The Not-So-Great Game

Why is the Pentagon handing over Afghanistan's riches to the Chinese?

In about a week, the Afghan Ministry of Mines will announce that the China National Petroleum Corp. (CNPC) -- the largest state-owned Chinese company -- has won the rights to develop and explore several oil fields in the Amu Darya basin in northern Afghanistan.

How was CNPC able to win a tender for such a strategic resource in a country where the United States wields tremendous influence? Amazingly, one reason is that the U.S. Defense Department, whose Task Force on Business and Stability Operations, which is charged with resuscitating the economies of Afghanistan and Iraq, designed and oversaw a tender process that played to the strengths of Chinese state-owned companies over Western private ones.

The Chinese government has been actively pursuing various natural resources in Afghanistan for years. In 2007, a consortium of Chinese state-owned companies won the only other major natural resources tender in Afghanistan to date, for the massive Aynak copper deposit, thought to be worth as much as $80 billion. Over the last decade, China has sought to lock down as many natural resources as possible throughout Central Asia to fuel its skyrocketing demand for minerals, oil, and gas.

It was in this broader context that the task force took control of the oil tender in northern Afghanistan. Since 2006, the task force has been encouraging private investment, industrial development, and energy development in Afghanistan and Iraq in a bid to build sustainable economies that can survive the looming drawdown of international forces and reduction in foreign assistance in both countries.

Natural resources are an important pillar of this mission because they hold the promise of generating meaningful revenues for the cash-starved Afghan government. In 2009, the task force commissioned the U.S. Geological Survey to conduct a comprehensive review of Afghanistan's geological riches, the preliminary results of which were announced in 2010 and showed that Afghanistan might contain more than $1 trillion in mineral wealth. This story was reported in news outlets worldwide and stoked considerable interest in Afghanistan. The task force then set out to design a process by which these resources should be tendered by the Afghan government, embedding myriad advisors -- ranging from energy experts and financial consultants to lawyers -- within the Afghan Ministry of Mines.

The Amu Darya tender was the first real test case. The tender covered an area of roughly 4,500 square kilometers between the towns of Sar-e-Pol and Sheberghan in northern Afghanistan, with five known fields containing an estimated 80 million barrels of crude oil -- about enough to supply 11,000 barrels per day for 20 years.

Our firm assisted a Western oil and gas company that participated in the tender, but lost to CNPC. We saw firsthand how the commercial terms that would govern the development of the oil as well as the procedures for selecting the winning bidder made it all but impossible for a Western company to win the tender against CNPC.

The terms offered by the Afghan government -- and designed, in large part, by the task force -- did not reflect realities on the ground in Afghanistan. The key term in any production-sharing contract is the profit split, which identifies what share of oil produced belongs to the government and what share belongs to the oil company. This split is based on a variety of factors, including the quality and quantity of the oil, the technical challenge of recovering the oil, the quality of local infrastructure, and the security and political risk of the region where the oil is located. Where there is less overall risk -- such as when there is plentiful, high-quality oil that is easy to access and move in a safe environment -- the government receives the lion's share of the profit oil. As risk increases, however, oil companies demand more profit oil to ensure an adequate rate of return on the capital invested.

In Central Asia, the norm is for the government to receive roughly one-third of the profit oil and for the oil company to receive the remainder. Yet in Afghanistan -- one of the riskiest countries in Central Asia, with incomplete geological data and the near absence of key infrastructure -- the task force pushed for a profit split that would give the Afghan government the majority of the profit oil. This was in addition to royalties and several other taxes included in the agreement, all of which are entirely atypical in Central Asia.

We provided the task force with several examples of contract terms in other Central Asian countries and repeatedly asked the task force to identify which countries served as the model for the unattractive commercial terms offered for the Amu Darya tender. The task force refused to answer our question, and the terms remained unchanged, resulting in virtually no interest in the tender among serious Western oil companies. The terms did not deter CNPC, however, which is willing to make investments in Central Asia that are not strictly profitable for the purpose of capturing resources and extending China's political influence.

