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Afghanistan’s looming financial collapse is little worry for the Taliban

Two key factors will ensure that the Kabul regime is here to stay – no matter how dire it gets for civilians

Paul Rogers author pic
Paul Rogers
27 November 2021, 12.00am
International aid has ceased under Taliban rule
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Majority World CIC/Alamy Stock Photo. All rights reserved

Before the Taliban takeover of Kabul three months ago, three-quarters of Afghan public expenditure came from international donor assistance, including most public-sector jobs in the medical, teaching, policing and legal sectors. Some of the aid was multilateral, with much of it delivered through UN agencies such as UNICEF, while other support came from non-government groups such as Médecins Sans Frontières (MSF, or Doctors Without Borders). This assistance made up 43% of Afghan GDP – and most of it ceased within days of the Taliban forming a government.

Some UN agencies and a few NGOs are continuing to provide aid, and charities may be feeding money into the country, but reserves in the US held by the previous government are frozen and the overall picture in Afghanistan is of a near-collapse of the economy – with levels of hardship at risk of tipping over into a catastrophe as the winter takes hold.

Reuters reported this week: “The United Nations on Monday pushed for urgent action to prop up Afghanistan’s banks, warning that a spike in people unable to repay loans, lower deposits and a cash liquidity crunch could cause the financial system to collapse within months.”

Abdallah al Dardari, head of the United Nations Development Programme in Afghanistan, told Reuters: “We need to find a way to make sure that if we support the banking sector, we are not supporting [the] Taliban. We are in such a dire situation that we need to think of all possible options and we have to think outside the box. What used to be three months ago unthinkable has to become thinkable now.”

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There is little sign of that new thinking so far, and while more help may start to trickle through, especially via UN agencies, most Western countries, including those that have fought two decades of failed war, are refusing to provide general assistance to the country.

Their grounds for refusal are that any such help involves working directly with the Taliban government, and that is wholly unacceptable. And there is widespread sympathy for that view, especially in relation to the post-takeover position of women, so graphically described in Mahzad Elyassi’s recent report for openDemocracy.

The West backs off

Despite the fact that the West could intervene, the Taliban are generally being blamed for the impending crisis. The determination to resist formal diplomatic contact remains firm, and although some talks continue in Doha, these partly relate to the US fear of an al-Qaida resurgence.

What does that mean for the near future? Is the Taliban regime heading for collapse in the face of a humanitarian disaster? In even thinking that, any Western politician, policymaker or commentator needs to understand two key elements – one is linked to various factors in Afghanistan’s regional dealings with its neighbours, and the other is on the national level within the country. The two elements together make it likely that the Kabul regime is here to stay.

On the regional level, Russia sees the 20-year Western defeat as useful in terms of its own status, and so will be keen to avoid the collapse of Afghanistan into a failed state. It has a particular interest in Afghan drug production and trafficking. The drug issue is also of major concern to Iran. Although it is also satisfied with the West’s poor results, it fears a failed state on its border and losing its many links in Herat and across much of western Afghanistan.

Both Russia and Iran lack the means to pump substantial financial assistance into Afghanistan, but they are likely to privately support any UN initiatives. Insofar as it has influence, Russia will no doubt use its continuing diplomatic presence in Kabul to encourage some moderation in the regime, not least on women’s rights, but the influence is likely to be minimal.

Two other countries in the frame are Pakistan and China. The Islamabad government may downplay its influence in Kabul, but its powerful Inter-Services Intelligence organisation and armed forces have substantial influence on the Taliban. Pakistan’s main concern is to maintain stability.

In the short term, Pakistan has been the main winner in the Taliban takeover, primarily because India has been the main loser. For Pakistan, a failed state to its west would be a disaster, allowing India a possible re-entry, and so any risk of a Taliban collapse will therefore be met with plenty of military aid.

The Taliban control Afghanistan’s drug production – this is a key source of income given that the country is estimated to produce 83% of all the world’s opiates

The key external actor in all of this is China, due to its narrow but direct physical link with Afghanistan via the Wakhan Corridor, as analysed in this column in August. The Beijing government has played it cautiously to date – not giving any hints of plans to construct an all-weather route into the corridor, but this is sure to come in the future.

China’s main concern remains with Uyghur separatists and paramilitary groups present in both Afghanistan and Tajikistan. Last month, it announced $8.5m in support for a new police base in Tajikistan, near its border with Afghanistan. China already operates a joint military base with the Tajiks on their side of the border with Xinjiang province. If a close relationship with Kabul does develop, then both will have much to gain, but in the short term, Beijing’s caution remains the key factor.

So, as winter approaches, just how secure is the Taliban regime? This is where the national situation within Afghanistan becomes so significant. It is at least a decade since the Taliban started their slow takeover of much of rural Afghanistan. In doing so, as Peter Chalk writes in the recently released December 2021 print edition of Jane’s Intelligence Review, the Taliban steadily increased their stake in the key financial source that puts them in a much stronger position than commonly realised – illicit drug production and distribution.

With full control now in their hands, the Taliban oversee the country’s opium production and refinement. Included in this is Helmand Province, the source of more than 50% of overall Afghan opiate production. According to Chalk’s article, the UN Office on Drugs and Crime’s ‘World Drug Report 2021’ estimates that Afghanistan is the source of 83% of all the world’s opiates, generating as much as 11% of the country’s GDP. Moreover, poppy cultivation in 2020 increased in areas under cultivation by 37%.

Opium production is dispersed across rural Afghanistan, largely in the hands of small-scale farmers, so the Taliban were able to gain wide-ranging control of output by becoming increasingly embedded in rural areas.

A further development in the past five years has been the increased production of methamphetamines (e.g. crystal meth) in the country. The main source is the wild plant Ephedra sinica, long used in Chinese and Indian medicine to treat colds and congestion. This low-growing evergreen shrub is common in mountainous areas in central Afghanistan, and ephedrine can be extracted from it. Production and processing are far cheaper in Afghanistan than in South-East Asia, which is one of the reasons that the Afghan trade is expanding rapidly.

The Taliban’s control of drug production means that no matter what state the national economy is in, they will enjoy healthy revenue streams. They are estimated to receive 60% of operational income from taxing opiate production and transport, with ephedrine a further likely source of income in future. This, along with regional relations, means that the Taliban have two key sources of support to count on. That is little comfort to Afghans facing their rule, especially at a time of potential economic collapse, but simply has to be factored into any Western attempt to influence the regime.

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