A year has passed since the Taliban coup in Afghanistan, which was completed on September 7, 2021 with the announcement of the establishment of an “interim” government in Kabul. As happens in dictatorial regimes, the temporary has become permanent, the government remains in place and the citizens of Afghanistan continue to suffer – especially the women who do not receive the elementary right to acquire an education.
Although no country has recognized the “Islamic Emirate of Afghanistan”, i.e. the rule of the Taliban, but in practice – many countries maintain fertile trade relations with Kabul. This economic process reached its peak on September 27, with the signing of the Taliban regime’s first international trade agreement, according to which Afghanistan will purchase gasoline, diesel, gas and wheat from Russia.
“We are working to diversify our trade partnership,” says the Afghan Minister of Industry and Trade, Nuruddin Azizi, who points out that Russia offered the country’s government discounts on goods compared to their prices on the world market. In the first phase, both parties entered into a running-in period, which, if successful, will lead to a long-term agreement.
The agreement, which Azizi refused to explain to the Reuters news agency as part of the payment method, includes the annual sale of one million tons of gasoline, one million tons of diesel, 500,000 tons of cooking gas and two million tons of wheat. This is a deal in which both Moscow and Kabul feel rent: on the one hand, Russia is becoming more and more isolated following the continuation of the invasion of Ukraine – and it needs every possible trade partner. On the other hand, the Taliban have gained a significant source of import and international legitimacy, even if it is of dubious origin.
In Moscow’s case, this agreement raises questions about Russia’s refusal to acknowledge money transfers to the Taliban for years, as has Pakistan and Iran. What is clear is that private parties in Pakistan, Saudi Arabia, the United Arab Emirates and Qatar are a significant source of income for the Afghan terrorist organization. According to estimates, it is 500 million dollars a year.
Another significant source of profit for the Taliban, similar to many terrorist organizations in the world, is drugs. Afghanistan is the largest exporter of opium in the world, with an estimated amount of 1.5-3 billion dollars per year. According to a BBC report, the local work mechanism includes collecting a 10% tax from the opium growers. Thus, the scope of the Taliban’s income from opium is estimated at 100-400 million dollars a year.
Waiting for a gas pipe
In the field of energy, the Taliban recognize a long-term solution in the TAPI (Turkmenistan-Afghanistan-Pakistan-India) gas pipeline project, which is designed to transport between the countries 33 BCM (billion cubic meters) of natural gas every year. Although the construction works of the project began in Turkmenistan in December 2015, they have been progressing slowly since then. To promote the project, the Deputy Prime Minister of Afghanistan for Economic Affairs, Abdul Ghani Barader, hosted the CEO of TAPI, Mohammadmirat Amanov, on September 15.
Just five days later, the President of Turkmenistan, Sardar Berdimuhamedov, hosted the Pakistani Oil Minister, Mossadegh Malik, in Ashgabat, since Islamabad is also interested in an effective and long-term response to the increases in energy prices. “The two discussed commercial and economic cooperation,” the Turkmen president’s office said. “The most significant part of the conversation was the field of energy. In this context, they emphasized the development of the TAPI gas pipeline. Beyond that, we discussed the development of power lines and optical fiber communications between Turkmenistan, Afghanistan and Pakistan.”
Selling gas on the road to Kabul / Photo: Reuters, ALI KHARA
To the delight of the Taliban, Afghanistan ranks 62nd in the world in coal reserves (about 72.7 million tons) and 45th in coal production (about 1.8 million tons per year). The polluting coal is a lever of pressure for the terrorist organization that controls Afghanistan, especially at a time when energy prices are rising. In this context, the Taliban doubled coal prices 2.2 times in July – from $90 per ton to $200.
Afghanistan’s coal is a charm for Russia and China
Afghanistan exports 10,000 tons of coal daily, half of it to Pakistan, according to the Afghan Ministry of Mines and Petroleum. Although Kabul drastically increased the price of coal, it is significantly lower than the world market. For the sake of comparison, the price of a ton of coal in Europe is about 385 dollars, so delegations from China and India recently arrived in the capital of Afghanistan, which are interested in getting involved in exporting coal from the country. “The coal industry and its exports provide 10-15% of the jobs,” says Khan Jan Alokuzai, vice president of the Afghanistan Chamber of Commerce.
