Assessment of Afghanistan's Trade Relations with Regional Countries under the Management of the Islamic Emirate of Afghanistan

Key words: Islamic Emirate of Afghanistan, foreign trade relations, regional cooperation, infrastructure projects, regional trade agreements, tribal and ethnic unity, political stability

An international conference was planned to be held by the current Afghan authorities in the middle of last November. The theme of this conference was "Afghanistan and the Region: Opportunities and Challenges". I have written my speech titled "Assessment of Afghanistan's Trade Relations with Regional Countries under the Management of the Islamic Emirate of Afghanistan". Because the conference was cancelled, I have been posting my speech on Facebook.

First of all, allow me to express my gratitude to the organizers of this event for inviting me to participate in such a timely and crucial evaluation of the actions of governmental institutions and private businesses, not only of Afghanistan but also of the countries in the region. An objective retrospective view of the developments over the past three years, both within Afghanistan and in its surrounding region, will allow governmental, business, and academic circles to identify existing challenges and opportunities for the formation and strengthening of regional cooperation in political, economic, and security spheres. It is extremely important to have a clear vision of the prospects for organizing and consistently advancing infrastructure projects that include Afghanistan, located at the center of our region.

Today, there is a prevailing unbiased view in expert, academic, and scientific communities. At all levels, including the UN and other international and regional organizations, there is recognition of the stabilization of the internal military-political situation in Afghanistan and a significant improvement in security levels. Ideas and calls are emerging to abandon the "Great Game" around Afghanistan and instead focus on "Great Cooperation" in mutual interests. There is hope that this dynamic will reveal Afghanistan's potential and resources as an independent subject of international relations for the sustainable development of its people's socio-economic life.

In my speech, I will present some assessments of the state of Afghanistan's trade relations with regional countries since the change of government in 2021. These are mostly positive and demonstrate the strong desire and concrete actions by all parties to maintain and develop existing trade and economic ties. There is an understanding that any attempts to disrupt the established system of foreign trade relations or pursue self-isolation would lead to instability, chaos in governance, and a collapse of the country's economy.

Unlike previous governments, the current administration does not rely on endless free external material, technical, and financial assistance (although it does not reject the support provided), especially through various intermediary non-governmental organizations, trust funds, and the payment for consultancy services and the work of numerous advisors. At the same time, the determination to not only maintain but also maximize the effective use of the entire economic infrastructure, regulatory framework, and the management system with trained personnel, created over the past twenty years with the help of the international community, is evident.

The UN Special Representative for Afghanistan, Roza Otunbayeva, in her report to the UN Security Council on June 24, 2024, stated the following: "Regarding the economy, the authorities de facto continue to pursue a policy of self-sufficiency through the private sector and state investments. A positive aspect is that the emphasis on the private sector also allows for the creation, albeit limited, of space for women entrepreneurs."

Trade, including foreign trade, accounts for more than 50% of the GDP and, accordingly, a large portion of the country's revenue. That is why the current government has maintained control over the entire infrastructure of foreign trade: state bodies, institutions, services, and enterprises of various legal forms, the system of legal and regulatory acts governing and controlling international cargo flows, including transport and logistics companies, as well as those providing services related to foreign trade transactions (banking structures, chambers of commerce, etc.). The initial economic decisions ensured the uninterrupted and effective functioning of the previous staff at all border crossings and customs institutions along the borders with neighboring countries and at border provincial centers.

Training and retraining of personnel continue at the National Customs and Tax Academy of the Ministry of Finance. The international computerized customs management system Asycuda, which covers most foreign trade procedures, has been preserved. Serious attention is being given to further digitalizing the infrastructure of foreign economic activities, integrating Afghanistan into international information and communication networks, and ensuring internet access. This allows for maintaining stable connections between business circles both within the country and abroad, including communication between financial organizations for interbank operations.

Filling the development budget and Afghanistan's economic prospects in the initial phase are linked to tax and customs revenue from foreign trade, with future expectations tied to income from restoring and building new irrigation systems and, as a result, increasing agricultural production. This includes taxes and fees for the operation of concessioned state-owned assets, direct foreign investments in the extraction of minerals, and transit opportunities. This is evidenced by the restored contacts at the official level regarding known projects of trans-Afghan railways, gas pipelines, and power transmission lines. In this regard, it should be emphasized that the existing foreign trade statistics show growth in intermediate goods for building industrial capacities.

Currently, over 50,000 vehicles are engaged in transit traffic through Afghanistan. Illegal checkpoints on roads, previously involved in extorting money from truck drivers, have been eliminated across the country. In October 2024, it was announced that all freight vehicles transiting through Afghanistan would be equipped with GPS tracking systems, ensuring transparency and security in the delivery of goods.

