A Taliban-led Afghanistan and the Chinese conundrum

Synopsis: This article explains the impact of US exit from Afghanistan on Pakistan and China.

Introduction

After postponing the announcement twice, Taliban spokesmen have said that they expect to have a new government in Afghanistan this week. The Taliban announced this after they captured the Afghan capital Kabul more than three weeks ago.

The real reason for the delay appears to be differences within various Taliban factions over the government’s structure, composition and cabinet portfolios.

How Pakistan impacted from the US exit?

Pakistan has to deal with an enormous refugee crisis.

Due to the poor fiscal condition of Afghanistan, the key assistance that Afghans will expect in terms of food, fuel and power will have to come from Iran and Pakistan. Iran has already signed a deal and is allowing export of its oil in exchange for cash.

Pakistan is facing awful economic situations due to restrictive IMF conditions. So, the Pakistan will find it exceedingly difficult to send supplies to Afghanistan.

Pakistan was already in FATF grey list. So, any activity of Pakistan to promote terror could jeopardise its attempts to exit the FATF grey list.

How Chinese benefitted from the US exit?

The Chinese have the technology to extract the rare-earth metals and huge deposits of copper in Afghanistan.

China is also engaging with the Taliban, to complete the new Belt and Road Initiative (BRI) investment.

Why does China make huge investments in South East Asia and Africa?

First, the cost of production is lower in Southeast Asia. So, the Chinese firms could gain more by shifting their production bases outside China.

Second, investing in these regions meant access to bigger markets for Chinese firms and more uniform regional development. For instance, the relatively underdeveloped Kunming region in Yunnan province became a commercial hub due to these investments.

Third, Chinese firms could evade protectionist measures targeted at their exports. For instance, by investing and start exporting from Africa and South East Asia to other developed nations the Chinese companies can evade protectionist measures on Chinese goods and services.

Fourth, reduce some of China’s energy requirements: Investments in these countries enable China to access cheaper foreign energy (oil and power) and minerals. For example, Chinese firms have constructed hydropower plants and a thermal power station in Myanmar, invested in copper processing activities in Vietnam.

How Afghanistan is different from South East Asian countries?

Afghanistan and Pakistan are not comparable to the economic potential of the Association of Southeast Asian Nations (ASEAN) countries. For instance, Pakistan is unable to repay a China-funded energy project, built under the BRI. Business decisions in Pakistan are not economically driven but are motivated by vested interests with the army. 

The Taliban are known to have a soft corner for the East Turkestan Islamic Movement — a militant group active in the Uighur province of China.

The Taliban ruling groups are far from united, making it impossible to make any reliable domestic and international policy predictions.

Further, The dependence on opium export makes Afghanistan vulnerable to world mafias and corruption.

Hence, the Chinese investments in Afghanistan and Pakistan will constantly face a risk of interruption.

Source: This post is based on the following articles

• “A Taliban-led Afghanistan and the Chinese conundrum” published in The Hindu on 7^th September 2021.
• “From fighters to rulers” published in The Hindu on 7^th September 2021.
• “Pakistan has opened the Pandora’s box in Kabul” published in The Indian Express on 7^th September 2021.