China's Afghan oil deal on the
skids By M K Bhadrakumar
Within a week of the Afghan government's
resolve to take its relationship with China to a
"new strategic level", Sino-Afghan ties have run
into bad weather. China finds itself in the middle
of a cesspool of first-class political intrigue,
sleaze and power plays that could sully its
good-neighborly image among the people of northern
Afghanistan.
The facts are as follows.
Toward the end of last year, Afghan President
Hamid Karzai took the fateful decision to award
the first contract for exploring, developing and
extracting oil in the Amu Darya basin. In a
crisply worded statement, Karzai's office put his
personal stamp on the decision: "The Afghan
cabinet has ordered Mines Minister Wahidullah
Shahrani to sign an oil exploration contract for
Amu Darya with China National Petroleum
Corporation (CNPC)."
The deal generated a
lot of interest in world capitals, as it
constituted a major win
for China, giving it access to not only the Amu
Darya basin, which is estimated to hold around 87
million barrels of oil, but also gave it an
advantage in chasing bigger Afghan reserves.
The Afghan-Tajik basin, a geological zone
in the northeast, is estimated to hold 1.9 billion
barrels of oil and natural gas liquids with gas
deposits equivalent to 1.5 billion barrels of oil,
according to US Geological Survey data.
Most important, the deal testified to the
astounding success of Chinese diplomacy in Kabul.
China already figures as Afghanistan's biggest
foreign investor. In 2007, it won a multi-billion
deal to mine Afghanistan's biggest copper deposit
at Aynak and also build a coal mine, power plant,
smelter and a railroad.
Three blocks of
the Amu Darya basin form part of a geological zone
that extends to Turkmenistan and Uzbekistan, where
Chinese oil and gas companies are already
well-established and China has built a pipeline
grid to evacuate the oil and gas to Xinjiang.
Again, Aynak and the Amu Darya basin and
the Afghan-Tajik basin all lie in proximity to
China's western frontier and Beijing is eager to
boost incomes in Xinjiang and accelerate the
development of its border province. To be sure,
the Amu Darya oil deal is of strategic importance
to China.
Unsurprisingly, the CNPC chose
the Watan Group as its local partner. Watan is
owned by the Popal brothers who are cousins of
Karzai. According to a New York Times report,
Watan's largest shareholder could be Qayum Karzai,
brother of President Karzai, who denies it. (The
New York Times recently reported that Qayum Karzai
was possibly mulling a run for the presidency when
his brother steps down.)
Evidently, China
kept a low profile and quietly worked its way
through the Byzantine corridors of power in Kabul
to reach the most powerful family in Afghanistan.
Indeed, Watan has proven credentials. It serves as
war contractors for the United States by providing
logistics, security services, etc. It protects
convoys of trucks carrying supplies for US forces
between Kabul and Kandahar. (There are allegations
that the company paid the Taliban to the tune of
10% of their $360-million contract so that the
insurgents would not attack the US convoys.)
Now, just when everything seemed to be
going brilliantly for the CNPC, trouble has
appeared out of nowhere. Chinese engineers from
CNPC are being intimidated from working on the oil
project in the northern province of Sar-e Pul by
local strongmen demanding hefty bribes and
kickbacks.
Skating on thin ice
It may seem a storm in a tea cup for
Watan, but then, Sar-e Pul is also the fiefdom of
Rashid Dostum, the leader of the Junbish-e Mili
Party and a key figure in the erstwhile
anti-Taliban Northern Alliance. To give a bit of a
figurative touch, no leaf turns on a tree in Sar-e
Pul and no bird takes off in that mountainous
province of rugged territory without Dostum
knowing and approving. And Sar-e Pul also belongs
to Afghanistan's "Wild West", teeming with highway
bandits and thieves, corrupt militiamen and police
where people die in mysterious road accidents.
In retrospect, CNPC should have known that
Kabul was far away from the Amu Darya region.
Maybe it trusted Watan's ingenuity; maybe, Watan
wanted to keep Dostum at arm's length knowing his
rough methods and his persistence. Or, China
didn't want to consort with Dostum, who is at
present opposed to Karzai - although he played a
crucial role in ensuring Karzai's victory in the
2009 presidential election.
It seems China
raised the CNPC's woes with Karzai during his
recent visit to Beijing to attend the summit
meeting of the Shanghai Cooperation Organization
(which granted "observer" status to Afghanistan).
Following talks between Chinese President Hu
Jintao and Karzai, a declaration was issued in
Beijing on Friday in which China pledged "sincere
and selfless help to the Afghanistan side". Hu
told Karzai at their meeting at the Great Hall of
the People in Beijing, "At present, Afghanistan
has entered into a critical transition period.
China is a trustworthy neighbor and friend of
Afghanistan."
