Exports

Until 1967, exports were agricultural products or agriculturebased products. There were practically no industrial exports aside from carpets. The value of exports rose during the 1970s, and by 1978 exports were nearly five times the value of those of 1968. At the same time, the composition of exports changed significantly. In 1966 dried fruits and nuts accounted for about a quarter of export receipts; cotton and karakul skins each contributed 18 percent, and carpets and rugs provided 12 percent. Fresh fruit, vegetables, wool, and animal hides and skins accounted for most of the other exports. In 1967 Afghanistan began exporting natural gas to the Soviet Union, and by 1978 natural gas accounted for 16 percent of export earnings. In the late 1970s-early 1980s natural gas prices rose sharply worldwide. Between 1978 and 1981 the export price of Afghan gas rose sevenfold, although it remained lower than gas prices elsewhere in the world. The higher gas export earnings provided most of the impetus behind the doubling of export receipts between 1978 and 1981. Higher gas revenues accounted for 60 percent of the higher export totals. By the 1980s natural gas became the primary Afghan export commodity. In 1981 it constituted 40 percent of export earnings. The other major commodity, dried fruits, still provided 25 percent of export receipts in 1981. The world demand for dried fruits in the late 1970s had also pushed up their prices significantly. Depressed production at home, however, caused cotton to fall to just 1 percent of exports in 1981, and karakul skins declined in significance to only 3 percent of exports. Carpets continued to earn 10 or 11 percent of the country's export revenues at the beginning of the 1980s.

Export volumes increased less rapidly in most cases than the 220percent improvement in export earnings between 1978 and 1981. Natural gas exports, for example, remained steady at about 2.4 billion cubic meters. Dried fruit export volumes rose by 74 percent to 101,000 tons, according to government statistics. Fresh fruit exports rose by only 7 percent between 1978 and 1981. The volume of carpet exports nearly doubled, and wool export volume rose by 230 percent during the period. More important, as a result of the higher natural gas and dried fruit export prices, Afghanistan's terms of trade were significantly improved by the end of the 1970s. There were indications, however, that export volumes rose little after 1981 and that fruit and wool exports declined in both quantity and price.

The direction of Afghan exports also changed as the Soviet Union took a much larger portion of total exports after the PDPA takeover in 1978. During the mid-1970s exports to the Soviet Union accounted for a little more than a third of total exports, but by 1981 the Soviets took 60 percent. Correspondingly, the shares of other regional countries dropped sharply between 1978 and 1981. Pakistan fell from 13 percent to 9 percent, and India from 12 percent to 6 percent. Exports to Western nations also decreased in significance. The American share dropped from 4 percent to 1 percent, the British from 9 percent to 5 percent, and the West German's from 7 percent to 5 percent.

Most of the Afghan trade with the Soviet Union and other communist countries was carried out through barter deals in which the quantities of traded goods and their prices were determined in annual negotiations. Trade accounts were kept in "clearing dollars," which corresponded to the official Da Afghanistan Bank exchange rate for dollars. These dollars were not convertible into other nations' currencies. The barter trade penalized exporters, who earned only Af50 per export dollar in bilateral trade arrangements, whereas a convertible dollar earned over Af100 on the free market in 1984. In addition, the Soviets frequently offered low prices for Afghan commodities. Natural gas was the most obvious example, but Afghan exports of citrus fruit and olives from the Nangarhar Valley Project to the Soviet Union were also priced lower than the prices offered by nearby Pakistani companies. Afghanistan exported highquality urea fertilizer and cement to the Soviet Union for low prices as well. The Soviets were sometimes known to resell Afghan commodities, such as foodstuffs, in Eastern Europe at a profit.