China Short of Investment Target in Afghanistan Oil Deal

The Lede: Last Tuesday, VOA reported that a Chinese investment into Afghanistan’s oil production capacity has come short of the original amount set in a deal last year. Beijing has been carefully increasing its outreach and cooperation with the Taliban-controlled government in Kabul since the 2021 departure of U.S. troops after nearly two-decade conflicts in the country.

What We Know:

• The total Chinese investment in Afghanistan’s oil extraction project in the first year came short of the expected amount by about two-thirds at just $49 million. The oil extraction deal signed in January last year between China’s Xinjiang Central Asia Petroleum and Gas Co. (CAPEIC) and the Taliban authorities in Afghanistan established a 25-year contract that required CAPEIC to invest $150 million by the first year and a total of $540 million by 2026. 
• A Taliban official who spoke to VOA anonymously noted that inaccurate material and labor cost estimates, and late approval by Afghan authorities contributed to the shortfall in expected investment. The Taliban’s treasury earned about $26 million from the project over the past year. CAPEIC plans to dig 22 additional wells this year with the aim of increasing production to more than 15,000 barrels per day.

The Background: An estimate by the U.S. Geological Survey, the Amu Darya basin in northern Afghanistan and southern Tajikistan puts potential resources at approximately 962 million barrels of crude oil and 52,025 billion cubic feet of natural gas. China and the Taliban have discussed including Afghanistan in the Belt and Road Initiative (BRI) and boosting the country’s security situation. Afghanistan shares a border with China's Xinjiang province, where there have been security concerns regarding the Muslim Uyghur population, which could be a stumbling block to Beijing’s larger goals in infrastructure and economic development in the region. 

Likely Outcomes:

• While some of the reasons given by the Taliban official regarding the shortfall in Chinese investment in Afghanistan’s oil extraction capacities may well be true, it may also be larger factors on the Chinese side that have resulted in the lower than expected amount. A disappointing Chinese economy in 2023 and a more careful direction in foreign spending are likely factors as well. Caution will likely continue in Afghanistan engagement, yet, Chinese foreign investments into infrastructure and economic partnerships are likely to continue in the future along the lines of the country’s geopolitical and strategic interests. For example, Chinese state-owned company is also in talks with the Taliban-led government regarding a copper mine in eastern Afghanistan. 
• Beijing’s diplomatic engagement with Afghanistan will likely also follow this warm, but gradual pattern. At the end of January, Chinese President Xi Jinping accepted the Taliban-appointed Asadullah Bilal Karimi’s ambassador credentials. Whether this represented the first official recognition of the interim Taliban government by a major nation remains vague and unclarified by Chinese officials. This kind of contrarian foreign policy opposite the West’s status quo is likely to remain a theme of China’s ties. 

Quotables:

"The Islamic Emirate of Afghanistan is a challenging terrain, but the characteristic of the Chinese is to go where no one else goes, trying to gain advantages…Fundamentally, China doesn't care about women's rights; if its interest is to get closer to the Taliban regime, it won't impose conditions.” - Valerie Niquet, analyst with the Foundation for Strategic Research

“Although the attraction of [Afghanistan’s] mining and energy resources is strong, there is considerable Chinese wariness about the internal security situation, the reliability of Taliban assurances regarding foreign investments, and Afghanistan’s poor infrastructure.” - Andrew Scobell, distinguished fellow for China at the United States Institute of Peace

"China has understood what the rest of the world has not. We are not in a unipolar world." Zabihullah Mujahid, chief spokesperson of the Taliban 

"China may be getting ready to break ranks and take the final technical step either within the U.N. system or outside of it through a bilateral initiative." - Omar Samad, former Afghan ambassador

Good Reads:

Afghan Oil Production Jumps With $49 Million Chinese Investment (VOA)

China’s President Accepts Credentials From Afghan Representative (VOA)

China quietly expanding influence in Taliban-ruled Afghanistan (CNA)