Canada’s “Investment” in Afghanistan and the New Silk Road.

Canada’s “Investment” in Afghanistan and the New Silk Road. Michael Skinner

Abridged version published as: The New Silk Road: Canada joining the U.S. In exploiting Afghanistan’s resources. By Michael Skinner CCPA Monitor, Vol. 19, No. 9 March 2013 Pg. 1

Abstract: 20 July 2011, US Secretary of State Hilary Clinton announced the “New Silk Road Initiative” – a plan to build a sprawling complex of transportation, communications, and energy transmission networks that will interconnect the Eurasian supercontinent via Afghanistan. Michael Skinner examines the decades long processes that led to Canada’s role in building the New Silk Road and analyses the implications of this plan for Canadians and Afghans.

Since George Bush declared the Global War on/of Terror on 20 September 2001, some influential Canadians have described Canadian’s sacrifice of tax-dollars and soldiers’ lives and bodies on the battlefronts in Afghanistan and beyond as an “investment”. The payoff promised for this “investment” was supposed to be global security and hence greater security for Canadians. The official story told us we would achieve this by destroying terrorism and liberating Afghans – especially Afghan women and girls.

Although the promised happy ending to this story failed to materialise, the promise initially proved seductive. Who could argue against liberating Afghan women while simultaneously making ourselves feel safer? Unfortunately, that seductive story was based largely in myth.

But wise investors don’t invest their money to pursue nebulous altruistic goals based on myths – investors, whether governments, corporations, or individuals make decisions based on the best available fact-based information in the expectation of returning a measurable profit.

Considering the increasing secrecy of the Canadian state we are unlikely to know for decades, if ever, all the facts that motivated the Chrétien, Martin, and Harper governments to make massive investments of both public funds and soldiers’ lives in Afghanistan. We do know, however, what motivates corporations to invest tens of billions of dollars there.

The US and its closest allies are implementing a plan to open Afghanistan and its neighbourhood – often referred to as Greater Central Asia – to free trade and connect the disparate regions of the vast supercontinent of Eurasia through this central region via a sprawling system of transportation, communications, and energy transmission networks. One of many economic impetuses in the region are Afghanistan’s vast resource wealth, which the US government estimates is worth $1 trillion, and which some experts believe is worth as much as $3 trillion.

US Secretary of State Hilary Clinton announced the ambitious plan, she named the New Silk Road Initiative, on 20 July 2011, but strategists developed the idea decades earlier.

Whether we realise it, Canadians play pivotal roles in implementing this New Silk Road Initiative, so we really should learn more about this underpublicized social engineering project, which will have enormous consequences – potentially positive and negative – for Canadians as well as Afghans.

Afghanistan from landbridge to inter-imperial barrier to bridgehead.

After a decade at war, many Canadians may still think Afghanistan is a remote worthless place. But for millennia, Afghanistan was a strategic landbridge at the centre of a transcontinental trading system that used the transportation network known as the Silk Road. Afghanistan was also a mining centre that exported gems and minerals throughout Eurasia and into Africa. However, with the advent of cheaper, faster, and more reliable sea travel by the 15th century, caravels and eventually clippers, and finally super-tankers and container ships superseded the camels, donkeys, and horses that traversed the ancient Silk Road.

Although Afghanistan lost its central place in global trade, it resumed geopolitical importance, in the 19th century, but for a different reason. The leaders of the British, Russian, and Persian empires, instead of using Afghanistan as a landbridge, used its rugged terrain as a barrier to separate their empires.

The British fought three wars in Afghanistan between 1839 and 1919. After the last British retreat from Afghanistan, in 1919, Americans and Soviets began to make tentative economic forays into Afghanistan, while still using it as an inter-imperial barrier – only now between the Soviet socialist and American capitalist empires.

With the collapse of the USSR, Afghanistan was no longer needed as an inter-imperial barrier. Instead as Zbigniew Brzezinski had argued in 1997, Afghanistan and the region surrounding it could now be used as a “bridgehead” to expand economic liberalization.

The idea of a New Silk Road did not begin with Clinton’s declaration in 2011. In fact, a Silk Road Strategy Act was first proposed, in 1997. However, US legislators failed to pass the Act into law as US negotiators simultaneously were unable to finalize agreements with the rival governments of a divided Afghanistan. The Taliban ruled most of Afghanistan while the United Islamic and National Front for the Salvation of Afghanistan (better known in the west by their sanitized name, the Northern Alliance) ruled a rump state in the north. The invasion of 2001 eliminated the difficulty of negotiating with these rival Afghan governments.

