Afghanistan: Commission announces €1 billion Afghan support package

In an interview with ABC’s George Stephanopoulos (telecast 19 August 2021), President Biden said he did not believe that the Taliban have changed but were going through an “existential crisis” in their desire to seek legitimacy on the world stage, writes Vidya S Sharma Ph.D.

Similarly, when Secretary of State Antony Blinken appeared on ABC’s “This Week” (August 29, 2021), he was asked how the US would ensure that the Taliban will keep their side of the bargain and allow foreigners and Afghans with valid documents to leave the country after August 31, 2021, respect the human rights and especially allow females to be educated and seek employment? Blinken replied, “We have very significant leverage to work with over the weeks and months ahead to incentivize the Taliban to make good on its commitments.”

What both Biden and Blinken were referring to is that the collapsing economy of Afghanistan (ie, the lack of funds to provide the basic services, rising unemployment, soaring food prices, etc.) would force them to moderate behaviour.


The rationale behind their thinking is that 75% of the Afghanistan Government’s budget is reliant on foreign aid. This money very largely came from Western Governments (the US and its European allies and India) and such institutions as IMF, World Bank, etc.

The Taliban have been able to fund their insurgency by turning to the harvesting of opium, narcotics smuggling and weapon trafficking. According to Afghanistan’s ex-central bank chief, Ajmal Ahmady, that money would not be sufficient to provide basic services. Therefore to obtain the necessary funds, the Taliban would need international recognition. The latter will not come unless the Taliban moderate their behaviour.

Guided by the above rationale, the Biden Administration quickly froze of the assets of Da Afghanistan Bank (or DAB, Afghanistan’s central or reserve bank). These assets mainly comprised gold and foreign currency amounting to US$ 9.1 billion. A very large percentage of them are deposited with the Federal Reserve (New York). The rest are held in some other international accounts including Switzerland-based the Bank for International Settlements.


On Aug. 18, the IMF (International Monetary Fund) suspended Afghanistan’s access to IMF resources including $440 million in new emergency loans on the ground that the Taliban government did not have any international recognition.

From President Biden’s address to the nation on 31 August, it was also clear that his administration, along with intense diplomacy, will use financial sanctions as a central tool to achieve US foreign policy goals.

Just like the cancellation/freezing of foreign aid (read salaries of Afghanistan Government’s employees and public sector outlays), other leverage instruments mentioned by Western Governments, in one way or the other, amount to financial sanctions, ie, what Afghans can import and export, preventing expatriate Afghans from using formal banking instruments to remit money home, etc.

In this article, I wish to explore to what extent any sanctions regime led by the US can influence the Taliban’s policies. More importantly, in addition to not allowing Afghanistan again to become the epicentre of terrorism, what policy changes West should demand in return for lifting sanctions or releasing frozen funds.

Before I examine this issue any further, let me give you a glimpse of the economy of Afghanistan and the depth of its humanitarian problems.

Afghanistan’s economy at a glance

According to The World Factbook (published by Central Intelligence Agency), Afghanistan, a landlocked country, has a population of 37.5 million. In 2019 its real GDP (on purchasing power parity basis) was estimated to be US$ 79 billion. In 2019-20, it exported an estimated US$ 1.24bn (est.) worth of goods. Fruits, nuts, vegetables and cotton (floor carpets) comprised about 70% of all exports.

Afghanistan is estimated to have imported goods worth US$ 11.36bn in 2018-19.

About two-thirds (68%) of its imports came from the following four neighbouring countries: Uzbekistan (38%), Iran (10%), China (9%) and Pakistan (8.5%).

Thus, Afghanistan only earns 10% of the foreign currency needed to pay for its import requirements. The rest (= shortfall) is met by foreign aid.

Afghanistan imports about 70% of electrical power at an annual cost of $270m from Iran, Uzbekistan, Tajikistan and Turkmenistan, according to its sole power utility, Da Afghanistan Breshna Sherkat (DABS). Only 35% of Afghans have access to electricity.

In the year 2020-21 (ie, just before the withdrawal of the US troops), Afghanistan received about $8.5 billion in aid or about 43% of its GDP (in US $). According to a report published in Al Jazeera, this amount “funded 75% of public expenditure, 50% of the budget and about 90% of government security spending.”

Natural and man-made tragedies

Due to the ongoing insurgency, Afghanistan already had 3.5 million internally displaced persons (IDPs) before the Taliban launched their major offensive in May-June this year to extend their rule to the entire country. According to the UNHCR, the recent Taliban blitzkrieg has created another 300,000 IDPs.

