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<a class="gmail-domain gmail-reader-domain" href="https://theintercept.com/2021/12/28/afghanistan-economy-collapse-us-sanctions/">theintercept.com</a>
<h1 class="gmail-reader-title">Humanitarian Exemptions to Crushing U.S. Sanctions Do Little to Prevent Collapse of Afghanistan’s Economy</h1><div>
<h2 class="gmail-Post-excerpt">More Afghan people may die from sanctions than from 20 years of war.</h2>
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<div class="gmail-PostByline-names"><a class="gmail-PostByline-link" rel="author" href="https://theintercept.com/staff/leefang/"><span>Lee Fang</span></a><span> - December 28, 2021</span><br></div><span class="gmail-PostByline-date"><span></span></span>
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<div class="gmail-moz-reader-content gmail-reader-show-element"><div id="gmail-readability-page-1" class="gmail-page"><div><div><p><u>When the U.S.</u>
pulled out of Afghanistan in August, ceding to the Taliban, the
country’s economy began a severe contraction — what the Financial Times
calls “one of the worst economic meltdowns in history.” The sprawling
crisis has left nearly 23 million people in extreme hunger, and at
least 1 million children under the age of 5 are now facing the immediate
threat of starvation, according to the United Nations.</p>
<p>As commerce ground to a halt, food and fuel prices skyrocketed, in
large part due to economic sanctions placed on the Taliban by the U.S.
As many as 300,000 Afghans have fled to neighboring Pakistan, and many
more refugees may soon leave the country. There are even reports that
some Afghans have resorted to <a href="https://nypost.com/2021/12/13/desperate-mom-in-afghanistan-forced-to-sell-her-twin-baby-for-104-so-she-can-save-the-other/">selling their children</a> in order to feed their families.</p></div><div><p>The
Biden administration defends the sanctions by pointing to a series of
exemptions designed to allow humanitarian aid. The Treasury Department
has touted its role as a leading humanitarian donor to the people of
Afghanistan and its work to ensure that funds flow “through legitimate
and transparent channels” via official sanction exemption licenses.</p>
<p>But those humanitarian exemptions, overseen by the Treasury’s Office
of Foreign Assets Control, are nowhere near enough, according to experts
who spoke to The Intercept. The OFAC licenses, including new licenses
released December 22, have not curbed the global chilling effect of the
sanctions and are ineffective in preventing a spiraling disaster that
could kill more Afghan people than nearly 20 years of U.S.-backed war
and occupation.</p>
<p>Businesses and individuals that violate U.S. sanctions on the Taliban
risk steep fines and criminal penalties. The broad sanctions imposed by
the U.S. lack specificity and raise the possibility that routine
commercial activities in Afghanistan could fall under sanctions policy.</p>
<p>“None of these OFAC licenses, none of them, addresses the issue of
international banks in their dealing with Afghan banks, hesitancy to
deal with Afghan taxes, banking transactions for commercial imports,”
said Shah Mehrabi, a member of Afghanistan’s central bank board. “The
sanctions have created a lot of fear in the minds of those who do not
want to go ahead and engage in taking this particular risk.”</p></div><div><p><img src="https://theintercept.imgix.net/wp-uploads/sites/1/2021/12/GettyImages-1237393913.jpg?auto=compress%2Cformat&q=90&w=1000&h=667" alt="The UN Security Council votes on a draft resolution to allow a humanitarian exception in Afghanistan sanctions regime, at UN Headquarters in New York, on Dec. 22, 2021. The UN Security Council on Wednesday adopted a resolution to exempt humanitarian assistance in Afghanistan from an asset freeze against designated leaders of the Taliban and associated entities. (Loey Felipe/UN Photo/Handout via Xinhua)" style="margin-right: 0px;" width="427" height="285"></p><p class="gmail-caption">The
UN Security Council votes on a draft resolution to allow a humanitarian
exception in Afghanistan sanctions regime, at UN Headquarters in New
York, on Dec. 22, 2021.</p>
<p class="gmail-caption">
Photo: Loey Felipe/UN Photo/Xinhua News Agency/Getty Images</p></div><div><p>OFAC
has issued licenses for medicine, remittances, education salaries, and
other forms of humanitarian assistance. Additional licenses released
last week <a href="https://home.treasury.gov/news/press-releases/jy0545">allow</a>
exemptions for education funds and expand the scope of U.S. funds to
aid organizations in Afghanistan. Mehrabi, who teaches economics at
Montgomery College in Maryland, noted that much of Afghanistan’s
domestic economy faces impending failure, a problem that cannot be
solved by “merely allowing humanitarian aid to flow.”</p>
<p>The Treasury Department, added Mehrabi, has focused on piecemeal
humanitarian exemptions and has not addressed the central issue of how
Afghanistan can import and export goods, collect taxes, and pay
salaries. “We’re talking about an economy that’s going to collapse if
Treasury does not clarify what could be done to the liquidity issue,”
said Mehrabi.</p>
<p>When the Taliban seized control of Afghanistan in August, U.S.
