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Managing Afghanistan’s mineral wealth

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Afghanistan is well known for its enormous mineral wealth, which remains untapped due to decades of conflict and prolonged political and economic instability. Mine exploration data suggests the country sits atop mineral resources worth more than $1 trillion. The minerals of Afghanistan include copper, iron, chromite, gemstones, gold, petroleum products like oil and natural gas, large deposits of coal, rare metals like lithium and uranium, and many others that have high economic potential. Of particular interest is the presence of lithium deposits in the country. This is a critical mineral as the world transitions from fossil fuels to renewable energy. Afghanistan’s lithium has the potential to trigger competition both regionally and globally for access to the country’s mining market.

Since the collapse of the former Afghan government and return to power of the Taliban in August 2021, the country’s mining industry has been in the spotlight. Many Afghan politicians and analysts have raised concerns regarding the current wave of extractions in the country at a time when the interim Taliban administration enjoys neither national nor international recognition. The development of mines under such circumstances is not without great financial, political and technological risks.

Even during a period of relative stability, Afghanistan was never able to start the extraction of copper under a contract signed with a Chinese consortium in 2007 due to security risks caused by the same Taliban militants that are now Afghanistan’s rulers. If developed, the Mes Aynak copper mine could generate revenues into the tens of billions of dollars. And Hajigak in Bamiyan province is a rich iron ore deposit that is potentially worth as much as $350 billion. Security and stability are a prerequisite for the development of mineral resources in any geographic setting.

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For a fragile country like Afghanistan, which has been in conflict for more than four decades, the presence of mineral resources could be considered as both an asset and a potential liability. Particularly worrisome is the situation when there is competition within the region for access to the country’s vast mineral resources. Despite recent mine activism, Afghanistan’s dilemma of inactivity on mineral resources development goes all the way back to the pre-war era, when the regimes of the time had little political will and little to no technical or institutional capacity to explore and develop the mines.

Since 2021, the Taliban regime has been quick on the exploration, extraction and development of mines to augment its meager financial resources in an attempt to run the government on revenues generated through the export of mineral resources. Of particular concern is the overexploitation of coal resources, which could be considered as Afghanistan’s strategic reserve for coal-powered electricity generation. Afghanistan is believed to possess millions of tons of coal deposits, which are being viewed with interest, as well as caution. Mineral resources are nonrenewable natural wealth that can potentially help Afghanistan earn adequate financial resources to spur its economic development in its journey toward self-reliance.

An important aspect of mining, especially when foreign companies are to be partnered with for exploration, extraction and development, is the relevant legal framework. A progressive legal framework is crucial for efficient mining. Article 9 of the Afghan constitution calls for the proper utilization of mineral resources as per the relevant laws. Afghanistan’s mining law of 2014 has been criticized for its inherent weaknesses, especially its lack of safeguards against corruption and insufficient mechanisms for ensuring transparency.

With the Taliban regime in power, there is a kind of legal vacuum, as it is unclear how the country’s trillions of dollars of mineral wealth will be managed due to the de facto rulers having no international legitimacy. Thus, any international mining contracts will be subject to greater complexity in terms of implementation and sustainability.

There are reports that the revenues from mines, besides helping the Taliban run its government machinery, are also partially being channeled into the private pockets of some of the Taliban leaders. If true, this could be another chapter in the long history of thefts of the national assets of Afghanistan. Another example is the illegal timber mafia that has led to continuous logging and deforestation in the country’s eastern Kunar province. Afghanistan cannot afford a new mining mafia as the country struggles to confront the declining economy in the wake of the political developments of August 2021.

There is also potential for rivalries within the Taliban regime, as various groups compete for the control of mines in their respective areas of influence. Such competition could accelerate the pace of extraction inappropriately and at great national cost. Afghans have traditionally boasted of their rich mineral wealth as their hope to spur economic growth. These mineral resources belong to the people of Afghanistan and not any particular regime.

Afghanistan’s mineral resources are the country’s strategic national assets. Any irresponsible use for short-term financial gains is not acceptable to the people of Afghanistan. The country’s de facto rulers must understand that they have huge responsibility on their shoulders with regards to mineral wealth management, as we owe this national treasure to our future generations.

 

Source: Arab News

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