Bayer, the pharmaceuticals and chemical company which grew out of the Nazi company IG Farben, responsible for the medical experiments at Auschwitz. Bayer is now famous for it’s GM and crop science business and was named one of 10 Worst Companies of the Year by Multinational Monitor in 2001. Kleinfeld is associated with all three of the most influential and private ‘global planning groups’. He attended the Bilderberg conference in 2008 and is a member of the Trilateral Commission and Director of the International Business Council of the World Economic Forum. He is also a Director of the Brookings Institution, one of the USA’s biggest think tanks, and the third most cited in Congress.

Kleinfeld was CEO of Siemens from 2005 to 2007 after spending 20 years with the company. He resigned amid a corruption scandal which saw the US Department of Justice investigating the company for charges of using slush funds of €426m (£291m) to obtain foreign contracts, and funding a trade union to counter existing Union action against them. Kleinfeld resigned just hours before the news broke to the media. In 2009, after a lengthy investigation, Kleinfeld and four other executives were forced to pay large compensation sums. Kleinfeld allegedly paid $2 million of the $18 million total collected from the five, though he still denied wrongdoing. Kleinfeld is also on the boards of the finance giant Citigroup and the U.S Chamber of Commerce.

Former Mexican President Ernesto Zedillo has been on Alcoa’s board since 2002, and chairs the Public Issues Committee. Zedillo is a prominent economist and another member of the big three elite think-tanks sitting on the World Economic Forum and the Trilateral Commission with Kleinfeld, and attending the Bilderberg conference in 1999. Like Kleinfeld he is also a director of Citigroup. Zedillo also sits of the International Advisory Board of the Council on Foreign Relations, an American foreign policy think tank based in New York City who carry out closed debates and discussions and publish the journal Foreign Affairs. CFR played a significant part in encouraging the war on Iraq, and helped plan it’s economic and political aims alongside the US Government, particularly how to gain oil contracts after the war. He directs the Club de Madrid, a right-wing/neoliberal focused group of former government officials, think tankers and journalists involved in pushing reactionary policies to terrorism (referring to the Madrid bombings).

Mr. Zedillo was Mexican president from 1994-2000. He was appointed by Secretary General Kofi Annan to be the United Nations Special Envoy for the 2005 World Summit, and chaired the World Bank’s High Level Commission on Modernization of World Bank Group Governance in 2008. He is a director of JPMorgan-Chase, Proctor and Gamble, BP, Rolls Royce and an advisor to the Bill & Melinda Gates Foundation. He directs the Center for the Study of Globalization at Yale University, which puts out influential reports and papers edited by him.

A fellow member of the Council on Foreign Relations is Alcoa board member E.Stanley O’Neal. O’Neal is a Harvard graduate and investment banker who served as CEO of Merrill Lynch from 2002 to 2007 and is a director of the New York Stock Exchange (now NYSE Euronext), the Nasdaq Stock Market and BlackRock – a key investor in the mining and metals industry. According to Forbes he was awarded $22.41 million in 2006. Mr O’Neal is also a trustee of another shady organisation, the Center for Strategic and International Studies, a private group led by John J. Hamre, former deputy secretary of defence which ‘provides world leaders with strategic insights on — and policy solutions to — current and emerging global issues’. CSIS provided propaganda materials used by the CIA to destabilise the Government of Chile in the run up to the 1973 coup.

A third Council on Foreign Relations member sits on Alcoa’s board. James W. Owens is Chairman of the Business Council of the CFR, CEO and Executive Chairman of Caterpillar from 2004 to 2010 and Alcoa board member since 2005. Caterpillar are famous for their tendency to profit from war-induced contracts including in Israel and Iraq, just the sort of thing that the Council on Foreign Relations are interested in. Owens is also a director of the International Business Machines Corporation and Morgan Stanley and a senior advisor to Kohlberg Kravis Roberts & Co, a global asset manager working in private equity and fixed income.

Indian mega magnate Ratan Tata has been a director of Alcoa since 2007 and is currently a member of the International Committee and Public Issues Committee. He chairs Tata Sons, holding company for the Tata Group, the family business which is one of India’s largest business conglomerates including telecoms, transport, tea and now one of the biggest steel companies in the world after they bought Corus outright in 2007. As well as his directorships of most of the Tata companies, he is also a a former director of the Reserve Bank of India, and advisor to NYSE Euronext (the New York Stock Exchange), and JP Morgan – one of the largest shareholders of the London Metal Exchange who set metal prices worldwide and enable banks to stockpile and futures trade aluminium. Mr Tata is also trustee of Cornell, Southern California, Ohio State, and Warwick Universities, a director of the Ford Foundation and a member of the UK Prime Minister’s Business Council for Britain.

A fellow member of the Ford Foundation, and Saving Iceland favourite most-wanted, is Kathryn Fuller. Ms Fuller chaired the Ford Foundation from 2004 to 2010 and has been a trustee since 1994. However she is most famed for her contradictory positions as World Wildlife Fund (WWF) Chief Executive (1989-2005) and Alcoa board member (since 2001). Newspaper Independent on Sunday claimed she joined Alcoa in exchange for a $1m donation to WWF US and allowed Alcoa to join WWF’s exclusive “Corporate Club”, a claim Fuller has found hard to refute. Despite publicly opposing the highly controversial Fjarðaál smelter project, Fuller abstained rather than voting against the project in Alcoa’s boardroom. Elsewhere she has claimed that Alcoa holds “a strong commitment to sustainability, including energy efficiency, recycling, and habitat protection.”

Compared to these heavyweights Alcoa’s other current board members may look like small fry, but they still command an impressive and worrying influence across a number of boards.

Sir Martin Sorrell is founder and chief executive officer of the £7.5 billion communications and advertising company WPP. He has been a NASDAQ director since 2001 and was appointed an Ambassador for British Business by the Foreign and Commonwealth Office. Before founding WPP, Martin Sorrell led the international expansion of famed UK advertising agency Saatchi and Saatchi. He calls himself ‘a money man’ saying: “I like counting beans very much indeed”.

Arthur D. Collins, Jr. is a big pharmaceuticals boss. He is retired Chairman and Chief Executive Officer of Medtronic Inc. who he had been with between 1992 and 2008, and previously Corporate Vice President of Abbott Laboratories from 1989 to 1992. He also sits on the boards of arms manufacturers – Boeing, and bio-tech giant Cargill.

Michael G. Morris has been Chairman, President and Chief Executive Officer of all major subsidiaries of American Electric Power since January 2004 having been a company executive since 2003. He is also a Director of the USA’s Nuclear Power Operations and the Business Roundtable (chairing the Business Roundtable’s Energy Task Force) as well as the Hartford Financial Services Group. He was listed 158th on the Forbes Executive Pay list in 2011 and received a total $9 million in 2010.

Finally, Patricia F. Russo, is a Director of asset management group KKR & Co, General Motors, Hewlett Packard and drug manufacturers Merck & Co, who’s arthritis treatment Vioxx induced heart attacks and sudden cardiac deaths in 27,000 people between 1999 and 2004. Merck were exposed for trying to bury negative evidence and distort drug trials to hide the known cardiovascular effects of Vioxx. Litigation following the scandal is ongoing and will be part of the business of Ms Russo.

Coming back to Iceland there is another former director of note. Norwegian national Bernt Reitan was Alcoa Executive Vice President from 2004 to 2010 and a director of iron alloy and silicon company Elkem from 1988 to 2000, putting him in the centre of the development of Iceland’s Hvalfjörður Elkem plant, and the Fjarðaál aluminium smelter. Elkem subsidiary Elkem Aluminium was sold to Alcoa in 2009. Reitan broke the ground at the massive Fjarðaál smelter in Reyðarfjörður in 2004 alongside Valgerður Sverrisdóttir, then Minister of Industry, and Guðmundur Bjarnason, Mayor of Fjarðabyggð. In view of his influential position in Iceland Reitan sits on the Icelandic-American Chamber of Commerce which was formed by the Iceland Foreign Trade Service in New York and promotes trade between Iceland and the USA.

Mr Reitan is also a Director of the International Primary Aluminium Institute and a former board member of the European Aluminium Association as well as Royal Caribbean Cruises Ltd, Yara Internation ASA and Renewable Energy Corporation ASA.

The combined power of these Alcoa Directors reaches deep into the political and corporate structures of the USA and Europe. In this light it is a mean feat for Alcoa to be ejected from Húsavík, but we can be assured that Alcoa’s aluminium claws are still dug in deep in Iceland – a small country with such cheap and abundant hydro power. 

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For more information on Powerbase’s mining and metals research please visit the Mining and Metals portal and peruse the aluminium industry profiles.

See other key figures in Iceland’s heavy industrialisation at our Hall of Shame.

Notes and References:

[1] The terms “greenfield” and “brownfield” are used by the aluminium industry, and though the former might give an image  of a “green” and less environmentally damaging construction than the latter, the meaning is in fact the absolute opposite. Samarendra Das and Felix Padel explain the difference: “While a brownfield project renovates or adds to an existing plant […] “greenfield” has a more attractive ring to it, but what it means is turning an area of green fields and forest brown as the area is cleared and polluted…” See: Samarendra Das and Felix Padel. 2010. Out Of This Earth – East India Adivasis and the Aluminium Cartel. Orient Black Swan. India. p. 336.
[2] Esmarie Swanepoel, 11 Jan 2011 ‘Alcoa Posts $21bn revenue in 2010′. Mining Weekly. Accessed 22/02/2012.
[3] Icelandic-American Chamber of Commerce, Statistics. Accessed 22/02/2012.

See also:

From Siberia to Iceland: Century Aluminum, Glencore and the Incestuous World of Mining – A special report for Saving Iceland by Dónal O’Driscoll, about the people and crimes behind Glencore International and Century Aluminum, which runs the Hvalfjörður smelter mentioned in the article above and fantasize about operating another one in Helguvík.

Click here to read Saving Iceland’s dossier on Glencore, Century and the incestuous world of mining.

Treated as the Master Plan’s trash can, the unique geothermal areas on the Reykjanes peninsula get a particularly harsh deal. Out of the peninsula’s nineteen energy potential areas, only three are listed for protection while seven are set for exploitation in addition to the four that have already been harnessed. Five additional areas are kept pending, more likely than not to be set for exploitation later. Existing plans for energy production outline how the peninsula is set to be turned into a single and continuous industrial zone, and the power companies seem to be simply waiting for a further green light to exploit the area. All this in order to further feed the aluminium industry.

In this overview we take a look at nine of these nineteen areas — those from the west of Gráuhnúkar — of which only one is to be protected according to the Master Plan. We look at the plans on the drawing board, their current status, the key companies involved, the already existing power plants, the threatened areas, and at last but not least: possible targets for direct action. On the map below, these areas are marked from number one to nine. Obviously the map only shows the areas at stake and the reader has to use her or his imagination to fill in power lines and the rest of the necessary infrastructure. Most of the following photos are taken by Ellert Grétarsson — click here and here for more of his photos.

Unmasking the Geothermal Myth

In a world increasingly concerned about carbon emissions,” Jaap Krater and Miriam Rose state, “the clean image of hydroelectric and geothermal energy is appealing.” This has certainly been the case in Iceland, where the highly polluting aluminium industry has attempted to re-model their dirty image by powering their production with so-called ‘green energy’. However, this greenwashing has not entirely worked as the eastern highland’s Kárahnjúkar dams — fully built in 2007 to power an Alcoa aluminium smelter in Reyðarfjörður — have proven to be as ecologically and economically disastrous as environmentalists warned. As a result the aluminium companies have now mostly moved from hydro and instead are increasingly focussing on geothermal energy.

One of the companies is Norðurál, subsidiary of Century Aluminum, who claim that their planned 360 thousand ton aluminium smelter in Helguvík will be one the world’s most environmentally friendly smelters. Why so? Because according to the company, the 625 MW of electricity required to run a smelter of this size is supposed to come only from the peninsula’s geothermal energy sources. However, environmentalists and scientists consider the estimation of geothermal energy believed to be extractable from the peninsula to be highly over-estimated, and claim that additional hydro power plants would be needed to power the smelter. This would most likely come from the much-debated and now temporarily halted dams in the river of lower Þjórsá.

Last year, unable to access the necessary geothermal energy in north Iceland, aluminium company Alcoa was forced to withdraw their six years long plan to build a geothermal powered smelter at Bakki, Húsavík. We predict that if Century cannot force through the damming of lower Þjórsá a similar situation awaits Helguvík. But that has not stopped the project’s interested parties, who still state confidently that the smelter will be built, and powered with geothermal energy.

Regardless of the need for additional hydro power, the exploitation of the Reykjanes peninsula’s geothermal areas spells the end of this magnificent nature of the peninsula as we know it. Test drilling and boreholes, endless roads and power lines, power plants and other infrastructure; all this would turn the Reykjanes peninsula — this unique land of natural volcanic wonders, which many scientists and environmentalists believe to be one of the world’s best options for creating a giant volcano park with educational and tourism-related opportunities — into a large industrial zone.

But these are only the very visible impacts of the planned large-scale exploitation. Other environmental catastrophes are in fact inevitable with large scale geothermal industry, becoming increasingly visible to the public as the green reputation of geothermal energy slowly decreases.

Two of Saving Iceland’s spokespersons — ecological economist Jaap Krater and geologist Miriam Rose — have thoroughly analysed the development of Iceland’s geothermal potential in a chapter, written on behalf of Saving Iceland, and recently published in a book on the current energy crisis. While we strongly recommend the piece for further reading about the geothermal myths, a few of their points will be addressed here, with relevance to recent events in Iceland.

Firstly, geothermal gases are rich in a variety of harmful elements and chemical compounds such as sulphur dioxide, whose impacts are systematically underestimated according the Public Health Authority of Reykjavík. Since production began at the Hellisheiði geothermal power plant — often claimed to be the biggest of its kind in the world — in 2006, a 140 percent increase of sulphur pollution has been measured in the capital area of Reykjavík, only 30 kilometres away. Recent studies, conducted by the University of Iceland, suggest a direct link between increased sulphur pollution on the one hand, and increased use of medicine for asthma and heart disease ‘angina pectoris’ on the other hand. However, engineering firms such as Mannvit, authors of many of the Environmental Impacts Assessments for geothermal power-plants, have so far ignored these studies and instead based their assessments on so-called prediction models. (Read more about the sulphur pollution here and here.)

Secondly, at the end of last year it was revealed that for two years energy company Reykjavík Energy — who own and operate the Hellisheiði plant — had on occasions been pumping waste water containing hydrogen sulphide into drinking water aquifers. Sulphides are far from being the plants’ only damaging effluents entering our water system; Krater and Rose mention that “geothermal fluids contain high concentrations of heavy metals and other toxic elements, including radon, arsenic, mercury, ammonia, and boron.”

Thirdly, it is suggested that depletion of one geothermal reservoir can result in the drying up of surrounding hot spring areas. While large-scale exploitation in Iceland is probably too young to witness these effects, environmentalists and geologists have warned that exactly this will happen in the Reykjanes peninsula if the existing plans go ahead.

The Key Companies Involved

HS Orka

HS Orka is an energy company that owns and operates two geothermal power plants on the peninsula — Reykjanesvirkjun and Svartsengi — the majority of who’s energy goes to Norðurál’s aluminium smelter in Grundartangi, Hvalfjörður. HS Orka’s majority shareholder is Magma Energy Sweden A.B., a puppet company of the Canadian firm Magma Energy, which was established to get around laws that prevent non-Europeans from buying Icelandic companies. After Magma’s 66,6% share, the remaining 33,4% is owned by Icelandic pension funds.

Before privatisation HS Orka (then called Hitaveita Suðurnesja) was owned fifty-fifty by the Icelandic state and several municipalities on the country’s south-west coast, but in 2007 the state’s share was sold to a private company named Geysir Green Energy (GGE). Following laws passed in 2008, regarding the separation of private energy production from competitive operations, the company became two different firms — HS Veitur and HS Orka — of which the latter takes care of energy production and sales. Bit by bit, GGE bought up two thirds of HS Orka’s shares. In 2009, GGE sold extra 10% to Magma Energy, which at the same time bought 32% from another energy company, Reykjavík Energy, and the nearby municipality of Hafnarfjörður. At this point GGE owned 55% of HS Orka and Magma owned 43%.

Harsh criticism arose over these deals which were effectively privatisation of Iceland’s natural resources, including a campaign led by pop-singer Björk and Eva Joly, the recent French Green Party presidential candidate, who at that point served as the Icelandic center-left government’s special financial advisor, following the general elections in 2009. Asked if the company was considering majority stake in HS Orka, Magma’s CEO Ross Beaty replied with a straight “no”. He then emphasised that the company would not buy more than 50% of the shares, as had officially been accepted by Iceland’s government, calling this “a rather awkward business position but certainly something that we feel can be workable.”

However, in 2010 Geysir Green Energy sold all their shares to Magma, which now owned 98.5% of HS Orka. A year later Magma sold 25% to Jarðvarmi slhf, a company owned by fourteen Icelandic pension funds, which a little later bought additional 8.4%. At last, Magma bought the 1.5% still owned by four different municipalities. Thus Magma holds 66.6% of the shares today, while Jarðvarmi owns 33.4%. The land use rights held by Magma allow for 65 years exploitation with an option to extend this for another 65 years.

Alterra Power

Just as the name could not have been coloured with more controversy and scepticism, Magma Energy merged with Plutonic Power and became Alterra Power, a company traded on the Toronto Stock Exchange. The new company’s Executive Chairman Ross Beaty, said that the merger would “strengthen both companies and […] create a larger, more diversified renewable energy company.” He further stated: “Geothermal will remain a core focus of the new company, but hydro, wind and solar assets will be solid business platforms for future growth. In the renewable energy business, bigger is better and this combination will achieve that while enhancing returns to each company’s shareholders.”

Alterra Power already operates geothermal, hydro and wind power plants in Nevada and British Columbia, which together with the Iceland plants have the energy capacity of 570 MW. In the company’s own words, they have a “strong financial capacity to support [their] aggressive growth plans,” which include geothermal plants in Chile and Peru. Such Latin-American adventures are certainly not new to the company’s key people, as Ross Beaty founded and currently serves as Chairman of one of the world’s largest silver producers, Pan American Silver, with some of its mines in Peru.

For the last three decades in fact Beaty has founded and divested a series of mineral resource companies, but has now shifted his focus to the ever-enlarging economy of ‘green energy’. As he explained himself: “This time around I wanted to build something green, so I looked at geothermal and it was just perfect, it just fit”. When confronted with the possibility that he and his company were taking advantage of Iceland’s economic collapse — a theory supported by the words of John Perkins, the author of ‘Confessions of an Economic Hitman’ — he called such ideas “ignorance and complete nonsense.” Only a few months later, he nevertheless said to Hera Research Monthly, an online investment newsletter, that “going into Iceland was strictly something that could only have happened because Iceland had a calamitous financial meltdown in 2008.”

Norðurál

Norðurál is a subsidiary of North-American aluminium producer Century Aluminum, whose largest shareholder is commodity broker Glencore International, a company that controls almost 40% of the global aluminium market. Glencore is mostly known for its many tentacles of corruption and worldwide human rights and environmental violations — most recently manifested in the exposure of child-labour in the company’s copper mines in the Democratic Republic of Congo, as well as the dumping of acid into a river at another site in the same country.

Norðurál currently operates an aluminium smelter in Hvalfjörður, which was fully built in 1998 despite harsh opposition by the fjord’s inhabitants. The smelter has been enlarged in a few phases, seeing the production capacity going from the original 60 thousand tons per year, to the current 278 thousand tons. Since 2004, the company has invested 20 billion ISK into building another Iceland smelter, in Helguvík on the north-west tip of the Reykjanes peninsula. According to the project’s Environmental Impact Assessment (EIA), the smelter is supposed to be powered solely by the peninsula’s geothermal energy — a claim that environmentalists and geologists have seriously questioned.

In April 2007, HS Orka signed a contract with Norðurál, promising the latter company 150 MW of energy for the Helguvík smelter’s first phase, supposed to be extracted by the planned expansion of the Reykjanesvirkjun geothermal power plant. Three years later, when no energy had been made available, the aluminium company filed charges against HS Orka for non-compliance. The conflict ended up in an arbitration court in Sweden, the registered home country of HS Orka’s owner, Magma Energy Sweden. Officially the conflict was presented to the public as a matter of energy prices but in late 2011 the court ruled that HS Orka is obliged to provide Norðurál the originally agreed-upon energy, suggesting that the conflict had to do with more than prices.

Already Existing Power Plants

Reykjanes

Reykjanesvirkjun is a 100 MW plant, owned by Alterra Power, whose energy partly powers Norðurál’s smelter in Hvalfjörður. It is located on 410 hectares of land located at the south-west tip of the peninsula. The company has plans for at least an 80 MW expansion of the plant, which is supposed to take place in two 50 and 30 MW phases, that according to HS Orka should both be completed in 2013.

However, following conditions set by Iceland’s National Energy Authority (NEA) last year, the expansion plans have become a bit more complicated. In order for it to happen, at least 30 out of the 50 MW included in the first phase have to come from another area than currently planned. Further extraction in the already exploited area would simply be unsustainable and decrease the area’s capacity. Geologist Sigmundur Einarsson actually believes that the field is already over-exploited. His claim is based on studies from 2009, by the very same NEA, which state that the area’s long-term sustainable production capacity is hardly more than 25 MW.

Svartsengi

The Svartsengi plant is operated by HS Orka and is located on 150 hectares of land owned partly by the municipality of Grindavík and partly privately. Next to it stands the Blue Lagoon, a tourist attraction created by the brine pollution from the power plant. The plant is a combined electricity and heat plant with a current electric power capacity of 75 MW, of which most goes to Norðurál’s smelter in Hvalfjörður.

The Threatened Areas

Eldvörp

The Master Plan gives a green light for the exploitation of Eldvörp, a 15 km long row of craters, located four km south-west of Svartsengi. Svartsengi and Eldvörp are thought to share a geothermal aquifer, which many claim to be fully exploited already. Thus even the smallest energy production would be unsustainable. Alterra Power still has plans to build a 50 MW power plant in Eldvörp, for which both research and utilization leaves have been granted. The planned plant is on land owned by the municipality of Grindavík, which apparently is about to finish the required land use plan enabling the project to take place.

The geothermal field is situated at the heart of the row of craters. There are only a few signs of geothermal activity on the actual surface, only fumaroles the lavafield and steam wisps when the weather is mild. One single borehole has already been constructed close to one of the craters at the centre of Eldvörp. It’s environmental impact is very limited compared with the impacts of the planned over-all drilling and the appendant pipelines, power lines, roads, powerhouse separator building. Such construction will have enormously destructive impacts on both natural and cultural relics in the area, including the row of craters and the Sundvörðuhraun lavafield.

Stóra-Sandvík

Stóra-Sandvík is a unique geothermal field in a coastal area close to the municipalities of Grindavík and Hafnir, as well as to the Reykjanesvirkjun plant, which in itself should be reason enough to move it from the exploitation category and instead to protection.

Krýsuvík

This geothermal area consists of four subfields — Sandfell, Trölladyngja, Sveifluháls and Austurengjar — which all connect to the same volcanic system, usually just named Krýsuvík. The geothermal activity is located at the margins of the system’s fissure swarms, while the Núpshliðarháls tuff ridge lies closer to its centre, with thousands of years old lava flats and eruptive fissures on both sides. Where the tuff has tightened due to geothermal transformations, small streams flow on to the lavafields and have thus created vegetated areas such as Höskuldsvellir, Selsvellir, Vigdísarvellir and Tjarnarvellir. As from the west of Hellisheiði, hardly any water runs on the surface of the whole Reykjanes mountain range, save the above-mentioned areas of Krýsuvík.

Interestingly, Krýsuvík is directly linked to what many consider to be the origins of environmentalism in Iceland. A geologist and environmentalist named Sigurður Þórarinsson, who had often voiced his concerns regarding Icelanders’ treatment of the country’s natural environment, had become seriously alarmed by what he witnessed by the Grænavatn maar in Krýsvík. It was, Sigurður said, used as a trash can for construction projects in the nearby area. At a meeting at the Icelandic Ecological Society in 1949, Sigurður suggested the creation of a legislation regarding nature conservation. Shortly afterwards, he was asked to take part in designing the legislation, which was passed in 1956 — the first in Iceland’s history. (Read about Sigurður Þórarinsson here.)

Out of the four Krýsuvík areas, the Energy Master Plan allows for the exploitation of Sandfell and Sveifluháls, while Trölladyngja and Austurengjar are supposed to be pending until the results of drilling in the two former areas are known. The National Energy Authority claims that these combined 89 km² of land should have the production capacity of 445 MW of energy for 50 years, and as such be Iceland’s third most powerful geothermal field after the Hengill and Törfajökull areas. However, independent scientists and environmentalists have seriously questioned these figures, believing the area’s maximum possible production capacity to be 120 MW for 50 years.

Sandfell

Sandfell area is a semi-unspoiled volcanic area of lavafields and tuff mountains, large vegetated flatlands, and beautifully formed craters. It is a uniquely colourful area, which will be permanently altered if HS Orka’s planned 50 MW power plant will be built. The company has already been granted permission for test drilling and one borehole has been test-drilled, but no results have yet been published.

Sveifluháls (Krýsuvík)

Sveifluháls is a 20 km broad and 150 to 200 meter high compounded and mostly non-vegetated tuff ridge. The 2-3 km long geothermal area of fumaroles, mud springs and muddy hot springs — usually referred to as simply ‘the Krýsuvík geothermal area’ — lies a little east of the Krýsuvík fissure swarm. Despite drilling done in the second half of the 20th century, the area is relatively unspoiled and could easily be brought back close to its natural state. Due to the tuff transformation, the area is especially rich in colour and contains unusual geothermal salt deposits and gypsum. The area is unique due to its many maars, for instance Arnarvatn and Grænavatn (pictured above), of which some show signs of Holocene volcanic activity. Sveifluháls is a popular stopover as well as an outside school-room for geology. It also contains historical relics of human residence, as far back as Iceland’s original settlement.

