On Saturday 2 December 2006 the negotiation teams of Mittal Steel, the world's largest steel company, and the Government of Liberia will meet in New York to finalise the renegotiation of the US$900 million iron ore mineral development agreement in Liberia.
Global Witness’s (1) October 2006 report “Heavy Mittal”(2) warned that the agreement is heavily weighted against the Liberian government, ceding important sovereign and economic rights to Mittal - almost creating a state within a state. Although the company has made certain concessions, the final sticking point appears to be the most crucial, agreeing a pricing mechanism for the iron ore. “Getting this right is critical for Liberia, because the pricing mechanism determines how much they’ll actually receive in royalties and tax; it is the economic foundation of the whole deal” said Patrick Alley, Director, Global Witness. “It was always one of the most remarkable aspects of this shoddy contract – a mining deal where the company is, unless things change, completely free to set the price it wants to pay for the resource”.
Mittal intends to sell the iron ore within the Mittal group. Under the existing contract the company would be able to sell the ore at below market value to an affiliate, which would not only reduce the actual royalties and tax paid to the Government of Liberia, but would encourage the repatriation of profits to a low tax regime, which Mittal has catered for. Under normal international taxation rules established to set fair transfer prices (3), the iron ore would normally be sold at an ‘arm’s length price’, which is usually linked to the current market price.
“Unfortunately it appears to be as bad as we thought. By not accepting the internationally accepted pricing standard, Mittal is in a position to maximize profit at the expense of the Liberian people” said Alley. “Mittal has one last opportunity to lead by example and work to become “the worlds most admired steel institution”, which is what they claim they want to be.”
For further information, please contact:
Patrick Alley: +30 6940 705864 + 44 7921788897
Natalie Ashworth: + 44 7968160377
Sofia Goinhas: +44 207 561 6393
(1) Global Witness is an investigative non-governmental organisation that focuses on the links between natural resource exploitation and conflict and was co-nominated for the 2003 Nobel Peace Prize. For more information on Liberia, see other Global Witness reports and briefing documents, available at www.globalwitness.org
(2) Heavy Mittal is available at:
(3) Laid down by the Organisation for Economic Co-operation and Development (OECD)
Press Release / Nov. 29, 2006