VZCZCXYZ0012
PP RUEHWEB

DE RUEHBUL #3787/01 3121115
ZNR UUUUU ZZH (CCY TEXT ADX: 297662 MSI3220 600)
P 081115Z NOV 07
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 1381
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0553
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4268

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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