There are plans to operate a 50-100 MW power plant in the area — a construction that would include somewhere between 10 and 20 boreholes, road construction, pipelines and power lines to connect the plant to the national energy grid. HS Orka has a research leave in the area but has not been able to guarantee the utilization rights, which are owned by the municipality of Hafnarfjörður.

Austurengjar

The geothermal area of Austurengjar is about 1.5 km east of lake Grænavatn — a relatively flat and mostly unspoiled area of mud pots, hot springs and dolerite ridges, which slopes north to lake Kleifarvatn. As a result of earthquakes in 1924, the geyser activity increased dramatically and since then, Austurengjahver has been the area’s most powerful spring. This colourful geothermal area is special as it lies completely outside of Krýsuvík’s volcanic system and shows no signs of Holocene volcanic activity. The plans for a 50 MW power plant at Austurengjar, including 10 to 15 boreholes and a whole lot of power lines, would directly impact the whole area and change the face of lake Kleifarvatn, which is today a wild and unspoilt lake, surrounded by mountains.

Trölladyngja

Trölladyngja is one of the three mountains (the other two being Grænadyngja and Fífavallafjall) that together make up the north-east end of a 13 km long tuff ridge called Núpshlíðarháls, which lies within Krýsuvík’s volcanic system. The geothermal area is about three km long and seems to be partly connected to extension fractures in the system. South of the mountains, a small stream called Sogalækur has shovelled out a considerable amount of clay and thus formed a colourful canyon called Sogin. The stream deposited the clay into the lava below and formed the vegetated field Höskuldarvellir. HS Orka has for many years had plans to build a power plant in Trölladyngja and three holes have been drilled already, resulting in very limited success but a lot of disruption. The Trölladyngja area is partly included in the Natural Heritage Register.

Protected Area(s)

Brennisteinsfjöll

Only one out of the peninsula’s nine potential energy generating areas will be protected if the Master Plan goes through parliament unaltered. Brennisteinsfjöll are a row of mountains, considered an impenetrable part of the Krýsuvík area, and do in fact constitute the largest untouched wilderness around the capital area of Reykjavík. As highlighted by Krater and Rose: “Wilderness areas are becoming rare globally, with over 83 percent of the earth’s landmass directly affected by humans, and the Icelandic wilderness is one of the largest left in Europe.”

Possible Targets for Protests and Direct Actions

The Ministry of Environment
Skuggasund 1
150 Reykjavík

The Ministry of Industry
Arnarhváll by Lindargata
150 Reykjavík

HS Orka
Brekkustígur 36
260 Reykjanesbæ

Jarðvarmi slhf
Stórhöfða 31
110 Reykjavík

Norðurál Grundartangi ehf (smelter and offices)
Grundartangi
301 Akranes

Norðurál Helguvík ehf (only offices)
Stakksbraut 1
Garður
232 Reykjanesbæ

Helguvík Smelter
See location on map here.

Century Aluminum Company (Corporate Headquarters)
2511 Garden Road
Building A, Suite 200
Monterey,
CA 93940
USA

For a list of more offices and smelter click here.

Alterra Power Corp. (Corporate Offices)
600-888 Dunsmuir Street
Vancouver, BC
Canada V6C 3K4

For a list of more Alterra Power offices click here.

Glencore International

Registered Office
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES

Headquarters
Baarermattstrasse 3
P.O. Box 777
CH 6341 Baar
Switzerland

_______________________________________________________

Main Sources

Áhugahópur um verndun Jökulsánna í Skagafirði, Eldvötn – samtök um náttúruvernd í Skaftárhreppi, Félag um verndun hálendis Austurlands, Framtíðarlandið, Fuglavernd, Landvernd, Náttúruvaktin, Náttúruverndarsamtök Austurlands (NAUST), Náttúruverndarsamtök Íslands, Náttúruverndarsamtök Suðurlands, Náttúruverndarsamtök Suðvesturlands, Samtök um náttúruvernd á Norðurlandi (SUNN), Sól á Suðurlandi. Umsögn um drög að tillögu til þingsályktunar um áætlun um vernd og orkunýtingu landsvæða. 11. nóvember 2011. (Download PDF here.)

Krater and Miriam Rose on behalf of Saving Iceland, “Development of Iceland’s Geothermal Energy Potential for Aluminum Production — A Critical Analysis”. In: Abrahamsky, K. (ed.) Sparking a World-wide Energy Revolution: Social Struggles in the Transition to a Post-Petrol World. 2010, AK Press, Edinburgh. p. 319-333. (Download PDF here.)

Various information from Náttúrukortið (The Nature Map) on the website of environmentalist NGO Framtíðarlandið (The Future Land).

Sigmundur Einarsson, Hinar miklu orkulindir Íslands, Smugan.is, October 2009.

Sigmundur Einarsson, Er HS Orka í krísu í Krýsuvík?, Smugan.is, November 2009.

Sigmundur Einarsson, Ómerkilegur útúrsnúningur iðnaðarráðherra, Smugan.is, November 2011.

Sigmundur Einarsson, Er HS Orka á heljarþröm?, Smugan.is, December 2011.

Catharine Fulton, Blame Canada? Geothermal energy, Swedish shelf companies and the privatisation of Iceland, The Reykjavík Grapevine, October 2009.

Catharine Fulton, Magma Energy Lied to Us, The Reykjavík Grapevine, May 2010.

Volcano Park to Open in Iceland? Iceland Review, July 2007.

Various information from the websites of Alterra Power, HS Orka and Norðurál.

International Rivers and Friends of the Earth International have teamed up to create a state-of-the-art Google Earth 3-D tour and video narrated by Nigerian activist Nnimmo Bassey, winner of the prestigious Right Livelihood Award. The production was launched on the first day of the COP 17 climate meeting in Durban. The video and tour allow viewers to explore why dams are not the right answer to climate change, by learning about topics such as reservoir emissions, dam safety, and adaptation while visiting real case studies in Africa, the Himalayas and the Amazon.

Preface

Glencore are the majority shareholder of Century, the owner of one operational and one half-built smelter in Iceland, it’s key operations for aluminium smelting. But who are Glencore and what are the implications for Iceland? This comprehensive article profiles the world’s biggest commodity broker, who’s only comparable predecessor was Enron. The profile covers the reach and grip of Glencore’s domination of metal, grain, coal and bio-oils markets, allowing it to set prices which profit very few and are detrimental to many. It shows the tight web of connections between the major mining companies and Glencore through shared board history and shared ownership of assets, cataloguing key shareholders (and board members) who’s stakes make them larger shareholders than institutional investors in ownership of Glencore. These connections include Rusal’s co chair Nathaniel Rothschild, a financier with a $40m investment in Glencore, and a personal friend of Peter Mandelson (former EU trade commissioner and British politician) and George Osborne (UK Chancellor).

The article details the human rights and environmental abuses of Glencore at it’s many operations, including the 2009 killing of Mayan indigenous leader Adolfo Ich Chamán who spoke out about Century’s activities in Guatemala under CEO-ship of Peter Jones (still a Century board member). It claims that Glencore is higher than most in the running for most abusive and environmentally detrimental mining company, going where lesser devils fear to tread – trading with Congo, Central Asia and embargoed countries such as Saddam Hussein’s Iraq and apartheid South Africa. Glencore founder Marc Rich was involved in trading embargoed Iranian oil, and fled the United States in 1983 accused of insider dealing and tax dodging over Iranian deals, becoming one of the 10 fugitives most wanted by the FBI, until he was pardoned by Bill Clinton. Glencore is still run by two of his main men.

Introduction

From Kazakhstan to Australia, taking in the views of Zambia, war-stricken Congo and Angola, cutting across from Siberia to Iceland is a network of mining and metals companies with a catalogue of environmental and community abuse in their wake. In Iceland its  face is Century Aluminum, but behind them, at the heart of this web lies the secretive commodity broker Glencore International of Switzerland. Glencore is about to launch one of the biggest placement of shares, raising $10 Billion, making a lot of people very rich and valuing itself as a company worth $60Bn. In this article we start to throw a spotlight on just how Glencore makes its money and how Iceland is just one of many victims of a company built on ruthless exploitation.

On the surface, Glencore’s wealth comes from the buying and selling of the world’s commodities (see below for more detail), specialising in grain and metal markets. However, what is unusual for a commodity broker is that it invests heavily in the very companies whose produce it is trading. Its interests are global, from the breadbaskets of Russia, to zinc mines in Kazakhstan, copper and cobalt interests in Congo and Angola, and aluminium in Iceland.

It is the latter that ties Glencore into the Icelandic economy through its 44% ownership of Century, as well as membership of the board of directors. Century is the owner of the Grundartangi smelter and is behind the building of another plant at Helguvik, for which a number of controversial new geothermal and hydro power plants would need to be built. There is also a doubt if enough energy to run a smelter in Helguvík actually exists. Glencore controls 38% of the global trading market in aluminium. Of this, 50% of this comes from Century and UC Rusal, the Russian Aluminium giant (of which Glencore owns 8.8%).

The result is a private network of personal ties and business relationships so tight that what matters to Century also matters to Glencore. The Icelandic government may be doing deals with Century, but Glencore is always present in the background, bringing unsavoury alliances to this particular bed. There are a lot of unanswered questions over how and with whom Glencore chooses to invest. One only has to look at its principle partners and deals to see it does not shy away from exploitation of war torn countries or making alliances with men whose fortunes carry with them heavy taints of corruption. Despite all the exuberance in financial circles at the profits to be made by the Glencore share offering, a few more level-headed traders and journalist are wondering if there should be more caution, especially given how little is known about the inner workings of the company and just how manages to pull off so many exceptionally profitable deals.

It is also worth noting that the last time the world saw such a commodity broker dominate a market to this extent ended up going very sour – that commodity broker being Enron.

Who are Century Aluminum?

Century is a company that specialises in smelting aluminium. It was founded in 1995 when various interests controlled by Glencore were brought together. In 1996 it was spun off as a public company^.1 As well as its Icelandic sites, which it owns outright, it owns or has a share in aluminium plants at Ravenswood, West Virginia, at Hawesville (100%), Kentucky (80% owned with the rest owned by Glencore), and at Mt. Holly, South Carolina (50%, the other half owned by Alcoa Inc). In the past it has had interests in the Congo. As a global player it is the 10th largest producer.

Its ownership remains dominated by Glencore at 44%, with the majority of the other shareholders being held in relatively small amounts by US institutional investors (hedge funds etc.).² It is clear from Century’s website that Iceland is a major part of their business and strategy and three executives of its Icelandic operations are listed as key management.

Key People

Gunnar Gudlaugsson, Plant Manager of Nordural Grundartangi

Joined Nordural in 2008, from Straumsvik, the Rio Tinto Alcan smelter, where he had served for over ten years.

Ragnar Gudmundsson, Managing Director of Nordural

Nordural is the holding company for the Icelandic interests of Century. Previously Chief Financial Officer of Basafell, prior to which he was a senior manager at Samskip, both leading companies in Iceland.

Wayne R. Hale, Chief Operating Officer

Joined Century in 2007, having previously been with Sual in Russia (it was Sual, Rusal and Glencore’s Russian aluminium interests which merged to form UC Rusal). Has also worked for Kaiser and Rio Tinto.

Peter Jones, Director

2001-2006 was President & Chief Operating Officer of Inco Ltd. Former President & CEO of Hudson Bay Mining & Smelting Co (retired at the end of 2009).

David J. Kjos, Vice President of Operations in Iceland

Former manager of Cygnus Inc, an aerospace manufacturing company; prior to that was with the United Development Co & Kaiser Aluminium & Chemical Co.

Logan W. Kruger, CEO, President

Joined November 2005. Before Century, from 2003 he had been a leading executive at Inco, the large nickel mining company where he over saw operations in the Asia / Pacific region, including the Goro Nickel operation in New Caledonia and other projects in Indonesia, remaining as a director of the Indonesian subsidiary P.T. Inco (Inco has since been acquired by the Brazilian nickel miner Vale). He has also served as head of Anglo American’s operations in Chile (2002-03) and as CEO of the Hudson Bay Mining & Smelting Co in Canada (1998-2002).³ He is also a director of Amcoal which over sees the South African coal interests of the mining giant Anglo-American.

Andrew Michelmore, Director

From 2009 CEO of Minerals and Metals Group; former CEO & Managing Director of OZ Minerals. Both firms are leading Australian mining companies. Minerals & Metals Group is a subsidiary of Minmetals Resources Ltd, a Hong Kong based company with significant aluminium interests in China.

John P. O’Brien, Chairman of the Board

Chairman since January 2008. His background is in business management and restructuring.

Willy R. Strothotte, Director

Chairman of Glencore and of Xstrata (see below under Glencore).

Jack E. Thompson, Director

Also serves a director for a number of other mining companies including Anglo-American and Centerra Gold (largest Western-based gold producer in Central Asia), among others.

Though there are 4 other directors who appear to represent general institutional investors, it is clear from the above that the board is dominated by mining executives who share considerable common history. There is much more that is not obvious just from this board of directors. For example, Century and Noranda purchased from Kaiser Aluminium the bauxite mine at St. Anns, Jamaica and factory at Gramercy, Louisiana, though Noranda has since bought out Century. Noranda is a spin off from Xstrata who originally purchased it in 2006 when it took over the Falconbridge mining company.

Other links of note are:

Xstrata and Anglo-American Chile are joint owners of the Collahuasi copper mine, the world’s third biggest such mine and which in 2010 saw violent action against striking miners.⁴

Hudson Bay (of which Logan Kruger, now Century CEO, was CEO until 2002) is now the subject of a lawsuit over the murder of Mayan indigenous leader Adolfo Ich Chamán who spoke out over the company’s activities in Guatamala – he was hacked to death by security personnel in 2009.⁵ This took place while Century board member Peter Jones was CEO of the company.

Centerra Gold has acquired the Kumtor mine in Kyrgyzstan from the government there. Given that the deal saw little benefit to the people of that country, it has, as a result, played an important political role there.⁶ Jack Thompson, board member of Century and of Anglo-American sits on Centerra’s board also.

In 2006, indigenous tribes people stormed the Inco mine at Goro, New Caledonia due to environmental concerns.⁷ Inco’s CEO of the time was Peter Jones, while Logan Kruger oversaw operations at this mine from 2003-2005, and remains a director of its parent company P.T. Inco of Indonesia.

UC Rusal, the world’s single largest aluminium producer is controlled by Russian oligarch Oleg Deripaska through his En+ Group which he chairs. En+ is the controlling interest in a large number of other extractive and power generation businesses, mostly based in Siberia.⁸

His co-chairman is the financier Nathaniel Rothschild who runs the mining investment company Vallar, has a $40m investment in Glencore and is on record as being keen to support a Glencore takeover of Xstrata.^9,10 Rothschild is also a personal friend of both Peter Mandelson, the former EU Trade Commissioner, and of George Osborne, current UK Chancellor.

Xstrata has large interests in Australia where it has been criticised for sharp business practices¹¹, run roughshod over indigenous people at the McArthur River site¹² and is subject of a campaign due to its environmental destruction at it Mangoola opencast mine.¹³

It is hard to single out any firm within the incestuous world of mining conglomerates as being better than the other. All have issues with relationships with indigenous people, suppression of union activity and environmental damage, however the ease at which these accounts can be found in the collective past and present of Century’s key people and directors is telling.

Glencore International AG

Marc Rich & Co

The origins of Glencore are in the trading firm controlled by commodities baron Marc Rich, a controversial figure over the last few decades. Rich built up a commodities trading empire by making deals with the likes of Ayatollah Khomeini to trade Iranian oil while a US embargo was in place. At the same time he was linking himself to Mossad, the Israeli secret service.

In 1983, he and his partner Pincus Green were accused of insider dealing, dodging tax and illegal dealings with Iran when that country was under US sanctions. As a result they both fled the United States and Rich was named among the top ten most wanted fugatives by the FBI until he was controversially pardoned by Bill Clinton on the latter’s last day in the White House. Interestingly, his representative in Washington for 15 years (1985-2000) was Lewis ‘Scooter’ Libby, the subsequently disgraced Chief of Staff to Dick Cheney.

Rich settled in Switzerland where he founded Marc Rich & Co, continuing his commodities dealing, specialising in oil, gas and metals. In 1993/4 he failed in an attempt to corner the world zinc market, which lead to the loss of control of his company, though he remains a comfortably well off billionaire.

At the same time part of the company was spun off to become the equally controversial Trafigura. This is another commodity broker who entered the news when it brought out a ‘super-injunction’ to stop reporting of its role in illegal dumping of toxic waste in Côte d’Ivoire, though it has other scandals to its name as well.

Glencore

Marc Rich & Co was taken over by Rich’s inner circle and renamed Glencore. Many of its partners, of whom there are 485, will become very wealthy men following the listing of the shares. Day-to-day control remains principally with two of Rich’s former lieutenants, the highly seclusive and media-shy Ivan Glasenberg (current CEO) & Willy Strothotte (founding CEO and Chairman). Under these two, Glencore has continued to grow and dominate many of the markets it is involved in. It developed the tactic of investing in producers of raw materials, then striking deals that gave it exclusive access to their products which it would then trade on the market. The result is a global empire with its fingers in many pies, particularly metals, oil and grain. The ruthless and aggressive dealings methods developed under Marc Rich continued to shape the culture of the company, though it remains mired in considerable secrecy.

A large part of Glencore’s success is its willingness to do deals in places and with people were the more respectable sides of capitalism are wary to tread, doing deals in Congo and central Asia. It has also never been afraid to make deals that breached embargoes, including Saddam Hussein or South Africa during the apartheid era. Large-scale deals are being done in Central Asia with the numerous mining barons which emerged there after the collapse of the USSR, and who have strong links to corruption in those states. To this day many of its subsidiaries continue to be accused of human rights and environmental abuses.

The networks of control associated with Glencore are vast. In terms of its position in the world, it controls huge amounts of the addressable global market in copper (50%), zinc (60%), aluminium (38%), lead (45%), cobalt (23%), ferrochrome (16%), thermal coal (28%), wheat (10%), and one quarter of the worlds barley, sunflower and rape seed.^14,15 What this means is that it can effectively set prices for these commodities.

Addressable: the amount of a commodity accessible to a market. For example, many mines are owned by larger concerns who have acquired them entirely for their own use rather than for trading the ore/products on the open market. Thus the percentages quoted are for the volume of the global market rather than the total amount if all production is taken into account.

Leading Business Interests¹⁶

Glencore has a vast number of interests around the globe. The following is a brief on some of its leading assets and their problems, and it is certainly not exclusive. Many of the other mines it has a controlling interest in are open cast, with all the attendant problems, such as habitat destruction and pollution of the environment.

Argentina

The AR Zinc Group, acquired in 2005 operates the Aguilar mine, the Palpala smelter and a sulphuric acid producer, Sulfacid S.A. in the heavily mined north-western state of Jujuy, Argentina. These operations are part of a group of mines and related industries that have caused significant environmental damage and health problems to the various indigenous peoples of the region – demonstrations and protests against the presence of the mining companies have been held, including AR Zinc.^{17, 18, 19}

Australia

Glencore have a 40% stake in Minara Resources (formerly Anaconda), which runs the Murrin Murrin mine. Willy Strothotte, Ivan Glasenberg and others connected with Glencore sit on Minara’s board.²⁰ Both Murrin Murrin and Mt Isa Mines, which is controlled by Xstrata, were cited in 2009 as among the worst polluters in Australia.²¹

Bolivia

Glencore owns the Sinchi Wayra mining company that operates five mines. There has been an ongoing dispute with workers over attempts to increase working hours and on pay. The workers have called on the government to nationalise the company.²² In the past it has been criticized for mass lay-offs as a cost cutting tactic.²³

Columbia

The El Cerrejon Norte mine, jointly owned with Anglo American & BHP Billiton has been described as “a continuing horror story of forced relocations of indigenous people, human rights violations, environmental destruction and other assorted injustices”, in particular against the Wayuu people. Union organisers have received death threats from paramilitaries.²⁴ Similar allegations are made in relation to its coal mine at La Jagua, which Glencore’s subsidiary Prodeco purchased from Xstrata.^25,26,27 Prodeco also operates an open cast coal mine at Calenturitas, La Loma.

Congo

Glencore acquired control in 2008 of the financially troubled Katanga Mining²⁸, one of Africa’s biggest copper and cobalt producers. It is situated in a highly troubled region where militias have funded their struggles by selling off resource rich land. There are reports of water contamination and poor working conditions at its mines.²⁹ Swiss NGOs have been highly critical of Katanga Mines, with Bread For All and The Swiss Catholic Lenten Fund publishing a report accusing Glencore of involvement with of human rights abuses, child labour, pollution and tax evasion in the region³⁰, which has lead to a campaign against the company. ³¹ Glencore also owns the new mine at Mutanda, also in Katanga province. Glencore’s minority partner in Katanga is the Israeli magnate Dan Getler who specialises in investments in the Congo and who has links to blood diamonds and to right-wing Israeli politicians, in particular Avigdor Lieberman.³²

Kazakhstan

Glencore has partnered with Kazakhstan private investment company Verny Capital to take control of the Kazzinc, which has extensive mining and smelting interests throughout that country. Currently 51% owned by Glencore, that stake is expected to rise to 93% following Glencore’s floatation. Verny is controlled by the controversial Utemuratov family, which is close to President Nazarbayev, who is also believed to have a stake.³³ Under Nazarbayev there has been large-scale transfer of the nation’s mineral wealth into private hands and Glencore has been integral to that process.

Peru

Glencore owns the Iscaycruz & Yauliyacu mines (Los Quenualos), which have been accused of unsafe working conditions and subsequent anti-union activities.³⁴

Philippines

Xstrata’s proposed Sagittarius mine at Tampakan, Mindanao threatens indigenous peoples and important rainforests. On 9th March, 2009 a leading opponent of the project, Eliezer “Boy” Billanes, was assassinated.³⁵ Mines in Philippines, such as this one, have also been linked with threats to food security, partly due to the particular nature of the ecology they work in.³⁶

Russia

UC Rusal³⁷, the Russian aluminium giant; controls the world’s largest deposits of bauxite (the ore from which aluminium is obtained) and is the second biggest producer of global alumina (aluminium refined from bauxite) with a 14% of global production. Controlled by oligarch Oleg Deripaska, the firm was created by a merger of Rusal with the smaller SUAL and Glencore aluminium interests. There remain strong links between Glencore and UC Rusal with Glencore owning 8.7% of UC Rusal, and a friendship between Deripaska and Glasenberg.³⁸

As well as UC Rusal, Glencore has numerous other business interests in mineral wealthy Russia. Some of these date back to when Glencore was swift to do deals to take control of Russian state assets following the collapse of the USSR. Though it has been edged out of some of these companies who prefer to sell direct to consumers in China, etc, it does have deals with Russian producers of coal, oil and grain, in part through EN+, Deripaska’s company. There are rumours that it is trying to exploit links into the zinc, nickel and lead producers. Other deals and their relations to Glencore remain murky³⁹, but another major partner is the independent oil refiner Russneft.⁴⁰

Zambia

Glencore has control of Mopani Mines, which has come under environmental scrutiny, being believed to be the source of acid rain due to sulphur dioxide emissions.⁴¹ In 2005, 20 miners died in different accidents at the mine, blamed in part on cut backs in training.⁴² A Daily Mail investigation has claimed that Glencore is engaged in exploitation tax evasion through sharp pricing techniques, so depriving the country of much needed revenue.⁴³

Zimbabwe

In 2011 Glencore signed an agreement with Mwana Africa to acquire nickel from the Trojan mine at Bindura in Zimbabwe – notable for its links with Morgan Tsvangirai. Mwana’s is a South African based miner with copper operations at Katanga in the Congo and gold mines in Ghana.

Other global interests

Glencore owns the PASAR copper smelter in the Philippines, the Sherwin Alumina smelter in Texas (cited for hazardous chemical releases^44,45) and the Portovesme lead and zinc smelter on Sardinia. It also owns 70% of the South African coal miner Shanduka. As owner of the Moreno sunflower oil company, one of the biggest in the world’s largest suppliers of sunflower oil, Glencore is heavily involved in the producing and selling of genetically modified products.⁴⁶ It controls 270,000 hectares of agricultural land and has various grain processing sites around the world which aid its interests in these markets.

The Energy Master Plan is a framework programme, meant to result in a long term agreement upon the exploitation and protection of Iceland’s glacial rivers and geothermal areas. Its making, which since 1999 has been in the hands of special steering committiees, established by the two above-mentioned ministries, reached a critical status in July this year when its second phase was finished and presented to the ministers who in mid August presented their proposition for a parliamentary resolution. Before it will be discussed in parliament the proposition will be open to comments and criticism from the public, as well as interested parties, energy and aluminium companies on the one hand, environmentalists on the other.

Twenty-Seven Energy Options Put on Hold

The proposition lists natural areas into three categories; protection, exploitation and hold. The last-mentioned includes areas that, according to the steering groups and ministers, have not undergone enough research for a decision to be made upon weather to protect or exploit them. Included in this category are, among other, the glacial rivers in fjord Skagafjörður as well as other rivers such as Skjálfandafljót, Hvítá, Hólmsá and Farið by lake Hagavatn in the south-west highlands. Also geothermal areas such as Trölladyngja and Austurengjar in Krýsuvík and certain areas around mount Hengill where the heavily indebted Reykjavík Energy (OR) already operates Hellisheiðarvirkjun, a sulphur polluting geothermal power plant. The 27 areas of the waiting category will be revised in five years, given that satisfactory studies have been made at that time.