sanctions imposed since 2002 that criminalize any form of support for
the Taliban as a Specially Designated Global Terrorist group suddenly
meant that penalties could apply to leaders of a sovereign state. As
U.S. forces withdrew, American <a href="https://www.lexology.com/library/detail.aspx?g=8722b5dd-85f8-47b9-b735-5737e112a3f3">law firms</a> quickly <a href="https://www.mmlawus.com/newsitem/pdf/taliban_resurgence_in_afghanistan_raises_sanctions_issues_for_financial_institutions_and_money_transmitters_1072.pdf">alerted</a> international <a href="https://nicholsliu.com/wp-content/uploads/2021/08/2021.08.24-Article-on-Afghanistan-Sanctions.pdf">institutions</a> across
the globe that any business transaction in Afghanistan could risk
violating sanctions. Any routine tax payment or duty paid to an Afghan
bureaucrat could be construed as aiding and abetting the Taliban.</p>
<p>“Even if the Secretary of the Treasury does not specifically
designate the entire Government of Afghanistan, it will be very
difficult for contractors and grantees to know whether standard
transactions with the Government of Afghanistan, such as paying taxes,
permit fees, utility fees, import duties, or other routine payments will
result in funds passing to the Taliban or its leaders in control of
various branches of the Afghan government,” noted a <a href="https://www.documentcloud.org/documents/21169083-20210824-article-on-afghanistan-sanctions">client alert</a> from the law firm Nichols Liu.</p>
<p>Contractors and businesses, the firm noted, can expect banks to
“de-risk from Afghanistan,” meaning that fund transfers to or from
Afghanistan “will be intercepted by intermediary banks and blocked until
the contractor or grantee can demonstrate that the specific transfer to
and the use of funds in Afghanistan will comply with U.S. sanctions.”</p></div><blockquote><span></span><p>“The banking industry is reading [the sanctions] as, ‘The entire government is now the Taliban.’”</p></blockquote><div><p>“The
banking industry is reading [the sanctions] as, ‘The entire government
is now the Taliban,’” a former U.S. Treasury Department official <a href="https://reliefweb.int/sites/reliefweb.int/files/resources/317-afghanistans-humanitarian-catastrophe.pdf">told</a> the Crisis Group.</p>
<p>The far-reaching sanctions, along with a Biden administration
decision to freeze nearly $10 billion of Afghanistan’s central bank
national reserves, sent the economy into free fall. Payments to doctors
and police stopped. Hospitals ran out of medicine. Residents could not
withdraw bank deposits. Even a printing press in Poland contracted to
print afghanis, the local currency, could not deliver its shipment.</p></div><div><p><img src="https://theintercept.imgix.net/wp-uploads/sites/1/2021/12/AP21339625834137.jpg?auto=compress%2Cformat&q=90&w=1000&h=667" alt="A Taliban fighter checks passports at the Afghanistan-Iran border crossing of Islam Qala, on Wednesday, Nov. 24, 2021. Afghans are streaming across the border into Iran, driven by desperation after the near collapse of their country's economy following the Taliban's takeover in mid-August. In the past three months, more than 300,000 people have crossed illegally into Iran, according to the Norwegian Refugee Council, and more are coming at the rate of 4,000 to 5,000 a day. (AP Photo/Petros Giannakouris)" style="margin-right: 0px;" width="427" height="285"></p><p class="gmail-caption">Afghans
are streaming across the border into Iran, driven by desperation after
the near collapse of their country’s economy. A Taliban fighter checks
passports at the Afghanistan-Iran border crossing of Islam Qala, on Nov.
