According to people familiar with the matter, when Taliban fighters are about to seize control of the Afghan capital Kabul, the Joe Biden government last week cancelled a large number of US banknotes originally scheduled to be shipped to Afghanistan. This is the US government’s efforts to avoid hundreds of millions of dollars. One of the moves that fell into the hands of this terrorist organization.
According to these people familiar with the matter, the United States is also preventing the Taliban from accessing Afghanistan government accounts managed by the Federal Reserve and other U.S. banks, and trying to prevent the Taliban from obtaining nearly $500 million in reserves in the International Monetary Fund (IMF).
These are the few diplomatic methods that Washington hopes to avoid deepening the political and humanitarian crisis.
An official in the Biden administration said: “Afghan government will not provide any assets of the Federal Reserve to the Taliban.”
Last week, when the Taliban occupied several provincial areas in Afghanistan and marched towards Kabul, the U.S. Treasury Department made an urgent decision to cooperate with the Federal Reserve Bank of New York to stop the delivery of large amounts of cash in sealed transport pallets. Although the governments of the United States and other US allies have not yet recognized the Taliban as the legitimate government of Afghanistan, the Taliban has controlled major state agencies, including the central bank and other offices that store government funds, and become the de facto in power.
An official from the Federal Reserve Bank of New York told the Wall Street Journal reporter: “As a policy, we neither recognize nor discuss individual account holders.” The official said: “As a general practice, we will indeed contact the appropriate US Government agencies communicate to monitor events that may affect the control of foreign central banks.”
Ajmal Ahmady, the governor of the Afghan central bank, who fled the country on Sunday, said in an interview that he learned last Friday that no more U.S. dollars will arrive in Afghanistan. But he declined to comment further on this decision of the United States. He said that the central bank of Afghanistan has about 9 billion U.S. dollars in reserves, almost all of which are abroad.
Ahmadi said on Tuesday that with the U.S. blocking the use of these reserves, “the amount available to the Taliban is almost 0.1% of these reserves.”
Ahmadi said that due to concerns about the Taliban’s offensive, bank managers earlier this month began to reduce the amount of cash held in branches in provincial capitals, including U.S. dollars. He said that by the time the first major capital city fell into the hands of the Taliban nearly two weeks ago, almost all the dollars had been returned.
“During this period, before the fall of Kabul, the Taliban did not receive any cash in US dollars,” Ahmadi said. “All dollars are safe.”
Nevertheless, the speed of the Taliban militants in Afghanistan was beyond the expectations of bank managers. Ahmadi stated that his job last Friday was to ensure the safety of local branches’ treasury, protect central bank staff, and assess potential economic impact. Last Saturday he met with private banks and exchanges to try to calm the currency market. Panic of reduced supply.
“At that time, we were still working in accordance with a mid-term assessment,” he said. “Even after the fall of these provinces, I don’t think anyone would have expected that the Taliban would take the whole territory by Sunday.”
The IMF declined to comment.
The Biden government is also taking steps to prevent the Taliban from acquiring other overseas assets.
US Secretary of State Antony Blinken warned on Sunday that the United States will use its own economic power to pressure the Taliban in several ways, including sanctions and economic assistance that is vital to maintaining the operation of the Afghan economy.
Blinken said: “If the Taliban do not uphold the basic rights of the Afghan people, if they re-support or harbor terrorists who may attack us, then the international community will not provide any support, and sanctions and travel bans will not be lifted.”
As part of the IMF’s overall rescue reserve replenishment plan, Afghanistan’s funds in the IMF’s reserve account will increase by more than $450 million next Monday. As the de facto government of Afghanistan, the Taliban may seek to use this reserve fund, especially when the country may face economic collapse.
But people familiar with the matter said that the United States, the largest shareholder of the IMF, is working hard to prevent this from happening. To decide to officially recognize the legitimacy of a government, all members of the IMF must agree. The former U.S. Treasury Department official stated that if this issue is unclear, the Taliban will not receive the funds for the time being.
Even if the Taliban can gain access to Afghanistan’s IMF reserve account, another country will need to help convert the unit of account of the funds allocated by the IMF into usable currency. In recent years, both China and Russia have shown their favor to the Taliban politically and economically, including as a member of the UN Security Council, they have made some moves that are beneficial to the Taliban.
The U.S. government has treated the Taliban as a terrorist organization for sanctions, as have the United Nations and the European Union. Some former U.S. Treasury Department officials and analysts stated that the Taliban’s seizure of the Afghan state institutions in Kabul is equivalent to extending the relevant sanctions to these institutions.
The above-mentioned people said that because foreign banks and companies that conduct transactions with the Afghan government may now be punished for doing business with the Taliban, cross-border trade and finance are expected to stop abruptly.
According to some former U.S. Treasury Department officials, another powerful economic weapon under consideration is to declare the whole of Afghanistan as a sanctioned jurisdiction, just as the U.S. government did with North Korea and Iran.
The Central Bank of Afghanistan has burned nearly US$700 million in foreign exchange reserves in the first few months of this year to prevent the collapse of the national currency. If the currency collapses, it will trigger economic crises such as hyperinflation.
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