The Taliban's Resource Strategy: Prosperity or Pitfall?
Key Takeaways:
Afghanistan’s mineral wealth remains largely untapped due to political instability and security issues. The Taliban have relied on foreign mining deals, especially with China, to sustain their regime.
China’s investments in Afghanistan’s resources bolster its green energy sector and support the Belt and Road Initiative (BRI), despite persistent security risks.
The Taliban’s opium ban drastically reduced cultivation but deepened economic instability, driving farmers toward illicit activities like synthetic drug production.
Deteriorating infrastructure and internal conflicts block long-term recovery. The Taliban’s mining deals lack the technical expertise and infrastructure needed for sustainable development.
Overview
On August 15, 2021, the Islamic Republic of Afghanistan collapsed as the Taliban took control of Kabul, following the withdrawal of US and NATO forces and a swift insurgent offensive. Three years later, Afghanistan continues to suffer the consequences. The economy has collapsed, contracting by an estimated 27 percent since the Taliban’s takeover, with little hope for recovery. Unemployment has risen sharply, leaving many without income, while most of the population struggles with limited access to electricity. At the same time, countless Afghans struggle to survive on less than a dollar a day.
Despite the weak economy, the Taliban remain determined to consolidate and legtimise their power. The group proceeded to sign economic deals with various countries, such as China and Uzbekistan, while urging the removal of foreign-imposed sanctions for human rights abuses, suggesting it is the "only solution" to easing their economic crisis. The only notable improvement in the country’s overall situation has been a slight decrease in conflict and extremist activity. However, this can be attributed to the Taliban's consolidated control, while active fighting continues in several regions, including the Panjshir Valley, against groups such as the National Resistance Front of Afghanistan (NRF) and Islamic State–Khorasan Province (ISIS-K). The overall economic and security outlook remains bleak due to a lack of planning, ongoing economic sanctions, and continued security concerns, along with widespread opposition to the group's rule.
Untapped Resources
Afghanistan is known to have vast untapped mineral wealth, estimated at over USD 1 trillion. However, tapping into these resources has proven far more complex and uncertain due to the country’s political instability and lack of infrastructure. Often referred to as the “Saudi Arabia of Lithium,” Afghanistan holds a critical supply of the mineral essential for electric vehicles and energy storage systems. Leading the charge in this sector is China, which has invested approximately USD 57 billion in its mineral supply chains, including significant stakes in lithium mining.
Beyond lithium, Afghanistan holds an estimated 2.2 billion tonnes of iron ore, 1.3 billion tonnes of marble, and 1.4 million tonnes of rare earth minerals, including uranium. The country is also believed to have 2,698 kg of gold, 500 million tonnes of limestone, 153 million tonnes of barite, and 183 million tonnes of aluminium. Additionally, Afghanistan is home to significant deposits of precious gemstones, such as lapis lazuli, emeralds, and rubies, as well as the distinctive pink onyx marble from Nangarhar. Leveraging Afghanistan's abundant resources, the Taliban has managed to fund its operations despite sanctions and a collapsed economy. Largely composed of militia members with little governance experience, they’ve signed lucrative contracts to sustain their economy and pursue foreign legitimacy. Since taking power in 2021, the Taliban claim to have signed over 200 mining agreements, including 15 deals worth more than USD 6.5 billion, with countries such as China, Iran, Turkey, Qatar, and the UK.
Mining has contributed approximately “USD 182 million in the fiscal year 2022-23, USD 118 million in fiscal year 2023-24, and USD 60 million in fiscal year 2024-25 (as of July 11, 2024).” The Taliban’s overall revenues for 2023 were estimated to be 210.7 billion Afghanis, up from 2022. Although only China and the UAE officially recognise them, the Taliban have leveraged resource extraction as their key diplomatic tool, indicating that future agreements may hinge on broader international recognition.
