Business
Afghanistan: Banking On China
By Strategy Page, May 10, 2023
May 12, 2023 - 9:27:17 AM

Over two billion dollars’ worth of American aid has been sent to Afghanistan since the IEA (Islamic Emirate of Afghanistan) took over in mid-2021. The United States halted normal aid because of the IEA but continued aid programs on a case-by-case basis. The U.S. still does not have diplomatic relations with the IEA and the aid is monitored via the foreign aid groups that manage disbursement of aid throughout Afghanistan. The IEA is desperate for foreign aid to replace the much larger amounts the previous IRA (Islamic Republic of Afghanistan) government had received. IEA assured foreign aid donors that it would not interfere with the distribution of aid but it did anyway, the most obvious being an IEA decision to ban Afghan women from working for foreign aid agencies and put additional restrictions on who could receive aid. It was increasingly common for the IEA to back off on agreements with foreign aid groups over how aid was to be distributed and used. The main problem was that IEA decisions were subject to modification by prominent imams (religious authorities) who had the authority to order the IEA to modify or cancel decisions on religious grounds.

This is what happened to emergency food aid. First it was decided that Afghan women could not work for the foreign aid groups distributing food. This was a problem because many widows with children needed this food and could not get it by bringing a male relative due to those being often not available or all dead. These self-destructive policies became common for the IEA and often got worse as rival imams contradicted each other. Aid agencies responded by withdrawing aid. This was not just because of the restrictive and unpredictable IEA rules, but because large quantities of aid were being diverted by the IEA to other uses of which corruption was only one. This has meant less foreign aid and over 95 percent of Afghans living in poverty. Many local observers (mainly Pakistani and Iranian) believe the IEA will self-destruct because of its inability to attract and maintain flows of foreign aid as well as similar problems with governing Afghanistan and providing security. This is required for the IEA to prevent Islamic terror groups, as well as tribal, religious and ethnic differences, causing a collapse of any central government and national unity.

IEA leaders see the situation differently. The IEA considers their decision making process superior because they put Islamic law above all else. That means criticism from donor nations who do not share their religious orthodoxy are irrelevant. That is the one of many reasons why no nations have established diplomatic relations with the IEA. That does not prevent foreign economic investment. China is offering to invest $10 billion to build and operate lithium mines in areas like Nuristan and Kunar provinces in eastern Afghanistan near the Pakistan border. Chinese companies refine over half the world’s lithium. China might even build plants to refine lithium ore into pure lithium suitable for use in batteries. Afghanistan has lithium deposits worth over a trillion dollars and the Chinese investment would build roads, tunnels, hydroelectric power plants and the mines themselves. The IEA would have to tolerate thousands of Chinese workers brought in to supervise and actually build all this infrastructure. The Chinese use very little local labor because a Chinese workforce is more efficient and reliable. Lesser investments are also handled by Chinese firms. One that is already agreed to and underway is the $700 million effort to finally establish oil fields, a refinery and power plants and pipelines to export oil. This deal would last 25 years and the IEA would receive a 15 percent royalty on oil sales. This project will also provide jobs for over 7,000 Afghans. China would bring in managers, engineers and other technical and supervisory personnel. The Chinese are spending about $140 million on this project during 2023.

There is some international cooperation with the IEA in areas of mutual interest. The most obvious one is Islamic terrorism, which is also a problem for the IEA. The primary Islamic terror threat in Afghanistan is from ISK (Islamic State Khorasan), which was formed in Afghanistan during 2015, with the help of ISIL leadership in Syria, to handle ISIL activity throughout the region (Central Asia, Iran, Pakistan and India). ISK found they were most effective if they confined their operations to Afghanistan and Pakistan, which they have been doing since 2019.

The IEA also has problems because they cannot gain any official recognition that they are the legitimate government of Afghanistan. Most nations consider the IEA a Pakistan-backed Islamic terror group that took control of the government with the additional help of Afghan drug cartels. ISK has become more active in Afghanistan and Pakistan since the IEA took over because now no one is in charge and that is ideal for ISK and the drug cartels. ISK and the cartels stay out of each other’s way because neither has anything to gain, and much to lose, by attacking each other. The cartels pay IEA to refrain from attacking drug operations, which include poppy crops and small labs that convert portions of the poppies into opium and then heroin. ISK sees no point carrying out terror attacks against the cartels because the cartels will do the same to ISK and on a larger scale. In that respect the cartels are terrorists, but only when cash does not suffice. ISK is different because they see IEA as heretics and enemies of Islam. IEA feels the same way towards ISK. Other Moslems in Afghanistan and neighboring nations regard ISK as religious zealots who defame Islam. The only relatively safe base for ISK is IEA ruled Afghanistan. Despite that, ISK attacks targets in Afghanistan, including IEA but not the drug cartels. ISK also uses its Afghan bases on the Pakistan border to carry out attacks in Pakistan. There used to be some ISK actions near the Iran border but attacks on Iran were more costly, in terms of cash and personnel, then similar efforts against IEA and Pakistani targets. ISK also plans attacks farther away, especially in Western countries. These attacks are more risky and prone to trigger massive counterattacks. Western nations, especially the United States, continue to observe ISK operations and carry out occasional airstrikes, usually with missile armed UAVs.