Further, the Covid 19 pandemic has hit Afghanistan very hard. Nearly 30% of its population (about 10 million) is infected with the COVID-19 virus and even the front line medical and healthcare staff have not yet been vaccinated. And the country is suffering from the second drought in four years.

Thus the Taliban are ruling over is a cash-strapped, drought-stricken country that is severely afflicted with the Covid -9 pandemic.

Humanitarian Aid: US moral responsibility

Some non-profit charities within and outside the US and some foreign governments have been impressing upon the US to provide humanitarian assistance to Afghanistan. The UNHCR also has spoken about the dire situation in Afghanistan.

The Taliban takeover of the country has further exacerbated the humanitarian situation. They have laid off tens of thousands of employees and many thousands have gone into hiding fearing for their lives in revenge attacks from the Taliban for working with the latter’s opponents. And their fears are justified as I discuss below.

In my first article in this series, I argued that Biden made the right call when he decided to withdraw the US troops from Afghanistan. This decision also meant that the Taliban were able to reclaim power after 20 years of insurgency.

Therefore, a strong case can be made that it is morally incumbent upon the US and its allies to lead a humanitarian aid programme in Afghanistan.

In this connection, Al Jazeera reports, “towards of August, the US Treasury issued a limited new license for the government and partners to give humanitarian aid in Afghanistan.” That is a piece of good news.

The US and its allies can provide the necessary humanitarian assistance through multilateral organisations, eg, the UN, Red Cross and Red Crescent, World Food Programme (WFP), Oxfam International, CARE, etc. This approach does not involve recognising the Taliban Administration and will ensure the aid reaches its target. It will ensure the funds would not be misappropriated or defalcated by the Taliban.

Since Western countries will not allow the ordinary Afghans to starve to death which would surely ensure the Taliban’s ouster from Kabul so let us evaluate how formidable a tool the financial sanctions collectively might prove against the Taliban?

How can we assess Biden’s claim of leverage and more importantly, if any deal is struck with Taliban 2.0, it would be delivered? Can the Taliban 2.0 be trusted? One way to determine this is to examine how they have behaved so far? Another thing that could shed light would be to scrutinize if there is any gap between what the Taliban 2.0 say in their press conferences for international consumption and how they act at home? Are they any different from the Taliban 1.0 that ruled Afghanistan from 1996 to 2001? Or, are they just more savvy in their public relations effort?

Cabinet of Terrorists

It can be reasonably argued that Taliban 2.0 is very much like the Taliban 1.0. The interim cabinet announced by the Taliban last month is full of hard-line members who served in the Taliban 1.0 cabinet.

Just like the Taliban 1.0 cabinet of 1996, the present cabinet also has the stamp of Pakistan’s external intelligence agency, Inter-Services Intelligence (ISI). The latter has financially supported, trained, armed, and organised shelter for them in Pakistan (to rest and regroup after a stint of fighting in Afghanistan) over the last three and half decades or so.

To ensure that the Taliban 2.0 will rule over the entire country, it is has been widely reported that in the battle of Panjshir, the last province to resist the Taliban rule, Pakistan helped the Taliban with arms, ammunition and even fighter jets so that the Taliban could quickly defeat the Northern Alliance fighters.

The reader may recall that the Taliban entered Kabul on August 15 and it took them nearly a month before the interim cabinet was announced.

It was widely reported that in early September there was a shootout in the presidential palace in Kabul in which Mullah Abdul Ghani Baradar, who led peace talks with the U.S. in Doha, was physically attacked by Khalil ul Rahman Haqqani, a member of the Haqqani clan, because Baradar was arguing for an inclusive government.

Soon after this incident, Lt. Gen. Faiz Hameed, chief of ISI, flew to Kabul to ensure that the Baradar faction was sidelined and the Haqqani faction was strongly represented in the cabinet.

The present Taliban cabinet has four members of the Haqqani clan. Sirajuddin Haqqani, the clan leader and the US-designated terrorist, now serves as interior minister, the most powerful domestic portfolio.

The Haqqani network, the most brutal and hard-line of all factions that comprise the Taliban, has the strongest links with ISI and has never severed its ties with Al Qaeda. This was reinforced, as recently as in May this year in a report produced by the UN’s Taliban Sanctions Monitoring Committee. It states, “the Haqqani Network remains a hub for outreach and cooperation with regional foreign terrorist groups and is the primary liaison between the Taliban and Al-Qaeda”.

It would be worthwhile to mention here that thousands of foreign fighters, including Chinese, Chechens, Uzbeks, and others, still comprise the Taliban militia. All these fighters have connections with terrorist groups/sleeper cells in their respective home countries.