The “discovery” of Afghanistan’s natural resources.

Afghans had mined their own resources for millennia. They exported minerals and gems to Egyptian pharaohs and Chinese emperors, long before Alexander the Great invaded and millennia before the British East India Company began its northward march through India, in 1600. After invading Afghanistan, in 1839, the British East India Company prospected in the south, while Russian prospectors did the same in the north.

During the Cold War, the Afghan government pitted First and Second World prospectors in competition against one another on overlapping but secretive exploration projects. By the 1970s, more than seven hundred geological reports indicated a wealth of resources awaited exploitation. Despite possessing huge deposits of many resources, only limited development was completed in Afghanistan during the Cold War, with the exception of natural gas extraction. From the early 1970s through the early 1990s, Afghans derived much of their foreign exchange from natural gas sales to the USSR.

More extensive exploitation of other resources was limited in part because of the lack of road and railway access and other infrastructure as well as political instability. But most western investors stayed out of Afghanistan because Afghans traditionally considered natural resources state property long before the nominally socialist PDPA seized control in 1978.

After more than a century-and-a-half of modern exploration and millennia of artisanal mining, it indeed seemed farcical, when, in 2010, American media reported the US Geological Survey had only recently discovered extractive resources in Afghanistan.

Opening Afghanistan for business and building the New Silk Road.

One consequence of the war is that the US government is privatizing Afghan natural and human resources. Since 2002, the US Agency for International Development (USAID) has been putting every Afghan state enterprise in transportation, communications, manufacturing, commerce, and resource extraction up for sale. The State Department reports Afghanistan “has taken significant steps toward fostering a business-friendly environment for both foreign and domestic investment”. Afghanistan’s new investment law allows 100 percent foreign ownership and provides generous tax allowances to foreign investors, but does not provide any protection for Afghan workers or the environment.

Few Afghan women were liberated by the Global War on/of Terror, but Afghan resources most certainly were. The “freedom” promised by the Operation Enduring Freedom invasion has proven to be the freedom to invest in Afghanistan.

With a business-friendly regime in place, all that is needed is the logistical infrastructure of transportation, communications, and energy transmission networks to open Afghanistan for business. And of course, a strong military-security force to protect this infrastructure and pacify noncompliant Afghans. NATO has committed to remaining in Afghanistan until 2024, and news reports of the withdrawal of US forces in 2014 tend to overlook the US-Afghanistan Strategic Partnership and the fact a sizable contingent of US forces will remain indefinitely. Canada is currently negotiating its own Strategic Partnership with Afghanistan.

Developing Afghan resources as well as those throughout Greater Central Asia and developing the logistical networks of the New Silk Road are interdependent synergistic projects. Numerous documents produced by organizations from the US Department of State to the Asian Development Bank stress the implications for interregional, intraregional, intercontinental, and global trade are immense.

I visited Afghanistan, in 2007, to ask Afghans to talk about the “international intervention” in their country. They told me many complex geopolitical and economic rationales (too complex to adequately analyze here) to explain why the US led Operation Enduring Freedom coalition invaded Afghanistan. Among the many complexly interrelated rationales Afghans identified were the intersecting interests of exploiting Afghan resources and resurrecting the ancient Silk Road as a modern system of transportation, communications, and energy transmission networks.

I doubt Afghans I met, in 2007, were surprised, when, in 2010, the US announced its “discovery” of Afghanistan’s resources, or when, in 2011, Hilary Clinton announced the New Silk Road Initiative. Nor were they likely surprised when, in late 2011, the Canadian mining company, Kilo Goldmines, which had made its fortune in the DR Congo during its horrific war, was awarded a concession to develop one of the richest iron-ore deposits in the world – the Hajigak iron-ore deposit in Bamiyan.

An Afghan geologist I met, in 2007, told me then that he fears Afghans will be condemned to greater suffering if the Hajigak deposit and more than a thousand others are developed by giant transnational companies.

My geologist friend led me to a mountaintop to overlook the Bamiyan Valley. I wrote then: “we can see that productive and sustainable agriculture fills every available niche in a delicate balance of nature. It is an extremely fragile environment, similar to the arid American southwest. Building a railway through the valley, spewing toxic waste into the atmosphere during the smelting process, and dumping tons of slag onto the watershed would have an incredibly destructive impact on the delicate ecological balance that has been maintained for millennia by the local farmers”.

