Contract breach or banditry? Inside the collapse of the Taliban's oil deal with China

Chinese-invested oil fields opened in Sar-e-Pul province in 2023, located in the Amu Darya River basin. China and Afghanistan signed a 25-year contract that pledged $540 million of investment in the first three years and specified that oil would be processed in Afghanistan. The project was the first foreign investment after the Taliban regained power in 2021. Two years after the signing, the Taliban terminated the contract, citing repeated violations by the Chinese firm, including missed investments, unpaid royalties, and incomplete geological surveys and infrastructure. Chinese employees and officials countered with accusations that characterized Taliban actions as equivalent to robbery.

Turbaned Afghan officials and hard-hatted Chinese engineers gathered in Afghanistan's Sar-e-Pul province in 2023, to mark the opening of Chinese-invested oil fields. The fields are located in the Amu Darya River basin, a major Central Asian watershed that includes glacier-capped mountains and vast, arid deserts. At a signing ceremony in Kabul, China's envoy, Wang Yu, hailed the deal as "an important project" between the two countries.

Under the 25-year-contract, China pledged to invest $540 million in the first three years. "The contract specifies that the oil will be processed in Afghanistan," noted Afghanistan's then-Acting Minister of Mines and Petroleum Shahabuddin Delawar. "We will not allow crude oil to be processed or transported abroad." But two years later, the deal collapsed amid mutual recriminations in a saga that sheds light on the often-opaque relationship between Beijing and the Taliban.

Afghan officials accused the Xinjiang Central Asia Petroleum and Gas Company, the Chinese company that had signed the 2023 deal, of breaching the contract, while some Chinese employees with AfgChin Oil and Gas Ltd., the joint venture that ran the oil wells, likened the Taliban's actions to "robbery." In June, the Taliban announced the termination of the contract, claiming that the Chinese firm had repeatedly violated it.

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