Lithium, Gold & Rare Earths: China Eyes New Business Opportunities In Afghanistan

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China has signalled that it will establish new diplomatic relations with Kabul after the stabilisation of the situation. There are many unknowns about the country’s future after the Taliban’s* takeover, but Beijing could help Afghanistan reap new business opportunities if peace and order are restored, says Asia Pacific commentator Thomas W. Pauken.

On 16 August, the Chinese Foreign Ministry announced that it respects the will and choice of the Afghan people, adding that it hopes that the smooth transition of power will be ensured in the country. Earlier, on Sunday, the Taliban* seized the Afghanistan capital of Kabul and declared the end of the war.

China’s Pragmatism in Foreign Affairs

Unlike American policymakers, who appeared to be caught off guard, Beijing was by no means surprised by the Taliban’s swift takeover, says Thomas W. Pauken II, a Beijing-based Asia-Pacific Affairs commentator and author of US vs. China: From Trade War to Reciprocal Deal. In fact, the Chinese had considered it a foregone conclusion around the same time in early July when US President Joe Biden held a press conference claiming the Taliban could not defeat the current Afghan forces, which were expected to defend the nation, the commentator remarks.

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“The Chinese government understood the Taliban was preparing to exploit the chaos and disorganisation of Biden’s US troops withdrawal to seize the country in a vacuum,” notes Pauken. “Widespread corruption was endemic in the Afghan government, while the massive development of opium poppy fields in the country had lured international criminal gangs and drug dealers to enter the country. Rampant corruption cannot be sustainable, since ordinary citizens become the biggest losers.”

Under these circumstances it is hardly surprising that the Taliban had won over many rural villagers as they were perceived as brutal but fair, according to the Asia Pacific observer.

“Afghan society was rotting to the core, the US troops failed in efforts to improve the local conditions, so inevitably the Taliban was well-poised to sweep into Kabul and take over the country,” he says. “China saw it coming.”

Speaking during the 28 July 2021 meeting with the Taliban delegation in Tianjin, State Councillor and Foreign Minister Wang Yi stated that the Taliban is “an important military and political force in Afghanistan and is expected to play an important role in the country’s peace, reconciliation and reconstruction process.”

Wang’s statement demonstrates the deep pragmatism of the Chinese government, Pauken says, suggesting that the Chinese leadership had already expected at that time the Taliban to form the new government in Afghanistan and made preparations for it. However, the Taliban is still seen as a terrorist organisation by Beijing, so the latter will not rush into recognising the militant group’s legitimacy, he adds.

Besides, the Afghan insurgents’ takeover does not come without risk for the People’s Republic, according to the commentator. Pauken highlights that there are different groups within the insurgent movement, adding that there have been unconfirmed reports saying that some militants are conducting recruitment and training to support terrorist cells connected to the Eastern Turkistan Islamic Movement (ETIM) and Uyghur separatists’ groups.

“China hopes that if the Taliban wishes to have closer ties with Beijing, they must crack down on ETIM and other terrorists seeking to infiltrate into China,” the commentator points out.

A member of Taliban (C) stands outside Hamid Karzai International Airport in Kabul, Afghanistan, August 16
A member of Taliban (C) stands outside Hamid Karzai International Airport in Kabul, Afghanistan, August 16

Potential Business Opportunities for China & Afghanistan

However, at the same time, it appears that the Taliban is beginning to witness the benefits of a peaceful transition to power, says Pauken, referring to the Afghan group’s reported attempts to preserve peace and order in territories under its control.

If safety and stability are restored in Afghanistan, China could contribute to post-war reconstruction and development there and push forward joint projects under the China-proposed Belt and Road Initiative (BRI), the Chinese daily Global Times suggested last Sunday.

There could be some amazing business opportunities for both Afghanistan and China, agrees the Asia-Pacific commentator. According to some estimates, Afghanistan holds between $1 trillion and $3 trillion in mineral wealth in underground reserves, including vast gold deposits and lithium that may be used to develop batteries for electric vehicles (EVs).

The climate change agenda and shift from fossil fuel vehicles to EVs make the country’s reserves of the silvery-white alkali metal especially important. Back in 2010, The New York Times noted that Afghanistan could become the “Saudi Arabia of lithium,” citing an internal Pentagon memo.

While Afghans hold many minerals and rare earths, they lack the infrastructure and equipment to mine it and sell to global buyers, Pauken emphasises, adding that China’s help to explore this wealth could come in handy.

“Chinese companies could sign joint agreements with Afghan miners to extract the lithium and to resell it to the US and European EV manufacturers at premium prices,” he says. “No telling how high the profit margins will be for them. Chinese companies and investors can work with the BRI to build new roads, bridges and railways to reach the lithium mines that can spell huge profits for Afghans and the Chinese.”

China’s longstanding ally, Pakistan can play an instrumental role as bridge-builder to draw Kabul closer to Beijing, Pauken presumes. Islamabad has already benefited from its partnership with the Chinese, the observer stresses, referring to the China-Pakistan Economic Corridor (CPEC).

“Pakistan serves as China’s Gateway to the Middle East and South Asia,” he notes. “Look to see Afghanistan join the BRI and become a part of CPEC.”

*The Taliban is a terrorist organisation banned in Russia and many other states.

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