DNA Explainer: Here's why China is eyeing friendship with Taliban

Afghanistan has huge deposits of natural resources estimated to be worth USD 1 trillion or more, including what may be the world's largest lithium reserves. The country has witnessed four decades of war - with the Soviet Union, between warring tribes and the US attack and subsequent control over Afghanistan after the 9/11 attacks.

And in all this what remained untouched was the mining of these huge natural resources and using them for the development work of Afghanistan. Poor infrastructure in the landlocked country, along with weak security, have hampered efforts to mine and profit from the reserves.

In 2018, a Reuters report stated that about 500,000 tonnes of talc, used in products ranging from paint to baby powder, were exported from Afghanistan in the year till March, according to the Afghanistan mining ministry. Almost all went to Pakistan, where much of it is re-exported. Pakistan provides more than a third of US imports of talc and much also ends up in the European Union, it said.

After the present Taliban takeover, the US has already frozen nearly USD 9.5 billion in Afghanistan's reserves. The International Monetary Fund has cut off financing for Afghanistan, including nearly USD 500 million that was scheduled to be disbursed around when the Taliban took control. 

Kabul now faces a growing economic crisis, with prices of staples like flour and oil surging, pharmacies running short on drugs, and ATMs depleted of cash. Taliban this week appointed a new Central Bank Chief to address those problems.

And amidst all this crisis, Beijing can offer what Kabul needs most - political support on international forums and economic investment in the war-torn country.

China's plans in Afghanistan

For China, Afghanistan holds economic and strategic value. China sees this as an opportunity to invest in the country's mineral sector.

The Taliban has said that they want good international relations, particularly with China. And China is also showing that they mean business.

Already the Communist Party-backed Global Times reported that Chinese investment is likely to be 'widely accepted' in Afghanistan. 

Another media report says that the US is in no position to meddle with any potential cooperation between China and Afghanistan, including on rare earth.

Beijing has been telling the Taliban not to do any terrorist attacks against China and view strong economic ties as key to ensuring stability. 

The plan is to take back these minerals to its own country and use in Chinese-financed infrastructure that includes about USD 60 billion in projects in neighbouring Pakistan.

In the mid-2000s, investors led by state-owned Metallurgical Corp of China Ltd won an almost USD 3 billion bid to mine copper at Mes Aynak, near Kabul.

It still hasn't seen any output due to a series of delays ranging from security concerns to the discovery of historical artifacts, and there's still no rail or power plant.

MCC said in its 2020 annual report it was negotiating with the Afghan government about the mining contract after earlier saying it was economically unviable.

Why Afghanistan's natural resources are important

In 2010, US officials estimated that Afghanistan had USD 1 trillion of unexplored mineral deposits.

The then Afghanistan government had said that the mineral resources are actually worth three times as much.

They include vast reserves of lithium, rare earths, and copper - materials critical to the global green-energy transition.

The Taliban takeover in Afghanistan comes at a critical time for the battery-materials supply chain.

Producers are looking to invest in more upstream assets to secure lithium supply ahead of what Macquarie has called a 'perpetual deficit'. 

The US, Japan, and Europe have been seeking to cut their dependence on China for rare earths, used in items such as permanent magnets.