Poverty rate
Afghanistan is one of the poorest countries in the world. Though in terms of GDP the country is in the middle of the list of 188 states, in relation to per capita income it is 179th. The situation is only worse in some African countries - Somalia, CAR, South Sudan and others. In terms of corruption, Afghanistan is also one of the outsiders. In the Transparency International Corruption Perceptions Index, the Asian country is ranked 4th from the bottom, followed only by Syria, Samoa and South Sudan.
It is clear that for now there is no opportunity for any large investments and projects. For the past 20 years, the Afghan economy has largely relied on foreign aid from the United States and its NATO allies. EU High Representative for Foreign Affairs and Security Policy Josep Borrell estimates that the US spent 300 million dollars on Afghanistan every day. In 20 years, Washington allocated two trillion dollars. The finances went to the maintenance of the military machine, though a considerable share of the money was also directed to humanitarian projects - providing food, water and electricity, building schools, housing and hospitals.
Rich mineral resources: gas, gold, copper
Despite all the poverty and misery, Afghanistan has always had great potential - its mineral resources. In fact, Afghanistan is rich not only in opium and heroin but also in rare metals, the total cost of which is estimated at over trillion dollars. Afghanistan has deposits of iron, chromite, gold (in the southern Pashtun provinces), lead and copper (60 million tons - almost half of the Russian deposits). Their exact volume is unknown, and extraction is difficult due to their location in remote mountainous areas. Sodium chloride, sulfur and lapis lazuli are currently mined nonmetallic minerals. By the way, Afghanistan is the only major supplier of lapis lazuli to the world market.
There are opportunities in the energy sector as well. In the Shebergan area there are 136 billion cubic meters of gas. The total gas reserves are estimated at 444 billion cubic meters. There are also deposits of oil in the provinces of Balkh and Jowzjan (3.8 billion barrels), uranium and gold. Afghanistan has large reserves of high-quality iron ores (2.2 billion tons), neodymium, cobalt and niobium (supercapacitors and superconductors).
Lithium and China
Lithium is of particular interest to potential investors. It is used in the manufacture of smartphones, tablets and other electronic devices. Lithium reserves are concentrated in the soda salt marshes of Ghazni and neighboring provinces. Their volumes may exceed those of the world leader’s - Bolivia. China is closely located to Afghanistan, and Chinese high-tech corporations like Huawei and Xiaomi are in desperate need of lithium. According to the business newspaper Financial Times, the Chinese have already proposed investments in energy and infrastructure projects during the negotiations with the Taliban (banned in Russia). The PRC is also interested in the production and transportation of oil and gas from Afghanistan and Central Asia.
Beijing may build highways to connect both the cities of Afghanistan and the country itself with neighbouring states. One of the priorities is the project of the road between Chinese Xinjiang and the Pakistani port of Gwadar. Thus, China will be able to reach the Indian Ocean, where its geopolitical rival India is located, and further strengthen economic relations with its ally Pakistan. The FT is also speculating on the China-Iran transport artery through Afghanistan, with the possible laying of gas and oil pipelines linking China to the Persian Gulf.
Taliban invite everyone
The Taliban, who took power in Afghanistan, is aware of the country's economic potential, therefore, after seizing Kabul, they invited other countries to invest in mining.
"We have just stepped out from the war and destruction phase and entered a new era. That is why the people of Afghanistan need help from other countries. We need assistance in such areas as health care, infrastructure, education and other sectors. You are welcomed to come and develop our natural resources,” the official representative of the Qatari political office of the movement, Mohammad Sohail Shahin said.
Earlier, on July 28, the leader of the Taliban moderate wing (banned in the Russian Federation), Mullah Abdul Ghani Baradar, met in Beijing with Chinese Foreign Minister Wang Yi. According to CNN, the Taliban agreed to open their country to Chinese investments in exchange for latter’s non-interference with their fellow Uighurs in northwest China.
The copper project turns out to be an epic fail
The previously mentioned high level of corruption, according to which Afghanistan is ahead of other countries, can become an obstacle for foreign investment: sometimes the level of bribery is huge. Difficulties are also created by the tribal nature of society: not only officials has to be taken into account to open an enterprise. All this is superimposed on the lack of infrastructure in an area rich with mineral resources.
According to the Bell, the Taliban have already reached the ceiling of profits from the artisanal mining of lapis lazuli: the group earned only 20 million dollars annually on it, and just 400 million dollars from the exploitation of all resources. This revenue, although is bigger than of the pro-American regime in Kabul, but incomparably less than it can be and in comparison with primary opium production (more than a billion dollars per year).
The problem of corruption is well illustrated by the copper project launched under President Hamid Karzai, who was seated after the 2001 US invasion. In 2007, the Chinese rented the large Mes Aynak mine. Production was supposed to start five years later and bring 350 billion dollars annually. But the development of the mine has not yet begun. It turned out that first the former Minister of Natural Resources demanded a bribe in amount of 30 million dollars from the Chinese for mining in area controlled by the Taliban, and then an increase in concession payments. Added to this was the lack of coal for the TPP of the concentrating plant and the phosphates needed for copper smelting. The copper project turned out to be epic fail.
A chance for a happy future
Despite all the difficulties, the Taliban still have a chance to use natural resources to boost Afghanistan's economy. According to the IEA, in 2020-2040, the demand for lithium in the world will increase 40 times due to the energy transition. If the Taliban manage to curb corruption and open the country to China and other big investors, then natural resources will bring large revenues to Afghanistan. There is already interest on the part of the PRC. “If China gains control of Afghanistan’s pristine lithium and rare earths reserves, it will be a key victory in the battle for resources with Europe and the United States,” the newspaper writes. “In 2019, the United States imported 80% of rare earth metals from China, while the European Union imported 98%,” The Bell notes, citing Quartz.
As for Russia, the expert of the Valdai International Discussion Club, Georgy Asatryan admits the country’s participation in various projects in Afghanistan only after the situation there stabilizes.
“The likelihood of Russia's participation in economic life in Afghanistan is high. Historically, Russia has always been interested in the Afghan economy. This process flourished during the Soviet period. With the introduction of US troops, the situation changed. Especially since 2014, when the United States torpedoed Russia's participation in projects, in particular, infrastructure and logistics. Russian companies are showing interest, but so far the situation is unstable, and I do not expect large-scale financial injections from Russia. But in theory, this is possible at the local level, and in the future - at higher levels, if the situation stabilizes, ”Asatryan told Vestnik Kavkaza.
