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Tech resource woes won't be solved with Afghan minerals

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Wondrous news don't you think? Afghanistan is stuffed to the brim with $1 trillion worth of valuable metals. We can just flog off a few mineral concessions and the country is rich, rich beyond the dreams of avarice while kittens gambol happily in the Kabul sunshine.

Sadly, no, not really: there's a few minor little problems with this happy picture. The first and most obvious of these is what economists call the resource curse. Imagine that you were an ambitious lad in some bombed out 13th century economy. We'll peg the annual value of that economy at, say, $12bn, like Afghanistan's. We then find that there's some natural resource worth, as the Yanks currently estimate, 80 or so times that annual economy. Whoever occupies the office of the Minister of Mines is rapidly going to become the richest person in the country, aren't they? So you, our ambitious little lad, are going to strive mightily to become the Minister for Mines: an attempt that is unlikely to involve swotting up on minerals management and an appeal to the best long-term interests of the country. AK 47s and a gallows for your predecessor in office seem more likely.

More warlords vying for greater power isn't exactly what we want for Afghanistan: the most recent Minister for Mines has been suspended for allegedly (and stoutly denied) taking $30m off a Chinese company for access to a copper deposit.

It isn't as if this unusual out there in the 'Stans. When based in Moscow 15 years ago we could roughly trace the progress of one of the factional control fights by who phoned us up from an aluminium plant in, I think, the Fergana Valley. If it was a new bloke offering us high-purity aluminium for $500 a kilogram then some new group now had control of the stockroom. Much of the fighting was to gain control of that stockroom so as to be able to finance the battle further: it didn't matter how often we told people that this high-purity stuff was worth $10 a kilogram, the fighting still went on for control.

Even if this particular local custom is suppressed there's still Dutch Disease to contend with: the huge investments pouring into a country and the massive exports of such resources, push up the exchange rate and thus strangle every other form of economic activity.

That's the basic economics - then there's the economics of mining to think about. The report on all these riches is not exactly detailed. It's some old Soviet maps and a recent aerial survey - to mining companies this is the sort of evidence you use to work out where to send the teams of men with drills and hammers. There's another five years of work on each and every outcrop of interesting rock before anyone can say that there's any economic value at all, let along value worth sending in a digger or two for.

For what the report actually does is value all those metals in the dirt - dirt at the end of a two-goat highway - at their full current market value. Full current market value without including the costs of digging them up, processing them or transporting them. The top three minerals they claim to have found are iron ore, copper and niobium.

The iron ore has a supposed value of $420bn. This entirely ignores the fact that iron ore is a low-value, bulky commodity. So low-value and bulky in fact that it is normally transported by sea. Yes, I did check and no, Afghanistan is not notably well supplied with either ports or sea access. The only alternative is a railway to China, but there's the odd mountain in the way there.

The second is copper concentrate at $240bn. Such concentrates have the same problem as iron ore, although you can refine it to copper cathode which is easier (and as a percentage of value, of course much cheaper) to transport. But this requires lots and lots of electricity. More electricity than an economy worth $12bn has. We're rather getting to thinking that Afghanistan must be a developed economy to exploit this resource, rather than this being a resource to exploit to develop Afghanistan.

The third is niobium at $80bn. You'd think that US-based boosters would at least check with their own experts on niobium at the USGS. There they would find out that this is some 600 years' supply for the US. Try bringing that sort of volume to market and of course prices are going to plunge.

No, the basic problem with this “analysis”, this $1 trillion number, is that it's measuring what everything would be worth as metal, outside Afghanistan, rather missing the point that it's currently not metal and is inside Afghanistan.

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