Afghanistan has reached agreements with Kazakhstan and Turkmenistan to build a logistics hub in the Afghan province of Herat to develop regional trade. On October 31, 2024, a ceremony took place in the Chinese city of Nantong, Jiangsu Province, north of Shanghai, marking the dispatch of a 55-car freight train to the port of Hairaton. The train will pass through China, Kazakhstan, and Uzbekistan. Negotiations are underway with China to lay a direct transport route between the two countries via the high-altitude Wakhan Corridor, where a road is being built.

In the summer of 2023, Iranian and Afghan companies established a joint venture to build three piers at the special economic zone of Iran's port of Anzali on the southern shore of the Caspian Sea. The Afghan company plans to invest $50 million in this project. In February 2024, Afghanistan's interim government announced an investment of $35 million to build its trade infrastructure in Iran's Chabahar port on the Oman Gulf. Thus, the current authorities and businesses are taking active measures to expand opportunities to access external markets via Iran, avoiding dependence on Pakistan, which periodically creates artificial barriers at its border and seaports for Afghan trade flows.

On August 29, 2024, the official opening ceremony of the International Trade Center "Termez" took place at the Afghan-Uzbek border. On September 11, 2024, the launch of seven major infrastructure projects, including the beginning of construction of a warehouse complex at the dry port of Turgundi railway station, occurred at the Turkmenistan border.

The Afghan Chamber of Commerce and Industry continues its work, organizing annual international and national trade exhibitions in Kabul and provincial centers, as well as in countries in the region: Turkmenistan, Uzbekistan, China, Kazakhstan, and others.

It is evident that one of the most important elements of foreign economic and trade strategy is the complete elimination of concerns that, along with Afghan exports across customs borders, drugs might be trafficked to neighboring countries. Therefore, the country is actively engaged in destroying poppy fields, the production, and smuggling of drugs. The development of exports and transit trade requires restoring trust in Afghanistan as a reliable partner for even truck-based TIR transportation. Neighboring countries' willingness to engage in foreign trade is also based on the complete absence of actions by the de facto authorities of Afghanistan to export their ideology or terrorist threats.

Experts conclude that foreign trade turnover is already comparable to, and in some cases exceeds, the levels of the republican period. In particular, neighboring Pakistan, facing a trade deficit with Afghanistan, has been forced to adopt protectionist measures. The number of foreign tourists visiting Afghanistan is also increasing.

In the current year, during the month of Mizan (September-October), approximately 350,000 tons of goods were transported through rail crossings, of which 7,000 tons were Afghan exports: dried fruits, fruit juice, and mineral stones. Specifically, through Hairaton – 245,480 tons, Akin – 49,121 tons, Turgundi – 52,181 tons. Transport has also started along the Haf–Herat line, with 780 tons.

Clearly, cooperation in this area requires accelerating the work of Afghanistan and the countries of the region on concluding or reaffirming participation in trade and customs agreements, both bilaterally and multilaterally. This includes the three-way agreement between India, Iran, and Afghanistan regarding the use of the Chabahar port, as well as the agreement on the Lapis Lazuli Corridor between Afghanistan, Turkmenistan, Azerbaijan, Georgia, and Turkey.

I would like to emphasize that it would be advisable to create a working group, for example, within the framework of the Economic Cooperation Organization, to develop a regional transit trade agreement that would significantly expand the opportunities and participants beyond the Afghanistan-Pakistan Transit Trade Agreement signed in 2010. International structures such as CAREC, SAARC, BRI (Belt and Road Initiative), and its AIIB (Asian Infrastructure Investment Bank) could also participate in this work.

It would be sensible to actively involve Afghanistan in the process of concluding a Customs Mutual Assistance Agreement in the region with China, Uzbekistan, Tajikistan, Turkmenistan, Pakistan, and Kazakhstan.

When concluding such documents, it might be worth for the current interim government to adopt a compromise wording and sign them on behalf of the "interim government of the de facto Islamic Emirate of Afghanistan." In other words, the concept of "de facto," which is used at the UN level, could be applied to the state, allowing other states or their private companies to bypass the issue of political recognition when concluding bilateral agreements. This would also facilitate the participation of Afghan representatives in events and meetings of working bodies of international and regional organizations, such as the Economic Cooperation Organization. It would be quite possible to adapt the practice of the global organizations to the new de facto state, where countries initially receive the status of permanent observer before eventually becoming full members of the United Nations.

Such approaches of the current Afghan government to its subjectivity in international relations have already been observed in agreements with several countries. This does not contradict the declaratory theory of statehood in international customary law, according to which the mere declaration of the creation of a new state makes it a subject of international relations. According to the 1933 Montevideo Convention, the political existence of a state does not depend on recognition by other states. In this case, it refers to the interim government of the de facto Islamic Emirate of Afghanistan.