Þjórsárver Wetlands to be Saved

Delightfully, the protection category features the uppermost part of river Þjórsá where Landsvirkjun wants to construct Norðlingaölduveita, a dam that would destroy the Ramsar listed Þjórsárver wetlands. River Jökulsá á Fjöllum, which has been seen as an energy potential for a new Alcoa aluminium smelter in Bakki, is also listed protected. The same applies for certain parts of river Tungná, in which Landsvirkjun is already building the Búðarháls dam that will provide energy for increased production in Rio Tinto Alcan’s aluminium smelter in Straumsvík.

The protection category also features geothermal areas such as the ones around Brennisteinsfjöll mountains on the Reykjanes peninsula, as well as Gjástykki, close to volcano Krafla and lake Mývatn. The same goes for the Grændalur valley and Bitra, which are located close to the small town of Hveragerði and have been particularily desirable in the eyes of energy companies. Bitra was saved by a local campaign in 2008 whereas Grændalur was recently threatened when Iceland’s National Energy Authority allowed a company called RARIK to operate test drilling in the valley, in complete contravention of previous rulings by the Ministries of Industry and of Environment.

Krýsuvík, Þeistareykir and Þjórsá to be Destroyed

The exploitation list features geothermal areas Þeystareykir, Bjarnarflag and Krafla in the north of Iceland, as well as Hágöngur in the mid-highlands west to glacier Vatnajökull. Also certain parts of the area around mount Hengill and finally geothermal spots in Reykjanes, Krýsuvík and Svartsengi, all three on the Reykjanes peninsula. Rivers Hvalá, Blanda and Köldukvísl are then all categorised as exploitable. And most critically the Energy Master Plan proposition allows for Landsvirkjun’s construction of three dams in the lower part of river Þjórsá.

Environmentalists Threefold Response

The most common response from environmentalist so far has been threefold. Firstly there generally satisfied by the protection of areas such as the Gjástykki, Jökulsá á Fjöllum and Grændalur, let alone the Þjórsárver wetlands. Shortly after the publication’s release, Iceland Nature Conservation Association (INCA) stated that, if approved by parliament, the Master Plan will mark the end of environmentalists’ forty years long struggle to save Þjórsárver from destruction. Though listed by the international Ramsar Convention on Wetlands due to its unique ecosystem, the wetlands have been on Landsvirkjun’s drawing table as a potential for construct a large reservoir, meant to produce energy for a planned expansion of Rio Tinto Alcan’s aluminium smelter in Hafnarfjörður, which was later thrown off in a local referendum. The plan has always been met with fierce opposition, no matter of Landsvirkjun’s repeated attempts to get it through by proposing a smaller dam and reservoir.

Secondly environmentalists are critical of the fact how many invaluable areas, such river Skjálfandafljót, are kept on hold instead of simply been categorised protected. Thirdly there is a clear opposition to the planned exploitation of certain wonders of nature, one example being the geothermal areas on the Reykjanes peninsula. Ellert Grétarsson, a photographer who has documented these areas extensively (his photos are here aside), fears that the drilling in Krýsuvík – covering between five and eight thousand square meters of land – will simply kill the area. And as a matter, says Ellert, the whole Reykjanes peninsula will be riddled with energy construction. Hjörleifur Guttormsson, former Left Green MP and a genuine environmentalists, shares Ellert’s worries and has asked for an integral study of Reykjanes before any decisions are made.

Þjórsá, the Bone of Contention

As as mentioned before the biggest concern regards Þjórsá, which has for a long time been the bone of contention between the two clashing arrays fighting for or against nature conservation. The struggle over Þjórsá has been especially tough, actually to such an extent that the government can be reputed to stand or fall with that conflict in particular. Guðfríður Lilja Grétarsdóttir, MP for the Left Greens, demonstrated, during parliamentary debate last April, her full opposition to the construction of dams in Þjórsá. At that point, three Left Green MPs, who up until then had been increasingly critical of the government and its lack of left-leaning policies, had just recently departed from the party, leaving the government with only one person’s majority in parliament. And as most members of the social-democratic People’s Alliance (Samfylkingin), which makes up the government along with the Left Greens, have not shown a sign of objection to the damming of Þjórsá, it wouldn’t be surprising if the river will be up for a heavy debate in parliament.

In fact it is more than sure that Þjórsá will be among the main matters of argument in parliament. The right wing Independence Party, which was in in power from and is largely responsible for the neo-liberalisation and heavy-industrialisation of Iceland, has always been one of the driving motors behind Landsvirkjun’s plans to dam Þjórsá. When the Master Plan’s proposition was presented in August, Ragnheiður Elín Árnadóttir, a MP of the party, called for the immediate starting of construction in Þjórsá. She also said she grieved the long period of which the project has been stuck within bureaucracy, referring to the attempts of Svandís Svavarsdóttir, current Minister of Environment, to halt the construction of one of the three proposed dams by refusing to include the dam, Urriðafossvirkjun, in a land-use plans for the parishes of Flóahreppur and Skeiða- and Gnúpverjahreppur (rural districts along Þjórsá) made by them at the request of Landsvirkjun.

Three Dams: Threat to Society and Ecology

The conflict in parliament mirrors the actual conflict in the Þjórsá region where locals have for a long time fought over the river’s fate. There Landsvirkjun hasn’t only used bribes in its attempt to get its plans through local administration, but also threatened farmers whose lands are at stake will the dams be built, by stating that if the farmers do not negotiate with the Landsvirkjun, the company will attempt for a land expropriation. This conduct has created a complete split within the local community, clearly demonstrated in last March when young locals from the region published a statement, in which they demanded a permanent halt to all plans of damming Þjórsá – thereby an end to the social conflict associated.

As a matter of fact two members of the Master Plan’s steering committee recently stated, when interviewed on state radio station RÚV, that due to the serious lack of studies regarding the social impacts of the planned Þjórsá dams, those plans should without any doubt have been put on hold. This is exactly what Guðmundur Hörður Guðmundsson, chairman of environmentalist organization Landvernd, said in last July following the publication of the Energy Master Plan’s second phase report.

Þjórsá’s position in the Master Plan proposition, yet shouldn’t be of any surprise. In the second phase report the three planned dams are not considered to be a great threat to the ecology of Þjórsá and its surroundings – contrary to the opinion of environmentalists who have voiced their worries concerning the dams’ impacts, for instance on the river’s salmon stock. Orri Vigfússon, chairman of the North Atlantic Salmon Fund (NASF), recently stated that “never before in the history of Iceland has there occurred such an attack on a sensitive area of wild salmon.” As is considered that the salmon’s spawning and breeding grounds are mosty located above waterfall Urriðafoss, where one of the three dams is planned to be built, Orri believes that the stock of salmon and salmon trout are likely to vanish.

Energy Companies Unsatisfied as Expected

As one could have imagined, Icelandic energy companies and other adherents of large-scale power production for heavy industry, are everything else than happy about the Master Plan’s proposition. Following its release Eiríkur Hjálmarsson, Public Relation manager of Reykjavík Energy, opposed the protection of Bitra on the ground that the company has already harmed the area with three examination boreholes, roads and electricity lines – but most importantly, spent 785 million ISK on the project. As reported earlier this year by Anna Andersen, journalist at the Reykjavík Grapevine, the foolhardy business operations of Reykavík Energy during the last decade or so – including large-scale geothermal projects associated with heavy industry – have brought the publicly owned company a debt of 233 billion ISK (2 billion USD or 1.4 billion Euros). Despite this financial collapse the company still advocates for the continuation of the agenda that brought it down.

Other energy companies have responded similarly, mostly complaining about the amount of areas listed as protected or on hold. Landsvikjun’s director Hörður Árnason has said that compared to the second phase report, the parliament proposition suggest that way too many energy options are put on hold. Another company, Suðurorka, owned by Alterra Power (former Magma Energy) and Íslensk Orkuvirkjun, had planned to construct a dam, called Búlandsvirkjun, in river Skaftá – a plan that the proposition puts on hold. The company argues that few energy options have been studied as thoroughly and while the studies might have been done – and might be thorough – not everybody agrees with the company on the impacts. Farmers in the area have opposed the project as some of their most important grasslands will be drowned under the dam’s reservoir.

Energy company RARIK will, due to the Master Plan, loose its grip on geothermal areas in Grændalur valley, as well as rivers in Skagafjörður and Hólmsá river – projects that the company claims to have invested in with 300 million ISK. Using the same monetary argument, HS Orka, also owned by Alterra Power, has been vocal about its 700 million ISK investment into their proposed, but now delayed if not entirely halted, geothermal plants in Trölladyngja. Finally representatives from Reykjahlíð, a small town that holds the good part of Gjástykki’s property rights, have stated that if the area will be protected, billions of ISK will be demanded as compensation.

The Predominant Strategy

Those arguments do in fact manifest the predominant strategy of those involved in the heavy industrialization of Iceland. Instead of waiting for all necessary contracts to been signed, all needed permissions to be granted, and all required energy to be ensured, the energy and aluminium companies have simply started major construction immediately when only one or a few permissions have been granted. And when criticised, not to mention when forced to stop, they have stated that because these projects have been announced and vast amounts of money put into them, they should be allowed to continue. If needed, they have also pointed out that because the natural areas at stake have already been harmed (by themselves), there is “no point” in preserving them.

One example would be Helguvík, where a framework for a proposed Century Aluminum smelter has already been built but hardly any construction has taken place there for two year. With every day that passes it becomes clear that not only has the company failed to ensure the energy needed to operate the smelter, but also that the energy simply doesn’t exist.

Geologist Sigmundur Einarsson has, for the last years, pointed this out and stated that the amount of energy needed for the Helguvík smelter cannot be found and harnessed on Reykjanes, like stated by the parties involved. For instance he believes that no more than 120 MWe can be harnessed in Krýsuvík, contrary to the official numbers of 480 MWe, and has repeatedly demanded answers from the authorities about where from the rest of the energy is supposed to come. Just as Saving Iceland’s questions about the whereabouts of energy for Alcoa’s planned smelter in Bakki, Sigmundur’s questions have never been answered, but he claims the Energy Master Plan proofs his theory.

Yet Another Three Kárahnjúkar Dams!

Environmentalists have reacted to the energy companies’ complaints and asked how on earth the companies can still pretended to be unsatisfied. As pointed out by Landvernd, these company’s are about be granted permission to harness energy equivalent of three Kárahnjúkar dams. From 2004 to 2009, Iceland’s energy production duplicated, largely with the construction of Kárahnjúkar dam, and is currently 16,900 gigawatt-hours. If the Energy Master Plan will be accepted as proposed, the energy companies will be able to duplicate the production again in few years, says Guðmundur Hörður, chairman of Landvernd, and continues:

The increase of public electricity usage is about 50 gigawatt-hours per year. The expansion entailed in the proposition would thus sustain that particular public increase for the next 265 years! If this will be the conclusion, the energy companies can be very satisfied. Still they send their agents onto the media, in order to cry and complain. That doesn’t give a good hint for a settlement.

Other environmentalists, Ómar Ragnarsson for instance, have mentioned that the whole discourse surrounding the Energy Master Plan portrays a false image. While the plan regards Iceland’s each and every hydro and geothermal area, potential for exploitation, the areas that have already been harnessed are kept outside of the discourse. Ómar says that it is simply false to state that “only twenty-two areas” have been categorised exploitable, as twenty-eight large power plants have already been built in Iceland. That means that out of the ninety-seven considered in the Master Plan, fifty have already been or will be utilised. In addition to the twenty-seven areas put on hold, another thirty-two have yet not been categorised by the steering committees, which makes the current proportion of protected areas even lower.

Ómar has also pointed out mismatches within the proposition. One example regards geothermal area Gjástykki that is listed as protected, as it is “a part of Krafla’s volcanic system, which has a protection value on a worldwide scale,” like stated in the proposition. But according to Ómar this will depend entirely on definitions. As an energy option, Vítismór, which is a part of Krafla’s volcanic system and is an inseparable part of the Gjástykki-Leirhnjúkur area, is currently listed as an addition to the Krafla power plant and would thus, regardless of its position within the Master Plan, be available for exploitation.

Limnology (or freshwater science) professor Gísli Már Gíslason upholds Ómar’s argument and has stated that half of Iceland’s “profitable hydro power” has already been utilised. One of those rivers is Jökulsá á Dal, harmed by the infamous Kárahnjúkar dam, which in order to be built required disallowing the protection of Kringilsárrani, an extremely important grassland for reindeer. This is not a unique incident as, for instance, the three dams in river Láxá are also manifestations of hydro power plants built in protected areas.

The Coming Struggle

Notably by the above-listed contradictions, which though demonstrate only a small part of the debate about the Energy Master Plan so far, the coming struggle about the fate of Iceland’s nature is going to be harsh and heavy. Armed with the rhetoric of economic crisis, unemployment etc., those in favour of heavy industry – in other words a big part of parliament, the energy companies, the Associations of Industry and Employers, the country’s biggest trade unions, and most recently Samál, a joint association of aluminium producers in Iceland – use literally every opportunity to push for the further development of industry, especially aluminium. In order for that development to occur, the country’s glacial rivers and geothermal areas have to be exploited on a mass scale.

Environmentalists, on the other hand, need to sharpen their knives and both ask and answer a great amount of questions. What, if any, are the actual benefits of heavy industry and its parallel large-scale energy production? And what are its impacts on Iceland’s society and ecosystems? No less importantly, what are its global impacts such as on the atmosphere or bauxite communities in India, Guinea, Hungary and Jamaica? How has it affected the economy and what are its contributions to the current economic situation? What are the impacts of the building of big dams and geothermal power-plants, fuelled by extremely high loans, bringing a temporary pump into the economy that inevitably leads to the demand for another shot? And what is the value of nature per se?

Only by answering all of these and many more questions, one can honestly try to answer the one fundamental question regarding the Energy Master Plan: What actual need is there for yet another three Kárahnjúkar dams, or in fact just a single more power plant?

Like explained on the project’s official website the process was “split into two phases. The first phase, 1999–2003, evaluated and ranked 20 large-scale hydro-power options, mostly located in the highlands, and the same number of geothermal options in 8 high-temperature areas.” The second phase was supposed to “rank all the options to produce the final result,” including “an evaluation of whether some areas should be conserved completely, without any energy-harnessing activities.” Proposed power projects were said to be “evaluated and categorised on the basis of efficiency, economic profitability, and how they will benefit the economy as a whole,” while the “the impact on the environment, nature, and wildlife” was also supposed to be evaluated, “as well as the impact on the landscape, cultural heritage and ancient monuments, grazing and other traditional land use, outdoor activities fishing, and hunting.”

TORFAJÖKULL AND KERLINGAFJÖLL PROTECTED – HELLISHEIÐI, REYKJANES AND KRAFLA AMONG “EXPLOIT-FRIENDLY” AREAS

The second phase’s report, as said before, was published in the beginning of July 2011, two years later than expected when the process started. On top of the protection list are two geothermal areas, around Torfajökull glacier and Kerlingafjöll mountains, which both have been viewed as preferable exploitation areas by the energy industry and its representatives in committees concerning the Master Plan. Other areas scoring high on the protection list are geothermal area Vonarskarð and rivers Skaftá and Hólmsá, south-west of Vatnajökull glacier, the latest-mentioned being a part of Landsvirkjun’s recently announced plan to build 14 new power-plants in the next 15 years. These areas are, according to the report’s authors, the highest ranking natural treasures that were taken into account in the making of the report.

On the other hand the geothermal areas on Hellisheiði by mountain Hengill, the Reykjanes peninsula and volcano Krafla, as well as river Tungnaá, are listed on the top of exploitation areas. Geothermal energy production has been going on Hellisheiði since 2006 (where Saving Iceland’s 2008 action camp was located ), resulting in highly increased sulphur pollution in the Reykavík capital area. There is a vast local opposition against the plant and the planned enlargement of it, its most recent manifestation being when residents of Hveragerði, living close by one of Reykjavík Energy’s boreholes, called the police to complain about constant noise coming from the borehole. Further construction is currently taking place in Hellisheiði as well as in Tungaá river where Landsvirkjun is building its Búðarháls dam that will produce energy for increased aluminium production in Rio Tinto Alcan’s smelter in Straumsvík, Hafnarfjörður. Already existing plans to increase geothermal energy production on the Reykjanes peninsula, for a planned Norðurál/Century Aluminum smelter in Helguvík, have resulted in worries of overexploitation – not only by environmentalists but also, and most recently, by Iceland’s National Energy Authority.

ÞJÓRSÁ RIVER NOT CONSIDERED NATURALLY VALUABLE

What mostly grabs one’s attention is the fact that Þjórsá river is llisted quite high on the report’s exploitation list, meaning that according to the authors, Landsvirkjun’s three planned dams in the river would not have any serious impacts on the environment surrounding the river. Thus the planned dams by Holt and Hvammur are number 15 and 16 on the list, while the damming of Urriðafoss waterfall – the most critical of all three – is located number 28, which is still above the list’s middle. This conclution completely contradicts environmentalists nation-wide and many local residents around the river, opposing all three dams. In an article e.g. published on Saving Iceland’s website, natural scientist and author Guðmundur Páll Ólafsson, criticised the rhetoric of those in favour of the dams:

When a glacial river is harnessed to generate electricity, this important function, and the binding of the greenhouse gas CO2, is diminished. What they generate is not green energy as the advocates of hydro-power plants and heavy industry maintain, but black energy. Dams and reservoirs hinder the function of glacial sediment in the oceans, and hence hydro-electric power plants that harness glacial rivers are far more harmful than has hitherto been believed.

The planned Þjórsá dams have also been highly criticised from a social perspective, most recently by a group of young locals who challenged Iceland’s government “to state officially that no dams will be built in the lower Þjórsá river, against the peoples wishes.” This happened shortly after a Supreme Court ruling stating that the decision of Environmental Minister Svandís Svavarsdóttir, to reject the construction of a dam in Urriðafoss waterfall in Þjórsá river, was illegal. The ruling was only a one small factor in the long and complicated farce concerning the Þjórsá issue – a farce including Landsvirkjun’s attempts to bribe local residents and the company’s threats of using expropriation in order to gain access to lands owned by people opposed to the dams. Following the publication of the Master Plan’s second phase report, Guðmundur Hörður Guðmundsson, chairman of environmentalist organization Landvernd, expressed the organization’s disagreement with Þjórsá’s position on the exploitation list, stating that a much better and more detailed research has to be done on the planned dams’ social impacts.

Interviewed by newspaper Fréttablaðið, natural scientist Guðmundur Páll Ólafsson voiced a very negative view towards the report, saying that the whole process of it marks the energy company’s coming retrieval. “My criticism is mostly based on the premises that the exploitation options are always at the forefront, but not to protect the Icelandic nature and Icelandic natural treasures from the outburst of the present,” Guðmundur said and added that the latter is much more important than to exploit certain areas. He also criticised the Minstry of Industry and the National Energy Authority for allowing Landsvirkjun to walk all over the second phase’s protective section.

THE COMING RETRIEVAL

Only a few days prior to the report’s publication Landsvirkjun announced the company’s future policy formulation, parallel to the publication of another report that was made for Landsvirkjun by a consulting service named GAMMA. The reports states that according to the results of the Energy Master Plan’s first phase, Landsvirkjun can duplicate its energy production in the next 15 years, promising between 9.000 and 11.000 thousand related jobs. If things go like planned, at least 3.000 people would be employed by energy-intensive heavy industry companies in 2025, while the so-called – and often doubted – derivative jobs would be a little more than 4.000, meaning that c.a. 4% of the Icelandic nation would work directly or implicitly for heavy industry. To make a good story better the director of Landsvirkjun, Hörður Arnarson, compared Landsvirkjun with the Norwegian oil industry, saying that if the company is allowed to follow its published strategy, only its dividend payment and tax payment could become 14% of the state treasury. Hence Landsvirkjun would be able to live up to the cost of Iceland’s police, courts, culture, sports, colleges and universities.

Aforementioned Guðmundur Hörður Guðmundsson, chairman of Landvernd, called Landsvirkjun’s strategy “the mapping of the next economical bubble,” pointing out that the financial amounts mentioned in the report are much higher than the amounts of the Kárahnjúkar dam project, which contributed fiercely to Iceland’s economic collapse in 2008. “How will the situation be here when all this construction will be finished?” he asked when interviewed by a left-leaning news-website Smugan, adding that Landsvirkjun is not the only energy company planning large-scale constructions. The editor of that same website, Þóra Kristín Ásgeirsdóttir, called the report “Landsvirkjun’s political manifesto” and asked when a time would come where expensive professionals would be hired to write a report about the immeasurable value of unspoiled nature instead of yet another report on the greatness of large-scale exploitation. In an open letter to Katrín Júlíusdóttir, Minister of Industry, Guðmundur Páll Ólafsson said that “in fact nothing has changed in the Minstry of Industry since the collapse […] except that the scurrility is more than before.”

ENVIRONMENTAL MINISTER PROMISES EMPTY-LOOKING CHANGES

As reported by Saving Iceland before, environmentalists are highly critical of the making of the Master Plan, especially in relation to a committee, nominated to sort the areas in question into three different categories: protection, hold and utilization. The committee did not include a single representative from environmentalist organizations whereas representatives from the energy and tourism industries, as well as the Ministries of Environment and Industry, had seats IN it. Minister of Environment and a Left Green MP, Svandís Svavarsdóttir, has now backed up the criticism, stating that there is, and has always been, an enormous advantage difference between environmentalists on the one hand and those in favour of extreme exploitation on the other. Interviewed by State TV station RÚV, Svandís said that within both the Ministries of Environment and Industry there is a will to strengthen environmentalists’ position, though no plans have been made how to actually execute that will.

Once again promises given about changes concerning the protection of Iceland’s nature seem to lack all real meaning.

It’s 14 years since the war ended over what was once the world’s largest copper mine, at Bougainville in Papua New Guinea, but Dateline has uncovered claims that the PNG government was acting under instruction from mining giant Rio Tinto, when it killed thousands of people who wanted the mine shut down. The allegations come from PNG’s former Opposition Leader, and now Prime Minister, Sir Michael Somare, in 2001 court documents obtained by SBS Senior Correspondent Brian Thomson for Dateline. In them, Somare says the company, and its subsidiary Bougainville Copper Limited, effectively used its wealth to control the government – a claim denied by BCL. With negotiations now underway to reopen the abandoned mine, could Bougainville be heading for a repeat of the bloody battle over its resources?

Overrun by Viking ambition, Reykjavík Energy built headquarters fit for Darth Vader, expanded ambitiously, dabbled in tiger prawn farming and flax seed production, went into the fibre optics business, invested in a new geothermal plant, speculated in places like Djibouti, and finally managed to run itself so completely into the ground that foreign investors will no longer offer the company loans.

In hopes of rescuing its multi-utility service company from the depths of abyss, the city of Reykjavík stepped in this March with a 12 billion ISK (105 million USD) loan, which is nearly its entire reserve fund set aside for the company, but still only a fraction of the company’s massive foreign debt of 200 billion ISK (1.7 billion USD).

With thousands of captive lifetime subscribers and a means of producing energy at very little cost, the company had all the makings of a cash cow. So what happened to Reykjavík Energy, an entity that less than a decade ago was a perfectly viable, municipally owned company providing the city with basic utilities: cold water, hot water and electricity?

From the top floor of Reykjavík Energy headquarters, an expansive view of Mount Hengill can be observed on the eastern horizon. The mountain range forms part of the Mid-Atlantic Ridge as it cuts through Iceland and divides the country between the North American and Eurasian continental plates. It is one of the most geologically active areas in the world.

Two thick white clouds of steam can be seen rising up from the mountain where Reykjavík Energy operates the Nesjavellir and Hellisheiði geothermal power plants. Together the plants provide hot water and electricity to more than half of Iceland’s population of 318.452.

Over the last half century, Iceland has successfully established a name for itself as a world-renowned leader in the field of geothermal energy, using it to heat 90% of the country’s buildings and nearly all 136 swimming pools in the country. As Iceland’s President Ólafur Ragnar Grímsson said at a geothermal conference last year, “We were very fortunate that while most of the world forgot about the geothermal sector, we had visionaries in Iceland. Not just scientists and technical experts, but also local councillors in towns and cities who saw the opportunities in this area.”

The President is well known today for having travelled the world during Iceland’s boom years giving laudatory speeches about the nation’s valiant bankers who led the country to economic prosperity, to the extent that some have called it cheerleading. However, since the crash he has abandoned the bankers, and now travels the world singing songs of praise for Iceland’s geothermal “visionaries,” who, instead of the bankers, helped “transform a country of farmers and fishermen into one of the most prosperous welfare economies in the world.”

The story goes, as he told it in Xiamen, China last year, “In my youth, over 80% of Iceland’s energy needs came from fossil fuel, imported coal and oil. We were a poor nation, primarily of farmers and fishermen, classified by the UNDP as a developing country right down to the 1970s. Now, despite the effects of the present financial crisis, we are among the most prosperous nations in the world, largely due to the transformation which made our electricity production and space heating based 100% on clean energy.”

He emphasises the last point that Iceland’s geothermal energy business has served to offset the effects of the economic crisis: “Yes, indeed,” he said in Abu Dhabi, Bali, and Shanghai last year, and again in New York this year, “geothermal energy has helped Iceland to survive the recent banking shock […].”

While the story that the President tells about Iceland’s transformation to geothermal energy is indeed marvellous, and it is true that the cost of heating and electricity is nowhere in Europe cheaper, one would have to be wearing rose-tinted glasses to see Reykjavík’s geothermal energy business as a saviour in the crisis. Upon closer inspection it appears that the country’s largest multi-utility geothermal energy company, which claims to operate “the largest and most sophisticated district heating system in the world,” has only driven the nation into deeper water.

