MAC: Mines and Communities

Potential for a Mining Boom Splits Factions in Afghanistan

Published by MAC on 2012-09-12
Source: New York Times

Potential for a Mining Boom Splits Factions in Afghanistan

Mauricio Lima

New York Times

8 September 2012

KALU VALLEY, Afghanistan - If there is a road to a happy ending in Afghanistan, much of the path may run underground: in the trillion-dollar reservoir of natural resources - oil, gold, iron ore, copper, lithium and other minerals - that has brought hopes of a more self-sufficient country, if only the wealth can be wrested from blood-soaked soil.

Mining projects have begun in some places with foreign help.

But the wealth has inspired darker dreams as well. Officials and industry experts say the potential resource boom seems increasingly imperiled by corruption, violence and intrigue, and has put the Afghan government's vulnerabilities on display.

It all comes at what is already a critically uncertain time here, with the impending departure of NATO troops in 2014 and old regional and ethnic rivalries resurfacing, raising concerns that the mineral wealth could become the fuel for civil conflict.

Powerful regional warlords and militant leaders are jockeying to widen their turf to include areas with mineral wealth, and the Taliban have begun to make murderous incursions into territory where development is planned. In the capital, Kabul, factional maneuvering is in full swing, including disputes over lucrative side contracts awarded to relatives of President Hamid Karzai.

Further, a proposed mining law vital to attracting foreign investment is up in the air, with the delay threatening several projects. The cabinet rejected it this summer, saying it was too generous to Western commercial interests. But some Western officials fear other motives are at work, too, including an internal fight for spoils, and perhaps an effort by some neighboring countries to sway sympathetic officials to keep Indian and Chinese state mining companies out.

"If you were to pick a country that involves high risk in developing a new mining sector, Afghanistan is it," said Eleanor Nichol, campaign leader at Global Witness, a group that tries to break the link between natural resources, corruption and conflict. "But the genie is out of the bottle."

Already this summer, the China National Petroleum Corporation, in partnership with a company controlled by relatives of President Karzai, began pumping oil from the Amu Darya field in the north. An investment consortium arranged by JPMorgan Chase is mining gold. Another Chinese company is trying to develop a huge copper mine. Four copper and gold contracts are being tendered, and contracts for rare earth metals could be offered soon.

The Ministry of Mines has also requested bids for a richer oil concession in the Afghan-Tajik basin, and American officials are optimistic it could come online soon.

And in the shadow of the Black Mountain, here in the Kalu Valley in remote Bamian Province, villagers hope that Indian and Canadian mining operations can turn buried iron ore into new lives for struggling families, breaking a cycle of poverty in this high place cut off by snow for six months of the year.

When the digging begins, Abbas Ali, a 30-year-old farmer here, will have to give up the four-acre potato field his family has worked for generations. He is more than ready.

"Our life will change 180 degrees," Mr. Ali said this summer, staring up with fervent brown eyes at the bowed wooden roof beams in the white-walled madrasa where he teaches for extra income. "We support any effort to make it happen quickly."

That hope, and the prospect of more self-sufficiency as international aid ebbs, is driving Afghan officials like the minister of mines, Wahidullah Shahrani, as he tries to get more projects going. The World Bank estimates that if things go very well, mining and agriculture together could raise annual growth rates by 3 to 4 percentage points between now and 2025.

But Mr. Shahrani is concerned about striking the right balance between generating revenue for the Afghan government and drawing in international investors, saying that getting contracts wrong would jeopardize critical development timelines.

"This is all about the credibility of the country," he said.

There are other concerns, too. Some officials are worried about a swath of small mines - for gemstones, marble, chromite and other resources - that are out of the state's control and might be fueling the insurgency.

A recent Defense Department analysis said criminal mining syndicates were smuggling chromite over the border, paying protection money to the Pakistani Taliban and the Haqqani insurgent network.

In the border province of Khost, the director of mines, Laiq Muhammad, said more than half the chromite there had been extracted illegally and smuggled to Pakistan, with no benefit to Afghanistan. "Not even one afghani has been added to national income from chromite mining," he said. Senior Pentagon officials say they are trying hard to bring the mines into the legitimate economy by finding international buyers for the chromite.

