About that coal in Kosovo

In comments to the post on Kosovo, Alex Harrowell asked the following reasonable question:

“How can you have something that’s both a “mineral resource grab” and an “economic black hole”?”

The short answer: you can, because it’s Kosovo.

Here’s why. There has been no serious investment in those mines since the Yugoslav economy hit the skids in 1986.

A modern coal mine is not a hole in the ground full of guys with picks. It’s a major industrial installation. You have huge drills, borers, grinders, driers, fans, pumps, you name it. A big coal mine uses as much power as a good-sized town. A big modern coal mine uses cutting-edge, state-of-the-art materials technology and software. It’s not guys digging coal any more. It’s guys operating and maintaining big, complicated machines that dig coal. In the United States, the majority of coal miners have four-year college degrees, and need them.

(Here’s another interesting statistic: in the last 50 years, the number of US coal miners has dropped by 68%. However, the US’ total coal production has gone up by 83%. You have less than a third as many miners producing nearly twice as much coal; per capita output has gone up nearly sixfold.)

Now Kosovo does indeed have a lot of coal. They aren’t huge deposits by world standards, but they’re pretty big — the biggest in the region, and (I’m told) fifth or sixth biggest in Europe.

Furthermore, it’s not bad coal, for lignite. It’s got some sulfur, but lignite usually does; it’s not particularly dirty, nor is it buried inconviently deep. When you put the whole package together — size of deposits, quality of deposits, ease of access, environmental issues — it looks pretty good. Not as fantastic as some partisans claim, no, but still a major coal field that’s well worth exploiting.

But.

There’s been no major investment in over twenty years; and twenty years is a long damn time, in that industry. I say “over twenty years” because even back in the 1980s, the Kosovo coal fields were the ugly stepsister of Yugoslav energy. The Albanian-dominated regional government didn’t have enough money to make major investments, and the federal government felt it was already throwing enough money at Kosovo. So we’re really talking more like thirty years, or even more. The miners today are using equipment and techniques from the 1960s and ’70s.

And not only was there no investment, but the mines suffered a decade of actual disinvestment in the 1990s. Slobo fired all the Albanians in 1989-90, and there weren’t enough Serbs to replace them. Then there was no point in investing in a mine running at just 20% capacity, especially since Serbia was under embargo and the coal couldn’t be exported anyway. So, like almost everything else in Kosovo in the 1990s, the mines went to hell. Deferred maintenance; neglect; management by political appointees; massive corruption. Productivity and efficiency, already low, actually went backwards for ten years.

Things have improved a bit since 2000 — UNMIK has sponsored some modest investment, especially in safety equipment — but not much. The mines are still running with antiquated equipment and at very low levels of productivity and efficiency. Bringing them up to date will require hundreds of millions of euros of investment.

Further. Because the mines are using crappy old equipment — and are grossly overstaffed — it’s costing them way too much to produce coal. Kosovar coal should be very competitive on world markets. Instead, the mines are losing money. It costs them more to mine and process the coal than they can get by selling it.

All that said, the mines should be an attractive investment. A billion dollars of investment? That’s well within the reach of a large modern mining company. The technology is off the shelf. The workforce is there. And once the investment is made, the mines could be some of the most productive and profitable in all Europe.

However.

One, who in their right mind would invest a billion dollars in Kosovo right now?

Two, the ownership of the mines is disputed. They were, after all, state-owned. The Kosovar state claims them; so does Serbia. Until that issue is settled, nobody’s going near them.

Three, go back and look again at that productivity statistic. Any investor would want to increase productivity, which is great, except that it will inevitably involve firing large numbers of workers. The province as a whole may benefit, but that’s in the long run. In the short run, it means pushing more unemployed workers onto the market in an overpopulated state that already has painfully high unemployment and is politically volatile. Even if a new investor is willing to do this, it’s very questionable whether the Kosovar government would allow it. This problem is far from unique — it’s been acted out all over Eastern Europe in the last fifteen years — but it will be particularly fraught in Kosovo.

Four, the Kosovar government has not taken this problem seriously. The Ministry of Energy and Mining? He’s a guy named Ethem Ceku. He has a degree in history. His qualifications to be Minister? One, he was in the KLA; and two, he’s the younger brother of Prime Minister Agim Ceku. [Update: this is incorrect. Ethem Ceku and Agim Ceku are not closely related. I apologize for the error.]

And five, if you really want to make those mines profitable, you have to export most of the coal. Since Kosovo is landlocked, that means railroads. Right now there’s one rail line that can carry coal trains, and it runs… north into Serbia. D’oh! (There’s also a line that goes south to Macedonia, but it’s not in great condition and was not designed to carry heavy coal trains.)

So, somebody’s going to have to spend a lot of money building a heavy rail line, either south into Macedonia or east over the mountains to Albania. Good luck with that.

In sum: Kosovo’s coal mines are both a bonanza and a black hole. At the same time.

