Will China’s gamble with Afghan oil deal pay off?

China has signed a deal with the Taliban government for the extraction of oil from the Amu Darya oil field in north Afghanistan. The deal has been signed between Shahabuddin Delawar, the acting Minister of Mines and Petroleum of the Islamic Emirate of Afghanistan and Chinese company – China Petroleum Economics and Information Research Centre (CPEIC).

Chinese ambassador to Kabul, Wang Yu was present at the agreement signing. Afghan news agency Tolo News reported that according to Delawar, the first three years will be exploratory and China will invest more than $540 million during these years.

Tolo News quoted Delawar as saying: “The first three years are exploratory. In this period, 4,500 square kilometers will be under the project in three provinces, including Sar-e-Pul, Jawzjan and Faryab. At least 1,000 to 20,000 tons of oil will be extracted”.

Wang pointed out that, “both sides should work together and cooperate closely to build the project into a successful model of China-Afghanistan cooperation.” He added that the agreement will provide confidence to other foreign investors to develop business in Afghanistan.

The Afghan minister said that nearly 3,000 jobs will be created for Afghans inside the country, adding that if the company failed to fulfill the pledged principled, the contract will be cancelled.

The agreement is a shot in the arm for the Taliban which took over Kabul on August 15, 2021 after overthrowing the democratically-elected Ashraf Ghani government. Since then, the Taliban has been boycotted by world governments over its failure to create an inclusive governance structure and for curbing the rights of women and girls.

The Taliban has been desperately reaching out to governments for investing in the country where the human indices have plummeted to a new low and the people face harsh living conditions.

Earlier this week, the Afghan acting Commerce Minister Haji Nooruddin Azizi made an appeal for foreign investments in Afghanistan to enable the country become self-reliant. He even said that the government will convert the erstwhile US military bases into special economic zones.

Some of the countries that have shown interest in investing in Afghanistan include China, Russia and Iran.

Despite the appeals and efforts, the main challenges for Afghanistan remain its limited view about women and their role in society, the treatment of the minorities as well as unrelenting violence coming from the Islamic State (IS). Continuing violence has dented investor confidence with some big attacks–the December assault on a hotel popular with Chinese tourists in Kabul and one on the Pakistani ambassador, taking place in recent times.

In the wake of the American pull-out from Afghanistan in mid-2021, Beijing had reached out to Kabul for investments through its Belt and Road Initiative (BRI) as well as the China Pakistan Economic Corridor (CPEC) with support from Islamabad.

With the Amu Darya oil deal in the bag, China may look at investments in Afghanistan’s mining sectors which could provide a win-win for both countries linked together through a sliver of a 70-odd-km border.

Also read: Afghanistan back in focus with US envoy Thomas West’s visit to India