12th August 2011
Ferronikeli, a mining and smelting plant owned by two Israeli tycoons, is one of the biggest enterprises in all of Kosovo. The iron and nickel alloy it produces is boosting the economy of the impoverished nation and provides much-needed jobs. But toxic waste at the site makes it hazardous to breathe the air or drink the water.
KOSOVO – Close to midnight on the hot summer day of June 8, the inhabitants of the town of Drenas, in Kosovo, were jolted out of their sleep by a huge explosion. “We thought NATO was bombing again, or that maybe it was an earthquake,” a local journalist, Bekim Dobra, recalls. After the initial panic subsided, the residents discovered that no natural disaster had befallen the youngest and poorest country in Europe, nor was a new war suddenly engulfing the Balkans: The explosion had occurred in the nickel mine located only a kilometer from the town. According to the local media, one of the furnaces used to produce metal in the smelting plant nearby blew up, injuring a number of workers and damaging dozens of homes.
The local population knows that the entire complex, known as Ferronikeli – for the iron-nickel alloy it manufactures – is owned by foreign entities: by Cunico, a company owned by the Benny Steinmetz Group (BSG ) Resources, Ltd. firm, and International Mineral Resources (IMR ), which is owned by Alexander Mashkevich, a Kazakh Jew who also holds Israeli citizenship.
While the mine and plant are only a small part of the global business enterprises of BSG and IMR, for the locals they are everything: a great hope – but also a great danger. Indeed, although Ferronikeli is the major economic “anchor” in their area and one of the biggest enterprises in all of Kosovo, people are concerned that its operations are causing an environmental disaster.
The explosion in the Ferronikeli complex now appears to have been a watershed event, after which anger and the fear of danger overcame the dread of clashing with the biggest employer in the region. The rattling of the windows and the damage – together with the perception that a national natural resource had been sold to foreign tycoons at a ridiculously low price – generated a protest. After the explosion, dozens took to the streets and marched to the fence that surrounds the complex. They blocked the entrance, disrupted activity for a few days, and invited senior government officials to the site.
However, blasts like the one in June are not the greatest threat to the local residents. An equal if less palpable danger is the pollution in the area. Official sources explain that under the license granted the owners of the mine, the large amount of waste that is generated there is supposed to be buried underground. However, an investigation by Haaretz shows that instead, the waste is carried by giant trucks to open ground, where constantly growing mounds of it are being created along a river which runs near residential homes. The dust contains particles of toxic materials which, according to the Kosovo Ministry of Environment and Spatial Planning, are polluting the air and the river.
“I would not live in Drenas for all the money in the world,” says Prof. Syle Tahirsylaj, head of the Hydro-Meteorological Institute in Kosovo, which is responsible for measuring levels of toxicity in the soil and the water. He adds that exposure to the particles emitted into the air by the smokestacks at the complex and by the residual waste on the ground can cause various types of cancer, fertility problems, respiratory ailments and more. This conclusion is backed up by conversations with official sources in Pristina, the capital of Kosovo, by reports of the country’s Environment Ministry, and by local and international organizations. They all attribute the serious air and water pollution in the area to the operation of Ferronikeli.
Riches in the earth
May 3, 2006, was a significant date for the tottering Kosovo economy. On that day, senior members of the local government joined United Nations officials and international and local businessmen at the headquarters of the UN Interim Administration Mission in Kosovo (UNMIK ) to celebrate the successful conclusion of the biggest privatization deal signed since the end of the war with Serbia: In return for a payment of 33 million euros, ownership of the nickel mines complex in Drenas was initially transferred to IMR / Alferon, a firm co-owned by the businessmen Alexander Mashkevich, Patokh Chadiev and Alijan Ibragimov. Under the terms of the purchase agreement, the company undertook to invest 20 million euro in the first three years and to employ at least 1,000 workers.
The prime minister of Kosovo, Agim Ceku, stated at the ceremony, according to a report on the website of Eciks Economic Initiative for Kosovo (an organization supporting economic development and foreign investment ), that “the government welcomes the signing of this contract.” He added, “This is the beginning of the revival not only of Ferronikeli, but of all of Kosovo’s economy. It is the beginning of a significant reduction of unemployment. I expect the investors to meet the obligations of this contract, and they will have the government’s support.”
