Afghanistan Aims to Revive Pipeline Plans


For the last eight years, as Afghans fought one another on the battlefield, foreign companies waged a back-room war for the right to build a pipeline to tap the vast energy riches of Central Asia.

El Segundo-based Unocal Corp. and Argentina’s Bridas Corp. headed two competing groups that hired diplomats skilled in the gentle art of persuasion and offered Afghan warlords tempting incentives in pursuit of a prize worth billions.

But like so many Afghan dreams dashed in 23 years of war, the $1.9-billion natural gas pipeline project never got past the talking and enticing. When rivalries were fully inflamed, the vision quickly vanished. Unocal pulled the plug on its involvement in 1998, after the Clinton administration ordered airstrikes on suspected terrorist camps in the country.


Now the leaders of Afghanistan and neighboring Turkmenistan and Pakistan hope to revive the venture at a summit today, and as the intrigue starts to swirl again, this shattered country desperate for foreign investment risks getting sucked into another bitter round of pipeline politics.

The Afghan government expects a pipeline would create 10,000 jobs and bring in hundreds of millions of dollars a year in transit fees alone. Warlords want to grab a cut of the profits, but they also hope that natural gas running through their regions will help fuel local industries.

Before Unocal pulled out, the company was accused of secretly supporting the radical Islamic Taliban regime to secure a safe route for the pipeline from Turkmenistan through western Afghanistan and to market in Pakistan.

Now that U.S. bombers have reduced the Taliban to roving bands of guerrilla fighters, the new government sees Unocal as the best-qualified firm to lead a project that would give an enormous lift to a ruined economy.

But the company says it isn’t interested, at least “not for the foreseeable future,” spokeswoman Teresa Covington said from Sugar Land, Texas.

“Anything beyond that is speculation, and I don’t think it would serve me to say ‘forever,’” Covington added. “But I can tell you that our management’s position is that we have no plans or interests in that pipeline.

“In addition to withdrawing from the pipeline consortium [in 1998], we also closed all of our offices in Central Asia, with the exception of Azerbaijan. Our view was that our capital and future growth, at this point, lay elsewhere.”

But after all the expense and trouble Unocal went through, Afghans such as Mohammed Ebrahim Adel, deputy minister of mines and industries, find it hard to believe that the firm doesn’t want to win the right to build the pipeline.

“Business has its secrets and mysteries,” said Adel, a mining engineer. “And maybe, before there is a real contract, they don’t want it to be disclosed in the media.”

A U.N. development official, who also speculated about Unocal’s true intentions, said that although Afghan leaders are saying little in public about the pipeline, it’s at the root of political maneuvering in the run-up to next month’s loya jirga, or traditional grand assembly.

Turkmen, Pakistani and Afghan Leaders to Meet

Interim Afghan Prime Minister Hamid Karzai, Pakistani President Pervez Musharraf and Turkmen President Saparmurad A. Niyazov are expected to sign a broad agreement to build the pipeline when they convene in Islamabad, Pakistan’s capital. Their meeting comes just days before the loya jirga is to decide who will rule Afghanistan for the next two years. That government will be asked to honor any agreements Karzai makes.

The new government would have to find foreign financing and firms willing to take on a complex project in a nation still not completely at peace. If Unocal made a bid, it would be hard to beat, said Adel, the deputy minister.

“Naturally, Unocal is economically and technically stronger” than other companies that have expressed interest, he said, adding, “We are sure Unocal will win, because it has big potential and can work better.”

To some here, it looked like the fix was in for Unocal when President Bush named a former Unocal consultant, Zalmay Khalilzad, as his special envoy to Afghanistan late last year.

In the 1980s, Khalilzad, who is also a key advisor on Bush’s National Security Council, was a special advisor in the State Department on the Soviet war in Afghanistan and the Iran-Iraq War. He became a consultant to Unocal in the mid-1990s.

Just 10 days after the Taliban seized power in Kabul in 1996 and began its vicious crackdown, Khalilzad argued in a Washington Post opinion piece that the U.S. should try to work with the mullahs and form a broad-based government that included other factions.

That same day, one of the paper’s front-page headlines declared, “Kabul Women Under Virtual House Arrest.” On the opinion page, Khalilzad argued: “The Taliban does not practice the anti-U.S. style of fundamentalism practiced by Iran--it is closer to the Saudi model....

