Many countries have contributed to
Afghanistan's reconstruction. But it's only been
since 2007 that China has attracted attention with
its investments.
In November 2007, the
Metallurgical Corporation of China (MCC) won the
tender to invest over US$2.9 billion to develop
the Aynak copper mine, which is the second-largest
copper deposit in the world. This was not only the
second-largest investment in Afghanistan in recent
years - equivalent to one-third of all foreign aid
spent in the country between 2002 and 2007 - but
it also raised China to the top tier of investors.
In a more recent deal in
October 2011, the PetroChina
Company Ltd (CPNC) plans to invest about $300
million in three oil fields in northern
Afghanistan.
As China becomes more and
more concerned about the impact of the power
vacuum created by the imminent US withdrawal, it
has begun to accompany its economic investments
with contributions on the security side as well.
Although China has sent its Snow Leopard
Special Operation forces to protect its most
important assets (such as the Chinese embassy) and
personnel in this unstable region, the number of
guards is very limited. Many more Chinese workers
and businesses rely on the International Security
Assistance Force and US security contractors for
protection.
As a consequence, the United
States and China, which have developed a
competitive relationship around resource
extraction around the world, might find common
ground for cooperation in Afghanistan.
Whether China becomes more active in
Afghanistan to protect its investments security
depends on the scale of Chinese involvement and
the priority of Afghanistan in China's regional
strategy. At a time of rising tensions between
Beijing and Washington, cooperation around
Afghanistan could be a win-win for all concerned.
Jewel in China's crown? After
the Soviet Union's collapse in 1991, China
increased its foreign engagement with its western
neighbors in Central Asia and South Asia. It
established and operated regional political,
military, and economic cooperation mechanisms with
Russia and the five Central Asia countries
beginning in 1995. It also re-balanced its
position between India and Pakistan, deepening its
relations with India, the rising regional great
power. After adopting a "Western Development"
policy in 2000, Beijing has been constructing an
energy transit network and consolidating defense
in its western provinces, especially in Xinjiang
and Tibet.
Besides its unique strategic
position, Afghanistan's less known feature, its
abundant mineral resources, is very attractive to
resource-hungry China. China has become the
second-largest net oil importer in the world since
2009. According to an International Energy Agency
scenario, Chinese oil imports are estimated to
grow from 4.3 million barrels a day in 2009 to
12.8 million barrels a day in 2035, rising from
53% to 84% of its total demand. It is also
dependent on foreign imports of copper and iron
for 80% and 53.6% of its needs respectively, and
its consumption will grow by 5-10% per year.
In 1960s and 1970s, Soviet geological
exploration revealed numerous mineral reserves in
Afghanistan. After 2001, the US Geological Survey
updated these findings and estimated that the
untapped mineral deposits are worth $1 trillion.
Three kinds of resources are most valuable
to China. Deposits in the Aynak region contain
about 240 million tonnes of copper, one of the
largest copper reserves in the world.
The
largest iron deposit in the country, meanwhile, is
the Hajigak deposit. The region contains 1.8
billion tonnes of iron ore, an enormous amount of
which is world-class quality. Finally, most crude
oil occurs in the Afghan-Tajik Basin, and most of
the natural gas is located in the Amu Darya Basin.
The estimated mean volumes of petroleum were 1,596
million barrels of crude oil, 444 billion cubic
meters of natural gas, and 562 million barrels of
natural gas liquid. On top of these traditional
resources, US surveyors recently discovered a rare
earth element reserve with at least 1 million
metric tons of lanthanum, cerium, and neodymium in
the Khanneshin area of Helmand province.
The drivers of China's
involvement After the US invasion in 2001,
Beijing reestablished official diplomatic contact
with the Transitional Authority and provided over
$200 million in foreign assistance. Chinese state
companies have conducted seven infrastructure
construction projects, including important
highways in Kondoz (2003-2005) and in Jalalabad
(2003-2006). A province-owned enterprise helped to
rebuild the water conservancy in Parvan in 2004.
The twin telecom giants, Huawei and ZETA, also won
some contracts of reconstructing and maintenance
of the telecom systems in Kabul and Kandahar.
These early contracts were at a relatively
low scale, and Chinese firms followed their
government's foreign aid policy rather than their
own economic interests. In bilateral trade, the
total amount has increased 40-fold since 1999 to
$716 million in 2011, but it is a one-sided
exchange. Chinese exports of manufactured goods
flood the Afghan local market, but China imports
only about $12 million (about 1% of the total
amount).
China so far has devoted most its
energy and money to the Aynak Copper mine in Logar
Province, 30 miles south of Kabul. According to
the contract, MCC will build a complete production
line of exploitation, concentration, and smelting,
as well as a 400-megawatt power plant, vital
transport infrastructure (probably the railway
linking Afghanistan to Tajikistan), and social
amenities (schools, clinics, and mosques) for the
local communities. It is scheduled to begin
operations around 2012 and 2013.
