VZCZCXRO1805
RR RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #3101/01 2781331
ZNY CCCCC ZZH
R 051331Z OCT 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 1837
INFO RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHRH/AMEMBASSY RIYADH 4309

C O N F I D E N T I A L SECTION 01 OF 02 KABUL 003101

SIPDIS

E.O. 12958: DECL: 10/15/2019

TAGS: EMIN EINV ENRG PREL SENV AF

SUBJECT: Security and Social Issues at Aynak Copper Mine
Classified By: CDDEA Ambassador E. Anthony Wayne for
reasons 1.4 (b) and (d).
¶1. (C) Summary: Problems are delaying progress on the
massive Chinese Aynak copper mine project, Afghanistan?s
single largest foreign investment to date totaling almost
USD 3 billion in infrastructural investment. While the
mine has twice the police force of the rest of Logar
province and benefits from nearby ISAF presence, the
China Metallurgical Group (MCC ? the mine?s contract
holder) reports security threats are delaying progress at
the facility. Minister of Mines Ibrahim Adel blames the
Ministry of Interior for not equipping the Aynak police.
Meanwhile, contacts at the Ministry of Mines admit the
first ten percent of MCC?s USD 808 million signing bonus
to the Ministry of Mines is "long gone" and cannot be
used for Aynak?s security. World Bank-funded technical
advisors at the Ministry of Mines argue the best way to
improve security is to create local employment at the
mine and in auxiliary support industries. However, they
express concern that MCC plans the minimum contractually-
allowed local sourcing. For this reason, the Ministry of
Mines is seeking ways to encourage the development of
Afghan support industries to enhance security through
local buy-in. End summary.
Background on Aynak Mine
- - - - - - - - - - - - -
¶2. (C) The Ministry of Mines awarded MCC the contract to
develop Aynak copper mine in April 2008. MCC is now
compiling a feasibility study for the Aynak copper mine,
requiring additional on-site drilling to confirm the
orebody´s geology and an environmental/social assessment
of the proposed project. Once the Ministry of Mines
reviews the study, the mine?s design, procurement and
construction is projected to take another two to three
years. The MCC also has a contract with the Ministry of
Mines to construct a coal mine and 400MW power plant,
with half the power supporting the mine and the rest
going to the national grid. Reportedly, MCC has also
signed a memorandum of agreement committing to lay a rail
line running north and south, connecting Aynak with the
proposed Hajigak iron mine and its associated coking coal
mine in Bamyan province.
Delays Certain
- - - - - - -
¶3. (C) Although the mine was originally projected to
begin production in 2012, observers say MCC faces at
least a five year delay in bringing the mine into
production. At full capacity, the copper mine is
expected to produce 200 thousand tons of refined copper
per year, earning Afghanistan approximately U.S. USD 450
million annually and creating over 10,000 direct and
indirect jobs. An Afghan-American contractor for MCC
says the mine currently contracts three local
construction companies and employs 300 to 400 people.
During a recent visit to the mine, however, few Afghan
workers were visible. The MCC has roughly 80 Chinese
employees on site. Eventually MCC estimates direct
Afghan employees will number around 3000.
MCC Meets with Mining Minister
- - - - - - - - - - - - - - - -
¶4. (SBU) During a September 17 meeting with Mining
Minister Adel, Aynak Police Commander Mohammad Mosen, and
U.S. military and civilian representatives, MCC-Aynak
President Zou suggested that MCC may not build a rail
line for Aynak. Minister Adel insisted that MCC has a
contractual commitment to install the line, but admitted
in a later aside that the rail contract had not yet been
signed.
¶5. (C) Security quickly became the principal topic of the
meeting. MCC Aynak President Zou urged Minister of Mines
Adel, as representative of the Afghan government, to do
more to secure the mine site. Insurgents had fired two
rockets at the site the night before, and MCC officials
reported they had lost several days of work due to IEDs.
There were, however, no casualties in these incidents.
¶6. (C) The Afghan government is responsible for Aynak´s
security, according to an initialed copy of MCC?s Aynak
contract obtained by the Embassy. There are now 1500
Afghan National Police (ANP) assigned to Aynak. (Note:
In comparison, fewer than 800 ANP are assigned throughout
the rest of Logar province. End note.) At the same time,
police at the mine have fewer than 20 vehicles. During
the meeting, Minister Adel openly blamed the Ministry of
Interior for not better equipping the Aynak police.
Other contacts at the Ministry of Mines later reported
the first USD 80.8 million of MCC?s USD 808 million
signing bonus to the Ministry of Mines is "long gone" and
cannot be used for Aynak?s security.
¶7. (C) The U.S. Task Force Spartan Commander reminded
Adel the copper mine´s district is the most secure in
Logar province. Besides 1,500 Aynak police, there are
regular ANP, Afghan National Army personnel, a Jordanian
battalion, and U.S. Forces based at the district center
nearby. Aynak ANP Commander Mosen welcomed an offer to
conduct a few joint patrols to the surrounding villages
with the Aynak ANP in the lead.
The Best Security: Local Buy-In
¶8. (C) In a separate meeting on September 19, World Bank-
funded technical advisors to Minister Adel told emboffs
community buy-in is the best way for MCC to achieve
greater security at Aynak. The Aynak contract requires
all unskilled laborers and a percentage of skilled
laborers to be Afghan. The MCC is also obligated to
build schools, set up a technical training center and
construct a 400MW power plant with associated coal mine
over the longer term. Ministry of Mines advisors point
out, however, that MCC is currently doing little to
create work for the surrounding villages. When asked by
Minister Adel, Mr. Zou said MCC is training local farmers
to grow Chinese vegetables, but he could offer no other
examples of community involvement projects.
¶9. (C) Communities near the mine are frustrated few jobs
are available, according to ISAF contacts. They know the
mine is rich in resources but they have yet to receive
any benefit and are as yet unaware that production will
not commence for years. With MCC facing production
delays of at least two-and-a-half years, local
disappointment is likely to grow unless MCC finds a way
to encourage local private sector growth to support
increasing mine needs.
¶10. (C) When Zou noted MCC will import most of its
supplies from abroad, Minister Adel countered that MCC is
contractually required to buy locally when price and
quality are comparable. (Note: The draft contract
obtained by the Embassy stipulates that prices are
compared before import duties are added, making it likely
Chinese imports will be cheaper than local goods. MCC´s
disinclination to buy locally will limit indirect
employment. End note.)
Comment
- - - -
¶11. (C) The U.S. is currently seeking ways to encourage
Chinese government non-military support for Afghanistan.
One way for the Chinese government to help Afghanistan
would be to create more near-term jobs to support the
Aynak copper mine and to encourage more local
procurement. Chinese government projects to support the
Aynak mine and create employment could focus on
agribusiness (to help feed employees), transportation
corridors, and finance for small businesses. We will
continue to monitor Aynak´s progress closely because the
project?s success or failure will affect future foreign
investment in Afghanistan, notably the large Hajigak iron
mine in Bamyan province. That project has attracted bids
on a pending tender from MCC, five Indian companies, and
a Pakistani/Saudi joint venture. End comment.
EIKENBERRY