China plans to invest in Mes Aynak mines in Afghanistan

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Ancient Buddha statues sit in serene meditation in caves carved into the red cliffs of rural Afghanistan. Hundreds of meters below lies what is believed to be the largest copper deposit in the world.

Afghanistan’s Taliban leaders are pinning their hopes on Beijing to turn this rich vein into revenue to save the cash-strapped country amid crippling international sanctions.

The fighters who stood guard near the rocky hill may have once considered destroying the terracotta Buddhas. Two decades ago, when the hardline Islamic Taliban first came to power, they sparked global outrage by blowing up gigantic Buddha statues in another part of the country, calling them pagan symbols that must be purged.

But now they are determined to preserve the relics of the Mes Aynak copper mine. This is key to unlocking billions in Chinese investment, said Hakumullah Mubariz, the Taliban security chief at the site, looking at the remains of a monastery built by first-century Buddhist monks.

“Protecting them is very important to us and the Chinese people,” he said.

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Previously, Mubariz commanded a Taliban combat unit in the surrounding mountains battling US-backed Afghan forces. When those troops surrendered last year, his men rushed to secure the site. “We knew it would be important for the country,” he said.

The dramatic overthrow of the Taliban illustrates the powerful pull of Afghanistan’s untapped mining sector. Successive authorities have seen the country’s mineral wealth, estimated at $1 trillion, as the key to a prosperous future, but none have been able to develop it amid ongoing war and violence. Now several countries, including Iran, Russia and Turkey, are looking to invest, filling the void left by the chaotic US withdrawal.

But Beijing is the most assertive. In Mes Aynak, it could become the first major power to undertake a large-scale project in Taliban-controlled Afghanistan, potentially redrawing the geopolitical map of Asia.

In 2008, Hamid Karzai’s administration signed a 30-year contract with a Chinese joint venture called MCC to extract high-grade copper from Mes Aynak. Studies show that the site contains up to 12 million tonnes of ore.

But the project got bogged down in logistical and contractual issues, and it never got past a few initial test wells before stalling when Chinese staff left in 2014 due to ongoing violence.

Just months after the Taliban captured Kabul in August, consolidating power over the country, the group’s new acting mines and oil minister, Shahbuddin Dilawar, urged his staff to rehire Chinese state-owned companies.

Ziad Rashidi, the ministry’s director of external relations, approached the consortium made up of MCC, China Metallurgical Group Corporation and Jiangxi Copper Ltd. Dilawar has had two virtual meetings with MCC in the past six months, according to company and ministry officials. He urged them to return to the mine, the terms unchanged from the 2008 contract.

An MCC technical committee is due to visit Kabul in the coming weeks to resolve the remaining obstacles. Relocation of artifacts is essential. But MCC is also seeking to renegotiate terms, including to reduce taxes and nearly halve the 19.5% royalty rate, the percentage owed to the government per tonne of copper sold.

“Chinese companies see the current situation as ideal for them. There is a lack of international competitors and a lot of government support,” Rashidi said.

China’s ambassador to Afghanistan said talks were underway, but nothing more.

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Acquiring rare minerals is essential for Beijing to maintain its position as a global manufacturing power. Without recognizing the Taliban government, China has distanced itself from the international community by calling for the unfreezing of Afghan assets and has maintained its diplomatic mission in Kabul.

For Afghanistan, the Mes Aynak contract could bring in $250 million to $300 million a year in state revenue, a 17% increase, as well as $800 million in fees over the life of the contract, according to reports. government and business officials. It’s a significant sum as the country grapples with widespread poverty, exacerbated by financial shortfalls after the Biden administration froze Afghan assets and international organizations cut off donor funds. Some have since resumed.

In Mes Aynak, a 2,000-year-old Buddhist town sits uncomfortably alongside a potential economic engine. Afghanistan’s tumultuous modern history has impeded both archaeological exploration and mining development.

Discovered in the 1960s by French geologists, the site would have been an important stop along the Silk Road from the first centuries of our era.

After the Soviet invasion in the late 1970s, the Russians dug tunnels to investigate the copper deposit; the cavernous boreholes are still visible. These were later used as an al-Qaeda hideout, and at least one was bombed by the United States in 2001.

Looters then looted many antiquities from the site. However, archaeologists who came in 2004 succeeded in a partial excavation, discovering the remains of a vast complex, including four monasteries, old copper workshops and a citadel. It became apparent that the area had been an important Buddhist settlement, a crossroads for traders from the west and pilgrims from afar, even from China.

Much to the shock of non-Taliban technocrats in his own ministry, Dilawar pledged to save the site and told the MCC director in Beijing that it was an important part of Afghanistan’s history, according to two officials present. in a virtual meeting.

He rejected open-pit mining plans that would raze the site entirely. The alternative option of underground mining was deemed too expensive by MCC. The Ministry of Culture has been instructed to come up with a plan to move the relics, most likely to the Kabul museum.

“We have already transferred some (artifacts) to the capital, and we are working to transfer the rest, so that the mining works can start,” Dilawar told The Associated Press.

While the ministry is optimistic that a deal can be reached, MCC officials are cautious and pragmatic.

They did not speak to the AP in the filing, citing sensitivities around the talks taking place while international sanctions still bar relations with the Taliban.

They expressed concerns about the feasibility of other contractual obligations, including the construction of a railway to the Pakistani border at Torkham, a coal-fired power plant and community amenities such as a hospital and schools. .

Another issue is how to compensate the residents of three villages near Mes Aynak that were destroyed a decade ago.

Mullah Mera Jan, a 70-year-old local elder, said he was still waiting for the funds promised to him by ministry officials after he was expelled from his village of Wali Baba.

Yet he, too, is hopeful that mining will begin soon. The villagers were promised 3,000 to 4,000 direct jobs and 35,000 indirect jobs. The men from his village are at the top of the hiring list.

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In the labyrinthine hallways of the ministry, hopeful investors line up, documents ready to lay claim to Afghanistan’s untapped mineral riches, including large deposits of iron, gemstones and – potentially – lithium.

These days, Russians, Iranians, Turks and of course Chinese are knocking on the door of Rashidi’s office.

All are “very eager to invest”, he said. The Chinese interest is “extraordinary”, he said. Rashidi has also contacted China’s CNPCI to revamp an oil block exploration contract at Amu Darya near the Turkmen border, terminated in 2018.

Dozens of small-scale contracts have been awarded to local investors, many of whom have joint ventures with international firms, mostly Chinese and Iranian.

The ministry’s revenue has grown exponentially, from 110 million Afghan dollars ($1.2 million) the year before the Taliban takeover to 6 billion Afghan dollars ($67 million) in six months since the Taliban took power, according to documents seen by the AP. However, most of this seems to come from more aggressive taxation, as the Taliban has merged its informal tax economy with that of the government. Outside of coal, it is unclear whether actual mining output has increased.

Ironically, it was the Taliban who hampered work at Mes Aynak for over a decade.

An MCC official recalled how the road leading to the mine was laden with IEDs targeting Afghan forces and NATO allies. An entire Afghan regiment guarded the Chinese engineers at the site. Mubariz, now security chief, said he remembered watching them from the mountains where he was planning attacks.

The MCC official said that when his Taliban hosts told him that they had restored security so that work could resume, he jokingly responded, “Weren’t you attacking us?

The men, machine guns around their necks, laughed too.

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