The other problem was the process, under which the company that bid the highest royalty would be designated the winner of the tender so long as it met the basic technical requirements for executing the project. It was clear from the beginning that CNPC would bid the highest royalty (especially given that the terms were unattractive to Western companies). Indeed, according to industry experts we consulted, it is common knowledge that CNPC typically bids $5 to $7 per barrel more than other interested bidders in oil tenders in which it participates. So this selection process all but guaranteed that China would win the tender.

There are other selection processes that would have been fairer to Western companies. Notably, a system that allocated a certain number of points for the royalty rate, but then also allocated points for technical qualifications, environmental track record, past performance, quality of the proposed work program, investment in the local community (including hiring of local staff), and other such factors, would have provided far more opportunity for Western companies to showcase their strengths and compete against CNPC. The task force ignored such alternate approaches -- even though they were expressly permitted under Afghan law.

We urged the task force to make the terms and the selection process fairer to Western bidders, but the task force (and other branches of the U.S. government) declined to do so for two reasons. First, the task force stated that it was neutral as to the outcome of the tender; so long as the process was transparent, they did not care whether the winning company was American or Chinese. This is shocking, given that U.S. troops in Afghanistan require a steady supply of refined petroleum products to sustain their operations and that placing these resources under the effective control of the Chinese government poses a threat to these ongoing operations. In addition, the presence of Western companies in Afghanistan would help strengthen U.S.-Afghan ties and would inculcate respect for the rule of law, transparency, and other related Western business values that are important to Afghanistan's development. Chinese companies, by contrast, are known to have a very bad track record in these areas, as well as in the employment of locals (Chinese low-wage laborers are imported).

Second, the task force argued that its main goal was to ensure that the tender generated quick revenue for the Afghan government, and CNPC offered more generous commercial terms than Western bidders. There is no doubt that the United States has a strategic interest in generating revenue for Afghanistan so that the country can become less dependent on the largesse of Western donor countries, but it also has strategic interests in promoting U.S. companies and in preventing China from capturing valuable resources. In addition, even if it were appropriate for the task force to focus singularly on generating revenue, a victory by CNPC -- which is known to break contractual commitments regarding payments to host governments, move slowly in developing resources, and use subpar technologies -- will not accomplish this goal. These considerations recently led the government of Kazakhstan to turn down various CNPC bids even though the commercial terms of those bids, on their face, appeared more attractive than those of other bidders. But the tender process designed by the task force did not allow the Afghans to take such considerations into account.

The Task Force on Business and Stability Operations did a disservice to Afghanistan and the United States by mismanaging the Amu Darya tender. It is, moreover, improper for the task force to spend taxpayer funds -- $20 million, in total -- to help China tighten its stranglehold over Afghanistan's natural resources and, by extension, the country's economic development. The troubling announcement that will be made this month is the perfect occasion for senior Pentagon officials and members of Congress to re-examine the activities of the task force and ensure they better align with U.S. interests.

hellosputnik via Flickr


Locked Up Abroad

It isn't just Amanda Knox or the hikers in Iran. Why even the average American tourist should worry about being detained abroad.

Anyone who has ever watched an American cop show on TV knows that when you're arrested in the United States, you have the right to legal representation. But did you know that when you're arrested and jailed in a foreign country, you're also likely to have the right to consular representation?

More than 170 states have agreed, in the event that a foreign citizen is arrested in their country, to inform the respective foreign government of the detention. The right is one of basic decency, as getting arrested abroad can be quite intimidating. It's scary enough when you don't speak the language. It's downright overwhelming when you don't know the intricacies of the criminal justice system.

Just imagine, for instance, if you were an American studying abroad in Italy -- remember Amanda Knox? -- or working in Syria and were arrested on suspicion of a serious crime. How would you plead your innocence? How would you navigate your case through the courts? How would you find a good attorney and arrange payment of your legal fees? Add to this that you're not likely to be detained in a jail whose conditions are on par with those in American prisons, and it's no surprise that foreigners arrested overseas often suffer physical decay and mental anguish.

