Friday Round-Up: 20th August 2021

Friday Round-up

20th August 2021

I’m not even going to try to touch on the scale of the humanitarian calamity that is unfolding in Afghanistan in a newsletter like this – suffice it to say that the outlook for everyone in that country, particularly women, has become extremely bleak at a pace that I think surprised all outside observers.  The state of the resource sector in Afghanistan must obviously be discussed with the caveat that none of this matters even close to as much as the suffering its citizens are now in for, and will be for the foreseeable future.

With that said, let’s discuss resources in Afghanistan.  The country is famous for gems from the Hindu Kush region, including emeralds, rubies, sapphires, turquoise and lapis lazuli.  Such stones are easy for small-scale and artisanal miners to exploit because they require much less processing than resources like metal ores, and are relatively straightforward to mine.  But there are much bigger fish to fry in Afghanistan for any group that could negotiate access and wants to invest the money to mine in extremely rugged terrain.  The Diplomat estimates that Afghanistan’s mineral resources to be worth between $1-3 trillion, while a 2010 estimate from the Afghan Mines Minister put the number solidly north of $3 trillion.

Afghanistan's gemstones are something better than world-class

Afghanistan is a treasure trove of sought-after commodities, including gold, silver, platinum, copper, iron, chromite, lithium, uranium and aluminium.  Some of these show astronomical grades, with the Hajigak iron ore deposit reportedly containing 62% Fe.  Others, such as lithium, could have reserves that rival Bolivia, currently the world’s current largest producer.  All this is pretty speculative, however, since the twin barriers of physical security and funding have prevented too many geologists from getting on the ground and assessing the state of the country’s resources.  Many of the richest deposits occur in the mountains, which are traditionally strongholds of the Taliban, and this not only prevents government or foreign access to these sites, but creates a desperately unsafe illegal mining industry whose profits are funnelled straight to the former insurgents/current rulers, providing a steady source of funds for the extremist group.

Geological diagram of the Hajigak iron ore body

Perhaps Afghanistan’s biggest resource blessing is rare earth elements (REE), which are a bottleneck of global supply for several reasons.  Firstly, they are required for virtually every piece of modern technology that has a current passing through it, so demand is always high.  Secondly, they are, as the name suggests, relatively rare – few countries have access to significant deposits.  And, of course, there’s the China factor.  Something like 35% of global REE deposits and 70% of global production occur in China, and much of the knowledge about the tricky extraction process resides there as well.  REEs were a significant worry when Trump got in a trade fight with China in 2019, because China controls so much of the world’s REE supply that major industries would grind to a halt if it decided to play politics with them, and China knows exactly how strong its position is.

Rare earths are crucial for electronics of all kinds

So substantial reserves of REEs in Afghanistan represent a major missed opportunity of the 20-year occupation.  The US and its allies missed an opportunity to shore up supply of these critical metals in a potentially friendlier jurisdiction than China, and because of that inaction Afghanistan missed the chance to exploit a resource that would provide it with substantial, secure, and urgently needed funds.  Now, China is swooping in.  Literally hours after the Taliban largely seized control this week, a Beijing spokeswoman said China was ready for “friendly co-operation with Afghanistan.”  Despite calls for China to act according to international humanitarian standards, they are certainly not going to give up this opportunity to not only earn riches from an almost entirely new resource base, but to further enhance their position as the controller of the world’s REE supply.  If Western nations refuse to deal with the Taliban, China will likely have no such compunctions, putting it in a strong position to control resources and funding, and therefore politics, in Afghanistan.  This will only shore up the Taliban economically, and the increased power of the Taliban leads to a further loss for the Afghan people, while China’s added dominance of the REE trade represents a loss for Western powers. The only possible upside is that an alliance between the Taliban and China will most likely prevent any conflict over mineral resources in Afghanistan, but this is cold comfort under the circumstances.

The resource sector is just one example of the utter failure of the Western intervention in Afghanistan, and China’s encroachment is a good case study in how it has only made things worse. A country that could live prosperously off its resources for many years lies shattered, and the benefits of those resources will now more than likely be directed against the interests of both the Afghan people and the West.  What an absolute waste of lives, money and hope this whole adventure has been.