Billionaire under sanctions could get $300 million in controversial US-Congo deal

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Dan Gertler, a billionaire under sanctions, is set to receive hundreds of millions of dollars under a controversial US plan to lift restrictions on the Israeli tycoon if he sells his remaining mining interests in the Democratic Republic of Congo.

Gertler was hit with sanctions by the US Treasury in 2017 over allegations of corruption in Congo, but he retains lucrative royalties from three mining projects there.

Under the U.S. proposal, the Treasury would grant Gertler special licenses to resell the three royalty streams to the Congolese government and eventually grant him a general license to regain access to the U.S. financial system.

The total amount Gertler would receive has not yet been decided, but U.S. officials expect it to be around $300 million, according to two people who asked to remain anonymous discussing the financial terms of the agreement, which have not been previously announced.

U.S. officials behind the proposal say Gertler's withdrawal from Congo would create more opportunities for U.S.-friendly companies to access metals such as copper and cobalt. Both minerals are essential for building clean energy infrastructure.

The Biden administration has placed access to these essential minerals at the heart of its Central Africa policy and has sought to deepen ties with Congo since the election of President Flix Tshisekedi in a rigged vote in 2018.

Congo is the world's largest source of cobalt and Africa's largest producer of copper, but the country's mining sector is dominated by Chinese companies.

The Gertler proposal drew criticism from civil society groups and at least four members of the US Congress, who warned last month that lifting Treasury restrictions in a deal that would further enrich the billionaire would damage the credibility of the American sanctions regime.

We fear that if sanctions are lifted, Mr. Gertler will profit massively from his ill-gotten assets to the detriment of the Congolese people, members of Congress wrote in a letter to Treasury Secretary Janet Yellen, reported by the New York Times .

U.S. officials stress that Gertler would remain on the sanctions list and that the blanket license restoring him access to the U.S. financial system could be revoked at any time if he fails to comply with any of the terms of the deal.

Gertler arrived in Congo at the age of 23 trading in diamonds in 1997 and, through his close friendship with former President Joseph Kabila, gained enormous power and influence in the country's mining sector.

Gertler says he took a risk by investing in Congo early on, while the country was still in the middle of a civil war. Ultimately, he gained access to some of the country's most lucrative mining assets and partnerships with international companies, including Swiss commodities company Glencore and Kazakh mining group ENRC.

When the United States imposed sanctions on Gertler in 2017, the Treasury said corrupt dealings involving his companies had cost the Congolese state more than $1.36 billion in revenue between 2010 and 2012 alone. Gertler has repeatedly denied all corruption allegations.

Shortly before being placed under sanctions, Gertler sold his stakes in two Glencore mining projects, Kamoto and Mutanda, but retained royalties representing approximately 2.5 percent of sales from each project. It also retains a similar royalty stream on a third copper-cobalt project, known as Metalkol, controlled by Eurasian Resources Group, the successor company to ENRC.

The present value of royalty streams depends on assumptions regarding the life of each mine, the level of production, metal prices and how to discount future cash flows.

Gertler will likely argue that the combined value of the royalty streams is more than $300 million. In a 2018 lawsuit against Glencore, the Gertler Companies said Kamoto's future royalties were worth $2.29 billion and Mutanda's were worth $695 million.

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U.S. officials estimate that last year Gertler earned about $120 million from royalties he received in euros to avoid U.S. sanctions.

The proposed agreement was shared by the Congolese government with Gertlers' representatives, who have not yet responded. However, U.S. officials are increasingly confident that this will happen, despite some opposition within the administration.

Gertler, the Treasury, the State Department, the Congolese government, Glencore and ERG all declined to comment.

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