Hu's message was direct:
China is prepared to go the extra mile to shore up
ties with Afghanistan and enter into wide-ranging
cooperation in preparation for the departure of
the bulk of the US troops at the end of 2014.
Significantly, Karzai pledged at the meeting with
Hu that his government will take "tangible
measures" to protect the Chinese citizens and
institutions in Afghanistan.
At any rate,
immediately after his return to Kabul from Beijing
on Friday, Karzai ticked off Dostum. On Sunday,
the National Security Council in Kabul (which
reports to Karzai) accused Dostum of "undermining
national interest" by intimidating Chinese
engineers working at the Sar-e Pul site. The NSC
has since directed the Attorney General's Office
in Kabul to investigate. A joint team from the
Afghan intelligence and the Attorney General's
office has been directed to book Dostum, if need
be.
But putting handcuffs on Dostum's
powerful wrists and dumping him in a dingy prison
cell is not so easy. China is skating on thin ice.
Karzai may end up offending Dostum, who commands a
huge following in the Amu Darya region where the
CNPC hopes to work for years if not decades.
Meanwhile, former vice president and
leading opposition figure, Ahmad Zia Massoud
(brother of slain Northern Alliance leader Ahmad
Shah Massoud), has come out in defense of Dostum
and the searchlight gets turned on the CNPC's oil
deal. Massoud scoffed at Karzai's moral right to
speak of "national interests". He told a press
conference in Kabul on Monday:
Those who looted $900 million from
Kabul are national traitors, those who built
private houses on the property of Ministry of
Defense in Kandahar are national traitors, and
those who misused the Ghori Cement plant and
took financial benefit from it are national
traitors.
The reference is to the
alleged role of Karzai's family members in the
scandal surrounding the Kabul Bank (which lost
about $900 million in insider deals, much of it
ending up in secret bank accounts in Dubai in the
United Arab Emirates).
Crab mentality
There could be a sense of deja vu, since
corruption and political sleaze are not exactly
the stuff of "breaking news" in present-day
Afghanistan. But some serious issues arise.
The line-up - Karzai versus Massoud and
Dostum - shows the acute political polarization in
Afghan politics. The opposition has got a fresh
issue to agitate and the CNPC deal itself may come
under public scrutiny.
At the root of the
current dispute is the local leadership's claim on
"revenue-sharing". This is somewhat similar to the
tussle in Iraq between the central government in
Baghdad and the local leadership in northern
Kurdistan province over the sharing of oil
revenue. Plainly put, Dostum wants his share of
any kickback from the CNPC that the people in
Kabul might have got, because the oil happens to
be in the territory under his control.
The
highly centralized Afghan polity is showing signs
of fatigue when it rubs against strong local
leaderships. The Afghan opposition has been
demanding a decentralized form of government with
delegation of powers to directly elected local
powers. (Unsurprisingly, Karzai doggedly resists
the opposition demands.)
In the period
ahead, Kabul's decisions to award contracts to
foreign parties in the extraction industry are
going to be increasingly controversial. The point
is, the scramble for Afghanistan's mineral
resources has begun. China and India are in the
forefront. The US's New Silk Road is a
barely-disguised project to gain control of
Central Asia's natural resources.
The
Indian and Afghan governments will be co-chairing
a Regional and International Investors meeting in
New Delhi on June 28 to discuss the strategies to
boost foreign investment in Afghanistan. It is
notionally a "private sector" meeting, but
government entities are also asked to attend, as
the government "plays a role in further exploring
and promoting investments in Afghanistan over the
long term and lays down better opportunities".
Interestingly, the first announcement of
the conference was made last weekend from
Washington. The US and India are interested in
jointly pursuing business opportunities in
Afghanistan's mining sector, which seems to be the
optimal way of countering competition from Chinese
companies.
The US is enamored of India's
"soft power" in Afghanistan, which it obviously
lacks; on the other hand, Washington can bring in
the "hard power" component. The resultant
US-Indian "smart power" - to use Joseph Nye's
famous expression - is expected to be more than a
match for China.
The ground reality is
that China's towering economic presence in
Afghanistan has become an eyesore. Competing
foreign players tend to develop the "crab
mentality" - pulling each other down - in a
business milieu lacking a level playing field.
This is where Dostum's entanglement with the CNPC
becomes a little more interesting than money.
Dostum always kept up links with foreign
powers. Originally trained in the KGB school in
the Soviet era, his mentors ranged from Uzbekistan
to Turkey to Pakistan and the US. There is always
scope to speculate whether he is acting on someone
else's behalf.
Ambassador M K
Bhadrakumar was a career diplomat in the
Indian Foreign Service. His assignments included
the Soviet Union, South Korea, Sri Lanka, Germany,
Afghanistan, Pakistan, Uzbekistan, Kuwait and
Turkey.
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