Cablegate: Afghan Commerce Official Wary of Iran's Assistance, Wary Of

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C O R R E C T E D C O P Y (ADDING CAPTION)

E.O. 12958 N/A
TAGS: ETRD ECON AF PK IR
SUBJECT: Afghan Commerce Official Wary of Iran's Assistance, Wary of
Sanctions Possible "Collateral Damage"
--------------------------------------------- --
Summary: Afghanistan's Uneasy Trading Relations
--------------------------------------------- --

1. (SBU) Econ-Commoff and Deputy PolCouns met with Deputy Minister
of Commerce and Industry, Azeem Wardak, to discuss bilateral trade
issues with Iran and Pakistan. Wardak emphasized the desire for
good relations with both neighbors. But he also vented frustration
at Pakistan's continued reluctance to abide by the 1965 Transit
Trade agreement and what he described as Iran's aggressive attempts
to exert influence on Afghanistan's trade policies, as well as
concern about possible "collateral damage" to the Afghan economy
from sanctions on Iran. We may see similar expressions of concern
regarding sanctions in upcoming high-level counterpart meetings with
the IroA. End Summary.

Trade Deficits Define Trade Relationships
-----------------------------------------

2. (SBU) In a frank discussion, Wardak gave a brief readout on trade
with Pakistan and Iran for the first six months of 2007. He used
statistics to highlight Afghanistan's role as an export market for
Pakistan and Iran, as well as to demonstrate Afghanistan's
dependence upon both its neighbors for basic commodities. For
example, Wardak noted Pakistani exports to Afghanistan totaled
approximately USD 1 billion for the first six months of 2007, while
exports from Afghanistan to Pakistan totaled USD 128 million for the
same period. Imports from Iran the first half of 2007 were about
USD 145 million, with Afghan exports to that country only amounting
to about USD 1 million.

Pakistan
--------

3. (SBU) Wardak said that transit trade issues with Pakistan are
still a major problem, reciting the now familiar litany of problems
at the border. Nonetheless, he said that he did not foresee a
dramatic falling off of trade with Pakistan due to the transit
issues, though he did note that a number of Afghan businesses and,
notably, Indian traders are looking more and more to Charbaher in
Iran as preferred transit point (Note: In a separate meeting with a
U.S. beverage industry owner in Kabul, the investor noted that he
had begun sourcing plastic bottles from - and through - Iran. End
Note.)

Iran
----

4. (SBU) At the same time, Wardak clearly expressed his skeptical
view of Iranian efforts to "help" Afghanistan. He said he had
recently rejected an aggressive Iranian offer to provide 10 advisors
for the Ministry of Commerce and Industry. He also said that Iran
has made repeated high-level entreaties, including at least one to
Vice President Massoud, for a "Free Trade Area" between Iran and
Afghanistan. Wardak said he rejected the offer when it was made at
his level and argued vigorously against it when Minister of Commerce
and Industry, Dr. Mir Mohammad Amin Farhang, asked if Afghanistan
should implement it. Wardak said a simple look at the huge trade
imbalance between Iran and Afghanistan made it clear the deal was
one-sided. (Note: The Afghan government derives a substantial
portion of its revenue from customs duties. A free trade area with
Iran would deny the government considerable funding.)

5. (SBU) Wardak also mentioned the Iranian offer to "invest" USD 50
million in additional development along the Herat-Islam Qala road,
which Wardak claimed came from a war chest made up of additional
revenues from oil sales. Wardak said he would gladly accept the 50
million, but not offer anything in return other than "thank you very

--------------------------------------------- ---------
Potential Sanctions Increase Uncertainty, and Need for Options to
Iran
--------------------------------------------- ---------

6. (SBU) When asked about the possible effects of increased
international community sanctions against Iran, Wardak took out a
map to emphasize Afghanistan's isolated position. He said that
Afghanistan has only two avenues for access to ports - via Pakistan
or Iran - and when one proves problematic, the other is, naturally,
utilized more. The problem for Afghanistan, he noted, is that there
is now increased uncertainty with both these ports. (Note: During
this conversation, Wardak received a call from Farhang claiming -
erroneously, it turned out - that Pakistan had "sealed the border"
with Afghanistan. Although the rumor was incorrect, it does
demonstrate Afghanistan's sensitivity to Pakistan's ability to
tighten the screws. End Note.)

7. (SBU) Wardak raised the Aynak copper mine concession in this
context, stating his preference for the Kazakh bid largely because
of the railroad they have offered from Hairatan through Kabul and
Aynak to Jalalabad that would link Afghanistan by rail to Europe.
He also mentioned his discussions with the Chinese about a railroad
through the Wakhan Corridor to Herat, with visions of further links
to Istanbul. The main point of both these ideas was clear:
expanding options beyond the traditional routes to Karachi and
Charbaher. While neither option by itself removes the importance of
Iranian or Pakistani ports for sea access, especially as Afghanistan
seeks to exploit transportation opportunities arising from improved
access to the north via the Sher Khan Bandar bridge, Wardak clearly
is trying to think outside the box on improving trade route options
for Afghanistan.

--------------------------------------------- --------
Comment: Afghanistan Worried About Enhanced Sanctions Against Iran
--------------------------------------------- --------

8. (SBU) Wardak registered strong concern about possible "collateral
damage" to Afghan stabilization and economic development efforts
that could result from enhanced international community sanctions on
Iran. We may see that concern expressed in upcoming senior-level
counterpart meetings with the IRoA. End Comment.

WOOD

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