Afghan Nation’s Untapped Treasure: Assessing the Taliban’s Capacity to Govern Mining Amid Corruption and Mafias

Afghan Nation’s Untapped Treasure: Assessing the Taliban’s Capacity to

Govern Mining Amid Corruption and Mafias

July 27 2024

The Taliban, struggling to run Afghanistan’s crisis-hit economy amid international isolation and sanctions, have turned their focus to the country’s untapped natural resources,which are estimated to be worth over a trillion dollars. Afghanistan, one of the poorest nations, holds an estimated $1 trillion worth of mineral deposits, which the Taliban hope will secure the country’s future.

In September 2023, the Taliban announced over $6.5 billion in new mining deals, identifying the sector as a crucial revenue source. Afghan Eyewitness reports that the evolving mining landscape under Taliban control from August 2021 to February 2024 showcases significant economic involvement and shifts in ownership and operations.

The Taliban have issued at least 205 mining contracts to over 150 companies since their takeover, averaging more than one contract per week. Analysts reviewed contracts published by Afghanistan’s Ministry of Mines and Petroleum (MOMP), revealing numerous foreign investment deals with companies from Pakistan, China, Iran, Turkey, Qatar, and the UK. Notably, some deals involved a company likely controlled by the Iranian Revolutionary Guard Corps as claimed in the report.

The Taliban-led MOMP became shareholders in at least nine mining projects, moving some from royalty-based agreements to direct partnerships. Of the companies holding contracts with the Taliban, only 14 held contracts under the previous Republican government. Before their takeover, there were 114 active contracts. Following their power seizure, the Taliban issued four new contracts within a few months, followed by over 100 in 2022. It is likely more licenses have been issued but not disclosed.

Sahil Middle East Mining and Logistics Company, formerly in logistics, now holds the most mining contracts under the Taliban. The second block went to Sahil, partnered locally with Dara-e-Noor and internationally with Turkey’s Epcol. Shamsh, partnered with British companies GBM and AD Resources, received the third block. Bakhtar Steel Company, along with Iranian companies Ahya Sepahan and Persian, was granted the fourth block. Nearly one-third of the disclosed contracts involve mining nephrite, a type of jade, with the rest focusing on marble, chromite, and gypsum. Nangarhar province, rich in chromite, talc, and nephrite, has the most issued contracts.

Afghanistan’s estimated $1 trillion mineral deposits have long attracted foreign interest. Between 2004 and 2021, the U.S. invested around $962.6 million in Afghanistan’s mineral sector, but these efforts failed to produce widespread economic benefits. Corruption was rampant under the former government. Despite laws to prevent state officials from holding mining contracts, many parliament members owned or partnered in mining projects. A 2017 U.S. Institute of Peace report described the sector as “large-scale looting,” with mining revenues funding the Taliban and other militant groups.

Stephen Carter of Global Witness highlighted the lack of oversight in the sector, stating, “The sector, as a whole, is operating in a very uncontrolled way. There’s no oversight… if that comes at the expense of taking shortcuts in the sector’s control, I think it will be seen as a very poor decision in the future.”

Javed Noorani, a researcher in Afghanistan’s mining sector, provides an in-depth analysis of the recent awarding of a contract for the Nuraba-Samti mine to an Afghan-Chinese joint venture. He writes of the pervasive corruption in Afghanistan’s mining sector, which continues to undermine the Afghan administration and numerous small-scale Chinese developers. Noorani identifies deep-rooted corruption as the primary barrier to investment and development in Afghanistan’s mining sector.

The Nuraba-Samti placer gold mine in Takhar province illustrates the legal and operational decay in Afghanistan’s mining industry. Initially surveyed in 1977, the mine’s gold deposits have not been updated or verified. The Nuraba-Samti mine was first contracted to West Land General Trading (WLGT) in 2008, but the company failed to develop the deeper, more challenging Samti mine due to financial and technical difficulties. By 2023, the Taliban awarded the mine to a China-Afghan joint venture, but details of the contract remain opaque.

Despite the potential, Afghanistan’s mining sector is fraught with challenges. Noorani emphasizes the need for transparency and professional practices to realize the country’s mineral potential. He says, “The claim that this new trading company will invest $310 million in three years and start the project in three months is simply unprofessional and unrealistic.”

The Taliban hopes to utilize Afghanistan’s vast untapped mineral resources to increase national revenues. However, the sector’s potential to contribute to Afghanistan’s economic future is threatened by historical corruption and ongoing political instability. The country’s natural resources could lead to corruption, the sale of valuable assets to foreign investors, and violent unrest, pushing Afghanistan towards a “resource curse.” Under the previous Afghan government, poor security, weak legislation, and corruption plagued the mining industry, deterring investors.

The Ministry of Mines and Petroleum estimates that Afghanistan possesses mineral deposits, including oil, gas, iron ore, copper, and gold, worth around $1 trillion. Kabul aims to generate $4 billion annually from mining and energy over the next decade. However, in 2012, these sectors contributed less than $150 million combined.

As Noorani concludes, “Deep-rooted systematic corruption in various forms under the former Kabul regime and the current Taliban government is the major obstacle to investment and development of mineral mines in Afghanistan.”

Involvement of Local Gemstone Mafia and Borderlords

Jalal Bulkhi, a name changed for security reasons, is a local trader involved in nephrite mining in eastern Afghanistan and holds a share in a mine in Kunar province. According to Bulkhi, the terms set by the Taliban are remarkably simple, welcoming anyone who can invest in mining. However, he points out the rampant unprofessional digging practices and the involvement of people from Pakistan’s tribal regions in investing, trading, or smuggling these precious stones. “As Afghanistan’s economic situation has worsened since the Taliban takeover, local people have increasingly invested in small-scale mining projects, especially since many foreign-funded projects have ceased.”

Pakistani traders frequently visit these mining sites in various parts of the country, striking deals with local traders for precious stones. Through Pakistan, these gemstones are smuggled to other countries, further complicating the already chaotic situation. Bulkhi says that extraction practices are far from professional, with significant Chinese involvement at higher levels, holding large portions of mining interests in collaboration with the Taliban.

Mohammad Karim Azim, executive director at the Afghanistan Chamber of Commerce, mentioned the revival of the Aynak copper mine contract in Logar province and commented on the previous government’s failure to capitalize on the country’s mineral wealth. “A poor nation slept on treasure, but did not trade off,” he remarks. Azim believes it is now a crucial time to extract these resources, emphasizing the need for security and substantial human effort to realize this potential.

Abdul Qadeer Mutfi, former spokesperson for the Ministry of Mines and Petroleum, says that during the previous government, Chinese companies in Aynak were not permitted to extract resources because they did not meet the economic conditions set by the contracts. These conditions included building energy centers, establishing a railway from Bamyan to Khyber in the east, and constructing several ring roads.

Mutfi emphasized that Afghanistan’s mining resources are a crucial national asset and should not be sold off to mining mafias. He stressed that mining should be leveraged to eradicate long-standing poverty and to establish sustainable infrastructure. “Our mining is important national wealth and should not be sold to mining mafias,” Mutfi says. “This should be a topic of national debate, focusing on using these resources to build sustainable infrastructures and eliminate poverty.”

The involvement of local gemstone mafias and border lords has further complicated the governance of Afghanistan’s mining sector under the Taliban. The lack of professional oversight and the influx of foreign, particularly Pakistani, traders have led to rampant smuggling and unregulated extraction practices. While the Taliban’s open-door policy for investors has stimulated local economic activity, it has also facilitated widespread corruption and exploitation of Afghanistan’s valuable mineral resources.