Xi Jinping, PM Modi $2.9 bn railway dream could trip on Afghan reality

From a distance, it is possible to imagine the muffled explosions that sometimes echo across the brown hills of Mes Aynak are the sounds of Afghanistan’s future—engineers blasting their way into the world’s second-largest copper ore reserves, holding an estimated 5.5 million metric tonnes. The mine, and other similar ones, are due to bring Afghanistan $1 billion a year in revenues, and create over 35,000 jobs.

Like most dreams, this one is starting to give way to reality but of a different kind: the explosions are rockets, police guards stationed at the mine say, fired by villagers disgruntled by land acquisition, would-be extortionists, and Taliban units that have overrun the province of Logar, where Mes Aynak lies.
 

Earlier this week, President Xi Jinping and Prime Minister Narendra Modi agreed to explore joint China-India work on a railway line in Afghanistan, with one spur carrying Mes Aynak’s ore to Torkham, and over the Khyber Pass into Pakistan; the other in a great north-western arc, into Iran at Hairatan.
 

“It’s the best news we’ve had in years,” a senior Afghan diplomat told Business Standard. “If our two great friends can cooperate to build this infrastructure, it will transform Afghanistan into a hub for commerce and trade across Central Asia.”

Beyond the barbed wire and watchtowers, though, lies a story that casts more than a little doubt on whether this dream will ever be realised.
 

Ten years after the May 2008, $2.9 billion, 30-year lease awarded to two state-owned Chinese companies, China Metallurgical Group Corporation and the Jiangxi Copper Company Limited, the project has fallen apart. MCC-JCL Aynak Minerals, as the Chinese consortium is called, has sought renegotiation, but the issue has remained pending despite years of negotiation.

Key to the 2008 contract was MJAM’s promise to build the railway line President Xi and Prime Minister Modi are now discussing—a project that involved traversing some of the most hostile terrain in the world.

The contract states that “MCC has made a commitment to the Government of Afghanistan to construct, at MCC’s sole expense, a railway associated with the project”. The line was to run from Hairatan to Torkhan, carrying out ore.

In 2011, then-Minister of Mines Wahidullah Shahrani said the line would run from Torkham to the northern city of Mazar-e-Sharif, passing through Kabul via Bamyan, near Mes Aynak.

The line was key to India’s own still-nascent $10 billion project to mine and process iron ore at Hajigak, from where a spur will link to the rail line and enable access to Chabahar.

Inside months of the contract being signed, though, global copper prices fell from $9.60 a kg to $6.60—and MCC began to edge back from its commitments.

The Chinese consortium, Afghan government sources have told Business Standard, sought a waiver on $808 million due to Kabul, on top of the $133 million initial payment. It also wanted to cut the royalties, which were set at 19.5 per cent.

Even more important, MCC argued that phosphate deposits and coal needed to smelt and process Mes Ink’s ore were not locally available—a claim Afghanistan’s government disputes. Thus, MCC said it would not build the 400 MW power plant around which the entire project was to have been centred.

Instead of shipping out processed copper by road, MCC said it would move ore back to China—by truck, rendering the ambitious rail line project unnecessary.
 

Experts are sceptical that the project, as planned, will ever move forward. China expert Andrew Small recently said  Mes Aynak “is no longer a priority for the Chinese government and does not play a significant role in China’s Belt and Road Initiative that is anyway focused on infrastructure development, outsourcing capacity, and market-building, and not the extraction of natural resources”.

Afghanistan, however, hopes that China—which has conducted at least one round of negotiations between the Taliban, Pakistan and Afghanistan—will revive the project, in the hope it will help stabilise the country. The rail line, Afghan officials say, will give the country’s fruit, timber and gemstone exporters easy access to central Asian and Chinese markets.

Heavily dependent on foreign aid, Afghanistan was forced to slash its development spending commitment for 2018 from over 150 billion Afghanis to 67 billion Afghanis because of a 25 per cent decline in receipts from foreign donors.
 

Even though the Asian Development Bank is considering funding the northern spur of the line, from Hairatan to Mazar-e-Sharif, there is no word on who will pay for the other sectors to be built.

Local security conditions have also been deteriorating, placing a question mark over the possibility of large-scale construction works in hard-to-protect rural areas. Last week, Logar’s deputy police chief, Colonel Khan Sadiq, said over 600  fresh Arab, Pakistani, Chechen and Uzbek jihadists have entered the province alone, making the country’s struggle to retake territory more difficult. The Long War Journal, which monitors the security situation in Afghanistan, estimates that government authority has either been evicted or is under challenge in 237 Afghan districts, compared to 150 firmly controlled by Kabul.