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Briefing Paper: The Taliban and Afghanistan’s Mines | Antonio Giustozzi

October 20, 2018

 

The mining reality

 

Introduction

 

Much has been said about the economic potential of mining in Afghanistan and what it could contribute to the coffers of the Afghan state. Most recently US President Trump was convinced to move ahead with plans to invest in extracting those minerals. All this speculation about what mining could contribute to the Afghan economy if developed on a much larger scale has drawn a lot of flak from analysts. One issue that is however rarely raised even by critics is that right now the Afghan state is able to tax only a small part of the mining activity that is already on-going in Afghanistan. If anybody taxes this stream of profits if local strongmen and insurgents, mostly the Taliban.

 

This paper is looking into the Taliban’s efforts to tax mining operations and tries to assess how important this source of revenue is for them. It also tries to evaluate the Taliban’s experiences in trying to control this flow of resources.

 

The paper is structured in three sections. One discusses the Taliban structure tasked with handing mining revenue. The second section discusses how successful the Taliban have been in their efforts to raise funds from mining. Finally, a section relations between Taliban and other non-state actors in the mining sector.

 

The Taliban’s ‘Mining Department’

 

Within the Taliban’s Central Financial Commission there is a department for mining, which as of mid-2018 was employing 725 staff between its headquarter in Quetta and the provinces of Afghanistan, at least according to Taliban sources.[1] This substantial investment in terms of human resources already highlights that the Taliban have set their eyes on mining revenue as an important component of their fund raising efforts.

 

The Taliban started taxing mining operations (alongside all other economic activities) in the early days of their insurgency. The current ‘official’ rate charged by the Taliban to mining operations is 3%. In the past it has been as high as 5%, but it was lowered recently ‘to encourage the miners to pay the tax money on time and regularly to Shura’s.’ Some mining operators also pay ‘voluntary contributions’ to the Taliban on top of tax, presumably in order to help the Taliban expand their influence and their business with them. It is typically operators who are mining illegally who support the Taliban with extra funds, because their interest is of course that the Taliban remain in control of the area.[2] According to a mining operator, it is cheaper overall to operate under Taliban control than under the control of the Afghan government, once all taxes and bribes are considered. The Taliban can also help the mining operators moving their goods to Pakistan, bypassing customs.[3]

 

A source among the mining operators however reported for the same period different (higher) rates, 4-7%, being paid to the collectors from the finance commission. The difference between the official tax rate as stated in Quetta and the rate practiced on the ground may suggests that perhaps there might be some corruption, a problem that is discussed below.[4]

 

Taliban tax collectors issue papers, which allow the mining operators to move their goods on roads controlled by the Taliban without further hindrance. In some of the largest mines, the Taliban have posted their representatives who are collecting taxes and also checking the overall process of extraction and transportation. Once tax is paid the mining operator is under Taliban protection and the Taliban actively intervene if gangs, warlords or others try to cause trouble to the operator.[5] [6]

 

Aside from taxing mining operations, from 2015 onwards the Taliban have also taken over a number of mines, which they now exploit directly. Among them are (the list is not exhaustive):

 

  • marble mines in Nangarhar;

  • uranium, magnetite and other mines in Khaneshin (Helmand);

  • lead and zinc mines in Dishu (Helmand); gold, zinc and other mines in Musa Qala, Sangin and Kajaki of Helmand;

  • copper, lithium, gold and coal mines in Pashtun Zarghoun, Guzara and Rabat-e Sangi of Herat;

  • silver and copper and other minerals in Push Kho district of Farah;

  • silver in Anardara district of Farah.[7]

 

In these cases, the Taliban have complete control and dig, extract and transport the minerals away from the mines, controlling all the process from ‘A to Z’. The Taliban say they plan to take over more mining operations in the future. The Taliban acquire the mines by grabbing them from operators who underpay tax or are late with their payments or, in their hope from competitors such as the Islamic State. Clearly mining operators are not happy about the Taliban becoming directly involved in mining, although they can do little about it for now. Tension between Taliban and mining operators might rise in the future, as the Taliban are toying with ideas of expanding their direct control over mining and possibly even eventually control all the mines.[8] The Taliban’s takeover of a number of mines is confirmed by an independent source.[9]

 

The Taliban’s mining operations seem to be still facing some management issues. One mining operator reported that the Taliban discount taxes to traders who buy minerals from them, as they seem to struggle to sell all their output quickly.[10]

 

How successful have the Taliban been?

