Trillion-dollar treasure

It had long been believed that Afghanistan possessed mineral deposits of significance, partially confirmed by Russian geologists during the 1970s and 1980s. The long years of war and instability disallowed further study until 2006, when a team from the United States Geological Survey, in collaboration with the US air backup, conducted an aerial survey, re-assessing the Soviet estimates. The preliminary results from that survey were released in 2007, and the US assessment exercise concluded in December 2009. Following recent revelations about the full data, it now appears that Afghanistan's mineral resources could be worth as much as USD 900 billion. But now comes the challenge of converting this underground treasure into wealth, and ensuring that whatever is unearthed is utilised for the good of the Afghan people.

The country's reserves appear to run the gamut of mineral types. The north has proven fields of coal, oil, gas, gold, copper, precious and semi-precious gems; the border with Pakistan in the east is likewise dotted with troves of emerald, ruby, aquamarine, kunzite, quartz, marble and lithium. The central provinces enjoy iron, chromites and lithium (the latter a mineral with a significant new potential market, due to its use in high-end batteries); while the southwest has potentially significant oil, gas, gold, uranium and onyx deposits. The southern part of the country, meanwhile, is said to have copper and gold veins that run for dozens of kilometres, estimated to be worth some USD 200-400 billion at today's market prices. There are also gold- and nickel-bearing areas sprinkled across the hinterland.

It is the suggestions of massive deposits of iron ore – estimated at more than two billion tons and potentially valued at around USD 420 billion – that have been extraordinary. This vein is thought to run at least from Badakhshan to Herat, a distance of several hundred kilometres. Revelations of this kind of money would seem to offer a massive opportunity for engineering a transition towards economic growth, reduced levels of poverty, and greater development and stability. Plus, according to a senior geologist in the Afghan Geological Survey, who wished not to be identified, the area along the Pakistani border possesses far greater multiple mineral reserves than has currently been made public. The rationale for this misinformation is the fear that tribal communities along the frontier would start fighting over these resources, and that the Taliban could mobilise forces in the areas to scare off potential investors. Indeed, such worries of looming violence have begun to mount with regards to these new mineral predictions in general, as the government and others try to figure out how to utilise these resources.

Social opportunity
The state of the Afghan mining sector's infrastructure is currently abysmal. According to sources in the Ministry of Mines, the government has at present awarded 169 contracts (some large but mostly small) for the extraction of various resources, including for marble, coal, gems, gold and copper. Many of these operations are under the control of warlords. While the government does not have the capacity to inspect mining activities, cronyism remains a primary concern. At the very least, though, efforts are now being made to put adequate mining infrastructure in place. A 75-km rail track, funded by the Asian Development Bank, connecting Hiratan to the city of Mazar-e-Sharif, is slated to finish by the end of this year. Iran is also building a railway track up to the city of Herat. These and other plans – including a full 'second phase' of rail links – would join the various mining spots, thus increasing commercial interest in Afghan mineral resources. Further, the railway links would enable the country to export its product both to Southasia and Europe, and act as a larger transit point, potentially doing much to integrate the region and continent and thus stimulate further economic activities.

In its first report on the Afghan minerals sector, in 2004, the World Bank highlighted the possibility of the country's deposits contributing significantly to overall economic growth. Most importantly, the Bank also suggested that the mineral wealth could provide the state with the ability to carry out work on the back of its own assessment of national development needs. Indeed, experience from elsewhere suggests that large-scale minerals extraction often accompanies social and infrastructural investment. In the Afghan context, the government could finally present a positive face to the increasingly disillusioned people of Afghanistan.

Mine extraction tends to promote the emergence of small- and medium-size enterprises, diversification of local economies, in-migration of skilled workers and, in certain instances, rapid urbanization. New businesses would come up in transportation, construction, mechanical workshops and accommodation, to name just a few. Such development would offer a significant boost to local economies, the possibility of mobilising youths into constructive labour and professions, and provide the state with the opportunity for legitimate regulation of local-level activities – while promoting 'social capital' among the masses. If done effectively, all of this could help to erode the support base of the insurgents among the vulnerable local populations.

Still, there are obvious challenges on the road to exploiting Afghanistan's mineral resources, too. The country's economy is currently dramatically dependent on the trade of opium, and lacks a strong industrial base. Further, a dangerous public mentality has taken hold in many sections due to the excessive, at times seemingly uncontrolled, flow of money of the past decade, which has led to a spiralling of expectation. The mineral revenues would almost certainly add to this spiral, particularly if the public is not informed about the challenges and costs involved in the proper exploitations of these resources. Indeed, the current security situation around some of the mine sites is already unfavourable for investment. Such a situation could worsen in the future, as the state increasingly finds it difficult to extend and maintain sovereignty over these areas, with warlords now keenly eyeing the mineral wealth.

Resource curse
The Afghan state today has environment, mineral, hydrocarbon, investment and income-tax laws that have been drawn up after the identification of a range of gaps, all with an eye to creating an enabling environment for private investment. Kabul has also pledged to utilise the so-called Equator Principles, designed to ensure that project financing takes into account social and environmental risks. It has also committed to observing several international standards aimed at helping fragile states to oversee the equitable extraction of their natural resources, particularly keeping the interests of local communities in mind. While these are clearly positive steps, in the absence of any current industrial-scale extraction it remains to be seen as to how strong implementation on such progressive standards can be. Either way, at the moment the government institutions do not have the required capacity to competently evaluate bids, or to monitor compliance.

Copper appears to be Afghanistan's second-largest reserve, and copper mining is a notoriously toxic form of mining, unless mitigated by using environment-friendly technology and planning. In experiences around the world, mining and other extractive activities have led to environmental and social disasters alike, particularly in weak states with bad governance structures and exclusive polities. In some circles, the term for this 'paradox of plenty' is known as the 'resource curse' – the possibility that a lucrative find such as oil or minerals can ultimately set in motion an escalating increase in corruption and violence, which ultimately leaves the country as a whole worse off than before. Examples from around the world include Angola, Nigeria and Southern Sudan. Against these experiences and the recent disclosure of mineral wealth, many both in and out of the country are now worrying for the fate of Afghanistan.

For one, the expectations on the part of the common people have been pushed a few degrees higher. Eventually, this could prove dangerous, potentially leading to armed disputes between communities over control of these resources. Further, there are suspicions over the timing of the information being made public, with the suggestion that it is mostly meant for consumption by the US Congress, in order to justify the country's continued presence in Afghanistan. Afghan and foreign geologists based in Kabul, meanwhile, have dismissed the news as hollow, saying that there has been no analysis of the composition of the minerals and whether extraction is economically viable, nor does this figure in the larger discourse.

The government in Kabul neither knew about such a huge presence until a month back, nor has it yet confirmed the recent figures. The state has also not been able to extend full sovereignty over the resources, and is yet to acquire the capacity to do environment- and social-impact assessments. Most critically, Afghan society today stands fragmented along ethnic lines, thus highlighting the risk of conflicts if the government does not put in place clear and fair rules with regard to land entitlements and other issues as it goes forward in dealing with its newfound minerals wealth. Together, these issues have created a notable gloom among many intellectuals in Afghanistan today. Against visions of the country falling victim to increasingly violent squabbles over lucrative resources – by Afghan communities and perhaps abetted by foreign interests – some are now making dire predictions: that these mineral deposits could make it only more difficult for their children and grandchildren to experience peace in Afghanistan.

~ Javed Noorani is a researcher in Kabul.