The War Economy

of Afghanistan
Introduction
- Ayesha Khan
 Afghanistan

• Afghanistan ,officially the Islamic

Republic of Afghanistan, is
a landlocked country located
in South-Central Asia
• Afghanistan shares border with
Pakistan, Turkmenistan, Uzbekistan,
Tajikistan and China
 Economy of Afghanistan
• Despite holding over $3 trillion in proven untapped mineral deposits,
Afghanistan remains one of the least developed countries on the planet

• Afghanistan's economy is the world's 96th largest, with a gross domestic

product (GDP) of $72.9 billion but the country fares much worse in terms
of per-capita GDP (PPP), ranking 169th out of 186 countries as of 2018

• If the natural resources of Afghanistan are properly managed, they can

provide an opportunity for Afghanistan to write its own story of economic
success
• Afghanistan is a resource rich
country with reserves
estimated around 3 trillion USD
which almost have remained
untapped
• Afghanistan is rich in precious
gemstones, copper, gold, iron
and cobalt as well as vast
amounts of lithium and many
more
• In the 1970’s Afghanistan was discovered to have a wide variety of mineral resources by
the Soviet geologists. Soviets tried to export some of the country's resources to the USSR.
Natural gas, for example, was exported by pipeline across the Amu Darya into the USSR in
the 1980s
• Afghan geologists hid the maps in their homes until the arrival of American forces in 2001.
According to The New York Times, Afghanistan could become “the Saudi Arabia of
lithium”
• US officials said that the deposits could sustain the Afghan economy and generate
thousands of jobs, reducing corruption and reliance on foreign aid but due to the current
situation, it is hard to say that Afghanistan could get any benefit from this
• There are six lapis mines in
Afghanistan, the largest being
located in Badakhshan province
• There are around 12 copper
mines in Afghanistan, including
the Aynak copper deposit
located in Logar province

• The Panjshir Valley, located north

of Afghanistan's capital Kabul, is
an area rich with more than 172
emerald mines known as
Panjshir emeralds
Iron :$285.4bn Lapis Lazuli:$0.4bn

Copper:$185bn Fluorite:$0.4bn

Cobalt:$34bn Lead &zinc:$0.3bn

Gold:$17bn Mercury:$0.3bn

Rare Earth elements:$5bn Magnesium:$0.1bn

Silver:$3.6bn Sulphur:$0.1bn

Aluminum:$3bn Phosphorus:$0.4

Graphite:$0.4bn Lithium: large deposits found

• Afghanistan’s precious natural resources – its land, water, forests and mineral deposits
– are critical to the country’s prospects for a peaceful and prosperous future
• Disputes over the management of natural resources such as land, water, timber,
minerals and drugs underlie and drive many of these conflicts and often serve to
intensify existing ethnic, political and regional divisions
• In Afghanistan, natural resources and conflict have an intimate and complex
relationship
• Drug production in Afghanistan has built a powerful shadow narco-economy that
provides huge revenues for traffickers, as well as some insurgents.
• The drugs trade has also contributed to pervasive corruption at many levels of
government.
• Afghanistan is the greatest producer of opium in the world. According to US- military,
90% of the world’s heroin is made from opium grown in Afghanistan.
• The daily lives of many Afghans are arguably more affected by these ‘lower-level’
local conflicts than the national-level insurgency.

The International Media

mostly talks about Taliban and
Al-Qaeda but natural
resources play major role in
country’s conflicts
 Origins of Illegal Mining and Smuggling in
Afghanistan
• The trafficking of precious stones and other mining commodities has long played a role in
organized criminal activities and fundraising strategies for militant groups throughout the
past four decades of conflict in Afghanistan
• The mining and extraction of lapis precious gemstones in the northern provinces of
Badakhshan and the Panjshir Valley became a critical source of revenue for the Jamaat-i-
Islami resistance movement. Emerald mining in the Panjshir Valley became a critical
component of the war economy around 1985
• The United Islamic Front( anti-Taliban militias ) continued to engage in precious stone
extraction and trafficking in the Panjshir Valley, Takhar, and Badakhshan, allegedly earning
between $60 and $200 million per year from the trade
 Exploitation of Natural Resources

