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Update No: 133 - (26/03/13)

Summary: The shape of the 2014 elections remains as uncertain as ever, with Karzai’s plans not finding much consensus around the political spectrum. In the meanwhile, Afghanistan is about to become an oil exporter.

Hard bargaining
President Karzai’s plan to obtain wide consensus for his candidate to presidential succession is not being welcomed across the political spectrum. The Daudzai-Rabbani-Mudabir ticket is a weak one in term of charisma and electoral competitiveness and could only work if no other ticket of wide appeal was running. The governor of Balkh province, however, is gathering around himself extensive support across northern Afghanistan to potentially field a strong ticket around the country’s ethnic minorities, which account for half of the population. Since voter turnout is in any case likely to be much higher among the minorities, because of security and other issues, Atta would actually be better placed than Daudzai. This would force the presidential camp to once again rely on electoral manipulation in order to secure victory, throwing the country into a new deep crisis exactly at the time when the withdrawal of foreign troops would be about completed. What Atta and others probably want is to renegotiate the ‘national unity’ ticket being proposed by Karzai, inserting in it some stronger representatives of the minorities like Atta himself. But as Daudzai is widely seen as a future weak president, having charismatic Atta as first deputy might not be what he needs or wants. There are still a few months left to present candidatures, but a lot of bargaining will be needed if a compromise is to be achieved.

Customs revenue takes a dive
While the politicians argue, the first signs of the economy stalling are becoming evident. The customs intake is down 4% this year, while the optimistic World Bank-promoted plan was that it would increase by 25%! Since customs are by far the main source of income for the government, this is going to become a major issue. A few major projects in the extractive industry and telecommunications boost GDP data, for example the Chinese CNPC is investing US$600 million in its oil operations in the north. However, people employed in the traditional economy are already suffering as shops close down and the building sector is not quite as dynamic as it was a couple of years ago. The lack of self-confidence derives from uncertainty over the future: will the Americans abandon Afghanistan altogether? While in the rural areas there is mostly satisfaction and relief that the westerners are leaving, as they are seen as the main cause of violence, in the cities there is angst as everybody knows that the flow of money will start drying up. In the US the debate over post-2014 US presence in Afghanistan is virtually over; Obama will probably announce his decision in the summer and will likely go for the 9,000 US troops option, hoping to get a few thousands Europeans on top of that. Such a force will include a protection element with combat capability, but not something that would have a significant impact on the on-going fighting. Should the current negotiations fail, Afghanistan would likely be in ‘free fall’.

A new oil exporter
The government has been signing a number of small oil prospecting contracts in northern Afghanistan and for the first time in its history Afghanistan will start exporting oil this year. By the end of 2013, 25,000bpd should be exported, although this is because Afghanistan has no refining capacity. By end of 2014, the numbers should go up to 40,000 bpd. Still, the optimism about the extractive sector is fading as investors start to acquaint themselves with the challenges of operating in Afghanistan. Uncertainty and potential instability are not the only issues. The Indians now believe that building a railway to their Hajigak mine in the mountains of Central Afghanistan might not at all be feasible technically; however will they move iron ore out, then?

 

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