In the last few weeks, after the Taliban takeover of most of Afghanistan, headlines have screamed about the country’s trillion-dollar mineral wealth, especially its fabled lithium deposits. Lithium will power the next-generation batteries for electric vehicles that would trigger a new economic revolution. As of now, China seems to have stolen a march over western nations in establishing a foothold in the country, with its policy of not interfering in domestic politics but focused only on doing business; nevertheless, it could be in for a lot of unpleasant surprises.
US & China –Different Playbooks But As Selfish
The Chinese approach seems a practical one when contrasted with the US’ playbook of ushering in western-style democracy while looking to exploit the resources of the country, and gaining strategic advantage in an important trade route. There is no altruistic motive in either the US or China’s interest in Afghanistan. While China is brutally forthright about it, the US sugarcoats it for international audiences and its citizens at home. The only difference between the US and China is that the former has the New York Times and Washington Post keeping a watch over human rights violations, while China is not burdened by vigilant and free media.
Looking at real investments made in Afghanistan, one finds that the Metallurgical Corporation of China (MCC), has a 30-year lease to mine copper in Afghanistan’s barren Logar province. Nevertheless, it could take five to six years to build infrastructure for mining there, but the project might not go anywhere while safety concerns linger.
Not Everything Is Going China’s Way
Not everything seems to be going as planned for China. State-owned China National Petroleum Corp (CNPC) is in the process of exiting its oil project in the northern Amu Darya Basin, according to Reuters. CNPC began producing oil there in 2012 under a 25-year contract but stopped work the following year as plans to refine the oil in Turkmenistan hit a snag. The project had also come under attack from local militants. An Indian consortium led by the Steel Authority of India (SAIL) is also pulling out. It was awarded rights to build a steel mill and develop iron ore mines in Afghanistan with a total investment of $11 billion in 2011.
The question of course remains that if the mineral resources of Afghanistan could be so easily mined, then why hasn’t the US done so in the last 20 years it has been there? To date, the Afghan government hasn’t made a profit from its existing mining projects. According to a report by Al Jazeera, the government loses $300 million per year.
No Nation-Building Track Record
The other major doubt that hangs over the entire affair is China’s ability to help transform the economies of the countries it has deep relationships with. It has been Pakistan’s ally for several years now, but let’s look at the state of the country’s economy in India’s western borders.
Chinese Allies – Pakistan, N.Korea Economic Wrecks
Perhaps, nothing is more embarrassing for Pakistan than an economic comparison with its former eastern state of West Pakistan, now an independent country. Bangladesh boasts a per capita income of $1,909 at the end of the fiscal year, up from $120 in 1972, while Pakistan’s per capita income stands at around $1,700 now from $180 in 1971. Pakistan’s currency, Rupee, is now trading well below the value of Bangladesh’s Taka: Taka 84 fetches one US dollar, whereas it costs more than Rs 140 in Pakistan.
Imran Khan, Pakistan’s prime minister, might have been rejoicing the Taliban takeover of Afghanistan, but the joy could be short-lived as the influx of refugees would strain the economy. The rise in Pakistan bond yields soon after the collapse of the government in Kabul indicates the loss of global investors’ confidence in the economy. Pakistan may also face a reduction in its export revenues if the instability and uncertainty in Afghanistan linger.
Meanwhile, alarm bells are ringing for Pakistan as the trade deficit hit US$3.058 billion in July. The government’s battle against bloated trade deficit is reversing as it widened 81.4 percent in the first month of the current fiscal year (FY22), driven largely by the almost double increase in imports compared to exports from the country, reported Dawn.
North Korea, another Chinese-supported country, is another basket case. Its economy in 2020 posted its sharpest drop since a deadly famine in the 1990s due to the coronavirus, natural disasters and international sanctions that have walloped Kim Jong Un’s already struggling state. GDP contracted 4.5% in 2020 in the sharpest fall since 1997, according to estimates from South Korea’s central bank. Its economy shrank last year to its smallest size since Kim took over in late 2011. GDP fell to 31.4 trillion won ($27.4 billion), down from 33.8 trillion won in Kim’s first year at the helm.
Borrowing From The Mafia, Paying With A Limb
China’s internationalization—as laid out in programs such as the Belt and Road Initiative—is not simply a pursuit of geopolitical influence but also, a weapon. Once a country is weighed down by Chinese loans, like a hapless gambler who borrows from the Mafia, it is Beijing’s puppet and in danger of losing a limb. The prime example of this is the Sri Lankan port of Hambantota.
As the story goes, Beijing pushed Sri Lanka into borrowing money from Chinese banks to pay for the project, which had no prospect of commercial success. Onerous terms and feeble revenues eventually pushed Sri Lanka into default, at which point Beijing demanded the port as collateral, forcing the Sri Lankan government to surrender control to a Chinese firm.
Bangladesh Dodges The Dragon
Learning from these lessons, Bangladesh dodged the Chinese debt trap. It did not allow Chinese investment in deep-sea ports suitable for a future Chinese Navy presence, as it canceled the Sonadia deep-sea project and only agreed to a port project in Payra, ‘approachable only through a 75-kilometer-long canal, a very unlikely place for a naval base.’
The US Even Helped Build China
In sharp contrast to China’s overseas investments which are nothing but debt-traps to further impoverish the borrowing nation, the US since World War II has helped countries in Europe, and in the pacific, like Japan to emerge as major economic powers. China too owes its spectacular economic success to US technologies, which it stole, and US capital that was invested in its companies.
The US has been selfish while playing its global leadership role, but the Chinese strategy of investing in countries in its grip is like the deadly embrace of a Red Dragon. Afghanistan under the Taliban might be a different story even for the dragon, which the Chinese could well come to regret. The crafty Taliban could be a tough customer even for the Chinese. It will be wise not to forget that the country has over the years earned the global epithet of the “graveyard of empires.”
The post has first appeared on Abhijit Roy‘s Facebook wall.