Final point: modern coal mining is not just a simple question of digging out the coal. It’s more like a game of Tetris in reverse. Modern coal mines use all sorts of advanced techniques — computer imaging, complicated software, incredibly advanced drills — to get the maximum possible coal out. The Kosovar mines aren’t using any of that stuff. So not only are they very inefficient, but they’re actually wasting coal and damaging the mines.

Still: the coal is there, and one day someone will exploit it. But not soon.

When? I have no idea. So many variables!

But I’ll be amazed if it happens within five years, and surprised if it happens within ten.

[Update: one commenter pointed out that a new mine is scheduled to be dug near Obiliq, and is supposed to be in operation in 2012. Digging a whole new mine gets around some of the difficulties given above. However, no license has been granted, no contract has been signed, and not a single shovelful of dirt has been turned yet. So I would call the Obiliq plan speculative at this point, and I’ll still be amazed if it’s producing within five years.]

60 thoughts on “About that coal in Kosovo

  1. Michael,

    Once again, you seem to be very shy to mention any figures or to provide any (neutral) source to back up your claims.

    Once again, you seem to avoid mentioning the Serbs from Croatia and Bosnia that “morphed” (using your phrase) into “Kosovar Serbs”.

    One day we hear that Serbian houses and apartments in Kosovo were burned, the other day we hear they are “comfortable Serbian houses and apartments”. Hence, either the Serbs from Kosovo are lying that there homes were burned or you Michael are lying. You can’t have it both ways.

    For your information, NATO troops, UNMIK police and the Kosovar Police Service guard the border linking Albania and Kosovo (like all other Kosovo borders), so you cannot call it a “non-existent” border.

    You seem to be either misguided and misinformed individual or plainly lying.

    I love the desperate attempt to milk some sympathy for the Serbs (the Native Americans of Europe ha-ha-ha…) who probably have more war criminals amongst them than any other nation in the world. Michael, I know that you don’t like people to remind you of this, however nearly the entire Serb leadership of the 1990s has moved from Belgrade to the Hague Tribunal and you are trying to portray them as “Native Americans” of Europe. Please, stop making a complete and utter fool of yourself. What planet are you living on?

    Finally, for your information (since you seem to be VERY misinformed) IT IS ILLEGAL to move into someone else’s property in Kosovo. For more details please check the Kosovo Property Agency: http://www.kpaonline.org/

    Let me know if you want more…

    Fidel Pardussi

  2. Ai yi yi.

    Okay, first, there’s almost no movement of Albanians from Albania to Kosovo today. That’s because Kosovo still has a lot of economic problems and very high unemployment. If you’re an Albanian in northern Albania, it’s much simpler and easy to go to Shkoder, Tirana, or abroad.

    In fact, the opposite is now true. As Albania’s economy perks up — it’s currently growing by about 6% per year — a few Kosovars are drifting over the mountains and looking for work in Tirana. Only a few, but the key point is, the flow is going west not east.

    “Michael” seems to be buying into the Serb nationalist view of Albanians. That is, Albanians are a faceless, formless mass of impoverished criminals who are incapable of building anything for themselves and can only live by stealing. The “Albanians coming into Kosovo from outside” thing is hardwired into this view — it’s impossible that Albanians could have a legitimate claim on Kosovo, so they must be illegal immigrants. And, of course, all they know how to do is burn and steal.

    It’s a deeply racist viewpoint, and also one with a fair amount of psychological projection. By condemning the Albanians as inferior — subhuman, really — the Serbs are absolved of their own bad behavior.

    On the other hand. Fidel, your claim that “it is ILLEGAL to move into someone else’s property in Kosovo” is technically correct but, as a practical matter, total nonsense. Kosovo is full of former Serb property that is now being illegally occupied by Albanians. This is so common, especially in Prishtina, that you would have to be blind to ignore it.

    Now, in some cases the Albanians can claim that the property was originally Albanian. The most obvious example of this is probably the former quadrangle of the University of Prishtina. The quad was almost the only piece of green space in the city center. After the Serbs took over the university in the 1990s, the Serb leadership donated the quad to the Serbian Orthodox Church. Which proceeded to build a huge, ugly church right in the middle of it. (The church, never quite completed, still stands there today — it’s an empty, trashed, grafitti-covered hulk.) So there are some legitimate disputes.

    But most of the former Serb properties are /not/ disputed — they’re houses, offices and apartments that were unquestionably the property of Serbs, and are now being occupied and used by Albanians. Often powerful and well-connected Albanians.

    In the months after the bombing stopped, KLA guys were particularly notorious for simply walking in with a gun and taking over. This had almost universal popular support… and why not? After all, hundreds of thousands of Kosovars had just been driven out of their homes by Serbs with guns. So pretty much everybody was happy to watch the Serbs being pushed out in turn.

    In some cases, the takeover has later been legitimized. I know a lawyer in Prishtina who makes a living getting title to Serb properties. He has a colleague in Serbia who contacts the original Serb owners and offers them some money to sell their title. Usually it’s much less than the real value of the property, but on the other hand a little money today is better than “maybe you’ll be recompensed someday, but don’t hold your breath”.

