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Does Afghanistan’s New Mining Law Benefit Its Mafias?

Foreign Policy SEPTEMBER 3, 2014
After years of delay, Afghanistan's parliament finally passed a new mining law, the Law on Mining 2014. On Aug. 16, Afghan President Hamid Karzai signed the law into being. Yet experts say the law lacks safeguards against corruption and is likely to facilitate the creeping control of the sector by armed groups, oligarchs, and monopolies that could threaten the state.
According to Afghan, American, and Soviet-era geological studies, Afghanistan has $3 trillion worth of natural resources: petrochemicals account for two-thirds of that total, while minerals, including gold, silver, copper, iron ore, a range of minor metals, and rare earths, marble, and gems account for $1 trillion.

The sector has long been promoted as the government's future revenue stream, and the United States has been touting it for years as the obvious replacement for the military and foreign aid that poured into the country after 2001.

At a self-congratulatory ceremony at Kabul's Intercontinental Hotel the day after Karzai signed the law, ministers lined up to tell assembled guests -- including ambassadors and representatives of donor countries -- that Afghanistan now has a mining law that conforms to international best practices. Following the lead of the minister for mines and petroleum, Mohammad Akbar Barakzai, they praised its emphasis on transparency, accountability, security, and governance; its respect for the environment and indigenous people. Potential investors, national and international, could have confidence in the efficacy of the law, they said.

While the Karzai administration celebrated the law, others expressed concern. The dissenting voice, according to a record of the speeches that I saw, came from a representative of the Extractive Industries Transparency Initiative (EITI), who bravely raised the negative aspects of the new law, including secrecy of contracts.

Stephen Carter of Global Witness, a mining industry standards advocacy group, echoed this criticism, telling me that: "Transparency over contracts and ownership, strong rules for open and fair bidding, and complaint mechanisms that local communities can actually use are [...] the first things that should have been included in the law if the Afghan government and its international partners are serious about avoiding the very real threat of natural resources fuelling conflict and corruption."

This issue raised alarm bells when the law was in draft form, prompting groups such as EITI, Integrity Watch Afghanistan (IWA), and Global Witness to lobby ministers for changes that would bring the legislation in line with international standards.

Global Witness even commissioned a comprehensive study of the draft law, and engaged industry experts to pinpoint weaknesses and make specific recommendations. Transparency, security, and beneficial ownership were among the many areas the ensuing report highlighted as problematic.

"The law is silent on security issues, but there is a real danger of mining supporting illegal armed groups," it said. In a reference to IWA research that found the Afghan Local Police (ALP) in Khas Kunar, in the eastern border province of Kunar, were making millions from smuggling chromite -- used in steel making -- into Pakistan, the report noted: "The danger in Afghanistan is clear from examples like the illegal mining carried out by Afghan Local Police forces in Khas Kunar -- forces which have been accused of human rights abuses and which have created tensions between local communities."

A lack of transparency, allowing details of ownership and involvement of public servants in mining contracts to remain confidential was also a problem, it said. "The law [...] would be greatly strengthened if it required publication of contracts and of the true, ‘beneficial' ownership of a license holder or applicant -- two basic and vital measures against corruption."

For some, it appears that the international community has used the potential for natural resources revenues as a justification for setting a deadline for withdrawal from Afghanistan. One source with long diplomatic and bureaucratic experience in Kabul, said: "It's a case of any law will do as long as it's a law. Then they can tick that box and go; job done."

It is not so clear, however, that Afghanistan can afford to simply tick that box.

The Taliban already supplement the tens of millions of dollars they earn annually from opium production with income from illegal marble mining. A report by the U.N. Security Council in June said that Taliban control of onyx marble mining in Helmand province alone earned it at least $10 million a year. Illegal mining in Helmand and Kandahar was enabling some Taliban outfits to become independent of the central command, it said, highlighting a dangerous development.

IWA also found that cross-border mafias are thriving as militias such as the ALP -- set up in 2010 to fight the Taliban in remote regions -- take control of various mines. These groups are expected to soon begin fighting each other to consolidate their positions.

This battle for control "may consign the country to a prolonged war," Javed Noorani, formerly of IWA and an expert on the resources sector, told me recently.

With the withdrawal of U.S. combat troops scheduled for December 31, and a drastic drawdown in external development aid, Noorani believes Afghanistan is transitioning not from war to peace, but "from military conflict to resources conflict." "The Taliban are not spectators to the sector but finance their war from revenues from the sector," he said. He believes illegal mining will allow non-state groups like the Taliban to consolidate and emerge to threaten the governments of Afghanistan and its neighbors, telling me that: "Their footprints are already here."

The security situation has already scuppered a $3 billion deal with a Chinese state consortium to exploit a huge copper mine at Mes Aynak, near Kabul. Insurgent attacks forced the company, MCC, to pull its people out more than a year ago, and the contract has been renegotiated to scale down the company's infrastructure obligations.

A $10.8 billion Indian deal to mine iron ore at Hajigak, in Bamiyan province, has not yet been signed as the Steel Authority of India-led group was waiting for the law to pass before finalizing the details. Now it seems as tenuous as the MCC deal. The fate of both contracts shines a light on the fundamental conditions any international miner must consider before entering the Afghan minerals sector: There's a war on. And there's no infrastructure.

So why, Noorani says he wants to know, did the international community back a law that will only benefit a "mining mafia" at a time when Afghanistan is in such desperate need of rule of law and revenues to fund its post-war development?