Taliban takeover: why China may disregard Afghan lithium reserves

China’s support for the new Taliban regime in Afghanistan has raised suspicions that Beijing is considering Kabul’s mineral wealth, estimated at $ 1-3 trillion.

In particular, there are media reports that China could try to extract Afghanistan’s lithium reserves down to the last pound. They pointed out how the communist nation, the world’s largest automaker, will need the metal as the world moves toward electric vehicles (EVs) as part of decarbonization.

China is our most important partner: the Taliban

According to a 2015 report from the Henry M Jackson School of International Studies at the University of Washington, Afghanistan has recently discovered mineral wealth that could boost its economy over the next few decades by $ 1-3 trillion and employ thousands of new workers. However, the challenge is the lack of skilled work in the country.

Chinese investments abroad

A 2010 American study had shown that Afghanistan could have one of the largest lithium deposits in the world.

Most recent reports point to this study as proof of Chinese interest in Afghanistan’s political affairs, but experts following the events say Beijing’s role is being misunderstood.

The misinterpretation stems from the fact that China is the top consumer of lithium, processing nearly 90 percent of the total lithium hydroxide available globally.

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James Jeary, editor of Lithium Market Services, CRU Group, said Line of business via email that Chinese producers have invested significant volumes in lithium projects outside of China this year. The Ganfeng Lithium group is among the notable investors.

“Investment in lithium supply has increased rapidly this year as the market prepares to accelerate demand growth starting in the mid-2020s due to increased uptake of EVs,” Jeary said.

Other opportunities

The editor of CRU Lithium Market Services has a different view of the Afghan situation. “Political instability in one country leads investors of all stripes to be cautious, which could hamper investment in Afghanistan’s lithium resources, particularly given that lithium resources are abundant globally and as such exist many other opportunities, ”he said.

“There is the obvious political risk of a long-term company in a conflict zone that is still in the crosshairs of its neighbors and all the superpowers,” said Lukas Trakimavičius of the Research and Lessons Learned Division of the Center for Energy Security. the NATO of Excellence.

China has much better options for extracting foreign minerals and is already using them, for example, Argentina, Chile, Zambia and the Democratic Republic of the Congo, he said.

Difficult obstacles

The Henry M Jackson School report said that securing water, power supply and transportation in a landlocked Afghanistan was a difficult challenge.

Trakimavičius, writing in the energypost.eu website, said China’s media reports that they hope to strike deals with the Taliban to secure mining rights in Afghanistan are likely an exaggeration.

He said it will take a decade or more to get a mine up and running, with costs running into billions of dollars.

Lithium, a key metal in electric vehicles, is in the spotlight as prices have nearly doubled since the beginning of the year. It is currently trading at 92,500 Chinese yuan (₹ 10.56 lakh) a ton, according to the Business economics website.

EV growth

US multinational and financial services group Morgan Stanley has projected 50 percent growth in electric vehicles this year.

Lithium-ion batteries are preferred in electric vehicles as they are rechargeable and account for more than 50 percent of demand for the metal today. The batteries are scalable and have a higher energy density, as well as a longer life cycle with less maintenance.

Lithium reserves are approximately 80 million tonnes (mt) with Bolivia with 21 mt, Argentina with 17 mt and Chile with nine mt, according to NS Energy Business. Three other major sources of the ore are the US (6.8 mt), Australia (6.5 mt) and China (4.5 mt).

Security interests

CRU’s Jeary said investment and successful extraction of Afghanistan’s lithium resources would increase supply from the lithium mine at a time of rapidly increasing demand.

“However, CRU currently does not factor in any lithium supplies from Afghanistan in its forecast,” he said.

Trakimavičius, from NATO’s Center of Excellence in Energy Security, said China’s main reason for engaging with the Taliban is to defend their security interests and prevent the spread of instability and militant Islam to Central Asia and China itself.

China’s declaration that it is “willing to develop good neighborliness and friendly cooperation” with the new regime is in line with its previous attempts to establish friendly relations with the Taliban. In July this year, Chinese Foreign Minister Wang Yi received high-ranking Taliban political leader Mullah Abdul Ghani Baradar, currently Afghanistan’s Acting First Deputy Prime Minister, and his team in Beijing.

Expensive option

Trakimavičius noted that it is “extremely expensive” to develop mines and related facilities. The recent expansion of an already operating mine in the Congo, largely owned by China, required $ 2.5 billion. The development costs of a totally new mine are much higher.

“China is unlikely to pull the trigger until it is absolutely sure that a mining project is really worth it,” Trakimavičius said.

He also noted that China has been trying to develop a giant Mes Aynak copper mine in Afghanistan since 2008, but the project has yet to start.

Since China has considerable alternatives, Beijing would prefer to consider them for its investments in raw materials.

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