Afghan mineral wealth could top $1 trillion: Pentagon

WASHINGTON Mon Jun 14, 2010 6:33pm EDT

An aerial view of Kandahar is seen from a blackhawk helicopter over Afghanistan, May 7, 2009. REUTERS/Jason Reed

An aerial view of Kandahar is seen from a blackhawk helicopter over Afghanistan, May 7, 2009.

Credit: Reuters/Jason Reed

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WASHINGTON (Reuters) - Untapped mineral deposits in Afghanistan may be worth more than $1 trillion, a finding that could reshape the country's economy and help U.S. efforts to bolster the war-battered government, Pentagon officials said on Monday.

Afghanistan has significant deposits of copper, iron ore, niobium, cobalt, gold, molybdenum, silver and aluminum as well as sources of fluorspar, beryllium and lithium, among others, a task force studying the country's resources found.

"It's certainly potentially good news, especially for Afghanistan," said Pentagon spokesman Colonel David Lapan. "If we can assist the Afghans in developing these resources, it certainly has the potential for adding a lot to their economy."

Deputy Undersecretary of Defense Paul Brinkley, who headed the task force, said the findings showed Afghanistan a path "toward its own economically sovereign capability to finance its own human and security needs."

Experts cautioned the challenge to exploiting Afghanistan's mineral wealth was huge and could take decades to overcome. The country has little mining infrastructure, is in the midst of a wrenching war and has a reputation for government corruption.

Mineral wealth in Afghanistan is scattered throughout the country, including along the border with Pakistan, where the Taliban-led insurgency is the most intense.

"This is an uphill climb for Afghanistan," State Department spokesman P.J. Crowley said, adding the United States was helping Afghan officials develop a system to fairly distribute future revenues. "We're not underestimating the challenges involved here."

The extent of Afghanistan's mineral wealth was identified by a task force that included members from the Pentagon, State Department and U.S. Geological Survey working in conjunction with officials from the Afghanistan Ministry of Mines.

A briefing paper released by the Pentagon said the main resources were iron ore with an estimated value of nearly $421 billion and copper deposits valued at $273 billion.

The minerals survey was part of a broader effort to identify the economic potential of Iraq and Afghanistan and help the governments develop the international business relations to exploit their resources.

"This really is part and parcel of Gen. (Stanley) McChrystal's counterinsurgency strategy," Lapan said. "This is that whole economic arm that we talk about but gets very little attention."

The Afghan review was initially carried out in 2006 and 2007, but the task force focused primarily on Iraq. With the drawdown of U.S. forces in Iraq, the task force turned its attention back to Afghanistan and did a follow-up assessment.

The assessment concluded the scale of Afghanistan's mineral wealth "was much bigger" than initially realized, Lapan said.

An estimate based on mineral prices late last year concluded Afghanistan was sitting on mineral wealth of $1 trillion, a figure Afghan President Hamid Karzai mentioned at a news conference January 31. Lapan said that figure may be low.

"There's ... an indication that even the trillion dollar figure underestimates what the true potential might be," Lapan told reporters at the Pentagon.

Officials said the trillion dollar figure did not include known oil and gas reserves or the value of expected deposits of minerals like lithium that have not been verified scientifically to the point of being able to estimate a value.

Brinkley said what was important was the mineral deposits were large enough to give Afghanistan its own economic sovereignty.

"This is a country that has an $800 million annual budget, that depends on the international community for the vast majority for the cost of its security, its development," he said. "So what's relevant about the number ... is the Afghan people ... have a source of indigenous wealth that, properly developed, will enable them to be sovereign."

But resources are likely to pose challenges as well.

Robert Lamb, an expert in post-conflict reconstruction at the Center for Strategic and International Studies, said if the minerals were to help produce a positive outcome to the U.S.-led war in Afghanistan, their exploitation had to be managed carefully and ordinary Afghans needed to benefit.

"This is one of those cases where U.S. interests are much more aligned with the interests of common Afghan citizens," he said. "Whatever system of revenue sharing is set up, people who live in the area where the mines are ... they should be seeing some of the financial benefits of those mines."

News of the country's untapped wealth is likely to intensify competition among regional players such as China, India and even Russia for a greater role in exploiting those resources.

Two Chinese firms have committed themselves to a $4 billion investment in the vast Aynak copper mine, south of Kabul, the biggest non-military foreign investment so far in the country.

Another big contract to mine an estimated 1.8 billion tons of high-quality iron ore in the remote mountainous region of Hajigak is expected to open for international bidding this year.

Firms from India and China are eyeing the contract, which the Afghan mines ministry says covers the largest unmined iron deposit in Asia.

(Additional reporting by Sanjeev Miglani in Singapore, Andrew Quinn in Washington; Editing by Eric Walsh)

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Comments (72)
karimnn wrote:
I don’t think you read the article past the first sentence, there are already major players, none of whom are Afghany companies, Afghanistan’s resources will be “reserved” for the highest bidder, that will certainly not include Afghanistany companies. The IMF will “conveniently” loan Afghanistan a large sum of money to allow these companies to extract those resources, once the project is complete, Afghanistan will have to pay back the loan at a very high interest rate. As far as your ridiculous war, I don’t think it is or will be mentioned anywhere in this article or any future articles pertaining to those resources; sorry!

Jun 13, 2010 12:41am EDT  --  Report as abuse
Garethjp wrote:
Well that is just amazing; its come as such a shock to all of us, that a country that has been invaded has natural recourse’s that can be used by the invading country.

Question: How has the Pentagon found this and not some lithium hunting company(if there is such a thing)?

Jun 14, 2010 1:00am EDT  --  Report as abuse
Tibbitts wrote:
That makes sense, we should force the afghans to give us their resources, because we came to their country and waged war. Thus perpetuating the very conditions that caused us to engage in that war. That makes sense.

Unfortunately, as @karimnn points out, the powerful multi-nationals have the real control here. I have no doubt it will be huge companies who are able to secure contracts to exploit Afghanistan’s recently discovered wealth, most of whom will be from here in America. I doubt very many people who actually live in Afghanistan will see a sliver of the profits.

Jun 14, 2010 1:03am EDT  --  Report as abuse
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