Eliminating Sanctions On the Taliban Won’t Solve Afghanistan’s Deepening Humanitarian Crisis

January 26, 2022
preble early

Since the U.S. withdrawal from Afghanistan last year, the country has been mired in a severe humanitarian crisis that could devolve into one of the worst on record if the country does not receive immediate assistance. The Taliban’s swift takeover of Afghanistan following the U.S. departure cut off most flows of foreign aid to the Afghan government. It also removed a set of diplomatic and bureaucratic protections that had allowed Afghanistan to remain interconnected with the global economy despite being a highly corrupt, leading narco-state that plays host to dozens of sanctioned entities. The Taliban’s takeover, moreover, led the United States to impose sanctions associated with the Taliban on Afghanistan’s national government. Some concerned parties have argued that removing the national-level sanctions against the Taliban government is necessary to alleviate the ongoing humanitarian crisis. Doing so, however, is unlikely to overcome the private sector’s reluctance to engage in high-risk financial and business transactions involving Afghanistan — even to support humanitarian activities.  The solution to the humanitarian crisis in Afghanistan is not about the reduction or elimination of economic and financial sanctions but about the willingness of the United States to provide immediate direct aid to the Taliban.

 

 

The United States needs to maintain sanctions against Afghanistan to counter the myriad threats to national and international security emanating from the country: terrorism, drug trafficking, and corruption-related threats. At the same time, U.S. sanctions are undoubtedly exacerbating the humanitarian and pose significant impediments to the ability of non-governmental and relief organizations to address it. More broadly, U.S. sanctions policies require reform to help mitigate their adverse effects on civilian populations. This will not be accomplished, however, by tinkering at the margins of U.S. sanctions against Afghanistan by solely carving out channels and exemptions for humanitarian aid. Such efforts would likely be unproductive or even counterproductive while failing to provide the Afghan population with the humanitarian assistance they desperately need.

In the near term, providing the Taliban government with direct — but monitored — foreign aid represents the best strategy for easing the humanitarian crisis in the country. While the political cost for the Biden administration may be high, it constitutes a worthwhile tradeoff for maintaining the economic and financial sanctions on Afghanistan that fulfill other important U.S. security goals.

The Landscape of Sanctions

Afghanistan constitutes the type of high-risk jurisdiction that US authorities have conditioned international banks to avoid since 9/11 through the implementation and enforcement of economic and financial sanctions. Afghanistan will thus continue to face challenges receiving trade and aid via private-sector channels even if the United States eases sanctions against the Taliban at the national level. The United States imposed anti-money laundering and anti-corruption sanctions beginning in 1999, and added subsequent layers of sanctions after 9/11 to disrupt terrorist operations and networks and to stymie Afghanistan’s lucrative drug trade and involvement in organized crime. These layers of sanctions push international banks to maintain hyper-vigilant compliance programs that in effect lead banks to avoid doing any business with the sanctioned country — even business permitted by the sanctions regime.

The U.S. government will not (nor should it) provide Afghanistan with a full exemption to all issue-based laws and regulations related to money laundering, sanctions, and the countering of terrorist financing. The Financial Action Task Force released a statement in September 2021 that called attention to the dangers of money laundering and terrorist financing in Afghanistan and a need for countries to improve information sharing while remaining vigilant. High-level members of the Taliban government are part of the Haqqani Network, which has engaged in a multitude of lethal terrorist attacks in Afghanistan and poses a mounting international terrorist threat. Since the 1980s, this group has engaged in licit financial activities including real estate, trucking, construction, and import-export trade. However, these activities — coupled with illicit forms of financial support — provide funding for their terror activities. Financial sanctions allow the U.S. government to isolate and contain terrorist threats emanating from the Taliban.

The recent sanctions review by the Biden administration touted the success of economic and financial sanctions at preventing terror groups from conducting operations or providing salaries and benefits to their members. Scaling back such sanctions and unraveling the efforts aimed at impeding terrorist operations would be unlikely to provide significant relief to the Afghan people and would represent a clear and present danger to U.S. interests and national security (as well as those of U.S. allies). Afghanistan poses a growing threat as a source of international terrorism in addition to being a leading global source of opium. U.S. counter-terrorism and counter-narcotic sanctions exist to counter exactly those types of salient threats.

Sanctions against the Taliban are also not comprehensive and do not resemble the sanctions programs against places like Iran, North Korea, or Syria. After 9/11, the United States adapted its economic and financial sanctions to target nonstate actors like the Taliban through a patchwork of executive orders and existing regulations. U.S. efforts at sanctioning the Taliban have focused on eliminating its ability to finance itself via financial networks or through drug trafficking. As Jason Bartlett has noted, the lack of a country-specific program of sanctions makes it difficult for the Treasury Department to act unilaterally in addressing humanitarian damage that economic sanctions could cause. The sanctions, as they exist and are now employed by the United States, focus on individuals, entities, and activities, rather than on the country as a whole. Removing them requires congressional input, which not only slows down the ability of the Biden administration to address the humanitarian crisis but also stymies any quick resolution to the problem. Even lifting the sanctions directly imposed against the Taliban leaves a host of related policies in place that make conducting international business transactions with Afghanistan risky, difficult, and unprofitable for most international banks and firms.

