Wednesday, November 1, 2023

Does China’s Investment in Afghanistan Succeed?


Last month, the Taliban-run Afghanistan saw a significant foreign investment when a Chinese firm signed a 25-year-long, multimillion-dollar contract to extract oil from the Amu Darya basin. Experts are cautiously optimistic the project may bring jobs and income despite China’s sketchy record on executing deals. The deal will see an initial investment of $150 million in the first year in Afghanistan and $540 million over the next three years, with the Taliban holding a 20 percent stake that will later be extended to 75 percent.

Abdul Jalil Jumrainy, an industry expert and the former director general of the Afghan Petroleum Authority at the Ministry of Mining and Petroleum, is hopeful that the project could provide economic relief and create jobs. However, he notes that it all depends on how it is implemented. Old Afghan hands are cautious in their optimism due to China’s lack of success in executing previous investments in the country’s mining sector.

The previous exploration and production sharing deal was struck in 2011 between China’s state-owned CNPC and an Afghan company called Watan Group for the “Kashkari block”, one of the three blocks now part of the recent Amu Darya tender. The deal would have seen a potential initial investment of $400 million to extract 87 million barrels of oil, eventually generating at least $7 billion in revenues for Afghanistan. However, negotiations fell apart due to concerns about corruption and CNPC’s refusal to take part in a tendering process.

The Chinese company also has not made much headway on its contract to extract copper from the Mes Aynak valley. In 2008, a Chinese company took a 30-year lease for Mes Aynak mines to extract nearly 11.08 million tonnes of copper, but more than halfway through their lease, the company is yet to develop the mines.

The deal has political significance given the Taliban government’s pariah state status, according to Jiayi Zhou, a researcher at SIPRI, an independent conflict research institute based in Sweden. She believes that Chinese investments are part of a wider picture of regional stability and security. Omar Sadr, an Afghan academic and former professor at the American University of Afghanistan, believes that China’s engagement with the Taliban is based more on security rather than economic interests. He points out that China’s main interests are preventing an entrenchment of the Eastern Turkistan Islamic Movement (ETIM) and the return of the US to the region.

The true test of the deal will remain to be seen in its implementations, experts say. Jumrainy notes that not many details of the deal were made public and questions what benefits Afghans will receive from it such as training, technology transfer, and revenues from the contract. Sadr adds that China has not committed much due to its awareness of the Taliban’s limitations and its need for security.

Overall, while China’s renewed interest in Afghanistan may bring some initial cheer to the beleaguered country, it remains to be seen if it can successfully implement this latest project and provide economic relief for Afghans.

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