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Home»Finance»Afghanistan Continues to Refine Its Extraction Strategy
Finance

Afghanistan Continues to Refine Its Extraction Strategy

January 11, 2025No Comments6 Mins Read
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Afghanistan Continues to Refine Its Extraction Strategy
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As the Taliban crack sharply down on non-governmental organizations and women’s rights, its government is gradually increasing revenue streams from resource extraction operations as it seeks to minimize the impact of Western sanctions and pressure. The Afghan government announced in November that it had signed three large deals worth over $1.2 billion with firms from several nations. Separately, the interim government signed 167 contracts for smaller mining projects from September 2023 to September 2024. 

Business is increasing. The year before the regime signed 108 extraction contracts as it reinvigorated the Ministry of Mines and Petroleum. After a change in leadership this summer, the Ministry of Mines and Petroleum seems intent on boosting production at existing concessions, improving the competitiveness of Afghan minerals in international markets, and building business ties with Afghanistan’s neighbors.

Hidden in a series of July 2024 leadership moves, the Taliban removed Shahabuddin Delawar as acting minister of mines and petroleum and put Hedayatullah Badri in his place. The minister position is a critical role for the Taliban government as it attempts to establish economic autonomy, reduce the impact of Western sanctions, and establish commercial ties with its neighbors. Delawar had been accused of nepotism, including securing a role for one of his sons as ambassador to Uzbekistan, which is a key collaborator in the Afghan mining industry. Badri, a former Taliban Finance Commission chief and governor of the Afghanistan Central Bank, is on international sanctions lists for his facilitation of the Taliban insurgency and involvement in the drug trade. Perhaps in an oblique reference to the accusations again Delawar, Badri promised transparency and accountability during his tenure at the ministry.

Badri’s longstanding ties to the drug trade have not slowed his ability to woo foreign officials. The recent announcement of a large lead and zinc tender in Bamyan Province suggests the Taliban have shifted to a new focus on larger deals with foreign firms. The minister has met with Turkish, Turkmen, Chinese, and other foreign officials in pursuit of these deals. His engagements been productive. In October, the ministry accounted a $1 billion natural gas extraction project with Uzbekistan’s Ariel Group. There may also be progress on the Ghorian Iron Mine project, as the ministry announced an international group had agreed to invest in the remote and undeveloped site.

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The Afghan government also continues to use smaller mines to provide jobs and create local revenue. Since their takeover of the country in 2021, the Taliban have taken firm control over Afghanistan’s mining interests. Even in Panjshir Province, one of the last areas to yield to the Taliban, the government has issued mining permits and organized weekly auctions. According to the regime, there are 10,000 miners working in 550 emerald mines in the province alone. The government has also sent technical teams into Panjshir to survey deposits and issue permits for ruby mines. In late December 2024, Nuristan Province started its own gemstone auction process, suggesting that other mineral-rich provinces may soon follow Panjshir’s example. Importantly for the Taliban, 10 percent of revenues from the sales go to the government.

The Ministry of Mines and Petroleum is working with both local and international businesses to improve the capacity of existing projects. Since first signing off on a deal to extract oil from the Amu Darya field in January 2023, the Xinjiang Central Asia Petroleum and Gas Company continues to expand production at the concession by bringing in additional equipment and digging new wells. While the amount of oil involved remain small, the Taliban continue their push toward self-reliance. A group of local investors has announced a deal to establish a new oil refinery in Balkh Province, potentially with Iranian assistance.  

The regime also announced in late November that coal revenues increased slightly through its state-owned enterprises. The increase in revenue is likely due to a decrease in customs taxes on coal last summer. The Afghanistan government has sought to increase its market share in providing coal to its energy-starved neighbor Pakistan, which currently sources about half of the coal for its power plants from South Africa and Indonesia.

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The Ministry of Mines and Petroleum continues to work on two game-changing projects that face long odds: the Turkmenistan-Afghanistan-Pakistan-India (TAPI) natural gas pipeline and the Mes Aynak Copper Mine. Both are perhaps wishful thinking, but the pipeline seems the more unlikely project. While Turkmenistan and Afghanistan continue to engage on the subject, even going so far as to begin practical work on the Afghanistan side of the border, New Delhi is skeptical. Without India’s support, it is not economically sustainable for Pakistan to join the effort. Further, Kabul does not have the infrastructure and finances to support its own pipeline with Turkmenistan. 

The Mes Aynak Copper Mine, which has been stalled for more than 16 years, has finally shown signs of progress. Acting Minister of Mines and Petroleum Badri met with the Chinese Ambassador to Afghanistan Zhao Xing very soon after he assumed the portfolio. A few days later, both sides held a ribbon cutting ceremony for a connecting road for the project. The Taliban have also worked to clear artifacts from an archaeological site near the mine and made progress on the necessary environmental impact study. 

However, much is uncertain regarding the project. The initial contact called for a 400-megawatt generating plant and a smelter to refine the mine’s copper ore. Neither appear on the radar at this point and it is unclear how viable the mine is without some sort of smelter available. Transporting unprocessed ore on the area’s limited roads does not seem feasible, especially with the pitiful state of trade between Afghanistan and Pakistan, where the nearest smelter is located.

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It is unknown how much mining revenue is going into the interim government’s coffers. The Ministry of Mines and Petroleum reported revenues of $100 million over the past year. However, since Badri assumed control of the ministry, reporting has declined. Indeed, the Taliban regime has stopped sharing budget information altogether. 

The government is undoubtedly benefiting from progress in its mining sector but may be approaching the upper limits of what is achievable without a massive influx of investment in its transport and electric power infrastructure. Gems and petroleum have straightforward transportation requirements compared to hundreds of tons of copper or iron ores. While the improvement of Afghanistan’s railroad network is under discussion, it is, at the very minimum, several years away from helping to bolster access to the country’s mines. 

Despite the challenges, the Taliban are making progress as they seek to bolster revenues, employment, and diplomatic ties. While Delawar’s skills as a former diplomat made several deals possible, the ministry is moving forward with Badri at the helm. Badri’s skills with taxation and revenue collection as well as his international ties from his time as head of the Taliban Financial Commission during the insurgency seem to be paying dividends. 

Self-sufficiency remains far away for Afghanistan. However, the current amount of mining revenues will enable the Taliban senior leaders to enrich themselves and fund enough of a government to sustain the current level of stability.

Afghanistan Continues Extraction refine strategy
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