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WSWS : News & Analysis : Australia & South Pacific : Papua New Guinea

PNG: behind the Sandline mercenary affair

By Peter Symonds
28 April 1997

The political crisis provoked by the deal between the Papua New Guinea government and the mercenary outfit Sandline International has provided a revealing insight into a new global scramble for mineral wealth.

The PNG government of Sir Julius Chan signed a $46 million contract with Sandline to provide mercenaries and sophisticated military equipment to spearhead a military operation against separatists on Bougainville.

Chan initially denied that the mercenaries were to be directly involved in frontline operations. But the terms of the contract explicitly stated that Sandline was to "conduct offensive operations in Bougainville" in order to "render the BRA [Bougainville Revolutionary Army] military ineffective and repossess the Panguna mine".

Sandline was to provide 70 staff, including aircrew and aircraft engineers, intelligence and equipment operatives, mission operators, ground technical and medical support personnel.

Arms to be supplied included helicopter gunships armed with multiple rocket launchers, transport helicopters, heavy machine guns, automatic grenade launchers, electronic surveillance equipment and large stocks of munitions.

The key target was the huge Panguna copper mine, operated by the Australian-British mining giant RTZ-CRA. When the BRA occupied the mine and shut it down in 1989, the PNG government lost 20 percent of its revenue, together with 44 percent of the country's export earnings.

As part of the plan to reopen the mine, the PNG government secretly approached RTZ-CRA through the Hong Kong-based brokers Jardine Fleming to purchase the company's 53.6 percent controlling interest.

A number of questions remained unanswered. How was the PNG government to finance the buyout? Who was to pay the estimated $500 million required to restart the mine and who was to run the complex mining operation?

The answer lies with Sandline International. It is not simply a private army for hire but part of a complex network of companies involved in mining operations.

Sandline signed the PNG contract but another company based in South Africa -- Executive Outcomes -- was subcontracted to provide the military personnel. Executive Outcomes is notorious throughout Africa for its mercenary operations.

Executive Outcomes operates with the sanction of the Mandela government. Many of its recruits are former members of the 32nd Battalion of the South African army, which under the former apartheid regime were involved in "destabilisation" operations, particularly in Angola.

Executive Outcomes was hired by the Angolan government in 1993 to fight the Unita rebels, formerly backed by the apartheid government. In return, Executive Outcomes, or its associated companies, was offered rich mineral concessions.

The company was also involved in military operations to shore up the regime of Valentine Strasser against rebel groups in Sierra Leone, securing for itself interests in diamond mines. Executive Outcomes is reportedly active in more than 30 countries in Africa, including Kenya, Sudan, Uganda, and has close links with international oil, gold and diamond ventures.

In the past, the major capitalist powers and their corporate empires have relied on subservient national governments to secure their interests. But with nation-states disintegrating economically, politically and socially, mining companies are resorting to mercenaries to exploit the mineral wealth in Africa and elsewhere. Executive Outcomes is the largest of an estimated 90 private armies active in Africa.

Sandline publicly denied that the deal with the PNG government involved any financial interest in the Panguna mine. But a letter written by Sandline chief Tim Spicer was tabled in early April at a commission of inquiry in Port Moresby. It outlines an offer to the PNG government to enter a joint venture to run the mine.

The ABC radio program "Background Briefing" on April 6 revealed another piece of the jigsaw puzzle. Tony Buckingham, one of the founders of Executive Outcomes, is the chairman of two mining companies, Branch Energy and Heritage Oil. Heritage Oil in turn has a controlling interest in Sandline.

Also significant is the involvement of Canadian entrepreneur Robert Friedman, now an Australian resident. Though an associated company Diamondworks, Friedman owns and controls Branch Energy.

The ABC program described Friedland as the "King of the Canadian Juniors". So-called juniors are mining companies which are prepared to venture into politically unstable areas of the globe and use whatever means are necessary to extract a profit. In reality, these companies are fronts for larger banks, finance houses and mining corporations keen to maintain a distance from risky and politically explosive operations.

Friedland, also known as "Toxic Bob," faces claims of $150 million by the US Justice Department to clean up the widespread pollution at his Summitville gold mine in the US. He has extensive mining interests around the world, including at the lucrative Lihir gold mine in PNG and the Emperor Gold Mine in Fiji.

Friedland employs in his private company Ivanhoe former top executives of RTZ and Jardine Fleming. He was clearly in a position to organise a deal involving the PNG government, Sandline, Jardine Fleming, Canadian finance houses and possibly RTZ-CRA to reopen the Panguna mine.

While the Australian media has provided some details of the financial interests behind the PNG government's deal with Sandline, little or no attention has been paid to the involvement of the Australian government in the ousting of Chan.

The machinations of the Chan government clearly cut across the interests of Australian capitalism which regards its former colony Papua New Guinea as its own private preserve for exploitation. Australian trading companies, mining corporations and banks have long dominated the most profitable sections of the PNG economy.

The Australian intelligence services had been monitoring the Sandline operation and briefed the Howard government on the details before they were leaked to the press. Howard's pressure on the PNG government to abandon the deal -- a move enthusiastically supported by the Labor opposition -- encouraged the PNG army chief Jerry Singirok to mount the challenge to Chan which finally forced his resignation.

The Liberals have no more objection to the use of military force to attack the people of Bougainville than their Labor predecessors who armed and financed PNG military offensives on the island at the cost of thousands of lives.

But having since lost confidence in the ability of the Australian-trained and supplied PNG Defence Forces to militarily defeat the BRA rebels, Howard has followed the Laborites in switching tack to attempt to broker "a negotiated solution" with the BRA to re-open the island to exploitation by Australian companies.

Sandline and Executive Outcomes are not the only ones threatening Australian capitalism's interests in PNG.

In the course of the army revolt, Singirok claimed to have been motivated by concerns over corruption in the PNG government and the possible loss of civilian life in any military operation on Bougainville. But in the course of the commission of inquiry, he has revealed that he had been working out an alternative arrangement to bolster the PNG military - with Germany, which prior to World War I, held Bougainville as a colonial possession.

Singirok stated that he had negotiated a $21 million deal with the German government. It was similar to the Sandline contract and involved the provision of training and equipment to prepare for military operations on Bougainville. He had sent two delegations to Germany to investigate the arrangement but had been put under "extreme political pressure" by the Chan government to proceed with the Sandline deal.

A further indication of Singirok's international connections came to light at the PNG inquiry when he was forced to admit that the British-based arms dealer Franklins had paid for a week-long stay he enjoyed in London last year. One of Franklins' associates, Shorts, also paid for Singirok to fly to Belfast to test military hardware.

Papua New Guinea has become a hotbed of imperialist intrigue. At stake are some of the richest gold and copper mines in the world -- Panguna, Ok Tedi, Porgera and Lihir. The Sandline affair provides a glimpse of the machinations of Canadian, South African, British, Australian and German capital and their PNG frontmen in seeking control of the mineral wealth of Bougainville.

The huge profits being extracted by the mining corporations benefits a tiny ruling elite in PNG. The living standards of the vast majority have declined sharply as successive governments have implemented the "structural adjustment" dictates of the International Monetary Fund and World Bank: cuts to government spending, a freeze on wages, lower corporate taxes and the floating of the kina. An estimated one-third of the labour force is unemployed and a 30 percent decline in the value of the kina since 1994 has severely eroded the value of wages.

It is this social chasm between rich and poor which fuelled the protests in Port Moresby and Lae against the Chan government. But without an independent perspective with which to fight for their social needs, the anger of the PNG masses is being manipulated by figures such as Singirok to advance rival imperialist interests.