Afghan Minerals and Anbar Oil, corruption for all

By Dave Anderson:

As Steve noted earlier today, the big story about new-found Afghan mineral wealth is really not a new story.  It is an information operation, or a propaganda piece aimed at the US public and portions of the Washington D.C. think-tank universe. 

Afghanistan's mineral riches were well known to the Soviets in 1985 and a
US
government Country Study in 2002 went into detail about their
knowledge. By 2005 the US Geological Service was being publicly
exuberant in its assessment
of Afghanistan's mineral resources (PDF). It published other public
reports about the "Significant
Potential for Undiscovered Resources in Afghanistan" in 2007, one
of whichfocussed on
non-fuel minerals. In 2008, it was Afghan
reserves of oil and gas that was making the news and in 2009, as
Reuters was reporting on Afghanistan's vast mineral wealth and McLatchy was
noting China's interest, rights to the vast iron deposits were already up
for tender.

My first thought when I saw this story last night while watching the Celtics beat the Lakers, was that this sounded amazingly like the mini-boom in stories from 2007 that said Anbar Province in Iraq had massive and newly discovered oil reserves.  April 2007, Time Magazine reported that there were over 100 billion barrels of unexploited oil reserves in Anbar.  

The report says about 100 billion barrels of oil and a large amount of
gas lie in the Sunni-dominated Al-Anbar province. Until now, Sunni
politicians have feared economic devastation if Iraq divided into a
federation or imploded into disparate ethnic states, since the territory
dominated by their ethnic group was thought to be the only one without
large reserves of oil.

100 billion barrels of potential reserves would give Anbar province reserves greater than the rest of Iraq, and place Anbar in the top tier of oil production sites in the world.  100 billion barrels of oil would have a spot market price of $6 to $7.5 trillion dollars.  That is a lot of money in a very corrupt region. 

I thought of the Anbar oil story as it emerged at a time when domestic political support for an unpopular was collapsing, the military was asking for more time, and the strategy was to buy off significant factions of the insurgency by promising arms, money, and implicitly future smuggling/corruption cash flows for the local elites. 

Large scale mineral based development strategies are fraught with peril if they occur in already corrupt nations or regions.  If the Afghan minerals are easily accessible and relatively cheap to extract and ship to Karachi or Chabahar, then that produces rentier politics where the money pools at the top of society and corruption ensues.  This is what we see in most extraction based economies.  And this could be "fine" from a US perspective as local stakeholders would be assured of their cash flows and have some minimal incentives to maintain some decent connections with the outside world.  

Announcing a trillion dollar find is a way to dangle mass corruption opportunities and cash flows to local elites that don't need to be backed up by US government dollars.  It is a way to buy a solution.