Edited by Sam Thielman
WHEN THE UNITED STATES withdrew from Afghanistan last year, the Biden administration stole—any other word feels euphemistic—$7 billion of Afghanistan's sovereign wealth. The theft crippled Afghanistan's central bank and threatened the lives of millions.
On Wednesday, the administration rolled out a measure to stabilize the Afghan economy—while not returning the money. But the success of the new Afghan Fund, and the fate of Afghans simply trying to afford food and other necessities, hinges on whether the Fund will allow the country to move beyond the legacy of war, or will simply continue the war by economic means.
The Fund is off to a rocky start. FOREVER WARS has learned that during the quiet negotiations the administration held with the Taliban concerning the Fund, which began in March, the Taliban—now the government of the Islamic Emirate of Afghanistan—proposed appointing a member of its board of trustees. The U.S. rejected that outright.
"The Taliban wanted a seat at the board so they could have a veto over potential misuse of the funds," Graeme Smith, a senior consultant to the International Crisis Group with extensive experience in Afghanistan, told FOREVER WARS. Asked about the U.S. veto of the Taliban appointment, someone FOREVER WARS can only quote as a U.S. source familiar with the back and forth between the U.S., its partners and the Taliban, said: "I can confirm that is accurate."
Accordingly, control of the Fund and its $3.5 billion in purloined Afghan wealth—the other $3.5 billion, per a February executive order, is reserved for damages pursued by families of 9/11 victims—rests with four people, none of whom reside in Afghanistan.
One is a former minister in the U.S.-backed pre-Taliban Islamic Republic of Afghanistan, Anwar Ahady, a U.S.-educated ex-governor of the central bank (which is known as DAB). Another is a member of the DAB's Supreme Council policymaking body, Shah Mehrabi, who was instrumental in establishing the new Fund after warning extensively of the dire human consequences of spiraling inflation resulting from DAB's current liquidity crisis. The other two trustees are, according to the State Department, "a U.S. government representative, and a Swiss government representative," as the Fund will be based not in the U.S. but Geneva, at the Bank for International Settlements (BIS). A State Department spokesperson said that neither the U.S. nor Switzerland have yet named their choices.
[BIS’s capital is held by its member banks—sixty-three central banks and monetary authorities, including the Fed, the Central Bank of China, and the Deutsche Bundesbank. The general manager is the former head of the Mexican central banking authority, and the head of the board is François Villeroy de Galhau, current governor of the Bank of France.—Sam.]
In other words, the Taliban government, with which DAB must inevitably deal, has no influence over the disbursement of $3.5 billion of Afghanistan's own wealth, to say nothing of anyone in Afghanistan. The Taliban denounced the Fund on Thursday. Asked by FOREVER WARS if its position is total noncooperation, Abdul Qahar Balkhi, the spokesman for Afghanistan's Ministry of Foreign Affairs, says, "Yes, we oppose this iteration of the Afghan fund and will monitor [the] situation through diplomatic means." Much depends on what the Taliban means by this iteration.
Mehrabi, the Fund trustee, does not know if the new Fund, influenced by the U.S. and not the Afghan government, will prove viable. "It's a very good question," he tells FOREVER WARS. With the Biden administration unwilling to relinquish Afghanistan's wealth, citing the encumbrances placed upon it by the 9/11 era's proliferation of sanctions on declared terrorist entities, Mehrabi considers it the best option available to avert an economic collapse. But that doesn't come without a warning to Washington. "We would hope it would not be a certain government, whether Switzerland or others, dictating what happens," he says.
MEHRABI, A PROFESSOR at Maryland’s Montgomery College who also sits on DAB's audit committee, emphasized in an interview the urgency of making the Fund work. He estimates inflation of the Afghani, Afghanistan's currency, has reached 51.7 percent over last year, and puts DAB's liquidity crisis in human terms. "People can't get their hard-earned deposits, and we must be in position to allow ordinary Afghans to withdraw their money to pay basic household expenses and run their businesses and so on," he says.
The State Department description of the Fund mentions "targeted disbursements" as the Fund's "short term" objective. That raised the prospect that the Fund would use Afghanistan's sovereign wealth to purchase commodities. Mehrabi rejects that outright. "The first and foremost purpose of [currency] reserves, not only for DAB of Afghanistan—ask any economist and they'll tell you—the purpose of reserves are to be used to influence monetary policy," he says. "The whole idea is to make certain that prices are stable."
Smith, the International Crisis Group consultant, observes that Mehrabi's perspective aligns with the Taliban's—something that might point toward cooperation with the Fund in the interests of forestalling an economic catastrophe. "The Taliban are very anxious to make sure this money is not squandered on some American pet project," he says. "They're adamant the money should only be used for central banking." A recent research report by David Mansfield underscored that the Taliban have taken steps to redress the structural corruption of the prior U.S.-backed regime, much of which was fueled by the U.S. war economy.
