The Chabahar Port Project and Afghanistan’s Alternative Approach to Trade

Jawad Torabi

Historically, and given the tensions in bilateral relations, dependence on the Pakistani market and trade routes has been a point of vulnerability for Afghanistan, a landlocked country. To overcome this vulnerability, Kabul has begun looking for other alternative trade and transit routes, and the trilateral agreement between Afghanistan, Iran and India on the Chabahar Port is at the heart of this pursuit.

Needless to say, the Chabahar project has the potential to provide similar strategic advantages to Iran as was the case with Pakistan. It would provide Iran with opportunities to use those advantages as leverage with Afghanistan over key bilateral disagreements. Moreover, strategic calculations of some other global and regional actors vis-a-vis Chabahar could also impact Afghanistan's interests in the long-term. Thus, Kabul will need take into account a thorough understanding of those challenges and formulate policies that help overcome the obstacles smartly.

Evolving Hydro-Politics in the Kabul-Tehran BilateralWater sharing remains a major bilateral issue between Iran and Afghanistan. Iran is facing a severe rainfall deficit and Afghanistan is concerned about a possible drought like situation and is in dire need of electricity. Iran's President Hassan Rouhani raised his concerns over dam construction in Afghanistan several times and has emphasised that Afghanistan must provide Iran’s share of Helmand River water. Afghanistan has responded by blaming Iran of excessive use of water and construction of 600 dams resulting in the drying up of some of the trans-boundary water bodies. More recently, in a worrisome development, the Special Military Adviser to the Iranian Supreme Leader, Yahya Rahim Safavi, recently described Afghanistan as the ‘source of future of water controversies’ that Iran will face. He further stated that one of the reasons behind the US' presence in Afghanistan is to influence its government to take certain policy actions on shared waters between Afghanistan and Iran.

Regional and Geopolitical ChallengesIn addition to bilateral challenges, there are other regional and geopolitical concerns that may have a bearing on the trilateral agreement. Recently, Iran's ambassador to Afghanistan underscored the necessity of improving relations between the banks of both countries. Earlier Iran had also urged Afghan banks to open branches in Chabahar.

On the other hand, on the regional level, both Pakistan and China consider the trilateral agreement as India's strategic counter to the China-Pakistan cooperation on the Gwadar Port project in Pakistan's Balochistan province. A possible counter-action by Islamabad and Beijing could have consequences for all parties to the Chabahar Project, including Afghanistan. By offering to extend China's Belt and Road Initiative to Afghanistan via the China-Pakistan Economic Corridor, Beijing and Islamabad have already begun work on a counter-balance to Chabahar.

Meanwhile, recently, the US gave assurances of non-interference in the “legitimate” business activities between India with Iran. According to the US' new South Asia strategy that was announced late last year, Washington is in favour of an improved Afghan economy and Kabul's relations with other regional countries, especially India. However, the current position taken by the administration in Washington led by US President Donald Trump on the Joint Comprehensive Plan of Action (JCPOA) agreement—a possible withdrawal in the coming months—and related uncertainties could put both Afghan and Indian banks at risk of facing possible sanctions if they continue their relations with Iranian banks.

Potential OpportunitiesFallout between Iran and Afghanistan over the water issue could potentially impact the trilateral project negatively due to the domino effect on trade interests, transit routes, markets and revenue collections of all three parties—Afghanistan, Iran and India. Conversely, it can also be argued that the port agreement might even help facilitate hydro-diplomacy between Iran and Afghanistan by finding a point of convergence for their interests. Moreover, given its friendly relations with both countries, New Delhi may even be able to mediate to help resolve disagreements between Tehran and Kabul that have a bearing on the Chabahar port, in the long run.

Looking AheadIt is important to consider that Chabahar is only one component of the broader jigsaw of Afghanistan’s alternative approach towards addressing trade uncertainties, and is one of the many steps Kabul is undertaking to insulate Afghanistan from shocks to its economy. Nonetheless, other obstacles such as lack of infrastructure, security concerns etc continue to threaten the future of the Chabahar project. Although Iran recently became Afghanistan's biggest trading partner, Pakistan—with cheaper transit routes for Afghan products—continues to retain the position of a major market.

In the past, despite lack of full implementation, agreements such as the Afghanistan-Pakistan Transit Trade Agreement (APTTA) helped implement a rule based system on bilateral trade to some extent. Reaching and fully enforcing new agreements like APTTA between Iran, Pakistan and Afghanistan could help establish a rule-based system of engagement in the region. Meanwhile, the Afghan government should continue exploring new cost-efficient areas of opportunities with clearer prospects to ensure it always has more options. Speeding-up the implementation of projects such as the Lapiz Lazuli corridor and establishing more cost-effective air and road corridors to potential markets could be a step in this regard.

Kabul must take in to account key factors—such as risk assessment; tying objectives with tangible outcomes; and looking ahead through a realistic lens—while undertaking an alternative trade and transit approach for Afghanistan.