KOSOVARS SPY SALVATION IN MINERAL WEALTH - IWPR

Experts' reports speak of vast, untapped resources, but questions over
their exploitation remain.

By Arbana Xharra in Pristina (BCR No 557, 25-May-05)

The sale in Kosovo of one of its biggest mineral mines has raised
hopes of the more effective exploitation of what experts say is a
great potential source of wealth.

The Ferronickel mines and plant in Drenas/Glogovac, 30 kilometres west
of Pristina, went under the hammer last week.

The sale was organised by the much-criticised Kosovo Trust Agency,
KTA, which the UN has charged with selling off Kosovo's socially-owned
firms.

That this region is mineral rich is beyond doubt. A recent joint
survey by Kosovo's Directorate for Mines and Minerals and the World
Bank put a 13.5 billion euro price tag on its resources of raw
materials.

The survey warned that the mines needed huge investment, to the tune
of about 1.8 billion euro, which might generate 35,000 new jobs.

Rainer Hengstmann, director of the Independent Commission for Mines
and Minerals, ICCM, is especially interested in Kosovo' reserves of
lignite, used primarily for generating electricity and heating.

"Kosovo's lignite wealth is strategically important, as it is one of
the biggest reserves of high quality lignite in Europe," he said.

Agron Dida, deputy minister for Energy and Mines, said, "In 2004,
Kosovo power plants used only around 5.7 million tonnes of lignite -
and there are an estimated ten billion tonnes [underground]," he said.
"We should be well set for the next few centuries."

Although Kosovo is apparently well endowed with valuable raw
materials, there is little to show for it. The territory suffers from
routine electricity shortages, for example, and Agim Shahini,
president of the Kosovar Business Alliance, says the power cuts put
off many foreign investors, "The unstable electricity supply is the
main disincentive to investors because factories cannot work on
generators."

Even the factories that should be processing Kosovo's underground
minerals lie unused and empty.

Ferronickel is one of them. Murat Mehaj, a geodesy expert who has
worked there since 1984, says at the peak of operations in 1989 the
company employed around 2,000 workers, producing 7,800 metric tonnes
of nickel per year.

Matters had deteriorated by 1991, when production slumped to only 300
tonnes per year. As Slobodan Milosevic tightened his grip on Kosovo,
the plant crumbled, laying off 1,800 workers.

The infrastructure suffered in 1999, when Serb police were stationed
in the buildings, which were hit by NATO bombs.

A sign of growing international interest in Kosovo's raw materials was
the World Bank's decision on April 21 to give 2.5 million US dollars
towards revitalising Kosovo's energy and mining sector.

At a press conference on March 17 in Pristina, Hengstman said two of
the world's largest mining exploration and extraction companies were
racing to exploit these underground riches, though he did not reveal
their names.

But the question of Kosovo's final status continues to block the
exploitation of its natural resources. In the current legal vacuum,
Serb officials say Belgrade has a right to veto any proposed deals.

Ivan Ahel, a Serb expert on Kosovo ores and technical director of
Belgrade's Zirovski Vrh uranium mine, said, "Under UN resolution 1244,
Kosovo is a part of Serbia and until that status changes, Serbia has a
right to be involved.

"As for who should manage that wealth, that requires a political
solution between the Serbian and Kosovo governments."

Ahel downplayed reports of the wealth lying underneath Kosovo's
surface, saying the quantities were large but the quality low.

"We have to make it clear to some Serb and Kosovo politicians that the
commercial interest is not as high as it might appear," he concluded.

Hengstman disputes Serbia's claim on Kosovo's natural resources. "The
natural wealth of Kosovo belongs to the people of Kosovo," he said,
cautioning that he could not deal with such complaints. "That's for
the politicians to deal with."

While Kosovo's status question is unresolved, Haki Shatri, Kosovo's
finance minister, says grants like the recent award from the World
Bank will remain important.

"Kosovo needs such donations because our unresolved status means we
cannot get loans from international monetary institutions," he said

Not all local Albanians share in the talk of a rosy future for Kosovo
built on valuable raw materials. Some point out that a great deal of
money has been invested already in mining projects - without obvious
results.

Around one billion euro has so far flowed from the World Bank and
European Agency for Reconstruction, EAR, into Kosovo's mining and
power projects. Yet the protectorate cannot even secure a decent power
supply to homes and factories.

"It is amazing to hear that there is this great wealth of minerals
underground that could help improve our electricity supply," one local
businessman told IWPR. "I have had to invest thousands of euro to buy
powerful generators."

Arbana Xharra is an economics reporter on Koha Ditore.