What the Resource Curse Means for Afghanistan

This article was written by Oilprice.com -- the leading provider of energy news in the world. Also check out these recent articles:

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.

Bad news for OPEC could be good news for investors
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

 


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2857044, ~/Articles/ArticleHandler.aspx, 4/16/2014 3:35:46 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement