Fundamental Gaps and Legal Inconsistencies of the Mineral Sector Development Strategy of Armenia

In May 2023, the Government of Armenia approved the Mineral Sector Development Strategy of Armenia (hereafter referred to as the Mining Strategy). The approval of the Mining Strategy followed several years of preparatory work carried out with the support of the World Bank. The document, which is the first of its kind to be prepared in Armenia, emphasizes the importance of the mining industry for the national economy and outlines the priorities that will guide sectoral policymaking until 2035. These include improving access to geological data through the creation of a digital database, addressing regulatory gaps related to the social and environmental impact of mining, and reforming the collection and allocation of mining-related tax revenues.

Despite being touted as an important step towards the modernization of Armenia’s extractive industry, the Mining Strategy contains multiple concerning suggestions that reflect the inequitable process through which it was developed. In conditions of strong political and social tension, the development of the Mining Strategy progressed with limited public involvement. Professional organizations and experts representing the mining industry led the proceedings, which allowed powerful interest groups to introduce provisions in the Mining Strategy that seem to defy existing legal protections and environmental safeguards.

Omission one: failure to address shady investments

Before reviewing these concerning provisions included in the Mining Strategy, it is important to note its omissions. Multiple studies[1] have demonstrated the prevalence of "unclean" investments in the Armenian mining sector and their disputed legality. Others have questioned their contribution to Armenia’s economic development[2]. But the Mining Strategy ignores the problem of investments of potentially corrupt origin. It also sidesteps a discussion of dubious links between companies operating in the sector, as well as the need to develop proper criteria for conducting due diligence assessments of such projects.

The Mining Strategy recognizes that mining operations must fully comply with "high international standards” but does not provide any instruments to ensure that these standards are met in practice. At the same time, the Mining Strategy does not address ongoing mining operations and disregards critical problems that exist in the industry. Without addressing the social and environmental inequities prevalent in the field, it is difficult to imagine a sustainable development of the sector.

Omission two: ensuring meaningful participation of local communities

Ensuring the consent of local communities has been one of the most persistent failures of mining-related governance, leading to regular protests against proposed projects. The current system of granting the so-called “social license” for mining is based on inadequate channels of public participation. Nevertheless, the Mining Strategy contains no solutions aimed at more effective public engagement and the recognition of the rights of affected communities. Without such provisions, the Mining Strategy is likely to reproduce environmental conflicts instead of resolving them.

Economic considerations dominate, creating significant threats

Alongside these concerning gaps, the Mining Strategy contains several potentially pernicious proposals that threaten the social and environmental sustainability of mineral resource governance in Armenia. The Mining Strategy is based on the central presumption that the mining industry in Armenia should develop rapidly. To this end, it proposes lifting all territorial and communal planning restrictions. In fact, the Mining Strategy suggests that mines should be operated wherever natural resources are found, even in areas where mining is prohibited or significantly restricted under existing legislation of the Specially Protected Areas of Nature, which represent habitats of endangered biodiversity. 

Existing legislation includes several restrictions aimed at protecting the environment, cultural heritage, and private property. Instead of building on and further strengthening these safeguards, the government, by adopting the Mining Strategy, risks weakening these protections and fueling a rapid and unsustainable growth of the industry. The Mining Strategy proposes to simplify existing mechanisms for granting mining permits. In particular, after the adoption of the legislation derived from the Mining Strategy, companies will find it significantly easier to acquire rights to land and water use, as well as rights of waste disposal, which are currently part of the permit-acquisition process.

No solutions to existing problems

Any strategy based on the assumption of a disproportionate expansion of the sector is unsustainable. Even after formal adoption, the Mining Strategy is unlikely to deliver the progressive change it aims to achieve, as it does not offer effective solutions to the deep-rooted socio-environmental problems afflicting the industry. Instead of recognizing and addressing these problems, the Mining Strategy suggests that environmentalists are radicals and local communities are uninformed, thereby precluding productive engagement with crucial stakeholders.

Additionally, the proposed process of cost-benefit assessment meant to guide decision-making regarding mining projects is based on a one-sided financial calculation of economic profitability, without proper accounting of economic, social, cultural, or environmental losses, negative externalities, and other restrictions.

Admittedly, the Mining Strategy assumes that mining operations must fully comply with "high international standards", but does not provide for any real instruments to ensure that these standards are met in practice. Mostly, the developed Mining Strategy does not apply to the ongoing mining operations and tries to avoid addressing the critical problems of the sector, but instead outlines the policy and rules for the new permits. However, it can be unequivocally stated that without solving the current social and environmental problems in the mining industry, it is not possible to ensure the future development of the sector as these issues are obviously the source of social conflicts around the sector.

