India spends billions to counter Chinas Afghanistan drive

Written by Bloomberg | Kabul/New Delhi | Updated: Apr 7 2012, 07:14am hrs
An Indian security guard, cradling a Kalashnikov assault rifle, shadowed two Indian engineers as they inspected the concrete shell of the parliament building they are constructing in Kabul.

Erecting the new seat of government is part of a push to seek both profit and a greater strategic role in the nearby country, where Taliban guerrillas battle the government with support from within Pakistan, Indias arch-rival.

India, having spent $1.5 billion over a decade on Afghan roads, schools and the parliament, now is proposing what may becomes biggest foreign investment: $11 billion to build an iron mine, steel mill and railroad.

India is showing its commitment to an unprecedented ambition and role in Afghanistan, said , a senior fellow at the independent Centre for Policy Research in New Delhi. Stabilising the northwest of the subcontinent, Afghanistan and Pakistan, is absolutely Indias top foreign policy priority, because most of our threats come from there.

Indias planned Afghan iron mine would help companies such as and by giving them shares in an estimated 1.8 billion tonne of ore, for which global prices have more than doubled in the past three years. Afghanistan may see its geographic and economic isolation reduced as India follows in promising money to build the countrys first major railroads.

As Afghan anger over the shooting of 16 civilians by an American soldier last month increases calls for an accelerated US exit, India is seeking to position itself as a rival to China in investment in Afghanistan and as an anti-Taliban force to help the Afghan government.

Instability and radicalism in Afghanistan pose a threat to our common security, Indian foreign minister SM Krishna said in a December speech at a conference in Bonn on Afghanistans future.

Indias expanded role in Afghanistan is anchored in its plan to mine from mountain ridges at Hajigak, 100 km northwest of Kabul. Indias government backed a group of seven Indian state-owned and private companies that won three of four blocks.

The Indian group, the Afghan Iron & Steel Consortium, or AFISCO, has offered to build a steel plant and railroad, and in December asked for $7.8 billion in government loans and guarantees, two people with direct knowledge said then.

They have sought certain assurances regarding the financing, foreign secretary Ranjan Mathai said at a March 21 press conference in New Delhi. When they made their bid they were confident that they would have the ability to do it, he said. This matter is still under discussion.

AFISCOs biggest owner, SAIL, hasnt said when iron production might begin, although the New Delhi-based company says full development of the mine and railroad may take eight to 12 years. Hajigak would be SAILs first expansion beyond India.

The Afghan deposit would offer needed future ore supplies for other AFISCO partners.

Indias mines ministry has assembled a second group of state companies to bid on licenses to mine copper or gold offered by the Afghan government, according to mines secretary Vishwapati Trivedi.

That bid may be combined with a separate offer being assembled by private Indian firms, he said in a March 21 interview in New Delhi.

Taliban or allied Islamic militant fighters killed at least 58 Indians and Afghans in two suicide bombings of Indias embassy in Kabul in 2008 and 2009. India accused Pakistans spy agency, the ISI, of assisting the first attack, which Pakistan denied.

Other Taliban attacks have killed Indian doctors and aid workers in Kabul and construction workers in southwestern Afghanistan.

India also is considering constructing a rail line from Afghanistan to the Chahbbahar port, which would give it a transport route that Pakistan cant control.