US sanctions against Iran endanger key Afghanistan trade project

US sanctions to be reimposed on Iran could hinder a major trade project aiming to boost Afghanistan's economy.

President Donald Trump's decision to withdraw from the Iran nuclear deal and resume sanctions could derail the development of a port complex in southern Iran, touted as potentially opening a way for millions of dollars in trade to reach land-locked Afghanistan, bypassing Pakistan.

Building up Afghanistan's economy would also reduce Kabul's dependence on foreign aid. Some 17 years after the US-led invasion to oust the Taliban from power, Afghanistan remains one of the world's poorest countries.

Read more: Washington has no plan for post-Iran deal diplomacy

With sanctions back on the table, the viability of the Indian-backed Chabahar port is under threat, with financial institutions nervous they could be penalised for doing business with Tehran.

"President Trump's decision has brought us back to the drawing board and we will have to renegotiate terms and conditions on using Chabahar," a senior Indian diplomat told Reuters. "It is a route that can change the way India-Iran-Afghanistan do business, but for now everything is in a state of uncertainty."

According to a person close to the Chabahar project, which launched in 2016, at least three building contracts have been delayed, with two Chinese companies and a Finnish group left hesitant to continue while bankers seek clarity from Washington before approving guarantees.

Hindering the development of Chabahar will leave Afghanistan dependent on Pakistan, historically its main trade partner and outlet to the world - and at times hostile neighbour.

That would undermine another Trump goal of pressuring Islamabad to shutter Afghan insurgent sanctuaries on its side of the border and force the militants into peace talks.