What the Resource Curse Means for Afghanistan

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Three years ago, the U.S. Geological Survey said some of the resources in Afghanistan could transform an economy normally dependent on illicit narcotics. With this year's pivotal drawdown of international forces, how a post-war government handles those reserves could determine its future.

The U.N. Office on Drugs and Crime said opium, a heroin precursor, represents the equivalent of roughly half of Afghanistan's gross domestic product. A 2011 study by the USGS, however, found natural resources could "completely" transform the nation's economy. 


USGS studied two dozen reserve formations in Afghanistan and found "giant" deposits of copper and cobalt near Kabul, gold in the south of the country and rare-earth elements in parts of Helmand province.

Last year, the Afghan Ministry of Mines launched a seismic survey in Herat and Badghis provinces. Working alongside Canadian energy company Terraseis Trading Ltd. and the U.S. Defense Department, the ministry said it was examining the reserve potential in the region's Kushka basin, near the border with gas-rich Turkmenistan.

In Jawzan province in northern Afghanistan, the government solicited bids for drilling four natural gas wells in the Juma and Bashikurd fields, first discovered in the 1980s.

Global Witness, along with its partners at Integrity Watch Afghanistan, said in a report it was time for the Afghan government to commit to greater measures to ensure any resource extraction was shielded from corruption. With provincial council and presidential elections set for April, it's time to get serious on transparency as the Ministry of Mines starts drafting new resource management plans, they said.

Stephen Carter, director of the Afghan program at Global Witness, said Kabul has taken a few steps in the right direction in the last few years.

"That should be priority for the next administration whoever wins the election because otherwise there is a serious risk that any benefit from extraction will be lost," he said.

Afghanistan's security future, meanwhile, is in serious doubt because Afghan President Hamid Karzai hasn't signed the necessary security arrangements with U.S. and international partners for a post-2014 mission. NATO Secretary-General Anders Fogh Rasmussen said that without those agreements, there will be no international troops in Afghanistan after 2014.

International forces are looking to retool their mission to advise Afghan forces taking on more responsibility for national security. In its report on 2013 casualties, the U.N. Assistance Mission in Afghanistan said insurgent violence in the country was "unrelenting," suggesting national forces might not be up to the task.

Despite the risks, Afghanistan is drawing in energy investors. In October, Dragon Oil, a Dubai-based company, said it signed exploration and production sharing contracts with the Afghan government for reserve areas near the borders with Uzbekistan and Turkmenistan. Without the proper safeguards in place, however, Global Witness warns the extractive industries in Afghanistan can "easily" lead to more conflict in the country.

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The article What the Resource Curse Means for Afghanistan originally appeared on Fool.com.

Written by Daniel J. Graeber at Oilprice.com.

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