Afghanistan: The Significance of Mineral Wealth



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Afghanistan: The Significance of Mineral Wealth


[Teaser:] A media blitz is under way regarding Afghanistan’s potential mineral wealth, and STRATOR is wondering why old news has suddenly moved above the fold.
Summary
In a June 13 story, The New York Times revived interest in Afghanistan’s potential mineral wealth, which has long been suspected. The country’s mountainous terrain indicates the likelihood of such deposits, and in 2007 the U.S. Geological Survey published a study reporting much of what is being said in the media today. But challenges in extracting the minerals and bringing them to market in an economically viable and competitive way remain extraordinarily daunting.
Analysis
The potential for mineral extraction in Afghanistan has generated immense press in the last few days, following a June 13 New York Times story on a estimated $1 trillion in mineral deposits believed to exist in the country and a June 12 statement by U.S. Central Command chief Gen. David Petraeus characterizing Afghanistan (with caveats, of course) as having “stunning potential” [economically?]. On June 14, a spokeswoman for the French Foreign Ministry announced in response to a question[during a press conference?] said that findings[from what? a recent geological survey?] would be revealed at a major conference in Kabul set for July 20. Also on June 14, chief Afghan presidential spokesman Wahid Omer spoke of Afghanistan’s potential for self-sufficiency.

Yet much of what is being discussed dates back to a study done in 2005-2007 by the U.S. Geological Survey in conjunction with the U.S. Agency for International Development and Afghan geologists. The results of this survey were published in 2007 by the U.S. government, though the findings of the survey have now reportedly been verified by a small Pentagon-led team, and there is increasing talk of lithium deposits in particular, one of the reasons behind the current coverage. Statements regarding Afghanistan’s potential mineral wealth have been made up in the past, with Afghan President Hamid Karzai using the $1 trillion figure at least as early as February of this year and Petraeus discussing the matter in December 2009.

Already the China Metallurgical Group has committed $3 billion a year [until when?] and $400 million thereafter [when?] to secure the rights to the Aynak copper mining district in Logar province. Verification drillings were done last year and a temporary camp is now being prepared. An iron-ore deposit is being examined in the area of[near?] Hajigak[this a town, right?], northwest of Kabul, but progress is at best[findings thus far are only?] preliminary, and at least one source suggests that the China Metallurgical Group may not even bid on the Hajigak deposit.
The presence of potentially large mineral deposits in Afghanistan has never been in doubt -- the country’s mountainous terrain indicates the likelihood of such deposits. The challenge is extracting the minerals and bringing them to market in an economically viable and competitive way, and this challenge remains extraordinarily daunting. Afghanistan is an underdeveloped country with extremely poor infrastructure, including no rail connection to the outside world (though one is under construction to Masar-i-Sharif in the north). Though the nature of a mineral deposit and the economics of its exploitation can all vary considerably -- even within a single country -- pulling ore out of the ground and moving it a great distance is a logistically intensive proposition, even with relatively developed road and rail networks.
Technically, developing sufficient infrastructure is possible in Afghanistan, but the cost of doing it is almost certain to drive costs[of the minerals?] far above what can be recouped on the global market.

STRATFOR has been focusing and continues to focus on how these reports came about just in the past week. There is clearly a media blitz now under way, and it is important to understand why. Over the next few years there will be little meaningful impact on the ground in Afghanistan in terms of investing in and developing the country’s minerals, and the key question is how Washington will play this mineral-wealth story to serve its interests in the region.


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