Does Afghanistan have a future?

Siobhan (0:00)

On August 15, 2021, the Islamic Republic of Afghanistan collapsed. At the cost of $2.3 trillion and roughly 200,000 lives, the 20-year intervention ended in a humiliating defeat for the United States. Upon seeing the Taliban advance, Afghan troops surrendered, often without fighting. Meanwhile, President Ashraf Khani fled Kabul mere days after stating he would rather die than leave. When the dust settled, the Taliban's victory was indisputable. For many, that is where the story ended. And following the invasion of Ukraine, press coverage dried up. But history does not cease when the cameras stop rolling. Since the Taliban's reconquest, Afghanistan has formed the eye of a brewing geopolitical storm. Economic disasters have wrought starvation, regional powers are pressing for influence, and Central Asia has been flooded with illicit goods. Nearly one year on, it is high time to ask, what happened to Afghanistan, and what does its future look like?

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By the time Kabul fell to the Taliban, the Afghan state had rotted from within. Factionalism, over-centralization, and corruption undermined the government's legitimacy. While in the short-term, drought and COVID-19 crippled the country's food security and health care capabilities, a situation exacerbated by the Taliban's summer offensive, which had internally displaced more than 3 million people.

The Taliban thus inherited a state beset with problems. Even worse, Washington's nation-building had constructed a state dependent on foreign aid. International donors financed over half of Kabul's $6 billion state budget and four-fifths of its social spending. Upon the takeover, this support was pulled overnight. The only potential respite was to draw on the central bank's cash reserves, which had grown to nearly $10 billion during the occupation. Yet, this presented a problem. Of these funds, 70% were, and still are, held at the Federal Reserve Building in downtown New York.

Since 2002, Washington's designation of the Taliban as a global terrorist group has barged it from America's banking system and anyone who transacts with it. Given the United States is the global financial hub, such measures are akin to an economic death sentence. Thus, once the Taliban assumed control, international trade halted as the risk of secondary sanctions deterred commercial entities.

Another devastating blow came in February 2022 Due to a potential civil claim by 9-11 victims and insurance companies, Biden issued an executive order freezing all Afghan Central Bank assets on American soil. Half of the $7 billion would be set aside for the potential claim. The other half would be held in trust for the Afghan people. And even though Washington has stated it will release the funds, Biden's decision is unusual for many reasons. In particular, the connection between the claimants and the Central Bank is unclear, as there are degrees of separation between them. First, it was Al-Qaeda that committed the 9-11 attacks, and the Taliban's complicity is yet to be established. Second, the Afghan Central Bank is independent from both the state apparatus and the Taliban. And third, the money deposited in the bank belongs to ordinary Afghans, who were friendly to the old non-Taliban government. So in essence, the 9-11 victims are suing ordinary citizens for their loss.

Still worse, freezing bank assets has deprived the Afghan economy of nearly all liquidity. The economy is at a standstill, the Afghani currency has collapsed, workers and teachers go unpaid, and inflation has accelerated. According to the UN, 97% of Afghans will be impoverished by the end of 2022 While, according to the IMF, the Afghan GDP will contract by one-third. A crash worse than the Great Depression. Combined with a global weath shortage, 23 million Afghans are now at risk of starvation. Foreign aid has softened these effects, but without a functioning economy, the threat of famine remains constant. Over time, Washington's policy could backfire. While many blame the Taliban for Afghanistan's backslide, citizens of sanctioned nations tend to blame the sanctioner, not the wrong government. The UN Security Council's comprehensive sanctions on Iraq in the 1990s caused thousands of famine deaths, especially among children. Those who survived were often radicalized against the West, joining jihadist groups like ISIS. Similar developments are possible in Afghanistan. For instance, in June 2022, earthquakes killed around 1,100 Afghans. Relatives living abroad could not send aid back home due to sanctions. This despair has driven a rapid uptake in opioid addiction among Afghans. And such events could eventually drive the impoverished to take up arms.