24, 2021.</p>
<p class="gmail-caption">
Photo: Petros Giannakouris/AP</p></div><div><p>Rajeev
Agarwal, the chief financial officer of KEC International, an Indian
firm tapped to build electric utility transmission lines in Afghanistan,
told investors in October that its five projects in the country
suddenly ceased payments in August. The “U.S. has choked all the funding
lines to Afghanistan,” reported Agarwal, according to a transcript of
the call.</p>
<p>“Sanctions are intended to have a chilling effect, in that sanctions
will always go beyond the face of the text,” said Adam Weinstein, a
research fellow with the Quincy Institute for Responsible Statecraft.
“No bank or business wants to walk right up to the line when it comes to
compliance with U.S. sanctions policy, given that these are risk-averse
institutions.”</p>
<p>Last week, 40 members of the House of Representatives wrote to
President Joe Biden urging him to ease sanctions and release Afghanistan
central bank funds controlled by the U.S. government. “No increase in
food and medical aid can compensate for the macroeconomic harm of
soaring prices of basic commodities, a banking collapse, a
balance-of-payments crisis, a freeze on civil servants’ salaries, and
other severe consequences that are rippling throughout Afghan society,
harming the most vulnerable,” noted the <a href="https://progressives.house.gov/_cache/files/7/9/79c380ca-661d-4158-9a88-f3a67ca24cdd/0C4CB37A3A6799AA59E3FCF4E01FCF3F.12-20-21-afghanistan-humanitarian-crisis-letter-1-.pdf">letter</a>, led by Reps. Pramila Jayapal, D-Wash.; Sara Jacobs, D-Calif.; and Jesús G. “Chuy” García, D-Ill.</p></div><div><p>The
letter also called on the administration to provide clarity to
financial institutions, including what’s known as “comfort letters” from
the Treasury Department to reassure banks that they may engage in
commerce without risk of violating sanctions.</p>
<p>The Intercept asked the Treasury Department for comment about the
concerns raised by the congressional letter, including whether the
agency has provided comfort letters to reassure banks that they would
not violate U.S. sanctions while facilitating transactions in
Afghanistan. Morgan Finkelstein, a spokesperson for the Treasury
Department, did not respond directly to the question about the comfort
letters and pointed to the existence of the OFAC exemption licenses to
respond to questions about concerns that U.S. sanctions are damaging the
Afghanistan economy.</p>
<p>“In contrast to sanctions programs administered and enforced by OFAC
with regard to North Korea, Cuba, Iran, Syria, and the Crimea region of
Ukraine, there are no comprehensive sanctions on Afghanistan,” reads an
FAQ on the Treasury site that Finkelstein sent. “Therefore, there are no
OFAC-administered sanctions that prohibit the export or reexport of
goods or services to Afghanistan, moving or sending money into and out
of Afghanistan, or activities in Afghanistan, provided that such
transactions or activities do not involve sanctioned individuals,
entities, or property in which sanctioned individuals and entities have
an interest.”</p>
<p>Kevin Schumacher, deputy executive director of the nonprofit Women
for Afghan Women, noted that banks and other multinational firms are
reluctant to pay large legal fees to review hundreds of pages of
Treasury Department guidelines with each client just to engage in
commerce with Afghanistan. The problem, he said, is that the U.S.