Eroding public engagement and local autonomy

At the same time, the Mining Strategy further erodes public engagement in mining-related decision-making, which is guaranteed by current legislation and international treaties. The plan to reform current norms related to land allocation included in the Mining Strategy seems to undermine local autonomy and principles of decentralized self-governance. More specifically, the Mining Strategy proposes to grant land-use rights simultaneously with the issuance of the mining permit. If a plot is communally owned, the government intends to facilitate the transfer of the land to the holder of the permit through communicating with the relevant local authorities. By setting up a process that places decision-making authority solely within the central government, the Mining Strategy ignores existing regulations regarding autonomy in local self-governance, including constitutional provisions and the rights of communities recognized under international treaties on the democratic governance of natural resources. Equally concerning, the Mining Strategy and the related Action Plan also contain legally unsubstantiated mechanisms for seizing communally or privately owned land for mining.

No Strategic Environmental Impact Assessment

For a comprehensive professional assessment of the provisions included in the Mining Strategy, the draft must be subjected to a Strategic Environmental Impact Assessment (SEIA). This requirement is defined in the RA Law "On Environmental Impact Assessment and Expertise" and is clearly stated in the World Bank’s project-related documentation. A WB document, entitled “Concept Environmental and Social Review Summary, Concept Stage,” clearly states that “the national environmental legislation requires strategic environmental assessment and state expertise to be applied to the policy/strategy document on the mining sector, however, this assessment is not part of the project and has to be undertaken separately by the government.”[3] Despite this guidance, the Armenian government approved the Mining Strategy without passing an SEIA.

Unifying permits poses additional dangers

The Mining Strategy proposes to introduce a mechanism for obtaining all mining-related permits in a single package. Such a package would include permits for water use, atmospheric emissions and more. At first glance, the rationale seems logical — through the Environmental Impact Assessment (EIA) process, the relevant government agencies are supposed to evaluate all potential impacts of the mine’s operation, including its effects on the quality of air and water. Unifying the permits under a single package would seem to streamline the process.

But this reasoning, which is referenced directly in the Mining Strategy, ignores the problems that diminish the effectiveness of the EIA mechanism in Armenia. The preparation of the EIA is often a formal procedure, relying on small teams of experts with limited specialization. Such EIAs, which serve as a basis for granting permits, are often seen as unreliable and incomplete.

To a certain extent, the current legislation compensates for this institutional problem through splitting the permission process among several state agencies specialized in different fields. Each body evaluates the project in its own area of expertise and can refuse or limit the granting of a permit, which often happens in practice. Moreover, according to the water legislation of Armenia, permits for significant water use must be combined with public discussions, and comply with water demand priorities and other fundamental legislative regulations. 

In contrast, the Mining Strategy proposes the simultaneous granting of all associated permits based on a de facto non-existent EIA review process. Most concerningly, this proposal is made without an analysis of the legal and institutional problems of the existing EIA process. The authors of the Mining Strategy, being representatives of the mining sector, must be aware that the EIA mechanism in Armenia is often superficial and largely formal. However, there is no attempt to address this key issue, compare Armenia’s experience with international best practice and offer solutions for the settlement of the problem. The issue of the EIA must be among the reform priorities as the validity of mining permits depends on its quality.

The Mining Strategy’s assumption that all the information related to the project is evaluated within the framework of the EIA and its state environmental review process, does not correspond to way the EIA process often unfolds in practice. The environmental and social impact of mining-related activities are often insufficiently assessed in the EIA review. The simultaneous acquisition of mining-related permits can only be justified after the implementation of significant institutional reforms of the EIA process and its state review procedure.

The adoption of a comprehensive Mining Strategy was a necessity. There has been a long-standing public demand to comprehensively regulate the mining sector in Armenia. However, the proposed Mining Strategy not only contains problematic provisions regarding the most fundamental issues, which need to be significantly revised and improved but also contains gaps in the regulation of the most important issues of the mining sector, such as the institutional problem of the EIA and state environmental review, health impact assessment, economic cost-benefit analysis and negative externalities of mining projects.

This publication was prepared within the framework of the project “Improvement of Mining Strategy.” The project was implemented by the “EcoRight” NGO in cooperation with the Heinrich Boell Foundation Yerevan Office – South Caucasus Region.

The content of the publication is the sole responsibility of the “EcoRight” NGO and can in no way be taken to reflect the views of the Heinrich Boell Foundation Yerevan Office – South Caucasus Region.