Despite increasing insecurity in Afghanistan and gun battles with Taliban rebels in the capital Kabul, Indian firms are bidding billions of dollars for a contract to mine iron ore in a central district of the country.
A consortium led by state-run Steel Authority of India (SAIL) could invest up to $6 billion in the mine, railroads and a steel plant in a race with China to lock in raw materials for two of the world’s fastest-growing economies.
The bid also signals India’s intention to remain engaged in Afghanistan long after 2014, when U.S.-led forces complete a pullout.
The contract for the Hajigak mines in Bamiyan province is potentially the single biggest foreign investment project in war-ravaged Afghanistan but it could be complicated by Pakistan, which is sandwiched between India and Afghanistan and fears closer cooperation between the two.
“We will be guided by Afghanistan’s national interests in arriving at a decision,” said a government official after six bidders, two of them Indian, emerged for Hajigak this week.
“If it is an Indian company which wins it then so be it,” the official said, dismissing concerns that deeper Indian involvement will stoke new tensions with Pakistan.
India is Afghanistan’s biggest regional aid donor and sixth largest overall. It has pledged $2 billion in projects, from constructing a new parliament building to laying a highway to Iran, to project Indian “soft power”.
Old enemy Pakistan publicly derides those attempts to secure influence in what it sees as its backyard, but Islamabad has been concerned by governments in Kabul that it feels are too cosy with New Delhi.
For Hajigak, bids to mine four blocks of an estimated reserve of 2 billion tonnes were received from the consortium led SAIL, U.S.-based ACATCO LLC, Iran’s Behin-Sanate Diba and Gol-e-Gohar Iron Ore, Canada’s Kilo Goldmines and Corporate Ispat Alloys, another Indian firm.
Afghan officials will name a preferred bidder after a 45-day evaluation process and the SAIL-led consortium is seen as having the best chance.
“India is a strong contender without doubt,” the government official said, adding that the bidder’s experience in mining, financial capacity and the royalty offered would be factors.
He also drew attention to President Hamid Karzai’s position that countries which had helped Afghanistan in the past must be given priority in developing its resources.
While the United States is still seen as an occupying force despite pouring billions of dollars of aid into Afghanistan, India’s lower-profile efforts, focused on key issues like roads, electricity and education, have won it goodwill.
But Indian interests have been frequent targets of attacks in the last decade.
The embassy in Kabul was hit by two bomb attacks in 2008 and 2009, killing 75 people and wounding hundreds. Indian engineers working on projects in Afghanistan have been kidnapped and hostels for Indian workers have been attacked.
The Taliban have claimed many of these attacks, but India blames Pakistan’s military spy agency, the ISI, saying it is trying to undermine New Delhi’s influence.
There are some fears that an Indian-run mining concession could be a large, and tempting target.
But with an economy ravaged by more than three decades of war, Afghanistan’s government is under tremendous pressure to ensure projects involving foreign investment flourish.
Jawad Omar, a spokesman in the mines ministry, said a 7,000-strong mine protection force is being raised to protect mine sites, including Hajigak.
So far, mainly Chinese and Indian companies have shown interest in mining Afghanistan’s resources.
China’s National Petroleum last week was chosen as a preferred bidder for an oil field in northern Afghanistan, taking the country a step closer to a second major deal after winning a $4 billion copper project in Logar province in 2007.
Global miners such as Rio Tinto and BHP Billiton have stayed away from Afghanistan because of security concerns but also because of high production costs especially in transporting deposits from the landlocked, mountainous country with few roads and little other infrastructure.
For India, a direct land route from Hajigak is out because it would involve travel through Pakistan.
Other options include transporting the ore westward to the Iranian port of Chabahar which is connected by roads that Indian engineers have built. The ore can also be moved by slurry pipelines after turning it into slush, but that may involve Pakistan as well.
New Delhi seems to be banking on the fact that the overall security situation will improve in coming years.
“The fact is a lot of things can change from now till the time this reaches production stage which I understand is years away in this kind of operation,” said an Indian diplomat in New Delhi.
Exploration at Hajigak is due to start next year and development of the mine will take four to five years.
A consortium of Indian state-owned companies will complete due diligence on a series of copper and gold projects in Afghanistan on June 5, and will make a final decision on whether to bid on the projects in coming weeks, a senior executive at one of the companies said Monday.
Shakeel Ahmed, managing director of state-run Hindustan Copper Ltd. (513599.BY), one of the companies in the consortium, said final bids must be submitted by the first or second week of July.
The consortium also includes Steel Authority of India Ltd. (500113.BY), National Aluminum Co. (532234.BY) and Mineral Exploration Corp.
Ahmed said in April that his company was one of four Indian state-owned entities on a shortlist to bid for four projects in the provinces of Ghazni, Badakhshan, Herat and Sar-e Pol.
Afghanistan's Ministry of Mines said companies from the U.S., Canada, United Kingdom, United Arab Emirates, Turkey and Australia had also expressed interest in the projects.
Ahmed said he wasn't worried about security in Afghanistan and described the political climate there as "quite conducive to investment."
Companies planning to operate in Afghanistan could face heightened security concerns in coming years. Experts say security could deteriorate after the bulk of foreign troops pull out beginning in 2014.
The Taliban bombed the Indian Embassy in Kabul in 2009, putting off some potential Indian investors.
However, another Indian consortium of state-owned and private companies in November won rights to the Hajigak iron ore mines in Bamiyan province, a $14 billion project.
Resource-rich Afghanistan has desperately sought foreign investors. China made the first big-ticket bet on Afghan mines, winning a concession to develop the $3 billion Mes Aynak copper mine southeast of Kabul in 2007.