A FINANCIAL BASKETCASE IS UNVEILED

When The Best Party came to power in Reykjavík after the May 2010 elections, the comedian-turned-Mayor Jón Gnarr said he was surprised to learn that Reykjavík Energy was in such a horrible financial state. “I had always had the impression that it was the wealth in the city,” he said of the company that is 94% owned by the city Reykjavík and exploits what is arguably Iceland’s greatest resource.

Yet despite the abundance of resources and a steady demand for its services, Reykjavík Energy managed to rack up a 233 billion ISK debt (2 billion USD or 1.4 billion Euros), which is nearly four times the city’s annual budget of 60 billion ISK. What’s more, 200 billion ISK (1.7 billion USD or 1.2 billion Euros) of this debt is in the form of foreign currency loans, which fluctuate at the whim of the króna.

“For months I found myself in daily meetings directly or indirectly related to Reykjavík Energy,” Jón Gnarr told me, admitting that it grew very tiresome. It was around that time, on September 25, 2010 at 11:43 pm, that he wrote the Facebook status update that would come back to haunt him in the form of political ammunition six months later [our translation]: “Reykjavík Energy is bankrupt. The city is in bad shape and its revenue has decreased. What should be done? Cut backs? Price increases? Streamlining? Where and how much? Meetings, meetings, meetings…”

Aiming to clean up the mess, Jón Gnarr’s team brought in Haraldur Flosi Tryggvason as Chairman of the Board and made him a full-time executive director with the gargantuan task of getting the company back on track. The initial ‘rescue operations’ included orchestrating a mass layoff of 65 employees in October 2010 and raising the price of heating and electricity by 27% between November 2010 and January of this year, to little fanfare from citizens and employees alike.

Though the decision to hire Haraldur Flosi was initially criticised because he had been the head attorney at Lýsing, a company that guaranteed the now-deemed illegal foreign currency loans to individuals, he is also one of the few Chairmen in the history of Reykjavík Energy to have a background in business. “We have made an effort to hire people based on professional training and experience rather than political affiliation,” Jón Gnarr told me.

In February, Haraldur Flosi had been noticeably cautious when he explained to me how the company managed to accumulate such colossal debt. “If the crash had not happened, it wouldn’t have been nearly as bad,” he said. “When the financial crisis hit, Reykjavík Energy was in a huge expansion period, so it was quite exposed to the crash, and because loans were mostly financed in foreign currency, the company’s debt about doubled overnight.”

The company chose foreign loans with a favourable interest rate of 1–2% over domestic loans with an interest rate of 10–15%. Had the company taken domestic loans at the higher interest rate, the debt would not have doubled in the crash, but it would nonetheless have been equally large today, Reykjavík Energy PR Manager Eiríkur Hjálmarsson would later tell me.

While this suggests the company’s massive debt cannot be wholly explained by the crash, Haraldur Flosi was not interested in pointing any fingers. He admitted that the company was perhaps over-optimistic in its investments, but yet his explanations were mostly framed by the economic crash.

“The biggest problem today is getting financing,” he said. “Foreigners have become sceptical of the situation here in Iceland. It’s more difficult to get access to money and it’s more expensive,” he told me, adding diplomatically, “but I think it’s the same everywhere. Many companies abroad are also struggling to adjust to this new reality. This is in a nutshell what happened.”

Less than one month later, this problem became more evident. Unable to secure loans from Deutsche Bank, Barclays, Citibank, Council of Europe Development Bank, European Investment Bank and Nordic Investment Bank, Reykjavík Energy announced on March 29 that it would be dipping 12 billion ISK deep into the city’s reserve fund, which had been set aside for a situation like this.

At the same time, the company announced that it would cease paying the city its annual 800 plus million ISK in dividends, it would continue raising the price of hot water and electricity, it would lay off another 90 employees, and it would begin selling off all assets unrelated to its core business. These assets include everything from a fibre optics business to The Pearl, a Reykjavík monument. Russian investors with ties to Ásgeir Þór Davíðsson from the sleazy Kópavogur strip club Goldfinger have already made an offer on Perlan, expressing an interest in turning the omnipresent monument into a flashy casino.

THE BEST PARTY TAKES THE RAP

Despite the fact the Reykjavík Energy had been heavily in debt for years, little had been said about it. “The state of the company should have been pretty clear for some time now,” Jón Gnarr told me, “but for some reason, while Icesave featured heavily in the public discourse, nobody talked about the state of Reykjavík Energy though the company debt is four to five times the Icesave debt.”

As soon as news of the emergency loan from the city broke, however, a blame game ensued. Fingers were pointed in all directions, but despite the fact that The Best Party is the only political party in Reykjavík that did not have a hand in running the company during the decade that it accumulated its monstrous debt, the fingers pointed were generally in the direction of Jón Gnarr and the new Reykjavík Energy directors.

It started on March 27 with an article on news website Vísir.is blaming Jón Gnarr and the new directors for making it difficult for the company to get its loans refinanced. As seems customary in the Icelandic media, Vísir based the entire story on an anonymous source: “According to our sources from the financial world, getting loans refinanced has not been going well, due to, among other reasons, comments that have been made by the directors and Jón Gnarr.”

Specifically, the article said, according to their sources, investors had received a translation of one of Jón Gnarr’s Facebook statuses: “Reykjavík Energy is bankrupt.” The status, which has since been deleted (and is quoted above in its entirety), was posted in September 2010, six months prior to the Vísir story.

This continued to be a point of contention for others, like Independence Party City Councillor and former Mayor of Reykjavík Hanna Birna Kristjánsdóttir, who publicly criticised Jón Gnarr for his comments about the company being bankrupt. She also disagreed with the idea of phrasing the city’s 12 billion ISK loan as a city bailout, which implied bankruptcy. This is despite Reykjavík Energy CEO Bjarni Bjarnarson claiming that the company would not have been able to continue paying employee salaries without the loan.

Then, on March 30, Haraldur Flosi’s predecessor as Chairman, Guðlaugur Gylfi Sverrisson, wrote a letter to the media both to make it known that when he was Chairman—between 2008 and 2010—the company had always been able to secure loans, and to accuse the new Board of fumbling a loan that was essentially a sure grab.

“In January 2010 the CFO of Reykjavík and the CFO of Reykjavík Energy met with the Nordic Investment Bank (NIB). They [NIB] expressed great desire to lend Reykjavík Energy 12–14 billion,” he wrote. “…In June 2010 when I left as Chairman, there were no doubts that NIB would loan the company the previously mentioned amount given that the company met stipulations [to raise prices].”

He concluded his letter with the implicating questions: “What changed after June 2010? Could it be that comments made by the directors and owner about the financial state of Reykjavík Energy have negatively influenced its ability to get financing?”

Sigurður Jóhannesson, a Senior Researcher at the University of Iceland Institute of Economic Studies, put it this way on a University of Iceland radio show: “I probably wouldn’t say that my company were bankrupt if I was trying to get loans, but I think that investors must look first and foremost at things like cash flow and annual financial statements. One can also read reports by rating agencies, and there is very little there mentioned about Jón Gnarr.”

If anybody knows best what the banks were thinking in 2010, however, it is probably Anna Skúladóttir who was Reykjavík Energy’s CFO from May 2006 until 2011. As Guðlaugur Sverrisson wrote, Anna met NIB in January 2010 and she confirms in conversation that “the bank expressed interest,” but told me that it was by no means a done deal. “In 2010, foreign loans weren’t just closed to Reykjavík Energy. Iceland as a whole was still on ice.”

Ultimately, the far bigger questions remain: What happened to Reykjavík Energy before Jón Gnarr and the Best Party enter the story in June 2010? And, could it be that something happened before 2010, which would explain the company’s financial state?

WHEN MONEY GREW ON TREES

Reykjavík Energy was founded through the merger of the institutions Reykjavík Electricity (Rafmagnsveita Reykjavíkur) and Reykjavík District Heating (Hitaveita Reykjavíkur) in 1999, and Reykjavík Water Works (Vatnsveita Reykjavíkur) in 2000. The company thus began on solid ground, with a long history of well-managed services to captive subscribers, respectively dating back to 1921, 1930 and 1909.

Historian (and active Left Green member) Stefán Pálsson, who worked as a curator of the Reykjavík Energy Museum for ten years before he was let go in the mass layoff last October, explained that the institutions were so lucrative that they had to find ways of spending money so that they wouldn’t show too much profit.

“They would, for example, hire hundreds of school children every summer to plant trees, make roads, and work on environmental projects,” Stefán said. “They would rationalise that we are harnessing geothermal energy from this area so we owe it to society to plant loads and loads of trees. And we give school children jobs, which makes their parents happy, which is good for society, and things like that.”

In fact, the institutions that preceded Reykjavík Energy were so lucrative that politicians could milk them to fund pet projects and other vanities. For instance, it was under Davíð Oddsson’s legacy as Mayor of Reykjavík that District Heating financed the construction of The Pearl, a well-known monument in Reykjavík, which opened to the public in 1991. “It was never supposed to turn a profit,” Stefán said. “The big tanks carry hot water, but then there is the building on top, the restaurant, and the sightseeing deck. And actually it was supposed to be even more extravagant with palm trees and tropical birds and plants.”

Nonetheless, the institutions were loaded with money and owed very little when these endeavours were carried out. It was not until after the institutions were turned into a private partnership company (sf.) in 2001 that the debt begins to amass.

A SLEEPING GIANT STIRS

If there is one person who has been most closely associated with Reykjavík Energy over the years, it is Progressive Party politician Alfreð Þorsteinsson. Alfreð’s involvement began in 1994 when he was appointed Chairman of a municipal body charged with overseeing the three institutions. It was under his leadership that the institutions were merged into Reykjavík Energy in 1999, and from then until 2006 he served as Chairman of the Board of the new company.

Alfreð, along with Guðmundur Þóroddsson, the former head of Water Works who was hired as CEO, were keen on stressing that Reykjavík Energy was now a company, Stefán explained. “We the staff were told that we were not to refer to it as an institution.”

This shift in mentality was also mirrored by a shift in the legal framework governing the company. A specific law, no. 2001/139, which was passed in 2001, gave Reykjavík Energy the right to take small loans and make payments for the purposes of running the company without the consent of its owners (the municipalities, Reykjavík, Akranes and Borgarbyggð). It also gave the company the right to operate subsidiaries and to invest in other companies. In essence, it enabled Reykjavík Energy to be run like a private company, while retaining a political management.

“The idea was that this new company was a sleeping giant that had been ineffective in the past. It had almost endless credit because it owed next to nothing, and around early 2000 that was not really something to brag about in Icelandic society; it was seen as an unused opportunity. You had this potential of taking loans to grow,” Stefán told me.

“The same argument was made to regular people who had paid off their mortgage; they were told that this made no sense, that it was downright silly. So people refinanced their homes, took a new loan to be paid over twenty years time instead of five, and this freed cash to play in the stock market, or to buy a summer house or a new jeep. I would say that Reykjavik Energy’s troubles stem from a large-scale version of the same thing.”

In the case of Reykjavík Energy, unleashing the power of capital meant buying tens of small district heating companies in the south and west of Iceland, expanding their service from five to over twenty municipalities. “You got the impression that somewhere in Reykjavík Energy there was someone with a map, putting down flags, you know with a Napoleonic dream of taking over,” Stefán jokingly remarked.

Additionally, Reykjavík Energy began investing in other companies, and by 2003, it had shares in over twenty companies, including Feyging ehf, a flax seed operation of which it was the largest shareholder. That project was abandoned in 2007 with a loss of 340 million ISK. An attempt to farm tiger prawns was also declared a failure in 2007, after seven years of work and 114 million ISK down the drain.

Alfreð, the former Chairman of the Board, is adamant that the investments were not too many or made too quickly. “When I left in 2006,” he told me, “the company’s debt was less than 70 billion ISK. The state of the company was very strong. The loans taken were all long term, to be paid off in 20–30 years.” In any case, that debt is still nearly seven times the debt that Reykjavík Energy inherited through the merger of the institutions in 1999.

BIG INDUSTRY FULL STEAM AHEAD

That being said, the bulk of Reykjavík Energy’s debt can be attributed to the construction of the Hellisheiði plant, which former Reykjavík Energy CFO Anna Skúladóttir said is “the largest investment in the company’s history.”

The decision to build the plant, she said, was made in the beginning of the 21st century when it became evident that the Reykjavík area would need more hot water as the Nesjavellir plant was expected to become fully utilised. At the same time, the decision was made to harness 300 megawatts of electricity to be sold to heavy industry, as it was considered more efficient to build and run a plant that produces both hot water and electricity.

In 2006, the company reached an agreement to sell electricity to aluminium smelting company Century Aluminum Norðurál, but when the crash hit in 2008, Reykjavík Energy had yet to secure financing for phase five of the plant build-up, including the 90 MW that were supposed to go to Norðurál in 2010.

By that time, however, it had already purchased five turbines at about 5 billion ISK a pop. “Turbines must be ordered at least three years in advance,” Anna explained. “It’s like ordering an airplane.”

Two of the five will come online this year, but an agreement was reached to postpone delivery of three of the turbines until a decision has been made to continue further plant production. Of the three outstanding turbines, Reykjavík Energy didn’t have a definite energy source lined up for the third one. What’s more, there were originally seven, not five, turbines ordered, but Independence Party politician Kjartan Magnússon said he was able to back out of two of them when he took over as Chairman of the Board in 2008.

When Moody’s reviewed the company for a possible downgrade in July 2008, it noted: “The company’s financial profile has continued to weaken during the course of the year, mainly due to the company’s exposure to unhedged foreign currency debt, the company’s primary source of funding. Conversely, 80% of its revenues today are in Icelandic krona derived from its operations as Reykjavik’s primary multi-utility.”

Despite the risks involved, however, it has essentially been government policy to attract heavy industry to the country. In the span of a decade, Iceland’s aluminium production went from 4% of the country’s GDP in 2000 to 14% in 2010—surpassing the country’s fish exports and making Iceland one of the largest aluminium producer in the world. “The ‘heavy industry agenda’ was a big part of the bubble in Iceland,” Minister for the Environment Svandís Svavarsdóttir said.

“The Left Greens always put a question mark next to heavy industry, but it was really the mainstream view. When we suggested that it was possible to do something else, people said, well ‘do you want to knit socks and pick mountain herbs?’ The Left Greens were considered a very foolish party for not wanting to proceed with heavy industry.”

Following the city’s bailout, though, it has been increasingly debated whether a municipally owned company should take the risks associated with making these kinds of heavy industry deals given that the city and its taxpayers are accountable. Not only is Reykjavík Energy financially incapable of continuing with phase six of the Hellisheiði plant for the time being, but they have also for the first time turned their back on the company’s heavy industry policy.

“We think that Reykjavík Energy should fulfil its role as a service company that provides people with electricity, hot and cold water, and sewage disposal,” Jón Gnarr explained. “We don’t think it should participate in heavy industry or other risky investments.”

BLOWING THE LID OFF 2007

Though it was undoubtedly unfortunate that Reykjavík Energy was in the middle of raising capital for the Hellisheiði plant when the crash hit, the company nonetheless made some very questionable decisions in 2007 at the peak of Iceland’s financial boom. For instance, the Board decided to buy shares in Hitaveita Suðurnesja for 13.4 billion ISK despite the fact that the company didn’t have any spare funds. The shares were paid for in entirety with a five year loan, which is due to come back to bite the company in 2013.

Perhaps, though, the spirit of the times is best captured in Reykjavík Energy’s decision to boost its geothermal operations overseas through a subsidiary company called Reykjavík Energy Invest (REI). At the same time as the banks had reached nearly ten times the nation’s GDP by expanding offshore, Reykjavík Energy also aspired to a world domination that made Ólafur Ragnar Grímsson proud. “I allege that if we continue like this,” he told a TV2 reporter in October 2007, “the Icelandic energy ‘outvasion’ can be an even bigger operation than the banks.”

The event that the President was praising is now commonly referred to as the REI scandal, in which Reykjavík Energy briefly merged its subsidiary company Reykjavík Energy Invest with Geysir Green Energy, a private company owned by, amongst others, FL Group and Glitnir bank, which were highly implicated in Iceland’s banking collapse.

According to an article that appeared in Fréttablaðið on October 4, 2007, REI’s project list included the building and buying of about 700 MW of energy in the United States, Philippines, Greece, Indonesia, Germany and Ethiopia. Their goal was to produce three to four thousand megawatts before year-end 2009, at which time they planned to go public. “These are very ambitious goals that will lead to the biggest geothermal energy company in the world,” FL Group Chairman Hannes Smárason told Fréttablaðið.

Though Reykjavík Energy Chairman of the Board at the time Haukur Leósson sincerely believed that the merger was in the best interest of the company, noting that they had negotiated 10 billion ISK for the use of Reykjavík Energy’s brand name alone, it is widely believed that there was foul play involved. When the former CEO of Glitnir and Chairman of REI Bjarni Ármannsson admitted in 2009 that the merger between REI and GGE had been a mistake, Independence Party politician Gísli Marteinn Baldursson wrote on his blog, “Hopefully he now realises that there were other things than our deliberation that have done more damage to Iceland and one would wish that more had shown care.”

Ultimately, the grand plans never materialised. After the company introduced the idea to the Board, news of the meeting went to the media and people were especially outraged to hear that key staff at Reykjavík Energy were being given special stock options. “There was so much anger,” Svandís Svavarsdóttir recalled. “I did a lot of interviews in the span of two to three days. I’ve never felt anything like it. It was like everything was burning in society. There was a lot of heat.”

The controversy led the Independence Party and Progressive Party majority municipal government to fall apart, and a new majority between the Social Democrats, Progressives, Left Greens and Liberal Party formed with Dagur B. Eggertsson becoming Mayor of Reykjavík.

While the so-called ‘100 day majority’ reigned, a steering committee headed by Svandís with representatives from every political party was set up to look into the events and to determine whether any lessons could be learned. The more they learned, the more it became clear to them that the merger should be stopped. They felt that Reykjavík Energy had developed too far from its owners and on its own initiative.

“In many ways, the REI story is a prototype of the financial crisis. Politicians decided to allow private individuals into public entities and let them behave as if they owned what belonged to the public,” Svandís told me.

“We saw that on a large and small scale in society. We saw it in the privatisation of the phone company, the banks, in the privatisation plan of the right-leaning government, which ruled for far too long, for eighteen years, but in Reykjavík this was basically the same thing that happened.”

At the same time as the REI deal was being discussed, an attempt was also made to privatise Reykjavík Energy. Part of such a proposal, which was put forth by CEO Guðmundur Þóroddsson and Vice President Hjörleifur B. Kvaran on August 28, 2007 rationalised that “[i]t is time to unleash the energy of free enterprise so that Iceland’s expertise and knowledge can be used to the fullest extent in the geothermal energy company outvasion.”

On September 3, 2007, the Board actually approved sending the proposal to the owners of the company for approval, e.g. the Mayor of Reykjavík, the City Manager of Akranes and of Borganes. However, the idea fell by the wayside when the frenzy erupted over Reykjavík Energy Invest. “Since then it hasn’t been brought up again, and I doubt it will be,” Svandís said. “Well I hope not.”

Reykjavík Energy Invest still exists today though its ambition is far from the grandiose dreams of its founders. Independence Party City Councillor Kjartan Magnússon, who became Chairman of Reykjavík Energy in January 2008, a few months after the REI scandal exploded, explained: “We decided after I became chairman to fulfil our commitments in projects abroad, in Djibouti for instance, but to stop the financing of such projects thereafter, and instead focus on selling knowledge and expertise.”

Said Anna Skúladóttir: “Unfortunately, looking back I think that everyone ran around crazy in 2007, it didn’t matter whether it was the municipality, State, companies, individuals—everyone was blinded. Hopefully we’ve learned something from this and can look forward.”

It might be noted that in 2009, Reykjavík Energy purchased a 7.1 million ISK Mercedez Benz ML 350 for Anna’s personal use. Anna went on to return the car in 2010 after Icelandic tabloid DV ran an indignant story about it.

A ROSY STORY INDEED

Though the crash alone is a convenient excuse as Reykjavík Energy’s debt doubled in 2008 due to fall of the króna and financing became more difficult, it could also be said that Reykjavík Energy was as much a victim of the financial crisis as Iceland’s banks were a victim of the United States mortgage crisis.

Truth be told, Reykjavík Energy managed in less than a decade to run a perfectly viable company into the ground, despite having the ingredients of a cash cow. As President Ólafur Ragnar Grímsson tells Icelanders, foreign leaders and journalists alike, geothermal know-how in Iceland is first class, and people come from all over the world to see it firsthand.

“We have great competitive advantages,” Ólafur said at a geothermal conference last year. “One is that Iceland is the only place in the world where you can, in a single day, witness all the aspects of geothermal utilisation. You can witness three geothermal power plants, a greenhouse town in a farming area, a world famous international spa, a medical clinic, as many swimming pools as you want to and visit fishing companies that use geothermal energy for drying their products.”

He continued: “…When we bring people here, they are inspired, they have a vision. They leave Iceland full of hope, inspired by the possibilities. That is very important, because political decision-making and even business decision-making need more than mere calculations. They also need a vision and inspiration—hope. That is what we can give.”

With all the geothermal know-how in the world, however, Iceland’s largest multi-utility geothermal energy company was inspired by a vision that took hold of Iceland during the financial bubble, which grew rapidly for a decade, peaked in 2007 and then burst in 2008.

When we called up the President to ask about his geothermal rhetoric, he explained, “The reason why I have emphasised the geothermal experience of Iceland as well as the technological know-how is that I believe this the most significant contribution we can make to the battle against climate change, which seriously is the most fundamental threat that the world faces.”

He added: “Even if one company in Iceland does badly it doesn’t mean that we should think to take this away from other countries, and quite frankly there is such a strong demand from the world to have access to Icelandic cooperation in this area that our problem is to meet the requests and they come from poor countries in the developing world to rich countries in Europe and the Western world.”

Despite the dark outlook presented by rating agencies for Reykjavík Energy, Jón Gnarr is optimistic. “The state of Reykjavík Energy is still difficult, and it’s very sensitive to exchange rates,” he told me, “but I believe that the plan that we have initiated is very good, and I am confident that the state of Reykjavík Energy will improve.”

_______________________________________________________________________________

In addition:

HEADQUARTERS

Price tag: 4.271,7 BILLION ISK

As the company struggles to stay afloat, its headquarters, which were built in 2002 under the chairmanship of Alfreð Þorsteinsson, stand as a symbol of what many believe to have been the excessive and ill-founded investments of the municipally owned company.

“A service company for the people of Reykjavík has no business building a house like that,” Independence Party representative Kjartan Magnússon disapprovingly told me. “The people of Reykjavík felt it was part of a power game. When you come into this house, it’s a sign of power.”

Similarly, former employee and historian Stefán Pálsson called it a monstrosity. “You would expect it to be Darth Vader’s Headquarters. It is my advice to politicians connected with Reykjavík Energy never to allow themselves to be interviewed outside the building.”

On a visit to the infamous headquarters, Chief Press Officer Eiríkur Hjálmarsson, a company veteran since 2006 and the lone survivor in the PR department after the October layoffs, showed a photographer around the building. He took us to top floor to see the view over Mount Hengill, where the company operates the two power plants at Nesjavellir and Hellisheiði.

Since our visit, that floor has been put on the rental market. The advertisement is telling: “Fantastic 745m² office space on the sixth and top floor in Reykjavík Energy is available for rent immediately. The building is fully equipped with the best of the best and has access to a big rooftop balcony with a vast unhindered view over the city…”

It continues: “In the house is a staffed reception, World Class (luxurious fitness centre), with optional access to lecture rooms, a library, computer room, and more […]Special housing for those with demands. Blue prints and more information can be solicited from our sales men, trod.is.”

The ad doesn’t mention it, but the building also houses impressive art, including a 35 metre tall granite fountain by artist Svava Björnsdóttir, which travels through all five floors of the building, and a Foucault Pendulum, which takes 26 hours to knock down all the pins before they pop up again.

However, former Chairman of the Board Alfreð Þorsteinsson doesn’t think it’s overly extravagant. “The main fault of the house is that it is considered beautiful and chic,” he said. “If it had been built as a one or two story house nobody would have said anything. Should we have built an ugly house?” Furthermore, he said the top-class kitchen, which has been heavily criticised is “not unlike other kitchens in Reykjavík.”

—

THE REI SCANDAL

The course of events

January 25, 2007

Former Reykjavík Energy CEO Guðmundur Þóroddsson proposed to the Board that Reykjavík Energy create a subsidiary company called Reykjavík Energy Invest (REI), which would oversee all of Reykjavík Energy’s stakes in ventures abroad, including Enex, Enex-Kína, Galantaterm and Iceland American Energy. The Board approved.

March 7

The Board additionally agreed that Reykjavík Energy would put two billion ISK into REI towards future projects. A report that was commissioned at the January 25 Board meeting and then delivered at the March 7 Board meeting noted: “There is great interest amongst Icelandic investors in environmentally friendly energy, for instance, Geysir Green Energy hf, Atorka hf and Enex hf. The first two named have already requested a partnership with Reykjavík Energy in the outvasion.”

June 11

Reykjavík Energy Invest was formally founded. Appointed to the Board were Björn Ársæll Pétursson, Haukur Leósson, and Björn Ingi Hrafnsson. Reykjavík Energy CEO Guðmundur Þórodsson would replace Björn Ársæll Pétursson as CEO in September.

September 11

Former CEO of Glitnir Bjarni Ármannsson was appointed Chairman of REI and bought stock worth 500 million ISK.

September 20

The Directors of REI met with banksters Hannes Smárason from GGE and Jón Ásgeir Jóhannesson from FL Group to discuss merging the companies.

September 22

Chairman of REI Bjarni Ármansson met with Chairman of GGE Hannes Smárason to flesh out the details of the merger.

September 23

Chairman of REI Bjarni Ármansson and Chairman of Reykjavík Energy Haukur Leósson met with Mayor of Reykjavík Vilhjálmur Þ. Vilhjálmsson at his home to brief him on the merger. Vilhjálmur did not inform his colleagues in the Independence Party about the merger until October 2, which greatly upset them, and led to a rift in the Independence Party.

