Afghanistan’s Minerals: A Thousand Splendid Billion
One of the news stories drawing my attention today is a report in the New York Times suggesting that Afghanistan has almost US$1 trillion worth of mineral deposits. The article, citing US geologists, lists iron, copper, cobalt, gold, and lithium as existing in vast quantities in the country’s soil. Lithium in particular has been highlighted, owing to its use in batteries for key electronic devices.
So, all this is excellent news, right?
Alas, not necessarily.
Having US$1 trillion of minerals in your soil is one thing, but being able to extract it is quite another. Just ask North Korea, which is estimated to have a hyperventilating US$5.94 trillion worth of minerals. As with Korea, there are good reasons to believe that Afghanistan will not be in a position to benefit from its mineral wealth for many years to come. Consider the following:
- Afghanistan remains in a state of war. While it could be argued that all factions have an interest in peace so that they can reap the benefits of mineral investment, it can be argued equally strongly that they will all intensify the war so that they can claim the biggest share of the pie. Not only that, but new conflicts could emerge between the central and regional governments over the spoils.
- Even if the Afghans tire of war, the fact is that all these minerals will be coveted by China, India, Pakistan, Iran, Russia, and Western countries. Afghanistan has been a cockpit of great power interests for generations, and the struggle for dominance over these resources could mean that external powers prolong the war through proxies. China has already emerged as Afghanistan’s biggest foreign investor, committing US$3bn to the Aynak copper mine. Meanwhile, the US has almost 100,000 troops in Afghanistan, and although Barack Obama seeks to start withdrawing them from 2011, the vast resources on offer suggest that the US has a good reason to keep a substantial military presence for many more years. Indeed, comparisons between Afghanistan and the remote planet Pandora featured in the James Cameron blockbuster Avatar are bound to increase.
- Conflict aside, Afghanistan’s infrastructure (both in terms of mining and transportation) will take a long time to get up to scratch. Because Afghanistan is landlocked, ports in Pakistan and Iran would be the most logical outlets to world markets, but neither of these countries inspires much confidence to investors, and probably won’t for some time.
- Even if mines can be built and metals transported abroad, corruption could keep revenues from benefiting the state coffers and the general public. Afghanistan’s Karzai administration has been accused of being highly corrupt, and there is no reason to expect a quick improvement.
- Furthermore, the pollution caused by mining could become highly problematic. Toxic waste, if dumped carelessly, could cause illnesses which could mobilise locals against foreign mining interests – whether Western or otherwise.
- In sum, even if Afghanistan were to become a major commodity exporter, it would not necessarily become prosperous. Rather, it could end up suffering from the ‘commodity curse’ whereby dependency on minerals obviates the desire to create value-added industries.
I apologise for sounding somewhat pessimistic. However, if I am wrong, and Afghanistan and North Korea are able to prosper from their mineral wealth, then three letters of the BLANK group of countries I proposed a while back will start to draw investor attention, leaving Burma and Laos behind.