The New Silk Road: Can a U.S.-Backed Initiative Bring Peace and Prosperity to Afghanistan?

Via Time Magazine, a look at a U.S. backed initiative to bring peace & prosperity to Afghanistan through trade:

Trucker Saleem Khan likes to think of himself as a modern version of the camel drivers who once traversed the central Asian plateau in trade caravans destined for the suqs of Arabia, the bazaars of China and the markets of India. For more than a millennium, Khan’s Afghanistan was the linchpin of the Silk Road, a trading giant and a cultural crucible that cast its influence as far as Greece and Japan. Trade could make Afghanistan rise again, says Khan, thumping the bejeweled bumper of his modern beast of burden, a Mercedes flatbed loaded with cedar logs from the forests of Uzbekistan. “I could go all the way to India with this or to China if I didn’t have to worry about borders, customs and bribes,” he says. That day may not be far away, if the latest solution for all that ails the region ever materializes.

Khan is not the only one to see Afghanistan’s future in its trading past. The U.S. has embraced a new vision for the country that places it at the center of a rejuvenated network of commerce, communications and energy transmission, a “land bridge” connecting the Middle East and central Asia to the insatiable markets of China, India and Southeast Asia. “Let’s set our sights on a new Silk Road,” U.S. Secretary of State Hillary Clinton said last fall as she laid out the new strategy. “An Afghanistan firmly embedded in the economic life of a thriving south and central Asia would be better able to attract new sources of foreign investment, connect to markets abroad and provide people with credible alternatives to insurgency.” The wish list includes tens of billions of dollars in trade and energy deals between former neighborhood friends and foes. The goal: to transform this war-wracked beggar of a nation — for the past decade, Afghanistan has sucked in an estimated $286 billion of nonmilitary aid — into a country that can stand on its own when foreign forces depart in 2014. On the new Silk Road, rail depots will replace Afghanistan’s ancient caravansaries, its camel tracks taken over by pylons and pipelines. And Khan will be able to drive all the way to India with his truckload of central Asian goods.

Whether or not that vision becomes reality depends largely on the cooperation of central Asia’s perpetually squabbling authoritarian governments, peace between rivals Pakistan and India and the end to a corrosive insurgency that has stunted Afghan development. The U.S. will also have to shelve reservations about the blossoming Afghanistan-Iran relationship in the name of regional stability. So far, the U.S. has been leaning on other Afghan trading partners while sidestepping Iran. “It’s a difficult proposal to say we want Afghanistan to develop in a way that ignores one of its key neighbors,” says Andrew Neff, senior analyst at IHS Energy Group.

In many ways, Afghanistan’s future echoes its past. For much of the past two centuries, its strategic location has been the cause of its undoing. In the 1800s it was a battleground between imperial Russia and Britain. The 1980s ushered in a proxy war between the U.S. and the Soviet Union. Now Iran, Pakistan, India, China and Russia have a stake, and few of them see any advantage to continued U.S. meddling. If Afghanistan is to successfully exploit its strategic advantages — resources and location — it will need to navigate long-standing regional tensions while reassuring nervous neighbors about their security. “We want to shift this definition of Afghanistan as a source of terror to one where it is the main catalyst for regional cooperation,” says Afghan Foreign Ministry spokesman Janan Mosazai.

Boosting the country’s economic prospects should help regional stability. Countries with tightly knit trade relations are less likely to go to war, a boon in a region where India and Pakistan have nuclear weapons and Iran is well on its way. If Afghanistan becomes a transit point for the energy pipelines that funnel central Asian gas and electricity to power-starved India and Pakistan, they will be less likely to use its territory for proxy wars.

Goodbye Aid, Hello Trade
When U.S. and NATO forces depart, the war economy and the aid program — which play a big part in Afghanistan’s robust 8% growth rate — will go with them. Roughly half Afghanistan’s $30 billion in GDP last year came from international aid. If those aid expenditures drop precipitously by 2014 as expected, the government will have to make up for a shortfall of several billion dollars just to cover the cost of its security forces and maintain existing infrastructure. Its vast untapped natural resources — an estimated $1 trillion to $3 trillion in gold, copper, iron, gas, oil and rare earths — are the surest bet to fill the gap quickly, according to U.S. and World Bank assessments.

Both China and India have bid big for mining rights in deals that could pad government coffers with $1 billion to $3.5 billion a year once the mines ramp up, which could take years. Then those resources will need to get to market. And that is where the old Silk Road meets the new. In February the Uzbekistan government, with $165 million in funding from the Asian Development Bank, completed the first tranche of a 75-km-long cross-border railroad — Afghanistan’s first — to the provincial capital of Mazar-i-Sharif. For the moment, that line ends at Naibabad, where Khan has just loaded his truck with cedar logs destined for construction sites in the capital. Eventually the Uzbek line will connect with a Chinese-built segment near Aynak, as promised in the winning bid for excavation rights. And in this way, in patchwork segments, the vision of a new Silk Road will come to life.

