Freeport-McMoRan is a leading US mining company, dating back to 1912, when it was formed in Freeport, Texas, to mine local deposits of sulphur. The part of its wider-reaching history that is of most interest though, dates from 1967 when it went into business with the new Suharto (“New Order”) regime in Indonesia.

General Suharto had recently overthrown Sukarno, the foundation president of Indonesia, and Indonesia and Suharto had something that Freeport wanted – seemingly limitless reserves of gold and copper located in the former Dutch colony of Western New Guinea. Since the early 1970s Freeport has mined enormous holes in the mountainous central region of Irian Jaya (West Papua), first at the Ertsberg mine, and when that was mined out, at nearby Grasberg. This (second) gigantic mined hole in the ground north of Timika contains the world’s largest gold mine and it’s third largest copper mine.

The Suharto regime was rewarded very generously for liberally doling out mining licences and concessions to Freeport and other US companies. In 1967, General Suharto still trying to consolidate his tenuous hold on power, gratefully signed a contract with Freeport very, very much on the company’s terms. Freeport Indonesia Inc was given a 30 year lease on the mine within a 250,000 acre concession. The traditional indigenous owners of the land were excluded from the consultations and received no compensation. Under the agreement Freeport was under no obligation to contribute to community development and there were no environmental restrictions on the firm’s operations. The deal “signalled the beginning of a complex but mutually supportive and beneficial relationship between the American company, the regime and its arm of repression (TNI/ABRI) that was to last another thirty years” (Denise Leith).

Freeport Indonesia became “an integral part of Suharto’s patronage system” (Leith). Within a government already synonymous with corruption, the President and his close cronies were all generously taken care of by Freeport. This was in addition to the official benefits to Indonesia of the partnership. So important was the US company to the Suharto regime it even assumed the role of a “quasi-state organisation”. As part of the quid pro qua Suharto provided the heavy security (ABRI and TNI) for the Freeport operation (funded by Freeport) necessary for the strategically vulnerable location of the mine.

By the late eighties the original, Ertsberg, mine was just about bottomed out, and the newly discovered Grasberg mine neatly filled the void, going on to yield massively more mineral wealth than Ertsberg. Suharto’s government was in a strengthened negotiating position as Grasberg blossomed and secured a percentage of the mine’s profits for itself. By the early 1990s the company was Jakarta’s largest taxpayer*, the largest employer in the province, and the source of over 50% of West Papua’s GDP.

As the profits rolled in very conspicuously for Freeport the corporation found it prudent to be seen to be giving something back to the community. From the nineties Freeport started for the first time to contribute to community development, building schools, medical facilities and houses, more job opportunities for the Melanesian population, in an attempt to cultivate an image of a benevolent, socially responsible, all-inclusive multinational.

The climate of graft and corruption redolent in the Suharto era did not abate after his 1998 downfall. A report by the New York Times in 2005 alleged that Freeport made payments between 1998 and 2004 to Indonesian army and police commanders totalling nearly US$20 million. The government also provided political protection for Freeport whose dodgy labour and environmental practices were in violation of US laws.

Freeport’s practice of bankrolling TNI to provide heavy security for the vulnerably located mine (at a cost of US$10 million for 2010 alone)** has proved to be a two-edged sword. The ongoing abuses of the police and army against Freeport workers and against OPM rebels has implicated the US corporation in TNI’s human rights violations. Freeport has found itself in the difficult position of trying to avoid the PR disaster of being implicated in the military’s repression of indigenous Papuans whilst having the need to maintain a high level of security for its operations.

Freeport’s environment record in West Papua has come under scrutiny. The corporation’s practices have been severely damaging to the local environment. Tailings from the mine have caused massive damage to 28 km of the province’s western rainforest, and a quantity in the billions of waste rock containing acid have emptied in the surrounding rivers and lakes of the district.