 

Not unlike the Afghan government, even the Taliban have been struggling to map accurately all mining activity in Afghanistan. Says one of their cadres working in the mining department:

 

Afghanistan is full of different mines and the total correct numbers of these mines is not available at this time, since these mines spread around the country. We have been actively involved in the extractions of minerals from some mines, but there are some mines that has been discovered recently and so far we or other people have not started any extractions process there.[11]

 

The Mining Department of the Taliban estimates that there are more than 400 active mining operations that none of the Taliban shuras is taxing yet. The Taliban have plans to extend their revenue collection to these mines too, but in fact the leadership has little incentive to do it for now, because of major problems in revenue management.

 

Indeed the main problem that the Taliban have been facing is the usual one of the divisions within the Taliban. As of mid-2018 two of the Taliban Shuras (Mashhad and the Shura of the North) were not transferring their mining revenue to the Central Financial Commission. Mashhad controlled about 15% of all the mines under Taliban control, but the Shura of the North controlled 40% of them. That means that the revenue of more than half of the mines controlled by the Taliban did not reach the mining department at all. The Quetta Shura controlled directly only 20% of the mines, with the Peshawar Shura controlling another 15% and Miran Shah only 10%. Even the revenue collected by these three Shuras might not be all making it to the Central Finance Commission, as commanders and shadow governors are suspected of keeping substantial amounts for themselves.[12]

 

The Mining Department estimates that if all was right it should be receiving about $100 million in revenue from mining all over Afghanistan. In practice only little over 20% of that amount makes it to the Central Financial Commission, with the rest staying with shuras, governors and commanders. The Quetta Shura earned only $10 million from mining in 2017, with another $9 million being sent from the Peshawar Shura and $3 million from the Miran Shah Shura. The source believes that the Shura of the North earned $45 million, which it kept all for itself. Quetta has no information on the revenue collected by the Mashhad Shura.[13]

 

Taliban leader Haibatullah has tried to deal with this problem and has even ordered the detention of some corrupt Taliban officials, but there seems to have been no impact. The problem appears to have got worse, or as some would say even started, as Haibatullah took over the leadership and divisions among the Taliban deepened.[14]

 

It is not clear to what extent the cash withheld from the Finance Commission is spent to support Taliban operations, or is embezzled for personal use. Allegations however circulate that some leaders, especially front commanders, are also pocketing the money for personal use.[15]

 

According to one of the Mining Department’s tax payers, the Taliban tax collectors tend to be loose and easy going in their demands:

 

there are Taliban commanders who even if you do not give them tax, they do not make any serious problems, I mean their behaviour is way better than Islamic State. Most of the time, the Taliban charge us little in taxes, we can urge them to underestimate how much we owe, … [16]

 

Tax evasion is punished with a penalty of 50,000 Afs, a modest amount if compared with the risk of death in IS-K areas. A source thinks that the Taliban’s soft approach to tax collection might be related to the challenge posed by IS-K, as they used to be much harsher in places like Nangarhar, before IS-K emerged.[17]

 

Similarly the Taliban do not punish mining operators who pay tax to IS-K, because they assume that they are forced to do so and are trying to enlist their help in taking back the mines lost to IS-K.[18]

 

A compounding issue is the growing competition among shuras and among fronts and groups for control over mining operations. In recent times the Miran Shah Shura has been particularly aggressive in trying to take over mining operations from other shuras.[19]

 

This circumstance is confirmed by a mining operator in Nangarhar:

 

In the past there was only a single Taliban representative, who was asking and collecting tax from mining business, and in particular this individual was related to Taliban mining and financial commission. But now there are different Taliban members who all ask for tax from mining operators. There are various commanders, Taliban Mining and Financial Commission members for Nangarhar province as well as other different senior and lower order Taliban officials.[20]

 

In addition to its internal problems, the Taliban have also been facing the external competition of IS-K, which was able to seize control over a number of Taliban-controlled mines, mainly in Nangarhar, but also in Kunar, Zabul, Helmand, Jowzjan, Sarepul and Badakhshan. The Taliban have been able to expel IS-K from the Khaneshin mines and are trying to recover control over mines in Nangarhar and Saripul, but IS-K is proving a resilient enemy. [21]

 

In Nangarhar, according to a local mining operator, IS-K controls now the bulk of the mining operations. What is left under direct Taliban control (that is being directly exploited by the Taliban) are:

 

  • the marble mines of Spin Ghar, Dur Baba District;

  • the marble, chromite, precious stones mines of Lajaikar and Gari, which are exploited by both Taliban and local strongmen;

  • the various mines of Toor Kamar, Soor Kamar and Nawar Tangi;

  • the marble and precious minerals mines of the Markikhil area of Sherzad the marble mine of Agzo, in Haska Meena district;

