Afghan mining deal with China facing failure Afghan natural resources are valued at $3 trillion.

A local laborer helps excavate part of the mountaintop copper works above the ancient city at Mes Aynak in Afghanistan, which sits on the old Silk Road trading route connecting China and India with the Mediterranean. (Photo: Matthew C. Rains/MCT /LANDOV)

Afghan natural resources are valued at $3 trillion. But for security reasons, a multibillion-dollar mining deal between Kabul and Beijing is now in jeopardy. Its failure would have a big impact on the Afghan economy.

It was meant to be the largest foreign investment in the history of Afghanistan. In 2007, the state-owned China Metallurgical Group Corporation (MCC) acquired the extraction rights to the Mes Aynak mine in Logar province for $3.5 billion (2.6 billion euros). The mine, located in eastern Afghanistan, is believed to sit on one of the largest unexploited copper deposits in the world. The Chinese put its current value at $10 billion, but the ambitious project is now on the brink of failure. Not a single gram of copper has been extracted in almost five years.

The Afghan Minister of Mines and Petroleum, Wahidullah Shahrani, blames the “precarious security situation” for the delay. But he also stresses that the site is home to 1,500-year-old Buddhist temples, which must first be secured by archeologists. “To be very upfront with you, the MCC doesn’t seem to be that active,” Shahrani said, adding that he would meet the Chinese sometime soon to talk about the project’s future.

The Afghan Minister of Mines and Petroleum, Wahidullah Shahrani, (Photo: dpa)Schahrani: ‘The MCC doesn’t seem to be that active’

So far, the Chinese have failed to fulfill their obligations with the Afghan government. Alongside the payment for the mining rights, the contract includes an $808 million bonus as well as the construction of a railway line and a 400-megawatt power plant.

Protection money

Zarghona Rassa, from the Afghanistan Extractive Industries Transparency Initiative (EITI), therefore believes that the Afghans will seek to review the agreement. “The government of Afghanistan is not happy with the way the Chinese are dealing with the contract,” Rassa told DW, adding that a cancellation of the deal was no longer off the table.

But it seems that it’s not only the Afghans, but also the Chinese who are unhappy with the current state of affairs. Jawed Noorani, from the Afghan NGO Integrity Watch Afghanistan, says the MCC no longer regards the deal as profitable and is therefore using the Buddhist temples as an excuse to gain time for new negotiations.

On top of that, a third player is now demanding protection money. “The security situation has worsened dramatically,” said Noorani. The Chinese had already agreed to invest in the railway line, the gas project and the power plant to get the electricity for extracting the copper. “Now the Taliban want a slice of the pie and that’s simply too much for the Chinese. This is why they want to renegotiate.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s