That ceremony marked the conclusion of a year-long privatization saga. Initially, a different company had been chosen to buy the mine, the American-Albanian firm of Adi Nikel, which offered about 50 million euros for the Drenas complex. However, the body in charge of privatization in Kosovo, KTA, reversed its decision, claiming the company originally chosen was financially unstable. Instead, the offer made by Alferon was accepted.
Former employees of the mine demonstrated against the new decision, which they alleged was politically motivated; sources at Adi Nikel hinted at corruption in the decision-making process. The Eciks organization quoted a memo by Adi Nikel spokesman Muhamet Jaku to the effect that Kosovo Minister of Industry Bujar Dugolli had asked for 3 million euros as a condition to win the Ferronikeli tender – a million euros each for Dugolli himself, for the prime minister at the time, Bajram Kosumi, and for their political party. “This is just slander,” Dugolli retorted.
Ultimately, the mining and smelting complex went to Cunico, which is half owned by Mashkevich and his associates at IMR, and half by BSG Resources, Ltd., which is fully owned by BSG.
Even though BSG bears the name of the Israeli tycoon Benny Steinmetz, he is not listed as its owner. Over the years his spokespersons have consistently emphasized that he is not involved in the decision-making.
In regard to this article, too, a spokesman reiterated that Steinmetz is not the group’s owner and does not control it, so he should not be connected to events at the Kosovo mine (see box ). Nevertheless, BSG’s website states that “the business activities … are managed by various entities owned (directly or indirectly ) by the Balda and Vessna Foundations, of which Benny Steinmetz and his issue are members of the class of beneficiaries.”
Indeed, financial newspapers and the business world treat the group as a corporation that is controlled by Steinmetz, and based on its market capitalization, he is considered one of the world’s wealthiest people.
Cunico, one of the corporation’s assets, is, according to its website, “an international mining and metals company, specializing in the exploration, mining and manufacture of ferronickel. We are the largest ferronickel manufacturer in Europe and the fourth largest in the world.” The company’s headquarters are in Holland; its marketing unit operates out of Dubai.
The Drenas complex dates from 1984, when Kosovo was part of communist Yugoslavia. It consists of three open nickel mines and a factory in which the metal, used in the manufacture of stainless steel and rechargeable batteries, is produced. In 1998, during the Kosovo-Serbia war, the complex ceased production and a year later was damaged by NATO bombings. It did not resume operations until it was privatized and underwent renovation.
The statistics indicate that Cunico made a very good deal. The Kosovo mines are estimated to contain nickel reserves worth more than $2 billion. According to Cunico, 6,000 tons of nickel extracted from the site were sold last year. Given the current price of nickel, that translates into revenues of about $140 million. This year, more than 9,000 tons are expected to be sold, and the goal for the years ahead, according to the company’s website, is 11,000-12,000 tons a year.
Cunico also owns a nickel mine in Macedonia. There, however, the company undertook to manage the mine in accordance with the environmental regulations laid down by ISO, the international standards organization, and by the European Union. No similar commitment was made regarding the Kosovo complex.
Kosovo is a battered and sad corner of Europe. On the way to Drenas, the feeling is of being in a Third World country: It has dusty, potholed roads, unfinished traffic circles, and there are no signs directing us toward the town, which is only a few dozen kilometers from the capital. Government officials are nowhere in evidence and the place looks like no-man’s land; this is obviously not a country in which one can expect tight supervision and transparency.
On the eve of our visit to Kosovo we approached Ido Talmor, an employee in the Ferronikeli PR department, asking to meet and learn about the life of Israelis who work at the mine and to visit the site itself. Talmor turned us down and wrote us that “the responsible officials do not want us to appear in any article that links us to the enterprise in Kosovo.” A sense of secrecy, mystery and sometimes fear hangs over the place. The citizens of this new country, which came into being in 2008, want to join the European Union, but the mentality here is hardly that of a transparent democracy. Even locals with a Western European education preferred to remain silent when asked about the Drenas enterprise.
