Afghanistan’s trillion-dollar mineral assets imperilled by corruption

Mining companies would give their eye teeth to exploit Afghanistan’s recently discovered $1 trillion of untapped mineral wealth, but analysts warn that corruption, war and lack of basic infrastructure are likely to continue delaying the much needed mining boom in the country.

The nation is sitting on vast reserves of oil, gold, iron ore, copper, lithium, rare earths and other minerals, but Graham Bowley, a New York Times reporter based in Afghanistan, points out that the country’s mining potential has “inspired darker dreams” and put the government’s weaknesses on display.

It all comes at what is already a critically uncertain time here, with the impending departure of NATO troops in 2014 and old regional and ethnic rivalries resurfacing, raising concerns that the mineral wealth could become the fuel for civil conflict.

Powerful regional warlords and militant leaders are jockeying to widen their turf to include areas with mineral wealth, and the Taliban have begun to make murderous incursions into territory where development is planned. In the capital, Kabul, factional maneuvering is in full swing, including disputes over lucrative side contracts awarded to relatives of President Hamid Karzai.

Afghanistan’s mineral wealth is so vast that an internal Pentagon memo from 2010 —when most of the reserves were discovered— stated the country was posed to become the “Saudi Arabia of lithium,” a key element in the manufacture of high tech devices.

However, a mining law to attract foreign investment was rejected this summer because it was considered “too generous to Western commercial interests,” explains Bowley.

The lack of such regulations is already threatening several projects, such as the multi-billion dollar contract awarded to a consortium of Indian companies led by SAIL in November last year.

The group was set to mine the huge Hajigak iron ore deposit, considered one of the largest iron deposits in the world at 1.8 billion tonnes.

China has also moved to acquire mining interests in Afghanistan with state-owned Metallurgical Corp’s successful $3.4 billion bid to build a copper mine – and a $6 billion railway to go with it – that should enter production in 2014.

Photo: Afghani village on one of the country’s mineral-rich hills, by Lebedev Alexey