October 3

Reykjavík Energy held a Board meeting and an owners meeting to introduce the merger. Invitations to the meeting were sent out the previous evening, which is extremely short notice. Nonetheless, the Board approved the merger, save for Svandís Svavarsdóttir from the Left Green party, who did not vote.

News of the meeting and specifically news that key staff were being given special stock options blew up in the media. The majority government between the Independence and Progressive parties collapsed. A new majority, dubbed ‘The 100 Day Majority’ took over. A steering committee headed by Svandís Svavarsdóttir began investigating the events that led up to the merger and proposed to City Council that the merger be thwarted.

—

‘OUTVASION’

Yes, it’s a made up English word

The term ‘outvasion’ is a direct translation of the Icelandic word ‘útrás,’ which is often used to describe Icelander’s expansion overseas. The ‘útrásavíkingar’ or ‘outvasion Vikings’ refers to the businessmen who set out to conquer the world with a Viking-like ambition that ultimately brought about Iceland’s downfall in 2008.

After many years of preparations the Greenlandic government say the final decision on Alcoa’s proposed smelter will be taken at the spring 2012 of the parliament. It is more likely, as the global history of the industry and the evidence in Greenland tells us, that the decision has in fact already been made undemocratically behind closed doors, despite the decreasing support of the Greenlandic people. In fact Alcoa and the Greenland government are so keen on passing the project that they have just hired an eighth employee at their national company Greenland Development- formed to enable the industry to go ahead. Juaaka Lyberth’s explicit remit is to influence public opinion on the smelter through the media. Greenland Development paints a rosy picture of an aluminium future for Greenland, but will their promises of prosperity come true? A comparison to Alcoa’s Fjardaal project in East Iceland suggests that many will not.

Local employment?

“The aluminum project is a major project that will offer a large number of stable and lasting jobs.” says Minister for Industry and Mineral Resources, Ove Karl Berthelsen.[1]

Despite this claim Alcoa recently asked the Greenlandic government’s permission to use Chinese contractors to build the two hydro dams and smelter. Chinese workers would be paid half the salary of members of the Greenland Workers Union. They claim this will be necessary to make the project competitive and that the Greenlandic labour force will not be sufficient[2].

Greenland Development responded immediately to this unpopular news by sending out a press release explaining why competitiveness was so important. The release explained that since the financial crisis China has increasingly dominated the market for aluminium smelting due to their low cost of construction and production. Building a smelter in China costs $3000/ton of production capacity compared to $4500 – £5000/ton in Iceland or Saudi Arabia. Greenland is in direct competition with these prices and will have to provide very good terms for the company if they want the project to go forwards[3]. ‘Good terms’ means cheap labour and foreign workers over Greenlandic contracts.

The labour question has dominated debate on the smelter in Greenland recently. Bjarne Lyberth, Head of the organisation Against Aluminium Smelter in Greenland is concerned that other important issues are being sidelined:

“In my view the issue on cheap foreign labour is just one of many problems. There is a risk that this becomes perceived as the main hurdle to the project and other serious cultural, social, health, environmental and, economic impacts just become “minor issues” to deal with later.”

However, the promise of jobs is usually cited as the biggest rationale for building such huge industrial constructions, and it is a very tempting one in economically deprived rural areas where smelters are often built. When the decision on the Fjardaal aluminium smelter and associated Karahnjukar dams was pending, the Iceland government made similar claims. They promised the Confederation of Icelandic Labour that the ratio of Icelanders to foreign workers at the dam construction site would be about 8:20, amounting to 3000-5000 jobs for Icelanders[4]. In reality the construction company Impregilo only employed around 100 Icelandic workers out of 1100 employees at the site. Many of these workers were Chinese, Portuguese and other non EU nationalities. Impregilo claimed that Icelanders didn’t want the work as it was not as highly paid as they had hoped, and there was a high turnover. In contrast the Chinese workers were very stable despite tough conditions[5]. Increasing company profit by using temporary low paid foreign labour is known as ‘social dumping’.

The construction of the dams was plagued with controversy as it was revealed that foreign workers were being paid less than Icelanders and made to work in unsafe conditions without proper equipment[6]. 1700 work related injuries were reported during the dam’s construction, 120 resulting in long term or permanent inability to work. Four workers are known to have died from injuries on the site[7] [8]. There is evidence that when the Icelandic coalition of unions became vocal about the treatment of workers in the press they were silenced by bribes from Impregilo who promised to pay into the union’s pension funds. A few years later it was revealed that the payments had not been made and the union (ASI) raised rights of foreign labourers again. Shortly after the funds were finally paid and ASI’s complaints ceased.

National income from aluminium export?

Greenland Development‘s recent news release explains;

‘The project economy of each individual project is decisive. The competition is as such between countries that it among other issues hinges on the terms a host country will provide for a new project. Countries in Asia, the Middle East and Latin America are all trying to develop smelter projects. Only projects that are competitive on a global scale will have a chance to become real projects and be implemented[9].’

In reality, being ‘competitive on a global scale’ with countries such as China means selling energy and labour as cheaply as possible and providing tax breaks that make the project attractive to the company – minimising benefit to the host country. National unions of workers the Greenland Employers? Association and the Organisation of Greenlandic Employers have warned that the only income from the project in its first few years will be tax paid by its employees, and with much workforce coming from abroad on low wages this is likely to be very little[10]. The government has also said that company tax should not be counted on for the first fifteen years, suggesting that large tax breaks have been given[11].

In Iceland predictions that the smelters could be an economic drain and not a boost are increasingly being proven. Energy prices paid by the smelter operators were kept from the Icelandic public until very recently following a scandal when it was revealed that  Century Aluminium had been paying a fifth of domestic prices – the cheapest energy for aluminium production in Europe[12]. Prices for Alcoa’s Fjardaal smelter were accidentally revealed by then company Chairman Alain Belda when he claimed that Iceland was charging some of the lowest rates in the world, just $15 per MWh (megawatt hour)[13]. The deals they made link energy prices to the cost of aluminium so when the market drops the taxpayer can end up subsidising the companies rather than profiting from them.

In the run up to Iceland’s dramatic financial crash in 2008 the OECD concluded their country report by warning Iceland that ‘large scale public investments are inherently risky’ and strongly advised them not to approve further aluminium developments until it was clear whether they would get a long term profit from existing ones:

‘No major investments in energy-intensive projects, including those already in the planning phase, should proceed without prior evaluation within a transparent and comprehensive cost-benefit framework (including environmental impacts and inter-generational effects).[14]’

Two years earlier a report by Icelandic bank Glitnir warned that any benefit from large scale aluminium developments “is probably outweighed by the developments’ indirect impact on demand, inflation, interest rates and the ISK exchange rate”. Similarly economist Thorsteinn Siglaugsson claimed that “Kárahnjúkar will never make a profit, and the Icelandic taxpayer may well end up subsidising Alcoa”[15]. A 2009 report by Economist Indriði H. Þorláksson concluded that the industry would have negligible benefits on the Icelandic economy, possibly causing long term damage, and should not be considered a way out of the financial crisis[16].

Despite all of this evidence Greenland Development have dedicated another recent news article on their website to trying to disprove that Iceland’s crash had anything to do with the smelters. Though they admit that ‘high investment in construction also played a role which put pressure on the economy’, this was ‘hardly significant‘. Instead they claim that aluminium industry ‘has been crucial in earning foreign currency for Iceland during the crisis‘[17].

In another article Greenland Development’s website enthusiastically claims that the aluminium price is likely to rise in the coming years due to demand for ‘green’ cars and solar panels and economic growth in Asia[18]. Though this would somewhat increase Greenland’s chances of making a profit there is no guarantee of market stability, which has been very volatile in recent years. A critique of the concept of ‘green aluminium’ can be found here[19].

Already there seems to be some degree of caution in Greenland about taking too much of the burden of construction costs and loans which caused so many problems in Iceland. The Greenlandic government is considering bringing in a third party to ownership of the project instead of taking the whole of the 50% stake they were offered by Alcoa.

Public more sceptical now

Despite Greenland Development’s expensive propaganda war, public support for the Alcoa smelter has been steadily decreasing. People’s organisations Avataq and the newly formed Against Aluminium Smelter in Greenland have worked hard to discover the truth about the environmental and social impacts of the smelter and the ethical track record of the company abroad. As a result Greenland Development reported that their own October/November 2010 survey of public opinion revealed rapidly changing attitudes:

‘there is a very low degree of knowledge, as well as a less positive attitude towards the project than in previous years. Of the citizens that have expressed either a positive or negative attitude towards the aluminium project, there is thus now only a small majority (54 percent) who are positive.[20]’

The main reason for the ‘increased scepticism‘ towards the project was ‘concern about the possible environmental consequences‘ with 20% of those interviewed believing that the project ‘can have a markedly negative impact on nature and the environment‘ compared to only 7% the previous year[21]. This was identified to be mainly due to critical media coverage and Greenland Development’s ‘information manager’ was hired shortly afterwards to address this. Environmental protection group, Avataq, says Greenland Development has deliberately tried to distort public opinion about the aluminum industry. Their head Mikkel Myrup explains:

“Greenland Development has assumed a role as an aluminium industry propagandist, and do that rather primitively. But this wouldn’t be possible without strong support from the civil servants in the central administration and the smelter municipality administration. The civil servant’s pro industry influence on the cabinet members and the parliament is a massive democratic problem, because they suppress and/or ignore information that would equip the politicians with a wider, and more realistic knowledge base from which to make enlightened decisions.”

With three operating smelters Icelanders have had a good opportunity to assess the benefits of the industry which has been promoted as their economic saviour. A recent online poll by news outlet Visir revealed that only 13% of participants thought heavy industry was the most important area to focus on. Despite high level promotion of the industry’s benefits by certain sectors of the national leadership evidence shows that tourism and fishing are still the most important and growing industries for the Icelandic people[22].

Last spring ALCOA released the first draft of the joint environmental impact assessment for the proposed Bakki smelter and power plants at Krafla and Theistareykir. Recently Iceland’s National Planning Agency commented on the draft assessment in a damning commentary.

The agency stated that the environmental impacts of the project are high and cannot be mitigated. 17,000 ha of untouched wilderness will be affected. Greenhouse gas emissions of the project would constitute 14% of Iceland’s total. There is a great deal of uncertainty on the full impact of the planned power plants and particularly on how much geothermal energy can be sustainably produced. Finally, the assessed energy projects will not be able to fully power the smelter, with 140 MW of capacity missing.

This confirms three key points of critique on the smelter that we have been voicing for several years now.

Firstly, the environmental impact of the geothermal plants and drilling in the north is much greater than Alcoa has claimed.

Secondly, we have said that carbon emissions from the projects would be so high that Iceland would find it extremely difficult to meet its international obligations. If Iceland wishes to become an EU member, then this impact assessment will surely be the kiss of death for the Bakki project.

Thirdly, when the joint impact assessment was announced we insisted that possible dams in Skjalfandafljót, Jökulsá Eystri, Jökulsá Vestri and Jökulsá á Fjöllum (a 72 km2 reservoir is on the drawing boards!) should be assessed for environmental impact, because one or more of them would be needed for a 346.000-ton smelter.

Now our calculations, that the northern geothermal fields will not produce enough energy for the smelter, have been proven correct. The original proposal for the smelter was for 250.000 tons, but ALCOA have stated in international media that they intend to extend the Bakki smelter to 500.000. Whether or not this will happen, new dams need to be built if the smelter is pushed through. This will lead to a large amount of borrowing and capital inflow that will again destabilise the Icelandic economy, which is too small to deal with projects this size.

Saving Iceland’s energy calculations were published in Morgunblaðið (22 August 2008), and greenhouse gas calculations were published in an international book publication on green energy and on savingiceland.org. Other environmentalists in Iceland have also raised these issues.

However, Alcoa and the consecutive Icelandic governments have thus far ignored them.

They refuse to comment on where the required energy is going to come from.

They refuse to think about how the economy will respond to more huge projects.

They refuse to comment on how Iceland can keep its green and unspoiled reputation if so much of its landscape and rivers will be ruined and if greenhouse gas emissions sky-rocket.

They now even refuse to respond to the national planning agency, except that they have said they will simply ignore the environmental impact.

We hoped that this kind of arrogance had been gotten rid of by the fall of the government in 2009 but apparently it is still there.

Clarity and transparency is for a start needed now on this simple question: if there is going to be a 346.000-ton or more smelter at Bakki, where will the new dams be built?

References:

Development of Iceland’s Geothermal Energy Potential for Aluminium Production – A Critical Analysis

Sparking a World-wide Energy Revolution: Social Struggles in the Transition to a Post-Petrol World. Editor: K. Abrahamsky. AK Press, 2010.

Jaap Krater is an ecological economist and a spokesperson of Saving Iceland

This article was first published in Morgunblaðið March 5 2011.

Sigmundur Einarsson, a geologist at the Icelandic Institute of Natural History, has written some articles on this matter (in Icelandic). He has tried, amongst a number of other environmental scientists,  to warn the Icelandic government about a new kind of collapse, an energy collapse due to following far too optimistic speculation of irresponsible people.

Einarsson’s first article was named: Iceland’s great energy sources. After the Icelandic economic collapse in 2008 politicians have constantly claimed that the future strength of the country lies in its wealth of power stored within rivers and geothermal areas. Einarsson has pointed out that all available geothermal power in Iceland would not be enough to power two big aluminium smelters proposed at Helguvík in SW Iceland and at Bakki in NE Iceland.

The only answer to Einarsson’s first article appeared in Century Aluminum´s homepage saying that about 1500 MW of energy is available from SW Iceland’s geothermal fields and rivers and that the Helguvík smelter needed only 625 MW. The company´s numbers on energy include all already harnessed geothermal fields along with highly optimistic numbers on areas not yet investigated.

Einarsson who has long experience working on geothermal activity in Iceland answered with more arguments titled Century Aluminum´s dreams of energy . The following table from his article includes every geothermal field in SW Iceland.

The following table shows the amount of technically exploitable power (TEP), already utilized power (AUP) and non-utilized power (NUP) in the geothermal fields of SW-Iceland. The numbers for TEP are Einarsson’s estimates and the numbers in brackets come from a paper by S. Björnsson, a geophysicist at the Icelandic Energy Authority.

Geothermal field             TEP (MW_e)            AUP (MW_e)            NUP (MW_e)

Reykjanes 100 (200)             100             0

Eldvörp/Svartsengi 100 (120)             75             25

Krýsuvík (Trölladyngja,             100 (480)             0            100

Sandfell, Seltún,

Austurengjar)

Brennisteinsfjöll (40)             –             –

Hengill (Hellisheiði,             600 (600)             333            267

Hverahlíð, Bitra, Nesjavellir)

Total            900 (1440)             508             392

Reykjanes geothermal field A 100 MW_e power station is already running in the area. The power company HS Orka has requested permission from the authorities (Icelandic Energy Authority) to the enlarge the station to 200 MW_e. The permission has not been granted since the power company has not been able to proof further exploitation to be sustainable (showing that Einarsson’s estimate for TEP might even be too high). In 2006 HS Orka signed a contract with Century Aluminum about 150 MW_e of energy for the Helguvík smelter, partly from this source. This delay is already under jurisdiction in Sweden, home country of  Magma Sweden, the owners of HS Orka.

Eldvörp/Svartsengi geothermal field Preparation for extended exploitation of the geothermal field has not started. The pressure within the reservoir has recently become steady after 28 years of constant draw down so increased exploitation is not likely to be allowed in the near future. Energy for the Helguvík smelter can not be expected from this source.

Krýsuvík geothermal fields This geothermal area which consists of 4 subfields has never bee harnessed. HS Orka has license for research in the total area but has only made agreement for future production with the landowners of the two smaller Trölladyngja and Sandfell subfields. Two deep drill holes in Trölladyngja subfield have proved negative and research has not started in the other three subfields. Scientific views on power potential of the total area are controversial, partly due to lack of data. Energy from these fields seems unlikely.

Brennisteinsfjöll geothermal field is quite small and lies in the mountains south of Reykjavík. This area is not likely to be harnessed in the future.

Hengill geothermal field with the subfields Hellisheiði, Hverahlíð, Bitra, Nesjavellir lies SE of Reykjavík. The area has been harnessed by the power company OR, owned by the Reykjavík municipality. This power company almost vent bankrupt after Icelands financial  collapse. The companies financial plans do not assume any new power stations in the next five years. So energy for the Helguvík smelter from this source can hardly be expected until at least 8 years from now. OR has secured energy for one 90 MW_e power station, but further plans have not been confirmed.

The above mentioned potential origins of power for the aluminium smelter are specified in the EIA report and nothing else.  Einarsson has in his articles repeatedly pointed out that it will never be possible to feed the smelter with energy from these geothermal areas. No answers have ever come from the authorities, neither local or governmental.

The third power company, Landsvirkjun, has prepared three water power stations in the river Thjórsá (Þjórsá) in South Iceland, producing about 230 MW. Landsvirkjun has repeatedly argued that the electricity from these power stations will not go to aluminium smelters. Other power potentials are not in sight in southern Iceland.

See also:

Threatened Areas

Development of Iceland’s geothermal energy potential for aluminium production – a critical analysis

Miriam Rose

After 13 years of continuous battle, the people’s movements to save the Niyamgiri hills from bauxite mining have won their land and livelihood back from the jaws of extinction. Niyamgiri is one of a series of threatened bauxite capped mountains in Orissa. On August 21st 2010 a review of the Vedanta mining project carried out by the Ministry of the Environment exposed the company’s “total contempt for the law”, having violated a number of environmental regulations, and revealed “an appalling degree of collusion” by local government officials with Vedanta. A few days later Environment Minister Jairam Ramesh called a halt to the project.

Two months later the Environment Ministry also rejected Vedanta’s plans for a six fold increase in capacity at the Lanjigarh alumina refinery, the plant at the foot of the Niyamgiri hills which would have been served by the 8 million tons of bauxite mined above. The company were also warned to follow pollution guidelines closely and were reprimanded for starting expansion work without prior permission (1). One month after that (November 2010) Vedanta Chairman and founder Anil Agarwal’s extravagant plans for a $3.2 billion ‘Vedanta University’ in Orissa were also knocked back when the High Court ordered that 6892 acres of beautiful coastal land, including part of the sacred Jagannath temple, had been illegally acquired and should be returned to the ousted inhabitants (2). An incredible victory! The events sparked celebrations across Orissa, and held the state government’s assembly in limbo for several weeks as ministers furiously argued over what had become an iconic battle of tribal people and people’s movements versus a mega corporation.

The Niyamgiri story has also been hitting headlines in the West in the past two years, focussing on the involvement of celebrities such as Bianca Jagger and Michael Palin, and the glitsy media campaigns of Action Aid and Survival International. Reading the papers you might think these large NGO’s led the fight against Vedanta. You would not hear that Action Aid accepted donations from Vedanta subsidiary Sterlite in 2003, and has signed MoU’s with Vedanta’s investors, ICICI bank (3), or that NGO professionals in their big jeeps have succeeded in splitting people’s movements in the area, paying particular tribal activists to be the face of their campaigns, and encouraging de-politicisation of the struggle. You would also not hear that the big NGO’s only joined the fight in 2007 and 2008, long after the people’s organisation Niyamgiri Surakshya Parishad (later Samiti) was formed in early Jan of 1998 in a gathering of more than 200 people in Asupada, a village at the foot of the lush green mountains. Nor that the Adivasi’s (tribals) are far from the helpless figures the NGO campaigns portrayed, but have fought tooth and nail for decades to successfully preserve their mountains and way of life from various threats, including logging during the British colonial rule. Sadly, the culture of protest orchestrated by the big NGOs was never intended to stimulate long lasting grassroots activism or to make the existing struggles visible. They were selling their product in India and the West, and by doing this they were actually suppressing the politics and the voice of the real people’s movements.

For the grassroots movements in Orissa the fight has been long and hard, with moments of great empowerment and also deep sadness and brutal police repression. After years of chasing away company men who surveyed their land with tools and clipboards, the threat of displacement finally became real for the Khonds when the Orissa government ordered the compulsory acquisition of farmlands around the proposed Lanjigarh refinery in 2003. During the land acquisition process government officials promised that the company would provide jobs to every family who sold their land. In reality very few got jobs or compensation. Instead local people suffer skin lesions, dust pollution, deaths from lorry accidents on the new road, TB and contaminated crops. One family who’s farm is just outside the refinery wall have begged the company to buy them out so they can leave their contaminated land and move somewhere safer, but Vedanta have refused.

Later that year the chimney of a BALCO refinery being built in the neighbouring state of Chhattisgarh collapsed killing 57 workers, a stark reminder of the unsafe conditions for aluminium workers in India. 2003 also saw the illegal arrest and detainment of Lingaraj Azad, state president of the political party Samajvadi Jan Parishad (Socialist People’s Council) and also convenor of Niyamgiri Surakshya Samiti (Council for the Preservation of Niyamgiri) who was jailed for 100 days on two occasions. In 2004 a rally of a thousand tribals protesting forceful evictions was violently broken up by police who ‘lathi-charged’ the crowd, striking them with long thin sticks that break the skin, and injuring women and men alike. Thirteen activists were arrested on invalid charges. On 23rd March 2005 the first state-sponsored murder took place when local activist Sukru Majhi was killed. This would be followed in 2010 by the murder of Arsi Majhi. 2000 had also seen police open fire on a meeting of tribals regarding another Orissa alumina refinery owned by Utkal in Maikanch village, killing three and wounding seven (4). In 2007 the Norwegian Government’s pension fund pulled its $13 million of shares in Vedanta as it believed its involvement could result in “an unacceptable risk of contributing to grossly unethical activities”, and in 2010 the Bank of England similarly dis-invested from the company on human and environmental grounds after UK authorities in India upheld allegations of illegal and unethical activity against tribal people.

Blockades of the Lanjigarh refinery by women and children in particular were a regular occurrence during the long struggle. One of the most symbolic protests took place in January 2009 when 10,000 mostly tribal people encircled the Niyamgiri hills in a 17km long human chain, vowing to protect its sacred ecology and its ancient inhabitants. A week earlier 7000 protesters had marched to the gates of the aluminium refinery saying ‘Vedanta Hatao!’ (Remove Vedanta!), demanding that the company leave the area (5).

Here in the UK, where the company is registered (despite violating a number of British company laws), the campaign came to a head at the 2010 Vedanta AGM, which was dominated by the Niyamgiri issue for the fifth year running. A Guardian article entitled ‘Vedanta’s very embarrassing silence’ reported how during the meeting our friend Orissa activist and film-maker Samarendra Das challenged the Lanjigargh refinery’s manager Mukesh Kumar’s claims that the mountain was not sacred to the affected Dongria Khond tribe. Testing his knowledge he demanded that Mr Kumar give the Dongria’s name for their holy Niyamgiri mountain, which he could not (6). The presence of paid protesters from Survival and Action Aid was minimal at the 2010 AGM, whereas they had dominated the previous years meeting, showing the volatility of NGO support and commitment. They may have believed the fight was over as the company appeared on the brink of bringing in the bulldozers and showed no signs of stopping.

The battle for Niyamgiri was fought on many fronts; through international solidarity, court room action, media campaigns, shareholder activism and in depth research and understanding of the aluminium industry itself (embodying what Gandhi termed ‘satyagraha’- the truth force). But at the root of all of these actions was the energy and determination of the Dongria Kondh, who’s understanding of the fallacies of ‘development’ are often as sharp as any university professor. In an improvised songKucheipadar village Deka musician and elder Salu Majhi is recorded asking how mining can be called ‘development’, and describing the ideological rift between the way they value their environment and societal well being, and the quantified measures of the company and state:

Use all this up in 25 years, very clever my friend
We are kui people
Storing water wont be enough
Our life is in our flowing streams (7)

Evidence agrees with Salu. Out of half a million Indians displaced by mining in the last 10 years in just four states, 92% are much worse off, even if they receive the paltry compensation offered by companies.

So where is Vedanta now? According to the Sunday Times Rich list the company founder and chairman Anil Agarwal is still tenth richest man in UK with wealth growth of a record 583% after the financial crisis. He remains very well connected in London, yet somehow manages to be invisible in the media, despite being an almost despotic character with a rags to riches story and a childish temper when he doesn’t get his way. Using his connections he has managed to rapidly diversify the business of the company, teaming up with the Scottish oil company Cairn Energy to exploit the controversial oil fields around Greenland. Two of Vedanta’s board members also serve on the board of Cairn India and one (Naresh Chandra) is also on the advisory board of BAE, not unusual for aluminium companies due to the direct link between aluminium production and arms manufacture (8).

But we must celebrate our victories before turning to face the next fight. In the three years since Saving Iceland’s 2007 International Conference against Heavy Industry we have seen a series of projects halted by people’s movements, a success we never would have dared to dream of! Trinidad’s La Brea smelter was canceled in 2010 after years of protest by our friends from No Smelter TnT and others. The site is now being reclaimed by local people who have permission to build a bio-digester or a mango plantation there! (9)

In Iceland all smelter construction ground to a halt following the economic crisis, and Alcoa’s plans for a mega smelter in Husavik, North Iceland, may have fallen through all together thanks to the determination of Saving Iceland and others to reveal the true costs of the dams and geothermal plants needed to power the project. In Greenland public opinion in favour of Alcoa’s enormous planned smelter plummeted after activists from Avataq sought international help to educate local people and politicians on the history of the aluminium industry and the clear lessons for communities dependent on an aluminium economy. The Greenland smelter now looks a lot less certain than it has long appeared. On top of the massive turn around of aluminium industrialisation in Orissa these victories are enormous.