Contrary to the inaccurate perception of Afghans as illiterate and ignorant, my knowledgeable friend reminded us of the genocidal slaughter of the Indigenous Peoples of the Americas as they were displaced to make way for economic development and the ecological destruction that resulted from resource extraction. My Afghan friend knew that, to this day, resource extraction disrupts social and environmental systems. He fears for the future of the Hazara people of Bamiyan and all Afghans throughout his country.

Considering the worsening relations today in Canada between the government and extractive corporations on one side versus the many nations of Indigenous Peoples on the other, my Afghan friend’s fears seem well founded. It is hard to imagine why a Canadian corporation mining in Afghanistan would treat Afghans better than they treat Indigenous Peoples in Canada. In fact, the few protections for Afghans who will inevitably be displaced by industrial development are entirely inadequate and environmental and labour protections do not exist.

The geopolitics and geo-economics of the New Silk Road.

Canadian politicians downplay profit motives for Canada’s mission in Afghanistan. Yet it is impossible to deny Canadian corporations are profiting from the Global War on/of Terror. Moreover, profit and power are inseparably intertwined.

From Halford Mackinder, at the beginning of the 20th century, to Zbigniew Brzezinski in the 1990s, strategists developed the idea that whoever controls the “heartland” of Eurasia will dominate the world. The “pivot” of American foreign policy toward Eurasia, since 2001, indicates strategists have convinced politicians of the perceived need for intervention in this region.

But Panitch and Gindin observe, history shows US military interventions either open new places or prevent “the closure of particular places or whole regions of the globe to capital accumulation”. Control is not essentially about military occupation of territory, nor is it about many of the other aspects of historical colonialism, although force and subjugation remain useful tools of empire. Control in the current imperial era is essentially about strengthening American primacy by expanding its institutions of global free trade.

In the case of Afghanistan, the military invasion has opened a state previously closed to investment. The war facilitated further institutionalizing free trade regimes throughout Greater Central Asia while preempting closure of the region by any potential rivals – notably China.

Afghan geological resources are also of greater interest than merely accumulating wealth. During the Cold War, the United States and the USSR had strategic interests in an array of radioactive and rare minerals as well as rare earths found in Afghanistan. In recent years China has begun to corner the markets in many of these strategic resources – a fact perceived as a potential threat by western strategists.

More common minerals, such as copper and iron, as well as hydrocarbon fuels, all of which Afghanistan has in abundance, are desperately sought by China and India. Exploiting these resources is an economic imperative, but tactical strategizing to control or deny access, even at the expense of perpetuating chaos in the region, could override the profit imperative if US strategists deemed this necessary for national security.

Politicians counter suggestions of imperial intent by asking: “If the US and its closest allies have imperial ambitions in Afghanistan, why did they allow the first of the large mining concessions – the massive Aynak copper deposit – to be awarded to a Chinese state enterprise”? The answer is complex.

Vancouver-based Hunter-Dickinson was the frontrunner to buy the Aynak concession, with its offer in the neighbourhood of $2 billion. Other bidders were based in Phoenix, London, and Moscow. Ironically, Aynak, like the later sale of Hajigak, which was split between a consortium of Indian state enterprises and Canada’s Kilo Goldmines, was not privatized in accordance with liberalization doctrine – it was sold to a subsidiary of the Chinese state enterprise, China Metallurgical Group (CMCC). Journalists originally estimated the sale at an astounding $3.0–3.5 billion, but the sale agreement posted by the Hong Kong Stock Exchange indicates a total investment of $4.39 billion.

The Chinese will construct a power plant to supply the mine and its smelters, develop a coal mine to feed the power plant, and construct a railway that will stretch from western China through Tajikistan to the Aynak mine and on to Pakistan. This railway will also link to the Iranian-Afghan rail project discussed below.

It is unlikely any private company would undertake such a large infrastructure project, considering the immense capital cost, compounded by the political and commercial risks of investing in Afghanistan. The American, British, and Canadian governments operate state-financed insurance schemes to protect investors from political risk in foreign investments, but they will not insure investments of this scale. The Chinese, however, so desperately need copper, regardless of how low or high its market price, they are prepared to assume the high risk of development in Afghanistan.

The Asian Development Bank (ADB) is at the forefront of financing construction of the New Silk Road infrastructure via the Central Asia Regional Economic Cooperation Program (CAREC). Probably of surprise to most Canadians, Canada along with Japan recently surpassed the US to become the two largest shareholders in the ADB.

