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The US Bet Half A Billion Dollars That Mining Would Save the Afghan Economy. It Didn't.

A new Inspector General report reveals that much of the money the US spent trying to build up the Afghan mining sector was squandered

by Avi Asher-Schapiro
Jan 14 2016, 9:00pm

Photo by Hossein Fatemi / EPA

Afghanistan sits upon an estimated $1 trillion in mineral wealth, a combination of precious stones, natural gas, copper and lithium deposits. But its government pockets only around $30 million a year in mining revenue. That's despite over $488 million in cash the US spent to grow the Afghan extraction industry.

Government officials in Kabul readily admit that as many as 10,000 natural wealth deposits are outside of their control. Taking advantage of the chaos, a combination of Taliban fighters, local warlords, and most recently Islamic State-affiliated groups, have managed to capture a huge portion of their country's underground wealth.

A new report by the US Special Inspector general for Afghanistan (SIGAR) reveals that much of that nearly half-a-billion the US spent on the Afghan mining sector was squandered. A Pentagon project, known as the Task Force For Business Stability Operations or TFBSO, for example, spent $215.4 million on 11 different extraction projects. Only three "generally met objectives," SIGAR noted, and none of the bunch actually could be considered complete after the Pentagon shuttered TFBSO last year.

US Senator Chuck Grassley, the chairman of the judiciary committee who's a longtime critic of waste in Afghanistan, did not appear pleased by the SIGAR audit. "Unfortunately for these kinds of projects in Afghanistan, you don't even need the fingers on one hand to count the success stories," the Republican senator told VICE News after reading the recent report. "With these mining debacles, US tax dollars almost literally went down a hole."

US policy makers long salivated over the potential of the Afghan mineral economy — an internal Pentagon memo from 2010 said it could become the "Saudi Arabia of lithium." After the invasion of Afghanistan in 2001, the US effort to jumpstart the Afghan extraction sector developed along two separate lines. The Pentagon spent hundreds of millions trying to build infrastructure, while the aid agency USAID tried to build capacity in the Afghan government to oversee and regulate the sector.

Related: The Pentagon Blew $43 Million on 'The World's Most Expensive Gas Station'

The SIGAR report goes through US expenditures on the mining industry by TFBSO and USAID in fine-grain detail. It found that the US spent $46.5 million towards "building capacity" for a system for awarding rights to extract minerals through fair procedures, or tenders — but not a single tender ever produced a working contract. In another instance, the US provided $7.8 million to fold mineral development projects into a counterinsurgency campaign known as village-stabilization operations. But the first batch of equipment the US paid for fell into the hands of a local-militiamen in the Kunar province. Horrified, the Afghan government suspended its cooperation with the nearly conceived mining-as-counter-insurgency program.

Sayed Ikram Afzali, the executive director of Integrity Watch Afghanistan, thinks that the US started out with the wrong attitude. "The US wanted mines to get started as soon as possible," he said. Over the past decade he's been meeting with Pentagon and USAID officials and warning them that pumping money into the Afghan extraction sector without proper oversight could spell disaster. "The armed opposition, like the Taliban, are increasingly taking control of mining," he told VICE from Kabul. "They make an arrangement with a local elite to extract minerals illegally...even now Islamic State in some places is tightening their grip on mines."

Afzali's organization first discovered that US-funded mining equipment fell into the hands of militiamen in the Kunar province back in 2013. Corruption in the mining sector, he said, is now as bad as ever. He estimates that at least 50 members of the Afghan parliament have a personal stake in certain mineral extraction projects.

Integrity Watch Afghanistan released an in-depth case study of 5 different Afghan mining operations last month — each project, it found, grew out of a corrupt contract procedure. In total, the 5 different sites were evading $50 million in taxes — more than the entire Afghan government brings in in a year from the whole industry.

The US did try to train the Afghan government to do the complex work necessary to oversee a massive mineral extraction sector. Until 2014, it helped raise money to subsidize the salaries of 72 Afghan bureaucrats who could regulate the industry. But that money dried up, and 35 of those employees lost their jobs — significantly hampering government oversight capacity.

As armed groups continue to swallow up large swaths of the Afghan countryside, the broken mineral sector may become a serious liability.

"The issue in Afghanistan is that mining is a much bigger contributor to corruption and conflict than it is to development of the country," explained Stephen Carter, the Afghanistan coordinator for Global Witness, a natural resources watchdog based in the UK. He thinks that the haphazard US strategy in the country bears much of the blame.

"The US has been mainly focused on mining as a commercial prospect, a goose that will lay the golden egg to fund the Afghan government and drive the economy." he told VICE News after looking at the recent SIGAR audit.

For over a decade, Afghanistan has relied upon foreign aid — mostly from the US — for around 45 percent of its total budget. While extraction revenues were supposed to help the government become self-sufficient, the industry has now largely devolved into a semi-legal enterprise, that's increasingly dominated by groups like the Taliban and the Islamic State. Carter estimates that the Taliban's second largest source of revenue comes from taxing small mining operations in the areas under its control. If the situation gets worse, he warned, smaller conflicts in Afghanistan could devolve into a resource war that resembles the bloody conflicts in Central Africa.