government “doesn’t really understand who they are going after.”</p></div><blockquote><span></span><p>“The OFAC licenses never work, never will.”</p></blockquote><div><p>“That
fear of the unknown,” said Shumacher, “is what prompts this massive
blanket sanction regime that has resulted in the tragedy that we are
seeing.”</p>
<p>“The OFAC licenses never work, never will,” added Shumacher. “The
moment that the banks see any sanction or any sort of restriction, they
just walk away from doing any transactions. That’s what’s happening now
with Afghanistan. The banks are not willing to take our business, and no
amount of OFAC licenses is going to satisfy their needs.”</p></div><div><p><img src="https://theintercept.imgix.net/wp-uploads/sites/1/2021/12/GettyImages-1237362995.jpg?auto=compress%2Cformat&q=90&w=1000&h=666" alt="KABUL, AFGHANISTAN - DECEMBER 21: Afghans holding banners take part in a protest and march towards former US embassy building demanding the release of Afghanistan's frozen assets and resuming international funds amid worsening economic conditions and rising poverty in the country in Kabul, Afghanistan on December 21, 2021. Following Taliban's takeover, international funds to Afghanistan were halted, and the country's assets abroad were frozen. (Photo by Bilal Guler/Anadolu Agency via Getty Images)" style="margin-right: 0px;" width="427" height="285"></p><p class="gmail-caption">Afghans
protest the former US embassy building demanding the release of
Afghanistan’s frozen assets and resuming international funds amid
worsening economic conditions in Kabul, Afghanistan, on Dec. 21, 2021.</p>
<p class="gmail-caption">
Photo: Bilal Guler/Anadolu Agency/Getty Images</p></div><div><p>In
the past, multinational corporations and banks have over-complied with
U.S. sanctions, ignoring OFAC licenses. Schumacher pointed out the
history with Iran: The U.S., while imposing stringent sanctions on Iran,
released OFAC licenses for the delivery of medicine and other medical
products. But banks, in fear of violating the U.S. sanctions, ignored
OFAC licenses and routinely blocked the trade of medicine and other
health care products to Iran.</p>
<p>The Washington Post <a href="https://www.washingtonpost.com/world/middle_east/sanctions-take-toll-on-irans-sick/2012/09/04/ce07ee2c-f6b2-11e1-8253-3f495ae70650_story.html">reported</a>
in 2012 that despite OFAC licenses allowing the exports of medicine to
Iran, exports of medicine quickly dwindled. “The exemption of medicine
from sanctions is only in theory,” one Iranian importer told the Post.
“International banks do not accept Iran’s money for fear of facing U.S.
punishment.”</p>
<p>There is little appetite among politicians in Washington, D.C., to
radically reverse course. The Biden administration, facing low public
approval ratings following the exit from Afghanistan and a tough
forecast for the 2022 midterm elections, may be continuing sanctions for
political reasons. Releasing the sanctions could be viewed as
recognition of the Taliban as the legitimate rulers of Afghanistan, a
symbolism that could cement negative attitudes about the administration
and its Afghanistan policy. Senate Republicans, led by Sen. Mitt Romney,
R-Utah, and Sen. Jim Risch, R-Idaho, have released <a href="https://www.romney.senate.gov/romney-colleagues-introduce-comprehensive-afghanistan-legislation">demands</a>
that the administration go even further in sanctioning the Taliban,
including any foreign governments that provide support to Afghanistan.</p>
<p>Earlier this month, the Intercept <a href="https://twitter.com/lhfang/status/1470522276130947073/video/1">attempted to speak</a>
to a number of senators, Democrats and Republicans, about U.S.
sanctions fueling widespread famine in Afghanistan. Many refused to talk
about the issue.</p>
<p>“I think we need to get aid to the Afghan people, but also I think
it’s the responsibility of the Taliban government to comply with what
needs to be done,” said Sen. Tammy Duckworth, D-Ill., without
elaborating. Sen. Josh Hawley, R-Mo., said any questions about
Afghanistan should be posed to Democrats and the Biden administration,
not Republicans.</p></div><blockquote><span></span><p>“We’ve deluded ourselves into thinking that sanctions are precise. They’re not.”</p></blockquote><div><p>The
Intercept also reached out to the offices of Sen. Rand Paul, R-Ky., and
Sen. Bernie Sanders, I-Vt., two vocal opponents of sanctions overreach
in the past, to comment on Biden administration sanctions on
Afghanistan. Neither responded.</p>
<p>Sanctions are often held up as a politically and morally viable
alternative to war. Not many Democrats want to revisit the issue of
Afghanistan, and few politicians on either side of the aisle would
recommend direct military engagement with the Taliban. But the ongoing
famine crisis and the destruction of what remains of the Afghan economy
could result in the deaths of millions of people.</p>
<p>The glib attitude among many in Washington toward the destruction
wrought by sanctions was captured in a memorable exchange with the
Clinton administration about its heavy-handed policies against Iraq.</p>
<p>In 1996, CBS “60 Minutes” anchor Lesley Stahl asked then-Secretary of
State Madeleine Albright about the half-million children in Iraq who
died from malnutrition because of U.S. sanctions against Saddam
Hussein’s government. “Is the price worth it?” asked Stahl. “I think
this is a very hard choice,” replied Albright. “But the price — we think
the price is worth it.”</p>
<p>“We’ve deluded ourselves into thinking that sanctions are precise,”
said the Quincy Institute’s Weinstein. “They’re not. They’re not a
precision weapon. They’re a blunt force, economic weapon that
essentially kills civilians.”</p></div></div></div></div>
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