  • the marble mine of Mamakhil, Kama district. [22]

 

In fact in Nangarhar at least one of the reason some mining operators give donations to Taliban on top of paying tax is that they fear a take over from IS-K:

 

Mining operators are pleased with Taliban, because they can communicate and understand each other well and easily, but with Islamic State, that is impossible.[23]

 

Agreements with other groups

 

While the Taliban’s leadership in general does not approve of ‘joint ventures’ with groups external to the Taliban in taxing mining operations, the Shura of the North has broken ranks in 2016 and negotiated agreements with groups external to the Taliban, that is local commanders of Jamiat-i Islami and the leadership of the Dawlat Islami - Khorasan. The Quetta Shura is openly at war with the Islamic State and does not enjoy good relations with Jamiat-i Islami, which is still a member of the NUG (despite deteriorating relations), so these deals can only be controversial. Typically these agreements involve equal sharing of tax revenue for mining operations taking place in areas where more than one group has a presence. The Quetta Shura tracks down these agreements, even if does not have the power to stop them, and reports that the Shura of the North has agreements with Jamiati commanders in Badakhshan, Baghlan, Saripul, Takhar and Jowzjan, and with IS-K in Jowzjan, Saripul, Samangan and Badakhshan.[24]

 

The exception to unapproved Taliban joint ventures with other groups seems to be Haji Zahir in Nangarhar, with whom the Taliban cooperate in the exploitation of some mines, or in moving the mined minerals. [25]

 

Conclusion

 

Overall, the Taliban might be more effective than the Afghan government in extracting revenue from the mining business, but are not much better at making good use of it. Little of what the Taliban raise is used to fund the war effort and especially to support any strategy laid out by their official leadership. Even cash kept to pay for sustaining Taliban fronts and groups around Afghanistan contributes little to the current Taliban campaign to seize strategic assets.

 

The Taliban’s leadership within the Quetta Shura is well aware of this and has been making half-hearted attempts to recentralise its revenue collection. But years of diatribe and infighting have weakened its authority, and the withdrawal of the bulk of US forces in 2014 has removed a key factor keeping the Taliban together.

 

Nonetheless as in the case of the narcotics trade, the Taliban are intent in taking more and more direct control of mining, in order to increase their overall revenue. This is probably a reaction to repeated threats by their external donors, sometimes implemented, to cut funding to the Taliban. In 2015, the leaders decided that they needed to increase their internal revenue collections, and the drugs trade and mining became primary targets. Although in the end none of this benefited the leadership much, increased revenue collection benefited the middle ranks of the Taliban, who pocketed most of it. This means that the increased extraction of mining revenue by the Taliban instead of helping the leadership consolidate control, actually weakens that control further.

 

Since the difficulties of the Taliban in centralising their own revenue, already noted in a previous paper on the Taliban and the drug trade, are confirmed in this paper, the question arises of whether the Taliban would able to control Afghanistan even in the event of a military victory.

 

[1] Sources in the Taliban’s Mining Department, July 2018.

[2] Sources in the Taliban’s Mining Department, July 2018.

[3] Interview with mining operator in Nangarhar, July 2018.

[4] Interview with mining operator in Nangarhar, July 2018.

[5] Sources in the Taliban’s Mining Department, July 2018.

[6] Interview with mining operator in Nangarhar, July 2018.

[7] Sources in the Taliban’s Mining Department, July 2018.

[8] Sources in the Taliban’s Mining Department, July 2018.

[9] Interview with mining operator in Nangarhar, July 2018.

[10] Interview with mining operator in Nangarhar, July 2018.

[11] Sources in the Taliban’s Mining Department, July 2018.

[12] Sources in the Taliban’s Mining Department, July 2018.

[13] Sources in the Taliban’s Mining Department, July 2018.

[14] Sources in the Taliban’s Mining Department, July 2018.

[15] Sources in the Taliban’s Mining Department, July 2018.

[16] Interview with mining operator in Nangarhar, July 2018.

[17] Interview with mining operator in Nangarhar, July 2018.

[18] Interview with mining operator in Nangarhar, July 2018.

[19] Interview with mining operator in Nangarhar, July 2018.

[20] Interview with mining operator in Nangarhar, July 2018.

[21] Interview with mining operator in Nangarhar, July 2018.

[22] Interview with mining operator in Nangarhar, July 2018.

[23] Interview with mining operator in Nangarhar, July 2018.

[24] Sources in the Taliban’s Mining Department, July 2018.

[25] Interview with mining operator in Nangarhar, July 2018.

 

 

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