By Maria Bonaventure
President Biden recently signed an executive order to split $7 billion in Afghanistan’s frozen funds, using the powers conferred on him by the United States Constitution and other laws, including the International Economic Emergency Powers Act (IEEPA), the National Emergency Act (NEA), and the United States Code.
The executive order states that the property of the Central Bank of Afghanistan held in the United States with the Federal Reserve will be blocked and will require US financial institutions to transfer this property into a consolidated account held at the Federal Reserve Bank in New York. The Administration will seek to facilitate access to $3.5 billion of those assets for the benefit of Afghanistan’s people and future, pending for a judicial decision.
The executive order also states that the remaining other half of the frozen assets amounting to $3.5 billion will be utilized to settle the claims of the families of the 9/11 the victims.
According to the parlance of international banking, normally, the relationship between a customer and the banker is that of creditor-debtor or debtor-creditor. To describe it briefly, if a customer maintains a credit balance in his account or maintains a deposit account, the relationship between the customer and the banker is that of creditor-debtor. The relationship is reversed to debtor-creditor relationship when the customer is a borrower.
It must be clearly noted that the relationship between the Central Bank of Afghanistan and the Federal Reserve in New York is a creditor-debtor relationship in case of account balances and deposits maintained by the central bank of Afghanistan. Gold deposits are maintained in the hands of the Federal Reserve as a trustee. Hence both the account balances and deposits and the gold reserves maintained by the central bank of Afghanistan must be treated to have come in the hands of the Federal Reserve Bank in its capacity as a banker for safe custody. These assets held by the Federal Reserve should be considered as assets that should be returned, and hence, cannot be divided or settled against any other claims – unless otherwise stated.
In banking practice, account balances are set off or appropriated towards irregular loan accounts and if any amount has come in the hands of the banker in any other capacity, say as agent or as trustee, the same could not be set off or appropriated against any other claims.
The executive order goes on to state that even before the August 15 turmoil, Afghanistan’s economy was on the verge of collapse. Widespread corruption crippled sectors that should have been profitable. The economy of Afghanistan was dependent on donations from donor countries and was not self-dependent.
Afghanistan has relied heavily on humanitarian assistance in the past, from civilian pay to teachers’ salaries. International grants provided about 75 percent of public spending and 50 percent of government funding. For the implementation of any project, whether digitalization of banking activities or electronic payment activities relied only on financial assistance. The minimum income from the export of agricultural products or carpets was not enough to sustain Afghanistan’s economy.
During the 20-year period from 2001 to 2021, none of the powers at the helm took any precautionary steps to exploit Afghanistan’s vast mineral reserves. No initiative was taken to improve the country’s basic infrastructure, such as providing transportation and even drinking water.
The factsheet itself reflects the fact that even before the Taliban seized power in Afghanistan in August 2021, widespread corruption was rampant and, therefore, the previous rulers were not genuine and did not fight for the cause of the country and the people of Afghanistan. The factsheet, referred here, is the paper that was issued by the white house informing about the blocking of the reserves of the central bank of Afghanistan. It should be noted here that even Ashraf Ghani’s victory over his main rival ,Dr. Abdullah Abdullah, in the last elections was disputed.
The factsheet, followed by a presidential executive order, states that the United States has been working closely with the United Nations to “transfer” $280 million in World Bank assistance from the Afghanistan Reconstruction Trust Fund (ARTF) to the United Nations last December.
The main purposes for which the ARTF is meant for are (1) to finance, among others, recurrent civilian operating costs including civil servant salaries and operations and maintenance expenditures, and (2) to invest in development fund aimed to fund individual development projects that support the national development strategy.
The $280 million grant was intended to increase food security and basic health services. ARTF has a $1.5 billion portfolio for the above two purposes. This equates to a gross diversion of funds because the ARTF targets and the proposed use for the $280 million transferred funds were quite different.
The whole world stood by the victims of the Twin Towers tragedy on that fateful day. It was also known to the whole world that all but one of the 9/11 victims’ families received precious compensation for that tragedy.
In addition, the US government itself was negotiating a smooth transfer of power with the Taliban and the previous Afghan government. What happened in Afghanistan was not exactly what the international powers wanted. But it is not in Biden’s interest to hold ordinary Afghan citizens accountable for the 9/11 attacks by freezing the assets of the Central Bank of Afghanistan and blocking aid that has been flowing so far.
Therefore, it is clear that the latest executive order signed by President Biden may not be in the best interest of ordinary citizens of Afghanistan, especially as the country’s fragile economy collapses and struggles to recover. The reserves do not belong to the Taliban, but to every single citizen of Afghanistan. Moreover, the terrorist elements who took part in the catastrophic 9/11 incident were later identified as nationals of Saudi Arabia, and the al-Qaeda leader was killed inside Pakistan. Thus, the 9/11 attacks have nothing to do with civilians in Afghanistan who are currently enduring the most difficult economic conditions.
It remains to be seen, then, whether the executive order will increase Biden’s popularity for simply blocking half of Afghanistan’s foreign reserves in favor of the families of 9/11 victims. Whatever the outcome of President Biden’s decision, the helpless people of Afghanistan will pay a heavy price for a crime they did not commit.
Maria Bonaventure has served as Chief Operating Officer (COO) with Azizi Bank, Afghan United Bank (AUB) and Maiwand Bank. He has also served as senior international advisor with Exchanger Zone – Aryapool group.
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Source: Hasht-e Subh Daily