Lure of Afghan mining bonanza sparks rivalries

Beneath the din of machine-gun fire reverberating through Afghanistan's embattled valleys, a quieter competition for eventual control of the country's mineral riches is getting underway. More than $1 trillion worth of minerals is the potential prize for those brave enough to sign contracts and start mining in the hope of claiming the spoils of a peace that Afghans hope will one day follow the Taliban insurgency. While an end to the fighting seems remote for now, mining lots are being quickly parcelled out among Afghanistan's resource-hungry neighbours, potentially sparking a new "Great Game" for control of its battle-worn ground. According to mining ministry documents seen by AFP, Afghanistan is planning to sell extraction rights for up to five mines every year until the departure of the last foreign combat troops in 2014 -- a rattling pace, say experts. With the war's Western backers pushing economic solutions to end the decade-long conflict, the tussle for future influence in Afghanistan is becoming a regional contest, experts say. China, flush with foreign exchange reserves and undeterred by the hazards of frontier capitalism, bought the first tendered oil and copper concessions, leading the list of Afghanistan's neighbours bidding for the mines so far. The huge Aynak mine south of Kabul, to which China won extraction rights in 2007, could yield over 11 million tonnes of copper, according to Soviet-era data and a newer study by the United States Geological Survey (USGS). And India looks set to win the biggest consignment yet if its consortium pips Iran's bid for the two-billion-tonne Hajigak iron ore mine in central Bamiyan province. A decision is due to be announced in the coming days. "Everyone's rushing," said deputy minister of mines Nasir Durrani, estimating the Hajigak deal could be worth up to $6 billion to the government. Staff at his ministry are busy pulling together Powerpoint presentations to inform and woo potential investors, and President Hamid Karzai urged Australia to invest in Afghanistan's minerals when Prime Minister Julia Gillard visited Kabul last week. Future deals on offer include several oil blocks, more copper and iron mines, and deposits of gold and lapis luzuli. Citing aerial studies, the USGS says that the war-scarred country sits on more than $1 trillion worth of minerals, though some experts speculate that rough figure could be three times higher. One US mining expert predicted the combined payout from the Aynak and Hajigak mines could earn the hard-up Afghan treasury half a billion dollars a year -- a significant boon to its foreign aid-dependent economy -- but not until 2016 at the earliest. It is also heavily contingent on solving a legion of security and infrastructure conundrums in a country that so far has just 75 kilometres (47 miles) of railway on its northern border, and scant power and water supplies. "We want to connect all of Afghanistan to all its neighbours by railroad," said Durrani, mapping an ambitious course. He said two feasibility studies are being carried out for rail projects that would skate a path through Afghanistan's rocky and dangerous lands. The first, to be financed by the Metallurgical Corporation of China, would run a line from the Pakistani border to the Aynak mine -- which it owns -- and on to Kabul, and link the Hajigak project to the capital and up to the Uzbek frontier. The second rail route, being looked at by the Asian Development Bank, would head south to Iran, from where mineral supplies could be shipped to India. The Hajigak iron ore is likely to be sold on to China, but getting it there could spark up rivalries between nuclear-armed foes India and Pakistan. Islamabad is extremely wary of any increase in New Delhi's influence in Afghanistan. "The concern is if the Indians win (Hajigak) that the obvious route would be through Pakistan. So I don't know how they work that out," said one US official. The United States in particular is pressing for a New Silk Road plan for Afghanistan, which aims to open up trading links across South and Central Asia and revive Afghanistan's long-dormant status as a continental hub. Facing economic pains and disillusioned voters at home, the Afghan war's Western backers are pressing economic solutions to help end the conflict. But so far, the risks have outweighed the potential gains for most Western companies, apart from one small gold mine in northwestern Badghis province backed by financial services giant JP Morgan. Industry watchers warn of the hazards in a country where corruption is endemic. Mining allocations have so far been carried out under the supervision of American experts and a host of institutions set up to monitor the awarding and development of the concessions. Durrani insisted this made corruption "impossible, impossible, impossible". He added: "We are committed to transparency. We are committed to best practice." Experience with the Chinese-owned copper mine has exposed both predictable and surprising problems. Mine clearance and legal disputes with land squatters delayed the project -- as did the discovery of ancient archaeological finds at the site. Commercial production is now expected one year late, in 2013. Regional investors are undeterred. "India -- they realise the potential here but they have geopolitical issues," said the US official, referring to the strains with Pakistan. "But the Chinese could come in early and often. They already have Aynak and oil. I wouldn't be surprised to see them bidding on everything."