Conflict Alerts # 483, 16 February 2022
In the news
On 11 February, President Biden signed an Executive Order to help enable certain US-based assets belonging to Afghanistan’s central bank, Da Afghanistan Bank. The order claimed that “this is one step forward in the United States’ effort to authorize the transfer of a significant portion of the funds to meet the needs of the Afghan people.”
According to the order, “The EOO will block the property of DAB held in the United States by USS financial institutions and require USS financial institutions to transfer this property into a consolidated account held at the Federal Reserve Bank of New York. The Administration will seek to facilitate access to $3.5 billion of those assets for the benefit of the Afghan people and Afghanistan’s future pending a judicial decision.” It added, “Even if funds are transferred for the benefit of the Afghan people, more than $3.5 billion in DAB assets would remain in the United States and are subject to ongoing litigation by US victims of terrorism. Plaintiffs will have a full opportunity to have their claims heard in court.”
Following the order, Mohammad Naeem, a spokesman of the Taliban’s political office, said: “The theft and seizure of money held/frozen by the United States of the Afghan people represents the lowest level of human and moral decay of a country and a nation,” adding, “defeat and victory are common in human history and life, but the greatest and most shameful defeat is the combination of military and moral defeat.” Similarly, DAB, in a statement, said: “DAB considers the latest decision of USA on blocking FX (foreign exchange) reserves and allocating them to irrelevant purposes, injustice to the people of Afghanistan.”
Issues at large
First, the humanitarian crisis in Afghanistan. The Taliban takeover has exacerbated the humanitarian crisis. Afghans are in desperate need of food assistance, livelihoods support, water, sanitation, health, hygiene, shelter and settlement assistance, and COVID-19-related assistance. 23 million Afghans are in need of food assistance. More than half a million people have lost their jobs since the Taliban takeover, deepening the economic collapse.
Second, Afghanistan's frozen assets. After the Taliban takeover in August 2021, several countries and international institutions decided to freeze Afghan’s central bank assets and have used it as leverage to get the Taliban to fulfil demands. Before the Taliban takeover, 80 per cent of Afghanistan’s national budget came from the international community. A total of about USD 10 billion is currently frozen; of which about USD seven billion is held by the US. The freezing of crucial Afghan assets has further aggravated the situation, as the Taliban government remains heavily underfinanced.
Third, the Taliban’s demand for unfreezing of assets. The Taliban has claimed that these assets are required to help stabilize the country’s deteriorating economy and prevent a humanitarian crisis. Given that the Taliban government’s is facing a financial crunch, it has called for the release of the fund since it took over the country. Pakistan and China have supported this and have called for the international community to release the funds.
Fourth, the US decision to release the assets. In January 2022, a US judge gave the White House until 11 February to draft a plan as to how it would handle the billions in Afghan assets frozen in the US. Following the above, the US Congress and other institutions called on the Biden administration to free up the funds to address Afghanistan’s extreme economic crisis. Although the executive decision has been made, it remains to be seen as to how the money would be dispensed with several lawsuits making claims to the funds and the Afghanistan aid efforts are expected to be a multi-step process.
First, the US’s decision to unfreeze assets is partially complete. The decision has only moved the Afghan assets into a consolidated account. Thus, the USD 3.5 billion for the Afghan people is likely to take time to be dispensed given the hesitancy to directly finance the Taliban government.
Second, addressing Afghanistan's humanitarian and economic crisis. Afghanistan’s economy was boosted substantially by foreign aid from the West. The sudden withdrawal of the funding has crippled the country's dwindling economy and aggravated the humanitarian crisis. To address the current situation, the international community would have to find a solution to dispensing aid to Afghanistan directly to the Taliban government or more efficiently through aid organizations to help curb the crisis.