Illegal mining and

Insurgent groups, warlord,
exploitation of natural
corrupt politicians
resources

According to a United Nations Security Council Major insurgent groups, terrorists

committee report from February 2015, minerals have groups including Al-Qaeda, Taliban and
become the Taliban’s second biggest source of income Haqqani network, warlords and corrupt
after illegal narcotics politicians all are major threat

In the 1990s, the United Islamic Front allegedly earned

between $60 and $200 million per year from illegal
extraction and trafficking in northern Afghanistan.
 Minerals Ownership and Mining Contracts
Afghanistan’s Underground Minerals – Belong to state under national
constitution
In principle – Legal mining activities can occur only under a contract issued by
Ministry of Mines and Petroleum [MoMP]
In addition – mining enterprises are required to pay taxes on their profits, in
accordance with country’s income tax law
But these contracts are not observed
Commercial exploitation often occurs during the exploration phase with
negligible payment of royalties and taxes to the government
 Industrial • Afghanistan- Well endowed with natural resources.
• Hundreds of millions of dollars’ worth of minerals
Scale Looting are being extracted every year, unaccompanied by
of payment of applicable royalties and taxes to the
state.
Afghanistan’s • Industrial scale mineral looting has not only
occurred through secret smuggling but also openly.
Mineral • Prior political penetration of power holders and
their networks in government explains this pattern
Resources of looting [massive corruption of government
agencies charged with overseeing the extractive
sector]
- Rabeea Jabbar
 NATURAL RESOURCES OF AFGHANISTAN
Natural Resources in Afghanistan
1. Significant Oil and Gas Reserves in the North
2. Few Mega Resources – Aynak Copper Mines,
Hajigak Iron etc.
3. Numerous medium sized and smaller deposits of
minerals- Gemstones [notably emerald and rubies] ,
gold, silver, coal, chromite, marble, granite, talc and
nephrite.

Lapis Lazuli – Country’s

signature mineral, a semi
precious colored stone.
 OCCURRENCE OF ABUSES
[ IN VARIETY OF WAYS AND AT EVERY STEP]
DURING THE
REVIEWING
BIDDING
AND
ISSUANCE OF TENDERS PROCESS AND
SHORTLISTING
BID
APPLICATIONS
EVALUATION
RECEIVED

THROUGH BYPASSING
THE LEGAL
FAILURE TO PROHIBITION
FAILURE TO AGAINST AND
CONDUCT
DELIVER ABUSE OF GOVERNMENT
ENVIRONMEN
STIPULATED EXPLORATIO OFFICIALS ENGAGING
TAL AND
ROYALTIES TO THE N PERIOD IN MINING activities
SOCIAL
STATE
IMPACT
STUDIES
 LOOTABLE AND NON LOOTABLE RESOURCES
• Richard Snyder lists four elements

ELEMENTS

FREQUENTLY
ESSENTIAL OCCURING

Low economic barriers Geographic dispersion

to entry and relative
ease of extraction - Illegality of some
Alluvial Diamonds lootable resources - Illicit
opium and opiates

Low bulk
 TWO ADDITIONAL IMPORTANT
POINTS DUE TO EXPANSION OF LE
BILLON’S CONCEPT

1. Resources that are lootable in small quantities may become non lootable (in
Snyder’s definition) when large amounts are concerned – Lapis Lazuli.

