China digging into Afghanistan's treasure trove

China is helping war-torn country exploit its vast mineral wealth, but the real story may be a major archaeological site unearthed along the way

PUBLISHED : Friday, 15 March, 2013, 12:00am
UPDATED : Friday, 15 March, 2013, 2:19am

China is establishing an economic and strategic foothold in Afghanistan, as the nation prepares for the end of a decades-long war by touting itself as the new Mecca of mineral wealth.

Demand for raw materials to maintain China's growth rates has long outstripped domestic production, making Afghanistan an attractive ally as a source of resources.

For its part, the Afghan government has identified mining as its source of revenue for post-war development.

The minister of mines, Wahidullah Shahrani, travels the world to attract investors to Afghanistan's US$1 trillion worth of minerals, which include copper, gold and rare earths.

In London this month, Shahrani won the support of British Prime Minister David Cameron, who hosted a forum of mining executives to promote minerals as the bedrock of Afghanistan's post-war future.

International combat troops are due to pull out by the end of next year, and have handed responsibility for security in much of the country to Afghan forces.

Success in developing the sector could bring the poverty-riven country full circle to meet a wealthy and powerful past built on its mineral riches.

Until the destruction of two massive Buddhas by the Taliban in 2001, it was not widely known that Afghanistan's past stretches a long way beyond Islam and insurgency.

At various points in its chequered history, Afghanistan has been a prosperous and powerful player in regional politics, precisely because it sits on huge mineral and hydrocarbon resources.

Beijing already has almost US$4 billion committed to the country's mining sector, and last year signed a bilateral strategic-partnership agreement with Kabul aimed at entrenching political, economic, cultural and security ties.

India was set to trump China with a contract worth up to US$10 billion once a new mining law had been passed by parliament, Shahrani said.

The massive projects being bankrolled by Beijing and New Delhi include roads, railways, power stations and smelters, as well as relocation, training and employment for Afghans.

The scale of the projects hints at the long-term strategic objectives of the rival powers, tussling for influence in a country at the region's crossroads as it emerges from decades of war, poverty, aid dependence and - since 2001 - a Taliban insurgency and a Western military presence.

Although nothing has come out of the ground yet, China's involvement has already been tainted by allegations of corruption, secrecy and a disregard for Afghanistan's cultural heritage.

State-backed China Metallurgical Group (MCC) has contracts with Afghanistan to develop copper and iron-ore deposits. A US$3 billion contract for a copper mine near Kabul, signed in 2008, was the first major mining deal for Afghanistan and the biggest foreign investment in the country at the time.

The mine at Mes Aynak, 40 kilometres southeast of Kabul, will exploit the world's second-biggest copper deposit, at around 5.5 million tonnes.

MCC's contract includes roads and railways to the borders of Pakistan and either Uzbekistan or Tajikistan. Depending on its feasibility, a smelter would also be built, Shahrani said.

MCC's initial insistence that the terms of the contract be kept secret - contrary to international norms - had been overturned, Shahrani said.

"I communicated with MCC through our legal people, and verbally they agreed with us that they will not have any objection to publishing the contract," he said. "They are about to issue a letter expressing their agreement to the publication of the Aynak contract."

Allegations that MCC paid huge kickbacks to a previous minister to secure the contract have not been verified. Shahrani denied rumours that MCC wished to renegotiate the contract because it included a royalty payment to the government of 19.5 per cent, compared to the standard 5 to 10 per cent.

Industry consultant Michael Komesaroff questioned the commercial viability of the MCC-Mes Aynak deal, but said it "demonstrates the competitive advantage Chinese SOEs [state-owned enterprises] derive from their cosy relationship with Beijing".

What should be very clear to everybody is that if it wasn't for this mining project, the site would not have been excavated

But one thing that plagues MCC, and by extension Beijing, is the fact that the mine sits on the remains of an ancient Buddhist complex.

An international campaign is calling for the mining plans to be halted and the site preserved.

Archaeologists say the site is one of the most important in the history of Buddhism. It dates back more than 2,000 years, when Buddhist monks discovered the copper node and established a trading hub around it.

The monks used Mes Aynak as a copper production centre, part of a vast Silk Road trading network stretching to Korea and possibly Japan, according to Philippe Marquis, the head of the French Archaeological Delegation in Afghanistan (Dafa).

Far from condemning Afghan and Chinese mining plans, Marquis said they should yield both economic and cultural benefits for Afghanistan. The Buddhist site was only discovered when MCC started exploration, he said, and so the copper could be thanked for sparing it from certain destruction.