The Suharto era were the halcyon days of Freeport in Indonesia. Subsequent Indonesian governments have not taken a compliant attitude towards the Phoenix-based US minerals corporation. On the contrary they had been distrustful and quite vocal in their demands of Freeport. In the wake of the 2009 Mining Law Jakarta has called for a larger cut of the royalties and increased domestic ownership of Grasberg to flow to it.

The parent Freeport company for its part is less sanguine about its future in West Papua than it once was. In recent years problems have magnified for Freeport – metals prices have collapsed and are at a “historic low”, mine workers in recent years have gone on strike over wages and safety issues, and production was affected by the company’s conflict with the government over export duties with Freeport’s right to export in doubt.

Despite the current setbacks it is far from apparent that Freeport Copper and Gold wants to cut and run from its Papuan commercial enterprises, it is after all literally sitting on a gold mine! In fact Freeport is currently earnestly negotiating with the Indonesian Government for the extension of its contract in West Papua which expires in 2021. Nevertheless it is a turbulent time for the mining corporation – last month the CEO of Freeport Indonesia, Maroef Sjamsuddin, abruptly resigned only one year into his term, and less than a month after the scandal involving the speaker of the Indonesian House of Representatives, Setya Novanto, who was forced to resign for soliciting kickbacks from Freeport in return for an offer to extend the Grasberg contract.

The copper and gold extraction of Grasberg, together with the exploitation of other natural resources in western Papua, especially silver, oil, gas and forests***, have gone hand in hand with the dispossession and impoverishment of native Papuans. The loss of traditional lands without recompense has contributed to the parlous state of the bulk of Melanesians in the province. The stark figures of a 2007 World Bank report tells the story of their exclusion from the province’s wealth generation – 40% of Papuans still live below the poverty line (double the national average); 1/3 of children do not attend school; only one in 10 villages have basic health services. Moreover, the famine in 2009 resulted in almost 1,000 deaths from starvation.

New President, Widodo, has signally his intent to put more focus on the West Papuan situation. How Jokowi and his government handles the poverty-stricken conditions of disadvantaged, indigenous Papuans, and how Freeport contributes in this, remains to be shown.

* this continues to be the case, eg, in 2010 PT Freeport Indonesia paid out about US$1.75Bn in taxes and royalties to the Yudhoyono government.
** the ever upward spiralling cost to the corporation of safeguarding its property with hired security (itself an increasingly tainted liability for it) is another concern for the mining giant.
*** Freeport is far from alone in multinational exploitation of Papuan resources – the Tangguh natural gas to LNG project in West Papua province is a massive income generator for BP and its Japanese consortium partners.

Note: The present ownership of the Grasberg mine is divvied up as follows – Freeport-McMoRan Copper & Gold (67.3%), Rio Tinto (13%), Government of Indonesia (9.3%) and PT Indocopper Investama Corporation (9.3%)[www.miningglobal.com].

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Glossary:
ABRI Angkatan Bersenjata Republik Indonesia (Indonesian Republic armed forces including the national police)
OPM Organisesi Papua Merdeka (Free West Papua Movement)
TNI Tentara Nasional Indonesia (from 1999, Indonesian National Army – armed forces minus the national police)

References:
D Leith, ‘Freeport’s troubled future’, 67, Inside Indonesia, Jul-Sep 2001

S Michaels, ‘Is a U.S. Mining Company Funding a Violent Crackdown in Indonesia?’, The Atlantic, 29 Nov 2011, www.theatlantic.com

P O’Brien, ‘The Politics of Mines and Indigenous Rights: a Case Study of the Grasberg Mine’, Georgetown Journal of International Affairs, XI(1), Wint-Spr 2010

‘Grasberg: The World’s Largest Gold Mine’, 24 Feb 2015, www.miningglobal.com

‘Biggest Gold Mine Keeps Working as Export Permit Expires’, Bloomberg Business, 28 Jan 2016, www.bloomberg.com

‘Indonesia parliament Speaker Setya Novanto resigns over alleged kickbacks’, The Straits Times, 16 Dec. 2015, www.straitstimes.com