This is exactly what the 1963 Vienna Convention on Consular Relations (VCCR), which entitles an individual arrested in a foreign land to receive the aid of his or her consulate, is designed to address. Under its terms, not only must the consulate be informed of the detention "without delay," but the consulate "shall have the right to visit a national ... who is in prison, custody or detention, to converse and correspond with him and to arrange for his legal representation." That is, unless the detaining government opts to ignore these obligations and rights -- a practice that is increasingly having a detrimental effect on foreigners arrested in the United States and, reciprocally, on Americans arrested abroad.


When Americans Sarah* Shourd, Shane Bauer, and Joshua Fattal were arrested by Iranian authorities in July 2009 on espionage and trespass charges after hiking along the Iran-Iraq border, they became the latest pawns in a game of one-upmanship between the United States and Iran -- a game that put the issue of VCCR obligations front and center.

Shourd was released in September 2010 on medical grounds, and the two men received their freedom one year later, after the government of Oman reportedly paid a total of $1.5 million in "bail" for all three.

All along, the American hikers have maintained their innocence. At a news conference last month upon their return to the United States, Bauer insisted that their detention was "never about crossing the unmarked border between Iran and Iraq. We were held because of our nationality."

The Iranian authorities showed little mercy to their American captives, keeping both men in solitary confinement in an 8-by-13-foot cell, frequently blindfolded, and with minimal outdoor time. According to Shourd, both men were subjected to physical punishment, with Bauer beaten and Fattal thrown down a flight of stairs. While neither man has publicly confirmed Shourd's allegations, Fattal did acknowledge the brutality of the guards at Iran's notorious Evin prison, where they were held: "Many times, too many times, we heard the screams of other prisoners being beaten."

During their ordeal, both men requested more humane treatment and greater access to the Swiss Consulate, which, in the words of Switzerland's ambassador to Iran, Livia Leu Agosti, functions as the "surrogate consulate for the U.S." in Iran. (The Swiss took on the vital role of representing American interests in Iran after the United States severed its diplomatic relations with Iran in 1980, following the seizure of the U.S. Embassy in Tehran by a group of militants that resulted in 52 Americans being held hostage for 444 days.) Although all three American hikers were permitted a highly publicized, emotional meeting with their mothers in May 2010 -- which Iran exploited for propaganda purposes -- Swiss officials were given access to the Americans on just four occasions over their 26-month detention.

The United States frequently chastised Iran for depriving the hikers of their right to consular representation. As State Department spokesperson Mark Toner protested on May 23 of this year, "We urge Iran to permit immediate consular access by the Swiss protecting power, and that's obviously an issue." Toner noted during his news conference that "the last regular consular access ... was October 26, 2010, which is quite a long time ago."

When the United States raised the matter of access to the hikers, Iran countered that there are at least 60 Iranians in American custody, many of whom have also been deprived of their right to consular representation. Iran's Foreign Ministry has been particularly vocal about the case of Shahrzad Mir Gholikhan, an Iranian woman arrested for violating American export-control laws that prohibit the transfer of military technology to Iran. Addressing Mir Gholikhan's case, Hamid Reza Shakeri-Niasar, a senior official at the Iranian Foreign Ministry, complained, "Despite the Islamic Republic of Iran's repeated demands and protests, the U.S. administration has failed to do its responsibilities" under the VCCR. According to Iranian authorities, Mir Gholikhan has been in U.S. custody for nearly four years on espionage-related charges, and at no time has she been permitted either consular access or a meeting with her family.

When Bauer arrived in Oman after being released from prison, he made a brief statement that "Two years in prison is too long." He then followed up his declaration with a hope that the release of him and his two companions would lead to "freedom for political prisoners in America and Iran." At first, this struck many observers as bizarre, with one blogger suggesting, "Maybe Shane was suffering from some kind of late onset Stockholm Syndrome when he made that remark about political prisoners."

