Taliban-led Afghanistan and the Chinese puzzle

Recent weeks have been troublesome for the people in Afghanistan. A devastating bombing on 26 AugustOutside Kabul airport, many people, soldiers and civilians were killed. This is not the first of its kind, there have been several bombings in the region, including a bomb blast in Gwadar a few days ago, targeting Chinese civilians. For an economy driven by the opium trade and ruled by tribal leaders, the new normal is set to be ruled by instability, fighting groups and, thereafter, boom, gloom and doom.

loot after a long war

In fact, the United States acted smart leaving Afghanistan. The Afghan occupation cost him more than what he was getting in return. An estimate by Brown University, US (https://bit.ly/3n5cPLJ) states that since 2001, the US has spent $2.26 trillion, of which $1.53 trillion was spent on defence. The Afghan economy did not flourish, with 90% of its population still living below the poverty line, with less than $2 a day. The only thing the economy can still brag about is its ability to produce opium and mercenaries.

But then there are some other things in Afghanistan that are valuable – vast deposits of rare-earth metals and copper. Especially the Chinese will be happy with this because they have the technology to dig. In fact, the withdrawal of the Taliban is seen as a victory for Chinese diplomacy and a defeat for the United States; In 1975, the equivalent of the US’s symbolic evacuation of Saigon, at the end of the Vietnam War. Indeed, China (also, Russia) has kept its embassies in Kabul operational while Western embassies have disappeared. In addition, China is engaging with the Taliban to fund new Belt and Road Initiative (BRI) investments. And the Chinese presence in Afghanistan along with forever ally Pakistan may look ominous for India.

Important link in BRI

Afghanistan is really important to the BRI. Without relying on Afghanistan, the bulk of Chinese investments in the China-Pakistan corridor would be at risk. Given the huge infrastructure investment in BRI, only several years of successful operation can pay it off. It is easy to spend in such a project, but it is extremely difficult to get the money back. The volume of trade that must flow through the new Silk Road must be massive and long-term. Otherwise, it will cost money and effort.

Read also: First talks between China, Taliban in Kabul

In fact, the Chinese successfully implemented this investment strategy, and it worked well in the context of Southeast Asia and Africa. First, lower costs of production in Southeast Asia mean that Chinese companies can profit by moving their production bases outside of China. Second, investment in these areas meant access to larger markets and more equitable regional development for Chinese firms. For example, the relatively undeveloped Kunming area in Yunnan province became a commercial center. Third, Chinese companies may have avoided protectionist measures targeted at their exports when they instead began exporting from Southeast Asian countries. Fourth, investment in Africa and Asia has also reduced some of China’s energy needs, giving Beijing access to cheaper foreign energy (oil and electricity) and minerals. Chinese firms have also built hydroelectric power plants and a thermal power station in Myanmar. China has also invested in power transmission and copper processing activities in Vietnam. China wants to copy the same strategies in the case of Afghanistan and Pakistan.

Success in these two countries would mean that China would be able to bring the Indian Ocean coastline and a large part of Eurasia together through high-speed rail lines, pipelines and maritime links. The idea of ​​connecting with the rest of the world stems from China’s aspiration to move out of manufacturing, move up global value chains, and begin focusing on product designing and innovation. According to the Chinese government, 4.4 billion people will be affected by the development of the BRI and within a decade there will be $2.5 trillion in trade.

shadow of terror

But here is the other side. Afghanistan and Pakistan cannot be compared with the Association of Southeast Asian Nations (ASEAN). Recent suicide attacks in Kabul and Gwadar are a sign and may even indicate a resurgence of terrorist groups such as Al Qaeda, Daesh and Islamic State. No business can flourish in the presence of terrorism, especially when the Taliban is known to have a soft corner for the East Turkestan Islamic Movement – ​​a terrorist group operating in China’s Uyghur province. Whatever the desire of the Chinese leadership for inclusive and peaceful development in Afghanistan, things are actually quite the opposite.

Even looking at Pakistan, which is a relatively better country than Afghanistan, the Chinese are facing problems. Pakistan is unable to repay the China-funded power project built under the BRI. Pakistan’s economy faltered due to dynastic politics and corruption. On top of this, there is an excessive dependence of the political class on the military. Business decisions are not driven financially, but are driven by vested interests and the military is shot down.

There are good reasons to believe that the Taliban’s withdrawal in Kabul will bring gloom and doom to the Chinese. The Taliban ruling groups are not united, making it impossible to make any reliable domestic and international policy predictions. Dependence on opium exports makes Afghanistan vulnerable to world mafia and corruption. All this implies that its undemocratic rulers cannot be compared to an autocracy like China, which has an inherently stable character. Sanctions, insurgency, factional warfare will likely be events in Taliban-controlled Afghanistan. These issues will extend to Kazakhstan, Turkmenistan, Turkey and other essential rings in the BRI series.

restrictions in the form of interference

Additionally, the Taliban are among the world’s least acceptable ruling elite to the West. The vast markets controlled by Western powers are the most attractive to China. Therefore, the next decade will see a sequence of BRI trade flows halting and going after possible European and US decisions to block or restrict trade from Afghanistan. Given the unfriendly relations between the US and China, any excuse will basically be taken up and used by the White House to stop trade with the BRI. Therefore, the cash flow at BRI will face the risk of frequent blockages. Financial markets will hopefully incorporate this and make funding of the remainder of the BRI more expensive and restricted. America’s move to clear Afghanistan in a game of chess could actually prove costly for China.

Nilanjan Banik is with School of Management, Mahindra University, Hyderabad. Guido Cozzi is with the Institute of Economics, University of St. Gallen, St. Gallen, Switzerland