The capture of Afghanistan by the “Taliban” movement and the declaration of the end of the war in the South Asian state, beset by revolution and fighting for 50 years, was one of the events. major figures in world history. The advent of peace in the region, although fragile, opens a new era of political and economic relations between the West and the East. Located in the heart of Asia and with a relatively rich natural resource base, Afghanistan may well become a new player in the commodities market, both as an exporter and as a transit country. . What are the opportunities for the global economy in Afghanistan and how will this affect the value of commodities? Let’s try to understand.
Oil and gas
Afghanistan indeed has a vast and rich natural resource base valued at $ 2 trillion to $ 3 trillion. The United States Geological Survey uses this data to study only 30% of the country. Many mistakenly believe that oil and gas are key fossil countries of great interest to potential “invaders”. However, this point of view is far from the truth. According to available data, Afghanistan oil reserves are around 3.6 billion barrels, but even if converted to proven reserves, the country’s market share in world reserves would only be 0.5%. Natural gas is much better, with recoverable reserves estimated at 1.67 trillion cubes. That puts Afghanistan at 18-19 in world reserves, somewhere between Kuwait and Norway. And yet, it is only 1% of the world’s reserves. Simply put, Afghanistan is not so rich in oil and gas as people think. Moreover, mining, given the poor infrastructure, extremely negative investment climate, armed conflicts and other unpleasant factors, will be very expensive and unlikely to bear fruit in the foreseeable future.
What does it mean? This means that Afghanistan is unlikely to ever become a oil and exporter of gas. At best, the extracted fuel will go to the domestic market and it is only when the country is at peace that the population will start to grow and infrastructure will be rebuilt. Therefore, there is no immediate expectation of any pressure on “black gold” and gas prices.
Afghanistan will help green energy
Despite the weak indicators of oil and gas reserves, we repeat that Afghanistan is very rich in natural resources. For example, there are deposits of ores of copper, iron, beryllium, manganese, lead-zinc and tin on the territory of the country. The Aynak copper deposit is considered the largest in Eurasia, with reserves of around 240 million tonnes of ore. The HajiGak iron ore deposit has a preliminary total of 428 million tonnes and is considered the largest in the Southeast Asian region.
There is also a large alluvial gold deposit on the border with Tajikistan, estimated at over 30 tonnes. Marble, talc, granite, basalt, dolomite, gypsum, limestone, kaolin, asbestos, mica and precious stones: emeralds, rubies, amethysts, yashma, kuncita, aquamarine and lazurite can be mined on the territory of the country. Large deposits of lithium, tantalum, niobium and cesium have been found and partially investigated.
Perhaps the most important discovery can be considered the largest reserves of lithium in the world, which, according to preliminary data, may already be larger than the reserves of Bolivia, which is considered a world leader. Lithium is used in the creation of lithium-ion batteries, which are used in all modern gadgets, as well as in batteries for electric vehicles. Lithium is a key resource in the green energy industry, an industry that is actively growing. Even today, Afghanistan is called lithium “Saudi Arabia”. All of the above minerals are of utmost importance to the modern and technological world economy. For example, neodymium and cobalt are used in magnets and special alloys, and niobium in supercapacitors and superconductors, which are used to create microprocessors and microchips.
There is currently a severe shortage in the market of commodities involved in the development of batteries and microprocessors. The demand for raw materials is very high, as is the demand for products. Is Afghanistan capable of solving this problem? Yes, but not now and not in the years to come. The development of rich deposits requires billions of dollars of international investment and the reconstruction of the country after the war. As the “Taliban” movement is considered a terrorist organization in many states, it is possible to impose various sanctions and prohibitions on the part of the United States which failed in the military conflict in Afghanistan.
What will happen to commodity prices?
Most likely, the shortage of raw materials in the market will continue, which in turn will continue to contribute to an increase in the prices of platinum, palladium, lithium, as well as manufactured products: batteries, semiconductors, processors and other components. Oil and natural gas prices will also behave within the framework of global demand, which now exceeds market supply. The end of the war in Afghanistan is a good event, but the state has a long, long way to go before entering commodity markets and exercising any influence on prices.
Since demand for the above products always exceeds supply, shares of semiconductor companies such as Nvidia, Micron, Intelligence, AMD, NXP Semiconductors and the like remain promising for investment. It is possible to include platinum and palladium, as well as oil and gas companies: Chevron, ExxonMobil, Gazprom and others in the investment portfolio.
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