The Taliban-led administration has signed its first international deal with a Chinese company to extract oil from northern Afghanistan’s Amu Darya basin, marking the government’s first major foreign investment deal.
Shahabuddin Dilawar, the acting mining minister under the Taliban regime, said on Thursday that the contract was signed with the Xinjiang Central Asia Petroleum and Gas Co (CAPEIC).
Chinese ambassador Wang Yu also confirmed the signing of the 25-year contract between Beijing and the hardline government.
“The Amu Darya oil contract is an important project between China and Afghanistan,” he said.
Under the deal, the Chinese petroleum company will invest $150m (£124m) a year in Afghanistan, tweeted the Taliban government’s spokesperson Zabihullah Mujahid.
This investment is expected to increase to $540m (£448.9m) in three years, the spokesperson said.
The Taliban-run administration will have a 20 per cent partnership in the project, while the share can be increased to 75 per cent, he added.
This is the first major public commodities extraction deal the Taliban has signed with a foreign company after seizing power in Kabul last year.
The country’s new de facto rulers have not been recognised by any country internationally.
This includes China, which has not officially recognised the Taliban regime, but has displayed support for the insurgent leaders and their rule by lauding “better security” being provided to the Afghans.
Experts have pointed out that $150m is comparatively loose change for China but a rather massive boost for the Taliban, which is struggling to run Afghanistan from its very limited national income.
“The Taliban will try to solidfy their political infrastructure as much as they can and they also realise that without a functioning economy, they can't run the state,” Kabir Taneja, a fellow at New Delhi-based think tank Observer Research Foundation, tells The Independent.
“The Taliban needs funds that are coming not just from agriculture and their opium trade but also formal trade.”
He pointed out that Afghanistan is still not known for oil in the global community, but the contract will help China build its image as an ally and emerge as a major trading partner.
It will also help China secure a missing piece of its puzzle for its longstanding Belt and Road infrastructure initiative. This is because Afghanistan is a geopolitically critical nation for China and India, its rival neighbour, has rejected the initiative.
“For China, the deal is more about posturing than gaining. Even if China loses some money into this, it is not significant. The Taliban is desperate and has been pushing China to sign this deal for a long time now,” said Mr Taneja.
This is a low-risk project for China and the country will not be placing its own people for the project but help operate it through Afghan companies or take Pakistan’s help, he added.
The contract signed by China also underscores the Xi Jinping administration’s involvement in the region alongside ally Pakistan, which has faced continuous regional tensions with Afghanistan.
The Taliban’s mining minister posed a precondition to Chinese authorities for the deal, asking them that the oil be processed in Afghanistan.
“We ask the company to continue the procedure according to international standards, also we ask them to provide for the interest of the people of Sar-e Pul,” he said, referring to the province where the Amu Darya basin is located.
Afghanistan is home to untapped resources worth more than $1 trillion and has attracted the interests of foreign investors but has largely remained an unsuccessful avenue for oil and petroleum trading due to political instability for more than half a century.
News about the deal comes just a day after the Taliban confirmed its forces had killed eight Isis members and arrested seven in raids and said those involved were linked to a recent attack on a popular Kabul hotel known for hosting Chinese businessmen.