2. Whether a mineral resource should be considered lootable in Snyder’s definition

may vary across stages of the supply chain, from extraction to processing (if any) to
transport and eventually export.
MINERAL LOOTING IN
AFGHANISTAN
 CHROMITE
• Found in Parwan, Logar, Maidan Wardak, Nangarhar, and Kunar provinces
[2012]
• Private operators have been extracting chromite under exploration
licenses from the MoMP. Five such contracts were awarded for mines
located in the Dadu Khel, Lalandar district, the Gadaha Khel area, Goshta
district and in Maidan Wardak.
• All in all, companies have extracted large amounts of chromite under
exploration licenses, transported it along national highways in large
trucks, and exported it.
• Non lootable [Snyder’s definition] - Lootable resource.
 GOLD
• Badakhshan, Baghlan, Takhar, Herat, and Ghazni; recently gold-bearing
areas; in Maidan Wardak and Kabul provinces.
• The Nuraba and Samti Gold Mine in Cha Ab district of Takhar was in 2008
contracted to a company that had previously had a contract for mining
chromite in Khost, which it reportedly misused to extract chromite during
the exploration stage and smuggle it out through Waziristan.
• Renegotiated in 2013.
• Despite extracting gold worth millions of dollars, the company is not yet
covered under Afghanistan Extractive Industries Transparency Initiative
(AEITI) reporting on mining revenue going to the government, strongly
suggesting that no significant royalty or tax payments have been made.
• Mixed picture with regard to lootability.
• Significant reserves - nonlootable. Alluvial gold - lootable.
 NEPHRITE
• Kunar, Nangarhar, Nuristan, Kabul, Logar, Badakhshan, and Parwan
provinces.
• Siberian Nephrite – world famous, Afghanistan Nephrite – even better
quality.
• A sitting MP – extracting significant amounts – with no contract and
smuggling it out of country.
• Earlier he reportedly paid 15 percent tax to the Afghan Taliban and 15
percent to the Tehrik-e-Taliban Pakistan, but now he is alleged to be
paying 15 percent to members of ISIS as well, to allow him to transport
the nephrite out.
 PRECIOUS GEMSTONES (EMERALDS AND RUBIES)
• Extracted in small amounts for millennia.
• Rubies and emeralds have been increasingly exploited in recent decades.
• Eminently lootable resources because they are remotely located, easy to
extract, and profitable to transport surreptitiously in small amounts.
RUBIES
Demand for Afghan
rubies appears to
Badakhshan have increased at least in
province, Jegdalek is part because new buyers
Jegdalek area under Taliban use them to launder their
Local people Local police in the illicit money
of Sarobi control, but
extracting district also are said
district of Kabul miners can
rubies using to take a 10 percent
province. work, &
artisanal cut from whoever
reportedly pay
techniques passes through.
about 10%
“royalty” to
the Taliban
 EMERALD
Discovered in the Khenj
district [now known as Powerful patrons in Kabul
Panjsher]