Mining has long been a source of conflict in Afghanistan, with its vast untapped resources driving both economic activity and instability. The Taliban, lacking widespread support, has faced criticism for signing questionable contracts and ignoring illicit mining. Previously, mineral reserves were state-owned but frequently exploited by illegal operations, with groups like the Taliban controlling resource-rich areas and imposing unofficial "taxes." Now in power, they have expanded illicit mining with foreign backing, focusing on high-value minerals like nephrite for traditional jewellery and lithium for China’s electric vehicle ambitions.
The Battle for Afghanistan’s Poppy Trade
Opium, long a cornerstone of Afghanistan’s illicit economy, is one resource the Taliban has been more reluctant to exploit to support its regime since 2021. In December 2023, opium cultivation in Afghanistan was measured to have dropped by an estimated 95 percent after the Taliban announced a nationwide ban. Farmers are estimated to have lost USD 1.3 billion in annual revenue, contributing to an eight percent economic contraction. Opium has long been the backbone of rural economies, sustaining a third of village incomes. With restrictions in place, farmers are increasingly turning to covert cultivation and synthetic drug production, including methamphetamines, to offset their losses.
The Taliban have been exacting in their enforcement of the ban, which has featured chemical eradication, mass arrests, and raids. The staggered approach, which began when they took power, has been largely successful by all accounts. For example, satellite imagery from Helmand, the primary opium-producing province, shows that 129,000 hectares of poppy cultivation area have been reduced to 740 total hectares. Similarly, in Nangarhar, 7,000 hectares in 2022 have now been reduced to 865 total hectares. However, apart from the severe economic impact and the decrease in local production, the ban has favoured criminal organisations and landowners who stockpiled dried opium, which they export at exorbitant rates. To offset the losses accrued by the opium ban, the Taliban regime has offered little and has not invested in local infrastructure projects or local job creation, only further increasing the economic instability.
The China Connection.
After China’s ostensible recognition of the Taliban in February 2024 as the government of Afghanistan, they have continued to channel their global ambitions for resources and influence throughout the nation. Despite ongoing instability from economic deprivation and conflict, Beijing remains committed to leveraging Afghanistan as a long-term supplier, securing vital minerals to support its dominance in the renewable sector and offset resource shortages. From August 2023 onwards, the Taliban has announced USD 6.5 billion of deals, with at least four contracts going to Chinese companies. This followed trilateral talks between China, Pakistan, and the Taliban regarding the expansion of the Belt and Road Initiative (BRI) through Afghanistan in December 2023.
In 2021, following the Taliban takeover, China quickly moved to explore Afghanistan’s lithium deposits, signaling its interest in the reserves while offering a potential pathway for the country to overcome economic turmoil, develop its infrastructure, and tap into its coveted mineral wealth. In January and April 2023, the Taliban’s Ministry of Mines and Petroleum announced two major deals. The first was an oil extraction deal in the Amu Darya basin, and the second was a proposed USD 10 billion investment by Gochin to extract lithium deposits.
Expansion Outlook
Although the Taliban seek to use Afghanistan's mineral wealth for legitimacy, their ability to rely on resource extraction as a primary revenue source and become a key trade partner for countries like China remains unlikely. The first reason is the persistence of violence stemming from groups who do not accept the legitimacy of the Taliban regime. This includes groups such as the NRF and ISIS-K, the former of which contests the Panjshir Valley and other regions, and the latter, which is known to stage sporadic attacks against the Taliban. In the Panjshir Valley, for instance, the Taliban have begun to auction rare jewels gathered in the region. The valley has seen a significant rise in security incidents, with the NRF using "hit-and-run tactics" against the ruling regime, including attacks on security posts, military vehicles, ambushes, and targeted killings. Reports show a lack of active projects in the region, with Beijing instead choosing areas closer to their border with Afghanistan, likely in a bid to guarantee safety. Despite sustaining severe losses, ISIS-K remains one of the main security threats to the regime and continues to conduct successful assassinations of Taliban officials across the country. Additionally, the group’s recent staging of attacks in Moscow speaks to their ability to coordinate attacks and draw on support from cells located across Central Asia.
