A Taliban fighter walks past a beauty saloon with images of women defaced using a spray paint in Shar-e-Naw in Kabul on August 18, 2021. (AFP)

US halted dollar shipments to Afghanistan to keep cash out of Taliban’s hands

The U.S. is also blocking Taliban access to government accounts managed by the Federal Reserve and other U.S. banks and working to prevent the group’s access to nearly half-billion dollars-worth of reserves at the International Monetary Fund, according to those people.

The actions represent the last vestiges of diplomatic leverage Washington hopes will help prevent a deepening political and humanitarian crisis.

“Any central bank assets the Afghan government has in the United States will not be made available to the Taliban,” a Biden administration official said.

As the Taliban took over several provincial areas across the country and made its way toward Kabul last week, the U.S. Treasury Department made an emergency decision to work with the Federal Reserve Bank of New York to halt shipment of the sealed pallets of cash. Although the U.S. and other allied governments haven’t recognized the Taliban as the legitimate government of Afghanistan, its control of the main organs of the state, including the central bank and other offices that house government coffers, make it the de facto power.

“As a matter of policy we do not acknowledge or discuss individual account holders,” a New York Fed official told the Journal. “We do, as a general practice, communicate with the appropriate U.S. government agencies to monitor events that may impact control of a foreign central bank,” the official said.

Ajmal Ahmady, Afghanistan’s central bank chief, who fled the country on Sunday, said in an interview that he learned on Friday that no more dollar shipments would be arriving, but he declined to comment further on the decision. He said the central bank has approximately $9 billion in reserves, nearly all of which are held outside the country.

With the U.S. move to block access to those reserves, “the amount accessible to the Taliban is almost 0.1%,” Mr. Ahmady said Tuesday.

Mr. Ahmady said that bank officials began reducing the amount of cash, including U.S. dollars, held at bank branches in provincial centers earlier this month amid concerns over the Taliban’s advance. By the time the first major provincial capital fell to the Taliban nearly two weeks ago, nearly all U.S. dollars had been repatriated, he said.

“During this entire period, no dollars fell into the hands of Taliban before Kabul fell,” Mr. Ahmady said. “All of it was secured.”

Still, the speed with which Taliban fighters took over the country surprised bank officials. Mr. Ahmady said he spent Friday working to secure local branch vaults and protect central bank staff, as well as take stock of the potential economic fallout and on Saturday met with private banks and market exchanges to try to quell panic over dwindling currency supply.

“We were still having a medium-term view at that time,” he said. “Even with the fall of these provinces, I don’t think anyone had the expectation that by Sunday, everything would fall.”

The IMF didn’t comment.

The Biden administration is also working to block other assets overseas.

Secretary of State Antony Blinken on Sunday warned that the U.S. would use its financial power in an effort to pressure the Taliban on several fronts, including through sanctions and financial aid that has been critical to keeping the Afghan economy afloat.

“Support from the international community, none of that will be forthcoming,” Mr. Blinken said. “Sanctions won’t be lifted, their ability to travel won’t happen, if they’re not sustaining the basic rights of the Afghan people and if they revert to supporting or harboring terrorists who might strike us,” he said.

Afghanistan’s reserve accounts at the world’s emergency lender will swell Monday by more than $450 million as part of a broader replenishment of bailout reserves at the IMF. As the de facto government, the Taliban could seek to tap that reserve, particularly as the nation faces a potential economic collapse.

But, the U.S., the IMF’s most powerful shareholder, is working to prevent that from happening, said the people familiar with the matter. Officially recognizing a country’s government as legitimate is a decision that the IMF’s collective membership would have to make. The lack of clarity on that matter, say former U.S. Treasury officials, will prevent the Taliban’s immediate access to the money.

Even if the Taliban gets access to the IMF account, it would require another country to exchange the IMF unit of lending into usable currency. China and Russia both have made political and economic overtures to the Taliban in recent years, including in actions favorable to the Taliban as members of the United Nations Security Council.

The U.S. government has sanctioned the Taliban as a terrorist organization, as have the U.N. and European Union. The Taliban’s seizure of the Afghan organs of state in Kabul effectively extends those sanctions to those institutions, some former Treasury officials and analysts said.

Because foreign banks and firms conducting transactions with the Afghan government now risk being penalized for doing business with the Taliban, cross-border trade and finance is expected to come to an abrupt halt, those people said.

Another powerful economic weapon that some former Treasury officials said is under consideration is declaring the entire country a sanctioned jurisdiction, as Washington has done with North Korea and Iran.

Afghanistan’s central bank has burned through nearly $700 million in foreign exchange reserves in the first few months of the year trying to prevent the country’s currency from collapsing, a circumstance that would spark hyperinflation, among other economic crises.


This story has been published from a wire agency feed without modifications to the text

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