By Olga Dzyubenko
BISHKEK (Reuters) - An emotional Kyrgyzstan president on Tuesday said "mob rule" had wrecked the sale of a gold field, blaming local clans for tripling the asking price and scaring off investors.
Jerooy, the second-largest Kyrgyz gold deposit, was tendered last month in a bid to rekindle investor interest in the Central Asian country which has seen two presidents toppled by violent revolts since 2005.
Instead of showcasing a new openness and transparency, the long-awaited tender exposed the influence of powerful clans in the nation which borders China and hosts Russian and U.S. military air bases.
The grip of Kyrgyzstan's central government, struggling to build the first parliamentary democracy in authoritarian post-Soviet Central Asia, remains tenuous in some regions.
"We live under the thumb of ochlocracy," President Almazbek Atambayev said, using a term meaning government by the mob.
"From the very beginning, the starting price was too high," the usually calm and measured Atambayev told a gathering of senior officials and non-government organizations.
"With this mob rule, we won't have a country as such."
Prime Minister Zhantoro Satybaldiyev told Reuters in an interview in March that under pressure from local residents the tender commission had set the starting price for the rights of subsoil use at Jerooy at $300 million, tripling the size of the original government offer.
Tender commission secretary Ulan Ryskulov told Reuters only one company had submitted a bid for Jerooy. He said it was a foreign investor but declined to disclose it. The commission will meet on Thursday to decide what to do next, he said.
The government sorely needs foreign investment as it struggles with widespread poverty. Per capita gross domestic product is less than a tenth of that in oil-rich neighbor Kazakhstan.
"We have just $1,200 (in per capita GDP), slightly higher than in Afghanistan," Atambayev said. "But they have been at war for 35 years. It is time for us to get down to work."
"INDEPENDENT ONLY ON PAPER"
Jerooy lies about 3,000 meters above sea level in the northern Talas region and has drawn several investors since the collapse of the Soviet Union in 1991 yet has never been developed.
Satybaldiyev has said it holds an estimated 100 metric tons of gold, a relatively small deposit in global terms but of high importance to the mainly Muslim nation of 5.5 million.
Talas has seen heated rallies calling for the government to use the sale for the benefit of the local population.
"Let's improve the investment climate," Atambayev said. "What happens, however, is 200 people gathering and saying that this field should not be developed for another 50 years."
"We are an independent nation only on paper," he said. "In Kazakhstan, life is better because they work. They fired up plants and factories, they developed their natural resources, while here natural riches are not allowed to be developed."
Would-be investors may have also been scared off by a $400 million arbitration claim filed against the Kyrgyz government by Kazakh company Visor Holding, alleging that its license to develop Jerooy was expropriated illegally.
Kyrgyzstan, whose State Geology Agency has dismissed the Kazakh claim as "sheer blackmail", is also embroiled in a bitter dispute with Canada's Centerra Gold over the country's largest gold deposit, Kumtor.
Parliament has set a deadline of June 1 for the government to renegotiate - or repudiate - a deal struck in 2009 with Centerra to operate the mine.
A state commission said that the Canadian investor has been paying too little to run the mine, and accused it of environmental damage leading to $457 million in fines.
Centerra, used to running Kumtor at altitudes of 4,000 meters and above, had looked at Jerooy, considering it "an attractive opportunity", Centerra Gold CEO Ian Atkinson told Reuters last week.
"But certainly right now, with the conditions of the tender and particularly the potential international arbitration over the deposit that has been launched by Visor against the Kyrgyz government, and that they are claiming damages of some $400 million, it is not something that we would bid on at this point of time until those issues are resolved," he said.
(Additional reporting by Shounak Dasgupta in Bangalore; Writing by Dmitry Solovyov, editing by William Hardy)
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