The low coal prices at the global level are high at the local level, and stand at 15,000 Afghanis per ton (about $172). Towards the winter in Kabul, where the temperatures drop below zero degrees Celsius, in Afghanistan they fear a season in which the residents will have difficulty heating their homes. “The government must think about the coal, and do something to lower the prices,” says Abdul Wasa Ahmadzai, a resident of Kabul to the local agency TOLO. “Citizens cannot buy coal for the winter, because the price has doubled and citizens still have financial problems,” adds Abdul Manan, a coal seller.
The Ministry of Mines and Petroleum in Kabul is working on a plan to lower coal prices for the local market. “We are interested in selling coal at low prices to our citizens for the winter,” said Ismet Ullah Burhan, the ministry’s spokesman. “We have a plan to lower the price.” However, the details of the plan are not clear.
The Chinese are in no rush to invest
The reason why the Taliban are trying to find solutions themselves is the realization that promises and visits by delegations do not guarantee money at all in practice. “We haven’t even seen a sign of investment from China,” notes Alukozai, vice president of the Afghanistan Chamber of Commerce. “Many of their companies came, met us, did an inspection – and then left and disappeared. It’s frustrating.”
According to a report on the “Al-Arabiya” network, the reason for Beijing’s refusal to invest is the connection between the Taliban and the separatist Uyghur organization, which aims to “liberate” the Xinjiang province in western China, the “East Turkestan Islamic Movement” (ETIM). Beyond that, the Afghan terrorist organization is interested in renegotiating existing projects, which is unacceptable from the point of view of the neighbor to the east.
The investments that remain “in the air” include, among other things, a Chinese metals company that already won a tender for copper mining in the Mes Ainq area in 2007, for three billion dollars. The Taliban expected to receive millions of dollars a year from the project, but everything is stuck. According to estimates, the soil of Afghanistan has an abundance of gold, copper and lithium, worth a trillion dollars – but no one has mined them with high intensity and advanced technology.
“As part of our communications with the Afghan Taliban,” says Zhao Lijian, a spokesman for the Chinese Foreign Ministry, “the Taliban have pledged several times that they will not allow their territory to be used for the activities of terrorist groups that attack countries, including China.” However, as mentioned, the Chinese are carefully examining the Taliban’s steps – and are aware of their connection with the Islamic movement of East Turkestan. Only last May, the UN published a report according to which ETIM, estimated to have tens of fighters up to a thousand, are expanding their area of activity in Afghanistan, through alliances with local Taliban commanders.
The same connection with the Islamic movement of East Turkestan prevents the realization of the potential of Chinese investments in the Afghan mining industry, which after the US withdrawal from the country – would seem to be only a matter of time. The Chinese Foreign Minister, Wang Yi, was one of the first world leaders to maintain open relations with the Taliban. In March, he even visited Kabul and met with his Afghan counterpart, Amir Khan Mutaki. Although he hinted at support for Afghanistan’s participation in the “Belt and Road” program, he emphasized much more clearly that Beijing “expects a full commitment to the fight against ETIM.”
An activity that the Chinese are actually happy to promote is in the field of roads, within the framework of which a new road and railway were inaugurated about a month ago, which shorten the duration of transportation and travel between the countries by several weeks. The road starts in Xinjiang province, crosses into Kyrgyzstan and Uzbekistan – and from there to Afghanistan. In the first phase, the goods will be transported for 500 km on the road from Kashgar in Xinjiang to Osh in Kyrgyzstan – but in the future, an additional track is planned in this section as well.
The first shipment, which included 12 wagons of food, household goods and other goods, arrived in Afghanistan about three weeks ago – after 12 days on the road. This procedure clearly indicates that Beijing has no problem creating Afghan dependency through the import of Chinese goods, but until their demands are met – they will refuse to allow significant investments.
