China hungry for Afghan copper

JALREZ VALLEY, Afghanistan — In this Taliban stronghold in the mountains south of Kabul, the U.S. Army is providing the security that will enable China to exploit one of the world's largest unexploited deposits of copper, earn tens of billions of dollars and feed its voracious appetite for raw materials.

U.S. troops set up bases last month along a dirt track that a Chinese firm is paving as part of a $3 billion project to gain access to the Aynak copper reserves. Some troops made camp outside a compound built for the Chinese road crews, who are about to return from winter break. U.S. forces also have expanded their presence in neighboring Logar province, where the Aynak deposit is.

The U.S. deployment wasn't intended to protect the Chinese investment — the largest in Afghanistan's history — but to strangle Taliban infiltration into the capital of Kabul. But if the mission provides the security a project to revive Afghanistan's economy needs, the synergy will be welcome.

"When you have men who don't have jobs, you can't bring peace," said Abdel Rahman Ashraf, a German-trained geology professor who's Afghan President Hamid Karzai's chief mining and energy adviser.

"When we take money and invest it in a project like Aynak, we give jobs to the people." Indeed, the project could inject hundreds of millions of dollars in royalties and taxes into Afghanistan's meager coffers and create thousands of desperately needed jobs.

Beijing faces enormous challenges in completing the project and gaining access to 240 million tons of copper ore that are accessible through surface mining. Taliban-led rebels operate in large parts of Logar and Wardak; the area is sown with mines; and China must complete an ambitious set of infrastructure projectsas part of the deal.

China's willingness to gamble so much in one of the world's poorest and riskiest nations testifies to its determination to acquire the commodities it needs to maintain its economic growth and social stability.

In Mount Toromocho in the Peruvian Andes, for example, the only copper deposit said to be larger than Aynak, China is relocating a town and its residents to get at a mountain of copper.

"Why the Chinese? Because they have money, they have lots of money," Ashraf said. "One day, when there is no more copper elsewhere in the world, the Chinese will have copper."

"If they (Chinese leaders) don't feed their immense industrial complex, their populace could become disruptive," said a Western official, who asked not to be further identified so he could speak freely. "We expect to see more such competitions" over Afghanistan's huge untapped reserves of natural resources.

Although China is contributing a much smaller share of the more than $15 billion in international assistance that's been pledged to Afghanistan since 2001 than the United States is, the Obama administration isn't complaining. China's investment in Aynak dovetails with the administration's emerging strategy for ending the war in part by delivering on unfulfilled vows to better the lives of the poor Afghans who constitute the vast majority of the Taliban.

But it'll be some years before state-owned China Metallurgical Construction (MCC) can begin the projected 15 to 20 years of production at the site 30 miles south of Kabul.

Copper is used in everything from batteries and electrical wire to computers and coins. International prices were high when MCC won the 30-year lease in April 2007 — one estimate at the time put the potential earnings at $42 billion — but they've fallen dramatically since. Still, China and Afghanistan stand to make a healthy profit, especially when demand recovers.

The site was discovered by an Afghan-Soviet team in 1974. However, in the face of armed resistance during their 1979-89 occupation of Afghanistan, the Soviets were never able to develop the site or harvest the ore.

The main challenge to MCC is the Taliban, who moved into Kabul's southern fringes after China clinched the deal, prompting the January deployment in Logar and Wardak of more than 2,000 troops from the Army's 10th Mountain Division from Fort Drum, N.Y. Last Tuesday, a roadside bomb injured three policemen protecting a crew building an access road to Aynak.

"We have stopped our work," said Noorzaman Stanakzai, the road contractor. "The enemies of Afghanistan are preventing families from putting loaves of bread in their children's mouths."

Other challenges include transporting equipment and materials into the landlocked nation from Pakistan and Central Asia; Kabul's inexperience in handling massive projects; endemic corruption — World Bank monitors, however, blessed the Aynak bidding process — lax enforcement of laws and the global economic meltdown.

Moreover, China must deliver the infrastructure projects that helped it snag the deal over six rivals, including Phelps Dodge, which was acquired by Phoenix-based Freeport-McMoRan Copper & Gold in 2007.

These include an on-site copper smelter, a $500 million generating station to power the project and augment Kabul's electricity supply, a coal mine to fuel the power station, a groundwater system, roads, new homes, hospitals and schools, and a railway line from the country's northern border with Uzbekistan to its southeastern border with Pakistan.

The deal, Ashraf said, is structured so that by the seventh year, the entire work force will be Afghan. Beginning in 2010, 60 Afghan engineering students a year will study in China, he said, adding that Chinese language courses have begun at Kabul University.

Employment projections vary, but there's general agreement that as many as 10,000 workers could be hired at Aynak and the coal mine in central Afghanistan, which the Jalrez Valley road project will link to the copper field. The railway will need thousands more.

A January 2008 report by Integrity Watch Afghanistan, a European research group, said MCC extracted more copper than expected from a mine in Sandaik, Pakistan, but the project has "had virtually no spillover effect on the local economy to date."

The report also warned of the potential for an "environmental and social disaster" if Aynak isn't properly managed, noting the area is home to 90,000 people and a source of Kabul's water. China may hope the Aynak deal will help position it to compete for more projects in Afghanistan, where three tectonic plates converge. The region is thought to hold some of the world's last major untapped deposits of iron, copper, gold, uranium, precious gems and other raw materials.

"It's the last frontier," said a second Western official, who requested anonymity to speak freely.