Extraction is illegal
but widespread,
even though the Local people
province is peaceful mining have no
Emeralds as a and secure. official contracts;
source of revenue Miners are said to they just inform
for the Soviet anti pay a the district
resistance group. 10% royalty to the government
provincial before extracting.
government which
never reaches CG.
 A CASE STUDY OF PANJSHIR
• Panjshir Valley is the home to the finest emeralds in the world.
• The documentary Afghanistan's “Hidden Gems: Wild Angle”.
• Exposes several aspects of the horrors of this business:
a) the plight of the miners,
b) the cruel manner of this extraction,
c) the huge profits the mafia, especially the Shura-e-Nizar, gains from this
business.
• Mostly smuggled through Pakistan and India and earns these greedy
smugglers some 150 million dollars every year.
• Pain and suffering of the miners - forced to work for eighteen hours every
day, far from their homes.
• Rings of dust around them, and risk their lives while blowing up rocks
in the mines.
• The Taliban has never made it into the region, but warlords have,
controlling illegal mining and smuggling.
• A few holes are drilled, in go the explosives then, you literally run for
it. This is exactly why the government makes it nearly impossible to
legally export emeralds. They are fragile much more fragile than a
diamond and are easily destroyed.
 LAPIS LAZULI
• Remote Kuran wa Munjan district of Badakhshan province [N.E]
• Continually extracted by mujahideen resistance forces and smuggled out
of Afghanistan [war costs as well as enriched commanders].
• Two groups – Hamid Karzai and Northern Alliance.
• Violent conflicts broke out in January 2014 when the NA took over the
mining area by force.
• In 2013 a contract was awarded to a mining company associated with the
faction linked to Karzai. Merely collected a fee from others who were
exploiting lapis. Cancellation in 2015.
• NA – continued illegal extraction.
• Transport to and through the border occurs on large trucks [lootable].
 LOOTING OF NONLOOTABLE RESOURCES IN
AFGHANISTAN: HOW AND WHY?
• Most of minerals in Afghanistan –
nonlootable at one stage or another except
precious gems.
• Moreover, the sheer scale of exploitation of
Afghan mineral products, most notably lapis
lazuli but also others, means that they
cannot be considered lootable at the
extraction stage, either.
• Why, then, is the dominant pattern private
exploitation, with negligible revenues
accruing to the Afghan government?
 ONE EXPLANATION
• Remoteness of many of these
resources and the limited reach
of the government into far-flung
parts of the country – superficial
plausibility.
OTHER EXPLANATION
• The post-2001 Afghan
government from the time of its
formation has been politically
penetrated by networks of
power holders—actors with
their own access to the means
of organized armed violence—
whose members are involved in,
or at least benefiting from,
ongoing mineral exploitation.
 Thus the organization of industrial-
scale looting in Afghanistan is
different from what Le
Billon’s and others’ analyses would
predict because of path dependence.
 THE CONTEMPORARY FLOW OF ILLICIT MINERALS
• The black market mining, and the trafficking of these resources surged
following the collapse of the Taliban regime in November 2001.
• Bordering the restive tribal areas of Pakistan, Khost Province is home to
a number of criminal mining syndicates, many of which specialize in the
surface extraction of chromite.
• In May 2010, the director of Khost’s mining department, Engineer Laiq,
admitted the provincial government has failed to prevent the smuggling
and illegal extraction of Khost’s chromite ore despite the presence of
300 armed security guards tasked with securing the mines.
• Afghan security officials indicate these syndicates are small in number,
namely a few large families, who smuggle the ore across the border to
Pakistan where members of the Wazir tribe buy and trade the mineral to
international customers.
POPPY ECONOMY OF
AFGHANISTAN
• Afghanistan has been the world's leading illicit opium producer since
2001.
• Afghanistan's opium poppy harvest produces more than 90% of illicit
heroin globally, and more than 95% of the European supply.
• More land is used for opium in Afghanistan than is used for coca
cultivation in Latin America.
• As of 2017, opium production provides about 400,000 jobs in
Afghanistan, more than the Afghan National Security Forces.
 DRUG TRAFFICKING
The following areas of Afghanistan play a role in the drug trafficking:
1. Production:
• "Southern region" of Helmand and Kandahar provinces, on the border
with Pakistan, which are the highest-volume areas for drug
transactions. There is a traditional route from Helmand, through
Pakistan, to Iran.
2. Smuggling:
• Herat, in Herat Province, the Northern Alliance stronghold, which
borders Iran
• Faizabad, in Badakhshan province, which has borders with Tajikistan,
Pakistan, and China.
 Afghanistan’s Resources
Fueling War and Insurgency

- Mahnoor Hayat Malik

 1. Research shows that there is
a statistical correlation between
natural resource endowment
and incidence of civil war/
violent conflict

2. Members of armed groups

benefit from looting, thus using
Key violence in order to maintain
their control and access to
Starters resources

3. Conflicts create war

economies when some parts of
a country are controlled by
rebels, warlords and insurgents
 Natural resources
can contribute to
conflict, especially
when the state does
not have complete
territorial
sovereignty
Natural resources, particularly
precious stones, have funded war
and insurgency in Afghanistan for
decades

