By Andranik Aboyan
The Zangezur Copper Molybdenum Combine(ZCMC)is the largest mining operation in Armenia and one of 10 leading molybdenum producers in the world. Currently the Armenian state is facing a lawsuit for its allegedly corrupt facilitation of an illegal deal which would increase the national debt by a whopping ten percent. It is important for Armenians to understand how and why we got here. Molybdenum is a critical element primarily used in steel alloys to enhance strength, resistance to corrosion, and high-temperature stability. Molybdenum is the key ingredient in stainless steel giving the material its characteristic strength and it has significant military application being used in armored vehicles, missiles, and aircraft. ZCMC employs 4,500 people making it the largest employer in Syunik and the third largest taxpayer in Armenia as of the first quarter of 2024.
Started as a state-owned enterprise in 1951, it remained so for more than a decade after Armenia gained independence from the Soviet Union. However, as was typical of post-Soviet countries, capitalist free market shock therapy, prevailed, and the enterprise was privatized in 2004 for $132 million. 60% of the company went to a German stainless steel processor called Cronimet. The remaining 40% was divided among different Armenian investors. “Armenian Molybdenum Production” received 12.5 percent, “Zangezur Mining” – 12.5 percent, “Clean Iron Factory” – 15 percent.
In 2014 Cronimet acquired the 15% stake in ZCMC from Pure Iron therefore increasing its ownership of the combine to 75%. It should be mentioned that the founder of Cronimet Günter Pilarsky was appointed as honorary consul of the Republic in Armenia in 2006 in conjuction with the creation of the Pilarsky Foundation. According to his website Günter “Through his many years of intensive professional involvement in Armenia, he has also seen a lot of suffering there (for example, due to a lack of basic medical care). As Honorary Consul of Armenia, Günter Pilarsky knows exactly where help is most urgently needed.” Knowing where help is needed is half the battle but it seems to be as far as the Pilarsky foundation has gone, despite the hundreds of millions that Cronimet squeezed out of ZCMC I was unable to find a single project that the Pilarsky foundation started in Armenia. No data regarding projects is available on the website.
Zangezur Mining and Armenian Molybdenum Production are alleged to have ties to former parliamentarian and former governor of Syunik Vahe Hakobyan. In 2017 the owenership of Armenian Molybdenum Production was transferred in its entirety to a company by the name of Star Dust owned by Julietta Darchinyan and Avetik Hovikyan. Some would claim this company acts as front for the Sargsyan family because owner Julietta was previously employed at two companies owned by Mikael Minasyan son in law of Serzh Sargsyan.
Moon Metals became the sole shareholder of Zangezur mining in the same year. Moon Metals itself is owned by Walnort Finance a company based in Cyprus. This fact will become important later. A program prospectus from ZCMC confirms this.
In 2021 following the Artsakh War and the petitions led by the Chief of the General Staff of the Armenian Armed Forces Onik Gasparyan, snap parliamentary elections were called. Pashinyan resigned in April and the National Assembly was dissolved on May 10th. Pashinyan was to serve as acting Prime Minister until his eventual re-election on the 20th of June. During that period Pashinyan would campaign in the streets and here he would criticize ZCMC and their German majority owner Cronimet vigorously. He alleged that employees of the combine were being politically repressed by the owners by being threatened to have their employment terminated if they attended Pashinyan’s rallies. In typical populist demagogue fashion Pashinyan used the rhetoric that the shares of the mine should be returned to the people not an inherently bad idea but as we’ll see all this panned out to be was perhaps the single most corrupt deal in the history of the Third Republic.
“I promise you now that none of those threatening you will have worked at ZCMC by mid-July. Its enough that some bashibozouks remained in charge of the Zangezur Copper Molybdenum Combine. I would like to reveal a secret; now negotiations are underway in this regard and I hope that some will take a constructive stance. Otherwise, the Armenian people shall get back their shares in the Zangezur Copper Molybdenum Combine from those bashibozouks, even under the nationalization law.”
-Nikol Pashinyan
These not so veiled threats actually tell us quite a lot about who Pashinyan is and what exactly he believes in. Pashinyan perceived opposition to himself from the leaders of ZCMC whether there actually was is dubious, no evidence has been brought forth to prove it. So he says the leadership of the mine will be “laid out on the asphalt” and the Armenian people will get back their shares even under the nationalization law. The last part of that is quite important as it shows a complete and total disregard for the established laws of the Republic of Armenia when it is beneficial to do so for Pashinyan. Article 8 of chapter 1 of the Armenian law on foreign investments specifically states “Foreign investments in the Republic of Armenia shall not be subject to nationalization. Government bodies cannot, also, confiscate foreign investments. Confiscation may be allowed only as an extreme means in case of emergency declared in accordance with the legislation of the Republic of Armenia, and it may be applied only upon the judgement of a court of Law and with full compensation.”. The majority stake in ZCMC being foreign therefore could not be nationalized.
