Deep dive on China's Afghan copper FDI
Wednesday, December 30, 2009 at 11:37PM ARTICLE: China Willing to Spend Big on Afghan Commerce, By MICHAEL WINES, New York Times, December 29, 2009
Latest story on the Chinese FDI in copper in Afghanistan (favorite subject here on the blog).
The basic contrast is incisive enough, suggesting the limited liability partnership (silent) that I've long described as existing between us and China across the Gap:
While the United States spends hundreds of billions of dollars fighting the Taliban and Al Qaeda here, China is securing raw material for its voracious economy. The world's superpower is focused on security. Its fastest rising competitor concentrates on commerce.
Now, you can feel ripped off, or you can rethink the incentive structure you've unwittingly walked into.
Or you can engage in the predictable catty bitching:
S. Frederick Starr, the chairman of the Central Asia-Caucasus Institute, an independent research organization in Washington, said that skeptics might wonder whether Washington and NATO had conducted "an unacknowledged preparatory phase for the Chinese economic penetration of Afghanistan."
"We do the heavy lifting," he said. "And they pick the fruit."
Wah! Wah! Grow up and realize there's a world beyond "geo-politics."
The pattern has been around for a while, a secret to no one, even as our MSM now just seems to be picking up the theme:
An Odd Global Pairing
Afghanistan is not the only place where the United States and China find themselves so oddly juxtaposed in the post-9/11 world. China is investing more in extracting Iraqi oil than American companies are. It has reached long-term arrangements to buy gas from Iran, even as the government there comes under the threat of Western sanctions for its nuclear program. China has also become a dominant investor in Pakistan and volatile parts of Africa.
It's only odd when you don't realize the frontier-integration period we're in as a result of globalization's significant and continuing expansion. We have the tendency to think nothing happens before the pol-mil situation is perfected, when it's the econ-network dynamics that drive the connectivity, resulting in new security challenges and a paucity of rules (the politics).
Impossible! We say. This amounts to nation-building that ignores the politics!:
China Metallurgical Group, often called M.C.C., will build a 400-megawatt generating plant to power both the copper mine and blackout-prone Kabul. M.C.C. will dig a new coal mine to feed the plant's generators. It will build a smelter to refine copper ore, and a railroad to carry coal to the power plant and copper back to China. If the terms of its contract are to be believed, M.C.C. will also build schools, roads, even mosques for the Afghans.
The sweeping agreement has some experts rubbing their eyes in disbelief. "It's almost as if the Chinese promised too much," said one international expert who, like some others interviewed, refused to be identified for fear of alienating the Afghans or the Chinese.
But even if elements of the agreement fall through, the Chinese have already positioned themselves as generous, eager partners of the Afghan government and long-term players in the country's future. All without firing a shot.
Imagine that! Promising too much in nation-building. Thank God we never do that.
But here's your COIN 101, staring you in the face:
Nurzaman Stanikzai was a mujahedeen in the 1980s, using American-supplied arms to help drive the Red Army from his homeland. Today he is a contractor for M.C.C., building the Aynak mine's electric fence, blast wall, workers' dormitories and a
road to Kabul."The Chinese are much wiser. When we went to talk to the local people, they wore civilian clothing, and they were very friendly," he said recently during a long chat in his Kabul apartment. "The Americans -- not as good. When they come there, they have their uniforms, their rifles and such, and they are not as friendly."
So Mattis is still right: it's jobs! Jobs! Jobs!
Now for the serious self-awareness:
American troops do not, in a narrow sense, protect the Chinese. The United States Army stations about 2,000 troops in Logar Province, where Aynak is located. But an Army spokesman said they generally patrolled well south of the mine area and had not provided direct security for Chinese investors or mine workers.
The Afghan National Police, which does protect the mine, was largely built and trained with American money. The 1,500 guards the police have posted in and around Aynak are special recruits not drawn from the main force, according to Maj. Gen. Sayed Kamal, who heads the National Police.
But the conclusion is inescapable: American troops have helped make Afghanistan safe for Chinese investment.
I try not to say "duh!" But what did you think would happen? An onrush of American investors, given our position in the global economy? Or does it make eminent sense for a rising China to show up?
Again, you can be stunned by this realization, or you can start re-thinking your alliances, my theme for the entire "Noughties."
So who cares about how it gets done, when the real point is getting the development on track:
Had an American company won Aynak, some Afghans noted wryly, critics inevitably would have accused the United States of waging war to seize the country's mineral wealth. Moreover, if China succeeds in developing Aynak and generating revenue for the Kabul government, that helps achieve an American goal.
"To the extent that the Chinese bring Afghanistan up to speed and start paying a billion dollars a year in royalties," a Western government official who has followed the Aynak project said, "that would mean that Afghanistan is on a firmer ground to start paying for its own security."
Again, the natural complimentarity of interests stares us in the face:
The United States views Southwest Asia mostly as a security threat. China sees it as an opportunity.
So why be surprised the Chinese continue to free ride when we're so intent on leading the pol-mil show? Why should they pay for anything they're going to have to live with anyway, with no input from them?
Meanwhile, the practicality of the Chinese is putting our economic nation-building projects to shame:
With government money and backing behind them, China's state-run giants take risks in places that even the largest private behemoths will not tolerate, and they can add sweeteners -- from railroads to mosques -- that ordinary mining firms are ill equipped to provide.
"The Chinese have sort of raised the bar. They've taken it beyond the scope of just an extractive operation," the Western official said. "The Chinese are willing to step up and take a long-term strategic approach. If it takes 5 or 10 years, at least they have a beachhead."