For that reason, Smith reads the Taliban's stated denouncements of the Fund as obligatory—this is, after all, Afghanistan's looted sovereign wealth distributed by Afghanistan's vanquished occupier without so much as consultation with the victors—but perhaps heralding a reluctant acceptance. "They're so far expressing unhappiness with U.S. unilateralism but might be hinting they might be willing to play ball," he says.
When I asked Balkhi if the Afghan government ruled out cooperation with the Fund, this was his response in full:
The government has a clear position: we oppose this iteration of the Afghan fund created without an agreement or without any input by the central bank of Afghanistan.
State reserves are not meant for disbursements but for currency stabilization and strengthening financial systems.
We will fine and ban activities of all individuals, institutions and companies that make use of these reserves.
When I asked for clarification, Balkhi gave me the quote in the first section of this piece. Parse his words as you like.
Balkhi did not answer a question about the U.S. veto on a Taliban board seat. Whatever its impact on the Taliban's position, Mehrabi said the board will establish an advisory committee "of all Afghans," though he stops short of saying Afghans currently in Afghanistan will participate, emphasizing instead economic expertise as the relevant criterion. "Full cooperation of the current regime is essential for this process to be successful," Mehrabi told FOREVER WARS.
WHETHER THE FUND can provide short-term stabilization of the Afghan economy may depend less on economic policymaking than on how the State Department characterizes the long-term objective of the Fund.
In the long-term, the goal is for funds not used for these limited purposes to be preserved to return to DAB. The United States has made clear that we will not support the return of these funds until DAB: (1) Demonstrates its independence from political influence and interference; (2) Demonstrates it has instituted adequate anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) controls; and (3) Completes a third-party needs assessment and onboards a reputable third-party monitor.
Whatever that means, it does not show a path to a return of Afghanistan's sovereign wealth to the central bank of Afghanistan. These read like unsatisfiable conditions. Does DAB coordination with the finance ministry jeopardize its "independence from political influence and interference"? If members of the Taliban remain on U.S. and U.N. blacklists, will DAB run afoul of the terrorism-finance protocols if it works on the economy with them in their official government capacities?
Smith believes that sometime "around late '21, early '22" U.S. and some European officials "turned an emotional corner" from a "fuck them, let them fail" attitude that the French allegedly still possess. "For the sake of regional stability, avoiding huge outflows of refugees and avoiding a famine where you would have blood on your hands, they [decided to] pursue an economic revival with the Taliban," he says. "This movement of money into a trust fund is one more incremental step toward working with the victors of this conflict rather than deciding to fight them."
I felt compelled to push back a little. In my experience, a substantial number of policy-adjacent Americans in national-security circles with Afghanistan experience are still in fuck-them-let-them-fail mode, particularly a year after a withdrawal they consider humiliating and dishonorable. With the leverage over the Afghan economy still in the hands of Americans, how durable should we consider any alleged turn away from pursuing through economic means the victory that military occupation couldn't produce? After all, with the board of trustees expected to operate by consensus, intransigence from the as-yet-unannounced U.S. government representative is sufficient to stop the Fund from functioning, should Biden or his successor seek to register disapproval with the Taliban, who are predictably stopping teenage Afghan girls from getting an education.
"Frankly, it's barely a consensus right now," Smith acknowledged. But he said he found "a surprising amount of pragmatism in Europe, with the exception of France, and from Washington, because they don't want to own the blame for this big mess they are leaving behind."
That said, Smith has encountered my skepticism from others. "It is true that [arguments about] what you should do, what you owe the Afghan people, these are not arguments that have any real weight with hard-nosed natsec people," Smith said, "so when we do briefings, we talk about rate of flow of migrants across borders, the pressure that puts on Europe, instability spreading across the Durand Line into Pakistan, that militancy can be contagious… I think it comes down to a stability argument, you don't want to destabilize Central Asia."
"Active negotiation with the current regime to address their concerns and the reason for [the reserves'] transfer, which is to protect and preserve these reserves from [9/11] plaintiff lawyers, could result in cooperation for the benefit of Afghans, as the Afghan economy is in a desperate condition," Mehrabi said. "Prices are over 50 percent and ordinary Afghans cannot afford to purchase basic necessities and pay for bread, cooking oil, sugar and fuel."
When I asked the State Department if the U.S. would use its position on the board to exercise leverage over the Taliban, continuing the war by financial means, a spokesperson replied:
The onus is on the Taliban. From the United States’ perspective, we need to have confidence that these assets not only will not be diverted to terrorists or criminals, but also will be managed responsibly by qualified professionals with authority to act on behalf of the state. We do not have that confidence today. At a minimum, DAB will need to: (1) Demonstrate its independence from political influence and interference; (2) Demonstrate it has instituted adequate anti-money laundering and countering-the-financing-of-terrorism (AML/CFT) controls; and (3) Complete a third-party needs assessment and onboards a reputable third-party monitor. We have been clear with the Taliban and DAB technocrats for several months now on the importance of these principles.