Including 4 terrorists belonging to the Haqqani clan, the present cabinet has more than a dozen persons who are either on the UN, the US and the EU lists of terrorists.

Master of spin doctoring

Complete Amnesty: How do the Taliban’s performance rate against their public statements? Though they repeatedly promised a complete amnesty for those who worked for the previous administration or the US-led international forces yet recently released UN threat assessment report shows that the Taliban have been conducting house-to-house searches to locate their opponents and their families. This has meant many thousands of employees, for fear of retribution, have gone into hiding and are, therefore, without income. The Biden Administration is reported to have given the Taliban a list of Afghans who had worked with foreign troops.

Now compare their actions with their statement. Zabihullah Mujahid, a Taliban spokesman, according to the BBC said at a press conference on August 21, said that those who worked with foreign troops will be safe in Afghanistan. He said, “We have forgotten everything in the past… There is no list [of Afghans] who worked with Western troops. We are not following anybody.”

Women’s rights: Further, the Taliban have ordered thousands of people not to show up for work. This is especially true for women employees. This is even though their spokesman, Zabihullah Mujahid, in a press conference on August 17 said, “We are going to allow women to work and study. We have got frameworks, of course. Women are going to be very active in society.”

About women, let me narrate to you what is happening on the ground.

On September 6, when some girls and women protested for not being allowed to go to schools/universities or work, the Taliban whipped the demonstrators and beat them with sticks and fired live rounds of bullets to disperse the protesters (see Figure 1).

The BBC reported one protester saying, “We were all beaten. I was also hit. They told us to go home saying that’s where a woman’s place is.”

On 30 September, an Agence France-Presse reporter witnessed the Taliban soldiers violently crackdown on a group of six female students who had gathered outside their high school and were demanding their right to go to school. The Taliban fired shots in the air to frighten these kids and physically pushed them back.

Figure 1: Photo of peacefully protesting women being threatened by the Taliban.

Notice a Taliban fighter pointing his Kalashnikov at an unarmed woman. (September 6, 2021).

Source: India Today: Taliban 2.0 is exactly like Taliban 1.0: Seen in six images

Press Freedom: What about their commitment to press freedom. Taliban spokesman Zabihullah Mujahid said (via Al Jazeera translation), “Journalists working for state or privately-owned media are not criminals and none of them will be prosecuted.

“There will be no threat against them.”

Etilaatroz, an Afghan news organization and publisher of a daily newspaper, sent a number of its reporters to cover women’s protests on 6 September. Five of these reporters were arrested. Two of them were tortured, brutalized and severely beaten with cables.

Figure 2: Etilaatroz reporters beaten by the Taliban for covering women’s protests on September 6, 2021

Source: Twitter/Marcus Yam

Free travel: As part of US troop withdrawal, the Biden Administration negotiated with the Taliban that along with foreigners, Afghans with valid travel documents will also be allowed to leave Afghanistan.

This was confirmed by the Taliban. Referring to Afghans with valid documents, Sher Mohammad Abbas Stanikzai, deputy head of the movement’s political commission in his press conference of August 27, said, “The Afghan borders will be open and people will be able to travel at any time into and out of Afghanistan.” The Biden Administration is reported to have given them a list of Afghans it wanted to leave the country.

History of negotiating in bad faith

When the US troop withdrawal was nearing the end, the Taliban changed their tune and said that they will not allow Afghan nationals to leave the country. Zabihullah Mujahid, in his press conference of August 21, said “We are not in favour of allowing Afghans to leave [country].”

The reader may recall in my first article in this series where I discussed the merits of US troop withdrawal from Afghanistan, I mentioned that President Trump signed a peace deal with the Taliban. I also mentioned that though the US stuck to the specific conditions and timetable as laid out in the agreement, the Taliban never delivered on their side of the bargain.

From the above discussion, it must be clear to the reader that the Taliban have a history of negotiating in bad faith and cannot be trusted to deliver what they may have agreed to during the negotiations or even promised publicly.

Biden Administration knows the Taliban are habitual liars

Fortunately, the Biden administration and US allies seem to be fully aware of this difficulty in dealing with the Taliban.

Peter Stano, a spokesperson for the EU said early last month, “The Taliban will be judged on their actions — how they respect the international commitments made by the country, how they respect basic rules of democracy and rule of law… the biggest red line is respect for human rights and the rights of women, especially.”

On September 4, Secretary of State, Antony Blinken said, “The Taliban seeks international legitimacy and support…our message is, any legitimacy and any support will have to be earned.”

