Blair's lobbying for gold firm backfires

Tony Blair has received a strongly worded rebuke from the Kyrgyzstan government over his efforts to lobby the country on behalf of an AIM-listed mining company.

The Prime Minister wrote a private letter to the President of Kyrgyzstan, Kurmanbek Bakiyev, last month in support of Oxus Gold, which had its mining licence for a project in the country removed by the Kyrgyz government. Mr Blair had suggested in the letter Kyrgyzstan was not living up to its obligations under his global anti-corruption initiative and the affair meant "there is a real danger of damage to Kyrgyzstan's reputation in the international financial markets".

The Kyrgyz government delivered an angry reply from Mr Bakiyev yesterday, who told Mr Blair: "We need not be reminded of our obligations under the Extractive Industries Transparency Initiative.... My government is committed to implementing these international agreements and we seek your help in their legitimate fulfilment."

The Kyrgyz government, elected last year after a popular revolution, said Oxus had not fulfilled its obligations to develop the Jerooy gold mine. Mr Bakiyev wrote: "Based on Oxus Gold's irresponsible and unlawful behaviour, we have no confidence they and their subsidiary will meet their contractually mandated obligations to our government." Oxus said it had fulfilled the conditions of its licence.

The company, which raised $60m (£33m) in 2004 on AIM to develop the Jerooy project, is close to finishing construction of the mine.

Oxus is thought to believe it has become victim of an attempt by a group of Georgian businessmen, in league with the Kyrgyz authorities, to take over its mine. Oxus said: "The company is concerned to have been approached in December 2005 by a potential second investor purportedly on the instructions of the [Kyrgyz] Prime Minister. The representatives who approached the company refused to disclose the ultimate identity of this investor.... Under these circumstances the company was unable to enter negotiations with the investor's representatives."

A Downing Street spokesman declined to comment on the contents of Mr Blair's letter.