"What should be very clear to everybody is that if it wasn't for this mining project, the site would not have been excavated. And if it is not excavated, it is doomed. Remove all the security which is on the site, and within two months it is going to be destroyed by looters," he said.

"In Mes Aynak you have two treasures: a copper mine that is an economic treasure; and a cultural treasure," he said. "With a bit of co-ordination it is possible for Afghanistan to have both treasures. And this is what we are trying to help them do."

The site is shedding light on the political and economic role of Buddhism as the philosophy spread from India to Central Asia, China and beyond. It is also yielding information about periods of prosperity and political power in Afghanistan's past that were built on its mineral reserves.

"It could be copper, it could be iron, silver, gold," Marquis said. "So archaeology is a very good way to document a process which is more or less at work again right now. It is a process that could give some real power back to Afghanistan."

The monks' control over the mining industry illustrates the central role of Buddhism at that time, "not only as a philosophy but also in the economic development of this country", he said.

"Until now, the economic aspects of Buddhism have never really been understood or properly studied. From Mes Aynak we are learning that Buddhism played a central role in the region because it integrated economic, social and political influence. And we are starting to understand that each time Afghanistan was an important political power centre, it was very often because it had the capacity to exploit its natural resources."

But not everyone is so upbeat about mining in Afghanistan. Filmmaker Brent Huffman has written about the impending destruction of the Mes Aynak site. He has also accused the Afghan Ministry of Mines of corruption, and said Afghans were unlikely to benefit from the country's mineral wealth.

"I often hear talk about mineral extraction being somehow good for Afghanistan, but I promise you this is not the case," he recently wrote on CNN's website.

"My fear is that in the future Afghanistan will consist of hundreds of these gaping toxic craters, and the resources the country needs for its own development will be lost. Afghans will see no benefit. They will suffer from irreversible environmental devastation and the permanent loss of invaluable cultural heritage."

The Asia Society lists Mes Aynak at No5 on its "10 most endangered heritage sites in Asia".

The area being excavated by Dafa and the Afghan Institute of Archaeology covers four square kilometres, and has at least 12 Buddhist monasteries. Archaeologists have found hundreds of statues of Buddha, some 10 metres tall, as well as rare wooden carvings, wall hangings, texts, stupas, and buildings - possibly for mine workers and residents.

The site dates back to about 100BC, with relics dating to the seventh and eighth century in the Christian era, Marquis says. Excavation began in April 2009 with some 650 workers, most of them local villagers.

Shahrani said the archaeologists had until the end of May to complete their work. "Once I get a clearance from Dafa and from our Ministry of Culture, then we will issue the licence to MCC to begin mining," he said.

Realistically, mining is not expected to begin before 2016. With the troop drawdown, a presidential election next year and parliamentary elections in 2015, analysts and industry experts say it will be some time before Afghanistan can present a stable political or security environment for such large-scale work.

Listed mining behemoths like BHP Billiton and Rio Tinto cannot justify the high risk or the cost of entering the Afghan sector, analysts say. They will leave it to state-backed companies such as MCC, which can use their political capital and ability to take reputational risk to ride out the instability in the service of a larger geopolitical agenda.

At the wildcatter end of the market is Afghan Gold and Minerals (AGM) - a 51 per cent Afghan-owned firm with backing from international investors with deep pockets. Alone and with some joint-venture partners, it has concessions to explore for copper and gold.

AGM, and any juniors that join it, will follow the traditional path of doing all the hard work and hoping for a future buyout by a listed major, said its chief executive officer Richard Williams.

In the meantime, Marquis said, Afghan authorities could use the excavation activities as an excuse for the inevitable delays to commencement of mining. The archaeologists at Mes Aynak were in "no rush", he said.

"The Minister of Mines is not really interested in archaeology. But right now he can say it is important because he doesn't want to be depicted in the media as doing as the Taliban did."

Afghan authorities were only starting to comprehend the site's importance, he said, as Afghanistan's historical narrative had been taken over by Islam and, more recently, the Taliban. Mes Aynak was even used by al-Qaeda as a training camp, overseen by Osama bin Laden as he planned the September 11 attacks, according to a US government report.

"[Afghans say] we can blame the Taliban for the destruction of the Bamiyan Buddhas, but if we are not able to care for our own cultural heritage, we will be no different," Marquis said.

"The mine is going to be an asset for this country. Income from the mining will last for 20, 30, 40 years; after that Mes Aynak will be of no economic value. But the cultural riches that are going to be excavated will still be there, and they will last forever.

"They are part of the history of the people in this country. It is very important to see that we are talking about two different systems and values. But it doesn't mean that economy should exclude culture, or that culture should exclude economy."