US sanctions on Iran threaten progress of vital Afghanistan trade project

WASHINGTON/KABUL: US President Donald Trump’s decision to pull out of the Iran nuclear accord and re-impose sanctions on Tehran threatens to derail a project to help build Afghanistan’s economy, endangering a key goal of the US strategy to end America’s longest war.

The Indian-backed Chabahar port complex in Iran is being developed as part of a new transportation corridor for land-locked Afghanistan that could potentially open the way for millions of dollars in trade and cut its dependence on Pakistan, its sometimes-hostile neighbor.

Building Afghanistan’s economy would also slash Kabul’s dependence on foreign aid and put a major dent in the illicit opium trade, the Taliban’s main revenue source.

But Trump’s decision to re-impose sanctions on Iran and penalize financial institutions for doing business with Tehran is clouding Chabahar’s viability as banks, nervous they could be hit with crippling penalties, pull back from financing.

“President Trump’s decision has brought us back to the drawing board and we will have to renegotiate terms and conditions on using Chabahar,” a senior Indian diplomat said. “It is a route that can change the way India-IranAfghanistan do business, but for now everything is in a state of uncertainty.”

The White House did not respond to requests for comment.

Launched in 2016, the joint IranIndia-Afghanistan Chabahar project already was facing holdups. It has yet to see significant traffic apart from some containers of donated wheat from India, and the first shipments of Afghan dried fruit to India are not expected before July.

At least three contracts to build infrastructure at the port now have been delayed, with two Chinese companies and a Finnish group left hanging while bankers seek clarity from Washington before approving guarantees, a person close to the project said.

In addition, Afghan traders, who were hoping for an alternative to Pakistan’s port of Karachi, now find themselves cut off from funding and forced to rely on the traditional hawala money transfer system, which is insufficient on its own to transform an economy.

Hawala is a trust-based system commonly used in Afghanistan that involves the movement of funds between agents in different countries.

“We know our correspondent banks would not let us pay for imports coming through that port,” said a senior executive at one major Afghan lender.

Chabahar is among a number of projects of transport and energy networks projects designed to boost Afghanistan’s trade and lay the foundations for a mining industry capable of exploiting its billions of dollars in untapped mineral reserves.

Bypassing the border with Pakistan, which last year was closed for some 50 days over various disputes, Chabahar is seen as a way for Afghanistan to consolidate its relationships with India and other regional powers.

“The only way to get India more involved” in Afghanistan’s economic development “is through Chabahar,” said Barnett Rubin, an expert with New York University’s Center for International Cooperation and a former adviser to the State Department and the United Nations. “Our Iran policy is headed for a train wreck with our Afghanistan policy.”

Some 17 years after the US-led invasion to oust the Taliban from power, Afghanistan remains one of the world’s poorest countries, highly dependent on foreign aid.

Apart from illegal opium exports estimated at some US$2 billion by the International Monetary Fund, its main products are dried and fresh fruits, and carpets, none of which amount to more than a fraction of the value of the drugs trade. — Reuters