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Afghanistan Still at the Heart of the Silk Road

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Afghanistan Still at the Heart of the Silk Road

Although devastated by war and contrary to what might appear from its political situation, Afghanistan is still at the heart of the Silk Road and a major player in regional connectivity, which will be immensely influential in shaping the future of Afghanistan and the region. After 13 years of war in Afghanistan, the NATO-led International Security Assistance Force (ISAF) formally concluded its combat mission in December 2014 and officially transferred responsibilities for domestic security to the Afghan National Forces (ANSF). The political situation of Afghanistan has once again been highlighted as the main point of conversation as many remain unconvinced of the ANSF’s capabilities to protect the country. However, it is the economic stability of the nation that has to be the key to sustainable peace. A stable Afghan economy is highly essential in order to sustain the many gains the war-torn nation has achieved over the past 13 years and to advance the partnership of the international community with the Afghan government. The focus, therefore, needs to shift to Afghanistan’s economy and work must be done toward establishing sustainable measures for economic growth.

In order to achieve this, Afghanistan must be firmly integrated into the economic life of the region. This serves as the premise for “the New Silk Road Vision” which was introduced by the former US Secretary of State Hillary Clinton in 2011. It is worthwhile to note that this concept was first developed and initiated by the Afghan government and has been a core goal in all of the major Afghan National Development Strategies (ANDS), going as far back as 2005. Former Afghan President Hamid Karzai further highlighted these ambitions when he spoke of Afghanistan as a future continental trade and transit hub in a speech at the Kabul Conference in July of 2010.

The concept of the New Silk Road is to revive trade across borders in Central and South Asia and to integrate Afghanistan further into the region by resuming traditional trading routes and reconstructing key infrastructure links broken by years of conflict. The New Silk Road vision can be achieved by the establishment of the energy market and the Lapis Lazuli Corridor where Afghanistan’s strategic location as the “land bridge” between many countries in the region plays a crucial role.
In the spheres of energy, Afghanistan is a viable transit country for the Central Asia South Asia-1000 (CASA-1000) transmission line.

A U.S. government-backed and World Bank-led project, CASA-1000 is a transformational project that hopes to address the energy needs of South Asia by directing some of the energy resources from Central Asia, which is endowed with some of the world’s most abundant clean hydropower cascades, through Afghanistan. Lacking access to sea, Central Asia has no option but to get linked to neighboring states. Owed to its strategic location, Afghanistan is the only possible route option for the CASA-1000 project. It offers the most direct route for transfer of energy from the Kyrgyz Republic and Tajikistan to the energy-hungry Pakistan. Bypassing Afghanistan would add a strenuous cost dimension to the project that could make it prohibitive.

The project involves transferring 1000 Megawatts of electricity to Pakistan through Afghanistan and 300 Megawatts of electricity to Afghanistan. In addition to receiving the 300 Megawatts of electricity, Afghanistan will generate revenue from the transit fee–a tax levied on energy that passes through the country. Afghanistan and Pakistan agreed on 1.25 cents per kilowatt for the transit fee on the transfer of electricity between the Kyrgyz Republic, Tajikistan and Pakistan through Afghanistan in October 2014. This was one of the first foreign policy achievements of the National Unity Government (NUG) of Afghanistan led by President Ashraf Ghani and Chief Executive Officer Abdullah Abdullah. Former Afghan President Hamid Karzai’s insistence over 2.5 cents per kilowatt was a stumbling block in the CASA-1000 agreement for over a long period of time. President Ghani halved the transit fee which marked an important step in linking Afghanistan with the region and fostering Afghan-Pak bilateral relations. This deal will bring in over USD 45mn in revenue to the Afghan government. Afghanistan could use the additional 300 megawatts of electricity to meet its domestic needs or re-export to Pakistan and generate further revenue.

The next important lynchpin in the realization of the New Silk Road in the arena of energy is the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline where Afghanistan once again plays a central role in connecting energy-rich Central Asia to energy-deficient South Asia. The idea of the USD 7.6bn (initial estimate of the cost) pipeline first originated in 1995 when the Turkmenistan and Pakistan leaders signed a Memorandum of Understanding (MoU).

