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  November 24, 2001  

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Central Asia/Russia

Reconstructing Afghanistan - on oil and gas
By Uwe Parpart

"We are going to have an enormous obligation, not only the United States but the whole international community, to not leave the Afghan people in the lurch, and not to walk away as has been done in the past," US Secretary of State Colin Powell told the opening session of a Tuesday, Washington, DC meeting on assistance to Afghanistan attended by 21 nations and the European Union.

Details of such assistance are to be worked out in follow-up gatherings of the group and will also be considered by multilateral institutions, including the World Bank and the Asian Development Bank. The twin aims are "quick-hitting projects" such as shelter, roads and agriculture, as well as long-term projects, US Undersecretary of State Alan Larson said at the end of the "extraordinary, significant conference". Prior to the Washington conference, United Nations development administrator Mark Malloch Brown had said on Monday that he could not estimate the cost, but he likened it to a rescue operation in Mozambique that cost US$6.5 billion over a five-year period.

This is all well and good. And the UN's Food and Agriculture Organization's plan to channel some $200 million into Afghanistan soonest for seeds and fertilizer and other agricultural aid is of the greatest immediate significance. But donor nations and multilateral agencies, beyond supplying emergency food and shelter, resettlement relief for refugees and initial concessionary loans for infrastructure repair and development, cannot and should not substitute for private foreign direct investment which is essential for sustainable economic reconstruction and development. Of course, such investment presupposes the formation of a stable and representative government in Kabul and the creation of an acceptable security environment and conducive macro-economic framework.

In turn, however, it is critical if long-term dependence on foreign aid (as in Cambodia and several African countries) is to be avoided and crowding out of private initiative by public sector institutions and corporations is to be forestalled. (Note that eight years after UN-supervised elections, Cambodia still depends 100 percent on bilateral and multilateral aid to finance its national budget.)

Afghanistan's best chance for attracting foreign capital rests with its strategic location as a potential major transit route for Siberian and Central Asian oil and natural gas exports to South and East Asia. Energy demand there will grow rapidly over coming years and alternative supply sources to Middle East production will be welcomed from India and Pakistan to Taiwan, South Korea and Japan.

Major oil and gas supply routes from western Siberia, the southern and northern Caspian regions, and Uzbekistan conjunct in Turkmenistan and from there supplies can pass through Afghanistan to Pakistan, India and beyond. In 1997, six international energy companies - with America's Unocal Corporation in the lead - and the government of Turkmenistan formed Central Asia Gas Pipeline, Ltd (CentGas) to build a 790 mile (1,271 kilometer) pipeline to link Turkmenistan (which has its own abundant proven natural gas reserves) with Pakistan. The group also considered an extension of the line to the New Delhi area in India.

Unocal said at the time that the project could be the foundation for a new commerce corridor for the region - the Silk Road for the 21st Century. For the obvious political reasons, nothing became of the project and it was abandoned in 1999. It's high time, however, to revive it at this point in time and perhaps on a larger scale than originally planned.

The Centgas project was to carry natural gas from the Dauletabad Field in southeastern Turkmenistan (which has independently certified reserves of more then 25 trillion cubic feet (708 billion cubic meters and is one of the world's largest) at a rate of up to 2 billion cubic feet per day (20 billion cubic meters per year). A 48-inch diameter pipeline was to extend from the Afghanistan-Turkmenistan border, generally follow the Herat-to-Kandahar Road through Afghanistan, cross the Pakistan border in the vicinity of Quetta, and terminate in Multan, Pakistan, where it was to tie into an existing pipeline system. Turkmenistan was to construct a pipeline to link with the CentGas line at the border and stretch approximately 105 miles to Dauletabad. A potential 400 mile extension from Multan to New Delhi was also under consideration. Estimated cost of the project was $1.9 billion for the segment to Pakistan, and an additional $600 million for the extension to India.

There is no need now, however, to limit the pipeline project to just the conveyance of natural gas. With proper connecting lines from the Caspian regions and Western Siberia, oil could be conveyed in parallel and exported through port facilities on the Pakistan coast.The market for both large amounts of oil and gas certainly exists in South and East Asia. And, of course, the oil and gas reserves that it would draw on are huge: Proven natural gas reserves within Azerbaijan, Uzbekistan, Turkmenistan and Kazakhstan equal more than 236 trillion cubic feet. The region's total oil reserves by most estimates are as high as 200 billion barrels - comparable to those of the Persian Gulf region.

The potential benefits to Afghanistan of centering economic reconstruction on a large combined oil and gas pipeline project are very substantial. There is money to be made and labor to be employed during construction (estimated to take two to three years). There is money to be made - an estimated $100 million per year - for the long-term foreseeable future. Beyond that, commerce will spring up all along the construction route and telecommunications lines can be laid along with the pipelines.

And as important as the pipeline project may be for economic reasons, its political-strategic benefits may even be larger: It would closely tie together the long-term economic interests of Afghanistan with those of Russia, the Central Asian republics, Pakistan and India, and all of Asia would have a major economic stake in a future stable Afghanistan. Call it a pipe dream? Well, why not - for once the term might be literally appropriate.

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