The Cable

U.S. Squandered $488 Million on Afghan Mining Projects

Minerals like iron and copper were once seen as Afghanistan's economic future, and the United States spent half a billion dollars to make it happen. It didn't.

AFMINE

The United States spent five years trying to help Afghanistan tap what U.S. officials believe is a $1 trillion mother lode of minerals. In the end, U.S. taxpayers threw away half a billion dollars with almost nothing to show for it.

According to a new report by the U.S. special inspector general for Afghanistan reconstruction (SIGAR), efforts to help Afghanistan develop some sort of economy floundered thanks to a combination of corruption, incompetence, lack of infrastructure, and a deteriorating security environment. Afghanistan’s ability to tap what could be vast wealth from deposits of iron, copper, and lithium is so hamstrung by lack of government oversight and a dearth of basic infrastructure that the country’s war-torn security situation is actually the least of its problems.

“Sustainable growth of extractive industries is hampered by the need for additional legal reforms, a lack of transparency, corruption, a lack of infrastructure, and inadequate security,” the new SIGAR audit concludes.

That’s a problem for Afghanistan, which needs to find some way to earn revenue once the influx of foreign assistance tapers off. Pentagon planners initially saw Afghanistan’s underground riches as one way to stabilize the country. “Afghanistan could eventually be transformed into one of the most important mining centers in the world, [U.S.] officials believe,” the New York Times reported in 2010. Another gambit to provide Afghanistan with hard-currency income and to help it forge better ties with its neighbors — a hugely ambitious natural gas pipeline from Turkmenistan through Afghanistan and over to India — is just getting off the ground but faces a spate of economic, political, and security hurdles.

SIGAR last year identified the risk that U.S. efforts would flounder. In all, the Defense Department — which focused on short-term, concrete projects such as mineral surveys and natural gas pipelines — and the U.S. Agency for International Development (USAID), which tried to imbue Afghan ministries with some veneer of professionalism, dumped $488 million into Afghanistan with almost no positive results.

The Pentagon’s Task Force for Business and Stability Operations (TFBSO), initially set up to rebuild postwar Iraq and dispatched to Afghanistan in 2009, spent $215 million on 11 projects, from seismic surveys to compressed-natural-gas filling stations. “[A]fter operating in Afghanistan for 5 years, TFBSO left with nearly all of its extractive projects incomplete,” SIGAR found. Results were so dismal that a $43 million gas station ended up being counted as one of the relative success stories.

USAID fared little better in its efforts to help the Afghan government take advantage of mineral wealth. Ministries are understaffed and often lack technical expertise to follow up on projects. Corruption is rampant, with mining concessions often winding up in the hands of people linked to ministries, the government, or the police, the report found. That’s when there are mining concessions at all: Of Afghanistan’s estimated 1,700 mines, only 300 are legally licensed by the state.

The proliferation of small-scale, illegal mining operations in rural areas ruled by militants creates its own problems. The Taliban and other insurgents squeeze money out of those mine operators, for example, “turning artisanal mining into a source of revenue for the insurgency,” according to the report.

It could get much uglier. Nongovernmental organizations told SIGAR that, as the report puts it, “if the practice of unlicensed small-scale mining continues, there is a risk that it will cause Afghanistan’s security situation to further deteriorate, resulting in a minerals resource war like that seen in the Democratic Republic of Congo.” Congo’s mineral wealth has ended up fueling decades of bloody conflict in one of the world’s poorest countries.

The good news, such as it is, is that the Pentagon’s task force closed up shop at the end of 2014. The bad news is that USAID is still on the hook to coax some positive results out of $200 million in taxpayer money, such as a commitment from Afghan ministries to crack down on corruption.

“[T]he risk remains that its programs will fail to achieve their objectives, resulting in wasted taxpayer dollars,” SIGAR’s audit concludes.

Photo credit: ROBERTO SCHMIDT/AFP/Getty

Keith Johnson is a senior staff writer at Foreign Policy. Twitter: @KFJ_FP

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