ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Opinion

Trump's $3tn Afghan mining mirage

New plans to tap mineral wealth face old problems of violence, instability and corruption

The U.S. has been in Afghanistan long enough that old ideas are starting to resurface as new ones. The administration of President Donald Trump is moving forward with plans to tap Afghanistan's mineral wealth, deposits of gold, iron, copper, zinc, lithium and other rare-earth metals worth an estimated $1 trillion-$3 trillion. While operational details remain unclear, Trump has discussed the idea with Afghan President Ashraf Ghani on multiple occasions, and at least one U.S. metals company is eager to participate.

There is something irresistible about the idea of unearthing Afghanistan's hidden treasure. The Soviet Union and two previous U.S. administrations were all drawn to it. The U.S. has already provided roughly half a billion dollars in aid to develop Afghanistan's mining and energy resources. But without major improvements in Afghanistan's security, governance, and infrastructure development, there is no reason to expect success.

Chinese excavators' equipment near a copper mine in Aynak, Afghanistan   © Reuters

A Chinese gamble provides a cautionary tale. A decade ago, China won the rights to develop the Aynak copper field, 25 miles southeast of Kabul, which could be the world's largest copper deposit. The $3 billion deal was the largest foreign investment plan in Afghanistan's history, and along with the big price tag came big promises. The state-owned company behind the deal, China Metallurgical Group Corp. (MCC), promised to build a power plant and railway. Afghanistan's mines minister, Mohammad Ibrahim Adel, promised the project would employ 10,000 people.

None of that has come to pass. In 2009, Adel was fired after denying accusations that he accepted a $30 million bribe from MCC. The general manager of MCC, Shen Heting, was expelled from China's Communist Party for corruption earlier this year. As commodity prices plunged, the calculus behind China's bid stopped computing. Chinese officials have since tried to renegotiate the contract, while the Afghan government has refused. Meanwhile, Afghanistan's security conditions have deteriorated, with the government controlling only around 60 percent of the country's 401 districts. Today, the Aynak mine sits idle.

"We are not nation-building again," Trump assured Americans earlier this year in a speech outlining what he called a "new strategy" for Afghanistan. Yet is impossible to imagine how Afghanistan's mineral wealth can be unlocked without doing just that. Even if the Taliban surrendered tomorrow, Afghanistan's governance and infrastructure gaps would remain. Before digging deeper into Afghanistan's mines, the U.S. should think carefully about whether it has the wallet to bet on these improvements and the will to wait indefinitely for results.

Consider the infrastructure picture. A new report by the Regional Economic Cooperation Conference on Afghanistan (RECCA), a forum started in 2005, highlights how Afghanistan could benefit from joining the transport networks now emerging across Asia. Afghanistan has signed onto China's Belt and Road Initiative, and last year, received its first cargo train from China. But heading back to China, the train was stopped by Uzbekistan's security officials, who would not allow the cargo to pass. The train returned to China empty, highlighting that infrastructure upgrades are necessary but not sufficient.

Iran and India are eager to connect with Afghanistan as well. As Iran emerges from isolation, it is spending heavily on upgrading its railway network, including a link between Khaf in Iran and Herat in Afghanistan. India is supporting a highway that stretches from Afghanistan to Iran's Chabahar port, where it has also invested. A grain shipment from India to Afghanistan passed through the port last month, a development with more symbolic value than commercial value at this point. The port is still under construction and largely disconnected from Iran's transportation network.

China and India's paths converge in Afghanistan, and the U.S. should encourage their cooperation. They are approaching Afghanistan from different directions, India from the west and China from the east. They have offered competing visions for regional connectivity, but both could benefit from a more stable, more prosperous Afghanistan. Of course, they are not the only regional actors with a stake in Afghanistan's future. Pakistan remains suspicious of India's intentions in Afghanistan, and Uzbekistan is an important gatekeeper as well. Realistically, cooperation between China and India may involve mostly staying out of each other's way.

The connectivity picture within Afghanistan is more dismal. Industrial mining operations benefit from rail transport, which can build economies of scale and drive down costs. With only short rail links into Uzbekistan and Turkmenistan, Afghanistan's government envisions building over 4,000km of railway by 2030. Complicating matters, Afghanistan's neighbors use three types of railway gauge, so it plans to build both standard and Russian broad gauge railways. However, a recent study by the Asian Development Bank found that only two of 12 railway projects were moderately likely to be economically feasible.

From development to operation, corruption is likely to plague both the railway projects and the mines they serve. To be sure, megaprojects are difficult in the best business environments. Almost as a rule, they are delivered over-cost, over-time, and with fewer benefits than were promised. But these challenges grow exponentially in weak governance environments. Afghanistan is one of the most corrupt countries in the world. The extractive sector, which includes oil and mining, is the most corrupt sector in the world. Construction and transportation are the second and third most corrupt sectors. Without stronger institutions, sinking money into Afghanistan's mines could be a recipe for as much pain as progress.

None of this is news, and that's the point. The U.S. has paid a heavy price to become intimately familiar with Afghanistan's governance challenges. Despite 16 years in Afghanistan, or perhaps because of it, the allure of a mineral bonanza remains. It is tempting because it holds out the chance for transformative wealth in a country wracked by poverty. It promises a striking success amidst an endless stalemate. But it also has the whiff of desperation, of gambling for redemption. It shines and shimmers. But unless Afghanistan's more fundamental problems are solved, its mineral wealth will remain a mirage.

Jonathan Hillman is director of the Reconnecting Asia Project at the Center for Strategic and International Studies in Washington, D.C. Find him on Twitter @HillmanJE.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media