Most importantly they all demonstrate the power of people’s movements to stop corporations in their tracks. Though we may sometimes doubt it, our grassroots actions to understand, expose and resist projects which we know will not benefit people or planet, are powerful, and they work. Davids continue to bring down Goliath’s… in fact they are the only thing that ever will.

*

The cancelling of Vedanta’s Niyamgiri project also occurred just after the publishing of Samarendra Das’ and Felix Padel’s seminal book on the fight and the global aluminium industry ‘Out of This Earth: East India Adivasis and the Aluminium Cartel‘, which was in the Indian best seller list and was read by the Home Secretary of India. For an in depth analysis of the aluminium industry and the struggle in India the book is highly recommended.

Notes:

(1) Govt says no to Vedanta’s $8.5 bn expansion plan, NDTV Correpsondent, October 21, 2010 (New Dehli).

(2) Deborah Mohanty, Indian Express, 16th Nov 2010. ‘Land acquisition procedure for Vedanta University illegal‘

(3) Das, Samarendra and Padel, Felix 2010 ‘Out of This Earth: East India Adivasis and the Aluminium Cartel‘. Orient Blackswan, Delhi.

(4) Das, S. and Padel, F. 2010,’Out of This Earth: East India Adivasis and the Aluminium Cartel‘, Orient Blackswan

(5) Saving Iceland, Jan 30th 2009. ‘Ten Thousand People Encircle the Niyamgriji Mountains in Orissa, India‘

(6) Peter Popham. ‘Vedanta’s very embarrassing silence’. The Guardian. Friday, 30 July 2010

(7) An excerpt from Samarendra and Amarendra Das’ 2005 documentary film Wdira Pdika (‘Earth Worm Company Man’

(8) Press Association, 25th April 2010. The Guardian ‘Rich list reveals record rise in wealth: Collective wealth of Britain’s 1,000 richest people rose 30%, the biggest annual increase in list’s 22-year history‘

(9) Richardson Dhalai, September 27th. ‘Rowley slams Govt’s decision to scrap smelter‘, Newsday.

It states that:

– Environmental impacts of the project are high and cannot be mitigated.
– 17,000 ha of untouched wilderness will be affected
– Greenhouse gas emissions of the project would constitute 14% of Iceland’s total.
– There is a high amount of uncertainty regarding the full impact of the planned geothermal power plants and particularly their impact of the geothermal energy resource base.
– The assessed energy projects are not sufficient to power the smelter, with 140 MW of capacity missing.

“These reports confirms three key elements of critique that Saving Iceland voiced now several years ago,” says Jaap Krater, a spokesperson for Saving Iceland.

“The first is that the environmental impact of the drilling in the north would be much greater than Alcoa claimed.”

“Secondly, when the joint impact assessment was announced we insisted that possible dams in Skjalfandafljot, Jökulsá Eystri, Jökulsá Vestri (both in the Skagafjörður region) and Jökulsá á Fjöllum should be assessed for environmental impact. Now our calculations that the northern geothermal fields will not produce enough energy for the smelter are proving correct.”

“Thirdly, we have said that carbon emissions from the projects would be extremely high and would make it very difficult for Iceland to meet its international obligations. This is also confirmed,” explains Krater.

“If Iceland wishes to become an EU member, then this impact assessment will surely be the kiss of death for the Alcoa Bakki project.

Saving Iceland’s energy calculations were reported in Morgunblaðið in August 2008 (1), while the greenhouse gas issues were published in a recent international book publication (2).

References

(1) Bakki Impact Assessment Should Include Dams, by Jaap Krater, Morgunbladid, August 22nd 2008, in Icelandic here and English here.

(2) Development of Iceland’s geothermal energy potential for aluminium production – a critical analysis, by Jaap Krater and Miriam Rose, In: Abrahamsky, K. (ed.) (2010) Sparking a World-wide Energy Revolution: Social Struggles in the Transition to a Post-Petrol World. AK Press, Edinburgh. p. 319-333. Also published on Saving Iceland’s website here.

A brand new solidarity brochure about the case of the RVK-9 was distributed at the Bookfair as well.

Watch the video below and download the brochure here. Be sure to visit the support site of the Reykjavík Nine at rvk9.org.

The nine currently stand trial, accused of having attacked the parliament of Iceland on the 8th of December 2008 and threatened the independence of the parliament.

Read more about the case and the context around it in the brochure, which can be downloaded in PDF format here, or by clicking on the picture above.

Please mail, print and distribute as widely as possible.

Click here to visit the support site for the Reykjavík Nine.

By Samarendra Das & Felix Padel

Most critiques of the aluminium industry focus on refineries and smelters, which are among the worst culprits of global heating. But bauxite mining excavates a huge surface area, and has caused environmental devastation in Jamaica, Guinea, Australia, India and recently also in Vietnam.

Perhaps no bauxite deposits are located in more sensitive areas than those in India, whose most significant deposits occur as cappings on the biggest mountains in south Orissa and north Andhra Pradesh. Tribal people live in hundreds of communities around these mountains, which they regard as sacred entities for the fertility they promote. Appropriately, the base rock of these mountains was named ‘Khondalite’ after the region’s predominant tribe, the Konds. Early geologists noticed the perennial streams flowing from these mountains, and modern evidence suggests that their water regime is severely damaged when the bauxite cappings are mined.

Bauxite has probably never been sold for a price commensurate with the damage done by mining it. For Konds and other small-scale farmers in East India, the aluminium industry brings a drastic disturbance to their way of life and standard of living that amounts to cultural genocide. If mainstream society sees these bauxite cappings of India’s Eastern Ghats as resources standing ‘unutilised’, Adivasi culture understands them as sources of life, and sees mining them as a sacrilege based on ignorance.

Bauxite Cappings of the Eastern Ghats

India’s most extensive bauxite deposits lie on top of a series of mountains in Orissa and Andhra Pradesh. The special geology of these mountains was noted by British geologists at the start of the 20th century. T.L.Walker named their base rock Khondalite in 1902, ‘in honour of those fine hill men the Khonds’, since the mountains based on this rock (‘garnet-sillimanite-graphite schist’) had almost exactly ‘the same boundaries as Khondistan’. In other words, the Kond tribe (also called Kuwinga, Kondho, Kondh and Khond), who now number about a million, inhabit the very region where India’s best Bauxite deposits occur.
Walker noted the abundance of fresh water coming down from these mountains, and the use which Konds made of it.

The frequent occurrence of perennial springs of clear cool water from beneath these laterite caps has been mentioned by both Ball and Smith. A very good example occurs south of Korlapat, where in March, in the dry season, I noticed a tiny rill which dashed down the precipitous face of one of these hills, to be utilised to irrigate a second rice crop in the fields of the valley below.  (1902 p.13)

This detail is significant. One of Orissa’s bauxite mountains, Panchpat Mali, has been mined since 1980. Konds living in villages below it describe how they used to rotate crops and grow two a year. Since bauxite mining started on the mountain, this is no longer possible.

Our water sources are drying, because of mining. We cannot to rotate our crops.  I, Sri Lasu Jani, speaking on behalf of my community, say we are struggling to survive. (Das 2005)

Bauxite cappings maintain fertility over a wide surrounding area. Aluminium’s capacity for bonding with other elements, that makes it so versatile in industry through an extensive range of alloys, is also evident in its natural form in the earth, where it is present everywhere in the soil, and forms 8% of the earth’s crust.

‘Without aluminium there would be no fertile earth’ (Pelikan 1973 p.151), due to Al’s bonding with H2O, which is fundamental to the soil’s capacity to retain moisture. Bauxite is a very special ore for its high aluminium content the alumina content of bauxite varies from 31-52%), and the regions where it is concentrated include some of the world’s largest forests, with the most biodiversity, including the Amazon rain-forest, Cape York in Australia, and areas in West Africa, and East India. India’s bauxite deposits are counted as the world’s 4th largest.

Since Nalco was formed (National Aluminium Company) in 1980, as an Orissa-integrated company based on mining Panchpat Mali, there have been repeated attempts by other mining companies to gain access to most of the other bauxite-capped mountains in this region. Every attempt so far (2010) has been thwarted by local campaigns protecting them.

‘Khondalite’ is a peculiarly appropriate name, since these mountains occupy a central place in Kond economy, culture and religion. Gopinath Mohanty, one of Orissa’s best known writers, records in his autobiography a conversation with an official undertaking the 1941 Census, to the standard question ‘What is your religion?’ The official found Konds’ reply of ‘Dongar’ (Mountains) is hilarious.¹ Yet this answer reflects Konds’ recognition of their mountains’ ecological importance, for maintaining the fertility of their fields. Each Khondalite mountain is a sacred entity to the tribal people, and often also to Hindus too, who live in its vicinity.

Of all these mountains, the best forested is Niyam Dongar. This is because the Niyamgiri range has its own tribe, the Dongria Konds, who live only within the range, and have maintained a strict taboo on cutting forest on the mountain tops – as opposed to the mountain sides, where they practise swidden cultivation at a steep gradient. The summits are held to be sacred to their principal deity Niyam Raja, ‘King of Law’, and necessary for preserving numerous perennial streams. Niyam Dongar is the largest in size and by far the best forested in the Niyamgiri range.

This is the mountain sought by Sterlite Industries, which first signed a Memorandum with the Orissa Government for mining it in 1997, and launched itself on the London Stock Exchange in December 2003, with a plan for building a new refinery and smelter in Orissa, based on this. Articles in the Financial Times in 2003-4 gave the mistaken impression that mining rights had already been secured. This was far from the case, and the majority of Dongria have repeatedly demonstrated their opposition.²

Current plans to turn Orissa’s poverty into wealth through mining its bauxite and other minerals have been brewing for a long time, and date from the colonial era. ‘Khondistan’ was invaded and conquered by the armies of the East India Company during the 1830s-60s (Campbell 1864, Padel 1995). Following surveys by British geologists from the 1860s-1900s, Cyril Fox, in publications from the 1920s, spelt out the blueprint for resource extraction that has surfaced as a new invasion by aluminium companies. He mentions most of the Khondalite mountains whose fate now hangs in the balance, highlighting Karlapat, one of the remotest, which has been sought recently by BHP Billiton among others. He also highlights the region’s hydro-potential – now realised in a series of massive dams and reservoirs built from the 1950s-1990s – and the co-ordination of new railways to meet at Vizag (Vishakhapatnam), now India’s biggest port (Fox 1932 p.136).

If Khondistan’s first invasion was legitimised in terms of Pax Britannica, the new one is justified by ‘giving the tribal people the fruits of development’. The first step in its realisation was an Eastern Ghats Bauxite Survey made by the Geological Survey of India in 1975-6 (Rao & Raman 1979) of the deposits in south Orissa and north Andhra Pradesh. This named the deposits India’s ‘East Coast’ deposits, not because these mountains are near the coast (which they are not), but because the rail-lines to Vizag facilitate transport to one of India’s biggest ports, used by Nalco for export since the 1980s, as well as for steel exports to Japan etc. The name also advertised the deposits’ accessibility – though in fact, many of the mountains are extremely remote, and the network of new railways and roads was still rudimentary. Accessibility was the key focus in a World Bank Investment Analysis of aluminium (Brown 1983), that rates the world’s deposits and plants according to this criterion.

The ‘East Coast’ survey was published in time for an international conference on Laterite/Bauxite at Trivandrum in 1979. Panchpat Mali, as the largest deposit, was made the source for Nalco, a new public sector aluminium company, vertically integrated in Orissa, which currently provides about 40% of the bauxite mined in India (‘Orissa’s Aluminium Complex’ – Rajagopalam et al 1981). A few years later, the UNDP (United Nation Development Programme) provided about half the funding for a research institute at Nagpur, the Jawaharlal Nehru Aluminium Research Development and Design Centre (JNARDDC). This was inspired in part by the Jamaican Bauxite Institute, set up through Norman Girvan’s seminal work on bauxite during the 1970s, as part of a move to try and ensure that Jamaica got a fair price for its bauxite. By contrast, research at the JNARDDC has been restricted to servicing the needs of mining companies, Questions asked in Parliament in 2002 highlighted the institute’s ‘languishing and pathetic conditions…due to lack of funds’.³

Dams and Bauxite Business

When Nalco’s aluminium complex was being set up in Orissa during the early 1980s, an article in the leading intellectual journal Economic & Political Weekly gave a range of economic arguments against it, in particular the low price for bauxite enforced by external pressures – in effect the aluminium cartel – plus excessive consumption of electricity and water, and excessive pollution. Another commented that to understand the effects of setting up Nalco, one must comprehend ‘the past, not very pleasant, history of the Indian aluminium industry’.⁴ We would add that is impossible to understand the effects of opening bauxite mines and building greenfield aluminium factories in Orissa and Andhra, unless one has an overall understanding of the aluminium industry and its effects worldwide, and in several countries in particular.

In India, a number of refineries and smelters were set up during the 1950s-70s as Joint Ventures with foreign firms. Each complex was built near a new dam/reservoir complex, to draw hydropower and water. Indian Aluminium (Indal) and Alcan (taking over from the British Aluminium Company), built refineries and smelters in Kerala, Maharashtra and Bihar, with a smelter at Hirakud in northwest Orissa, constructed between 1950 and 1956, and a principal customer for Hirakud hydropower. This dam’s foundation stone was laid by Nehru, and it displaced at least 150,000 people, causing immense hardship, with two government administrators reportedly killed during unrest.⁵

Three other refinery-smelter complexes were set up: by Malco (Madras Aluminium Company), with Italian help near the Mettur dam on Kaveri river, in Tamil Nadu; by Balco (Bharat Aluminium Company), with Russian and Hungarian help, at Korba, for which the Hasdeo Bango dam was built, in what is now Chhattisgarh; and by Hindalco (Hindustan Aluminium Company) at Renukoot, near the Rihand dam, which made one of India’s biggest reservoirs, in the south of Uttar Pradesh, on the border with Madhya Pradesh (now Chhattisgarh).

Hindalco represented a joint venture beginning in 1959 between G.D.Birla and  Henry Kaiser’s son Edgar – the largest US investment in India to that date. The Rihand dam was one in a succession of Kaiser-built dams in India. It was designed to supply Renukoot, and was financed through World Bank loans through the influence of George Woods, shortly before he became President of the Bank in 1962. An estimated 200,000 people, mainly Adivasis, were displaced by this dam, without proper warning or compensation, and the electricity price, guaranteed for 25 years, was a twentieth of the normal rate.⁶

Before this, Nalco’s refinery at Damanjodi and smelter at Angul were built in collaboration with Pechiney, and though these factories have often been cited as outstanding examples of rehabilitation and environmental management, closer inspection shows they are nothing of the kind. Bauxite mining on Panchpat Mali, now at six million tonnes per year, has seriously affected the mountain’s water-holding capacity (as mentioned above). About 400 people work the mine, using about 70 ‘dozer-rippers’ and trucks. The work-force is divided into unskilled, semi-skilled and skilled labourers. A notice at the mine entrance lists the daily wage for each—between 55 and 117 rupees (between $1 and $3). Like most bauxite mines, this is open-cast. The mined-out area on top of the mountain stretches for several km already. It is ‘re-landscaped’, which means putting the overburden and topsoil back and planting trees, but most of these are eucalyptus, notorious for desiccating the soil, and large areas are sterile pits. At the foot of the mountain, several Kond villages including Kapsiput and Gortili receive the full impact of noise and waste. Lasu Jani and other villagers walk up the mountain most days to labour in the mine, but the dust pollution from blasting, and the rapid deterioration of their land, which had been exceptionally fertile, coupled with the authorities’ refusal to deal with a host of extreme difficulties and unmet promises, has affected peoples’ lives profoundly. As Lasu says,:

We have been writing applications to the authorities three or four times. Still they don’t care. The Collector [senior administrator] invited a few elders of our community and then abused them by calling them goats, sheep, bloody fools and they were beaten by the security forces. We had to run away from there. The police told us before not to come with arms, otherwise it would have turned violent. Still they charged and fired gas on us. 70 of us had false cases made against us. 15 of us still have court cases pending against us for the last five years. They don’t listen or give us any job. (Das 2005)

A conveyor belt 14.6 kms long takes bauxite from Panchpat Mali to the Damanjodi refinery. It was completed in 1985, displacing at least 3,000 people from 19 villages.
Nalco had a book written about this displacement process and their ‘action programmes’, meant to ensure that

people who were happy peasants enjoying fruits of their labour amidst natural surroundings yesterday are not rendered homeless and unemployed today leading the life of destitutes because of their sacrifices in the national interest. (Muthayya 1984, pp. 1–8)

Yet this is exactly what has happened. In the words of a young tribal woman in Amlabadi, the main resettlement colony at Damanjodi:

I loved my village, it was very pleasant though remote…. We had cattle, and I used to look after them. We had goats and sheep, a kitchen garden. It was so nice when I was little. We used to cultivate vegetables on our own… They kept us here. An asbestos roof, and everything else is earthen, only a thin layer of cement. It is unsafe to live in… In Damanjodi people are living with hardship, some even have not enough to eat a meal. It was nice before, at least they had land, nobody was starving. Now, no land and no cattle. So no food… Unemployment and even educated unemployed are everywhere… We have lost everything…  Nalco is death for us. (Das 2005)

Jobs invariably promised to ‘Land Displaced Persons’ (LDPs) rarely if ever materialise in practice without a bribe. This was attested to us even for the lowest level of labouring and bauxite mining jobs. Statistics on poverty show that Koraput, where Damanjodi stands, is one of India’s most poverty-stricken districts (CSE 2008). The effects of pollution, as well as industrial disease among workers, are notorious, though virtually unrecorded.

Damanjodi refinery was built alongside the Upper Kolab dam, which provides it with electricity and water. Construction on this dam started in 1976, and continued until 1992, when it started to generate electricity. It was built by the Central Water and Power Commission (CWPC), which had also built Hirakud. Lobbying from the electricity sector and industrialists played a decisive role in the decision to build it, and Damanjodi refinery is among its main customers. The dammed water flooded an irregular-shaped area between hills that are now bare and badly eroded. At least 14,000 people from 60 or more villages were displaced between 1984 and 1990, as the water level rose. Estimates vary wildly, as with most dams, since the administration has not kept a proper count. Most ‘oustees’ now live in poverty-stricken rehabilitation villages, or had to resettle themselves, suffering severe neglect (Jojo 2002). To pay for this dam, 3,769 million yen (c. $20 million) was loaned by the Overseas Economic Cooperation Fund of Japan.

During these same years, a new railway line was built from Koraput to Damanjodi, then on to Rayagada, in order to carry Damanjodi’s alumina to the smelter which Nalco was building at Angul in central Orissa, as well as for export via the port of Vishakhapatnam. This railway snakes high through Orissa’s bauxite mountains, with stations at convenient places for future mines and factories. The line cost an estimated .$400 million, of which $80m (80 crore rupees) came as a loan from the Saudi Fund for Development. These investments are signs of long-term Japanese and Middle Eastern interest in Orissa’s bauxite.

Building the smelter at Angul involved a history of intimidation and displacement that has barely been told, and involved a desperate act of resistance, when a local man stabbed to death the Additional District Magistrate Gopabandhu Pattnaik, as he was addressing a crowd on 23rd December 1987.⁷ Officially, the smelter displaced 4,000 families from 40 villages. Like Damanjodi refinery, it has its own coal-fired power station, but also draws power and water from a dam, in this case Rengali, which displaced at least 224 villages, and was almost certainly built to supply the smelter. Agitation against this dam between 1972 and 1978 faced ruthless suppression by police. The history of pollution from this smelter includes major spills of toxic waste from ash-ponds during the cyclone in 1999 and on 31st December 2000, when a containing wall broke, damaging land and buildings over 20 villages and causing many deaths. National TV news on 13th September 2004 reported fluoride contamination over 500 acres of fields, leaving the crop unfit for consumption, and interviewed villagers, who complained they could not get medication for their bone disease because Nalco officially denies this exists. Inhabitants of nearby villages, as well as their few remaining cattle, show severe signs of skeletal fluoridosis from the smelter. The Nandira and Brahmani rivers near the smelter, into which smelter effluents run, are seriously polluted, and all fish are said to have died in them for a stretch of at least 30 km. A report from the Supreme Court Monitoring Committee on Hazardous Wastes, whose team visited Nalco’s smelter in June 2006, lists numerous violations of pollution levels and confirms that fluoride and other emissions into air and water remain unacceptably high, while toxic Spent Pot Lining (SPL, classed as a hazardous waste) was not being properly disposed of.⁸

In mid-2002 there was an outcry in Orissa at the proposed privatisation of Nalco – one of India’s most profitable companies, ‘pride of Orissa’as well as of the public sector. Nalco’s huge profits stem from the quality of Orissa bauxite, whose low silica content allows it to be refined at a lower temperature than most.

Gandhamardan was the next mountain marked out for bauxite mining – probably the best forested bauxite-capped mountain after Niyam Dongar. It was saved by a people’s movement in 1984-7, that united tribals, dalits, Hindu devotees and nationwide activists, and managed to prevent the project even after Balco had constructed a 9 km road up the mountain as well as a new colony for hundreds of officers and workers, now a ruin. Among Dalit women leaders, Jambubati Bijira from Dungripalli village was prominent, encouraged by her husband, who worked for Balco, and got fired. When most of the men had been arrested, she and other women laid their babies on the road in front of mining vehicles, shouting to run them over, since they would have no future if the mountain was mined. The Ministry of Environment and Forests eventually sided with the protestors, after a high level enquiry. The US company Continental Resources has retained a provisional mining lease, and there have been reports of Nalco and Vedanta interest, while plans for a Lower Suktel dam nearby are linked to a planned refinery to process Gandhamardan’s bauxite. Villages marked for displacement by this dam have already faced severe police repression in the form of lathi charges and intense pressure to sign away their land.⁹

Five years after the saving of Gandhamardan, a new alumina project in the Kashipur region of Orissa emerged, facing intense opposition, and inaugurating an era of conflict over bauxite and alumina that has continued ever since. The Utkal project started out as a joint venture between Tata, Norsk Hydro and Indal. Alcan was a prime mover, but joined a little later, manoeuvring a takeover of its subsidiary Indal by Hindalco in 1998. After seven years of protests against the proposed invasion and takeover of of tribal and dalit land and villages, police repression culminated in police opening fire on a group of tribal protestors at Maikanch village in December 2000, killing two men and a boy. Hydro withdrew, after Tata had already withdrawn. This incident was alluded to by India’s President in his Republic Day speech on 25th January 2001:

The mining that is taking place in the forest areas is threatening the livelihood and survival of many tribes… Let it not be said by future generations that the Indian Republic has been built on the destruction of the green earth and the innocent tribals who have been living there for centuries.

An enquiry into this firing delayed the project another three years, but after police repression started again in 2005, Alcan withdrew in April 2007, under pressure from Canadian campaigners over numerous violations of law and human rights, just before it was taken over by Rio Tinto in July-October.¹⁰

Nevertheless, the refinery is being built on a site cleared of several tribal and dalit villages, in an atmosphere of repeated demonstrations and sustained opposition. The Utkal project is based on mining Bapla Mali, which surrounding tribal people are determined to prevent. There is outrage too at the refinery’s plan to take water from Baro and Sano Nadis (Big and Little rivers). These flow towards the Upper Indravati reservoir, built with aluminium interests in mind using World Bank loans in 1989-1997, at the cost of many workers killed in a terrible accident on 28th July 1991, over 40,000 villagers displaced, repression of a movement against the Indravati dams, and vast deforestation. The river’s water was channelled north instead of south, and since 2006 has been piped to supply Vedanta’s Lanjigarh refinery. The villagers displaced by this dam are among the most neglected in Orissa, witnessing a long line of broken promises. ‘If I starve, you also bear responsibility’, as a villager told a World Bank consultant.¹¹

Hindalco and its sister company Aditya Aluminium (both controlled by the same Birla dynasty who built Rihand dam) are also negotiating to open new mines on other mountains: Kodinga Mali – where another refinery is planned – and Mali Parbat, where intense opposition has come under escalating repression, with the area invaded by several thousand armed police targeting Maoist rebels. Here an organisation called Chasi Mulya Adivasi Sangho (Cultivating Labour Tribal Society) forcefully took back tribal land illegally taken over by traders, at the same time as organising resistance against mining companies. Maoist support was fairly open, so when CMAS men and women protested outside Narayanpatna police station on 20th November 2009 against atrocities being committed by armed police in tribal villages, police marksmen shot dead two of its leaders, and these atrocities intensified, with over 100 leaders arrested.¹²

The first Birla factory in Orissa was Orient Paper Mill (1940), whose pollution of the Ib river was the subject of a letter to Birla’s friend Gandhi (1946). This became in effect Orissa’s first Public Interest Litigation (1950). The judgement finally went against Birla in Orissa’s High Court. This was then negated by a River Pollution Act passed by the Orissa Assembly (1953), that took away Courts’ jurisdiction on matters of river pollution.¹³ Meanwhile, Mystery of Birla House (Burman 1950) is a tax commissioner’s exposure of the Orient Paper Mill’s history tax avoidance. There is an irony of history here: G.D.Birla, Aditya’s grandfather, was a staunch friend of Gandhi, and Gandhi’s assassination took place in the grounds of Birla house. Yet this Birla factory could be said to have set a glossed-over trend of corruption and pollution that culminates in recent events surrounding Hindalco’s invasion of Adivasi lands in the Kashipur and Koraput region, orchestrated under the aegis of G.D.’s grandson Aditya.

