Kabul starts race for Afghan resources
By Robert M Cutler
MONTREAL - Afghanistan last week began a tender process for exploration and
development of precious metal and mineral deposits, according to a press
release from the country's Ministry of Mines. The tenders will close in March,
with licenses for exploration and possible development to be awarded in July.
Concerned are the Badakshan project, targeting gold deposits in Badakshan
province, in the northeast; the Zarkashan project, focusing on copper and gold
in Ghazni province, in the central southeast; and Balkhab and Shaida projects,
looking exclusively at copper, the former in the north-central Sar-I-Paul and
Balkh provinces, and the latter in western Herat province.
According to Minister of Mines Wahidullah Shahrai, the licensing
program is linked to a privatization program complementing the fiscal and
regulatory regime already in place. He noted that the government was in
meetings with Anglo American Plc in London. The announcement comes several
months after the autumn deadline projected in the middle of last year, after a US
Department of Defense task force on business development (which had earlier
worked in Iraq) assisted in drawing international accounting firms in the
process, to prepare the tender.
The announcement also follows on large publicity in the US press in the middle
of last year, concerning compilation by the US Geological Survey of a
comprehensive database of the country's mineral potential, following discovery
of old charts and data in Kabul in the middle of the last decade in the course
of planning for a broader economic reconstruction of the country.
The new compilation by the US Geological Survey (USGS) integrates historical
mapping by German and Soviet surveys together with geophysical data and
drilling and sampling data into a geographic information system (GIS) database.
Interestingly, other press reports mention the British Geological Survey as
contributing to the reconstruction of the records of the Afghan Geological
Survey, which suffered damage from the war.
At the time of last year's publicity, the figure of US$1 trillion was
prominently mentioned in the press as an estimate of Afghanistan's mineral
wealth, and unofficial estimates range up to $3 trillion. By way of contrast,
the country's gross domestic product for 2010 is estimated at slightly of $27
However, also last year USGS geologist Jack Medlin remarked, as quoted by the
New York Times, "With virtually no mining industry or infrastructure in place
today, it will take decades for Afghanistan to exploit its mineral wealth
fully." That wealth extends to promising deposits of such industrial metals,
besides copper, as cobalt, iron, lithium, niobium, sulfur, zinc and also some
rare earth elements, as well as precious and semi-precious stones.
The country has a national mining law that the World Bank helped to draft, but
it is not clear how thorough-going its application might be, in the face of
potential conflicts between the political center in Kabul on the one had and,
on the other, tribal and provincial networks of influence in the regions. There
is also the possibility that the finds could give Taliban forces an additional
motive for fighting to retake control of the whole country.
So far, India and China have been the most prominent investors in Afghanistan's
mineral resources. According to Bloomberg News, a consortium of seven Indian
steel and mining companies announced earlier this month that they would build a
steel mill and power plant in conjunction with development of iron-ore mines in
the Hajigak region, about 215 kilometers west of Kabul in Bamiyan province.
In 2007, China won rights for the $2.9 billion development of a copper mine at
Aynak, Logan province, in the south, leading to the replacement of
Afghanistan's previous minister of mines following accusations of bribery. The
development of the 24,200-hectare site (over 15 square miles) will destroy an
area filled with ruins of fifth-century Buddhist monasteries.
Aynak, believed to contain the second-largest copper reserves in the world,
will be Afghanistan's largest infrastructure project. China has a 30-year lease
and is expected to spend over $3 billion developing the project, where the
deposits are estimated to be worth up to $88 billion.
Aynak's development by China has already led to construction of a coal-fired
electrical plant because there were no power sources available, as well as the
country's first freight railway. The contract includes obligations by China to
contribute significantly to the social infrastructure, building mosques,
hospitals, markets and bazaars.
It will take years to develop Afghanistan's mineral wealth, but the potential
is significant. Such projects as Aynak and the others for which tenders were
announced this month will not bring about security on their own, but if they
are successful, then they can engender powerful demonstration effects, showing
that the gateway is open.
There is also concern in the Western non-governmental organization community
that deleterious environmental effects could have the contrary result of
actually creating more instability.
Dr Robert M Cutler (http://www.robertcutler.org),
educated at the Massachusetts Institute of Technology and The University of
Michigan, has researched and taught at universities in the United States,
Canada, France, Switzerland, and Russia. Now senior research fellow in the
Institute of European, Russian and Eurasian Studies, Carleton University,
Canada, he also consults privately in a variety of fields.
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