By Peter Graff

SANGIN, Afghanistan, June 11 (Reuters) - NATO is pinning its hopes to restore peace in Afghanistan on a single road.

At the bottom of the Sangin Valley road is the highway that links southern Afghanistan to Kabul. At the top is the Kajaki Dam, by far the biggest aid project the West envisions for the country.

In between are 180 km (110 miles) of rutted, pitted mountain track, winding past opium fields and through bazaars along the banks of the Helmand River.

Contractors say they are ready to start within weeks on a $150 million project to renovate the dam, providing power to millions of Afghans and proving once and for all that the international community can provide the sort of benefits the guerrillas will never deliver.

But to build it, they will need to drive two 12-tonne transformers and a 26-tonne turbine up into the mountains. And that means they first need to rebuild the road.

Winning control of the valley so the dam can be rebuilt has become the prime goal of NATO forces in southern Afghanistan.

"It has been the main focus of our military objectives in the last two months: clearing the upper Sangin valley in order for governance and stability to develop and for the road and dam to be completed," said Lieutenant-Colonel Charlie Mayo, spokesman for NATO forces in Helmand province.

Thousands of U.S. and British-led NATO troops have mounted a series of assaults on the valley, and NATO now says it is ready to proceed.

The road goes through territory that until a few weeks ago was completely controlled by Taliban guerrillas.

For the past year, the main bazaar town along the way, Sangin, was perhaps the fiercest battlefield of the war, with British troops fighting sometimes to nearly their last round of ammunition to hold a single compound.

The latest operations seem to have been a success. In the past weeks, once-deserted market stalls have reopened.

Now, says the newly installed district chief, the locals are ready to help start rebuilding the road.

"All the elders have promised us that they will provide workers," District Chief Haji Issatullah said over glasses of sweet tea on a carpet in his new compound, a sandbagged municipal building inside the perimeter guarded by a company of British infantrymen.

The area is still far from wholly quiet. One British soldier was killed and four were wounded in an ambush on Saturday.

The Taliban are now in complete control of Musa Qala, a connected mountain valley which British troops abandoned last year.

But Issatullah insisted Taliban attacks would not stop the road.

"The road will provide jobs, and then people will be able to use the road itself," he said. "The Taliban might try to attack, but I don't think they will be able to stop the roadwork."

The next few months will be make-or-break for a project that could come to define the West's efforts to penetrate the Taliban heartland.

Stu Willcuts, who runs the dam project for Louis Berger, an engineering firm hired by the U.S. government, says the road itself will generate up to 2,500 jobs, with another 400 or more hired to restore the dam and replace cables through the entire valley.

He now has promises from elders leading two tribes that each control six km stretches of road near Sangin to help build it.

"I've got 12 km. They say: hire our boys," he told Reuters. "It just takes a lot of hard work, a lot of meetings, a lot of drinking tea."

He recites the names of tribes along the route, some of which are sceptical, some of which are murderously hostile. The hope is that when tribes allied to the Taliban see other groups getting a new road, they will want one too and lay down their arms.

The dam and the road were first built by the Americans 30 years ago. Willcuts hopes to attract local engineers who still remember that original project.

"You can't be a pessimist," he says. (Read more from Peter Graff's reporting trip to Afghanistan on his blog http://blogs.reuters.com/category/from-reuterscom/embedded-in-af ghanistan/)

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