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Update No: 134 - (26/04/13)

Summary: President Karzai hesitates between alternative options for the 2014 elections, after having half-committed himself to the Daudzai option. Karzai seems to be trying to extract the best possible deal from a number of interlocutors, but these seem to be on the verge of losing their patience.

In the meanwhile the world is reminded of why Afghanistan might be a problem by the news that the next opium poppy harvest might reach close to a new record.

In many provinces the bulk of NATO forces have already been pulled out of their forward operating bases and moved to more central locations; the Taliban have been systematically moving back into villages from where they had been forced out in 2009-11. The Kabul region appears to be particularly troubled and local governors have been sounding the alarm bells.

Although some of the Taliban might in the end re-open talks with Kabul, others are tightening their links with jihadist groups in the Arab world, Pakistan and Central Asia. The Islamic Movement of Uzbekistan has now an Afghan branch integrated with the Taliban, which recruits heavily in the Afghan north-east. The Movement has an interest in developing a territorial base in Afghanistan, in order to facilitate its on-going efforts to infiltrate Central Asia from there.

Karzai’s dilemmas
President Karzai reportedly met some Taliban diplomats and one of their leaders in Qatar at the end of March. Karzai appears to be negotiating with a single Taliban faction based in Quetta, as he negotiates with the Pakistani government and his coalition partners over a future settlement. It would appear that Karzai is still keeping several options open: a deal with Pakistan, an alternative deal with a group of Taliban dissatisfied with Pakistan and a more or less inclusive deal with his Tajik and Hazara coalition partners. The fate of the 2014 presidential elections rotates around this deal-making: Karzai might have to postpone the elections somehow if a deal is not ready in time. Going to the elections without a pre-arranged deal could spell disaster, even if a deal is not a guarantee of success either.

A potential threat to Karzai retaining some influence after the 2014 elections (if they do take place) could derive from various attempts to bypass him and form a coalition which would bring together some of the largest current ruling coalition partners and win the support of the Pakistanis. Such a coalition would be quite competitive even against a Karzai-sponsored candidate and could present itself as the ‘coalition of peace’, promising to deliver a settlement to end the internal conflict. Perhaps the current talks of such a coalition are just an attempt to put pressure on Karzai and force him to make a choice; Karzai continues to ventilate hypotheses such as the candidature of Zalmai Rasul or of one of his family members, both of which are clearly unacceptable to the Pakistanis and would imply a continuation of the civil war. Some of Karzai’s advisers seem in fact to be advising the president that he does not have to ‘sell-out’; the Afghan security force are according to these advisers not in such a bad shape that they would stand no chance against the armed opposition. Karzai’s dilemma is whether to use the leverage deriving from the current weakness of the Taliban in the south now in order to negotiate a deal with the Pakistanis from a position of relative strength, or try to hold on and see his leverage grow further if the predictions about the resilience of the Afghan armed forces turned to be right. However, should the predictions prove wrong, Karzai and his allies might well lose everything.

Opium country
Whatever little industrial economy Afghanistan had is suffering badly. In Herat, one of the three main industrial centres, only about 100 factories (of the 400 which existed in the recent past) are still active. Manufacturers find it difficult to compete with the neighbours because of high costs (labour and transport), weak services and utilities (erratic electricity supply) and hostile custom policies by the Afghan government, which does not impose higher rates for finished products as opposed to raw materials. Because the industrial base of Afghanistan is very small, the government prefers to favour consumers over industrialists. As a result it is not surprising that the trade deficit continues to widen. In the first 9 months of the year March 2012-December 2012, imports rose marginally by US$3 million to US$6.42 billion, while exports dropped by US$114 million to US$261 million. Imports are now 26 times larger than exports. This is of course in part explained by the big role played in the Afghan economy by smuggling, particularly of narcotics. This year the opium poppy harvest is expected to grow for the third year in a row, to reach a level near the previous record production. A major factor in driving production up is rising prices, themselves a result of a fall in production three years ago due to a poppy illness which compromised a large part of the harvest. Although prices have been falling back since last year, they are still high on a historical scale.