In 1996, the Central Asia Gas Pipeline, Ltd. consortium for construction of a pipeline, led by U.S. oil company Unocal, was formed. On 27 October 1997, the consortium was incorporated in formal signing ceremonies in Ashgabat, Turkmenistan by several international oil companies along with the Government of Turkmenistan. In January 1998, under the Taliban regime, Afghanistan signed an agreement that allowed the proposed project to proceed. After the ousting of the Taliban in 2001 by the US-led foreign forces, the arrangements were invalidated. The new deal was revived in 2002 and received full support from Washington. Despite the ongoing turmoil in Afghanistan, in 2005 the Asian Development Bank financed technical feasibility study. At a donor meeting in 2006 in New Delhi, countries promised to accelerate planning of the pipeline and to help Afghanistan become an energy bridge.

The Afghan government has made several pledges to relieve concerns about the security of TAPI’s route. In 2011, when Afghanistan’s security situation seemed to be sufficiently stable to revive TAPI under the auspices of ADB, Wahidullah Shahrani, the former Minister of Mines and Industries declared that “This huge project is very important for Afghanistan. Five thousand to seven thousand security forces will be deployed to safeguard the pipeline route.”

The project aims to export up to 33 billion cubic meters (bcm) of natural gas per year through a proposed 1,800-kilomter pipeline from the Dauletabad gas field in Turkmenistan along the highway through Herat, Helmand and Kandahar in Afghanistan, to Quetta and Multan in Pakistan, and on to Fazilka in India. The pipeline could become a recipe for long-term stability in Afghanistan by generating revenue for the Afghan government and creating jobs for Afghans in general.

Envisaged to be completed by 2018, the pipeline is expected to produce USD 400mn a year in revenues for Afghanistan.It will further provide an alternative energy source for Afghanistan, which is currently depending on Iran for fuel. In addition to the economic benefits that the project will bring in its wake to the participating countries, it has serious geopolitical implications as well that will further bolster Afghanistan’s ties with its neighbors, particularly Pakistan. Pakistan and Afghanistan’s tensions over trade and terrorism are profound. The TAPI project will promote positive political and economic interaction between the two neighboring nations by providing an avenue for mutually-beneficial economic cooperation.

Establishing an energy market through Afghanistan could also be a game changer for the United States of America. The Americans are not yet ready to call it quits in Afghanistan after a decade that has seen them spend billions of dollars of aid as well as be witness to thousands in casualties suffered by their soldiers. In its changed strategy, the U.S. is looking to maintain a high regional profile with minimal military commitment by linking economies and bringing in major international financial institutions, such as the World Bank and the Asian Development Bank, to fund major energy projects like CASA-1000 and TAPI gas pipeline. By endorsing these projects, the US is trying to strengthen its foothold in Afghanistan and extend its sphere of influence to the region.

Another major project in revival of the ancient Silk Road is the Lapis Lazulli Corridor which will connect South Asia to Central Asia and then to Europe, where Afghanistan serves as the connecting bridge again. Its name comes from the fact that Afghanistan’s lapis lazuli and other semiprecious stones were exported through this route to Caucasus, Russia, Europe, the Balkans and Northern Africa over 2,000 years ago. Lapis Lazulli Corridor runs from Aqina in northern Faryab province and Turqundi in western Herat province of Afghanistan to Turkmenbashi of Turkmenistan which arrives in Baku, capital city of Azerbaijan, after passing the Caspian Sea. It connects Baku to Tbilisi, Georgia’s capital, and also the ports of Polti and Batumi of Georgia. The Corridor then connects cities of Kors and Istanbul of Turkey and finally ends in Europe.

The Asian Development Bank has allocated USD 130mn for the implementation of the Corridor which further integrates Afghanistan into the region via road and rail. According to a recent study by the Afghan Ministry of Commerce and Industry (MoCI), transit through Turkmenistan, Azerbaijan, Georgia and Turkey via road and rail is a viable transit route for trade with the EU, Balkans and Eastern Europe. An initiative of the Afghan Ministry of Foreign Affairs, the proposal for the Corridor received approval from the regional countries in March 2014.

