US to redirect frozen assets from Afghanistan after Taliban reject deal

The Biden administration announced on Wednesday it would create a new fund from some of Afghanistan’s central bank’s frozen reserves, with the aim of easing the country’s growing humanitarian crisis without enriching the Taliban, who have rejected previous attempts. compromise agreement earlier this year.

In a statement, the Treasury Department said a new watchdog would deploy $3.5 billion in Afghan central bank reserves to help stabilize the country’s battered economy. The fund – which will be managed in part by Swiss government officials and Afghan economic experts – can be used to help the country pay for essential imports, such as electricity, and will not be accessible to Taliban officials, according to the department. The funds will be held by the Bank for International Settlements in Basel, Switzerland. Biden officials also sent a letter to Taliban officials saying the money could be returned if new financial guarantees were implemented.

“This is a very important first step,” said Shah Mehrabi, a former member of Afghanistan’s central bank who will help manage the new fund. “Afghans will always continue to say that the 7 billion dollars must be returned to the Bank of Afghanistan, and that should happen when [it] is able to address some of the concerns.

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The announcement follows more than a year of fighting over whether the Biden administration should return the $7 billion in Afghan assets that became inaccessible to the country’s leadership after the Taliban rose to power in August 2021. Economists say the freezing of these funds fueled the collapse. Afghanistan’s economy and its hunger crisis, but the Biden administration and other analysts have said the Taliban cannot be trusted to administer such large sums of money. Biden officials also announced in February that half of the $7 billion in funds would be earmarked separately for litigation filed by victims of the Sept. 11, 2001, terrorist attacks.

The deteriorating Afghan economy has put pressure on US officials to explore how they could return the funds to the country’s central bank. In June, U.S. officials met with Taliban leaders in Doha, Qatar, to discuss possible compromises that would allow Afghan central bank technocrats to use the funds under close scrutiny to ensure the money does not fall. not in the hands of the Taliban. The Taliban rejected these proposals. In a statement, the Afghan central bank strongly criticized the administration’s decision as “unacceptable” and urged to return the reserves “to the Afghan people”.

With an elusive deal, economists and aid groups have grown increasingly concerned about Afghanistan’s economy amid an exodus of capital and people. Human Rights Watch estimated in August that about 90 percent of the country was going hungry. Some economists say the new fund is insufficient to meet the country’s needs, given that central bank reserves are essential to support a crashing currency. A severe drought and a devastating earthquake have also combined to create what some experts have called the world’s biggest humanitarian disaster.

“This decision can in no way compensate for the damage caused to the Afghan economy and to the millions of people who are starving, in large part due to the United States’ confiscation of Afghan central bank reserves,” he said. said Mark Weisbrot, co-director of the Center for Economic and Policy Research, a liberal think tank.

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Yet the United States leaves open the possibility that Afghanistan could eventually recover all of the bank assets. Deputy Treasury Secretary Wally Adeyemo sent a letter to the Afghan central bank on Tuesday saying it must meet three conditions – demonstrate political independence from the Taliban, implement anti-money laundering guidelines money and add a “third party monitor” – before the US could consider returning the funds. US officials say the Taliban have refused to take steps to ensure the funds are returned and the country regains economic stability.

“Flaws in economic management contribute to the economic and humanitarian crisis in Afghanistan,” Adeyemo wrote in the letter.

He added, “There is currently no institution in Afghanistan that can guarantee that these funds will only be used for the benefit of the Afghan people.”

Luftullah Lutf contributed reporting from Kabul.

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