mineral discovery solution to afghanistan's problems?
14 juni 2010
With Jaakko Koroshy
Today the Pentagon announced that the US Geological Survey has discovered large amounts of mineral riches in Afghanistan. These include precious metals such as gold, base metals such as copper and iron ore, as well as rare metals such as niobium and lithium. The latter are particularly interesting as they are used in green technology applications -such as hybrid cars. So far, the largest known quantities of extractable rare earth metals are found in China. However, China restricts their export though quota, potentially limiting our capacity to develop green technologies and to transition to a green economy.
Despite this important discovery, the chances that Afghanistan develops a substantial mining industry in the short to medium future are slim. Successful mining requires huge capital investments and large of cheap energy and water in order to process ores. It also requires good infrastructure, including roads connecting the mining site to deep-sea ports from where the processed ores can be transported for further refining and manufacturing of half products. And most importantly, developing a substantial mining industry requires a stable regulatory environment and a reliable “social license” to operate from local communities so as to have the requisite security.
Investors must be able to rely on a mine to be in production for several decades in order for an investment to be profitable.
Investors must be able to rely on a mine to be in production for several decades in order for an investment to be profitable.
Despite more than 8 years of international reconstruction and stabilisation efforts in Afghanistan, the country has none of the above. Large-scale investments by major multinational mining companies without credible security guarantees are therefore difficult. Investments by less risk-averse state-led mining companies, mainly from China, are more realistic. China has already shown willingness to commit to infrastructure development and cutting deals with unpalatable regimes, not only in Afghanistan, but also in many African countries under roughly comparable conditions.
A systematic investment by Chinese state-led companies would make China a long-term stakeholder in the future of Afghanistan. China is already investing in the largest copper mine in Afghanistan. The state-owned China Metallurgical Group will invest nearly $3bn in the mine at Aynak, south of Kabul. reportedly, this will be the largest foreign investment in Afghan history and will employ 10,000 people. Chinese interests might coalesce with coalition interests, but China would be more likely to position itself as a neutral party and might well cooperate with local Taliban or other power brokers to secure local security guarantees. India might also try to position itself in the race for Afghanistan's mineral riches, especially if it fears the emergence of a Taliban-Islamabad-Beijing axis. India’s interests might be more aligned with Western interests.
Transport routes will be vital to any exploitation of Afghanistan's mineral resources. India is the largest regional donor in the country and has invested heavily in Afghanistan’s road infrastructure. In January 2009, India completed construction of the Zaranj-Delaram highway in southwest Afghanistan near the Iranian border. India also invests in the Iranian port of Chabahar. The Indian-built route to the Iranian port at Chabahar might be an interesting alternative route for mineral transportation. This would bring Iran into the equation but bypass the difficult and dangerous Khyber-pass and the road through Pakistani tribal areas to the Chinese constructed
port of Gwadar.
port of Gwadar.
The discovery of mineral riches could change the dynamic of the war and add a new layer of complexity to resolving the Afghanistan conflict. First, the Taliban could be empowered by this development, if they are able to position themselves as indispensable security partner in the Afghan mining business. This would strengthen their position in any negotiations as part of the reconciliation initiative currently pursued by the government in Kabul. Secondly, the discovery may exacerbate regional tensions as India and China scramble for access to Afghanistan’s resources and transport routes through Iran and Pakistan are key to providing access to the sea. Pakistan sees India’s growing influence in the region as a threat. India hopes its investment in the Iranian port and the Afghan road network will allow it to gain trading access to Afghanistan without having to go through Pakistan. Pakistan currently
blocks any Indian goods reaching Afghanistan through Pakistan. Third, the discovery may create expectations on the part of the Afghan population that things may finally get better. And the unavoidable disillusionment if riches fail to materialize or to have a positive effect on their lives.
blocks any Indian goods reaching Afghanistan through Pakistan. Third, the discovery may create expectations on the part of the Afghan population that things may finally get better. And the unavoidable disillusionment if riches fail to materialize or to have a positive effect on their lives.
The immediate prospects of a prosperous Afghan mining state are slim. The attempt to explain the discovery by the Pentagon as good news might therefore be more directed at the home-front than anything else, trying to convince a war-weary US public that there is something worth fighting for. Or at least something worth not loosing.
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