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US sanctions on Iran threaten key trade project in Afghanistan

Trump's decision to re-impose sanctions on Iran is clouding Chabahar's viability as banks, nervous they could be hit with the crippling penalties, pull back from financing


Chabahar port
Launched in 2016, the joint Iran-India-Afghanistan Chabahar project is already facing holdups

President Donald Trump's decision to pull out of the 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 strategy to end America's longest war.

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

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 stated in analysis.

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

"President Trump's decision has brought 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 do business, but for now everything is in a state of uncertainty." The White House did not respond to requests for comment.

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 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.

First Published: Sun, May 20 2018. 23:52 IST