Forecast 2013
In his February speech President Obama has announced the next step of his planned disengagement from Afghanistan, saying that 34,000 US troops will leave in 2013. That would leave 32,000 of them at the beginning of 2014. The pace of handing over to the Afghan security forces has been accelerated by 12 months and as US units will now be focused on organising their withdrawal, their participation in any fighting is going to be very modest in the future. There is so much equipment to be taken out, that NATO planners have now determined that even two years will not be enough to pull everything out, so much will be left behind for the Afghans to keep. Obama has not said however how many troops will be left after 2014 and it is now likely that he will not announce a decision on this until next year. For now the accelerated American disengagement suits Karzai and his power circle: weaker foreign presence means less leverage to interfere in Karzai’s decision-making and plans. By 2015, if a deal with the Taliban will not be in place, many around Karzai might come to miss the Americans, but by then the power circle will also have finalised and perhaps implemented their retirement plans to Dubai, in case things were to take a wrong turn.

In many provinces the bulk of NATO forces have already been pulled out of their forward operating bases and moved to more central locations; the Taliban have been systematically moving back into villages from where they had been forced out in 2009-11. The Kabul region appears to be particularly troubled and local governors have been sounding the alarm bells.

The Taliban in southern Afghanistan are in a state of internal crisis and have not yet been able to reclaim much ground despite the dramatic downsizing of ISAF presence there; this has inspired some sense of self-confidence in the upper echelons of Kabul power, that they might be able to push through without much American support. As of early 2013 the Pakistanis were sending signals that they were willing to reach a political settlement, particularly if Omar Daudzai, who has good relations with them, were to become president, as Karzai is hinting. For the moment however, the Pakistanis are also keeping good the more radical factions of the Taliban, whom they use to exert pressure and to gain diplomatic leverage. The hint is that any deal will have to make sure Pakistan sees its interests as well protected, or it might unleash the bad guys against Kabul.

The underlying economic trend is likely to be even more negative in 2013 than it was in 2012. Aggregate statistics do not show that, because investment by non-labour intensive enterprises (telecommunications, airlines, etc.) covers up the decline of contracting, which was employing hundreds of thousands of Afghans and is even making a few of them rich. Already now the remaining ISAF forward operating bases are largely supplied by the air, so that services of transit Afghan security guards (at its peak a US$2 billion business) are no longer required.

The first signs of the economy stalling started becoming evident in late 2012. 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 or later and will likely go for the 9,000 US troops option, hoping to get a few thousands of 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’.

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?

On the political front we should expect a lot of negotiations and hard bargaining as Afghan politicians try to reframe the political settlement at the roots of the current ruling coalition, in a way which might guarantee some stability after 2014. Success is not guaranteed as there are widely differing perceptions about what each faction and group is entitled to, but if Karzai were to effectively endorse Daudzai, that would be one step ahead as at least a major faction (the Islamic party) would be on board, which would not have been the case if Karzai had chosen a member of his own family.