But Bauer's words seem to have been carefully chosen. He told reporters, "Sarah, Josh, and I oppose U.S. policies towards Iran which perpetuate this hostility." Among those policies is the United States' evident disregard for the VCCR rights of Iranians detained by American authorities. And to the hikers, it is this game of political tit-for-tat between the two countries that ensnared them and left them to rot unjustly in jail, without adequate representation.


Most Americans evaluating the hikers' unfortunate fate might conclude that even if the United States has trampled on the rights of Iranians in custody, the U.S.-Iran relationship is unique and therefore not likely to affect them, as very few Americans visit Iran.

The problem, though, is that the United States' disregard for its Vienna Convention obligations is vast in scope, which has lead to a slew of diplomatic complaints -- and concerns of retaliation -- from even its closest allies. In the last 15 years, strong protests and diplomatic démarches have been issued by Britain, Canada, the European Union, Germany, Mexico, and Paraguay -- hardly the group of rogue states with which Iran often gets lumped.

If states are offended by another state's failure to grant consular access to detainees under the VCCR, imagine the frustration when their nationals are sentenced to death -- and then executed -- without proper consular representation. When it comes to executing foreign nationals in violation of the VCCR, the United States is in a class all by itself. According to the Death Penalty Information Center (DPIC), a Washington, D.C., nonprofit organization that is often critical of capital punishment, out of at least 160 capital cases in which a foreign national was sentenced to death in the United States, only seven -- less than 5 percent -- were in full compliance with the VCCR's requirements. DPIC has calculated that since 1976, when capital punishment was reinstated by the Supreme Court, 27 foreign nationals from 15 countries have been put to death in the United States without full and proper compliance under the VCCR -- the most recent incident being Florida's execution of Cuban national Manuel Valle on Sept. 28. With Valle's death, there are now at least 135 foreigners representing 34 nationalities on death row, most of whom have raised a VCCR violation claim. The plurality of these inmates are from Mexico.

In 2003, Mexico brought legal action against the United States in the International Court of Justice (ICJ) on behalf of dozens of Mexicans on death row who were denied proper consular access. The ICJ, in its Avena decision, held that 51 of the Mexican citizens had indeed been deprived of appropriate consular notification and access. The ruling -- which amplified the ICJ's determinations in two previous cases brought against the United States, respectively by Paraguay and Germany -- ordered the United States to provide "review and reconsideration of convictions and sentences" in order to determine if the failure to notify the 51 Mexican defendants of their consular rights prejudiced their cases. To date, the vast majority of these defendants have never been granted judicial "review and reconsideration." In fact, two of them -- José Ernesto Medellín and Humberto Leal -- were executed in defiance of the ICJ's binding Avena ruling.

And that's just capital cases culminating in death sentences. Imagine how many other occurrences of violation there have been. While there is limited data on this, one investigation found that in 1997, the New York City Police Department arrested more than 53,000 foreign nationals, but notified the respective consulates in only four instances.


So, are you an American thinking about taking a trip to Bangkok? Or Berlin? Or Santo Domingo? Or just a drive across the border to Tijuana or Toronto? Well, you're not alone. Every year, Americans take 60 million trips abroad. And every year, upwards of 6,000 Americans are arrested by foreign authorities. Obviously, the odds are slim that you'll be arrested while traveling overseas. But, should you have that misfortune, don't forget that you have a right to consular notification and representation.

Of course, as the realm of international relations operates under the rule of reciprocity, don't be surprised if your requests for consular access are ignored. Former American police officer Scott Loper, who was denied consular access after being arrested in Canada on "criminal harassment" charges, can attest to this. So can American contractor Alan Gross, who remains jailed in Cuba on espionage-related charges, with restricted consular representation.

As the American hikers detained by Iran learned -- the hard way -- in diplomacy, what goes around comes around.


*Correction, Oct. 6, 2011: Shourd's first name was incorrectly stated as "Sharon." It is "Sarah."