    But even if we index out the disputed properties and the ones where a deal has been made, there are still thousands of Serb properties being illegally occupied. That’s a fact, and there’s no point in pretending otherwise.

    Doug M.

  3. Just so that I can’t be accused of going completely off topic, my point is that no foreign corporations will not invest any significant money into Kosovo’s coal mines or any other business because of uncertainty over ownership. Fidel would appear to have no doubt about who owns what, I have a different view. International law supports the Serbian government on this issue. When there is doubt, corporations will not invest.

    Indeed, property rights across all former communist states are being revisited with a view to returning property “confiscated” by communist regimes after WW2. In Kosovo and Metohija this is particularly interesting. Metohija means “land owned by monasteries” and much of Metohija belonged to the Serbian Orthodox Church until Communists confiscated most of their land. Will the Kosovarians return land stolen from the Serbian Church? Fidel should understand that on issues such as this Albanians will be judged.

  4. Dear Doug,

    You are absolutely, absolutely correct on everything you wrote in the last post. However, please, please do not attribute to me comments that I have not made myself.

    All I said is that in Kosovo it is illegal to move into someone else’s property. Nowhere did I say that it does not happen, but the point is that it is illegal and eventually you will be forced to move out or purchase the property (if the owner of the property agrees to sell the property to you).

    Yes, after the war in 1999 Kosovar Albanians have moved into Serbian houses, particularly in the capital city, (partly because Albanian homes were burned by the Serb troops during the war), however it was illegal then, it is illegal now and it will always be illegal to move into someone else’s house in Kosovo. Today, the vast majority of this people have either been forced out or they had to purchase the houses.

    The concept has some similarities with squatting (albeit often it involves no violence).

    The point I wanted to make earlier is that property rights do exist in Kosovo and that it is illegal to move into someone else’s property without their consent. The courts are dealing with these issues and anyone who has illegally moved into someone else’s property will be forced out.

    Peace!

  5. What the hell are you talking abou guys.You can not dudge about Albanians. I am an Albanian living in Prishtina and for the people that acuse us of steeling, burning or whatever I must reming you that there’s been 12 thousand peopel killed (by serbs crimininal police always by the support of local serbs),there are about 2 thousand people we dont know yet where the criminilas put ther bodies.About the serbs and their state Serbia its is clear that even now a day there are criminals in the goverment of Serbia and the fact that the criminals are voted by the majority of population is means…(name it yousell).

    I must say that Kosova will be indipendent soon and you ARE FREE TO COME TO INVEST HERE.
    WE WILL WELCOME.

  6. Ok, how about burning the coal and selling power? it may not be 100% of it, but a large part and that could be more efficent than transporting coal. Also, cheap power + favorable taxes could mean that industry builds around the power plants.

    Those idiots who spew hate don’t deserve a response.

  7. I have to comment. As one from “Northern Albania” I laughed when I read the “Albanians are moving in Kosova.” Hahaha. There is nothing in Kosova for Albanians. People might go to visit it, but they are no opportunities for people there right now.

    And one cannot go into another country and occupy a house. How do you know it is Serbian (if that is your intention) ? You do not know and a mistake in this case can be fatal. If–and I suppose they are–Serb owned houses are being occupied it is by Kosovar Albanians since they know the area. Is it right? Nope. I suppose it will be solved soon. Not sure how the Albanians will be able to collect for their houses burned by the Serbs though. Any suggestions?

    The Northern Albania is empty because young men are in USA (Malesia e Madhe,) Italy, Germany, GB etc,, not in Kosova. Also many moved further down in Albania, especially near the cities.

    The church owns the land: OK, how they got it and did the person who gave it to them have rights to the land?

  8. Hello, peace and study.

    I hope there is a modo to moderate the talks.

    I think that people have to stay calm and not to burn their mind.

    Olli Rehn just said in Belgrade on the 23 or 24 of July 2009 that Serbia will not enter EU if the restitution law is not voted.

    Who are the owners of the coal mines before WW2 and communist regime gave to SFRY ?

    Are they the true owners, what is the heir company of these days company which was extracting at that time ?

    Does the Kosovar Gov tried to take contact with this company or physical heirs ?

    I think it’s the begining of the begining because if Kosova wants to enter EU they have to do the same Olli Rehn said for Serbia…?

  9. JU LUTEM ME JEPNI NJE MENYR PER KONTAKTIMIN PER TE MARR QYMYR NGA KOSOVA KAM NJE KOMPANI QE DON TE MARRE QYMYR NGA KOSOVA MBI 80 MILIONA TONA NE VJET DAKORDOHET TE NDERTOI HEKURUDH NGA KOSOVA PER DURRES ME TREGONI VIA EMAIL:AVHCON@AOL.COM

  10. kosovo has the fifth largest lignite coal in the world not in europe again a very misleading article