China taps huge copper reserves in Afghanistan

WASHINGTON — At a former al-Qaida stronghold southeast of the Afghan capital, a state-owned Chinese company is at work on a $3 billion mine project to tap one of the world's largest unexploited copper reserves, a potential financial boon for an impoverished country mired in war.

The promise of a bright future at Aynak, however, cannot conceal the troubling reality of how business is often done in Afghanistan, according to critics of the Kabul government's decision to reject bids from competitors in the U.S., Canada and other countries.

The bidding process unfairly favored China, they allege, and epitomized the back-room deals and abuse of power that has turned Afghans against their government and undercut the U.S. military effort there.

Corruption and graft long have been ingrained in Afghanistan's public institutions. Yet the extent of this corrosion has taken on new significance as the White House considers expanding the U.S. commitment to a war unsupported by a growing number of Americans.

Widespread fraud in Afghanistan's presidential election in August has raised doubts about how quickly a stable and credible government can be installed. A U.N.-backed commission threw out nearly one-third of President Hamid Karzai's votes, setting the stage for a Nov. 7 runoff.

In his recent assessment of the situation in Afghanistan, the top U.S. commander warned that unchecked corruption has led alienated Afghans to support the Taliban-led insurgency.

Afghan officials insist the Aynak bidding was handled openly and honestly, and will create thousands of jobs. But several U.S. geologists and Western businessmen who watched the process closely disagree.

James Yeager, an American geologist who advised Afghanistan's minister of mines, says a few Afghan officials dominated a secretive selection process that gave the winner, China Metallurgical Group Corp., improbably high marks over its foreign competitors.

Said Tayeb Jawad, Afghanistan's ambassador to the United States, said the bidding process was above board. He said he pushed for the U.S. bidder, Phelps Dodge, to be awarded the Aynak rights, but that China offered to start work right away while Phelps wanted to wait until the country was safer.

"We can't afford to give the mining rights to a company that will sit on them for the next 10 or 15 years," Jawad said.

China Metallurgical, better known as MCC, has a poor track record with mining projects in other countries, according to Yeager and other critics. In neighboring Pakistan, for example, where MCC operates a copper mine, there's been little benefit to the local economy. But that information was ignored during the deliberations, they say.

MCC did not immediately respond to questions submitted by e-mail, as the company requested, about whether MCC received special treatment from the Afghan government on the Aynak bidding process; whether it was allowed to see copies of other bids, as at least one competitor alleges; or whether the Pakistan mine has failed to help the local economy.

The Aynak deal was awarded to the Chinese late 2007, but the project is only now getting under way. Before copper can be hauled from the ground, China must make a substantial investment to build a power-generating station, roads and a railway to move the metal.

Yeager and Larry Snee, a former U.S. Geological Survey official who also has worked in Afghanistan, contend that MCC probably will steer most of the jobs to Chinese workers.

"Of course, the Afghans are going to benefit," Snee said. "But will they get all they deserve?"

China needs huge quantities of raw materials to feed its rapid economic growth and energy demands. It is well positioned to become the dominant force in Afghanistan's potentially lucrative minerals sector, said Don Ritter, president of the Afghan-American Chamber of Commerce in McLean, Va.

"In what direction do (Afghanistan's) mines and minerals develop?" Ritter said. "Do they go the Eastern model, where everything is done behind a closed door? Or, is there an open, transparent competition, where the money is laid on the table without undue influence?"

Yeager has distributed a 78-page report on the Aynak contract in which he contends that M. Ibrahim Adel, Afghanistan's minister of mines, and his associates shut out legal, financial and technical experts who could have helped them on the decision.

Yeager doesn't accuse Adel or anyone else from benefiting personally by awarding the work to MCC. But the final decision, Yeager says, was dictated by bureaucrats concerned with dollar amounts and personal preferences.

One of the losing competitors for the contract was Hunter Dickinson, a global mining company based in Vancouver, Canada. Robert Schafer, Hunter Dickinson's chief of business development, said an Afghan official told him that its bid had been shown to the Chinese while the proposals were being evaluated.

Schafer said he "wasn't surprised at all" to learn that MCC won.

Wang Baodong, a spokesman for the Chinese Embassy in Washington, did not address the allegations. He said China is committed to pursuing economic, trade and investment projects in Afghanistan that benefit both countries.

China has contributed little to improving security in Afghanistan, yet with the Aynak deal, stands to gain from the sacrifices made by the U.S. and NATO in troops and money.

"The world isn't fair," said Robert Kaplan, a senior fellow at the Center for a New American Security in Washington. "A worse outcome to staying and helping the Chinese would be withdrawing and losing a great battle in the war against radical Islam."
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