The significance of the Lapis Lazuli Corridor was highlighted by the representatives of the concerned countries in the first technical working group meeting of Lapis Lazuli Corridor held in Turkmenistan on 15 November 2014. The Corridor was termed as a “shortest, less expensive, and secure passage” connecting Caucasus and Central Asia. It seeks to improve and streamline transport infrastructure and customs procedures, increase trade, create employment opportunities and bolster economic ties between the concerned nations benefitting from this trade route. The officials regarded the operationalization of the Corridor as a key factor in reviving the New Silk Road. President Ashraf Ghani also reflected on the importance of the Corridor in connecting Afghanistan with the regional countries in his speech to the American congress in March 2015 and said that Afghanistan has “already made significant headway in making the vision of the

Furthermore, the Lapis Lazuli Corridor will provide Afghanistan with an alternative trade route. Afghanistan currently relies on its neighboring countries, mainly Pakistan, for the transit of its goods. Afghanistan’s right of transit through Pakistan was recognized in the Afghanistan- Transit Trade Agreement (ATTA) that dates back to 1965. The agreement was superseded by the Afghanistan Pakistan Transit Trade Agreement (APTTA) which came into force in June of 2011. As per the agreement, Pakistan will allow Afghan trucks to carry Afghan products to the markets of China, India and other countries through the seaports of Karachi, Qasim and Gwadar Ports. However, Afghan merchants have time and again complained about the hurdles caused by Pakistani customs in exports of Afghan goods to international markets by blocking the trade routes or hiking shipping freight rate. In January 2015, as many as 2,000 Afghan containers loaded with food and non-food items were stuck at Karachi port for over two weeks due to unjustified raise in freight rates by Pakistani customs. While Pakistan has always promised to be fully committed in helping to successfully implement the APTTA, Afghanistan finds their promises dubious as transit problems on Pakistan’s soil continue to be a major impediment in boosting Afghan exports. Afghanistan Chamber of Commerce and Industries (ACCI) sees the Lapis Lazuli Corridor as the best alternative trade route for Afghanistan’s goods to reach the international markets and reduce its reliance on neighboring countries.

The U.S. supports the vision of the Lapis Lazuli Corridor which is a key component of the New Silk Road initiative. In addition to strengthening the U.S. presence in the Central Asian and South Asian regions, the Lapis Lazuli Corridor touches upon the economic and political motives of the U.S. in the Caucasus region as well where they have already established a foothold by endorsing the Baku-Tbilisi-Ceyhan oil pipeline. This pipeline is of great significance to the US as it would lessen their dependence on Middle Eastern oil and Russian pipelines, as well as denying Iran a role as a Caspian energy exporter. The Lapis Lazulli Corridor complements this existing infrastructure and further brings the U.S. closer to the Caucasus region.

While Afghanistan’s political situation is irrefutable, its strategic geographical position holds a great economic value both for the country itself and the region. Afghanistan’s equidistant location between the China Sea and the Mediterranean Sea made it a major thoroughfare of the Silk Road for centuries. Afghanistan still is a key player in the revival of the Silk Road which was destroyed by the years of conflict. It is not silk anymore but energy that will help re-establish the old trade networks of the Silk Road. Through the CASA-1000 project, Afghanistan connects the supply and demand factors of the energy market. The project aims to transport available summer electricity surplus from Kyrgyz Republic and Tajikistan to energy deficient Pakistan through Afghanistan. The TAPI gas pipeline is the next essential project in the establishment of the energy market that will strengthen regional cooperation, economic growth and integration among the countries of the New Silk Road. The pipeline offers a potential capacity of 33 billion cubic meters per year of gas from Turkmenistan to India through Afghanistan. Afghanistan is also working towards achieving the Lapis Lazuli Corridor which will further bring Afghanistan closer to the region and beyond to Europe through roads and rails. All these projects have received strong support from major donors and are highly endorsed by the U.S. who is maintaining its influence in Afghanistan and region by connecting economies with minimal military commitment.

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