The Pentagon's mineral utopia

President Obama's decision to sack Stanley McChrystal, his general in Afghanistan, has focused attention back on a war that most people would rather forget. The derogatory comments made by the general's aides about the president were insubordinate and foolish and risk obscuring an unpleasant truth: the war in Afghanistan is not going well.

We lack the political conviction to get the job done and the enemy knows it. This poor, blighted country seems further away from stability and prosperity than ever.

The good news is that the Pentagon has a solution to the problems in Afghanistan. It is calling on capitalists to save the day, pointing out that there are $1 trillion (Dh3.67trn) of mineral resources to be exploited in the country. "Come and get them!" was the cry recently as the Pentagon announced the findings of its geological survey of Afghanistan.

The hope is that miners will bring new investment, build roads and other infrastructure and create jobs. This would give Afghans an alternative to working for the local warlord or in the poppy fields, bringing peace via the private sector.

Unfortunately, the Pentagon's absurdly optimistic assessment of Afghanistan's mineral wealth demonstrates just how badly the war is going. The boasts about Afghanistan's natural resources feel like a desperate attempt to "big up" the country and, for several reasons, I'm afraid it didn't work.

First, the survey itself is nonsense. It takes years to properly survey the geology of a potential mining prospect and perhaps a decade or more to do a survey of an entire country. Any short-term analysis of Afghanistan's geology is, therefore, little more than a guesstimate.

Second, $1trn sounds like a conveniently round number. It looks suspiciously like somebody has extrapolated the findings for one or two localised resources across the whole country, which is highly misleading. I could dig a hole in my garden, find copper, iron and gold and calculate that my neighbourhood was sitting on millions of dollars worth of natural resources. There are minerals everywhere but there is a big difference between finding a few specks of gold in a rock sample and finding a deposit of sufficient concentration to make it economically viable to mine.

Third, by hyping the mineral wealth in Afghanistan, the Pentagon has just doubled or even tripled the level of bribes that miners will have to pay to get anything done in the country. Mining lesson number one is that you always underestimate the value of discoveries because people just get greedy otherwise.

Fourth, I'd like to know how the Pentagon expects a mining company to get the ore it produces in Afghanistan out of the country. Has the Department of Defence actually looked at a map? Afghanistan is land-locked so ore would have to be taken out via Pakistan, Iran, Turkmenistan, Kyrgyzstan or Uzbekistan. Good luck raising the financing to build that railway line.

Lastly, mining companies do not like political risk. When investing $5 billion or more in a project, investors like to know that their money is safe. They do not want to build a mine and its associated infrastructure and then have it seized by the neighbourhood warlord or a government that plans to sell it on to a competitor.

This political risk is why the world's largest mining companies have the majority of their operations in stable countries such as Australia, South Africa and Canada. There are plenty of other places they could go but mining is an expensive gamble at the best of times without adding the possibility that someone with an AK-47 will ruin all your hard work. The only people vaguely interested in Afghanistan's real or imagined mineral wealth are the Chinese. Unlike private companies, the Chinese government can tie mining licences to aid, trade and arms agreements, which will make the Afghans think twice about messing with those rights in the future.

Somehow, I doubt that the Pentagon had in mind the Chinese when it urged people to come and take advantage of Afghanistan's mineral wealth. But instead of worrying about digging holes in the ground (or insulting the president for that matter), the US military needs to figure out what it can sensibly achieve in Afghanistan before it is too late.

- The writer is business correspondent of The Times of London. The views expressed are his own

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