POLITICAL ECONOMY

Bribery allegation ignites political firestorm on Afghanistan's Aynak Copper tender process

Considered the second most corrupt nation by Transparency International, Afghanistan's reputation hit a new low in the wake of allegations the nation's Minister of Mines accepted a substantial bribe from a Chinese company.

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A report by a former consultant to the Afghan Ministry of Mines and Industry regarding the Aynak Copper Tender has generated allegations that Afghanistan's Mines Minister took either a $20 million or $30 million bribe to award the development of Aynak to a Chinese firm.

On Wednesday morning the Washington Post published a story claiming state-owned China Metallurgical Group (MMC) received a contract for a US$2.9 billion project to mine copper from the Aynak project. The alleged bribe was paid to Mines Minister Mohammad Ibrahim Adel in Dubai.

Adel denied the allegation in an interview with the Washington Post and had scheduled a news conference Wednesday to discuss the charges.

However, MCC is also reportedly the front runner for another Afghan mining project involving iron ore west of Kabul.

A paper published by Tucson-based geologist James Yeager--which was made available to the news media, including Mineweb, about a month ago--was critical of a lack of transparency and other shortcomings of the Ministry which, Yeager asserted, created a "perfect storm of tender events."

These shortcomings reportedly included: "A strong-willed Minister unrelenting in his preference to see this award through with Asian partners. A primary donor and embassies with parachuting presence were overwhelmed, unwilling or simply not attentive to the details of the tender events until it was too late."

Yeager also asserted the Afghan Government "was not prepared in any way to address the legal, fiscal, or contractual aspects required for the breadth and depth of this project."

"The consequences may ultimately be that a series of flawed processes have now taken root in the Afghan minerals sector that will continue to guide sector development until and unless more transparent and market-oriented principles are introduced," he advised.

Yeager claimed China dominates natural resources development in Afghanistan to the detriment of Western mining companies, which must operate in a more open and transparent environment. Afghanistan and China enjoy a broad economic relationship, which benefits Chinese mining companies.

"Chinese companies are not subject to a Chinese version of the U.S. Foreign Corrupt Practices Act; China is in a position to dominate the future development of the Afghan mining and natural resources sector because Chinese firms can package their tenders to include what Western countries refer to as ‘foreign aid,'" Yeager wrote.

"The Chinese model of doing business does not support the kind of open and transparent, democratic capitalism that the international community has agreed is essential to building Afghan institutions that tend to engage the support of the people."

"Thus, Chinese or ‘Eastern' dominance of mines and minerals development has the potential to limit and constrain the very governance reforms essential to fighting the insurgency" of the Taliban and Al-Qaeda in Afghanistan, Yeager suggested.

CNN contacted State Department spokesman Ian Kelley who said U.S. officials had seen Yeager's report and are aware of the allegation of bribery. He said the issue reflects concerns over corruption, a problem that Afghan President Hamid Karzai has taken seriously.

In his interview with the Washington Post, Adel said MCC won the contract because its proposed investment included plans to build a railroad and a 400-megawatt power plant, and to make an $808 million bonus payment to the Afghan Government far exceeded that of other companies involved in the tender bidding process. However, the company is two years behind schedule in the development of this infrastructure.

Karzai, who has been under pressures from the U.S. and NATO to eliminate the graft and backroom deals that cost his administration much popular support, announced the formation of a new anti-corruption unit on Monday.

China Metallurgical has not commented on any of the bribery allegations.

The Aynak copper deposit is believed to have at least six million tons of copper and would yield $200 million annually in royalty revenues for the Afghan Government for 30 years.

The companies that were selected to submit bids for Aynak Copper were identified as the Bahana Consortium of Australia, the China Metallurgical Group, Phelps Dodge of the United States, the Green Mountain Mine Management Company of Iran, Hindalco Industries of India, Canada's Hunter Dickenson, Kazinvest Minerals of Kazakhstan, South Korea's SK Mining Investment and Development, and Russian companies Strikeforce and Tyzhpromexport.