However, at a gas station outside the rundown town we meet someone who is an exception to the general rule: Bekim Dobra, 27, an investigative journalist who covers events in his area for the country’s largest newspaper, Koha Ditore. It’s Sunday, the day on which weddings are held in Kosovo, and the roads are filled with convoys of honking cars with pieces of cloth stuck under the windshield wipers, and people hanging out of the windows and waving the national flag and that of Albania, from where the Kosovans originate.
Dobra had been invited to an engagement party, but when he heard we were interested in Ferronikeli he changed his plans and devoted the day to a tour with us. The traditional festive food was replaced by greasy schnitzels and burning-hot pita in a local restaurant.
“I wrote so much about Ferronikeli since it was sold for a ridiculous price that my editors started to ask me whether I didn’t have anything else to write about,” Dobra explains.
We drive to the complex, which from the outside resembles nothing so much as a military base. We cross a rail line along which a freight train will soon pass and enter the gates of the complex. The watch towers, walls and barbed-wire fences that surround the site make it clear why Dobra dubs it “Guantanamo,” after the notorious American detention center. He says it’s a case of “over-security,” which has the effect of stirring fears among potential investors in a country whose reputation is hardly that of an island of stability.
Security at the site is provided by a few Israelis in their early thirties, who formerly served in elite army units. Some have worked for BSG elsewhere and came to Kosovo in the wake of the purchase of Ferronikeli. A few of them, who refused to speak with us, live in a modern luxury apartment building called Pandora Tower in the center of Pristina, a 30-minute drive from the mine complex. When we asked to be allowed inside, the guards at the gate called one of the Israelis; he refused to let us in.
From the closed gate Dobra takes us to the pit of the old mine, where there is no more digging and a spectacular pool has been created by the groundwater. A group of youngsters compete in diving into the water, displaying impressive skill. The sweltering heat makes it tempting to join them, but the acrid smell in the air, the stifling dust and the strangely greenish boulders all around bring us back to reason. Even as we feel asphyxiated, the kids cavort amid the very colorful deposits of slag and mineral wastes.
The oldest person in the vicinity looks nothing like the “responsible adult in the room,” and when we approach him as he emerges from the water, he asks that his name not be used. He tells us he works at Ferronikeli as a shift foreman and seems more interested in talking about his conditions of employment than about the quality of the water he has been swimming in. “To work there is like driving a 30-year-old car at a speed of 100 kilometers an hour,” he quips.
We arrive at the site’s eastern gate and turn to a dirt path about half a kilometer long, which leads to a low hill. A sign bearing the Ferronikeli logo greets us with the word “Danger,” and immediately behind it we see black dunes which cover an extensive area that borders on the Drenica River. In the background, huge Ferronikeli trucks are unloading more of this black substance before returning to the plant.
The black hills, which look like the surface of an alien planet, are made of slag – the waste that remains after the nickel has been extracted. There are millions of tons of slag here. Tiny particles of it are carried aloft by every breeze which, according to an analysis done by Ferronikeli itself, contain bits of toxic metals such as nickel, manganese and chromium.
On the black expanses we see a few local workers, whose job appears to be to level the mounds. One says that they are subcontractors of the plant. For working here, under the broiling sun, they are paid the equivalent of less than NIS 2,000 a month, which is the average salary in Kosovo. We ask one if he is afraid to touch the material. “Of course I am afraid,” he replies, “but I have no choice, because I have to make a living.” The black dunes are supposed to be covered with dirt, he adds, but remain exposed for years. This is later confirmed by official sources.
The black material is made of small sharp fibers. Direct contact with it produced a cut in the hand; apparently, no complicated chemical analysis is needed to understand the nature of this stuff. But there is also no shortage of reports on the affects of slag on both air and water. In 2008-2009, for example, the Kosovo National Institute for Public Health examined the quality of the water in the Dernica River, as part of a study under the auspices of the University of Pristina. They found that the level of nickel in the water was 20 times higher than the guidelines set by the World Health Organization; the lead level was found to be three times as high. The study noted that “the water source lies nearby in the area of the foundry Ferronikeli, therefore higher level [sic] of nickel found in this water source.” The report added that the high level of metals is probably due to geological factors and “anthropogenic pollution.”