In Bamian, up on the mountain above Abbas Ali's home, 12 new wooden and brick security huts march across the hillsides of the 230-square-mile concession area, a sign of intent - maybe - that the soil will soon be broken and the mine's promise fulfilled.

But they are also a nod to the possibly more violent times ahead.

Bamian's chief geologist Mohammad Amin, 27, was striding through the boulders scattered on the hillside. "If the Taliban are able to make it to this part of the country, this project will be halted and nobody will be able to work," he said.

There are signs, in fact, that is happening in this part of Bamian, which until the past year had been considered relatively secure. Now, the road to Kabul is no longer safe for foreigners, and there has been a string of attacks on government officials and security forces.

Beyond the concerns about security, there is the matter of creating the mines themselves. The prospecting project here - named Hajigak, after one of the treeless mountain ridges - has long been marked by yellow stripes. They are Soviet survey ditches, testament to efforts decades ago to tap Bamian's iron ore that never panned out.

Before mining can actually begin, there is a need for a power plant, a smelter, and a road to bring the ore down the pristine red-rock ravines of the Kalu Valley.

There are also plans for a major railroad - a first on a large scale for Afghanistan - to take the iron ore out, perhaps west to an Iranian port or to join up with a rail route promised by the Chinese from the Mes Aynak copper mine east to Pakistan or north to Turkmenistan.

The Mes Aynak mine, in Logar Province, is another trove of potential Afghan wealth awarded to the Chinese in 2007. It is already behind schedule, and no work has begun on a railroad yet. Mr. Shahrani is adamant mining will start in two years and blames the discovery of Buddhist ruins and artifacts, as well as Soviet-era mines that had to be cleared, for the delay.

But in a country where the future always seems to be put off, the delays may also reflect an unwillingness, say officials who work closely with the mining industry, by international investors to put in hundreds of millions of dollars they could lose if Afghanistan again descends into turmoil.

"Everyone is hesitant to plan beyond 2014," said a Western official who spoke on the condition of anonymity. "They have dragged their feet. The government might change and you have built your new roads and new power plants. It might all be gone."

Doubts about the government's role in any resource boom loom large for the Afghan public, too, where there is deep skepticism that the weak state and notoriously kleptocratic ministries can build a functioning mining economy that will help ordinary people.

Some outsiders fear that the recent delay in the new mining law represented, in the messy world of Afghan politics, an attempt to discredit Mr. Shahrani and win control of the mining ministry, one of the government's most lucrative power bases.

Already, there are examples of how resource riches can spark conflict.

At the Amu Darya oil field in June, President Karzai's government accused a rival, the warlord Gen. Abdul Rashid Dostum, of putting pressure on the Chinese oil company to make illegal payoffs. General Dostum's party said he wanted the Chinese only to hire more local labor. And at Mes Aynak, where the government says nine villages were displaced, the mining project has caused tensions among locals contending for compensation for their land.

As the details of the Hajigak contract are negotiated, the people of Bamian are clear about what they want in return for opening their lands to mining: paved roads, a gymnasium, a conference hall, a technical college, and guaranteed work for locals among the 50,000 jobs some say the mine could generate. Hoping to avoid the frictions that have arisen at other sites, they have formed a 114-member commission to work on issues like compensation and jobs and provide a mechanism for airing grievances.

Some of the people of Bamian - most of whom are Hazaras, wearily familiar with years of ethnic oppression by those in power in Kabul - remain dubious that wealth will automatically come their way. But there is still hope in the valley of the Black Mountain, in Abbas Ali's village.

At a store in the dusty bazaar, Shir Ali, 38, a gangly man who drives a minibus, says that with a job as a day laborer or security guard or driver, he could buy uniforms and textbooks to send all of his 12 children to school.

Sitting at the counter behind open sacks of rice and beans, the storekeeper, Daoud, 38, cracks his bronzed face with a smile, sharing the optimism but also the trepidation about whether at last his country can really make something of itself.

"If the mine doesn't come, we will be like those people who live on treasure," he said, "but they cannot use it."

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