GARDEZ, Afghanistan — When construction crews faced attacks while working on a major American-financed highway here in southeastern Afghanistan, Western contractors turned to a powerful local figure named simply Arafat, who was suspected to have links to Afghanistan’s insurgents.

Subcontractors, flush with American money, paid Mr. Arafat at least $1 million a year to keep them safe, according to people involved in the project and Mr. Arafat himself.

The money paid to Mr. Arafat bought neither security nor the highway that American officials have long envisioned as a vital route to tie remote border areas to the Afghan government. Instead, it added to the staggering cost of the road, known as the Gardez-Khost Highway, one of the most expensive and troubled transportation projects in Afghanistan. The 64-mile highway, which has yet to be completed, has cost about $121 million so far, with the final price tag expected to reach $176 million — or about $2.8 million a mile — according to American officials. Security alone has cost $43.5 million so far, U.S.A.I.D. officials said.