Are the Chinese overreaching? Let's just say that, with connectivity comes learning, and the curve is getting steep for the Chinese as well.
But the opportunity is clearly there for the U.S. to positively influence the evolution, because it's not all hunky-dory with the Chinese firms, whose opacity hides much that is arguably quite negative:
The wild card, of course, is that no outsiders can know how much of China's Aynak venture is in fact brilliant strategy, and how much is merely a potentially ruinous business deal by an overzealous corporation. Beijing's corporate strategy is as opaque as it is overwhelming.
China Metallurgical, a Fortune Global 500 company that has so many subsidiaries that they are mostly identified by numbers, is a signal example. The corporation reports to the top level of the Chinese government. Big foreign investments like the one at Aynak require blessing at an equally high level. M.C.C. has huge and productive investments around the world.
Yet hardly all those ventures are successes. An M.C.C. copper mine in Pakistan is widely said to have serious environmental problems. A Pakistan lead mine has been dogged by conflict, including a suicide bombing that killed 29; residents accuse the company's Chinese work force of stealing local jobs. In Papua New Guinea, 14 Chinese workers at an M.C.C. nickel mine were injured in May in a pitched battle with local people who rioted over what they called intolerable working conditions.
That bid in 2006 for the iron mine in Gabon? Four years after C.M.E.C. struck its deal, the bargain appears to be unwinding over hints of corruption and global objections to a dam that would destroy Kongou Falls, one of central Africa's most treasured waterfalls.
I have these talks with Chinese extractive companies. Get down the chain a bit and reach the "younger" guys, meaning mid-level and my age, and you quickly encounter the realization that Chinese companies are not playing this as smartly as they should or can or must. But up on top? It's just the bulldozer approach, with bribery and over-promising a common tool. The younger guys know they'll be stuck with the resulting reality, and so are highly interested in discussing more clever approaches, but the resistance up top--for now--remains overwhelming.
It's much the same story on our side in the pol-mil establishment: get down low enough and you'll find the officers and officials who realize full well we should be upping our cooperation with the Chinese across the board. But above them sit those who want it all: the US runs all COIN with minimal input by outsiders (meaning anyone not in our command chain) and the US retains the option of planning for and buying for big-war scenarios that involve the same nations we need to shift toward in terms of broadening our global COIN ops.
A bitch, I know. But the sad truth is that there is always a generational change aspect to this. Took a long time to get the institutions to move toward COIN/small wars/what I call SysAdmin. Internationalizing that comes slowly enough because it will take a far longer time to reorient our alliances from sole reliance on the traditional West (NATO) to unconventional cooperation with the rising East. But until that evolution unfolds, expect to read a lot more articles like this.
As an editorial note: awesome article full of great writing and reporting.
(Thanks: Jarrod Myrick and Jack Ryan)
Reader Comments (4)
What is the solution?
A Chinese leadership that recognizes the compelling reasons to clean up their act abroad while taking in hand the consequences of more political liberalization at home. And that's one generation of leadership (the 6th) away, meaning we navigate a tough decade ahead (unless the upcoming 5th Gen surprises in a good way).
Ideally, we'd hold the fort, so to speak, in the Gap for the next decade, but as the financial crisis revealed, we're pretty much tapped, as is our traditional slate of allies.
That means the key thing of this decade is working on a reorientation of our alliances from the tired, aging West to the restive, rising East, because therein we find the natural partners for frontier integration and further expansion of globalization--even if their top leaders don't yet realize or are too scared to confront this emerging reality.
That is a tricky course for us: demonstrating our continuing utility as an ally yet likewise signaling the limits of our strength--a very FDR-like balancing act with a much poorer hand than FDR had but with a magnificently more benign international environment (only peon threats, really, and no one coming close to our military power and the willingness/experience to use).
So there's good and bad, a tricky decade ahead, and a premium placed on careful, calculated, visionary US leadership. I see Obama being good on the careful and calculated, but I don't yet see any real vision--except the brain dead "get-rid-of-nukes," "smart" sanctions (oh my, replacing the dumb ones, yes), "smart" power (ditto rhetorical nonsense) and so on.
Still, I would be seriously considering a move to Canada if McCain had won, so I'm thankful enough.
“That is the crux of conundrum: we can't make the Gap stable merely by virtue of our pol-mil efforts (our economic ties are frankly weak), so we need the dovetailing of the Chinese network-economic integration. Left to their own devices, they will do that badly--and they know it and fear it. But they also don't feel the confidence to try things abroad that would elicit the "wrong" thinking back home.”
“our economic ties are frankly weak”
I agree with this assessment and the projection for the short term. In the longer term, I have to wonder which of our necessary economic ties are weak or missing? Why are they weak or missing? What is the problem? Why is learning how to fix this problem not a better opportunity and more important than most other consideratons that are holding/demanding our attention? How much longer can we expect to want to specialize so exclusively on pol-mil? What could (could not) be done and what should (and should not) be done currently and during the next ten years to learn how to strengthen these weak economic ties for the long term? How soon can we expect the Chinese to learn how to do (and be able to afford to do) a large part of their own pol-min security work and to do this more cheaply, more conveniently, more timely, and more reliably on their own without our help? (It could be that our opportunities and our fears are fairly similar and no less in the US than theirs are in China.) Both/all nations will experience and learn from the changeable demanding evolving nature of network-economic integration, act strategically and responsibly with vision, or be left behind “comfortably” in sideline niches with static repressive outside dependencies.