Monday, June 21, 2010

The Curse of Plenty, History’s Great Irony

Let’s suppose there is $1 trillion worth of minerals under Afghanistan, as senior US officials and a confidential Pentagon memo say. Is that a good thing? Some experts in mining and in third-world-resource politics argue that it is not.

Because it takes up to 20 years for a mine to start earning profits and Afghanistan has been a battleground for 31 years, “no mining company in its right mind would go into Afghanistan now,” said Murray Hitzman, a professor of economic geology at the Colorado School of Mines.

The country’s underground treasure “will be good for the warlords and good for China, but not good for Afghans,” predicted Michael Klare, a professor of peace and world security studies at Hampshire College in Massachusetts and the author of “Resource Wars” and “Blood and Oil.”

History tends to second such skepticism. The great empires of the world were built thanks to gold mines, not atop them.

It’s the little mercantile nations with their cohesive political systems and fierce navies that looted the big feudal ones paved with rubies.

Arid Spain and Portugal siphoned off South America’s gold; the tiny Netherlands dominated vast Indonesia. Britain, barren except for coal, built an imperial swap shop of grain, lumber, cotton, tea, tobacco, opium, gems, silver and slaves.

Japan, less than a century out of its bamboo-armor era, conquered much of China for its iron and coal. The post-colonial era hasn’t been easier on the resource-rich have-nots.

“Countries with a history of conflict have perverse effects from mineral wealth — more war, more corruption, less democracy and more inequality,” said Terry Lynn Karl, a political-science professor at Stanford University in California and the author of “The Paradox of Plenty,” which shows how the populations of poor countries like Nigeria often get poorer after oil is discovered and a tiny elite benefits.

It has long been known, geologists said, that Afghanistan has huge deposits of copper, iron, gold, cobalt and many other minerals, including lithium, an element vital to modern batteries.

An internal Pentagon memo suggested that Afghanistan could become “the Saudi Arabia of lithium.”

But some experts suggested that the lithium prediction was optimistic and that Saudi Arabia was not the best example of what sudden wealth does in a poor country.

That kingdom and its neighboring emirates have tiny populations ruled over by powerful, cohesive families. And the Arabian Peninsula is easy to police in a crisis.

Afghanistan, Klare said, was more like eastern Congo, home to diamonds and coltan — another element vital to modern electronics. Both are full of warring tribes, illiterate populations, corrupt governments and brutal warlords.

And both are rugged and remote, far from coasts and with few roads or railroads, making it hard to get minerals out and policing forces in.

Rich as eastern Congo is, the lot of its population for the past 15 years has been disease, starvation and massacres at the hands of local militias and invaders from Rwanda, Angola and Zimbabwe.

Mozambique and Angola also illustrate the “resource curse,” said William Reno, a political-science professor at Northwestern University in Illinois and the author of “Warlord Politics and African States.”

Both were Portuguese colonies that fell into civil war after being freed in 1975. There was less to fight over in Mozambique, which had only cashews and shrimp to export, so the war was shorter and less intense.

But in Angola, with the rebels holding the diamond mines and the government owning the oil, profits were squandered on tanks and jet fighters. The war lasted a decade longer.

Compared with those countries, Afghanistan is at disadvantage, mining experts say. Even for $1 trillion, its riches may not be worth digging up.

Compared with oil drilling, minerals mining is extraordinarily expensive and time-consuming.

Gold, silver, copper and other minerals are usually locked in ore that must be tunneled down to, blasted out by the ton, carried to the surface and ground into powder for processing.

Digging the shafts and building elevators, processing plants, railroads and tarmac roads “can cost hundreds of millions to billions for a single mining operation,” said Roderick Eggert, director of the economics division at the Colorado School of Mines. “Even a small gold mine is $100 million.”

Also, someone must provide security, and 20 years of security by the US military would cost hundreds of billions of dollars.

England, the Netherlands, Spain, Portugal and Japan all discovered that the costs of policing empires outweighed the financial gains and that it was more practical to let private companies shoulder the risks.

And, experts say, while Afghanistan does have lithium deposits, so do many other countries.

Whether it pays to extract it depends on the price of lithium.

Recently, South Korea said it would build a plant to extract it from seawater that, if world prices rise, can supply far more than Korea needs.

Which could leave Afghanistan as the Saudi Arabia of sand.

Donald G McNeil Jr for The New York Times.

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