Once Pashinyan had safely entrenched himself in power again he followed up on his threats and so it was on September 30th 2021 Industrial Company JSC wholly owned subsidiary of Russian billionaire Roman Trotsenko’s GeoProMining Gold, acquired 75% of ZCMC and in the same day gifted 15% to the Armenian Government.
Afterwards, the government transferred its 15% stake in ZCMC to the Armenian National Interests Fund (ANIF) for trust management. Notably, the ANIF Board of Directors is chaired by Tigran Avinyan, Armenia’s former Deputy Prime Minister.
Several economists, politicians, and media outlets expressed concern over the lack of transparency in this transaction. Additionally, media outlets requested a copy of the donation agreement from the government, but the request was denied, citing “commercial issues” related to the transfer.
In October, Varuzhan Hoktanyan, Project Director at the Transparency International Anti-Corruption Center, criticized the lack of transparency surrounding the sale of of ZCMC shares to Roman Trotsenko, noting that no further clarifications were provided.
Hoktanyan questioned GeoProMining’s decision to donate 15% of its stake to the government, while the government justified the deal by claiming it would enhance its role in managing ZCMC profits and fostering its development. He expressed skepticism about whether these claims align with reality.
Hoktanyan also criticized the decision to transfer the shares to the prime minister’s office instead of the Ministry of Economy, which he argued would have been more competent. He viewed this move as further evidence of centralized power within the prime minister’s staff, suggesting that ministries might eventually be overshadowed by the prime minister’s office.
During a parliamentary session on October 6, 2021, Prime Minister Pashinyan announced GeoProMining’s intentions to invest in Armenia, including plans for a copper smelter and a nuclear power plant, although the realization of these projects remained uncertain. It is now clear that the nuclear power plant deal has fallen through because on July 9th Security Council Secretary Armen Grigoryan said “We have entered a very substantive phase” with the US on the issue of building a new nuclear power plant.
On August 24, 2022, the Armenian government approved a draft decision to transfer an additional 6.8% stake in ZCMC to ANIF for management. During a weekly cabinet meeting, Prime Minister Pashinyan disclosed that in March, AMP Holding had secretly donated its 6.8% stake to the government, requesting confidentiality at the time due to “commercial issues.”
“Now that they no longer require secrecy, we are transferring that 6.8% stake to ANIF for management. As of March 24, the Armenian government holds a 21.875% stake in ZCMC, which is a significant development,” Pashinyan announced.
A few months after transferring its 21.8% stake in the ZCMC to ANIF, the government made another decision.
On December 22, 2022, the government approved the transfer of its 21.8% stake in ZCMC to the State Property Management Committee, without providing a reason. The decision was justified by a need for a “more institutional approach” to the government’s involvement in the corporate management of the company. No further details were provided.
Pastinfo reported that serious discussions took place at ANIF, with some foreign members expressing concern that their association with shares acquired through a suspicious transaction could harm their reputations.
This decision occurred under the leadership of Nikol Pashinyan, who rose to power on promises of cracking down on corruption. Instead he revels in it.
After the government facilitated acquisition of ZCMC the combine donated 70 million drams or 180 thousand dollars to Anna Hakobyan’s My Step Foundation.
This debacle does not seem to align with Pashinyan presenting himself as someone who can conduct a western pivot reducing reliance on Russia instead he just handed one of the largest enterprises Armenia has to an infamous Russian oligarch all for his own personal benefit.
This brings us to the current day where now the previously mentioned Walnort is suing the Republic of Armenia in International Court for 1.2 billion dollars(a quarter of Armenia’s annual budget). They claim the government violated their shareholder rights by not allowing Walnort the right of first offer which the ZCMC charter specifically states. In addition they claim the government breached an investment protection agreement signed between Cyrpus and Armenia in 1998.
It is hard to imagine a world where Walnort is not successful in litigating this case. It remains to be seen whether Pashinyan’s greed and politically motivated populist manevurings result in a settlement that would increase Armenia’s national debt by 10% in a single stroke and even further economic disenfranchisement or will he manage to find his way out of this disaster as well. I would be remiss if I did not say it was the combination of that very same politically motivated populist maneuverings and desire to hold onto power no matter that put Artsakh’s national security at risk and resulted in its total occupation.
