Landlocked Afghanistan has many resources to offer, but they come at significant costs and risks.
U.S. President Donald Trump is said to be eyeing Afghanistan’s mineral resources as a way to help fund reconstruction efforts in the impoverished nation and secure it from scavenging Islamic militants.
Efforts to dislodge the Taliban from Afghanistan have cost the United States a whopping $117 billion.
According to investors who have studied the country, given the free movements of Pakistan-backed militants in the region, makes Afghanistan one of the world’s most dangerous places. The very notion of investing in its mineral resources is likely to be a pipe dream.
A decade back, with the United States Geological Survey finding mineral deposits worth at least $1 trillion, both foreign officials and Afghans have viewed the reserves as a way to establish economic independence for the region.
As per the findings of the Geological Survey, deposits of gold, platinum, silver, as well as large quantities of uranium, iron ore, natural gas, zinc, bauxite, tantalum, coal, and copper have been found.
Deposits of copper have been of particular interest given the deficit of new rich copper mines, globally.
Some reports have said, Afghanistan could be the next “the Saudi Arabia of lithium”, thanks to huge amounts of deposits in the region. Large quantities of lithium will be required for electric car batteries and smartphones.
However the lack of basic infrastructure, as in roadways and railroads, have made difficult for Kabul to govern and build a legitimate mining sector. The cost of having foreign engineers and geologists to visit remote sites to carry out new surveys is sky rocketing especially since nothing is being produced to pay for it.
“There is no low-hanging fruit that could trigger rapid growth and foster self-sustaining development,” reads the government’s National Peace and Development Framework document, which was presented at last year’s donor conference in Brussels.
“There is zero active mining and very little exploration, if any,” says Leigh Fogelman, director at Hannam & Partners, a merchant bank in London. The bank’s founder, former JP Morgan rainmaker Ian Hannam, has been a long-time investor in Afghanistan through the Afghan Gold and Minerals Company (AGMC).
However, small and medium sized mines operated by local operators are thriving. As per William Byrd, a development economist with the United States Institute of Peace, local operators outside government control are looting the resources at an industrial scale.
“The big mining opportunities are just languishing and there’s looting of smaller resources everywhere,” said Byrd.
Afghan officials have been luring the U.S. with these resources and have sought to raise interest in Afghanistan with the Trump administration. A continued U.S. presence could bring some stability to the region.
“President Trump is keenly interested in Afghanistan’s economic potential,” said Hamdullah Mohib, Afghanistan’s ambassador to Washington in June. “Our estimated $1 trillion in copper, iron ore, rare earth elements, aluminum, gold, silver, zinc, mercury and lithium. That’s new.”
As per sources, Trump had argued with advisors in July at a White House meeting that Afghanistan should pay in its mineral wealth for the assistance provided by the U.S. government.
According to Jim Mattis, the U.S. Defense Secretary, on Sunday Trump came to a decision vis-a-vis his Afghanistan strategy after a review with national security advisors. Details of the same are yet to be disclosed.
Despite the humongous promise of wealth, private investors are wary, said Fogelman.
“In the case of large, public sector investment, the situation would be different – however, there would still be the problem of building up logistics and export links. I reckon it would still likely take years to get a meaningful large-scale operation going,” he added.
Even with private armies defending the mines against ravaging insurgents, the cost of moving minerals is likely to be prohibitive unless the entire country was secured – which again will take multiple years.
As per a 2014 mining ministry study, the bulk of Afghanistan’s promising deposits of lithium are in the eastern province of Ghazni and in the far southern region of Gowde Zereh in Helmand province. Both regions are Taliban territory.
“The idea that this will materialize in the near future and pay for the security sector budget is unrealistic,” said Byrd.
Even without the war, mining is tough.
In 2008, China managed to acquire a 30 year lease on the Mes Aynak copper mine for nearly $3 billion. They even got the Taliban to explicitly declare the area as a no target zone. Contractual delays have however plagued the project.
“It’s illusory to think that minerals will save Afghanistan in any foreseeable future,” said a senior Western diplomat in Kabul.