Frozen Afghanistan reserve funds in spotlight as US faces court deadline on 9/11 cases

Justice Department faces a Friday deadline to give legal opinion on awarding much of the $10bn reserves to families of 9/11 victims

Money changers wait for customers early in the morning of January 19 in Kandahar, Afghanistan. AFP

President Joe Biden's administration faces a deadline this week to submit a legal opinion that could show what the US intends to do with the $10 billion in Afghan reserves it froze as the Taliban overtook the country last August.

A federal court order from December stipulates that the Justice Department has until Friday to submit an opinion detailing what it considers to be the national security interests of the US in handling the frozen reserves.

The opinion could also influence the outcome of court cases related to the September 11, 2001 attacks, with plaintiffs representing victims' families seeking up to $7bn of the reserves as compensation for their losses.

A federal judge last year extended the department’s deadline to until January 28 to give the Biden administration time to sort through the complex legal and geopolitical issues at play.

Handing the reserves to the Taliban could be interpreted as a US recognition of their rule, while continuing to withhold them could further exacerbate the economic and humanitarian crises in the country.

“I don’t think that releasing the nearly $10bn in frozen assets directly to the Taliban without conditions is the answer,” said Lisa Curtis, director at the Centre for a New American Security, during a panel at the Washington think tank.

“There is a way to provide assistance to the Afghan people without legitimising the Taliban.”

The freeze in federal reserves has prompted Afghan banks to limit withdrawals, further compounding the cash crisis and driving up the cost of food and consumer goods amid a drought.

A low or non-existent level of reserves also curtails the Taliban’s future options to address these issues by reducing its ability to withdraw loans from organisations such as the International Monetary Fund.

Ms Curtis encouraged the Biden administration to work with the World Bank to revive the Afghanistan Reconstruction Trust Fund and turn it into a relief fund.

“We can’t be so rigid that we allow the Afghan people to suffer at this time, and we need to find creative solutions,” she said.

“We need to find a solution that can get liquidity in the system [and] pay the salaries of the civil servant workers, particularly in healthcare and education.”