The U.S. Global Magnitsky Human Rights Accountability Act also poses a looming threat to Afghanistan. Given the Taliban’s human rights record and the country’s endemic corruption, Afghanistan could be a rich environment for the application of Magnitsky sanctions. The Treasury Department’s current stance on human rights further suggests the momentum is on the side of those aiming to impose more sanctions against human rights abusers in Afghanistan. As the 2022 midterm elections approach, Biden may face calls from members of Congress to enforce the act, which further complicates any course of action the administration may take. Even if the United States were to rescind organizational sanctions on the Taliban, many of the group’s members are already listed on the U.S. Specially Designated Nationals and Blocked Persons List, and more of its officials could be ripe targets for Magnitsky sanctions in the future. Such sanctions imposed on the Taliban’s leadership could further degrade the Afghan government’s international legitimacy and the willingness of firms to conduct business in Afghanistan. Even if U.S. policymakers opt not to employ the measures against Afghanistan, the threat of those sanctions will persist.

“Lifting” Sanctions Is Not as Easy as It Sounds

Even if the U.S. government lifts its organizational sanctions against the Taliban, most international firms will continue to perceive the risks associated with violating issue-oriented sanctions and anti-money laundering policies as too high to justify doing business in Afghanistan.

The Department of the Treasury has earned a reputation as a fearsome enforcer of U.S. sanctions. Empowered with the authority to penalize sanctions violations, the Office of Foreign Assets Control has imposed fines against sanctions violators to the sum of hundreds of millions of dollars. The body’s fines on the financial sector, and especially foreign-owned banks, have been very fierce. As a result of its decade-plus campaign of industry outreach promoting compliance, this office has convinced most large-scale businesses to take the risks associated with violating sanctions very seriously.

Major international companies have become increasingly averse to doing business with sanctioned jurisdictions like Afghanistan, Iran, and Venezuela. The high costs of trying to comply with sanctions and the legal and financial risks when compliance cannot be guaranteed have led to a phenomenon of “de-risking.” De-risking occurs when firms decide to stop doing business in higher-risk jurisdictions altogether. The prevalence of overlapping sanctions, anti-money-laundering policies, the drug trade, and lack of a well-regulated financial system make doing business in Afghanistan very risky. As a partial response, the United States has adopted carve-outs and exemptions for humanitarian-related transactions to try to keep financial channels open to foreign aid. Those policies largely have failed in their objectives.

The costs and difficulty of implementing humanitarian exemptions for sanctions against Afghanistan are administratively burdensome, especially for the Treasury Department with its resource challenges. The associated risks have meant that few parties have used the exemptions. Both not-for-profit organizations and for-profit firms have adopted policies to avoid the risks of running afoul of U.S. sanctions. Indeed, the challenges posed by de-risking are not unique to Afghanistan. America’s aggressive use and enforcement of sanctions to promote overcompliance by firms have exacerbated the economic costs sanctions impose and their adverse humanitarian consequences.

The task of reassuring international businesses is daunting for the Taliban. Its inability to foster a climate of transparency, as well as its undermining of monitoring and enforcement tools in the financial system, have been counterproductive. Since assuming power, the Taliban have shut down the Bank of Afghanistan’s financial intelligence unit, which helped to promote Afghanistan’s budding transparency and ability to monitor and police its financial system. This unit had been a target of the Taliban’s ire when it was used to exclude the group from Afghanistan’s economy. Now, the inability of Afghanistan’s central bank to monitor its financial system further exacerbates the serious risks of doing business in Afghanistan for foreign businesses and nongovernmental organizations, while accentuating the effects of de-risking and overcompliance on global financial institutions.

All these developments strongly suggest that lifting direct sanctions against the Taliban will not stimulate the willingness of international businesses to reestablish commercial ties in Afghanistan as long as the Taliban remains in power.

Direct Aid: Sounds Harder, Works Better

Critics have argued that even small carveouts and exemptions to U.S. sanctions are bolstering and empowering the Taliban. Yet direct foreign aid provides the United States with an extensive amount of control and power that lifting economic sanctions would not provide. Direct foreign aid would allow the U.S. government to target funds to critical areas. Regulations could be devised to limit the role of the Taliban in receiving these funds by favoring financial institutions operating in Afghanistan that are not under control of the Taliban (there are nine such institutions). Funds could be earmarked for specific purposes and programs, which the United States could coordinate with nongovernmental organizations and other private-sector entities rather than writing a blank check to the Taliban. As Melissa Skorka argues, U.S. policymakers will need to have a coherent plan to ensure that aid money cannot be used in a way that would empower dangerous elements of the Taliban, like the Haqqani Network. Maintaining targeted sanctions on known supporters of terrorism will be an important element of any plan developed.

