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Wednesday, August 17, 2022

In defiance of the Taliban’s demands, President Biden moves to divide $7 billion in frozen Afghan funds

According to officials familiar with the internal deliberations, President Biden will begin to clear a legal path for certain relatives of victims of the September 11th attacks to pursue $3.5 billion from assets that Afghanistan’s central bank had deposited in New York before the Taliban took over the country, according to officials familiar with the internal deliberations.

As part of the emergency powers, Mr. Biden will issue an executive order to consolidate and freeze all $7 billion of the Afghan central bank’s assets in New York, according to officials. He will also ask a judge to allow the transfer of the remaining $3.5 billion into a trust fund for the purpose of paying for immediate humanitarian relief efforts in Afghanistan.

The very unusual combination of actions, which are anticipated to be unveiled on Friday, is intended to solve a complex knot of legal, political, foreign policy, and humanitarian issues that have arisen as a result of the attacks and the conclusion of the United States’ 20-year war with Afghanistan.

When the Afghan government collapsed in August, with top officials fleeing the country, including its president and the acting governor of its central bank, it left behind slightly more than $7 billion in central bank assets on deposit at the Federal Reserve Bank of New York, according to the International Monetary Fund. Because it was no longer obvious who — if anybody — had legal right to get access to that account, the Fed decided to make the money inaccessible for withdrawal until the situation could be clarified.

Following their takeover of Afghanistan, the Taliban promptly claimed ownership of the funds Nonetheless, a group of families of 9/11 victims, one of numerous groups who had obtained default judgments against the organisation in once-seemingly hopeless cases years earlier, attempted to seize the property in order to pay off that obligation. The group was successful.

Meanwhile, Afghanistan’s economy has been failing, resulting in widespread famine, which in turn has resulted in a massive and destabilising new surge of migrants – indicating an obvious need for significant investment in humanitarian aid.

People familiar with the situation said that the White House’s National Security Council oversaw months of deliberations on the central bank funds that included top officials from departments such as Justice, State, and Treasury. They spoke on the condition of anonymity to discuss a sensitive matter that has not yet been made public.

Approximately one-fifth of it came from foreign currency money that had amassed during the previous 20 years – a period during which the United States and other Western countries made major donations to Afghanistan, which assisted in the generation of that activity.

The central bank also holds around half a billion dollars in reserves for commercial banks in Afghanistan, which are required by law to preserve a specific percentage of their deposits with the central bank, which includes the savings of ordinary Afghan citizens. Those assets are held by Da Afghanistan Bank, yet the bank owes the same amount to the commercial banks as it does to the Afghan government.

Following the Taliban’s takeover of Afghanistan, they chose their own official to head the central bank and asked that the money kept in New York be released as soon as it was possible. To the contrary, under long-standing terrorist sanctions imposed by the United States, it is prohibited to conduct financial transactions with them or on their behalf.

Another alternative has been to leave the assets in place, attracting attention for what is expected to be years, if not decades, until the Taliban is forced out of power and a more regular government is established.

Although Mr. Biden will seek to direct the remaining funds to a trust fund that will be used to provide food and other assistance in Afghanistan — while keeping the funds out of the hands of the Taliban — it is unclear whether this will be possible if Mr. Biden is granted a partial stay of execution. According to the sources, putting up the fund and ironing out the technicalities would take many months to complete.

It is very rare for the government of the United States to seize control of a foreign country’s assets while on home land. A two-part legal procedure for Mr. Biden to produce that conclusion is alleged to have been contemplated by administration officials.

Because of a scarcity of actual cash, the minority of Afghans who have bank accounts have been forced to limit the amount of money they may take from their savings. Making more money accessible, according to experts, would certainly result in an increase in capital flight: As Afghans’ trust in the country’s future dwindles, an increasing number of Afghans are relocating their assets overseas.

Because of concerns about breaking Taliban-imposed restrictions, certain remittances and other foreign money transfers have been postponed, as have previously scheduled imports of products and services.

Against this background, Afghanistan’s currency has suffered a significant decline in value, affecting millions of people who were already living on the verge of famine in their capacity to get sufficient nourishment.

Following a deterioration in the situation, the Treasury Department has taken steps to grant some exceptions to the sanctions, including allowing the money transfer company MoneyGram to send money to Afghanistan so long as the money does not benefit anyone on a list of individuals who have been individually sanctioned as terrorists.

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