• The country is still grappling with

more than 20 insurgent and
terrorist groups

• Taliban and other radical militant

and terrorist groups including al-
Qaeda, the Haqqani Network,
and the Islamic State Khorasan

• Taliban insurgents, warlords and

corrupt politicians are all a major
threat
 • IS is known to have vastly exploited
The Islamic natural resources in Iraq and Syria
State • IS poses a grave threat to the Afghan
mining industry
Turning its • Talc mining has become a key
Attention to strategic priority for the Islamic State
in Afghanistan as one IS commander
Afghanistan has been reported to have said: “At
any price we will take the mines”
• It appears to be turning its attention
to Afghanistan’s poorly monitored
mineral resources to fund its primary
operations in Iraq and Syria
• Access to talc mines is also a current
source of conflict between the IS-KP
and the Taliban
 The US in Afghanistan

With a
The US has
deploying of
battled
more than
continuously for
more than 16 100,000 troops
years
at the conflict’s
peak
WHY HAS THE
- US FAILED IN
-$1tn (£740bn)
With having
sacrificed the
on military AFGHANISTAN
operations
lives of nearly
2,300 soldiers - $100bn on
nation-building

Source: The Guardian, 2018

 Link between Opium &
Insurgency in Afghanistan

- Expanding opium harvest sustained

the Afghan resistance against the
Soviet forces

- The US has failed to curtail the

Taliban insurgency since 2001 due to
swelling surplus from the country’s
heroin trade

- Opium trafficking is estimated to

make up 60-65% of the Taliban’s
income (according to US officials)
 Taxation
• Taxing farmers in Taliban-controlled zones
• Collecting the 10 % ushr in some districts
• Keeping track of how much farmers and other
members of the local community are earning by
maintaining informants in each community,
Since 2001, paying the equivalent of $10 a tip for
Taliban information
commanders have
Protection Money
diversified their • Provision of protection for opium trade –
activities within another source of opium-related earning
the opium • Providing security for opium crops as they grew
trade • Protecting drug shipments as they leave the
farm area

Heroin Labs
• Overseeing heroin production
• Turning opium into crystal heroin and various
other high-end products
 • Taliban take a significant cut of the profits
from mining and tax in almost all forms of
economic activity in areas under their
control. This includes the lucrative opium
crops of Helmand, the timber trade in
eastern Afghanistan, marble cutting in the
south, and lapis in the north of the country
Sustained
• United Nations Security Council
Taliban committee report 2015: Minerals have
become the Taliban’s second biggest
Insurgency source of income after illegal narcotics

• May 2016 Global Witness report: “the

revenue going to warlords and the Taliban
from just one small area of Badakhshan
(province) rivals the government’s
declared income from the entire Afghan
natural resource sector”
 • "We're hitting the Taliban where it hurts, which is their
finances," explained the commander of forces, General John
Nicholson, in a press conference the day after the first wave of
bombing
Iron Tempest • This was when opium production jumped to record highs in
Afghanistan, with the Taliban operating up to 500 drug labs
(November (estimated by US Commanders)
• Taliban narcotics production, processing, trading and
2017) transportation networks targeted
• After hundreds of airstrikes failed to curtail the Taliban’s $200
million-a-year opium trade, the US military quietly ended a
yearlong campaign
US Military’s
Failed Opium
War in
Afghanistan According to a Latest UN
The US has spent
research from the survey: Opium
London School of growth has gone $8.9 billion in US
Economics: 20% down from counter-narcotics
Operation Iron 2017-2018. efforts since
Tempest had a Production 2001, yet the
negligible effect decline is due to war-torn country
on the Taliban factors including has consistently
and the drug weather produced about
trafficking conditions not 85% of the
networks in because of US world’s illicit
Afghanistan military action opium supply
Counter-Strategies to Combat Issues Related to
Narcotics and Illegal Mining in Afghanistan