President Karzai appears to have chosen Omar Daudzai, his chief of staff, as his anointed successor, whom he will support in the 2014 elections. Karzai has been telling foreign diplomats that he and his circle have agreed on this name as well as on the names of the two vice-presidents to appear on Daudzai’s ticket: Salauddin Rabbani, head of the Peace Council and son of late president Rabbani, and Sadiq Mudabir, head of the administration office. Daudzai has a background in the Islamic Party and seems likely to win support from the extensive networks that this party still maintains, as well as being acceptable to the Pakistani authorities, with whom he has links. As a Pashtun, he can hope to win the majority of the vote in the Pashtun belt, south of the Hindukush. Salauddin, on the other hand, has weak credibility as a leader among the ranks of the Islamic Society, which his father once led, and many will fear that he will not stand up to Daudzai and defend the interests of his mainly Tajik constituency. Karzai is trying to prevent the emergence of a strong alternative presidential candidate from the ranks of the Society; if he fails it is unlikely that Salauddin will bring in many Tajik votes. Mudabir, finally, is a conservative Hazara Shiite, whose task is to bring in the Hazara vote but has a weak public profile and no base of his own. He seems even less likely than Salauddin to bring in a lot of Hazara votes. The new presidential team is clearly a compromise, trying to square competing demands from a multitude of lobbies and groups. One lobby which gets little to appease it, is the international community – the presidential ticket is rather heavily weighted towards conservative, Islamist tendencies. Still, probably few in the West still care about where Afghanistan is going. ISAF will cease combat operations in spring, after which withdrawal efforts will peak up quickly. By the end of 2014 at the latest, no more than a few thousand foreign troops will be left, in a training and mentoring role. Even training and mentoring has already started to be downsized, with mentoring no longer taking place below the battalion level (which is where most patrols take place). President Obama still has not made his decision concerning troop levels after 2014 known, but it is known that he asked as usual for a range of options (maximum, medium and minimal) to the military, from which he will choose. He first was given a range of 6-15,000 troops for post-2014, but has since asked for that to be reduced and for a zero option to be added. So right now the choice is 0-3,000-6,000-9,000 foreign troops, to which the Americans (unrealistically) hope other NATO countries can add 50% (except in the case of the zero option, of course). Obama seems inclined to go for the middle way (6,000 troops), which is most defensible politically (exactly because it is a middle way). The zero option would apply if negotiations with President Karzai over the legal status of American troops in Afghanistan were to fail.

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.

Indeed there has been a flurry of diplomatic activity around Afghanistan, with reportedly 30-40 western diplomacies involved in trying to open a communication channel with the Taliban. Most of these efforts seem to be heading nowhere, but one led by the Germans and the Americans is at least in contact with the right people in Quetta and Peshawar.

The Taliban, however, are putting forward heavy preconditions for serious talks: a negotiating tactic, or do the Taliban think they deserve to control half of Afghanistan in the event of a peaceful settlement? Even if President Karzai decided to accept Taliban demands, he would then have to bring on board a whole range of Afghan factions opposed to the Taliban, each of which would also demand its fair share of the cake.

Karzai’s plan to run a national unity candidate in 2014 is already running into trouble as Atta Mohammed, governor of the northern province of Balkh and most powerful Tajik politician in Afghanistan at the moment, seems to be getting ready to run against Karzai’s presidential candidate. If Atta were to run, he would likely attract the bulk of the Tajik vote, which is estimated at around 25% of the population.

The regional powers in the meanwhile are upping their stakes in Afghanistan. The Turkish government has reappeared on the diplomatic scene after a long lapse and has offered again to host a Taliban liaison office on its territory. There are rumours that Turkmenistan might do the same. The Chinese government has instead offered for the first time substantial aid to Kabul and will soon start training some of Afghanistan’s police. The Chinese are also talking not just about investing in the extractive industry, which they already do, but also in hydropower, agriculture and construction. Intelligence sharing with Kabul is already increasing and Beijing is going to train Afghan diplomats as well.

Although some of the Taliban might in the end re-open talks with Kabul, others are tightening their links with jihadist groups in the Arab world, Pakistan and Central Asia. The Islamic Movement of Uzbekistan has now an Afghan branch integrated with the Taliban, which recruits heavily in the Afghan north-east. The Movement has an interest in developing a territorial base in Afghanistan, in order to facilitate its on-going efforts to infiltrate Central Asia from there.

The first phase of the military withdrawal has already led to a reduction in the number of Afghan contractors employed by the foreigners, with a negative impact in sectors of the economy. About 20% of small and medium size Afghan businesses have closed down last year, but in terms of investment, some major new ventures have more than offset these losses; the opening of two new airlines alone accounts for much of this new investment.

 

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