Taliban 2.0 can expect a few more friends this time

The Taliban 1.0 ruled for 4 years. It was a pariah regime, only recognised by three countries: Pakistan, Saudi Arabia and Qatar. The Taliban 2.0 can expect a few more countries to recognise them, especially China, Russia and Turkey.

As long as the Western countries continue providing humanitarian aid, the Taliban 2.0 will have little need for international recognition. 70% of its exports go to four neighbouring countries. Lack of international recognition will not stop this trade. The Taliban have a well-developed network to smuggle opium to other countries. The same network can be used to sell nuts, carpets, etc.

The Taliban control the entire country, so they would be able to collect more revenue in taxes.

China has promised $31 million worth of aid to Afghanistan. It has also promised to supply coronavirus vaccines. On July 28, Chinese Foreign Minister Wang Yi hosted a 9 member Taliban delegation. Wang said China expects the Taliban to “play an important role in the process of peaceful reconciliation and reconstruction in Afghanistan.”

China is keen to establish diplomatic ties with Afghanistan at least for four reasons:

  1. China is interested in exploiting Afghanistan’s vast mineral wealth, estimated to be more than one trillion dollars. However, such ventures will not yield much revenue to Afghanistan treasury in the short term.
  2. China would not want the Taliban to provide any kind of assistance to Uyghurs, a Turkic ethnic group, native to Xinjiang province. In return for their promise, the Taliban will most likely receive some recurring financial assistance/aid.
  3. China would want to extend its China-Pakistan Economic Corridor (CPEC) project to Afghanistan as Afghanistan gives it another access to the Central Asian states and further beyond to Europe.
  4. In return for any assistance that China may offer to Afghanistan, China may demand the use of Bagram airbase.

Just like China, Russia is happy to see the US defeated in Afghanistan. Both Russia and China, along with Pakistan, would be happy that the US is not present in their backyard anymore. Both will also be keen to fill in the political vacuum left by the departure of the US and thus provide international legitimacy to the Taliban.

Like China, Russia has been in contact both publicly and clandestinely with the Taliban for a decade or so. It also does not want the Taliban to export Islamic extremism to Russia or its security partners in Central Asia. It wants Islamic extremism to be sealed within Afghanistan’s borders.

According to Russian security experts, Russia has provided arms to the Taliban on at least two occasions. Once it was when Gen John Nicholson, the head of US forces in Afghanistan, alleged in March 2018 that Russia was arming the Taliban. According to Russian experts, it was a token arms transfer meant as a confidence-building gesture.

The second time Russia gave arms to the Taliban to avenge the killing of Russian mercenaries by US troops at the February 2018 Battle of Khasham in Syria.

According to Andrei Kortunov, the director-general of the Russian International Affairs Council, Russia fears that a sharp deterioration of the Afghan economy could make the Taliban’s hold on power tenuous as it could strengthen the positions of ISIS (K) and Al-Qaeda and other extremist groups.

But Russia will need to balance several delicate relationships. It would like to engage with the Taliban and assist them so that Afghanistan is not fragmented or balkanised. It would also like to ensure that it does not pose any threat to Central Asian states. And if Afghanistan becomes unstable then Afghan refugees do not flee to the neighbouring Central Asian states (Tajikistan, Uzbekistan, and Turkmenistan). In other words, if the Taliban hold on power slips then Afghanistan’s problems do not spill to Central Asian states.

Russia cannot be seen to be too close to Afghanistan because it would then cause concerns in India with which Russia has enhanced security cooperation. India sees the Taliban as a proxy of Pakistan.

Turkey has also shown interest in engaging with the Taliban. President Recep Erdoğan envisages Turkey to be the centre of the Islamic world as it was during the peak of the Ottoman Empire. It was the seat of the Caliphate. This vision of Turkey has seen President Erdoğan intervene militarily in Syria, Libya, and Azerbaijan. Turkey, as a NATO member, has maintained a small contingent of troops in Afghanistan for the last 20 years in non-combat roles.

Turkey is interested in taking control of the security of Hamid Karzai International Airport in Kabul. The Taliban wants to do it themselves. However, they have offered Turkey the opportunity to take responsibility for logistical support to Kabul airport. At the time of writing this article, the negotiations were deadlocked. Turkey has been impressing upon the Taliban that the international community would prefer if the airport security was controlled by a country they had confidence in.

Erdoğan also does not want to see any Afghan refugees come to Turkey. To prevent them from seeking shelter in Turkey, Erdoğan has been building a wall along the Turkey-Iran border.