In a bid to further consolidate India’s growing economic interests in Afghanistan, coal minister Sriprakash Jaiswal is all set to lead a high-level delegation to Kabul over the next fortnight to ink a pact with the Afghan mines ministry. The pact will pave way for Coal India Ltd and Singareni Collieries to explore coal deposits in the country.
Responding to a recent request by Afghan mines minister Wahidullah Shahrani that Indian coal companies need to employ their expertise to help his country develop the untapped coal basins, the coal ministry has sought clearance from the ministry of external affairs for the visit this month. According to highly-placed sources in the coal ministry, the delegation would comprise Coal India Limited chairman S Narsing Rao and his counterpart from Sinagreni Collieries Company Limited Sutirtha Bhattacharya.
During the visit, the delegation will be briefed in detail on the investment opportunities in the country’s coal sector. “Following the high-level meetings, both the sides would ink a Memorandum of Understanding (MoU) aimed at propelling investments in the Afghanistan’s mineral sector, especially coal,” a senior coal ministry official told The Indian Express.
Seeking to promote Indian investments, the Hamid Karzai government has already signed a strategic agreement to further cooperation in areas of minerals and hydrocarbons. Shahrani’s ministry has also inked MoUs with Indian ministries of commerce, mines, petroleum and steel.
“I would like to mention that Afghanistan has rich reserves of coking coal which we would be putting on bid in the near future. Signing of this bilateral cooperation MoU will greatly boost the interest of Indian public and private sector companies to invest in these coal mines in Afghanistan,” Shahrani said in his letter to Jaiswal. Reminding that India and Afghanistan have “age-old ties” the Afghan mines minister has asked Jaiswal to help in further strengthening the bilateral ties. The government of India has emerged as the biggest donor for projects aimed at giving Afghanistan a facelift. It has already invested about Rs 10,000 crore in various projects.
A consortium of Indian steel companies led by SAIL has recently been awarded the bid to explore the Hajigak iron ore mines in the country’s Bamiyan province. The syndicate has also planned to set up a steel plant and allied infrastructure worth Rs 40,000 crore provided it is extended all necessary assistance to enable the same.
According to Shahrani, Afghanistan has over $2.5 trillion of untapped mineral resources. Coal is primarily located within a Jurassic belt from the northern provinces of Takhar and Badakhshan through the center of the country and towards the west in Herat, according to Afghan mines ministry.
Yesterday China signed an "strategic" agreement with Astan. The game is well and truly on. India needs to maintain good relations with Iran. Its the only way to Astan for India. We cannot afford to screw up on Iran.
India must tiptoe carefully along the tightrope between Washington and Tehran, such that cooperation with one not be perceived as a threat to the other. Iran knows well that even if Indians dance with Iranians India is watching the US's reactions over Iran's shoulders. What if the gateway i.e. the Iranian port of Chabahar is closed if Iran is irritated or attacked? Then those mines that A'stan awarded as "insurance policies" would be choked off.
You take up this point always, and is a valid point, but think about it. Is Iran the only transit point that we are using to reach CAR and Russia at present? As a matter of fact, Iran is not being used for those two regions at all, yes, it is a proposed transit point.
You have your answer there.
Reaching Afghanistan through Iran is the most cost effective option, but not the only option. Our concern isn't so much the transit facility, but more so the security.
CAR is NOT an option or us. I mean to reach CAR itself we need Iran and Astan right now. Which brings us back to the old question of an easy route via GB but then it's for the future. Right now we need Iran no matter what anyone days. India has to take center stage in the dispute between Iran and the rest and see if it can broker some resolution to the problem. It will be the beginning of India's emergence as a global player.
We use European and Ukrainian ports to reach CAR and Russia, we are at present not using Iran as a transit for those two destinations, though this route means double the time than if we were to use Iran.
Iran is being used for Afghanistan and Iran.
Yes, Iran is indeed the best option for Afghanistan, CAR and Russia, but it is not the only option we have. If it comes to it, we can completely live without Iran, though not an ideal situation but in the bigger scheme of things if we are getting some very significant benefits, I wouldn't mind trading off Iran.
Eventually, Yusuf, Iranian nuke sites will be pounded, there is no way Israel will tolerate them go nuclear, and it comes to that, we will have to take a stand, but that is still quite some years from now, and till then we can negotiate some significant deals.
No we will not have to take any stance if Israel bombs Iran. Once they have been bombed, we will condemn the bombing as violation of sovereignty and also urge Iran to give up its weapons program. Lip service which will not make a difference to either side. Israel will be told before hand that you can bomb the shit out and we will condemn it to please Iran.
Going via Europe and Ukraine etc is both time consuming and very very expensive to make our investment in Astan viable.
If we can keep our neutrality, and still extract benefits out of both Iran and Israel, I would then rate it as one of the finest points in Indian diplomacy. If indeed we can do it, nothing can be paralleled to what we have done in the region so far.
Absolutely, but point being, Iran is not the last resort, something Amoy keeps highlighting.
That's exactly what india is doing right now. Lending an ear to both side but doing what suits it. The US and Israel need Indian support only as far as sanctions i.e reduction in oil imports from Iran. Once the guns boom, they would care less about what India thinks and neither does India. India will condemn the bombings in public but say the opposite in private.
But, by then damages would have been done to India. Alternatives like via Ukraine or whoever else doesn't make sense in terms of cost and logistics for bulks of coal, iron ore etc. etc. That implies huge commercial risks for all the investment made in Afghanistan. Lip service in the aftermaths won't help India herself let alone Iran.