Trade Between Afghanistan And Iran Reaches Record Levels

Publication: Eurasia Daily Monitor Volume: 1 Issue: 48

Historical, cultural, and linguistic links between Afghanistan and Iran have always encouraged close ties between the two countries. Frequent and close contacts continued between the two states until the Taliban came to power, ruling from 1996 to 2001. When the Taliban regime was deposed by U.S. forces and the anti-Taliban Northern Alliance in December 2001, connections were re-established. Political and economic ties between Iran and Afghanistan have burgeoned, despite strained relations between Iran and Afghanistan’s new benefactor, the United States.

Iran has become a principal trading partner for Afghanistan, along with India and the Central Asian states. However, these new trade relationships have come at the expense of Pakistan, historically Afghanistan’s main trading partner and the entry point for its imports and exports. However, the new government in Afghanistan under President Hamid Karzai has become wary of Pakistan, as the country had nurtured the Taliban regime.

Iranian President Mohammad Khatami paid an historic visit to Afghanistan in August 2002, the first by an Iranian head of state in 40 years (Iran Press Service, August 13, 2002). That visit, in turn, resulted in a string of bilateral trade agreements between the two countries that were signed in January 2003.

Renewed links with Teheran allow Afghanistan to use the Iranian port of Chabahar for its import-export trade, thereby cutting Kabul’s dependency on the Pakistani port of Karachi. A bilateral Trade and Transit Agreement created the Chabahar Free-Zone Authority, which allows the import and export of goods to and from Afghanistan at a 90% discount on Iranian customs duties or tariffs, and it also allows 20% of the port’s warehouse space to be allocated for goods en route to Afghanistan. This warehouse space will increase to 30% in the future, and Afghanistan will also be given the opportunity to construct its own quay in Chabahar. These terms and conditions are much more attractive than what is being offered in the Pakistani port of Karachi. Kabul also can use the other main Iranian port, Bandar Abbas, due to a transit agreement signed in 1974.

Access from Afghanistan to Chabahar remains difficult. Goods are either driven from Herat in Afghanistan to the Iranian city of Mashad, and then sent by rail from Mashad to either of the ports or dispatched by overland transport all the way. To facilitate this trade route, Iran (along with India) has agreed to upgrade the road and railway systems connecting those two ports (Afghan Ministry of Commerce press release, January 24, 2003). The official border crossing point is Dougharoun on the Iranian side and Islam Qaleh on the Afghan side. The Iranian customs post is located near the border town of Taibad, about 150 km west of Afghanistan’s principal western city, Herat.

Herat, once a part of the Persian Empire, has been the principal beneficiary of this burgeoning trade with Iran. The city and the province (also named Herat) are governed by Ismail Khan, a hero of the mujahideen war against the Soviets in the 1980s. Khan’s strong ties to Iran were emphasized during President Khatami’s historic visit to Afghanistan in August 2002. Ismail Khan accompanied President Khatami when he arrived in Kabul to meet his host Prime Minister (before he was nominated president) Hamid Karzai.

In September 2003 Afghan Trade Minister Mostafa Kazemi delivered a talk on “Iran-Afghanistan Economic Prospects” during the First International Trade Fair in Chabahar. Some 110 domestic and foreign companies attended the six-day exhibition. Companies from Japan, Korea, Italy, Germany, France, Britain, Finland, India, and Taiwan displayed their merchandise, such as food products, construction materials, household appliances, and agricultural and petrochemical products at the fair. Kazemi announced that $2 billion in goods had transited Iran in 2002. He also encouraged Iranian businessmen to invest even more in Afghanistan (Payvand’s Iran News, September 9, 2003).

The first seminar on trade development between Iran and Afghanistan was held at the Iran-Afghanistan Joint Chamber of Commerce in Tehran in May 2004. The meeting was attended by the Afghan charge d’affaires in Iran, and it praised the steps taken by the Iranian government to cement economic and commercial ties with Afghanistan. Seminar participants noted that Iran’s exports to Afghanistan rose from $52 million in 2001 to $115 million in 2002 and to a record $212 million in 2003. (Tehran Times, May 11, 2004).

Later in June, the deputy governor of Iran’s Khorassan province addressed a meeting of the provincial Export Promotion Committee. Referring to the common border between Khorassan and Afghanistan and its crucial role in cross-border trade, the deputy governor said that an exhibition of Iranian products would be held in Kabul “within the next three months” to introduce Iranian products to the Afghan market. He also announced that Khorassan province would host three international fairs to display products from the Iranian food, agriculture, and mining sectors (IRNA, June 19, 2004).