(C) CHINA-AFGHAN RELATIONS PLAGUED BY CORRUPTION,

1. (C) Corruption and commercial fraud have plagued
China-Afghan economic relations, according to a Beijing-based
Afghan diplomat. Our contact claimed that a "mafia" of
corrupt Afghan officials, including Foreign Minister Ragin
Dadfar Spanta and former Minister of Mines Ibrahim Adel, had
received large bribes from state-owned China Metallurgical
Group Corporation (MCC) to support the company's bids on the
Aynak copper mine and Hajigak iron ore tenders. The Afghan
diplomat said that small-scale Afghan businesses were often
victims of commercial fraud in China and that his efforts to
help the businesses recoup their losses had yielded few
results. Despite skepticism about China's willingness to get
involved in Afghanistan, he suggested that the United States
and Afghanistan should coordinate in pressing China to
increase its assistance. End Summary.

Corrupt Afghan Officials "Milk the Chinese Cow"


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2. (C) Corrupt Afghan officials took large bribes from MCC to
facilitate the company's bids on the Aynak copper mine tender
and Hajigak iron ore tender, Afghan Embassy Commercial
Attache Abdul Munir told EconOff January 8. Unable to get
kickbacks from U.S. and European companies, Afghan officials
saw the Chinese company as "a cow to milk" for bribes,
according to Munir. He claimed that Afghan Foreign Minister
Spanta received $45 million of payments from MCC and that
former Minister of Mines Adel received $30 million from the
company through middlemen in Dubai. He said former Afghan
Ambassador to China Eklil Hakimi was also involved in this
"mafia" of corruption, advising MCC on its bids in exchange
for large bribes. At one point, Ambassador Hakimi advised
MCC to propose constructing a railway as part of its Aynak
proposal. According to Munir, the company saw no economic
reason to build the railway but took Ambassador Hakimi's
advice to ensure a successful bid. Although MCC committed to
building the railway as part of the contract, Munir predicted
that MCC would never build it unless the Afghan and Chinese
governments pressured the company to do so.

Afghan Businesses Cheated in China


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3. (C) Small-scale Afghan businesses are regularly defrauded
by unlicensed Chinese companies and shady middlemen, said
Munir, who has received 50 complaints of commercial fraud in
the last three years. According to Munir, the inexperienced
Afghan businessmen typically come to China looking for cheap
Chinese goods to import but fall victim to unlicensed Chinese
companies that take up to 50 percent of payment up front and
then never deliver the promised goods. Munir's complaints to
the Chinese Ministry of Commerce and police in Xinjiang
(where most of the deals have taken place) have yielded few
results, with only five of the 50 cases resolved favorably
for the Afghan businesses.

U.S. and Afghanistan Should Press PRC to Do More


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4. (C) Munir expressed skepticism about China's willingness
to significantly increase assistance to Afghanistan or
closely coordinate with the United States. He said some
Chinese officials had told him privately that China would
avoid getting deeply involved in Afghanistan as long as a
large number of U.S. and NATO forces remained. Nevertheless,
Munir argued that China could potentially play a more
productive role in Afghanistan. He suggested that the United
States and Afghanistan should coordinate in urging China to
provide Afghanistan greater assistance in the areas of
education, agriculture, infrastructure and energy.
HUNTSMAN