Biden orders freeze on $7bn of Afghan assets within US

President Joe Biden has cleared a legal path for victims of the 9/11 attacks to receive billions of dollars from Afghanistan’s central bank, thus capping months of uncertainty over the bank’s funds in the US. Photograph: Al Drago/The New York Times

President Joe Biden has moved to freeze about $7 billion (€6.1 billion) in assets held in US financial institutions by the Afghan central bank in the wake of the Taliban takeover, as he vowed to direct $3.5 billion to humanitarian aid and preserve the rest for families of victims of the September 11th terror attacks.

In an executive order signed on Friday, Mr Biden directed “all property and interests in property” of the Afghan central bank in the US to be blocked and transferred to an account at the Federal Reserve Bank of New York, effectively cutting off the Taliban’s access to the US financial system.

The move caps months of uncertainty over the Afghan central bank’s funds in the US. The Biden administration has faced competing pressures to keep humanitarian assistance flowing to the Afghan people, while ensuring that court-ordered payouts to families of the victims of the 2001 attacks are honoured.

“This executive order is designed to provide a path for the funds to reach the people of Afghanistan, while keeping them out of the hands of the Taliban and malicious actors,” the White House said.

“The United States has sanctions in place against the Taliban and the Haqqani network, including for activities that threaten the safety of Americans such as holding our citizens hostage.”

Under pressure

Since the US’s military withdrawal from Afghanistan last August, Washington has been under pressure to find a way to punish the Taliban government economically without closing the door to humanitarian aid.

US officials said their plan was to set up a trust fund to manage the distribution of the $3.5 billion in funds, which would be separate from the bilateral aid that was already being sent to Afghanistan.

They noted that the US had already contributed more than $516 million in humanitarian funds to Afghanistan since Kabul fell to the Taliban and last month announced a further contribution worth $308 million. The US already has a network of independent aid organisations it uses to distribute its humanitarian contributions, from water and food to healthcare and sanitation services.

“We are going to be ensuring that we have very robust controls in place, this is not going to the Taliban,” a senior Biden administration official said.

The Biden administration said it could still take some time to direct the funds, both for humanitarian aid and for distributions to relatives of 9/11 victims, which would have to be approved by the federal court overseeing the litigation.

“We have to go through a judicial process here, it is going to be at least a number of months before we can move any of these funds,” a senior Biden administration official said.

Grim assessment

The announcement on Mr Biden’s decision to freeze Afghan assets was accompanied by a grim assessment of the country’s economy. The White House said Afghanistan’s economy was “on the brink” even before the US pullout, including high poverty rates, widespread damage to crop yields from a two-year drought and a poorly developed financial system.

“The Taliban’s forced takeover made the already frail economic situation worse,” the White House said. “The IMF estimates that Afghanistan faces an economic contraction of 30 per cent, and many of the senior officials and technical experts needed to provide sound economic management have fled the country as a result of the Taliban’s actions.” – Copyright The Financial Times Limited 2022