The Taliban is sitting on $ 1 trillion worth of minerals that the world desperately needs

Stocks of minerals such as iron, copper and gold are scattered across provinces. There are also rare earth minerals and, perhaps most importantly, what could be one of the world’s largest deposits of lithium – an essential but scarce component in rechargeable batteries and other technologies that are crucial in tackling the climate crisis.

“Afghanistan is certainly one of the regions richest in traditional precious metals, but also metals [needed] for the new economy of the 21st century, “said Rod Schoonover, a scientist and security expert who founded the Ecological Futures Group.

Security challenges, lack of infrastructure and severe drought have prevented the extraction of the most valuable minerals in the past. That is likely to change soon under Taliban control. Yet there is interest from countries including China, Pakistan and India that may try to engage despite the chaos.

“That’s a big question mark,” Schoonover said.

Huge potential

Even before President Joe Biden announced that he would withdraw US troops from Afghanistan earlier this year, setting the stage for the return of Taliban control, the country’s economic prospects were weak.

By 2020, an estimated 90% of Afghans lived below the government-imposed poverty level of $ 2 a day, according to a report by the US Congressional Research Service published in June. In its latest country profile, the World Bank said the economy remains “shaped by fragility and aid dependency.”

“Private sector development and diversification is limited by insecurity, political instability, weak institutions, inadequate infrastructure, widespread corruption and a difficult business environment,” it said. in March.

An Afghan man holds a small piece of gold, wanted from the site of a planned Qara Zaghan mine in 2011.

Many countries with weak governments suffer from what is known as the “resource curse”, where efforts to exploit natural resources do not benefit the local population and the domestic economy. Yet revelations about Afghanistan’s mineral wealth, based on previous studies by the Soviet Union, have made a big promise.

Demand for metals like lithium and cobalt as well as rare earth elements like neodymium is skyrocketing as countries try to switch to electric cars and other clean technologies to reduce carbon emissions.

The International Energy Agency said in May that global supplies of lithium, copper, nickel, cobalt and rare earths would have to increase sharply, otherwise the world would fail in its efforts to tackle the climate crisis. Three countries – China, the Democratic Republic of the Congo and Australia – currently account for 75% of global lithium, cobalt and rare earth production.

The average electric car requires six times more minerals than a conventional car, according to the IEA. Lithium, nickel and cobalt are essential for batteries. Electricity networks also require huge amounts of copper and aluminum, while rare earth elements are used in the magnets needed to make wind turbines work.

The US government has reportedly estimated that lithium deposits in Afghanistan can match those in Bolivia, home to the world’s largest known reserves.

“If Afghanistan has a few years of calm that allows the development of its mineral resources, it could become one of the richest countries in the region within a decade,” Said Mirzad of the US Geological Survey told Science magazine in 2010. He led Afghanistan Geological Survey until 1979.

Even more obstacles

That calm never came, and most of Afghanistan’s mineral wealth has remained in the ground, said Mosin Khan, a non-resident senior fellow at the Atlantic Council and former director of the Middle East and Central Asia of the International Monetary Fund.

While there has been some extraction of gold, copper and iron, the exploitation of lithium and rare earth minerals requires much greater investment and technical know-how as well as time. The IEA estimates that it takes an average of 16 years from the discovery of a deposit before a mine starts production.

Right now, minerals generate only $ 1 billion a year in Afghanistan, according to Khan. He estimates that 30% to 40% have been sucked in by corruption, as well as by warlords and the Taliban, who have led small mining projects.

Still, there is a chance that the Taliban are using its new power to develop the mining sector, Schoonover said.

“You can imagine that a trajectory might be that there is some consolidation and some of this mining no longer needs to be unregulated,” he said.

Afghans watch nervously as Taliban regime takes shape and US and its allies continue hectic exit

But, Schoonover continued, “the odds are against it,” given that the Taliban will have to devote its immediate attention to a wide range of security and humanitarian issues.

“The Taliban have taken power, but the transition from rebel group to national government will be far from straightforward,” said Joseph Parkes, an Asian security analyst at risk intelligence firm Verisk Maplecroft. “Functional management of the nascent mineral sector is probably many years away.”

Khan notes that foreign investment was difficult to grab before the Taliban ousted Afghanistan’s civilian Western-backed government. Attracting private capital is becoming even harder now, especially as many global companies and investors are held to ever higher environmental, social and managerial standards.

“Who would invest in Afghanistan when they were not willing to invest before?” said Khan. “Private investors will not take the risk.”

U.S. restrictions can also pose a challenge. The Taliban has not been officially designated as a foreign terrorist organization by the United States. However, the group was placed on a list of specially designated global terrorists from the US Treasury Department and a list of specially designated nationals.

An opportunity for China?

State-sponsored projects, partly motivated by geopolitics, could be a different story. China, the world’s leader in rare earth mining, said on Monday it had “maintained contact and communication with the Afghan Taliban”.

Taliban co-founder Mullah Abdul Ghani Baradar, left, and Chinese Foreign Minister Wang Yi in China on July 28, 2021.

“China, its closest neighbor, is embarking on a very significant green energy development program,” Schoonover said. “Lithium and the rare earths are so far irreplaceable due to their density and physical properties. These minerals are part of their long-term plans.”

Should China step in, Schoonover said there would be concerns about the sustainability of mining projects given China’s results.

“When mining is not done carefully, it can be ecologically destructive, harming certain sections of the population without much voice,” he said.

However, Beijing may be skeptical about entering into venture partnerships with the Taliban due to the persistent instability, and may focus on other regions. Khan pointed out that China has been burned before, after previously trying to invest in a copper project that later stalled.

“I believe they will prioritize other new / border geographies well before Taliban-led Afghanistan,” said RK Equity partner Howard Klein, who advises investors on lithium.

– Matt Egan and Charles Riley contributed with reporting.

.

Leave a Comment