Taliban Signs First Foreign Deal With China for Oil Extraction Project

Taliban spokesperson Zabihullah Mujahid (L) gestures as he speaks during the first press conference in Kabul, Afghanistan, on Aug. 17, 2021. (Hoshang Hashimi /AFP via Getty Images)

The Taliban regime in Afghanistan has signed an oil extraction agreement with China’s Xinjiang Central Asia Petroleum and Gas Co. (CAPEIC) in Afghanistan’s first major foreign deal since the Taliban seized control in 2021.

Under the contract, the CAPEIC will invest $150 million in one year and $540 million in the next three years for oil extraction in Afghanistan’s Amu Darya Basin, Taliban spokesman Zabihullah Mujahid said.

“In this contract, the Islamic Emirate will be a 20 percent partner, and this share will increase to 75 percent,” he wrote in a Twitter post on Jan. 5.

Zabihullah said they'll extract oil from an area covering 4,500 square kilometers (1,737 square miles) in Sar-e Pul, Jawzjan, and Faryab provinces, with the daily extraction rate increasing gradually to 2,000 tons from 1,000 tons.

The contract has a 25-year term and will automatically be terminated if CAPEIC fails to meet its material obligations within a year, he noted.

The Amu Darya is the largest gas-bearing basin in Central Asia and the world’s third-largest gas-rich basin after the Western Siberian basin and the Persian Gulf basin, according to a 2019 study by PetroChina.

It’s located mainly in Turkmenistan and Uzbekistan, as well as in parts of northern Afghanistan and northeastern Iran.

Chinese State Councilor and Foreign Minister Wang Yi meets with Mullah Abdul Ghani Baradar, political chief of Afghanistan's Taliban, in Tianjin, China, on July 28, 2021. (Li Ran/Xinhua via Reuters)

No country has recognized the Taliban as Afghanistan’s legitimate government since it took power in 2021. However, the Chinese Communist Party (CCP) continues to engage with the Taliban for economic interests.

Afghanistan is estimated to be sitting on untapped natural resources of more than $1 trillion, which has attracted the interest of some foreign investors, although decades of turmoil have prevented any significant exploitation.

In 2012, the state-owned China National Petroleum Corp. signed a contract with the former U.S.-backed administration in Afghanistan to extract oil at the Amu Darya. The Amu Darya was estimated to have 87 million barrels of crude at the time.

Acting Deputy Prime Minister Mullah Baradar said the Taliban’s new agreement with CAPEIC resulted from another Chinese firm, which he didn’t name, ceasing oil extraction after the fall of the previous government.

‘Exaggerated the Threat’

The CCP allowed the Taliban to keep Afghanistan’s embassy in Beijing and offered humanitarian aid to Afghanistan, without formal recognition of the regime. Analysts believe that security is another factor driving the CCP’s support for the Taliban.

Jennifer Murtazashvili, a nonresident scholar in the Asia Program at the Carnegie Endowment for International Peace, said in her 2022 report that the CCP is concerned about a possible spillover of Islamic extremism from Afghanistan into China and the Xinjiang region.

“The primary security concern of China is potential threats from the relatively small East Turkistan Islamic Movement, a group that seeks to liberate Xinjiang province and the Uyghur people from Chinese government control,” she said.

“China aims to ensure that the Taliban are willing to eliminate Uyghur militant groups operating inside of Afghan territory. It is important to stress that China has exaggerated the threat and involvement of Uyghurs in terrorist organizations.”

The CAPEIC deal came a day after the Taliban said its forces had killed eight ISIS terror group members in raids, including some responsible for an attack on a Chinese hotel in Kabul, Afghanistan, last month.

“Although both parties hinted that there will be significant future investment by China in Afghanistan, few details have emerged,” the report reads. “This is because, without security, it is simply impossible for China to secure its own people working in the country.”

Reuters contributed to this report.