{"id":202267,"date":"2022-01-03T12:00:01","date_gmt":"2022-01-03T12:00:01","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=202267"},"modified":"2021-12-29T05:16:37","modified_gmt":"2021-12-29T05:16:37","slug":"humanitarian-exemptions-to-crushing-u-s-sanctions-do-little-to-prevent-collapse-of-afghanistans-economy","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2022\/01\/humanitarian-exemptions-to-crushing-u-s-sanctions-do-little-to-prevent-collapse-of-afghanistans-economy\/","title":{"rendered":"Humanitarian Exemptions to Crushing U.S. Sanctions Do Little to Prevent Collapse of Afghanistan\u2019s Economy"},"content":{"rendered":"

More Afghan people may die from sanctions than from 20 years of war.<\/em><\/strong><\/p>\n

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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.
Photo: Mohd Rasfan\/AFP\/Getty Images<\/p><\/div>\n

28 Dec 2021 – <\/em>When the U.S. pulled out of Afghanistan in August, ceding to the Taliban, the country\u2019s economy began a severe contraction \u2014 what the Financial Times calls \u201cone of the worst economic meltdowns in history.\u201d The sprawling crisis has left nearly 23 million people in extreme hunger, and at least\u00a01 million children under the age of\u00a05 are now facing the immediate threat of starvation, according to the United Nations.<\/p>\n

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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 selling their children<\/a> in order to feed their families.<\/p>\n<\/div>\n

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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 \u201cthrough legitimate and transparent channels\u201d via official sanction exemption licenses.<\/p>\n

But those humanitarian exemptions, overseen by the Treasury\u2019s 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\u00a020 years of U.S.-backed war and occupation.<\/p>\n

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>\n

\u201cNone 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,\u201d said Shah Mehrabi, a member of Afghanistan\u2019s central bank board. \u201cThe 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.\u201d<\/p>\n<\/div>\n

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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.
Photo: Loey Felipe\/UN Photo\/Xinhua News Agency\/Getty Images<\/p><\/div>\n<\/div>\n<\/div>\n

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OFAC has issued licenses for medicine, remittances, education salaries, and other forms of humanitarian assistance. Additional licenses released last week 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\u2019s domestic economy faces impending failure, a problem that cannot be solved by \u201cmerely allowing humanitarian aid to flow.\u201d<\/p>\n

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. \u201cWe\u2019re talking about an economy that\u2019s going to collapse if Treasury does not clarify what could be done to the liquidity issue,\u201d said Mehrabi.<\/p>\n

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 law firms<\/a> quickly alerted<\/a> international\u00a0institutions<\/a>\u00a0across 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>\n

\u201cEven 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,\u201d noted a client alert<\/a> from the law firm Nichols Liu.<\/p>\n

Contractors and businesses, the firm noted, can expect banks to \u201cde-risk from Afghanistan,\u201d meaning that fund transfers to or from Afghanistan \u201cwill 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.\u201d<\/p>\n<\/div>\n

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\u201cThe banking industry is reading [the sanctions] as, \u2018The entire government is now the Taliban.\u2019\u201d<\/strong><\/em><\/div>\n<\/blockquote>\n
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\u201cThe banking industry is reading [the sanctions] as, \u2018The entire government is now the Taliban,\u2019\u201d a former U.S. Treasury Department official told<\/a> the Crisis Group.<\/p>\n

The far-reaching sanctions, along with a Biden administration decision to freeze nearly $10 billion of Afghanistan\u2019s 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>\n<\/div>\n

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Afghans are streaming across the border into Iran, driven by desperation after the near collapse of their country\u2019s economy. A Taliban fighter checks passports at the Afghanistan-Iran border crossing of Islam Qala, on Nov. 24, 2021.
Photo: Petros Giannakouris\/AP<\/p><\/div>\n<\/div>\n<\/div>\n

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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 \u201cU.S. has choked all the funding lines to Afghanistan,\u201d reported Agarwal, according to a transcript of the call.<\/p>\n

\u201cSanctions are intended to have a chilling effect, in that sanctions will always go beyond the face of the text,\u201d said Adam Weinstein, a research fellow with the Quincy Institute for Responsible Statecraft. \u201cNo 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.\u201d<\/p>\n

Last week,\u00a040 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. \u201cNo 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\u2019 salaries, and other severe consequences that are rippling throughout Afghan society, harming the most vulnerable,\u201d noted the letter<\/a>, led by Reps. Pramila Jayapal, D-Wash.; Sara Jacobs, D-Calif.; and Jes\u00fas G. \u201cChuy\u201d Garc\u00eda, D-Ill.<\/p>\n<\/div>\n

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The letter also called on the administration to provide clarity to financial institutions, including what\u2019s known as \u201ccomfort letters\u201d from the Treasury Department to reassure banks that they may engage in commerce without risk of violating sanctions.<\/p>\n

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\u00a0the Afghanistan economy.<\/p>\n

\u201cIn 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,\u201d\u00a0reads an FAQ on the Treasury site that Finkelstein sent. \u201cTherefore, 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.\u201d<\/p>\n

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 \u201cdoesn\u2019t really understand who they are going after.\u201d<\/p>\n<\/div>\n

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\u201cThe OFAC licenses never work, never will.\u201d<\/strong><\/em><\/div>\n<\/blockquote>\n
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\u201cThat fear of the unknown,\u201d said Shumacher, \u201cis what prompts this massive blanket sanction regime that has resulted in the tragedy that we are seeing.\u201d<\/p>\n

\u201cThe OFAC licenses never work, never will,\u201d added Shumacher. \u201cThe moment that the banks see any sanction or any sort of restriction, they just walk away from doing any transactions. That\u2019s what\u2019s 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.\u201d<\/p>\n<\/div>\n

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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>\n

The Washington Post reported<\/a> in 2012 that despite OFAC licenses allowing the exports of medicine to Iran, exports of medicine quickly dwindled. \u201cThe exemption of medicine from sanctions is only in theory,\u201d one Iranian importer told the Post. \u201cInternational banks do not accept Iran\u2019s money for fear of facing U.S. punishment.\u201d<\/p>\n

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 demands<\/a> that the administration go even further in sanctioning the Taliban, including any foreign governments that provide support to Afghanistan.<\/p>\n

Earlier this month, the Intercept 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>\n

\u201cI think we need to get aid to the Afghan people, but also I think it\u2019s the responsibility of the Taliban government to comply with what needs to be done,\u201d 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>\n<\/div>\n

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\u201cWe\u2019ve deluded ourselves into thinking that sanctions are precise. They\u2019re not.\u201d<\/strong><\/em><\/div>\n<\/blockquote>\n
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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>\n

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>\n

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>\n

In 1996, CBS \u201c60 Minutes\u201d 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\u2019s government. \u201cIs the price worth it?\u201d asked Stahl. \u201cI think this is a very hard choice,\u201d replied Albright. \u201cBut the price \u2014 we think the price is worth it.\u201d<\/p>\n

\u201cWe\u2019ve deluded ourselves into thinking that sanctions are precise,\u201d said the Quincy Institute\u2019s Weinstein. \u201cThey\u2019re not. They\u2019re not a precision weapon. They\u2019re a blunt force, economic weapon that essentially kills civilians.\u201d<\/p>\n

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Lee Fang<\/a> – lee.fang@\u200btheintercept.com<\/a><\/em><\/p>\n<\/div>\n<\/div>\n

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Go to Original – theintercept.com<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

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