Incidentally, one of the researchers who conducted the study agreed to meet with us and explain the findings, but did not show up and explained to us by phone that she was fearful of cooperating with us.
Another study, conducted at the end of 2009 by an American institution, the local Center for Policies and Advocacy, and drawn up with U.S. State Department financing, states that the province of Drenas is one of the most polluted in the country because of the Ferronikeli site and the nearby slag heaps, which have a direct impact on air and soil quality. In addition, the report said, Drenas suffers from problems with its water (which are also contaminated by Ferronikeli ). What consequences can pollution of this order have? According to the U.S. Agency for Toxic Substances and Disease Registry, exposure to a high concentration of nickel can cause respiratory ailments, diseases of the nose cavity and lung cancer.
According to Prof. Eilon Hadar, director of the Zuckerberg Institute for Water Research at the Sde Boker Campus of Ben-Gurion University of the Negev, “The question is whether the nickel we see in the water today originates at the complex. According to my assessment and understanding, the answer is yes, because nickel on this scale does not come from nature.” He adds that it is important to prevent rainwater from carrying away the waste. “The rainwater trickles down into the heaps of waste and emerges on the slope into the nearby river. The waste should be collected and treated, and there is a way to do that.”
In a quiet neighborhood overlooking the Ferronikeli compound, a few minutes’ drive from the dunes, Ismail Dibrani, 29, a member of the Drenas municipal council, has been waiting for us patiently. He is late for a wedding to which he has been invited, but also thinks it’s important to talk to us.
“Everyone here is afraid,” he says, his little daughter next to him. “Not just me. That is why people went out to demonstrate. In a normal country this factory would have been shut down.”
Is that really a solution? The mine employs 1,000 people from the area.
Dibrani: “We have nothing personal against the company or against the management, and of course we want people to work. But we are fighting for them to abide by European standards of environmental protection and not violate our human rights.”
Dibrani has been occupied with the mine since he was elected four years ago. “What we find most worrisome at the moment is the waste, because the micro-particles turn into dust when there is a wind, enter the respiratory system and reach the lungs,” he says. “Under the terms of the privatization agreement, the company is obliged to cover the waste with 50 centimeters of earth and vegetation on the site.”
The pollution from the smokestacks is also a subject of concern, though some progress has been made in that area, says Dibrani: “We managed to reduce the amount of smoke that is emitted thanks to our insistence that filters be installed in the smokestacks. The factory badly missed the target dates that were set, but in the end it was done. The problem is that that do not activate the filters every day or at night [a charge denied by the company: see box]. Data from the Hydro-Meteorological Institute show that the pollution is higher at night.”
Dibrani, too, has noticed the secrecy that surrounds Ferronikeli. He notes that after the recent explosion, the factory prevented journalists from entering the complex, and subsequent media reports said the police were encountering difficulties in their investigation of the event. Asked why it is so hard to deal with Ferronikeli, Dibrani laughs uneasily. “I don’t think I am the person who can answer that question,” he says. “You have to ask the government.”
In the center of Pristina is one of the city’s symbols: a large, bizarre structure left over from the communist era which has been converted into a shopping and sports center. Nearby is the new high-rise that houses the government ministries. We arrive uninvited, because our official requests to the Environment Ministry were rebuffed. On a high floor we meet Gazmend Avdiu, the spokesman of the environment minister – who is not here. Even though we are uninvited, Avdiu speaks to us and assures us he is being frank.
“I found the whole situation there strange,” he says, referring to the visit he made to Ferronikeli with the minister, Dardan Gashi, after the explosion. “We invited the media, but the reporters were stopped at the gate. We told them that if the media were not allowed in, the minister would not enter, either. I also asked myself what they have to hide.”
Avdiu explains that air-pollution tests in Drenas were conducted concurrently by Ferronikeli and by the Environment Ministry, through the Hydro-Meteorological Institute, to whose offices, on the edge of Pristina, we drive afterward.
Prof. Tahirsylaj the institute’s director for the past 20 years, welcomes us in his crowded office, which is filled with maps, charts and an assistant who is holding a loud telephone conversation.