History of international relations has many examples where private businesses operate in a country that is not recognized by their own government. Until 1933, the U.S. government, which did not recognize the Soviet Union and did not develop trade relations with it on an official level, did not prevent private American companies from doing business there. Between 1922 and 1925, the Russo-American Industrial Corporation was established, which helped create or modernize 34 textile industry facilities in the Soviet Union. Since 1924, the Amtorg Trading Corporation operated in the U.S., promoting Soviet-American trade, acting as an intermediary in export-import operations between Soviet foreign trade organizations and American companies, and essentially performing the functions of a Soviet embassy and trade representation. Since 1920, the All Russian Cooperative Society Limited (Arcos) had been registered in London, even before the official recognition of Soviet Russia. It carried out export and import operations and had branches in several European countries, North America, and Asia.

It is known that long before establishing diplomatic relations with Beijing, Washington began to establish contacts with the leadership of the People's Republic of China through intermediaries, easing the embargo and encouraging American businessmen to develop mutual trade. By chance, in the spring of 1971, "ping-pong diplomacy" was employed. In 1974-1978, the private company Pullman-Kellogg built 8 ammonia production plants in China, where 140 American specialists worked.

Diplomatic relations between the Socialist Republic of Vietnam, proclaimed in 1976, and the U.S., which had been involved in the Vietnam War for almost twenty years, were established only twenty years later, in 1995. However, as early as the 1980s, Vietnamese Americans and other Asian descents actively invested in the country's economy, giving it a significant boost.

The dynamics of views of most countries in the world, including the U.S., whose position influences the opinions of many Western countries, as well as neighboring states, suggest the possibility of commercial participation of their businessmen in the development of Afghanistan’s economy.

In this regard, the report titled "The Afghan Kosh-Tepa Canal and Water Security in Central Asia," published in November 2024 by the U.S. think tank Center for the National Interest, which is considered close to Republican circles in the U.S., is of interest. The report highlights the critical importance of this irrigation project for increasing arable land and improving food security in the country. The authors express support for the bold decision of the de facto Afghan authorities to promptly continue the initiative of the previous republican government. Moreover, they recommend that the administration of the newly elected President Donald Trump quietly work with their allies, partners, regional countries, and multilateral institutions to provide financial, technical, and consultative support for the construction of the canal. They also suggest the development of a new regional agreement on the joint use of water and more efficient methods of water management in Central Asia.

At the same time, counterparties should understand that the current government will maintain control and ensure continuity in the future permanent state institutions, the formation of which is deliberately postponed for an indefinite period. The historical peculiarity of Afghan statehood is that the creation of traditional state structures, or so-called inclusive government, inevitably leads to acute, including armed, struggles for resources and power among different fragments of Afghan society. The de facto authorities of Afghanistan are clearly aware of this danger and seek to delay the final formation of their statehood, stabilize the political and economic situation, and thereby reduce the intensity of tribal, ethnic, regional, and ideological contradictions. These concerns likely explain the reluctance to convene the traditional Loya Jirga, which would inevitably provoke a new phase of conflict over the interests of tribal and regional leaders. For example, it would be hard to expect the Pashtuns from the south to agree to allocate significant budget funds for the construction of the large Kosh-Tepa canal in the northern part of the country.

It should be noted that the Taliban have managed to maintain control over the situation: over the past three years, there have been no clear opposition from tribal, clan, and ethnic political networks to the current government's efforts to strengthen centralized rule. The peace agreements made between tribes that had been in blood feuds for decades speak to the desire to consolidate the Pashtuns, traditionally opposed to centralization of power, into a state-forming nation.

Thus, at this point it can be stated that the current situation in Afghanistan presents both challenges and significant opportunities for regional cooperation and economic development. Despite the political uncertainties surrounding Afghanistan's government, there has been a clear commitment to maintaining and expanding trade relations with neighboring countries, as well as to integrating the country into the broader regional and global economic landscape. Afghanistan’s trade, customs, and infrastructure sectors are being modernized, with strong cooperation from regional partners like Kazakhstan, Turkmenistan, China, Iran, and Uzbekistan. The elimination of illegal trade practices, the push for self-sufficiency, and the increasing role of the private sector in Afghanistan's economy indicate positive developments that could contribute to long-term stability and prosperity.

However, the situation remains fluid, with the Afghan government’s reluctance to finalize its political institutions serving as both a stabilizing and delaying factor. The current leadership seeks to avoid destabilizing internal conflicts while cautiously navigating the complex path to statehood. The ongoing efforts to build infrastructure, strengthen governance, and cultivate international partnerships highlight Afghanistan's potential as a central player in regional trade and economic growth. The growing support for Afghan projects, such as the Kosh-Tepa Canal, from international think tanks and foreign investors demonstrates the possibility of constructive engagement, despite the political challenges.

Overall, while the political landscape remains uncertain, the economic and infrastructural developments occurring in Afghanistan and its region are creating a foundation for sustainable growth. International partnerships, continued cooperation on infrastructure projects, and a focus on security and transparency in trade will be key to achieving long-term stability and prosperity in Afghanistan and the broader region.