- Nawal Khan
 United Nations Office on Drugs and Crime
(UNODC)

Drug Control and Rural Opium Poppy

Rehabilitation Program Reduction Project
(1980-1990) (1997-2000)

Reasons for the failure of

the projects

•Widespread public insecurity

•Lack of political support
 Counter Narcotics Directorate
(2002)

National Drug Counter Ministry of Counter

Strategy (NDCS) Narcotics (MCN)
(2003) (2005)

Tasks under CND

•Law enforcement
•Institutional building

The set target was to eliminate poppy cultivation and drug trafficking in
Afghanistan by the year 2013, which is clearly unattainable.
In 2009, Obama administration Special Representative
for Afghanistan, Ambassador Richard Holbrooke called
US counter Narcotics in Afghanistan;

“The most wasteful and ineffective program, I

have seen in 40 years in and out of the
government.”
 Afghanistan Extractive Industries Transparency Initiative
(AEITI)
The EITI is a "voluntary coalition of governments, corporations, civil society groups,
investors, and international organizations" that was "created in 2002/2003 to improve
transparency, and accountability in governments and extractive producers in resource-rich
countries," like Afghanistan.

Natural Resource extraction laws in Afghanistan

Hydrocarbon law of 2006 Mineral law of 2010

Failure of laws

•Not in line with international industry standards

•Lacked clear provisions to address transparency
•Lack of disclosure of contracts
•Lack of participation of civil society
•Involvement of local communities in the extraction process
POST-CONFLICT PEACE BUILDING
MEASURES IN AFGHANISTAN

WRT RESOURCES
PEACE BUILDING
•It is a complex, long-term process of
creating the necessary conditions for
sustainable peace.

• It reduces the risk of lapsing or relapsing

into conflict

• It strengthens national capacities at all

levels for conflict management

• It lays down the foundation for

sustainable peace and development.

• It focuses on the proper functioning of the society.

 The UN Secretary General’s report,
No Exit Without Strategy:
• The UN Secretary General’s report, No Exit Without Strategy
• describes the three means of reconstructive peace building.
• They are:
• 1. Consolidating internal and external security
• 2. Strengthening political institutions
• by increasing effectiveness and participation;
• 3. Promoting economic and social reconstruction.

A positive peace would restore relationships,

meet the needs of the whole population, provide
POSITIVE PEACE
ways to manage conflicts constructively, and
hence be widely regarded by Afghans as
legitimate, fair, and worthy of support.
 Can natural resources be utilized in Afghanistan for economic
and social reconstruction of the civil society?

Afghanistan can follow the example of Botswana and maintain a stable

government and foster economic growth.

Botswana’s economic success is mainly driven by natural resources,

particularly diamonds

Botswana's institutional foundation, including its laws and codes, is a

shining example for Afghanistan to substantially profit from mineral
resources.

As in Botswana's case all actions were done under government's political

support and disclosure of contracts in the public domain.

Afghan government, needs to improve economic development, and also reduce

conflict incentives in peace building scenario.
 Maximizing the opportunities for peace building

The illegal opium economy Developing a successful

must be tackled through a extractive sector relies on
careful approach that the Government being able
focuses on: to:

(1) Minimize the negative social,

human rights and environmental
(1) The counter-narcotics impacts of mining
strategy needs to be
comprehensive (2) ensure mining benefits all
Afghans by managing revenue
(2) Effective law effectively and diversifying the
enforcement economy

(3) criminal justice (3) strengthens transparency and

accountability to reduce corruption
(4) Alternative livelihoods
(4) provides responsible security
around mine sites.
 In a nutshell…
• Wider peace building in Afghanistan is easier to list than achieve

• It must include improved resource governance and sustainability

• Better accountability and transparency

•Increased community participation and stronger mechanisms for

dispute resolution

• Reduced competition for resources

•Improved trans-boundary resource management

•For a prosperous and peaceful Afghan society