Turkey is also interested in engaging with the Taliban because Erdoğan hopes this will help Turkey’s construction industry to win some construction projects. Erdoğan believes Qatar, a long time backer of the Taliban, might provide funds for such projects.

The US would probably not mind Turkey engaging with the Taliban. Turkey could play an important role in backchannel negotiations between the US and the Taliban in future.

How effective sanctions could be?

They work by attrition. Very slowly. Just like the flowing water in a stream smooths and polishes a stone. And they may not yield any tangible result in the desired timeframe.

One of the weaknesses of any sanctions slapped on a country is that the sanctions imposing parties assume that the rulers of the targeted country care for the welfare of their citizens.

No matter how carefully targeted, sanctions cause a lot of hardship to ordinary citizens of the targeted country. Economic stagnation or an economy growing at a very sluggish pace reduces ordinary persons’ chances to realise their full career potential. It reduces their access best health options in terms of the latest medical and surgical breakthroughs.

The authoritarian rulers are only interested in staying in power and enriching themselves. For example, North Korea has been under sanctions for decades. We often hear of food shortages and increasingly tough living conditions in North Korea but this has not stopped the successive Chairmen of North Korea from developing and amassing nuclear weapons and intercontinental ballistic missiles instead of spending funds on initiatives that will ameliorate the living conditions of ordinary North Koreans. Nor have the sanctions forced North Korea to come to the negotiating table with a reasonable proposal. This is why the sanctions failed to yield results against Saddam Hussein’s regime in Iraq. The same is true of Iran, Russia, Venezuela, Syria, and other countries.

The authoritarian rulers know that as long as their repressive security apparatus supports them they can continue to remain in power. For example, the Iranian Ayatollahs know that as long as they look after the interests of the Islamic Revolutionary Guard Corps (Pasdârân-e Enqâlâb-e Eslâmi) they will remain in power. The Revolutionary Guards have brutally crushed all popular uprisings against the regime in the past and ensured widespread rigging during all Presidential elections.

Further, it is easier to ensure the sanctions are being implemented in some countries than in others. For example, Iran mainly exports oil so it is easier to monitor its oil trade. Russia has been able to largely neutralise the effects of sanctions.

The imposition of sanctions on the Taliban also assumes two things: (a) they hanker after international recognition; and (b) they cannot survive without Western aid.

The Taliban 1.0 survived for four years without international recognition. As stated above, the total aid to Kabul for the year 2020-21 was about $8.5 billion.

Perhaps half of the aid was being embezzled. But let us be more conservative and assume only 25% of the aid budget was being misappropriated. Then we come to a figure of $6.3 billion. Blaming the West for hardship, the Taliban can save some money by reducing the salaries of government employees. They do not have to pay the wages of ghost employees and soldiers. A big chunk of the Government budget was going towards providing security. This will not be the case anymore as the insurgents are in power now. The Taliban can also make up a part of this shortfall by collecting taxes more efficiently. The remainder shortfall will almost certainly be met by aid provided by their old and new benefactors, eg, oil-rich Saudi Arabia and Qatar, China and Russia.

It was mentioned above that the Taliban had reneged on their agreement and were not permitting those Afghans who worked in various capacities for the US, NATO and Australian missions to leave the country. It was also mentioned that the Taliban were conducting house-to-house searches to find these people. All these developments will put pressure on the US and its allies to do their best to get these persons out as quickly as possible. If the Western countries still want these people out then they probably would be forced to pay a hefty ransom (it could be in the form of releasing some funds deposited with the Federal Reserve in New York.).

However, it would be wrong to conclude that the sanctions would be totally ineffective. The Taliban might cosy up to China initially because China is willing to recognise them and also offer them some funds for development purposes. But they are not stupid. They would soon figure out that it would be in their interests to seek better relations with the West so that they can improve their negotiating position versus China, Pakistan, etc.

For example, the US could also offer to release some funds in return for outlawing opium production. Just like Russia and China, it is also in the interests of the US that extremist Islamists, if harboured, remain confined within Afghanistan and their movements and activities (eg, trying to radicalize youth in other countries) are closely monitored. Releasing some frozen assets could be used as a bargaining tool towards this end.


Vidya S. Sharma advises clients on country risks and technology-based joint ventures. He has contributed numerous articles for such prestigious newspapers as: The Canberra Times, The Sydney Morning Herald, The Age (Melbourne), The Australian Financial Review, The Economic Times (India), The Business Standard (India), EU Reporter (Brussels), East Asia Forum (Canberra), The Business Line (Chennai, India), The Hindustan Times (India), The Financial Express (India), The Daily Caller (US. He can be contacted at: [email protected]

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