EurasiaNet Business & Economics - Afghan-Pakistani Tension Prompts Kabul to Develop New Trade Routes

BUSINESS & ECONOMICS

AFGHAN-PAKISTANI TENSION PROMPTS KABUL TO DEVELOP NEW TRADE ROUTES

Ahmed Rashid 1/24/03

President Hamid Karzai is taking steps to establish landlocked Afghanistan as a trade hub connecting the Middle East, Central Asia and Europe. Over the past two months, Afghan authorities have reached trade deals with Iran, India and the Central Asian states � all of which grant major concessions to Afghan goods. The new direction Afghan trade is taking is leaving out Pakistan - formerly Afghanistan’s principle trading partner and entry port for imports and exports.

Some Pakistani observers claim the main obstacle to the normalization of trade relation is the hostility of former Northern Alliance leaders who now occupy senior positions in Afghanistan’s interim government. However, other analysts note ambiguities in Pakistan’s policy towards Kabul. Pakistani leaders promise both aid and trade to bolster the Karzai’s government. At the same time, Islamabad has effectively undermined Kabul’s authority by allowing senior Taliban leaders and other anti-government renegades, including Gulbuddin Hekmatyar and Jalaluddin Haqqani, to find de facto sanctuary in Pakistan’s tribal belt.

Western diplomats in Islamabad say the Interservices Intelligence, which dominates Pakistan’s Afghan policy, appears more interested in trying to counter Indian and Northern Alliance influence in Kabul than in improving trade ties. "Pakistan is loosing out because its myopic policies place countering India above trade and stability in Afghanistan," says a Western ambassador in Islamabad.

If Pakistan’s security apparatus does not realign its policy towards Kabul, Islamabad could find itself isolated, observers say. Such isolation could result in Pakistan missing out on the expected windfall from the development of Central Asian oil and gas resources.

Already, many influential officials in Kabul are opposed to allowing Pakistani companies to bid for contracts in the reconstruction projects that are due to start in the spring. However, Karzai has emphasized that he wants Pakistani companies to participate in Afghanistan’s reconstruction.

Steve Shaulis, one of the few American traders who has exported Afghan dried fruit and cotton for a decade despite the country’s civil war, had always used the Pakistani port of Karachi, which for the past 50 years has been the only export port for Afghan goods. But in recent months, he’s felt compelled to seek alternatives. He cites the fact that Pakistan doubled its rail freight charges from the Afghan border in 2002. He adds that Pakistan has refused to implement a new transit trade agreement with Kabul and placed new restrictions on Afghan goods.

Shaulis says he is now using Iranian ports. "Export cargoes have shifted to being routed through Iran where transit rates are half the cost, and the service much faster and less restrictive," says Shaulis, who is developing a major agro-business in southern Afghanistan as part of the country’s reconstruction efforts. "Most Afghan shippers are perplexed by Pakistan’s attitude."

In early January, Commerce Minister Sayed Mustafa Kazemi signed a deal with Iran that will give Afghan exporters the right to use the port of Chabahar with a 90 percent discount on port fees and a 50 percent discount on warehousing charges. In addition, Afghan vehicles are to be allowed full transit rights on the Iranian road system.

On January 6, at another meeting in Tehran, India, Iran and Afghanistan signed an agreement to give Indian goods heading for Central Asia and Afghanistan similar preferential treatment and tariff reductions at Chabahar. India additionally agreed to finance the upgrading of the road between the port and the Afghan border. "Chabahar is a new option for Afghanistan-destined goods and, more importantly, goods for Central Asia can now travel via Afghanistan," says Kazemi.

[Click here for highlights of the recent trade agreements.]

India and Iran have also signed a memorandum of understanding to build a railroad from Chabahar to the Afghan border. Iranian officials say their aim is to develop Chabahar into a major port for Afghanistan and Central Asia, while reserving the port of Bandar Abbas for trade with Russia and Europe. "Chabahar opens up Central Asia to the Gulf and Afghanistan becomes the hub," says Saad Mohseni, director of Moby Capital Partners, a joint Australian-Afghan investment house based in Melbourne and Kabul. "Both India and Iran are ready to invest in the infrastructure to develop this trade route which will benefit Kabul."

Kabul’s improving ties with Tehran are causing some concern in Washington. Iran will provide electricity to western Afghanistan and shoulder the $16.5 million cost of the project. Meanwhile, Iran and Turkmenistan will also provide natural gas to Herat city. In January alone the Afghan ministers of foreign affairs, education, commerce and women’s affairs visited Tehran. Western diplomats in Kabul say the rapid expansion of Afghan-Iranian relations was partly responsible for prompting US President George W. Bush’s January 13 order designating Afghanistan as a preferential trading partner. The agreement will enable Afghanistan to export 5,700 types of goods to the United States without being subject to tariffs. The irony is that Afghan exports, including carpets and dried fruit, will probably travel through Iran.

Kabul is also moving swiftly to open trading routes in Central Asia. In late December General Mohammed Daud, military commander of Kunduz in north eastern Afghanistan, headed a trade delegation to neighboring Tajikistan. Despite its lack of resources, Tajikistan has agreed to provide electricity to Kunduz and reduce tariffs for Afghan goods transiting Tajikistan. Dushanbe also offered 200 scholarships for Afghan students and pledged to build more bridges across the Amu Darya River that divides the two countries. The Aga Khan Foundation completed the first of five new bridges last November. Meanwhile General Rashid Dostum, an influential northern warlord based in Mazar-e-Sharif, negotiated a similar deal with Uzbekistan The deals call for greater trade, reduced tariffs and the provision of electricity to Mazar-e-Sharif.

Karzai remains hopeful that trade ties with Pakistan can soon be restored. "We have no preferences, no favorites, as long as Afghanistan can benefit all round," the interim Afghan president said in an interview.

Editor�s Note: Ahmed Rashid is a journalist and author of the books "Taliban: Militant Islam and Fundamentalism in Central Asia" and "Jihad: The Rise of Militant Islam in Central Asia."

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