May 8, 2023: The UN has indefinitely extended its halt to relief operations in Afghanistan because of IEA interference, especially the ban on the UN employing Afghan women. Foreign aid groups believe that half the Afghan population (that’s 20 million people) face severe food shortages. This will cause some starvation deaths and even more fatalities because prolonged hunger makes victims more likely to die from some other affliction. In early 2022 the UN estimated that 95 percent of Afghans were not getting enough food and eventually there would be starvation deaths. The UN experts calculated the total need and costs to transport the aid to where it is needed most. The major flaw in this plan is that few foreign aid donors are willing to donate. Disaster areas have earned unofficial “risk level” ratings that measure how much of the aid disappears (is stolen) before it can get to those in need. Afghanistan is considered one of the riskiest aid recipients in the world and has earned and sustained that designation over the last fifty years. Some aid groups continue to work in Afghanistan without employing local women and tolerating a certain amount of IEA meddling.

The IEA believes there are nearly four million opium and heroin addicts in Afghanistan. The government is destroying poppy crops and arresting about a thousand drug dealers. The major drug cartel operations in Kandahar and Helmand provinces were left alone. China insisted it was more likely to invest in Afghanistan if the IEA did something about the heroin and other drugs produced in Afghanistan and exported to neighboring countries, including China as well as worldwide. The IEA agreed and issued a decree banning farmers from growing poppies, the plant that produced opium, which is further processed into heroin. The farmers, especially in the south (Helmand province), ignored the decree, pointing out that poppies were the most profitable crop they could produce and the heroin cartels had more firepower than the IEA. Just another reminder to be wary of Taliban promises. Money talks. Farmers can obtain 7-15 pounds of opium per acre (8-17 kg per hectare), to create the opium which is refined into heroin. The farmer is paid about a thousand dollars per acre for the opium. But the value of that opium increases fifty times once it is refined into heroin and sold in foreign markets. Most of that increase goes to middlemen (refiners, smugglers and distributors). Most of the increase in value occurs once the heroin gets out of the country, but that still makes the opium and heroin trade the biggest single segment of the Afghan economy.

In Kabul, IEA intel discovered where the ISK second-in-command was when it identified two ISK hideouts in Kabul. Both were raided and in one hideout the senior ISK official was found and killed.

May 7, 2023: The three nations (China, Russia and Pakistan) that have the most economic activity with Afghanistan are urging the IEA to help Afghanistan as well as the IEA by allowing women to work. Another needed activity is cracking down on the drug cartels and Islamic terror groups that currently operate freely. So far the IEA has ignored these suggestions. In response, the world largely ignored the IEA and Afghanistan.

May 6, 2023: The IEA agreed to allow the Chinese BRI (Belt and Road Initiative) project to extend from Pakistan into Afghanistan. The Pakistan portion of BRI is called CPEC (China-Pakistan Economic Corridor) project. While China is picking up most of the $60 billion cost of CPEC, it means that China owns many of those new economic assets, especially the new port of Gwadar. In early 2017 China and Pakistan signed an agreement granting China a 40-year lease on new Chinese-built facilities at Gwadar. The lease granted China most (over 80 percent) of the revenue brought in by port and free trade zone operations. China usually imports its own workers from China to do most of the work on projects like this. By 2022 China had several hundred thousand Chinese in Pakistan, some of them with their families. Extending CPEC into Afghanistan will involve several billion dollars’ worth of spending in infrastructure and thousands of jobs for Afghans. Chinese engineers and supervisors will manage the work and the IEA will be responsible for keeping the Chinese safe. There are already some Chinese working in Afghanistan and they have to be careful when they travel because kidnapping foreigners for ransom is popular with many Afghan outlaws.

May 4, 2023: In the southeast (Khost province) TTP gunmen crossed into Pakistan (North Waziristan) and encountered Pakistani soldiers. A gunbattle left three TTP men dead as well as six Pakistani troops. In nearby Kurram unidentified gunmen attacked a school and killed seven teachers, most of them local Shia. There has long been armed violence between Shia and Sunni Pakistanis in this area. Currently, most of the violence in North Waziristan is caused by TTP gunmen who are based in Afghanistan. Lately the TTP has expanded its operations to the southeast, where Afghanistan borders the Pakistani province of Baluchistan. TTP violence in Baluchistan has visibly increased.

April 30, 2023: Iran and Pakistan share borders with each other and Afghanistan. Iran and Pakistan have prosperous and peaceful relationships, but have problems with the new government in Afghanistan. Pakistan was the first nation to officially recognize the new (2021) IEA (Islamic Emirate of Afghanistan) IEA government in Afghanistan. There are still disagreements between the two countries and the resumption of diplomatic relations makes it easier to discuss possible solutions to disputes. Currently the only countries willing to trade with Afghanistan are Iran, China, Russia and Pakistan. Since IEA took over in 2021, Afghanistan has been a much more difficult country to do business in. Iran recognized the IEA and exchanged ambassadors in March 2023. Inside Afghanistan the economic and security situations are chaotic. It is in the interests of Iran and Pakistan to try and remedy this.

April 24, 2023: The lack of foreign aid has led the IEA to extract more in taxes from Afghans than any previous government. This is unpopular and the IEA tax collections are increasingly facing armed resistance to paying what is demanded. The IEA has not got a lot of security forces personnel to back up the tax collectors so a lot of tax revenue is uncollectable. There are also problems with corrupt tax collectors, who further reduce the amount collected.

Source: Ocnus.net 2022