July 20, 2010

Meddling with Metals and Resources in Iraq and Afghanistan: How will this End?

I went to an event last Wednesday morning at the U.S. Institute of Peace (USIP) that included a panel with James Yeager, former advisor to Afghanistan Ministry of Mines, Graciana del Castillo, a Senior Research Scholar at Columbia University and Scott Worden, Senior Rule of Law Advisor at USIP, and was moderated by Raymond Gilpin, Associate Vice President for Sustainable Economies Centers of Innovation. Strange as it may seem, the event gave me a  feeling of déjà vu.  The event, “High-Value Resource Contracts, Conflict, and Peace in Afghanistan,” didn’t on its face have much in common with an event that I had attended last Monday at the Woodrow Wilson International Center for Scholars, “China and the Persian Gulf.” Yet I was hearing an eerily similar refrain:  At the Wilson Center last Monday, Senior Research Fellow at the New America Foundation, Afshin Molavi, declared that “China has won the Iraq war,” in the sense that its state-owned petroleum and oil companies have acquired lucrative contracts, and have virtually become one of the dominant players in Iraq. 

Then on Wednesday, Yeunger’s very first statement of the session raised the issue of dealing with bids on Afghan mining tenders from Chinese state-owned corporations.  He argued that the current situation, where Western-owned, private corporations must submit bids against Chinese state-owned companies like MCC (China Metallurgical Group Corporation), is inherently unequal because China’s corporations are aiming only to gain access to commodities, and therefore don’t have to be financially profitable; in fact they can even operate at a loss.  Furthermore, bids from these companies are often accompanied by a financial aid package from the government of China that can be hard to turn down, especially if you’re the government of one of the poorest countries in the world, such as in Afghanistan, where a 20-30 million dollar bribe may be more tempting.  Worden also pointed out that there have been (passive) accusations that China’s mineral companies are free-riding off of the security provided by the U.S. military.

Thus, it seems that China’s state-owned enterprises are playing a large, but mostly hidden, role in the reconstruction and nation-building efforts that the United States is leading both in Afghanistan and Iraq.  This connection prompted several questions for me: Is China interested merely in securing access to certain commodities, or is it actually pursuing broader geo-strategic aims in both countries?  Furthermore, China’s economic presences could have several effects, both anticipated and unanticipated, on our efforts in Iraq and Afghanistan.  Will China’s investments in infrastructure and the royalties that mining provides lead to greater stability and development, or will it only lead to corruption, instability and internal conflict there? 

The “announcement” in June that Afghanistan contains perhaps 1 trillion dollars worth of minerals deposits led to a similar debate about whether mining could lead to peace and prosperity, or would it lead to the vicious cycle of the resource curse in Afghanistan.  Yet introducing Chinese companies into the equation adds even more uncertainty, because it means that the United States and other Western powers may not have control over how mining contracts are written or how mining operations are conducted: Will local people be employed? Will environmental standards be considered? Will the revenues promote public goods or wind up in the pockets of warlords?  But I think the long-term security question for the United State is: how exactly will China’s economic involvement in Afghanistan and Iraq affect our efforts there?