That is, if disgruntled neighbors agree to make nice, allowing trade and energy to flow from central Asia to India. India and Pakistan, which have gone to war three times in the past 64 years, have a near trade embargo. So while India has the rights to mine Afghan iron, there is no economical way to get it across Pakistan to India’s hungry steel mills. “If you can unlock the India-Pakistan transit trade route, that then opens up tremendous possibilities for Indian companies to get more involved in central Asia and vice versa. Not only would they benefit, but Pakistan itself would benefit,” says Robert Blake, U.S. Assistant Secretary of State for South and Central Asian Affairs.

The prosperity would have ripple effects across the region, argues Shuja Nawaz, the Atlantic Council’s South Asia director. The tighter the economic dependencies between nations, the less likely conflict would be, particularly in the case of Pakistan, which has historically used Afghanistan as a launchpad for proxy attacks against India. “Once Pakistan’s business sector sees greater returns from trade than from using Afghanistan as a cockpit to fight for influence in the region, the post-2014 scenario becomes much more sustainable,” Nawaz says. Such was the case with the countries across Southeast Asia that negotiated the ASEAN trade pact in 1967, which catapulted the region to decades of high growth. Conflicts among rival nations within that trade body occur, but they are typically resolved through dialogue and mediation rather than armed confrontation.

There are signs of hope: for instance, the 1,680-km Turkmenistan Afghanistan Pakistan India (TAPI) pipeline project, which will connect Turkmen gas fields with the energy-hungry populations of Pakistan and India. After two decades of setbacks and false starts, the four countries finally signed a deal on May 23, a step toward fulfilling Indian Prime Minister Manmohan Singh’s oft-quoted dream of a day when “one can have breakfast in Amritsar, lunch in Lahore and dinner in Kabul.”

The movable feast will take time. Chronic insecurity, poor governance, corruption and cronyism are still rife within the region. (Afghanistan, Uzbekistan and Turkmenistan scored fourth, fifth and sixth to last on Transparency International’s corruption perception index last year; Kazakhstan, Pakistan and Tajikistan were not far ahead.) What’s more, closer trade ties can complicate politics. Russia has used its export dominance over Eastern Europe for political leverage by shutting off gas and oil supplies to the region. “Trade can stop conflict, but it depends on the relationship. Maybe it sounds nicer than war because there are no bullets, but it can be used just as effectively as a weapon,” says Peter Zeihan, vice president of analysis at Stratfor Global Intelligence.

Footing the Bill
In March, Afghanistan and neighbors India, Pakistan, China and Iran, among others, convened for a two-day conference in Dushanbe, Tajikistan, to draw up a shopping list of projects that would breathe life into the new Silk Road. Those include thousands of kilometers of rail and road construction, dam and hydro-electric projects, electrical-grid expansions and pipelines. Then there are cross-border economic zones, paperless customs proceedings and regional transit-transport agreements. The hardware alone would cost in the tens of billions of dollars. That’s not much different from the average monthly expenditure of the U.S. and NATO in Afghanistan, which is why the plan’s architects are pushing for a “transition dividend,” whereby the countries that withdraw will commit some of those savings to building Afghanistan’s trade future.

Still, it’s a hard sell for international donors drained by a decade of support. The U.S. says it’s tapped out and wants the private sector to swoop in. “This is not about the U.S. spending vast sums to get this going,” says Marc Grossman, special envoy to Pakistan and Afghanistan. “This is about the U.S. opening people’s minds to the possibilities.” Energy giants like Chevron and ExxonMobil have expressed tentative interest, but costs are still in question. Official estimates for the Silk Road project, initially pegged at $7.6 billion, have nearly doubled since 2008. Stratfor’s Zeihan estimates that the total could easily reach $40 billion, which includes security costs for building a pipeline through one of the most insurgent-racked areas of Afghanistan and the cost of steel and other scarce raw materials.

Of course, on the old Silk Road, the private sector covered everything from caravans to security. But traders rarely had to worry about the customs delays and prohibitive tariffs that plague regional trade today. In October 2010 the U.S. helped Pakistan and Afghanistan hammer out a far-reaching trade pact. But only months after it launched in July, disputes over tariff guarantees brought Afghan imports from outside Pakistan to a halt. Nasrullah Rahmati, a clothing manufacturer in Kabul who employs 600 women to sew uniforms for the Afghan military, has had to dramatically scale back production because $2.5 million worth of fabric has been held up for eight months at the Pakistani port of Karachi while the two countries work on a solution. An inadvertent attack on a Pakistani military post that killed 24 soldiers in November hasn’t helped.

The unlikely fixer? Iran. The only reason Rahmati’s business hasn’t completely collapsed is that he found a Korean supplier who could ship through Iran, which has helped develop western Afghanistan’s road network and is second only to Pakistan in terms of exports to Afghanistan. And yet the U.S. is doing “as much as it can to actively discourage that connection,” says Neff of IHS Energy Group. If left out of regional trade negotiations, the long-standing U.S. foe could become a spoiler. “Iran is a neighbor, just like Pakistan,” says Afghan Commerce Minister Anwar-ul-Haq Ahadi. “It’s important that Afghanistan open all of its doors. We want to have options.” If the U.S. is banking on trade-induced peace to secure Afghanistan, bullying its neighbors isn’t likely to help. On the new Silk Road, the trickiest routes to navigate might just be the surest paths to peace.

This entry was posted on Tuesday, July 3rd, 2012 at 3:36 pm and is filed under Afghanistan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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