Iranian Financial Assistance to Afghanistan and Its Economic Consequences

Iran has played a great role in the political and economic modernization of Afghanistan. In the 1960s and 1970s, Iran gave foreign aid, and in the first decade of the 21 century, it gave grants and directly exported technical and engineering services to Afghanistan. In 2002, Tokyo Conference participants defined a plan for the development of Afghanistan. At the conference, various countries committed themselves to give more than £15 billion to Afghanistan in loans and grants. Iran also allocated £250 million in the framework of projects as grants for the reconstruction of Afghanistan. The article examines theories of economic development and the role of foreign aid in the reconstruction of developing countries, including Afghanistan. The main aim of the author is to document and analyze Iran’s role in this process. The author’s primary hypothesis is that the impact of foreign aid, including Iranian assistance with reconstruction, has increased the volume of trade and investment between Tehran and Kabul. The article has two sections: the first one features a discussion about theoretical issues while the second section studies economic reasons, processes and consequences of Iran's participation in the reconstruction of Afghanistan.