While the Utkal project was stalled, another company called Sterlite made a move to build an alumina refinery at Lanjigarh with a view to mining Niyam Dongar, and registered on the London Stock Exchange in December 2003 as Vedanta Resources, after promotion by J.P.Morgan and many other banks. Sterlite had already bought controlling shares of Malco and Balco, the latter a highly controversial privatisation of a public sector company with many irregularities (Bidwai 2001). Intense opposition to the Lanjigarh refinery has met with vicious repression.¹⁴ In Septmember 2005, the Central Empowered Committee, advisory body on forests to India’s Supreme Court, released a long report detailing numerous violations in the project. This report recommends strongly against the refinery and mine: the refinery should never have been approved, because it was sited right on the banks of the Bansadhara river at the point where it forms below Niyam Dongar, and because application for the refinery was delinked from the mine, which would involve felling a huge area of primary reserved forest on top of the mountain (CEC 2005). The J.P.Morgan report detailed large numbers of deaths on roads around the Malco and Balco projects, and pollution from the factories – a pattern that has been repeated with interest at Lanjigarh. It mentions Niyamgiri, but concentrating on economic factors, failed to notice the mountain’s superb forest cover, or the Dongria who have preserved this, so failed to foresee today’s intense opposition.¹⁵

The CEC’s recommendations were sidelined, partly by commissioning more reports, from the Wildlife Institute of India – which concluded, until ‘leaned on’, that the mine would cause great harm to the mountain’s water regime and wildlife – and the Central Mine Planning & Design Institute, which argued against this that during mining micro-cracks would form on the side of the mountain that would ‘facilitate run-off’ and help ‘recharge ground water’  (CMPDI August 2006 pp.18-20) – a monstrous distortion of science: during the monsoon, rain water  runs straight off the mountain, but the water-holding capacity of the mountain during summer months is ruined, as with Panchpat Mali.

By this stage, the Niyamgiri case was being heard in a succession of hearings at the Supreme Court. In a session on 6th September 2007, the Judges called for a report from the Ministry of Environment and Forests that was submitted on 5th October by India’s Attorney General about the situation of bauxite mining leases in Koraput and Kalahandi districts. This report is full of inaccuracies, and outlines a selection of ten mountains with a combined total of 54 memoranda of understanding by various companies, showing the extent of bauxite mines being planned. The case also sidelined the Konds, who have been vocal in their opposition to mining, not least in a public hearing held in Belamba village on 28th April 2008 for a sixfold expansion of the refinery, from the 1 million tonnes per year originally applied for to 6mtpy. Nearly everyone present spoke strongly against the refinery, which has already heavily polluted the Bansadhara river and caused enormous suffering for villagers displaced as well as those near the refinery; yet the hearing was reported in a way that implied people gave their consent!¹⁶ The company’s attempt to mine Niyam Dongar received a setback when the new Environment Minsiter Jairam Ramesh drew attention to extensive tree-felling without permission on the basis of highly questionable ‘provisional clearance’.¹⁷

The authors witnessed three sessions of the Supreme Court case, where many things amazed us. Among the most extraordinary were the argument made by pro-Vedanta lawyers about how the project would alleviate the region’s poverty, giving everyone in Kalahandi ‘two square meals a day’, and sidelining Dongria Konds from the case, despite this tribe’s role in preserving forest on the mountain summit at 4,000 feet. Also, the idea that the forest, wildlife and impact on local people can be compensated by making the company pay large sums for reforestation, a wildlife management plan, and tribal development. The judges admitted that a recent report from the Norwegian Pension fund had blacklisted Vedanta, but called on Sterlite to set up a Special Purpose Vehicle with the Orissa Mining Corporation and Orissa Government, when the report actually mentions Sterlite alongside Vedanta for numerous violations of the law at numerous sites in India and other countries.¹⁸

While the Vedanta drama has unfolded from 2003 to2010, several other major bauxite projects are in various stages: Alcoa, BHP Billiton and Rio Tinto have mentioned an interest several times, Larsen & Toubro has a joint venture with Dubal (Dubai Aluminium) for mining Kuturu Mali and Siji Mali with a refinery near Kalyansingpur, IMFA has designs on Sasubohu Mali, Jindal has designs on mountains in south Orissa and north Andhra Pradesh (with a refinery at S,Kota in Andhra), where RAK (Ras Al-Khaimah, another Dubai-based company) also has plans for mining the Jerrela range.

Meanwhile, Vedanta’s new smelter in north Orissa has started production, while Hindalco/Aditya Aluminium has advanced plans for a new smelter nearby. Both these draw from the Hirakud reservoir, which has been refurbished with aid from the DFID. 30,000 farmers held demonstrations there in November 2007 against the diversion of water from Hirakud to these new smelters. After police lathi-charged the crowds, Orissa’s Chief Minister invited the movement’s leaders to a meeting, announcing that some of Hirakud’s water would go to farmers, though if all the deals for supplying aluminium and steel plants go through, evidence suggests that water reaching farmers along the (highly inefficient system of) canals is likely to diminish still further.²⁰

Invasion and Resistance: the threat of Cultural Genocide

Analysing the social structure of the aluminium or steel industry, the clash of ideologies emerges as a key fault line. The tribal viewpoint is powerfully expressed by Bhagaban Majhi, a leader of the Kashipur movement against Utkal:

Agya, unnoti boile kono? (Sir, what do you mean by development?) Is it development to displace people? The people, for whom development is meant, should reap benefits. After them, the succeeding generations should reap benefits. That is development. It should not be merely to cater to the greed of a few officials. To destroy the millions of years old mountains is not development. (Das 2005)

Resistance became focused through the Gandhamardan movement, and intensified with the Kashipur movement that stalled Utkal for more than ten years. The Maikanch police firing, which killed three tribal people in December 2000, showed the depth of polarisation. All the bauxite mountains are protected by local tribal and non-tribal villagers, who see them sacred entities for the life they give through their perennial streams.

It seems to be hard for mining executives, and many government officials, to comprehend the strength of resistance to these projects, and people’s attachment to their mountains. The mainstream belief, that the aluminium projects will bring development and wealth to a region long sunk in poverty, looks on those resisting these projects as ‘anti-development’, driven by ignorance of the benefits of industry, and instigated by outsiders. Yet the mainstream view of ‘educated people’ often seems ignorant of the history of aluminium, briefly summarised in this paper, and extremely ignorant about the tribal villagers, their culture and values.

What is actually happening over large areas of East India is a process of cultural genocide, carried out by people who do not understand what they are destroying. Driving them is a 200 year old ideology that powered forced industrialisation from Western Europe to the USA to the USSR and China. In India, industrialisation has displaced an estimated 60 million villagers within the last 60 years, more than 2 million in Orissa alone, of whom a majority are Adivasis and Dalits.20  Very few have been properly compensated, let alone improved their standard of living, especially since most lost their livelihood as cultivators, and therefore their food security. This is why most of these people consider these projects have been the opposite of development.

This reality contrasts starkly with companies’ rhetoric of ‘generous R & R packages’, ‘Sustainable Development’ and ‘CSR’, in the present rush to make deals for mineral resources and construction projects. Whatever wealth is generated for the nation as a whole, or for its business elite, the people displaced face a worse poverty than anything they knew before: ‘projects meant to reduce poverty are the ones adding to the numbers of the poor.’ ²¹

According to World Bank and other international standards on involuntary resettlement, if a project really constitutes ‘development’, then ‘the first rule is that all parties to the project should be better off.’ ²² In practice however, it is clear to everyone, and easy to demonstrate, that most of India’s 60 million displaced people are not better off at all.

There is a strong tendency among those implementing displacing projects to simply deny these risks that their projects are bound to make most oustees poorer.²³ When forced to admit the hardship which displacement causes, they tend to justify it in terms of ‘sacrifice’ – a sacrifice of the few for the many, or ‘for the national interest’. This usage has western roots: indigenous areas affected by uranium mining in the US are known as ‘National Sacrifice Areas’ – to which Russell Means, a leading American Indian activist of the Lakota tribe replied ‘We are fed up with being called a national sacrifice people!’ ²⁴

When so many people’s lives have been ruined, how can so many more displacements be planned ‘in the name of development’? ²⁵ As Bhagaban puts this:

We have sought for an explanation from the Government about the people who have already been displaced in the name of development. How many have been properly rehabilitated? You have not provided them with jobs; you have not rehabilitated them at all. How can you again displace more people? Where will you relocate them and what jobs will you give them? You tell us first. The government has failed to answer our questions. Our fundamental question is: how can we survive if our lands are taken away from us? We are tribal farmers. We are Earthworms (Matiro poko). Like fishes that die when taken out of water, a cultivator dies when his land is taken away from him. So we won’t leave our land. We want permanent development. Provide us with irrigation to our lands. Give us hospitals. Give us medicines. Give us Schools and teachers. Provide us with lands and forests. The forests we want. We don’t need the company…. But the government is not listening to us. (Das 2005)

The whole issue of displacement has been routinely neglected in development projects. While Environment Impact Assessments have often been rudimentary, their shortcomings have at least been frequently attacked by campaigners and in the courts. Social Impact Assessments are given far less importance still, and administration of R & R is normally relegated to highly unsuited personnel, in a low-status Govt post, when their task requires the utmost sensitivity.²⁶ Officials’ usual response to the inevitable complex difficulties that arise, since almost every displaced family faces huge trauma and injustice, is to deny the problems. Much energy goes into masking painful realities and abuses of power – a deliberate manipulation of the economic and cultural risks inherent in displacement.²⁷

Economic risks are evident wherever people have been resettled. Even World Bank studies admit that ‘income restoration’ remains elusive: the hard fact is that most oustees’ standard of living declines drastically.²⁸ As for cultural risks, tribal culture exists through relationships ordered in a carefully maintained social structure, which traditional anthropology analyses in terms of distinct domains, each of which is torn apart by displacement:-

*    The Economic System, along with the whole tradition of cultivation is completely destroyed with people’s removal from their land, and the termination of their existence as farmers.
*    The Kinship System is fractured by displacement from villages, where social relations follow the pattern of a village’s traditional layout, and spatial distance from kin in neighbouring villages. In every area where a project causes displacement, there is a split in long-standing relationships, and tension between those who accept compensation and move, and those who remain opposed.
*    The religious system is undermined by removal of sacred village sites, as well as the mining of venerated mountains. As a woman from Kinari village said to us days after being moved to Vedantanagar colony to make way for the Lanjigarh refinery, after seeing bulldozers flatten her village and its central earth shrine, “Even our gods are destroyed.” Losing her land means she can never grow her own food again, so the whole system of values attached to the customary way people have supported themselves is undermined.
*    The material culture, through which people make most of what they need, is destroyed as soon as the houses people built from local earth and wood are knocked down and replaced with a concrete house.
*    Above all the power structure is transformed. From being in control of their area and its resources, people find themselves at the bottom of extremely hierarchical structures of power and authority. Traditional tribal society is remarkably egalitarian, and women have a higher status than in much of mainstream society, which they lose when new, corporate forms of domination invade their area. In many ways women have even more to lose than men, which is why they are often at the forefront of campaigns against displacing projects.

In other words, tribal people’s economic and political systems are fundamental to their culture, and when dispossessed of their land these systems are effectively destroyed. This is why adivasis often say they would rather die than leave their land. Losing their land brings the death of all they value, including the sacredness of nature, respect for elders’ knowledge, ritual contact with the ancestors, growing their own food on family land and making their own houses and tools, exchanging food with neighbours with an egalitarian spirit. These things are swept away by corporate values, which emphasize money and financial power. ‘We’re being flooded out with money’ is how adivasi elders describe the process.

Actual Genocide involves physical extermination – all too evident in the civil war situation in neighbouring south Chhattisgarh, where over 600 tribal villages have been burnt with countless atrocities by Salwa Judum, in areas where steel companies require huge tracts of land. In south and west Orissa, direct killings, e.g. by police in the Maikanch and Narayanpatna incidents, may be relatively few. But they symbolize a psychic death for Adivasis that non-tribal people rarely understand. Underlying this Cultural Genocide is the invaders’ total lack of respect for tribal people’s traditions and connection with the land. Mainstream culture, in India as in the West, ceased a long time ago to be rooted in the soil: most elite and middle class families (as well as many working class ones) tend to move around a lot, buying and selling distant properties over the generations rather than staying put in one place. As land prices shoot up, collective attachment to the land a village has worked over successive generations has no value in newcomers’ eyes, which focus only on profits the land can generate – a completely novel attitude to land for tribal people.

Few outsiders listen to what Adivasis actually say – even when claiming to support them. When they are interviewed on TV, the intimidating superiority assumed by interviewers brings out only stereotypes. The authors have witnessed countless Adivasis transported to meetings around India as spokespeople or symbols of resistance, being completely sidelined in the road shows, rarely even asked to give their views, simply sitting in dignified silence in the meetings, and returning to their villages sad at the confusion among people who say they want to help them. Elders in a Kond village once asked us: ‘Where are the saints in your society? We are all saints here.’ This is a culture that emphasizes sharing, with low but equal consumption and minimal wastage.

Belief in markets was as strong in the 1830s as it is in the 2000s, and shows in the first colonial writings on the Konds. In 1836 the Honourable G. E. Russell, senior civil servant of the East India Company in charge of the first stage of British conquest, advocated setting up markets for the Konds on the grounds that

giving them new tastes and new wants will, in time, afford us the best hold we can have on their fidelity as subjects, by rendering them dependent upon us for what will, in time, become necessities of life.

As his superior put it, Lord Elphinstone, Lieutenant-Governor of the Madras Government: ‘with the extension of this commerce their wants will increase.’ ²⁹
Spreading consumer values is at the heart of the new market-driven invasion of Kond land by mining companies. A terse Kond counter-view comes in an improvised song recorded from Salo Majhi, a blind singer in Kucheipadar, the village at the forefront of the Kashipur movement.

‘They are flooding us with money
They are coming to take our Mountain…
The lazy people are invading…’ (Das 2005).

The ideology opposing the invasion is one of standing firm, and resisting displacement. It could be called an ideology of sustainability, in contrast to the ideology of material development through mining and industrialisation. It is this ideology of sustainability that has checked a succession of projects in East India. In West Bengal, Tata’s nano-car factory and Indonesia’s chemical giant Salim Industries have been stopped in their tracks; while in Orissa the anti-Posco and Kalinganagar movements are two out of many opposing iron-ore mining and mega-steel projects. In the words of Kishen Pattnayak,

Orissa has enormous mineral reserves. This is considered to be the biggest asset to increase the prosperity of Orissa. This is really a myth. Mining areas of Orissa have never been known for being rich or developed. Now the condition is becoming much worse……A few national/multi-national companies and their contractors and those ministers and officials helping these companies in unlawful, unethical manner become the owners of huge property. Orissa as a state is not going to get any benefit from this.³⁰

The Real Price of Bauxite

Aluminium executives admit that getting bauxite at a cheap price is the starting point of value creation for their companies.³¹ The need for subsidies on electricity and other materials for producing aluminium has often been stressed (e.g. Graham 1982, Gitlitz 1993, Switkes 2005). Less so with the price of bauxite. Basically, if this cannot be kept low, the price of aluminium will rise.

The industry in India defines itself by increasing consumption. A policy shift took place in India from 1990/1991, just after the Bureau of Industrial Costs and Prices recommended keeping a check on aluminium consumption in India due to the high costs of electricity and environmental impacts (BICP 1988). A few years later, executives at INCAL conferences of the Aluminium Association of India (1998 and 2003), lamented the ‘dismally low level’ of consumption in India, which averaged 0.65 kg per capita per year, and aimed to increase output as fast as possible, towards the average of 25 kg consumption in ‘developed’ countries. A proliferation of aluminium foils and tetrapaks, use in construction, in cars and trucks, and in the arms industry, have recently boosted the consumption of aluminium in India, though the emphasis in new projects is on export, e.g in the huge Utkal/Hindalco and Vedanta/Sterlite factories going up in Orissa now. Nalco set the trend, starting to export over 50% of its output around the year 2000.

Orissa’s new refineries and smelters make no economic sense if these companies cannot obtain local bauxite cheaply. Since starting operation in 2007, Vedanta’s refinery in Lanjigarh has had to bring bauxite from Chhattisgarh and even Australia, and has claimed to be losing $100,000 a day due to the delay in getting clearance to mine Niyam Dongar (Times of India 2 March 2009).

There is no set price, let alone free market, for bauxite. Different companies get it for wildly different prices, and how much royalty and other taxes they pay varies greatly around the world. Nalco calculated its raising cost of bauxite in 2007 as 236/- rupees per tonne, of which 64/- is royalty and 172/- extracting cost. |Rs.236/- is  about $6, less than half the world’s average. Compared with the price of bauxite, the price of commercial information about bauxite is costly indeed. A copy of CRU’s Analysis Report: Bauxite mining costs (2007) costs £9,950.

If a proper Cost Benefit Analysis was done of any bauxite project, conventional estimates of revenue and benefits in triggering employment and other industries need setting against ‘externalities’: if subsidies on electricity, water, infrastructure, transport etc were included in costs, the price of aluminium would have to rise exponentially. Costs of dams and coal mines would have to be included.

The Wuppertal Institute for Climate, Environment and Energy in Germany, which the authors visited in July 2006, calculates the material intensity of producing one tonne of aluminium at 85.38 tons of abiotic material (i.e. overburden, bauxite waste etc), 9.78 tonnes of air (i.e. basically GHG emissions), and a staggering 1,378.6 tonnes of water consumed (Ritthoff et al 2002 p.2002).

The externality cost of carbon emissions is calculated at $85 per ton by the Stern report, while producing a ton of aluminium is estimated as emitting between 5.6 and 20.6 tons of CO2, depending on whether a smelter uses coal or hydro-power (most in Orissa use both), which would give an externality cost of over $1,000 per ton of aluminium for these two factors alone.21 Also to be included in this calculation are SO2 and many other factory emissions, methane and other GHGs from reservoirs, and emissions from coal mining and captive power plants. What this does not include, and would be impossible to assess financially, is the effect of bauxite mining on mountains’ ecology and water regime, the loss of forests and their biodiversity, and the impacts on people whose environment is being rapidly impoverished to feed an escalating demand for aluminium consumption.

Yet in many ways, it is these non-economic costs that are the highest. The judgement in the Indian Supreme Court case, delivered on 8th August 2008, emphasised the idea of ‘striking a balance’ between environmental and economic needs through the concept of ‘sustainable development’. In particular, the Judges drew on the concept of ‘green accounting’, by which the Net Present Value (NPV) of forests can be calculated to determine compensation. This project was undertaken by a team from the Green Indian States Trust and TERI, financed in particular by Deutsche Bank (Gundimeda, Sukhdev et al 2005, 2006). Implementing the ‘polluter pays’ principle has introduced a new level of threat to India’s environment, by reducing natural resources to an artificial monetary value – often a gross underestimate – in effect subverting the principle into a licence to pollute. The judgement laid out a Rehabilitation Package, by which Vedanta, supplied from the mine by a Special Purpose Vehicle run by the Orissa Mining Corporation, Sterlite Industries (Vedanta’s subsidiary), and the Orissa Govt, would have to pay the forests’ NPV + ‘5% of profits before tax and interest from Lanjigarh project or rupees 10 crore whichever is higher’.  Local reports showed that the first traffic to make much use of the new roads into Niyamgiri was the timber mafia. If Niyamgiri’s forests are being felled like this, what trust can be placed in authorities’ reforestation plans?

Net Present Value of forest or biodiversity becomes a formula that blurs the elementary distinction between primary forest and plantations. Lado Majhi, a Dongria of Lakhpadar village, put this point most powerfully at the Belamba Public Hearing on 25.4.09, where he was the first to speak:

Niyamgiri is our Mother. Our life depends on the mountain. Can you pay five lakhs for each tree? Our Sarkar [Govt] should not sell out to a foreign company. Even if everyone else accepts the project, we won’t allow mining on Niyamgiri.³²

In other words, biodiversity – especially in a forest on top of a mountain, protected as inviolate by local people – cannot be costed or compensated in financial terms. The GIST-Deutsche Bank enterprise of working out the NPV of forests becomes a pretext for selling them off. The Niyamgiri case makes this clear – not least because Deutsche Bank has been a prominent promoter of investment in Vedanta.

The basic waste of bauxite is red mud. In March 2008, Vedanta joined an international Red Mud Project, whose website reveals that despite use of red mud in bricks being banned in Australia after tests by the Health Department in 1983 found that radiation levels were unacceptably high, vast quantities are used to make bricks in China, while in India, 2.5 million tons of red mud were used for cement in 1998-9 alone.³³ We have seen, and photographed, red mud lakes leaching into streams at Muri refinery (Jharkhand) and at Korba (Chhattisgarh). Red Mud contamination is not only from caustic soda, but from at least 14 rare earths and 22 radio-active elements, all of which are present in bauxite as destabilised minerals, including uranium.

At least the Orissa State Pollution Control Board has pointed out Vedanta’s violations at Lanjigarh, which figured in the Norway government report blacklisting Sterlite/Vedanta (Council on Ethics, 2007). Residents of Chatrapura and other villagers have attested that the refinery regularly discharges highly toxic chemicals into the river, writing a letter to the OSPCB about this on 9.9.08. Many people and animals have developed body sores after bathing in the river, and at least two people have died, covered in sores. Meanwhile, residents of Bondhaguda and other villages close to the refinery and approach road are suffering from lung diseases. Yet, once again, in June 2009, Vedanta won a Golden Peacock award for excellence in its environmental record! ³⁴

In effect, with the closing of many refineries and smelters in ‘developed’ countries, aluminium production is being ‘outsourced’ to ‘developing’ countries such as India, where environmental and human rights legislation is circumvented on a regular basis. In March 1996, for example, R.C. Das, Chairman of the Orissa State Pollution Control Board (OSPCB), wrote a report recommending against any further bauxite mines, refineries or smelters in the state, having studied in detail the excessive pollution from existing plants (a refinery and two smelters), and knowing by experience the ease with which the companies involved avoid correcting the situation (Das 1996). For this, he was dismissed by the Orissa Government. The Global Reporting Initiative, used by Vedanta and promoted by the International Aluminium  Institute and other bodies, was set up to avoid proper regulation, and facilitates a deception of figures.³⁵ For example, deaths in factories and on roads around them, is grossly under-reported, due to the system of sub-contracting. Vedanta’s annual reports have Sustainable Development reports attached, and each of the ‘big four’ London-based accountancy firms in turn have ‘verified’ these, based on the most superficial analysis.

The history of other countries’ experience of bauxite-based industrialisation is vital to understand forthcoming impacts in Eastern India. The exploitation at the heart of aluminium economics starts from the aluminium companies getting bauxite cheap. If the true costs of mining bauxite were taken into account, India’s bauxite would have to be sold for far more than it is now.

Jamaica’s experience is relevant here. Michael Manley’s bauxite levy in 1974 increased the price of Bauxite immediately by about $10, from $8 to $19.94. But this feat has never been repeated, and savage reprisals from the US exemplify the influence that keeps the price of bauxite low, in India and worldwide. Jamaica also exemplifies the heavy environmental and social costs of bauxite mines. Recognition of these costs is behind a campaign to save Jamaica’s Cockpit Mountains from bauxite mining – a movement analogous to the movements in India.³⁶

Brazil’s wealth in bauxite, water, forest, coal and iron is similar to Orissa’s, though on a vaster scale. The way Japanese companies and banks sold the Tucurui dam in a scheme that impoverished the state’s electricity company has parallels with the privatisation of Orissa’s electricity companies and their complex debt-relationship with aluminium companies, with villages around e.g. the Indravati reservoir lacking the electricity they were promised.³⁷ New dams and smelters in Iceland and Trinidad have many parallels with Orissa, including circumvention of laws protecting the environment, and harsh repression of community movements against these projects.³⁸

Of all the world’s bauxite deposits, those in India probably have the greatest population density around them – a largely tribal/indigenous population, whose spiritual bond with their mountains is simultaneously economic, since their livelihood and cultural survival depends upon them. What this means is that the consequences of mining bauxite in Orissa and Andhra are likely to involve more upheaval than anywhere else where bauxite has been mined.

Vietnam’s tribal highlanders face a similar and simultaneous threat as those in Orissa and Andhra Pradesh. The country claims to have 8 billion tons of bauxite (even more than India), lying on mountains in the Central Highlands, where Chalco and other companies are currently trying to set up mines, despite protests by a wide range of leading citizens, who point out the threat to the Hill Tribes and to the long-term health of the country’s environment and economy, including tea and coffee plantations, lakes and rivers.³⁹

Another incalculable cost is the escalating resource war. Maoists attacked Nalco’s Panchpat Mali mine on 12th April 2009. They numbered about 100 and killed ten security staff hostage, losing four themselves, after which production dropped from 14,000 tonnes per day to 9,000, and security has increased.⁴⁰ We have seen how Hindalco’s move towards mining Mali Parbat has been opposed by the tribal organisation CMAS, which was supported by Maoists, and has therefore been targeted by an incursion of at least 4,000 armed police, and numerous arrests after the police firing that killed two members in November 2009. The situation in Dantewara district of Chhattisgarh, where Tata and Essar are trying to set up steel plants based on new iron ore mines, is far worse, with an estimated 300,000 tribal refugees from over 600 villages burnt by the pro-mining tribal militia, Salwa Judum, armed by the police to fight against Maoists. There have been several well-reported atrocities by Maoists, as against hundreds of unreported atrocities by Salwa Judum and the security forces. ‘Peace Committees’ are similar militias springing up in Orissa on the Salwa Judum model.⁴¹

The ‘Operation Green Hunt’ war currently escalating across Eastern-Central India against the Maoist insurgency has many features of a resource war, since the region’s concentration of tribal people, its forests and minerals, and its Maoist strongholds are largely coterminous. The violence in Kandhamal district, when about 50,000 Christians were driven from their homes, also has a hidden connection with bauxite deposits on mountains in the south of the district known as the Ushabali plateau: this was announced in July 2008, just six weeks before the Swami Saraswati’s murder by Maoists. In the aftermath of this violence, there have been calls to build a railway to the district, whose real purpose is clearly to facilitate extraction of this bauxite.⁴² Increasingly, non-violent movements against factories and  displacement are being analysed as Maoist-instigated, even when they are not.⁴³

And how does one calculate the cost of corruption? During 2009-2010 Orissa was rocked by mining scams, mostly related to iron ore mines in the north, but bribes seem to be a regular feature of mining deals, and the effects of corruption are visible at every levels around a project.⁴⁴

The metal factories going up in Orissa now are raising India’s GHG emissions exponentially. When Indian or Chinese business or government representatives argue that as ‘developing countries’ they have a right to increase their carbon emissions, this suits business interests in London and other capitals. The picture painted in Anderson’s 1951 essay still holds: the environmental costs are too high, and it makes sense for the most powerful countries to outsource most aluminium production. But side by side with this imperative is the strategic need for aluminium. As Anderson says, no war can be waged or won without consuming and destroying vast quantities. The metal has had a central place in the military-industrial complex since the First and Second World Wars (Padel & Das 2006).

