The United States administration Sunday froze Afghan government reserves held in American banks, trying to cut the Taliban off from accessing billions of dollars after the militant group took control over the country, in a similar move the U.S. did for Venezuela, according to a report published Tuesday.
The report by The Washington Post cited people familiar with the matter who spoke on the condition of anonymity because they were not authorized to discuss government policy not yet made public.
The sources said the decision was made by U.S. President Joe Biden’s Treasury Secretary Janet Yellen and officials in the Treasury's Office of Foreign Assets Control. The State Department and White House were also involved in the decision, according to the report.
“Any central bank assets the Afghan government have in the U.S. will not be made available to the Taliban,” an administration official was cited by the report as saying.
Meanwhile, the Biden administration is expected to face hard choices over how to manage existing sanctions on the Taliban since this would make it difficult to deliver international humanitarian assistance to the civilians in Afghanistan.
The Taliban most recently has declared the war in Afghanistan over after taking control of the presidential palace in Kabul, while Western nations scrambled Monday to evacuate their citizens.
Afghan President Ashraf Ghani said Sunday, "The Taliban have won with the judgment of their swords and guns, and are now responsible for the honor, property and self-preservation of their countrymen," after fleeing the country as the militants entered the capital virtually unopposed, saying he wanted to avoid bloodshed. The ensuing hours saw hundreds of Afghans desperate to leave flood Kabul airport.
"Today is a great day for the Afghan people and the mujahideen. They have witnessed the fruits of their efforts and their sacrifices for 20 years," Mohammad Naeem, the spokesperson for the Taliban's political office, told Qatar-based media outlet Al-Jazeera TV. "Thanks to God, the war is over in the country," he said.
It took the Taliban just over a week to seize control of the country after a lightning sweep that ended in Kabul as government forces, trained for two decades and equipped by the United States and others at a cost of billions of dollars, melted away.
The country's central bank, Da Afghanistan Bank (DAB), is thought to hold foreign currency, gold and other treasures in its vaults, though the exact contents are unclear, according to an Afghan official who spoke to Reuters. Moreover, the vast majority of the assets are held outside Afghanistan, according to another source familiar with the matter, which may leave most of the DAB's assets beyond the militants' reach.
Reuters was unable to reach Afghan central bank officials. The bank's governor, Ajmal Ahmady, said in a Twitter thread he left deputies in charge of the bank Sunday, later flying out of Kabul Hamid Karzai International Airport after President Ghani and other key officials had already fled. Ahmady did not respond to Reuters' emails and messages seeking comment.
The Taliban said in a statement Saturday that the treasury, public facilities and government offices were the property of the nation and "should be strictly guarded."
The most recent financial statement posted online shows the DAB holding total assets of about $10 billion, including $1.3 billion-worth of gold reserves and $362 million in foreign currency cash reserves, according to currency conversion rates on June 21, the date of the report.
However, a big chunk of it won't be held in the country.
Central banks, especially in developing nations, often park their assets overseas with institution such as the Federal Reserve Bank of New York (FRBNY) or the Bank of England.
According to DAB's consolidated statement, the FRBNY held gold bars worth 101,770,256,000 afghanis – at the time $1.32 billion – on behalf of the Afghan central bank in its vaults by 2020's end.
The DAB's June statement also states that the bank owned investments worth $6.1 billion. While the latest report did not provide details of those investments, a breakdown in the year-end report showed that the majority of those investments were in the form of U.S. Treasury bonds and bills.
Investments were made through the International Bank for Reconstruction and Development (IBRD), an arm of the World Bank, or through the FRBNY and held in New York. Among its smaller items are shares in an investment pool by the Bank for International Settlement, which is based in Switzerland, as well as the Economic Cooperation Organisation Trade and Development Bank in Turkey.
Asked by Reuters about the holdings, a FRBNY official said the bank does not acknowledge or discuss individual account holders as a matter of policy, but is generally in contact with U.S. government agencies to monitor events that may impact control of a foreign central bank.
The DAB's foreign currency cash holdings worth around $362 million consist almost entirely of U.S. dollars and were held at the bank's head offices and branches as well as the presidential palace, which is now in the hands of the Taliban.
The year-end statement also details that just under $160 million worth of gold bars and silver coins were held at the bank's vault at the presidential palace.
The Afghan central bank's vaults are also home to 2,000-year-old gold jewelry, ornaments and coins known as the Bactrian Treasure, according to UNESCO. The around 21,000 ancient artifacts were presumed lost until 2003, when they were found in a secret vault in the central bank’s basement, having survived the previous era of Taliban rule undiscovered.
Afghan lawmakers in January floated the idea of sending the treasures abroad for safe keeping, warning they were vulnerable to theft, according to local broadcaster Tolo News.
Looking at the central bank's international reserves, the International Monetary Fund (IMF) estimated those at $9.5 billion in 2021 in its latest review published in June.
This translates into an import cover of more than 15 months – well above the three months seen as a safe minimum. The IMF said it considered the level of reserves "broadly adequate to risks facing Afghanistan."
A key question will be the handling of Afghanistan's share of a pending $650 billion allocation of Special Drawing Rights currency reserves to the Fund’s 190 member countries on Aug. 23.
The distribution of the SDRs, the Fund's unit of exchange based on dollars, euros, yen, sterling and yuan, aims to shore up the reserves of developing countries strained by the COVID-19 pandemic. As an IMF member, Afghanistan is eligible for an allocation of about $455 million, based on its 0.07% quota shareholding in the fund.
The militant group gaining access to those assets would be hard to digest in capitals around the globe, but not all countries have access to the SDRs they are allocated. In 2019, the IMF suspended Venezuela's access to its SDRs after more than 50 member countries representing a majority of the fund's shareholding refused to recognize Nicolas Maduro’s government as Venezuela’s legitimate ruler following disputed 2018 elections.
The fund has not responded to a request for comment on the pending SDR allocation to Afghanistan.
A source familiar with the matter said that IMF actions in such cases are guided by the views of its members. The IMF membership also has not reached a consensus on whether to recognize Myanmar's military leadership since they seized power in a February coup.
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