In February 2019, Afghanistan sent its first export containers to India through Iran’s port of Chabahar. The port is a strategic South-North corridor that will expand trade between these three countries.
Iran is Afghanistan’s top trade partner. Most of the trade flows from Iran to its eastern neighbor, given Afghanistan’s small export capacity of only $1.5 billion – $1.8 billion annually.
In 2017-2018, the total volume of trade between the two countries stood at $2 billion. This figure constituted nearly a third of Afghanistan’s total $7 billion annual trade volume. Iran’s exports held a 22 percent share of Afghanistan’s $11.5 billion consumer market.
Despite the reimposition of US sanctions against Iran in May 2018, Tehran remained a top exporter of goods to Afghanistan, according to the Afghan Statistics Administration. According to Afghan experts, the real import figures from Iran were much higher, given the lack of border controls and frequent trafficking of goods.
In August 2019, Iran and Afghanistan signed a Memorandum of Understanding (MoU) to provide electricity exchange options between the two neighboring countries. Exports from the Dogharoon Customs in northeastern Iran to Afghanistan indicated a 20 percent rise during the middle of 2019 compared to the same period in 2018.
In 2019, Afghanistan imported oil from Iran, despite US sanctions on Tehran. Afghanistan could turn to Central Asia for its oil imports but there would be a steep cost. In addition to oil, Kabul imports products such as kerosene, mazut, and dissolvents from Iran.
Iran’s cement exports to Afghanistan also increased under sanctions, because of the higher quality of Iranian cement. Moreover, some 30 percent of Iran’s exports to Afghanistan flowed from the Iranian Southern Khorasan Province, which also serves as a coal and minerals hub for potential exports to Afghanistan.
In 2020, Afghanistan’s authorities confirmed that Iran had exported $1,264,000,000 worth of goods to its neighbor, including oil products, wheat, machinery, edible oils, fabrics, metal products, and electricity. These figures meant that Iranian exports were almost equal to Afghanistan’s own net exports.
Surprisingly, Iran’s exports to Afghanistan were even more than China or Pakistan, or any Central Asian country. Iranian exports were double the size of exports from these other countries whose exports to Afghanistan stood between the range of $400 million – $500 million annually. The increase in global customs and tariff rates, as well as global price changes, forced a decrease in Afghanistan’s trade by approximately 1.3 percent with most of its other neighbors, especially Pakistan. Conflicts, and the occasional closing off of the Afghan-Pakistan border, has also contributed to trade dampening between the two countries.
The aforesaid data indicates that US sanctions have not impeded trade between Iran and Afghanistan. As immediate neighbors, trade between the two countries makes sense. Iran can also evade sanctions easily when trading with Afghanistan. It has been home to millions of Afghan refugees since the 1980s, a cross-border dwelling community that carries enormous trade potential.
To reaffirm the importance of this trade, Iran and Afghanistan held their eighth joint trade exhibition in Kabul on February 21, 2020. The expo arrived on the heels of an announcement by the United States early in the year that it would exempt the development of Chabahar port from its sanctions regime.
Chabahar is vital to Afghanistan’s economy, as it offers the country access to warm waters and to the fastest and cheapest export route to the world. In comparison, the Lajevard export border crossing that connects Afghanistan via Central Asia to the Black Sea costs Afghan businessmen $2,200 to get a truckload of goods across. Many of Afghanistan’s adjacent neighbors have even delayed these exports, by refusing to facilitate visas for Afghan businessmen. Although Afghanistan still exports some goods through Pakistan’s port of Karachi, a truckload of goods through this route costs $5,000.
India and Afghanistan recently set up cargo flights connecting the South-North corridor by air, which increases Chabahar’s strategic importance. To reaffirm the significance of these trade routes, Afghanistan has developed a National Export Strategy and held the Afghanistan Heart of Asia gathering in which both Iran and India participated, These steps suggest that trade with its key neighbors like Iran will likely persist because it is cost-effective and strategically important to Kabul.