Russia And China Are Looking To Tap Afghanistan’s $1 Trillion Resource Reserves

Power vacuum

“Nature abhors a vacuum” is a familiar maxim in science. It means that empty spaces are unnatural as they go against the laws of physics. The saying could equally be applied to Afghanistan, where the end of a 20-year-old war with the United States has resulted in a power vacuum eager to be filled by another global power(s).

“Russia is clearly interested in [a] consolidated Afghanistan under a stable rule,” NBC News quotes Fyodor Lukyanov, a top Russian foreign policy expert who leads the Moscow-based Council on Foreign and Defense Policy. “It doesn’t matter so much for Moscow who is in charge in Kabul.”

Iran nearly went to war with the Taliban in 1998 after they killed 10 Iranian diplomats, but has since improved ties with the group; it is also one of Afghanistan’s biggest trading partners.

China sees an opportunity to exploit potentially lucrative oil and gas and mining projects which have been scrubbed or delayed by security concerns, a lack of infrastructure and technical issues. The country reportedly has $1 trillion worth of minerals in reserves, including copper, iron, lithium and rare earths.

Beijing recently said it would provide the Taliban with $31 million in emergency aid including food and 3 million covid-19 vaccine doses.

All three countries are worried that the withdrawal of US forces will create chaos in the region, ensnaring them in Afghanistan’s internal affairs. Moreover, they are concerned about terrorism once again breeding under Taliban protection.

China’s Industrial Slowdown Could Kill The Commodity Rally

Chinese factory growth was at its slowest in July in 15 months

One of the biggest drivers of the surge in metals prices this year, the world’s top commodity consumer China, is showing signs of a slowdown in demand, which could drag down copper and iron ore prices for the rest of the year after a blistering rally in the first half.

Chinese factory activity growth slowed down to the smallest in 15 months, imports of copper and iron ore are also slowing down amid surging prices and curbs in China’s steel manufacturing, while authorities are releasing metals stocks from reserves to cool rallying prices which raise manufacturing costs. All these factors from the past few weeks are bearish for the Chinese demand—and as a result, imports—of metals such as iron ore, copper, zinc, and aluminum, Reuters columnist Clyde Russell notes.

Although analysts say that slower Chinese demand doesn’t necessarily mean lower commodity prices, because of tight global markets, China may not be a key driver of metals demand through the end of 2021. That’s because of slowing factory growth, authority-mandated caps on steel manufacturing, and the release of tons of metals from China’s reserves. The Caixin/Markit Manufacturing Purchasing Managers’ Index (PMI) showed this week that Chinese factory growth was at its slowest in July in 15 months, also because of high raw material prices, especially for industrial metals.