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Such insider - or 'green-on-blue' attacks - are not uncommon in Afghanistan, though in this case it's unclear what motivated the shooting.
Apparently an argument between Afghan and NATO soldiers near the capital Kabul ended with two NATO soldiers injured and one Afghan soldier shot dead on Saturday, according to officials.
"There was an argument between an Afghan and foreign soldier inside a military base... where they opened fire on each other. An investigation is ongoing," defense ministry spokesman Dawlat Waziri said.
The shooting injured one Australian soldier and one soldier from New Zealand. Other Australian soldiers shot the Afghan National Security Force member.
“It is impossible to completely remove the threat of insider attacks, but the actions of the ADF Force Protection soldiers demonstrate that our training and force protection techniques are appropriate and prepared to respond, when incidents such as this occur,” Australia's Acting Chief of Defense Force Air Marshal Mark Binskin said.
It's unclear what caused gunfight, though insider attacks, also known as "green-on-blue" shootings, are not uncommon in Afghanistan. It may have been caused by a personal dispute, or the shooting could have been orchestrated by the insurgent Taliban.
Last year such attacks by Afghan soldiers, or men and women dressed in Afghan soldier uniforms, constituted for about 15 percent of all NATO deaths. That's about least 60 NATO personnel.
These attacks have strained ties between Afghan and NATO forces, many of which are due to with withdraw from Afghanistan sometime 2014.
"If it gets worse it'll make the coalition plan for post-2014 come apart pretty quick," an army strategist working on those plans told Reuters, referring to insider attacks.
International troops are in charge of training Afghan security forces, a difficult task if the instructors fear violent attack from those they train or feel they cannot trust them.
In June this year, NATO gave security control to the Afghan forces, though about 97,000 international troops from about 50 nations remain in-country.