It is not often one can read that the interests of China and America coincide and that they are cooperating on a major project. Ignore what politicians say, the reality is China and America often find themselves competing for the same resources and the same markets, around the world. So it is on the face of it refreshing to see that in what appears to have been a fair and open tender, China Metallurgical Group secured the rights to develop the world’s largest untapped copper deposit, at least according to this report in the Economist. The mine is at Aynak about 30 miles south of Kabul, yes that’s right Kabul, and is likely to cost MCC somewhere in the region of US$3.5bn to cover not just the mine but a host of other investments needed to make extraction possible. These include an onsite copper smelter, a 400 MW coal fired generating station to power the project and augment Kabul’s electricity supply, a coal mine to fuel the power station, a groundwater system, roads, new homes, hospitals and schools for mine workers and their families, and a railway line from the country’s northern border with Uzbekistan to its south eastern border with Pakistan. Meanwhile American troops from the 10th mountain division and about 1,500 Afghan troops are protecting some 300 Chinese workers in a compound by the mine site. And there for some lies the rub. While American troops are risking their lives, the Chinese are laying the foundations for a multi billion dollar payback down the line. But actually creating long term employment in Afghanistan is very much in America’s interests if they hope to extract themselves and leave behind a functioning economy, and hence society.
The Afghan government and the American forces hope the mine and related infrastructure will bring much needed employment to a country proving very difficult to attract inward investment no kidding I hear you say. Reports from a MCC mine in Pakistan suggest actually very little employment spills over in the neighboring economy but the American forces are hoping for a much bigger payback from Aynak due to the level of infrastructure required.
China may hope that the Aynak deal will help it position itself to compete for more projects in Afghanistan. For geological reasons the region is thought to hold some of the world’s last major untapped deposits of iron, copper, gold, uranium, precious gems and other raw materials. The U.S. Geological Survey estimates that Afghanistan also has more than 1.5 billion barrels of oil, mostly untapped since soldiers of Alexander the Great discovered pools of oil in the north more than 2,000 years ago, not to mention 15 trillion cubic feet of natural gas. Two other major copper deposits are close to Aynak, and the government is preparing to solicit bids for a lease to develop the Hajigak iron mine, which is said to contain an estimated 60 billion tons of ore according to a report in McClatchy.com.
India meanwhile is getting very twitchy about what it sees as an encircling China, already with long historic ties of support in Pakistan, now in Afghanistan and to the countries north and east where it shares borders. Asia’s second emerging economy is apparently intent in fighting for rights to future resources in Afghanistan. Whether their endeavors or those of China turn out to be a good long term bet remains to be seen. One thing is for sure, China’s commitment to invest in and develop Anyak underlines their desperation to secure long term sources of supply in spite of the costs and risks involved.