Iran’s cash flow to Afghanistan: an old issue

Afghan President Hamid Karzai has acknowledged that his office has received cash from Iran, but insists it was part of a “transparent” process, according to the BBC. Karzai’s comments came following mixed reactions in the United States on Afghan-Iranian aids-cooperation.

Karzai was responding to a report in the New York Times that Tehran had been passing bags stuffed full of cash to Karzai’s aides. Speaking at a news conference, he said many countries had given money to Afghanistan in this way, including the US. “The government of Iran has been assisting us with five or six or seven hundred thousand euros once or twice every year, that is an official aid,” he told reporters.

The U.S. State Department spokesman P.J. Crowley however told CNN the United States does not question Iran’s right to give financial assistance to Afghanistan, nor does it question Afghanistan’s right to accept it.

“But we remain skeptical of Iran’s motives, given its history of playing a destabilizing role with its neighbors,” said Crowley.

Before the 9/11 attacks, Iran was providing political, military and financial aid to anti-Taliban factions in Afghanistan. Iran’s share of the total assistance provided to the groups was estimated as 60-65 percent. Russia provided 20-25 percent, Turkey and Uzbekistan around 5 percent. Later on, the balance of forces was changed when the war started in the region.

The Islamic Republic of Iran had been involved in the reconstruction of Afghanistan since 2002, although this was not largely covered in the international media campaign called “the reconstruction of Afghanistan.”

In his article, ‘what will the growth of Iranian influence in Afghanistan cause?’- that appeared on Centrasia website, Dmitry Verhoturov pointed out that “…retrospective analysis and statements of Iranian officials indicate that Iran has participated in the reconstruction of Afghanistan from the very beginning and it has taken the central role in this process.” The Iranian government allocated $ 500 million in grant aid, which amounts to 46.1% of all funds allocated in 2002-2004 to rebuild the Afghan economy.

When all the other donors, the U.S., EU, Japan and other countries participated mainly in the rehabilitation of roads, humanitarian assistance, reconstruction of telecommunication and communication, Iran spent money on Afghanistan’s major industries such as agriculture and energy.

In 2002, Iranian Ministry of Agriculture signed an agreement with the Ministry of Agriculture of Afghanistan in which Iran was supposed to carry out the rehabilitation of irrigation and water supply systems in several provinces of Afghanistan, supply seeds and fertilizers, and train specialists in the field.

Particular attention was paid by Iran to the energy sector. Since 2002, Iran made efforts to develop power grids of Afghanistan’s western provinces. They developed a project to build two power transmission lines. The first one was built in 2003. Second line started its work in January 2005. These power lines cost 115 billion riyals (13.6 million dollars) to the Iranian side.

The third important aspect of Iranian aid was the restoration and construction of roads in the western provinces of Afghanistan. The Iranian company has built two major roads: Herat-Eslamkala and Herat-Meymaneh. In January 2005 the grand opening of the Dugarun-Herat road, was attended by Afghan President Hamid Karzai

The impact of Iranian assistance to rebuild the Afghan economy can only be roughly estimated, since Iran prefers not to report on the ongoing economic projects in Afghanistan. But this assistance is very productive, and the effect of those efforts can be seen on the Afghan-Iranian trade.

“The general idea of Iranian aid to Afghanistan was to help restore basic branches of the economy: energy, agriculture, and the other industries, so that in the near future, Afghanistan could become not only the financial aid recipient but also the trade partner. In agriculture, for example, Afghanistan for a long time will be in need of seeds, fertilizers, machinery and equipment for irrigation systems and processing of crops. The demand for these commodities in the area will increase. It is a similar situation regarding energy and other industries,” Verhoturov noted.

According to Iranian data, in 2003, Iranian exports to Afghanistan amounted to 372.7 million dollars. Iran’s revenues from transit traffic in Afghanistan have reached 1.19 billion dollars. And Afghanistan became the second country in terms of transit.

According to some other sources, in 2003 the trade turnover between Iran and Afghanistan was estimated at 260 million dollars. It is still clear that Iran remains one of the leading economic partners of Afghanistan. It is also clear that Iran’s aid to Afghanistan was already paid back through trade and transit traffic.

* Anna Varfolomeeva is an international reporter at M4 Media

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