China strategy stamped on Afghan deal
By Ron Synovitz
China surprised other potential investors by securing a US$3.5 billion deal
last month to develop Afghanistan's Aynak copper field, the largest foreign
direct investment project in the history of Afghanistan. The size of the
agreement was almost double the expected amount.
By some estimates, the 28-square-kilometer copper field in Logar province could
contain ore worth up to $88 billion. But there is no power plant in the area
that can generate enough electricity for mining and extraction operations, and
Afghanistan has never had the kind of railroad needed to haul away the tons of
copper that could be extracted.
That is why a large part of the Chinese bid includes the cost of
building a 400-megawatt, coal-fired power plant and a freight railroad passing
from western China through Tajikistan and Afghanistan to Pakistan.
The cost of building so much infrastructure in such a volatile security
environment is prohibitive for many private firms. But Niklas Norling, a
specialist on China and Central Asia at the Stockholm-based Institute for
Security and Development, says the price tag is tolerable for a Chinese state
firm - in this case China Metallurgical Group Corp in partnership with Jiangxi
Copper - because the project contributes to Beijing's plans for the development
of western China and its regional trade links.
(China Mettalurgical was expected to invest around $3 billion to explore and
develop the mine, including building a power plant, a village for the workers
and railway line to take the mineral out of the country, Thomson Financial News
reported.)
(Jiangxi Copper, China's top integrated copper producer, and China
Metallurgical will pay $808 million for the right to explore and exploit the
copper field, Reuters reported.)
"You have to see this in the context of China's great western development
program, which has led to major investment into the western provinces [of
China] and, of course, also crossborder connections to Central Asia, South
Asia, and Iran," Norling says. "In order to develop the west [of China], they
need energy resources, and they need other resource materials. So far,
Afghanistan has remained virtually untouched by Beijing's concerns, in contrast
to China's involvement in Central Asia, Pakistan, and Iran.
"The past few years have seen investments into the Karakorum Highway in
Pakistan, the Gwadar port [in Balochistan and] a multibillion-dollar pipeline
from Kazakhstan to Xinjiang [Uyghur Autonomous Region]. China has signed a $100
billion, 25-year energy contract with Iran. And so on and so on," Norling said.
"So, of course, this forms part of a greater strategy."
China in competition
The Aynak copper mine also should be seen in terms of China's competition with
countries such as Russia and the United States for economic influence in the
region, Norling said
"All states [in this part of Asia] basically are swing states whose
geopolitical alignments could tilt either way during the next decade, including
Afghanistan, Pakistan, Iran perhaps also, and the Central Asian republics. The
state that manages to acquire the most influence will, of course, tie these
states into their orbit. And I think China is progressing well to do this."
Even so, the same obstacles that prevented Anyak from being developed during
the past 30 years could prevent China Metallurgical Group from meeting its
goals there.
Years of war and factional fighting in Afghanistan have ensured that the Aynak
deposit has remained largely untouched since Soviet geologists surveyed the
area in the 1970s. The copper field is in a relatively secure part of
Afghanistan, but the railroad and power lines would be difficult to defend
against attacks by militants.
Another important factor would be keeping the local population happy about the
venture. For now, many residents in the area say they support the project
because of the thousands of jobs Afghan officials have promised it will create.
But with corruption in Afghanistan running high, and with billions of dollars
at stake, some residents are concerned their safety may be neglected.
"The extraction and production of copper begins with explosives," said local
resident Abdul Wasi Ahmadzai. "Then it is processed in a way that produces
[toxic] dust and dangerous gasses, affecting areas near and far. So we want to
be sure that the government pays close attention to these issues."
Concerns also have been expressed about the need for the Chinese firm to
prevent toxins from seeping into the underground water table. The fear is that
drinking-water supplies could be contaminated for people as far away as Kabul.
Fazlullah, a legislator in the upper chamber of parliament from Logar province,
said maintaining support for the project from Logar residents requires proper
monitoring of issues such as environmental protection, as well as the private
property rights of those who say parts of the copper field are on their land.
"The humanitarian and citizenship rights of our people whose lives are
threatened by this project are not being mentioned - the people who will be
losing their homes, stocks, and farms," Fazlullah said. "They must decide about
the fate of the villages which will be destroyed by this project. The
environmental effects of this project undermine the villages of Surkhab and
Mosaayee."
Environmental standards
Afghan Minister of Mines and Industry Ibrahim Adel said there are no villages
in the area that is to be mined. He also said the Chinese firm is obliged to
compensate residents who will lose their property as a result of the project.
"Regarding the environment, both sides have accepted that the best standards
will be enforced. Those are the [international] standards of 'equator
principles' and the World Bank. So Aynak will be one of the world's most unique
mines, with high environmental standards," Adel said.
The Afghan government is eager for China's involvement. China has proven in
other developing countries that it is an efficient partner and that the
projects it initiates are usually realized. But Norling is more cautious,
considering the scale and location of the Aynak project.
"These plans are still ideas. It will be seen in the next six years whether
this will actually materialize," Norling said. "If the security situation does
not improve, or if it even gets worse, it might jeopardize this project. Time
will tell. I think the first step will be to see how the security situation
turns out in the next one or two years."
With new geological studies revealing other potentially lucrative mineral
fields across Afghanistan, the Aynak deal is seen by other would-be foreign
investors as a multiple litmus test - on how Afghanistan deals with
international investors, on the level of corruption, and on whether security
can be provided for such high-profile, foreign-funded projects.
(Radio Free Afghanistan correspondent Sultan Sarwar contributed to this
story from Prague and Logar province.)
Copyright (c) 2007, RFE/RL
Inc. Reprinted with the permission ofRadio Free Europe/Radio
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