The US
Institute of Peace (USIP) estimates the annual 19%
royalties can bring an average $300 million annual
income to the Afghan government and shift the
focus of the Afghan economy away from the opium
trade. It will create 5,000 direct and 30,000
indirect jobs. Both Kabul and the international
community see this long-term investment as vital
to Afghan reconstruction and development.
Another important energy contract, CPNC's
$300 million oil exploitation project, concerns
northern Afghanistan. The three oil fields in
Zamarudsay, Bazarkhami, and Kashkari, which
contain a total of 88 million barrels, are
adjacent to Turkmenistan and Uzbekistan. Little is
known about the terms of the contract, but the
investment will include a production facility and
a transport network (pipeline). Considering the
low population in the region, there will be less
local development of infrastructure investment
than in Aynak.
These two investments
comprise over 90% of Chinese FDI in Afghanistan.
But this Chinese FDI amounts to little over 10% of
the total FDI flowing into Afghanistan.
Emerging security
concerns Because of the Taliban's
resurgence, it now operates in 80% of the country,
including the provinces in the west and north. The
number of violent incidents began to increase in
2009 and reached a high in 2010. Most attacks
targeted the local population and the security
forces.
Personnel connected to investment,
business, and infrastructure projects have
experienced a low incidence of violence. Nor is it
evident that the Taliban and other Islamic
extremists have specifically targeted Chinese. In
2004, in the only reported attack in Afghanistan
that specifically targeted Chinese, militants
killed 11 Chinese employees working on a Jalalabad
highway project. The Aynak copper project is
located in Logar province, a base for the
Hizb-i-Islami Gulbuddin and the Haqqani Network.
This makes the investment in Aynak more insecure
compared with the oil project in Faryab and Sar-E
Pol province of the northern Afghanistan.
Complicated tribal politics and rivalries
also add uncertainty to China's investment
strategy. Although the central government in Kabul
has welcomed Chinese investors and guaranteed
their security, the Chinese still face complex
tribal politics in local areas. Moreover, the
Islamic Movement of Uzbekistan (IMU), which has a
direct relationship with the East Turkestan
Islamic Movement in China's Xinjiang Uighur
Autonomous Region, has set up camps in the two
provinces to recruit and train Afghans. The IMU
might instigate anti-Chinese sentiment and attack
Chinese investments.
The primary security
issue for Chinese business representatives is
transportation of the extracted resources out of
landlocked Afghanistan. At present, there are two
major transportation routes between China and
Afghanistan: land transport from Kabul to Karachi,
then by ship to China, or land transport from
Kabul to Bandas Abbas, then by ship to China. For
the Aynak cooper mine, both the southern
(Kabul-Karachi) and the western (Kabul-Bandas
Abbas) routes are practicable.
However,
both routes are expensive and time-consuming. The
southern route also crosses through the unstable
areas in eastern Afghanistan and northern
Pakistan, where insurgent attacks are frequent.
MCC plans to solve this transportation problem
with a rail link between Afghanistan and
Tajikistan. For the oil fields in the north,
pipeline transit will be a much safer method than
road/railway transportation. China can plug the
new pipeline into the existing grand pipeline
system in Central Asia, but this might involve
further negotiation with neighboring Turkmenistan.
China's Central Asia
strategy China has been actively
participating in almost every issue in Central
Asia since the 1990s. On one hand, this reflects
China's rising economic and political influence
and military strength over the past two decades.
On the other, China can't avoid engaging in the
region given Central Asia's strategic centrality
in geopolitics.
Consider, for instance,
the twin issues of separatism and terrorism in
China's troubled Xinjiang province. The tensions
in the Xinjiang Uighur Autonomous Region are an
important factor behind Beijing's eagerness to tie
itself with Central Asia. In the 19th and 20th
centuries, Uighurs and other Turkic ethnic groups
made several failed attempts to establish an
independent East Turkestan state. In addition to
suppressing these rebels, China has also adopted
special political, economic, social, and cultural
policies to suppress the separatist sentiment,
integrate local populations, and enhance their
recognition within the PRC.
After the
Central Asian states gained their independence in
1991, separatists gained popular sympathy in the
Central Asian states and in Turkey, reinforcing
separatist sentiment. Poor governance in Central
Asia not only enabled the smuggling of weapons and
personnel across borders but also encouraged the
emergence of Islamic extremism in the region, such
as the IMU.
What's more, the Central Asian
Islamic extremist groups started to establish
links with the Taliban and al-Qaeda in northern
Afghanistan and Tajikistan. Some Uighur rebels and
members of ETIM had received training both in
al-Qaeda and IMU camps.
In response, China
used trade and investment as tools to pressure
Central Asian countries to end their support of
the Xinjiang separatists. It further initiated
multilateral military cooperation against the
"Three Evil Forces" (terrorism, separatism, and
extremism) in the region within the Shanghai
Cooperation Organization (SCO). China included
Afghanistan as a guest observer in the SCO and
expressed its concerns about anti-terrorism
efforts in Afghanistan. In this sense, Afghanistan
is a geographically peripheral but strategically
integral component of Chinese anti-separatism and
anti-terrorism strategy in Central Asia.
