Afghan Commerce Official Wary of Iran's Assistance, Wary of

UNCLAS KABUL 003787 SIPDIS SENSITIVE DEPT FOR SCA/FO, SCA/RA, AND SCA/A DEPT PASS AID/ANE DEPT PASS USTR FOR GERBER AND KLEIN DEPT PASS OPIC FORZAHNISER DEPT PASS TDA FOR STEIN AND GREENIP CENTCOM FOR CG CFC-A NSC FOR JWOOD TREASURY FOR LMCDONALD, ABAUKOL, BDAHL, MNUGENT, JPDUVIVIER OSD FOR SHIVERS COMMERCE FOR HAMROCK, CHOPPIN, AND FONOVICH SIPDIS 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