Qatar is satisfied with the progress in Kabul
In contrast to China, which for many years, even before the Taliban coup, maintained strong ties with the terrorist organization, and even serves as their recognized advocate, is Qatar. In the past, Doha hosted the peace talks with the Taliban.
In Qatar, certainly, satisfied with the outstanding positive trend in the Afghan aviation industry. The Emirati company “Fly Dubai” is expected to resume its flights to Kabul next month, while Turkish Airlines will resume its flights both to the capital of Afghanistan and to Mazar-e-Sharif in the north of the country starting in March.
The Qatari Foreign Minister, Mohammad al-Thani, took advantage of his presence at the UN General Assembly to promote Afghanistan’s interests in meetings and speeches. – Thani. “At the same time, we also examined what is required from the international community.”
The poorest country in the world
As part of the international desire on the one hand to help the poverty-stricken Afghan people and on the other hand to prevent the Taliban from diverting the funds to finance terrorist activities, last month the US transferred assets worth $3.5 billion of the Afghan Central Bank to a trust fund at the Bank for International Settlements (BIS) located in Basel.
Those assets, which are managed through a board of trustees, are intended to pay for essential imports such as electricity, to settle debts with international financial bodies, and to finance the printing of banknotes. In total, the US holds assets worth $7 billion of Afghanistan’s central bank deposited at the Federal Reserve Bank of New York.
A girl works in a brick factory in the Kabul area. Child labor has soared since the Taliban returned to power / Photo: Associated Press, Ebrahim Noroozi
Before the Taliban coup, the central bank used to take notes every year in the total amount of 3-4 billion Afghanis ($33-45 million), and replace them with new notes printed outside the country. However, the sanctions against Kabul do not allow this routine operation – thus creating a liquidity crisis.
Just recently, on September 27, the UN envoy to Afghanistan, Markus Potzel, presented to the Security Council how dire the economic situation in the country is. “Patience is running out for many in the international community regarding relations with the rulers of Afghanistan,” Potzel said. “Despite positive moves.” In recent months, it’s been too little, too slowly – and swallowed up by the negative developments.”
Among the negative developments, the Taliban’s insistence on preventing girls from going to high school – and the increasing reduction of women’s rights. “The Taliban does not care to risk international isolation,” explains the UN envoy to the divided country. Futzel is concerned about the fact that out of the $4.4 billion humanitarian aid program budget for Afghanistan, $1.9 billion has been received so far.
The World Bank defines Afghanistan as the poorest country in the world. While the world’s GDP per capita was $10,936 in 2020, Afghanistan’s was $517 – more than 20 times. In fact, every single one of the World Bank’s figures on Afghanistan indicates how shattered the local economy is. Since 2019, per capita income has fallen to nearly -40%, and in the fourth quarter of last year – 70% of parents’ households suffer from food insecurity. According to the UN, half of Afghanistan’s 39 million citizens need humanitarian aid. At the same time, the United Nations Development Program (UNDP) warned in the middle of this year that 97% of the Afghan population lives below the poverty line.
This situation also stems from inflation in Afghanistan, which crossed the 15% mark in May. This is “fueled” by food inflation, which at that time had already reached 25%. At the same time, Afghanistan’s trade deficit is extreme. At the time, the volume of exports in the first quarter of the year was about 400 million dollars – imports reached 3.5 times. The International Monetary Fund predicts that economic output in the country will decrease by a third by the end of 2022.
It should be noted that the citizens of the Taliban who live every day under the regime of a terrorist organization, also suffer from terrorist attacks – especially from the Khorasan province of the Islamic State (ISIS). A report by the Information Center for Intelligence and Terrorism named after General Meir Amit, found that ISIS carried out 2,705 terrorist attacks throughout the world during 2021, claiming 8,147 victims. In the first place of the table of victims is Afghanistan, with 2,210 murdered in 365 attacks. That is, 27% of those murdered in ISIS attacks during the year 2021 were in Afghanistan.
In conclusion, foreign investments in general and investments from China and Russia are expected to arrive and even expand. However, past experience shows that in the case of the Taliban – it is not worth expecting that the Afghan people will benefit from the revenues, and they will continue to be the poorest in the world.