Friday, January 11, 2008

Afghanistan Agonistes

The United States has 17,000 troops in Afghanistan and is planning to send 3,000 more to forestall a possible Taliban spring offensive. The reason for the additional U.S. troops is because America’s European allies, which have supplied a smaller 11,000 troops, have failed to meet NATO’s request for an additional three battalions.

Between fiscal years 2001 and 2007, adding in 2008, the cost of U.S. military operations in Afghanistan will exceed $100 billion. To that number should be added $7 billion in U.S. civilian aid for reconstruction and development projects.

Private investment, in marked contrast, is minuscule by comparison, $690 million in 2004, $570 million in 2005, finally surpassing $1 billion in 2006. These include soft drinks, bottled water, cement factories, and mobile phones and telecommunications.

In a competitive tender that took place on November 20, 2007, on the $3 billion Aynak copper mine near the capital of Kabul, the China Metallurgical Group won out over two western, one London-based, and one Russian companies. Aynak is estimated to contain up to 13 million tons of copper, the second largest unexploited copper deposit in the world. In its January 9, 2008, edition, the Wall Street Journal wrote that the Chinese company offered the highest price in that it was most willing to accept the political, economic, and social risks associated with mining in Afghanistan.

Several inferences can be drawn from these facts. One is that security is so weak in Afghanistan that three western and one Russian companies were unwilling to risk $3 billion to secure a vast new source of copper. Another is that the U.S. has spent well over $100 billion in Afghanistan overthrowing the Taliban and trying to stabilize the Karzai government, but a potential victor could be China, which won the reddish brown prize.

1 comment :

Thomas Spitters said...

Sir:

Your brief financial analysis of the international economic situation in Afghanistan is full of ideas and nonetheless takes some technical knowledge to really comprehend. One thing that is wrong with countries like Afghanistan auctioning things like property and resource rights, I am sure you can agree, to countries like China is the long - term business and security risks they present to neighboring territories and to regions affected by the multi - national as well as internal Afghani and Chinese supply chains.

It is easy to agree that many of the economic activities with respect to countries like Afghanistan are politically motivated, and the three billion dollar price tag paid for these copper rights there is a kind of bird in the hand for China, even though these types of transactions can be viewed as unethical or maybe illegal. The reasons for this are that the public hears about an auction and understands a transaction has taken place, but along with the mining rights comes a whole other series of rights, agents of change for business and industry in the country, and international persons including new businesses that the U.S. can not benefit from even given its wartime expenses to make Afghanistan a safe place to live.

The sale of mineral rights to China might also be viewed as a security risk as the demand for copper materials, and copper as an amalgam has been consistently greater over the years. The mention that these rights are to the second largest deposit for copper in the world begs the question about whether or not China is playing a game in efforts to corner mineral resources to the extent it can.