One prominent mining company which has faced
controversy for its relationship with state security forces in
a conflict zone is Freeport McMoRan Copper & Gold Inc.
This US company controls a gigantic mine in Indonesia
which contains the largest gold reserves and the second
largest copper reserves in the world. The Grasberg mine in
Indonesia’s eastern region of Papua, formerly known as
Irian Jaya, is run by a local subsidiary called PT Freeport
Indonesia which is 90.64% owned by Freeport McMoRan
and 9.36% owned by the Indonesian government. Freeport
Indonesia has a joint venture with Rio Tinto, the global
mining giant, which itself owned a minority shareholding
in Freeport McMoRan until 2004. Indonesians, observers
and company staff commonly refer to the US parent and
the local subsidiary interchangeably as “Freeport”.
Freeport’s mining operations have been guarded since the
1970s by the Indonesian military, which has been fighting
during this time to suppress a rebellion for Papuan
independence. The Indonesian military has a history of
atrocities against civilians and is known to have been
involved in corruption and illegal business activities, as
have the police. For this reason, there has long been
controversy over the close relationship between the mine
and the government security forces which guard it.
This controversy grew after 31st August 2002, when gunmen
ambushed a party of teachers working for Freeport Indonesia
and killed two Americans and an Indonesian, and wounded
another eleven people. A Papuan man, Anthonius Wamang,
has been indicted by a US court for his part in the killings.
1
Wamang, who appears to be in hiding, has claimed both to
be a Papuan rebel and a business partner of Indonesian
soldiers.
2
Although the Indonesian authorities have blamed
the killings on Papuan rebels, the case remains unsolved and
various observers, including Indonesian police officers and
US officials, have voiced suspicions that members of the
security forces may have been involved (see box: The ambush
of August 2002, page 16).
Freeport, the investors and the
Indonesian military
After the August 2002 killings, two New York City pension
funds with shares in Freeport McMoRan called on the
company to provide more information about its
relationship with the Indonesian military. It had been
known for some time that Freeport made payments
towards the cost of military and police protection for the
mine, but almost no information had been disclosed about
these payments. The New York City pension funds cited a
news report which suggested the August 2002 ambush was
part of an attempt by soldiers to extort more money from
Freeport and said: “The characterisation of these payments
as extortion raises the additional concern of whether such
payments violate the Foreign Corrupt Practices Act.”