Mining Companies Face Ban in Eritrea Under Drafted UN Sanctions

Eritrea faces tougher United Nations sanctions that would ban companies from investing in the African country’s mineral resources such as gold.

“All states shall prohibit investment” in Eritrea’s mining industry and “prohibit the import of gold and other raw materials” from Eritrea, according to a copy of a draft resolution introduced by Gabon, one of three African nations on the UN Security Council.

Eritrea’s $2.59 billion economy relies on mining. Gold has drawn investment from companies including Canada’s Nevsun Resources Ltd.

Another resource is the money sent back by Eritreans living abroad. The expatriates pay a 2 percent tax on those remittances. The UN resolution would seek to ban collection of the tax.

Further economic sanctions may hurt more than 5 million people living in poverty. Eritrea is one of the world’s poorest nations, with citizens earning just over a $1 a day, the UN says.

A July 18 UN report said the tax on remittances is the “most significant source of revenue” for the government, estimating the income to be “tens, possibly hundreds of millions of dollars on an annual basis.” The government, through a joint gold-mining venture with Vancouver-based Nevsun, has “started to receive royalty payments worth millions of dollars,” the report said.

Failed Plot

The latest push to punish Eritrea was triggered by a UN report in July that said its government planned a failed plot in January to disrupt the African Union summit in Addis Ababa by bombing civilian and governmental targets.

The draft resolution “condemns in the strongest possible terms Eritrea’s continued pattern of destabilization activities, including training, financial and logistical support to armed groups in the region including al-Shabaab.”

Eritrea has been ruled by President Isaias Afeworki, a former rebel leader, since it gained independence from Ethiopia in 1993. The UN has already sanctioned the country in the Horn of Africa for supporting al-Qaeda-linked terrorists fighting to topple the Western-backed government of Somalia. The current sanctions include an asset freeze and a travel ban on government leaders.

Al-Shabaab, a Somalia-based terrorist organization that the U.S. says has links to al-Qaeda, generates between $70 million and $100 million a year in revenue from taxation and extortion in areas under its control, according to the UN report.

Terrorist Links

Islamist groups including al-Shabaab and the Hisb-ul-Islam movement, previously based in Eritrea, have gained control of most of southern and central Somalia in their bid to oust President Sheikh Sharif Sheikh Ahmed’s UN-backed transitional government. Somalia hasn’t had a functioning central administration since the removal of Mohamed Siad Barre, the former dictator, in 1991.

U.S.-backed Ethiopian troops invaded Somalia in December 2006, ousting the Islamic Courts Union government that had briefly captured southern Somalia. The troops withdrew in January.

To contact the reporters on this story: Flavia Krause-Jackson at the United Nations at fjackson@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net

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