After he shows us with unabashed pride the sophisticated measuring instruments in the institute’s courtyard, he presents the results of the latest tests. The most important factor is the level of PM10, the percentage of particles in the air with a diameter of less than 10 microns (10-thousandths of a millimeter ). On 15 of the 17 test days in April, the PM10 level exceeded the permitted level by 50 particles per cubic meter and sometimes reached a level three times higher. The average PM10 per day exceeded the standard four times in this period.
Tahirsylaj has no doubt that the source of the pollution lies in the Ferronikeli complex.
“They are protecting their interests,” he says. “They want to extract as much as they can and exploit the mine to the maximum.”
The minister’s spokesman, asked about the Environment Ministry’s options, replies, “The minister can probably order the complex shut down – for example, until they activate the filters all the time. They installed them, but someone has to press the button to make them work.”
We submitted data about the air pollution in Kosovo to a former head of the air-quality unit in Israel’s Environment Protection Ministry, Dr. Michael Gerber. He said that the level of PM10 particles was very high, but added that he couldn’t understand why the Kosovo institute hadn’t checked the composition of the particles. (The institute informed us that it does not have the means to do so. ) According to Gerber, because the waste contains nickel, chromium and manganese, which are toxic metals, it’s likely that these substances also exist in the micro-particles. And why isn’t the plant making use of the filters it installed, we wondered. “Filters need changing,” Gerber explains, “and the less you use them, the fewer you need to replace.”
Avdiu, the spokesman for the Environment Ministry, even dares to suggest that those who conducted the tests may have let the plant off easy. “If the team we send there to check the pollution gets payment from outside, we need to know that. This is Kosovo, and the staff of our mobile unit are only human,” he says.
Ferronikeli, for its part, says that the results of the institute’s examinations are very good and that in the tests it conducted the findings were lower.
“Ferronikeli does not trust our measurements, because they think we are ‘out to get them’ in order to extract more money for them,” Tahirsylaj explains. To resolve the dispute, the two sides recently agreed to employ an external, independent company to examine the pollution levels there.
Agron Veliu is in charge of environmental quality at Ferronikeli and is in contact with the government about this subject. In a phone conversation he admits that the results of the measurements depend “on which side you talk to.” Asked about the PM10 excesses, he guffaws and replies, “Does the Hydro-Meteorological Institute know the source [of the pollution]? Is it the mine? The cars? The traffic?” He also maintains that the Environment Ministry does not have tools to examine properly whether the waste substances are dangerous.
Still, the waste was supposed to be buried.
Veliu: “Part of it was buried.”
When will it all be buried?
“We are leveling the material, and when it has all been leveled, we will cover it up. In the meantime, we are using that site and when we finish filling it we will cover it.”
This has been going on for years already. “But we are using the site. It cannot be covered at this time.”
In Macedonia, Cunico has undertaken to operate by EU standards. Why can’t it do the same in Kosovo?
“Kosovo and Macedonia are two different countries. We are operating according to Kosovan law. This is a young country, not like Macedonia.”
Dr. Gerber is not surprised by this response. “Tycoons are inclined to get out of Europe, where there are regulations and very strict supervision,” he says. “So instead, they move quickly to the periphery, where there are no regulations and they can run wild.”
Will the real owner please stand up?
On behalf of Benny Steinmetz, media adviser Eli Davidovich offered the following response: “Mr. Steinmetz does not hold shares of the NewCo Ferronikeli complex or of Cunico Resources, its parent company. Mr. Steinmetz does not hold any position in those companies, and is therefore not involved in their activity. Parenthetically, I will add that BSG Resources, which holds 50 percent of Cunico’s shares, is not under Mr. Steinmetz’s ownership and is not in his control. These are simple facts which can be examined and proved easily. Accordingly, I request that you avoid mentioning Mr. Steinmetz’s name in connection with your references to the Ferronikeli plant.”
The response from Alexander Mashkevich’s office: “He is not the owner of shares and he does not hold any position in the company you mention. According to an examination which we made, one of the companies in which we are partners has an indirect holding in minority shares, which naturally do not afford us involvement or a role of any kind in the company’s decisions or activity. It is therefore self-evident that it is irrelevant to interject our name into the subjects you mention.”