Aluminium’s claims to be a ‘green metal’ do not add up (Mathias 2003). Bauxite reclamation, where we have seen it in Orissa and Chhattisgarh, consists of little more than eucalyptus or jatropha plantations. For tribal people in villagers near Lanjigarh, the heating of the climate and decline in rainfall from the new refinery and its captive coal-fired power plant is something obvious. Knowledge, here, is a continuum still rooted in the earth – a different basis of knowledge, that the modern mind struggles to comprehend (Padel 1998). The importance of intact mountains and forests for the earth’s climate is something tribal people ‘know’ because they know their environment thanks to uncounted generations of ancestors who lived and worked in this landscape.

Notes
1.Gopinath Mohanty: Sroto Swati 2000 (his autobiography, in Oriya) Part III p.324.
2.FT 5 November 2003, and 3 November 2004, Samantara 2007, and The real face of Vedanta documentary  www.youtube.com).
3.Parliament of India: Rajya Sabha nos. 66 and 80 (March and December 2002). The UNDP gave Rs 17 crore and the GoI, 19 crore. Among JNARDDC’s first functions was an international meeting on bauxite (Bauxmet) in 1998, and studies of bauxite from several mountains in Orissa.
4.Articles in Economic and Political Weekly:  Rajagopalam et al 1981, Subramanian 1982. This section of our paper summarises arguments presented in our forthcoming book: Out of this Earth: East India Adivasis and the Aluminium Cartel (2010)
5.Viegas (1992) summarises the outline of this dam’s history – though not its connection with the smelter. The violence is referred to in an article ‘Sarkar Javaab Diantu’ (‘Government, explain’) in Dharitri newspaper by B. Krishna Dhalo, 23 October 2007.
6.Madhu Kudaisya (2003), pp. 334–35; Gita Piramal 1996.
7.Mohanty et al 2004, p. 33, in an article by Golak Bihari Nath. Samarendra visited this man’s family in 2005, shortly before he was due for release.
8.This SC Monitoring Committee report is item 34 in Environment Protection Group Orissa’s website  freewebs.com).  Newspaper reports on the toxic spill of 31.12.2000 in Indian Express and Asian Age, 1–11 January 2001.
9.Bahuguna 1986; Onlooker, 1–15 July 1986: ‘Adivasis up in Arms to Save Nature’; PUDR 1986; and Meena Menon in The Hindu Survey of the Environment (2001), p. 148. On Lower Suktel: Dams, Rivers and People, January 2005, p. 9–10, Das 2005.
10.Extensive coverage in Barney et al 2000, PUDR May 2005, Das 2005, Goodland 2007, and our forthcoming book, Out of This Earth. On Alcan’s withdrawal from Utkal: http://www.corpwatch.org/article.php?id=…
11.Caufield 1998 p.227; see also a documentary film about this dam: Sahu 2009.
12. Amnesty International index ASA 20/021/2009, 2 December 2009.
13.G. D. Birla, Towards Swadeshi: Wide-ranging Correspondence with Gandhiji, ed. V. B. Kulkarni, Bombay: Bharatiya Vidya Bhavan, 1980, p. 118, and Karunakar Supkar 2007, pp. 28–32.
14.PUCL May 2003, Padel and Das 2004, Das 2004.
15.E.g. Sukru Majhi’s death on 27.3.05, and the Assistant Sub-Inspector of Lanjigarh police station, killed on his motorbike by an alumina lorry on the road to Lanjigarh (Sambad 24.1.08 p.1). Many deaths have been mentioned in the local Oriya press, but very few in Vedanta’s Annual Reports (2004-8), due to the system of subcontracting, which allows the company to shrug off responsibility and record a much lower number than actually take place. Vedanta’s PR companies Finsbury and CO3 have carried on a battle against Survival International and others (see http://www.pressreleasepoint.com/dongria…, and a Survival website ‘Behind the lies’, exposing Vedanta’s PR offensive at www.survival-international.org). On villagers thwarting Vedanta’s attempts to take vehicles up the mountain to start setting up the mine from January 2009, see Action Aid International-India  www.minesandcommunities.org).
16.http://epgorissa.blogspot.com/2009/07/protests-against-vedantas-mining-of.html, www.youtube.com Recorded in Proceedings of the Public Hearing for Vedanta Aluminium Ltd held on 25.4.2009 for expansion of refinery capacity from 1 millions tons per year to 6mtpy, held at Belamba village under P.C.Rauta, Regional officer of the Orissa State Pollution Control Board, Rayagada, and Chudamani Seth, Additional District Magistrate, Kalahandi.
17.‘Vedanta flouts rules in Orissa, central government wants to know why, http://www.indiaenews.com/business/20091…; and ‘Vedanta flouted Centre’s norms, http://www.hindustantimes.com/india-news…
18.Council on Ethics 2007,  IA no.2134 of 2007 on Writ Petition no.202 of 1995, of petitioner T. N. Godavaraman Thirumulpad (petitioner) versus Union of India and others (respondents), in the matter of Sterlite Industries (applicant), at the Forest Bench of the Supreme Court of India, 8.8.08.
19.Articles in New Indian Express, Bhubaneswar, from November 2007: ‘No Hirakud water for industries’, 8.11.07 front page, ‘Industries eye other dams too’ 26.11.07 front page (‘Currently 13 industries are drawing water from Hirakud and another 20 are in agreement with the Government to do the same’), ‘Naveen’s water woes overflowing’, 27.11.07 p.3, ‘Farmers reject Naveen largesse’, 28.11.08 p.6, ‘Industries default on water cess’ 28.12.2007 p.6. Also POKSSS 2008.
20.Fernandes 2006 pp.110-111.
21.Mathur 2006 p.2.
22.David Pearce quoted by Cernea in Mathur ed. 2006 p.22.
23.Cernea 2006.
24.Moody 2007 p.127, Russell Means 1982.
25.Padel 2000 Ch.8.
26.Mathur 2006 pp.48 & 69-70.
27.Cernea 2006 pp.26-28.
28.WB OED Report no.17538, cited in Mathur 2006 pp.61-2.
29.Russell 1836, Elphinstone 1841, cited in Padel 1995 p.179.
30.Kishenji was a great political leader of Orissa and India. He wrote these unpublished words shortly before he passed away in 2005.
31.Rolf  Marstrander’s paper in INCAL 2003 (Aluminium Association of India).
32.Proceedings of the Public Hearing for Vedanta Aluminium Ltd held on 25.4.2009 at Belamba, and www.youtube.com
 33.www.redmud.org, consulted on 15 November 2008, under ‘Red Mud, Industrial Uses’. Sea dumping seems to have been a general practice until recently, and took place in Greece’s sensitive Gulf of Corinth. The main researchers profiled on this website include five from India, four from Greece and one from China. One of the Indian scientists, Harish K. Chandwani had helped set up Korba and the JNARRDC.
34.Ashutosh Mishra in Down to Earth (17 November 2008), ‘Extracting a cost: Vedanta’s refinery pollutes river, sickens people in Orissa’,  http://www.downtoearth.org.in/full6.asp?…, and OSPCB reports to the Central Pollution Control Board in Delhi, 1995 and 2002.
35.Moody 2007 pp.16-19, 156-60.
36.Blum 2003 p.263. On Jamaica’s hike of royalty see Bonnie Campbell 1995 p.199, and Jamaica Information Service ( jis at jis.gov.jm) 14 March 06; also Jamaican Bauxite Environmental Organisation at www.jbeo.com; Switkes 2005, p. 11;  John Maxwell (18 February 2007), ‘Is Bauxite Worth More than People?’ ( jankunnu at gmail.com, 2007); Oli Munion, ‘Corporate Crimes in the Carribean: How Jamaica and Iceland Face a Common Enemy,’ in Voices of the Wilderness, Saving Iceland  www.savingiceland.org), summer 2008.
37.On Brazil: Gitlitz 1993; Switkes 2005; Barham, Bunker and O’Hearn 1995; Bunker and Ciccantell 2005 p. 67 ff. On Orissa’s electricity reforms: Prayas et al 2003.
38.On Iceland: Rose 2008, Sigurðardóttir (forthcoming). On Trinidad: Kublal-Singh 2008, and ‘Trinidad: Anti-Smelter Camp may be a Permanent Fixture’, 31 October 2008 (Peter Richards at http://ipsnews.net/news.asp?idnews=35314).
39.Sergei Blagov in Asia Times, 24 May 2006, at www.atimes.com and 27 October 2008 at www.tradefinancemagazine.com 10 April 2009 ‘About 1,000 Vietnam Catholics hold anti-government vigil’ Brisbane Times 27 April 09; http://www.thefirstpost.co.uk/47848,news…; Lam 2 June 2009; Mydans 29 June 2009; John C. Wu on Vietnam, in US Department of the Interior for US Geological Survey, June 2007 at the http://minerals.usgs.gov/minerals/pubs/c…, and vietnamnews.vnagency.com.vn/showarticle.php?num=01IND080406.
40.‘Nalco’s Orissa mine production drops after Maoist attack’, Thaindian News 5.5.2009 at http://www.thaindian.com/newsportal/busi…
41. Articles by Javed Iqbal in The New Indian Express: ‘Operation Tribal Hunt?’ 15.11.09, and ‘State-sponsored violence at Narayanpatna’ 24.12.09; PUDR April 2006: Where the State makes War on its Own People ( www.pudr.org).
42.The Hindu 12.7.08  http://www.hinduonnet.com/businessline/b…). Railway suggestion: http://www.orissadiary.com/ShowOriyaColu… (5th January 2009)
43.Sudha Ramachandaram: ‘India drives tribals into Maoist arms’, 16.1.2010 at http://www.atimes.com/atimes/South_Asia/…
44.Pravin Patel: ‘Mining Scam of Orissa: a tip of the iceberg’, 21.9.09, http://www.orissadiary.com/ShowOriyaColu…

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Samarendra Das, from Orissa, studied maths and computer science at Berhampur and Indore Universities. He is a film-maker and political activist with the Samajvadi Jan Parishad (Socialist People’s  Council). His film about the aluminium industry in Orissa (Das 2005) gives an Adivasi perspective. Felix Padel is a freelance social anthropologist who obtained his doctorate from Oxford University, after studying also at the Delhi School of Economics. Padel’s first book analysed British rule over the Konds in Orissa (1995). Their book Out of This Earth: East India Adivasis & the Aluminium Cartel is published in 2010 by Orient Blackswan.
On Saving Iceland’s website you can also read two articles by Samarendra Das written in conjunction with Felix Padel: Agya, What Do You Mean by Development? and Double Death – Aluminum’s Link with Genocide and a press release on their book: Out of This Earth: East India Adivasis and the Aluminium Cartel

There are countless reasons for Magma Energy not being allowed to purchase HS Orka. Those who have no idea why should quit reading this and get their hands on books like Naomi Klein’s ‘The Shock Doctrine’ and documentaries like ‘The Big Sellout’ by Florian Opitz. They show how the privatisation of natural resources brings about increased class division and poor people’s diminished access to essentials—without exception.

People could also study the history of Ross Beaty, the man that wants to build Magma Energy to being ‘the biggest and best geothermal energy enterprise in the world.’ Ross is the founder and chairman of Pan American Silver Corporation, which operates metal mines in Bolivia, Mexico and Peru, where mining is done by the book: environmental disasters, human rights violations, low paid labour and union restrictions, to mention but a few of the industry standards.

Even though such facts are evident to all, the acceptance of this kind of critique is rare in Iceland. Those who criticise privatisation and marketisation from a radical perspective, analysing the global economic and power structures we live within (as well as institutions like the International Monetary Fund and the World Bank), are often dismissed and their words dismissed as only “one more argument against global capitalism”. Their pleading is thus supposedly belittled. The phenomenae ‘capitalism’ and ‘representative democracy’ have been normalised and recognised as ‘the only right way’ of social organisation; daring to criticise today’s ruling ideologies is seen as banal, uncool, even hysterical. After the collapse of Iceland’s bank casino and the nationalisation of private debts, it took months until the word “capitalism” appeared and was accepted in the critical debate of that winter’s resistance.

The fundamental questions that are never asked

In this discourse about the use of natural resources, the Earth and man, some people must wonder why the fundamental questions are never asked: Is man ‘supposed’ to ‘exploit’ nature just because he can? Is he ‘allowed’ to exploit nature like he does today? Does he ‘own’ nature or does he live with it? Is he not a part of it, does he not depend on it for his existence? These questions were asked at a public meeting on the Magma affair, recently hosted by Attac in Iceland. To begin with they were written off as theological reflections. After few objections the moderator changed his mind and called them philosophical, but did not want the panel to turn into a forum for philosophical reflection on man and his role on Earth. But objections rose again, both by guests and panellists, the latter trying to answer the questions, with uneven success.

God and the rational man

Considering these questions, theological and philosophical isn’t necessarily wrong. In the book of Genesis, God provides instructions for humanity: “Be fruitful, and multiply, and replenish the earth, and subdue it: and have dominion over the fish of the sea, and over the fowl of the air, and over every living thing that moveth upon the earth.” Those words, like others in the Bible, have often been used as arguments of those in favour of man’s domination of the planet. Hannes Hólmsteinn Gissurarson, Iceland’s most famous spokesman for free market policies and neo-liberalism, used them to criticize James Cameron’s Avatar, saying God’s message is clear: Man is ‘obligated’ to “[…] conquer drought and floods with irrigation and dams and bridging or damming big rivers; to keep whales, elephants and lions at bay with reasonable harvesting, and to exterminate vermin.”

A similar attitude is found widely within Western philosophy. Starting with the ancient philosophers of Greece, man has been placed higher than other living beings on this planet. For instance, French philosopher René Descartes, often referred to as ‘the father of modern philosophy’, claimed our species’ rationality and intellect is what makes us men and separates us from animals. ?These and similar ideas have been debated back and forth. Freethinking philosophy students ponder man’s purpose and existence in this world, tearing through schools of philosophy and re-entering society all erudite. But philosophy has smoothly been separated from reality. It is allowed to wallow in the whole world’s philosophy, asking complicated, challenging questions. But seeing it as a part of reality and as real element in the discussion—e.g. now when Magma’s purchase is being discussed—is not an option. Philosophers can simply dawdle between library shelves while pragmatists argue over the tiny difference between private and state ‘ownership’ of the Earth.

The ‘pragmatist premises’ that surface when philosophy and our alleged reality are separated prevent some of the discussion’s factors to be considered. “Aluminium has to be produced somewhere! Without genetically modified food, humanity will starve! ” With these premises, we jump over few of the debate’s steps so it starts in the middle of the stairway, instead of the beginning. This is called manipulating a debate.

Extremes? Or the real facts?

At the above-mentioned public meeting, the “green socialist” Mörður Árnason stated that independent from his favour of privatising ‘utilization rights’, he could not agree that the man ‘owns’ the Earth. Rather that he is its guardian—from God’s hands or another’s—and one that hasn’t done the job well enough so far. It is easy to agree with him that man has not protected the Earth during the last centuries. But on the other hand, there is a reason to doubt that the opposite is actually possible when the ideas of the man as the planet’s owner or guardian are in the foreground.

In his book ‘Violence’, Slovenian philosopher Slavoj Žižek asks if it is not time to stop ignoring the fact that organised religion is one of the main sources of murderous violence in the world today, by always defining the violence and murders as the work of violent extremists who abuse the noble spiritual message of their creed. The same question can be transferred to humanity’s destructive behaviour, since it is clearly not some extreme fundamental-heavy-industry-moguls who alone bear responsibility for the state of the planet. We are dealing with an entire culture, a whole system of destructive power structures and behaviour patterns that build on the premises of man’s domination over nature.

When Björk says that we should think in terms of the 21st century—which she says is free from heavy industry but full of nano- and biotechnologies—she assumes that lately, man has been on a wrong road but should now head somewhere else on full speed. “To a new place,” like her friend Ólöf Arnalds sang at Björk’s ‘Náttúra’ concert in 2008.

This is a misunderstanding. First of all, there is no new place. There is only one Earth, and it has to be liberated and protected. Secondly, the 21st century way of Björk, Mörður and other progressivists, is in full harmony with the dangerous ways in which humanity has been leading, since the beginning of the industrial revolution, at least. The innovation and high-technology that are offered as real solutions—the new green deal!—do not replace heavy industry and old-school polluting production. They are only additions to what is already there, forming a global, industrial, unsustainable economical system that constantly is built upon. But removing from the bottom is impossible. The system stands and falls with its foundations.

Solutions! But only those who produce money

So often the opponents of environmentalists try to bury the dispute by accusing the latter of not offering any solutions ‘instead’ of the industry they oppose. This is of course nonsense. Anybody who opposes one thing has another to offer. This is self-evident, though the solutions can differ. For instance, the solution to Iceland’s constitutional violence towards refugees could span everything from ‘more just laws’ to a world without borders. The solution to an abusive or violent family father could be him receiving assistance to reform, or him being exiled from his community.

The biggest flaw of the discourse is how it only assumes solutions that fit into the ruling system’s frame. There is no space for other solutions, even though are very obvious, e.g. a healthy culture thriving on a healthy planet.

Instead, opposing parties fight about where the money should go. It is not discussed whether unsustainable capital ‘should’ be produced, the debate is rather based on the premises that ‘capital production’ is fundamental. Money can be produced from whatever is at hand—Earth itself or the beings living on it. Within this culture—where jobs like entrepreneurial investment, treasury and human resources management have become as natural as a newborn’s breath—money is people’s biggest goal and the central point of all existence and discourse. No matter if there is no real value behind it. The market and industries might have found their ways to put a price ticket on every square centimetre of this planet and every second that passes. But when one comes to think of it, how can human lives be measured with money? And what about mountains, rivers and forests?

The myth about ‘green’ economy and industry

In connection with above-mentioned Coca-Cola-sponsored ‘Náttúra’ “nature concert” and the parallel opening of the Náttúra.info website, Björk stated that she and her comrades were not one more group of “angry environmental guerrillas”. These happy environmental entertainers’ project seemed to be about not challenging the status quo at all, rather to keep on the old track of industry and production—this time under the banner of institutionalised green flags and environmental certifications.

They went all over the country to find solutions in employment affairs, something that could replace heavy industry but still make money. The list became long, all the way from treatment-tourism and exported children’s food, to biotechnology, identification software for law enforcement and the production of solar panels.

In the magazine ‘Dealing with Distractions’, which was published in December of last year, parallel to the resistance to the UN’s climate change conference in Copenhagen, Mikko Virtanen writes about so-called ‘alternative industrialism’ and points at the self-evident facts that environmentalists seem to avoid recognising and discussing: “To build a new green infrastructure of such a massive scale would require a lot of energy and materials, which can only be provided through the use of already existing fossil fuel based infrastructure. […] The production of this new infrastructure will require a vast amount of raw materials, much of which are not renewable themselves, and are environmentally destructive to obtain. […] It has yet to be proven if we even have the raw materials available to make enough wind turbines and solar panels to keep up current levels of energy consumption or any significant level of industrial production at all.”

His result is that we “need to put wind energy, solar energy and other alternative industrial solutions on the list of false solutions along with agrofuels, nuclear energy, and clean coal technology. As soon as possible, we need to start doing the only thing that can halt the destruction of our life supporting systems: reducing our industrial production and consumption to the absolute minimum.”

What about bringing these ideas into the discourse on energy production and nature conservation here in Iceland?

Xenophobia or not xenophobia?

Magma’s opponents have been accused of xenophobia and refused it. But wait a minute… In his writing about Magma, former Morgunblaðið editor Styrmir Gunnarsson says that the Icelandic nation ‘has’ the right to reap profit from ‘its property’. His words mirror almost whatever party that opposes Magma’s purchase. Guðfríður Lilja Grétarsdóttir, group chairman of the Left Green party, says that “the resources should be used for the good of the community.” Though she notes that it does not matter if private pockets are Icelandic or foreign—they should not be filled with money that ‘should’ go into public pockets—she still assumes that nature within political borders belongs to the human beings inside it (or rather those who are accepted by the authorities).

At a recent press meeting, Björk and her comrades who started a petition against Magma’s purchase asked if ‘Icelanders’ should not level the country off and pay ‘their’ debts by keeping full dominance over resources and profit from them. In Reykjavík Grapevine’s last issue, Björk was interviewed and asked about the xenophobia accusations, which she says are an “attempt to sidetrack the discourse.” But she immediately criss-crosses and says: “The real question is whether it is a good idea to privatise and sell of our energy resources at this point. We as a nation are badly burnt after the collapse.” People might argue that the recognition of the political phenomenon ‘nation’ has nothing to do with xenophobia.

But when the discourse is about issues like ownership over the Earth, the actual sidetracking is recognising a nation that has right above others to decide the arrangement of nature. Here, Slavoj Žižek’s question applies again: Should we not stop ignoring the violence that consists in the separation of people into nations, by always focusing on those considered extreme nationalists and racists; Nazi skinheads and racist politicians like Sarkozy, Geert Wilders and Pia Kjærsgaard? While we only see the alleged extremes of political issues, but do not dig after their roots, those who on the surface keep themselves outside the extremes, get a change to build up their prejudiced and often hateful agenda without it being noticed.

The root is left untouched. Because of how extremely Bush Jr.’s stupidity and hatred was displayed, it was enough for Obama to be black to gain some sort of a respect from opponents of U.S. foreign affairs policies. Similarly, he only had to slip the word ‘green’ into his vocabulary, to gain similar recognition from environmentalists.

The Earth without borders

Björk says she cannot separate the protection of Iceland’s nature and her role as an Icelandic artist because of how connected they are. Then she says: “Iceland has given me so much, I feel as if Iceland’s nature was bestowed upon me and all the rest of us as a gift, and I feel a great need to defend it.” This enormous emphasis on this being ‘Iceland’s’ nature and that as ‘Icelanders’, people should protect it—an idea not at all limited to Björk and her partners—makes it impossible to dismiss accusations about xenophobia as sidetracking.

Certainly it is likely that libertarians, who in the same sentence talk about xenophobia and hostility towards foreign investment, are simply not capable of having a discussion about the ownership of the planet. Therefore they follow the footsteps of those who inserted accusations of anti-hedonism into their objection to the opponents of Kárahnjúkar dam. But that does not give Magma’s opponents permission to dismiss all criticism about the integration of environmentalism and nationalist chauvinism. Sigur Rós have especially stated that they are not a political band, but just cannot sit by and watch such heavy industry constructions in ‘their own backyard’. During Saving Iceland’s international conference in 2007, Ómar Ragnarsson—one of Iceland’s best-known environmentalists—said that compared to other nature, the “Icelandic one” is the equal to a Christmas meal in comparison to other meals of the year. And nobody would skip that dinner for another one! Do we really have to argue about if chauvinism and xenophobia are included in such pleadings?

In his 1922 book ‘At The Cafe: Conversations On Anarchism’, Italian anarchist Errico Malatesta simply but sharply explains his objection to nationalism: Why should a worker rather stand with a factory-owner within the same political borders, rather than another worker outside of them? Though the meaning is communistic and primarily regards social defects of borders, these words can simply be implemented with nature at front. Why should the struggle for the protection and liberation of the Earth, which constantly comes under persecutions by the culture of the ‘civilised’ man, be subjected to man-made borders?

It is time for the discussion about borders, states and nations, to be removed from internal debates amongst philosophers and anarchists—it needs to come to the surface as a real discourse.

We cannot eat money

Undoubtedly, some people will oppose internal arguments within the environmental movement, asking those who at least agree that Magma should not own HS Orka—that nature should never be owned by private party, independent from whatever premises that opinion is based on—to drop the debate on ideology, tactics and emphasis, now when the purchase has to be stopped. But that is not necessarily right. If we drop critical discourse, internally and externally, the environmental ideal is bound to stagnate and become one-sided.

Then again, we may ask if these really are internal fights.

The opponents of Magma are obviously not on the same side. On the one hand we have people who ask the public and authorities to do what they demand, so that they can start making music again. Instead of aluminium production they suggest all kinds of production requiring huge amounts of water, the design and production of identification software for law enforcement, nanotechnology solutions and long-term biotechnology researches.

On the other hand we have people who fight for a completely different culture. Free from overproduction. Free from overuse of water and other goods. Free from identification repression and law enforcement. Free from nano- and biotechnologies, which focus on making man even more of a sovereign than he already is. And between these two directions, there are endless views, opinions and facts. Sharing an enemy does not necessarily make us comrades in arms. Though anarchists and right-wingers share their objection to state communism, it is highly unlikely that they will ever stand together in a struggle. The same logic applies here.

In the discourse about Magma Energy, nature conservation, energy production and ownership, there is a need for much wider range of views and opinions. So far, hardly no-one has given convincing arguments, proving that nature is better set in state hands than private ones. So far, none of those who oppose the privatisation of nature have reasoned for the man’s ownership of the Earth to begin with.

An old American Indian proverb says that not until the last tree has fallen, the last river polluted, and the last fish caught, will people realise that they cannot eat money. These foreboding words are something we need to take seriously. We cannot dismiss them as philosophical reflections, important to keep in mind but never supposed to be brought into real discourse and actions regarding the Earth, its protection and liberation.