“We should use as a positive incentive the benefits that will accrue to Afghanistan from the construction of oil and gas pipelines across its territory,” he added. “These projects will only go forward if Afghanistan has a single authoritative government.”

Unocal announced in October 1997 that it would lead a seven-member consortium, called Central Asia Gas Pipeline Ltd. The group planned to build a 790-mile pipeline from the Turkmen-Afghan border to Multan, Pakistan. A $600-million extension to supply an even bigger market in India was also under consideration, Unocal said.

Marty Miller, then a Unocal vice president, cautioned at the time that the project faced “significant economic, political and commercial challenges” but added, “It has exceptionally sound economic fundamentals, given the presence of proven gas reserves in Turkmenistan and the market needs of Pakistan and India.”

At least two groups of Unocal officials from the U.S. visited Afghanistan in 1997 and ‘98, headed by a Unocal vice president, Chris Taggart, said Khodainoor Mandar Khail, who met them as president of Afghan National Oil Co.

Karzai’s interim government has allowed Mandar Khail to keep his job, but so far there is little for him to do. He sits at an empty desk, reading and rereading an old copy of the Economist, and reminisces.

Mandar Khail said he accompanied both Unocal delegations to the southern city of Kandahar, where the Taliban’s reclusive--now fugitive--leader, Mullah Mohammed Omar, made all the important decisions.

Mandar Khail said he didn’t know whether Omar granted a rare audience to the Americans, but said that “at that time, he was available” to join in such important negotiations.

Unocal was so confident that it would sign a deal, it opened a school in Kandahar to train workers in pipe-fitting, welding and other skills required for the project, Mandar Khail said.

When Unocal announced it was suspending its involvement in the bidding in August 1998, the company denied it had trained Afghan workers for the project.

In December 1997, a month after rival Bridas announced it was close to signing a pipeline contract with the Taliban, Unocal welcomed a Taliban delegation, including several government ministers, to its offices in Sugar Land.

The trip included a tour of offshore oil wells, and Khalilzad helped entertain the visitors.

Argentina’s Bridas proposed a pipeline through western Afghanistan in 1994, the same year the Taliban emerged as a small militia of ethnic Pushtuns in Kandahar.

Unocal presented plans for a similar pipeline the following year, and in 1996, Bridas tried to sue in a Houston court. The lawsuit was dismissed.

Two weeks after the Aug. 7, 1998, bombing of two U.S. embassies in East Africa, Unocal announced it was suspending all activities related to the pipeline project in Afghanistan. Its news release blamed “sharply deteriorating political conditions in the region.”

Previous Contracts Are Now Void, Official Says

Mohammed Alem Razm, Afghanistan’s minister for mines and industries, says any contracts signed by previous governments or commanders are now meaningless.

Razm was an intriguing choice as minister of mines and industries in a country that has little of either. A former general under ethnic Uzbek warlord Abdul Rashid Dostum, Razm has spent most of his adult life in the military.

His appointment to what has become a key post in Afghanistan’s government appears to have more to do with pipeline politics than professional qualifications.

Dostum, a ruthless commander with a reputation for abandoning allies and offering his services to the top bidder, was in Bridas’ corner in the competition to build the pipeline and even signed a deal with the Argentine firm in 1996.

After the Taliban’s collapse last year, Dostum opposed the interim government until Karzai paid him a visit in his northern stronghold of Mazar-i-Sharif.

Karzai, an ethnic Pushtun, not only persuaded the Uzbek commander to change his mind, but appointed him deputy defense minister and Kabul’s chief representative in the north.

Now Razm, one of Dostum’s closest commanders, is responsible for what could be one of the country’s most important development projects. Afghan officials hope the pipeline could be expanded to carry oil as well as natural gas.

Like his deputy, Adel, Razm also said this week that Unocal was the best company for the job.

Whoever ends up building the pipeline shouldn’t follow the shorter, western route that Unocal and Bridas proposed, but instead ought to make it run a much more expensive and difficult southern route through Kabul and then into Pakistan, Adel said.

That would benefit the national interest, he said. Of course, it would also ensure that the lucrative pipeline passed right through his boss’ home turf.