The Afghan minister of mines accepted a roughly $30 million bribe to award the country's largest development project to a Chinese mining firm, according to a U.S. official who is familiar with military intelligence reports.
The allegation, if proved true, would mark one of the most brazen examples of corruption yet disclosed in a country where the problem has become so pervasive that it is now at the heart of Obama administration doubts over Afghan President Hamid Karzai's reliability as a partner. The question of whether Karzai can address his government's graft and cronyism looms large as he prepares for his inauguration Thursday for a new term, and as President Obama completes a months-long strategy review that will define the future of U.S. involvement in Afghanistan after eight years of war.
Karzai is coming under intense international pressure to clear his cabinet of ministers who have reaped huge profits through bribery and kickback schemes. Although he announced a new anti-corruption unit this week, the president has been reluctant to fire scandal-tainted ministers in the past, and it is unclear whether he is ready to do so now. Meanwhile, Afghans' perceptions that they are ruled by a thieving class have weakened support for the government and bolstered sympathy for the Taliban insurgency.
In the case of the minister of mines, there is a "high degree of certainty," the U.S. official said, that the alleged payment to Mohammad Ibrahim Adel was made in Dubai, United Arab Emirates, within a month of December 2007, when the state-run China Metallurgical Group Corp. received the contract for a $2.9 billion project to extract copper from the Aynak deposit in Logar province. Aynak is considered one of the largest unexploited copper deposits in the world.
Issue gains urgency
The selection of the Chinese firm, known as MCC, has angered some Afghan and American officials who worked on the bidding process with Adel. They say he was biased toward the company and did not give a fair hearing to the proposals of Western firms. But the issue has also gained urgency because the ministry is reviewing offers for another massive mining deal -- this time for an iron ore deposit west of Kabul known as Haji Gak -- for which MCC is the front-runner.
"This guy has done this already; we're in the same situation again," said the official, who spoke on the condition of anonymity.
In an interview, Adel denied repeatedly that he has received any bribes or illicit payments during his three-year-old tenure as minister and said that MCC won the contract after a fair review process. The Chinese company's investment -- including plans to build a railroad and a 400-megawatt power plant, and to make an $808 million bonus payment to the Afghan government -- far exceeded that of other firms, Adel said.
"I am responsible for the revenue and benefit of our people," Adel said. "All the time I'm following the law and the legislation for the benefit of the people."
The performance of the Mines Ministry under Adel typifies the weakness of Karzai's government. Afghanistan's wealth of mineral resources represents a potential bright spot in an otherwise feeble economy. Flush with copper, iron, marble, gold and gemstones, the mining sector could become a major source of revenue for the country.
But today, no major mines are functioning, and current and former U.S. and Afghan officials said incompetence and corruption have hindered the industry's development and frightened away potential investors.
"There is a pattern of improprieties that have gone on. We do know that the World Bank procedures, and the government of Afghanistan procedures, were badly breached repeatedly," said one former American adviser to the ministry. "There is every reason to believe there were probably gratuities exchanged."
Adel trained as a mining engineer in what was then the Soviet city of Leningrad, and his autocratic style has alienated current and former Afghan and American officials who have worked with him. It also has prompted widespread allegations that he or his deputies have received payments to award lucrative contracts to allies.
$25 million in a cardboard box
The first major contract of Adel's tenure was to privatize the Ghori cement factory, the country's only functioning cement plant, set in the limestone hills of Baghlan province in northern Afghanistan. The former mines minister, Mir Mohammad Sediq, said that Mahmoud Karzai, the head of the Afghan Investment Co. and the brother of the Afghan president, approached him, asking to take over the factory.
President Karzai replaced Sediq and installed Adel as minister in March 2006. Adel moved quickly on the cement proposal. A competitor for the project, the Aria Zamin company, said Adel used his influence to deny the firm a fair chance. The company's representative in the bidding, Nasir Khisrow Parsi, said that in the final days of the bidding process, Adel told him his company needed to present $25 million in cash to the ministry as a guaranty to show that the firm was serious.
"I told the minister, 'This violates the rules of the process. This is totally wrong,' " Parsi recalled. "In a country like Afghanistan, a person cannot carry even $100,000 from one place to another."
But Mahmoud Karzai's Afghan Investment Co. (AIC) came up with the money. The cash for the guaranty was carried in a cardboard box, flanked by gunmen, and placed on a desk in the ministry's headquarters in Kabul, officials said. One former deputy minister who witnessed the spectacle feared violence, but the deal went smoothly and AIC won the right to rehabilitate and expand the factory.
Adel defended the process but acknowledged that he has changed his procedures. "It was unusual. It was our first bidding," he said.
‘Only God can stop this corruption’
To Parsi, it was a blatant example of influence peddling in the ministry.
"They can do whatever they want," said Parsi, who now works in the geology department of the Mines Ministry. "The whole ministry is corrupt. No one is clean there. I don't see how this is going to end. Only God can stop this corruption."
Mahmoud Karzai could not be reached for comment. Adel said he exerted no influence over the ministry's decision. "If Mahmoud comes here, he has to sit there 30 minutes or one hour waiting for me," Adel said in his office.
The contract called for a massive increase in production -- from the 40,000 tons produced this year to 3 million tons -- by refurbishing the functioning plant, finishing construction on a second, adjacent factory, and building a third. But on a recent visit to the factory, the grounds were quiet and nearly abandoned. A manager blamed technical problems.
The work on the Aynak copper mine, in the high desert terrain of Logar province, has also gone slowly. The Chinese company has fallen about a year to 18 months behind schedule. The railroad project has not started. The company has complained about security threats from neighboring villages, despite an on-site force of more than 1,500 Afghan national policemen.
The deposit is estimated to hold enough copper to generate more than $200 million a year in government royalties, an amount equivalent to about a third of Afghanistan's budget last year, according to a report on the project by James R. Yeager, an American geologist who served as a ministry adviser.
Yeager's report criticized what he called a "murky and insufficient tender process" led by a "strong-willed minister unrelenting in his preference to see this award through with Asian partners." In ministry meetings to evaluate the bids, which included proposals from American and Canadian firms, Adel was a dominant force, several officials said.
"Anytime somebody brought up anything, he would squelch it," Yeager said in an interview. "We never really had any discussion."