Secretary of commerce Wilbur Ross. Photo: AFP
Secretary of commerce Wilbur Ross. Photo: AFP

The Ghurian iron mine in Afghanistan’s Herat province is a perfect pilot investment target for a proposed US/Uzbekistan mining venture underwritten by the US Overseas Private Investment Corporation (OPIC), according to Dr Mohammad Humayon Qayoumi, chief adviser to the president of Afghanistan.

Speaking to Capitol Intelligence at the Trans-Caspian Forum in Washington, DC, in May, Qayoumi said the Ghurian mine, located on the Iranian border, could be used to supply iron ore to smelters in the north and south of Afghanistan, and even to the United Arab Emirates.

The openness by Afghanistan to US private-sector investment in the country’s nascent mining sector directly contradicts a US State Department assessment prepared for President Donald Trump stating that Afghanistan does not have the infrastructure, transportation, regulatory or environment controls to support private-sector mining in the country.

US private-sector investment in mining activity via Uzbek and Kazakh mining companies will be one of critical issues raised in US Commerce Secretary Wilbur Ross’s upcoming trade mission to Uzbekistan and Kazakhstan at the end of this month.

The trade mission follows high-level summits between Trump and his Uzbek counterpart Shavkat Mirziyoyev on May 16 and with Kazakh President Nursultan Nazarbayev on January 18.

The discussion of a US/Uzbek venture follows the signing of a memorandum of understanding between Mirziyoyev and OPIC president Ray Washburne during the Uzbek president’s Oval Office meeting with Trump on May 16.

The Trump administration is working to win over strategic Central Asian countries with large US private-sector investments as a way to extricate US soldiers from Afghanistan and the region. The presidents of Uzbekistan and Kazakhstan were able to announce US private-sector deals worth an aggregate of US$15 billion during their meetings with Trump.

One of the key strategies to reboot the Afghan economy is to develop the country’s lucrative but greatly unexploited mining sector, which is rich in iron ore, copper, lithium and even gold.

“Afghanistan is an El Dorado for miners but the security risks scare away most Western miners. It is almost the exclusive domain of the Chinese and Russians,” a Bank of Nova Scotia mining banker has said.

While US-Uzbek government relations are strong, the Central Asian country lacks dynamic business leadership with the very notable exception of Uzbek-Russian steel and media mogul Alisher Usmanov.

The owner of Russian/Ukrainian steel group Metalloinvest and an early investor in Mark Zuckerberg’s Facebook through his Digital Sky Technology (DST) group, Usmanov remains one of the most powerful business leaders in the former Soviet Union and is ranked as the 37th-richest man in the world.

Unlike his fellow so-called oligarchs such as Renova Group owner Viktor Vekselberg or former Rusal chief Oleg Deripaska, Usmanov has deftly managed to avoid being be placed on the US Treasury Department’s OFAC (Office of Foreign Assets Control) sanctions list.

Usmanov is the only person I can think [of] with enough clout to get Uzbek mining companies to work in Afghanistan and at the same time get Western banks and funds moving on the venture,” a source close to the Trump administration said.

Uzbekistan’s ambassador to the United States, Javlon Vakabov, told Capitol Intelligence that Usmanov was making significant social-responsibility investment such funding the construction of a mosque in Tashkent and redevelopment and restoration of the ancient city of Bukhara, a UNESCO World Heritage site.

Frustrated with the lack of progress by US military forces in Afghanistan, Trump ordered his administration to promote US private sector investment in mining in the country, according to Bob Woodward’s best-selling White House exposé Fear:

“Afghanistan continued to frustrate Trump…. In late September, he had hosted a reception at the United Nations annual meeting in New York. Azerbaijan President Ilham Aliyev and his wife posed for a picture with the Trumps. The Azerbaijan leader passed word that the Chinese were mining substantial amounts of copper from Afghanistan.

“Trump was furious. Here was the United States paying billions for the war, and China was stealing copper.

“Afghan president [Ashraf] Ghani had dangled the possibility that the United States would have exclusive access to vast mineral wealth, untouched in the Afghanistan mountain ranges. His argument: There’s so much money to be made, don’t walk away. Rare-earth minerals, including lithium, a main ingredient in the latest batteries. Some exaggerated estimates held that all the minerals in Afghanistan might be worth as much as several trillion dollars.

“Trump wanted the minerals. ‘They have offered us their minerals!’ he said at one meeting. ‘Offered us everything. Why aren’t we there taking them? You guys are sitting on your ass. The Chinese are raiding the place.’”

After ordering then-secretary of state Rex Tillerson and White House national security adviser General H R McMaster to get US investors into Afghanistan’s mining sector, the State Department issued a highly negative assessment on potential mining activity in Afghanistan, including a comment that the Chinese were not getting anything out of Afghanistan.

“This is hogwash. The Chinese, Russian, Tajiks and Uzbeks all have some mining activities in Afghanistan,” a Canadian mining banker said. “It is shocking the State Department would issue such a categorical report when simple site visits would contradict such a statement.”

Another group that has been successful in mining a portion of Afghanistan’s considerable mineral wealth is the Taliban, who then use the proceeds to carry out deadly attacks against US soldiers and North Atlantic Treaty Organization allies.

In fact, US investment into the Afghan mining sector was first proposed by former Goldman Sachs banker Robert Hormats while serving as undersecretary of state for economic affairs in the Barack Obama presidency.

Hormats, during in an interview in his seventh-floor office at the State Department in 2009, told this reporter that the Obama administration intended to promote investment in Afghanistan’s mining sector, including providing investment to Chinese mining companies.

A State Department source said the negative assessment by State was not surprising, as many employees at the department remained loyal to former secretary of state and presidential candidate Hillary Clinton.

“Hillary Clinton brought in some 160 people into State when she became secretary of state and many more Foreign Service officers believe that she, and not Trump, is the legitimate president of the United States,” the insider said. “Unfortunately, that loyalty has brought about internal dissension within State where to some, lying and insubordination to the president is considered acceptable, and even a noble act.”

President Trump has now increased the financial firepower of OPIC to carry out strategic private-sector investment in places such as Afghanistan by increasing OPIC’s investment and loan-guarantee budget to $60 billion after the passage of the Better Utilization of Investment Leading to Development (Build) Act on October 3.

The Build Act, while bitterly opposed by the United States Agency for International Development and Republican Senator Rand Paul, will merge OPIC and USAID’s Development Credit Authority into a new authority, the United States International Development Finance Corporation (IDFC).

While touted as a way to limit or counterbalance Chinese Belt and Road infrastructure investments, the IDFC’s main mission is to bring about regional stabilization by creating economic growth and jobs wherever frontline US soldiers are at risk in areas of Africa, Central Asia, and MENA (the Middle East and North Africa).

The first test of the new agency, which can now make direct investment, will be Ross’s trade mission to Uzbekistan and Kazakhstan carrying the extremely seductive carrot of US private-sector investment.

PK Semler

Peter K Semler is the chief executive editor and founder of Capitol Intelligence. Previously, he was the Washington, DC, bureau chief for Mergermarket (Dealreporter/Debtwire) of the Financial Times and headed political and economic coverage of the US House of Representatives and Senate.

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