Another major obstacle to establishing sustainable mining operations and resource extraction is the country's deteriorating infrastructure. Following the former government's collapse, foreign-funded infrastructure projects came to a halt, while a shortage of domestic technical expertise has further hindered the Taliban’s ability to resume them. Projects estimated to have been worth more than USD 2.8 billion were stopped, mainly to bolster the agriculture, energy, and transportation sectors, with none being resumed under the new regime. Additional concerns include government corruption and occasional intra-Taliban conflicts during their time in power.
Strategic Appeal
Despite Afghanistan’s uncertain viability as a global resource supplier, its trade agreements with China and other nations reflect a broader strategic agenda—one that exploits its resource wealth while simultaneously addressing security concerns. From an investigation into certain mines, such as the Nephrite mines, on the border of Kunar and Nangarhar provinces, foreign investment by countries such as China is developing in the region surrounding the mines. China likely seeks to deepen the Taliban’s dependency by investing in resource-rich areas, securing access to untapped minerals, and maintaining stability through controlled, isolated zones. With Afghanistan’s economy in turmoil and the regime burdened by debt, China can extract resources to mitigate losses while positioning itself as the primary power willing to engage with the Taliban. As long as the Taliban remains in power, Beijing is expected to escalate resource extraction over the next five years.
Beijing and its allies in Central Asia and Pakistan are likely focused on developing mines along Afghanistan’s border regions to facilitate the free flow of extracted minerals and ensure the expansion of the BRI. Despite ongoing security and investment challenges, Afghanistan remains a key component of the BRI and a long-term objective for Beijing. The push is bringing investment from allies such as Iran, who have pledged to invest USD 6 billion to establish a direct link to China. By expanding the BRI, China can reinforce security at critical points along the Afghan-Pakistan border and within its Xinjiang Uygur Autonomous Region—likely a key factor behind its implicit recognition of the Taliban.
The Wakhan Corridor, which borders China's restive Xinjiang Uygur Autonomous Region, has long been a primary security concern and significant risk to regional stability. Fears that instability in Afghanistan could foster militant groups opposing the Chinese government are likely the main driver behind Beijing’s closer engagement with the Taliban in the short term. Groups such as the East Turkestan Islamic Movement and ISIS-K have been known to support and recruit Uyghurs, prompting Beijing to use strategic investments to secure its borders. A resurgence of these groups or increased pro-Uyghur militant activity could have severe consequences for investments in Central Asia, Pakistan, and the broader BRI.
Summary and Outlook
The Taliban regime has successfully leveraged its vast, untapped resources to secure contracts with foreign governments, but it still faces a lack of substantial investment on the ground. While China has begun to open and facilitate mining operations in various regions, it has yet to fully develop a mineral supply chain that connects Afghanistan’s resources to China for both green initiatives and domestic use. China’s recognition of the Taliban is likely aimed at securing exclusive access to these resources, while also ensuring the expansion and security of the BRI against threats from ISIS-K and pro-Uyghur militant groups. However, these efforts are likely to increase overall risks and provide clear targets for the many groups opposing the Taliban, with the potential to become a primary driver of conflict.
China offers the Taliban one of their few pathways to international recognition and foreign investment, with the group likely seeking to enhance its global presence moving forward. However, this relationship comes with significant concerns, particularly regarding the Taliban's activities, which could strain China’s relations with Central Asia and Pakistan. This was evident in China’s construction of a military base in Tajikistan, potentially preparing for the collapse of the Taliban regime, and the recent killing of a Chinese national along the Afghan-Tajik border. The victim was reportedly part of a group of gold miners operating in the border region, underscoring the vulnerability of mines and surrounding areas, which become targets for both disgruntled locals, who once relied on the mines, and opposition groups aiming to disrupt China’s interests.
China’s support for the Taliban could serve as a flashpoint in foreign relations, potentially dampening Central Asian governments' willingness to cooperate. The Taliban’s strategy to leverage mineral resources mirrors efforts made by previous Afghan governments, which similarly promised economic growth during periods when the Taliban was out of power. However, those initiatives failed due to many of the same challenges that persist today, making it unlikely that the situation will change in the near term. The economic benefits observed thus far seem to be a short-term tactic to generate revenue while offsetting losses from foreign aid and opium production.