According to the ADB, between 2001 and 2011, it had invested $17 Billion through its CAREC program to build “regional infrastructure and initiatives to promote connectivity and trade, helping the mostly landlocked countries [of Central Asia and Afghanistan] reach out to global markets”. The CAREC New Silk Road plan – in the works for years before Clinton’s 2011 announcement – has already constructed 7,000 km of road and rail links.

The ADB reports: “deepening regional trade links are also opening up previously unexploited resources, including huge energy resources”. The ADB intends to increase integration of Greater Central Asia with China, Japan, Russia, India, and Pakistan. To implement this intent, the ADB is financing six transportation/communications/energy-transmission corridors in Central Asia all of which require passage through Afghanistan.

Private companies will benefit from the surplus capacity of the Chinese coal mine, power plant, and especially the railway China is building with ADB financing.

Facilitating China’s huge and extremely risky investment, for which success is dependent on the US-led military mission in Afghanistan, might be a cunning tactic as part of the engagement-containment strategy outlined in the US National Defense Strategy. The US strategy is to engage China in the global economic system, while the US also positions its military to contain China if strategists deem that necessary. Afghanistan is a prime location to simultaneously engage and contain China, because China is now in the paradoxical position of requiring the US and NATO military force to protect China’s investment, but simultaneously fearing containment by these same forces.

So the short answer to the politicians’ question above: it’s in the interest of the US and its closest allies to engage China in developing Afghanistan provided China complies with the rules of the American dominated global economic system.

Iran, however, is notably absent from the list of countries the ADB is financing. Yet, Iran shares the longest border with Afghanistan. To date Iran has been the most prolific railway builder in Afghanistan as it nears completion of a rail link from Iran to the Afghan city of Herat, which will eventually link to the railway the Chinese are building to Aynak and on to Pakistan. This exclusion of Iran, despite Iran’s close relationship with Afghanistan, China, and the other states of the region, is a likely source for further conflict. Many Afghans fear Afghanistan could become a battlefront in a US-Iran war.

Whatever the outcome of the current Global War on/of Terror, investors in the military-industrial complex and its sibling, the development-industrial complex, are profiting. In the worst-case scenario, American strategists and politicians could decide it is in America’s national interest to escalate chaos in the region rather than allow China the imperial privilege of establishing control.

Who are the winners and losers?

The question of industrial development of the incredible scale now underway in Afghanistan and throughout Central Asia is not about whether it should occur – it is occurring. It is akin to the massive infrastructure development that occurred in North America during the 19th and early 20th centuries. The question that does need to be asked is: who are the winners and losers? In the skewed rules of the game as it exists now, investors – many of them Canadians – are positioned to be the winners and all but a few Afghans the losers.

Many Afghans recognize the immediate beneficiaries of the Global War on/of Terror are the investors in the companies that compose the transnational Military Industrial Complex, which includes the more than 800 member companies of the Canadian Association of Defence and Security Industries (CADSI). Indeed, the oft-made argument that Canadian Forces had to fight alongside the Americans on all the battlefronts of the Global War on/of Terror, as an “investment” to protect Canada-US trade relationships was not about protecting natural resource trade, which the Americans cannot afford to cut-off; it was about ensuring the US continues to import Canadian-made military and security goods, and continues to hire Canadian contractors. CADSI estimates its members now export $5 billion to $7.5 billion of goods and services per year the bulk of which is exported to the US (the government claims exports are only $475 million).

And many Afghans foresee that the beneficiaries of the war will be the investors in the intersecting developments of Afghan resources and the New Silk Road. Like the investors in the military industries, these investors are likely to profit, regardless of what fate for better or worse awaits most Afghans.

But unfair, inequitable, and environmentally destructive development is unsustainable. It eventually causes blowback as Canadians are beginning to realize during the Idle-No-More revolution in Canada. It’s time for Canadians to look beyond short-term profits to analyse the long-term prospects for their huge “investment” in Afghanistan. It’s time to seek better means to create socially and environmentally sustainable development.

Michael Skinner is a musician, composer, and Human Rights activist. For a decade he was a National Education Facilitator for the Canadian Union of Postal Workers. Since 2006, he has been a Researcher at the York Centre for International and Security Studies at York University, Toronto. Skinner has written numerous reports, academic papers, book chapters, and articles about the international interventions in Central America and Central Asia. This article includes material from his chapter in the recently published anthology, Empire’s Ally: Canada and the War in Afghanistan.

© Michael Skinner and Michael Skinner Research, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Michael Skinner and Michael Skinner Research with appropriate and specific direction to the original content.