Rather than lifting sanctions on the Taliban or designated individuals within it, the U.S. government could also release some of the Afghan central bank’s approximately $7 billion in frozen reserves. This form of sanctions relief would be akin to providing aid to the Afghan government and could be conditioned and monitored in a similar way to any direct foreign aid. In the short term, providing Afghanistan either its frozen reserves or U.S. aid could help address the economic and humanitarian crises in the country. Afghanistan’s existing currency reserves alone, however, are likely insufficient to stem the humanitarian crisis it is experiencing.

By providing direct funding to the Taliban-led government in Afghanistan, the United States can bypass the sanctions-averse banks and firms that may not otherwise act on their own accord to address Afghanistan’s humanitarian crisis. U.S. policymakers can also avoid sending firms conflicting messages about their own responsibility in complying with sanctions that seek to isolate dangerous individuals and entities within the country. This approach also means that the U.S. government will not have to give exemptions to transactions involving Afghanistan that might be serving otherwise important purposes (promoting human rights, supporting counter-terrorism, stopping drug-trafficking, etc.).

The political challenges of providing foreign aid to the Taliban-led government are admittedly significant. In the United States, the 2022 midterm elections are on the horizon, and Afghanistan was an issue that significantly harmed the Biden administration’s popularity. Between June 2021 and the pullout from Afghanistan at the end of August 2021, Biden’s disapproval rate among independents increased to 57 percent from 43 percent. Disapproval among Democrats over the same period also increased slightly (while remaining high and unchanged among Republican voters at 88 percent). In addition to Afghanistan, the Biden administration has several crises to manage — COVID, Russia — and too little political capital to deal with them all. Given U.S. public opinion on Afghanistan, the Biden administration may be wary of risking the partisan attacks that direct foreign aid to the Taliban would ultimately bring, even if it is necessary to fulfill America’s ethical commitment to Afghanistan’s people after a two-decades-long presence in the country.

Fixing the Effects of U.S. Sanctions Is a Long-Term Game

The United States has valid national security interests in maintaining sanctions against Afghanistan. It also has an ethical obligation to help alleviate the humanitarian crisis that its withdrawal precipitated, and its sanctions are exacerbating.

Offering humanitarian exemptions and carveouts to sanctions has been insufficient to alleviate the private sector’s concerns about the risk of doing business with Afghanistan. Offering additional, though limited, sanctions relief to the Taliban — even as myriad U.S. sanctions, anti-money-laundering, and anti-corruption policies remain in place — will do little to change the perceived risks of doing business in the country. The administrative burden of implementing these exemptions creates substantial burdens on firms and aid organizations and therefore limit the speed and depth of any humanitarian assistance that could conceivably be provided in the current climate.

In the long run, U.S. policymakers should find ways of making humanitarian exceptions for their sanctions policies easier to use while addressing the challenges posed by the significant risk aversion the sanctions cause. Promoting overcompliance with U.S. sanctions may be a feature rather than a bug of the implementation strategy, however, and the situation in Afghanistan is too dire to wait for potential reforms and adjustments to be found and implemented. The U.S. government will continue to maintain sanctions against Afghanistan, fatal and flawed as those instruments may be. As such, the U.S. government needs to counterbalance the ill effects of its economic sanctions on Afghanistan in other ways. Providing the Taliban-led government with direct foreign aid while also maintaining a patchwork of sanctions policies for counter-terrorism, counter-narcotic trafficking, human rights support, and anti-corruption purposes may, counterintuitively, be the most pragmatic option in the near term for alleviating the suffering of the Afghan people.

If Afghanistan becomes an ungovernable failed state because the United States fails to provide support in the form of direct foreign aid, it will be a humanitarian tragedy and run counter to the foreign policy and national security interests for which the United States sanctioned the country in the first place. Absent robust U.S. aid, the Taliban-government may also seek closer relations with U.S. adversaries in the region, like China or Iran. While providing direct foreign aid to the Taliban-led government for humanitarian purposes is politically unpalatable, it is the clearest course for meeting America’s ethical responsibility to the Afghan people and realizing U.S. foreign policy and security interests.

 

 

Keith A. Preble (Twitter: @poliscikeith) is a research fellow at Center for Policy Research at the University at Albany, SUNY. He is working on the Project on International Security, Commerce, and Economic Statecraft (PISCES).

Bryan R. Early (Twitter: @B_R_Early) is an associate professor of political science and associate dean of research at the Rockefeller College of Public Affairs & Policy at the University at Albany, SUNY.  He is the founding Director of PISCES at the Center for Policy Research.

Photo by Sayed Muhammad Shah/UNAMA