NewCo Ferronikeli, in a (verbatim ) written response to questions from Haaretz, rejected most of the allegations against it in regard to the environmental harm it is causing, but made no direct reference to the various reports concerning pollution, which were conveyed to it. According to the company’s response, it invested more than 60 million euros in the first years of operating the mine, “at least 20 million euros of which has been invested toward environmental protection equipment … The company continuously invests great amounts toward improving of environmental and operational parameters … The company complies with the environmental requirements as per the local regulations and continuously upgrades its environmental protection standards … The company has recently been certified ISO 9001 standard and is currently targeting to apply for an ISO 14001 standard certification.”
Nor is the company disturbed by the black waste or by the fact it is not covered up. “Samples of the ‘black dust’ (or ‘slag’ ) … have been examined and analyzed by laboratories in two universities (in the Czech Republic and Greece ). Both have confirmed that the slag does not pose any risk to the environment,” NewCo Ferronikeli wrote. “The slag is being deposited under the supervision and the approval of the Ministry of Environment and the International Council on Mining and Metals. The region will be rehabilitated according to approved plans.” At the same time, the company made no reference to the high rate of particles in the air.
In regard to water pollution, the company says it regularly takes samples of the local water to ensure that it is not polluted. In addition, the water around Drenas “runs through the naturally existing minerals and therefore nickel percentage can be higher.”
In response to an allegation made by a number of people, about the plant’s failure to activate the smokestack filters all the time, the company wrote: “The installation of the filters has been completed in 2009, and ever since they have practically been operating almost 99 percent of the time, 24/7.”
NewCo Ferronikeli says it is not trying to hide anything about the explosion in the furnace. Its written statement said the company cooperated with the police, the Environment Ministry and the media, and that the cause of the event was investigated by the company, which sent a report to the government.
The company added that as far as it knows, Benny Steinmetz and Alexander Mashkevich have not visited the complex: “Both of them are not linked to the company, and the company certainly cannot respond on their behalf.”
In the latest list of billionaires published by Forbes magazine, Benny Steinmetz is in 162nd place, with a personal fortune estimated at $6 billion. That also puts him in second place on the list of the richest Israelis, after the late Sammy Ofer and his family.
Steinmetz, who keeps himself and his business holdings well out of the limelight, is considered to be close to former Prime Minister Ehud Olmert. He is 55 and was born in Netanya. His father, Reuven Steinmetz, dealt in diamonds – a trade Benny also entered after his army service, when he moved to Antwerp. He returned to Israel in 1996 and diversified his business interests. His empire now includes companies that deal in minerals, real estate, energy and natural resources, and it stretches from Russia via Eastern Europe to Africa. About a year and a half ago, he sold 1.5 million shares of the Israeli cellular phone company Cellcom, which he had held for years, but other than that he is not known to have investments in Israel.
Alexander Mashkevich, who is a year older than Steinmetz, was born in Kyrgyzstan and moved to Kazakhstan in the 1990s. He arrived in Israel in 1991 and received Israeli citizenship and a passport. In the past few years, he has divided his time between Israel, Kazakhstan and Britain. He is one of the owners of the international mining giant ENRC, which is traded on the London stock exchange, and he also has private businesses including a bank and an insurance company in Kazakhstan. He also recently announced the creation of an international news network that is meant to compete with Al Jazeera and CNN. According to Forbes, he is worth $3.7 billion, making him Israel’s sixth-richest person. Considered a confidant of Labor MK and former cabinet minister Benjamin Ben-Eliezer, Mashkevich founded the Euro-Asian Jewish Congress and until recently was its president.
Mashkevich and Steinmetz have known each other for more than 10 years. In an interview last year with Amiram Barkat in the Israeli financial newspaper Globes, Mashkevich was quoted as saying, “Benny is one of my best friends … We were partners in many projects and he is one of the most professional businessmen I know. He is very honest, very intelligent. A workaholic.” He also told the paper, “We are still partners in the Balkan mines, but not in Africa.”
Last December, Haaretz’s TheMarker revealed that Mashkevich had bought a penthouse in the Sea One project in Tel Aviv for NIS 110 million; it will cover the entire 21st floor and have an area of 1,000 square meters.
By Uri Blau