The government of Australia recently sent a letter to Prime Minister Viktor Chernomyrdin which said that, inasmuch as the Australian government is encouraging businesses to invest in Russia, it is attentively following developments in the project to create the joint Russian-Australian company Lenzoloto. Between the lines of this letter it was clear that the Australian government was trying to convince Chernomyrdin of the respectability of the Australian partner in this venture, Star Technology Systems Ltd.


Seventeen years ago the Soviet government officially registered the gold deposit at Sukhoi Log near the town of Bodaibo in Irkutsk, believed to be one of the five largest deposits in the world. According to 1984 estimates, developing the deposit would cost 770 million rubles. In today's rubles, that would be about two trillion, or nearly $1 billion.


Despite this high cost, the Soviet government undertook a development project exactly ten years ago. However, the onset of perestroika and government budget problems kept the project from being realized.


In December 1991, as soon as the new government came to power, Lenzoloto's management proposed to Yegor Gaidar that they attempt to attract foreign capital to the project.


After the government consulted a number of gold experts and the local administration, the Australian consortium Star Technology Systems Ltd. was chosen as the foreign partner. In April 1992, Gaidar signed a government decree transforming the state concern Lenzoloto into a closed joint-stock company with 31 percent foreign capital.


The amazing thing about this deal was that the foreign partner agreed to contribute $250 million as its 31 percent. Since the entire value of the project's capital was 2.139 billion rubles, that gave the Russian side an exchange rate of about 2.5 rubles to the dollar. This is still by far the most advantageous foreign-investment deal on record from the Russian point of view.


But soon the project began to run into problems. First, the local administration claimed that the project had not taken into consideration the development of the region. Then people began complaining that the rights of the workers were being infringed. Then people began using the project for political ends, claiming that Russia had been sold out and that our gold was being given away to foreigners.


In the last year, Star has invested $11.5 million, but the government still has not declassified the geologic studies of the site, and Star still has no precise idea what it has acquired. Moreover, the new company Lenzoloto still has not been given the prospecting license that the old state-run Lenzoloto held. Therefore, Star has suspended financing of the project, but it still has not given up hope.


Reliable sources say that an already-prepared government order will get the Sukhoi Log project moving. The order has been endorsed by high-level authorities in 16 different government agencies, although it still has not been made public since gold mining remains a sensitive political subject.


In the final analysis, it is not a matter of which foreign partner is involved or on what terms. It is much more a matter of doing something, of getting out of this morass of indecision that has already lasted several years. As long as the current situation holds, gold mining in Russia will continue to decline, creating the impression that Russia is not particularly interested in gold.