The second component of China's strategy
in the broader Central Asian region involves
energy. The increased international dependence on
oil and gas, as well as China's growing thirst,
has sharpened competition over these fuels. At the
same time, China has been diversifying its sources
of energy in order to reduce its dependency on oil
from Middle East. Given the fragility of the
maritime supply line via the Indian Ocean and the
Strait of Malacca in wartime, these factors make
it more important to control Central Asia, as it
is both a producer and a transit region.
Therefore, China has pursued the
exploitation rights of several oil and gas fields
in Central Asia through bids and purchases,
including two agreements with Kazakhstan for $5
billion in oil-field development and $9 billion in
pipeline construction. Both countries recently
signed an accord to expand a pipeline network by
more than 80% in September 2011.
Moreover,
China's state-owned enterprises have also
committed $100-$120 billion to projects in Iran
(mostly in its oil fields), despite the long-term
sanctions by the United States and Europe.
Although facing political and economic
difficulties, the Sino-Iranian network of oil
pipelines would be another most important transit
line on the continent. As such, Chinese investment
in Afghanistan oil fields is part of its overall
resource diversification in the region.
An
equally important geopolitical factor is how
China's further involvement in Afghanistan will
affect stability in South Asia. The complicated
interactions among Pakistan, India, and
Afghanistan have produced a comparably complex
policy in Beijing. China worries that Islamic
extremists in Afghanistan and Pakistan influence
not only Uighur separatism and security in
Xinjiang, but also the effective governance of
Pakistan, which is important for the further
development of Sino-Indian relations.
On
the other hand, China realizes it cannot ignore
Pakistan's sense of insecurity that has been
heightened by more Indian involvement in
Afghanistan. It also sees India as both a strong
competitor for Afghan natural resources and an
encircling external power (through Afghanistan).
Beijing has thus used its engagement with
Islamabad to balance New Delhi's influence.
China's higher profile at the Istanbul
International Conference on Afghanistan in
November reflects this approach.
Superpower cooperation As the
current great power in the region, the United
States is the major variable influencing China's
policy making. Traditionally. the United States
has had few critical interests in Central Asia and
has seldom made the region a high priority, except
when the Soviet Union invaded Afghanistan. During
the 1990s, the only US strategic interest in the
region was the non-proliferation of nuclear
weapons.
Only after 9/11 did the United
States turn its attention back to the region. Now
with the announcement of its new Asia strategy in
October, the White House is shifting its focus to
the Asia-Pacific region. At the same time,
Washington is not eager to see China expand its
influence in Afghanistan and its environs.
From a strategic perspective, then, China
does not want to attract too much attention with
its grand strategy in Central Asia. The United
States and India have been very concerned about
the westward expansion of China's influence into
the Indian Ocean since 2006. They claim that China
has a vision of a "string of pearls", trying to
gain access to the Indian Ocean through strategic
investments and military base constructions in
Hainan Island, Cambodia, Myanmar, Sri Lanka,the
Maldives, and the Gwadar port in Pakistan. If
China further increases its involvement, such as
sending military personnel to protect its
investments in Afghanistan or to help train Afghan
security force, Washington will take notice.
Chinese economic interest in Afghanistan
may not be as important as its interests in other
countries. Its investment in Afghanistan
represents only a tiny proportion of its total
overseas investment stocks - $168.6 million out of
$3.1 trillion - which is even lower than its
investments in Sudan and other African countries.
Moreover, China has been diversifying its
acquisition of resources by making deals with many
countries. It has also used mergers and
acquisitions to secure stakes in mining, oil, and
gas sectors.
Considering the importance of
its investment security and Afghanistan's role in
geopolitics, China will probably increase its
involvement in Afghan issues alongside the gradual
withdrawal of US and North Atlantic Treaty
Organization forces. However, traditional
geopolitical, strategic, and economic factors
greatly constrain China's ability to become more
active in Afghanistan.
Many articles and
statements in the Chinese press support Chinese
cooperation with the United States on Afghanistan
reconstruction. For instance, as far back as 2004,
Men Honghua of the International Strategic
Institute of the Central Party School discussed
potential Sino-US cooperation in failed states,
including Afghanistan. According to a WikiLeaks
cable, China has "expressed interest in
cooperating with the US for delivery of non-lethal
aid to Afghanistan" since 2006. But the Chinese
government formally rebuffed the possibility of
military cooperation in Afghanistan - namely the
opening of a supply route for US forces - in 2009.
Particularly as US involvement in the
Afghanistan War decreases, US-China cooperation
can still go forward in the economic and cultural
realms. China sends its workers to dangerous areas
where US personnel are reluctant to go for
construction and other infrastructure projects. In
a region of great conflict, the United States and
China might eventually find greater common ground.
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