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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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India - Afghanistan's Major Post 2012 Energy Investor?

An “if” – a major “if,” in fact, is whether Afghanistan will achieve sufficient political stability following the withdrawal of foreign military forces in 2014 to begin economic development.

If so, who then will reap the rewards of Afghanistan’s untapped mineralogical riches?

A major player in the potential bidding to exploit them is India’s ONGC Videsh Ltd, the overseas arm of India’s state-owned Oil and Natural Gas Corp (ONGC), which is among eight international energy firms shortlisted by the Afghan government to explore for oil and natural gas in northern Afghanistan.

So, what exactly does Afghanistan have in the way of energy potential to interest outside investors?

Well, according to a September 2001 report by the U.S. Geological Service, “It’s not just the U.S. military working to bring a better future to Afghanistan. For Afghanistan to recover and prosper, it needs a sound understanding of its land and resources. … after two years of exhaustive research, the USGS, Afghan Geological Survey, and the Task Force for Business and Stability Operations have released the results for 24 areas of prime mineral development in Afghanistan. … the Afghan Geological Survey and the U.S. Trade and Development Agency, the USGS released the first-ever assessment of undiscovered oil and gas resources, estimating a mean of 1.596 billion barrels of oil and a mean of 36.462 trillion cubic feet of natural gas. Much of the petroleum resource potential of Afghanistan and all of the known crude oil and natural gas reserves are in northern Afghanistan.

Afghanistan seems to be shaping up as the first major battleground for Central Asian resources between the two BRIC rising Asiatic superstars, India and China. And watching nervously from the sidelines is Afghanistan’s eastern neighbour Pakistan, a close ally of Beijing.

On 28 June India held the Delhi Investment Summit on Afghanistan during which Indian External Affairs Minister S. M. Krishna told participants, "The holding of a major investment meet on Afghanistan when NATO forces draw down by 2014 and terrorism continues to take a toll of lives, may at first sight appear counter-intuitive. Afghanistan may not be the easiest destination to sell to an investor. But India has ventured to do so. Firstly, Afghanistan has suffered three decades of conflict and violence that have destroyed the structures of the State. Despite over 11 years of heightened international attention and foreign assistance, Afghanistan continues to remain a special case for development and technical assistance in years to come.  Secondly, this attention and assistance will be necessary not just for Afghanistan's good, but to our own security, that of Afghanistan, its neighbours, the region and the world at large.”

Krishna expanded on his theme, telling his audience, “Let us not forget why the world returned to Afghanistan in 2001. The Bonn, Chicago and upcoming Tokyo Conferences, and the Istanbul process on regional confidence-building, demonstrate the will of the international community to remain engaged in Afghanistan. But both military interventions and foreign aid are to a large extent influenced by public opinion and prevailing economic conditions. We need something more enduring, something based on self-interest rather than generosity that can move the country towards greater self-reliance and inter-dependence."

Krishna’s extensive remarks should dispel any doubts in Islamabad and Beijing that India intends to exercise a major economic role in rebuilding the shattered Afghan economy in the years to come.

What is most fascinating is that Afghanistan’s neighbours are determined to benefit from the country’s projected stability after 2014, which has been achieved by the investment and sacrifice of U.S., NATO and ISAF troops. Notably, Pakistan, China and India did not contribute a single pair of ‘boots on the ground” to the military campaign to pacify Afghanistan, which began in November 2001.

Accordingly, those countries which sacrificed blood and treasure will only be able to watch as India, China and Pakistan vie for influence with the notoriously corrupt government of afghan President Hamid Karzai.

Cynical analysts are already speculating what form the bribes will take.

Straight out “soft” loans? (China.)

Transport links and access to the “world ocean?” (Pakistan.)

Loans, promises of infrastructure development and vague commitments to military assistance? (India.)

Kabul’s choice of investment partners will evidently devolve down to which government and national investors offer Karzai’s government the “sweetest” deal.

Some deal for the governments of the U.S., NATO and ISAF forces.

By. John C.K. Daly of Oilprice.com

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