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 An Ariana Media Publication 10/02/2014
 To tap its resources Afghanistan must provide security

Deutsche Welle
08/17/2012
By Karen Leigh in Kabul

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Away from its political disputes and war trauma, in corners of the country not visited by combat reporters and diplomats, lie Afghanistan’s vast lakes, mountain ranges, floral valleys – and natural energy reserves.

Politicians and experts say the potential to harvest hydropower and gas – and its location at the crossroads of Central Asia, ideal for a trade hub – could be the ticket to making the country self-sufficient and re-building its post-war economy.

Some estimates put its mineral and energy potential in the trillions of dollars.

"Afghanistan's relative needs and expectations are so modest that even a few hundred thousand barrels per year would be an accomplishment and more than the country needs," says Michael O'Hanlon, a specialist in national security at the Brookings Institution in Washington and a member of General David Petraeus's External Advisory Board at the Central Intelligence Agency.

Afghanistan is currently dependent on pricey foreign energy imports.

The bulk is brought in from Uzbekistan and to an extent from Turkmenistan, Tajikistan and Iran.

From importer to exporter

Mahmoud Saikal thinks it's possible for Afghanistan's energy industry to become self-reliant and eventually begin exporting to the same countries on which it currently relies.

The country's former deputy foreign minister and Ambassador to Australia, he is the champion of its fledgling energy industry.

At home in Kabul this spring, he took a visitor through a presentation he was planning on giving the next week in Dushanbe, which he hoped would be one of his country's biggest energy trading partners.

But raw potential isn't everything.

Afghanistan's tumultuous recent history and dearth of foreign investment means it has a mountain to climb as it works to attract investors from India, China, and other investment-savvy nations.

"It has the potential to produce between 25 and 30 megawatts of electricity per year if it could exploit its full potential," Saikal said. "The bulk of that will come from water. It [also] appears Afghanistan has the potential to produce oil and gas."

Violence scares off investors

Still, there's skepticism, namely from the foreign investors who would be looking to set up production plants and pipelines on the country's rugged terrain.

Investment markets are based on prevailing wisdom, "and right now," O'Hanlon says, "Afghanistan's security future is not seen as promising. People are really worried about the potential to fall back into warfare. There's enough violence going on now that it's bad enough to limit a lot of foreign investment."

A spate of attacks by extremist fighters – including one in Kabul in April, in which a hotel was taken over and shots fired on the US military compound – have done little to quell fears.

"Afghanistan is still at war and not that many parts are immune to potential dangers of the war," he adds. "Investors could be scared off by having their pipelines and transit routes attacked."

Despite heavy foreign defense investment, conditions "are still worse than they were five years ago," notes Hanlon:

"Energy investments have to have [foresight], and most people are not bullish about Afghanistan post-2015" – once the US withdraws its forces from the country.

Last year, the China National Petroleum Company became the first major investor, signing a 25-year deal with Afghanistan's Watan Oil and Gas that will, according to the UK's Daily Telegraph newspaper, give it access to approximately 160 million barrels of oil from fields in Northern Afghanistan.

Murky deals

(Shining light on the hurdles foreign businessmen could encounter, Watan won the contract despite being under the stewardship of infamous Karzai cousins Rashid and Rateb Popal, recently accused of paying off Taliban leaders with American money.)

The deal has also created conflict with local tribes in the north, where the bulk of exploration is taking place.

"The internal capacity and capability of Afghanistan must be good enough to manage the mining and energy production of Afghanistan," Saikal says.

"But in the past few years we are seeing a dramatic weakening of the rule of law and governance. Karzai has been promoting traditionalism and tribalism, which could help him continue his rule but doesn't help Afghanistan manage its resources."

International models

Other traditionally unstable countries – namely Iraq, Angola and Nigeria – have flourishing energy markets.

Similarly war-torn Iraq has managed to get its energy production back to pre-war levels, nine years later. But Iraq is located close to the oil-rich Arabian Gulf trade mecca.

Angola's boom began largely after peace had returned following the 2002 end of its 27-year civil war.

And Nigeria, though violent and politically unstable, has a long-established oil-drilling infrastructure and decades of foreign energy investment.

Creating that same infrastructure in Afghanistan will be expensive.

At the end of the day, "to think this is a worthwhile investment, you need 10 years' stability predicted," O'Hanlon says. "And who will predict that in Afghanistan?"

Editor Michael Knigge

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