October 3, 2023

While the oil deal has raised hopes in the war-torn country, experts warn of China’s sketchy track record.

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Taliban-ruled Afghanistan received its first significant foreign investment last month when a Chinese firm signed a 25-year, multimillion-dollar oil production contract. Experts are cautiously optimistic that the project could generate jobs and income, despite China’s sketchy record of deal-making.

On January 6, the Taliban signed a contract with the Xinjiang Central Asian Oil and Gas Company (CAPEIC), a subsidiary of the state-owned China National Petroleum Company (CNPC), to extract oil from the Amu Darya basin, which stretches between Central Asian countries and Afghanistan, where it occupies about 4.5 square kilometers ( 1.73 square miles). The deal includes an investment of $150 million in the first year in Afghanistan and $540 million over the next three years, a Taliban official said. Twitter.

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“Daily oil production will be between 1,000 and 20,000 tons,” spokesman Zabiullah Mujahid tweeted, adding that the Taliban would be a 20 percent partner in the deal, which would later be increased to 75 percent.

Abdul Jalil Jumraini, an industry expert and former director general of the Afghan Petroleum Authority under the Ministry of Mines and Petroleum, is one of many who are following developments with little hope.

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“Looking at the situation now, how our people are fighting, in my opinion, this [project] can be a source of income providing economic assistance – an opportunity for Afghans to benefit from their resources,” Jumraini said. “Even if most of the funds go to the government, jobs will be created and some Afghan experience will be used, which is good,” he said.

Although “it all depends on how it will be implemented,” he added.

Sketchy past

While the announcement initially cheered the beleaguered country, old Afghan hands are cautious in their optimism, not only because China has yet to make its investment in the country’s mining sector, but because this particular deal looks just like the one that the previous Afghan government canceled due to corruption.

This exploration and production sharing deal was negotiated in 2011 under the previous Afghan government between the Chinese state-owned CNPC and the Afghan company Watan Group for the “Kashkari Block”, one of three blocks currently part of the recent Amu Darya tender. .

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“It was a big win for the government because CNPC is a very big company and China is currently the largest buyer of oil and gas in the region,” recalls Jumraini.

China imports gas from Turkmenistan through four pipelines, three of which transit through Uzbekistan and one through Tajikistan. Afghanistan was offered the opportunity to become part of the fourth gas pipeline.

A Chinese company has not made much progress in fulfilling its copper mining contract in the Mes Aynak Valley (pictured) [File: Shafiullah Zwak/AP Photo]

“The Afghan government at the time asked CNPC to take part in the tender, but they refused. It was a great opportunity for Afghanistan to develop its oil sector if the Chinese agreed to a fair tender,” Jumraini said.

The previous deal, also spanning 25 years, included a potential initial investment of $400 million to produce 87 million barrels of oil, ultimately generating at least $7 billion in revenue for Afghanistan.

According to Jumraini, Afghanistan has significant oil and gas potential. “Afghanistan was one of the main exporters through Turkmenistan to the Soviet Union. However, over the past few decades, there has not been enough exploration work, which requires billions of dollars of investment,” he said.

The previous government hoped that China would become a major investor in Afghan mining industries, including copper, oil and gas, but very little materialized.

“There were some regulatory and budgetary concerns about CNPC spending on the Amu Darya wind farm, and when the government raised questions and hired independent auditors, CNPC closed the field and its employees left the country. Costs were higher and contracts were given to Chinese companies without proper procurement rules,” he recalled.

The Afghan government made several more attempts to reopen the deal, but negotiations failed. “When we visited China to ask CNPC to resume the deal, they asked to be the only source of agreements for the entire Amu Darya basin, covering 10 blocks. But the government decided against it and put the potential gas block up for auction instead. We invited them to participate in the tender process, but they were not interested,” Jumraini said, adding that CNPC’s local Afghan partners had similar concerns, which led to disagreements between the two sides.

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Jamraini suggested that previous disagreements with CNPC may be why the deal with the Taliban was done through an affiliated company rather than through the state body itself.

Then comes the case of the Mes Aynak mines, one of the largest untapped copper deposits in the world, 40 km (25 miles) southeast of Kabul.

In 2008, a Chinese company leased the Mes-Aynak mines for 30 years to produce about 11.08 million tons of copper. Now that the lease has more than half expired, the company has yet to start developing the mines. “Until concrete investments are made on the ground, I would be skeptical to view any announced figures or targets as anything more than declarative ambitions,” Zhou said.

In a sign that the Taliban are aware of China’s sluggish actions, a Taliban spokesman said that under the Amu Darya contract, “if the said company fails to complete all the materials and items mentioned in the notice within one year, the contract will be automatically terminated. terminated.”

Political significance

Still, the deal has some political significance given the Taliban government’s rogue state status, said Chiayi Zhou, a researcher at SIPRI, an independent conflict research institute in Sweden that specializes in China’s geopolitics. “But it’s also not entirely surprising: Chinese corporations have been in public contact with the Taliban over the past year to renegotiate and renew previous mining and oil contracts entered into in 2008 and 2011. This deal, in fact, is the fruit of these negotiations,” she said. said.

Zhou also noted that the Taliban are in talks with several other neighbors to restart economic cooperation projects.

“There is a general consensus among Afghanistan’s neighbors that there is no alternative to some form of engagement with the Taliban, if only for reasons of regional stability and security,” she said, noting that such channels of economic interaction between Afghanistan and its neighbors remained open. “I would at least partially view Chinese investment as part of that larger picture,” Zhou added.

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Omar Sadr, an Afghan academic and former professor at the American University of Afghanistan, told Al Jazeera that China’s engagement with the Taliban is based more on security than economic interests.

“China’s interest in Afghanistan is driven by two main factors: preventing the East Turkistan Islamic Movement (ETIM) from strengthening and the US returning to the region,” Sadr said.

ETIM is an al-Qaeda-linked armed group that has carried out attacks on China in an effort to create an “East Turkistan” on the Chinese mainland. It is in China’s interest to stabilize the Taliban government, Sadr Al Jazeera said.

“Both of these interests are historically linked to China’s engagement over the past 10 years. Any form of economic interest will be secondary to the security interest,” he added.

China’s renewed interest in Afghanistan came after the fall of the US-backed Afghan government. Independent Chinese investors have invaded, albeit unsuccessfully, Taliban-controlled Afghanistan. This latest deal strengthens China’s presence in the war-torn country.

But the true test of the deal remains to be seen in its execution, experts say.

“The real victory is not about getting a contract or getting the Chinese back on the ground, but how [the Taliban] regulate and implement [contracts and projects]given the current capacity at the ministry,” industry expert Jumraini said, adding that not many details of the deal have been made public.

“The question remains what benefits the Afghans will get; training, technology transfer, contract revenue – none of this is known,” he said.

Sadr added that China is also aware of the limitations of the Taliban and, as a result, does not take much action. The investment in the deal with the Taliban is significantly less than announced between 2002 and 2021.

“His state corporations, in particular, will not invest in Afghanistan until they are sure of its security. We must remember the latest attack on Chinese investors in downtown Kabul that prompted China to advise its citizens to leave Afghanistan,” he said, referring to the December 2022 attack on a hotel in Kabul, popular with Chinese citizens, claimed by ISIS (ISIS) . responsibility.