Biden administration loosens sanctions on Taliban-held Afghanistan

US Treasury Department issues broad licence allowing commercial and financial transactions within Afghanistan, but White House still holds central bank's frozen reserves

An Afghan woman feeds her sick son while he undergoes treatment in the malnutrition ward of the Indira Gandhi Children's Hospital in Kabul, Afghanistan. AP

The US on Friday drastically loosened its sanctions on Afghanistan, permitting private companies and individuals to conduct commercial and financial transactions within the Taliban-held country.

The Treasury Department issued the broad sanctions licence in the hopes of ameliorating the deteriorating humanitarian and economic crisis in Afghanistan. It has not, however, authorised transactions with the Taliban or the Haqqani Network.

“The license will ensure US sanctions do not stand in the way of transactions and activities needed to provide aid and support the basic humanitarian needs of the people of Afghanistan,” a senior administration official told reporters on a press call.

“It’s critical that Afghan institutions be put in a position where civil servants are allowed to function.”

Another senior administration official noted that the licence makes it “very clear that you can continue to make commercial transactions in Afghanistan as well as transactions with the government” — so long as they do not involve people who have been sanctioned.

The licence also does not cover transactions with the country's central bank, even though US President Joe Biden's administration agreed to return part of $10 billion in Afghan reserves it froze following the Taliban takeover in August.

Mr Biden issued an executive order this month that could unlock as much as $7bn of those frozen assets.

However, the president intends to make $3.5bn of the frozen Afghan reserves available to families of 9/11 victims who are suing to gain access to the money as damages against the Taliban.

The freeze on 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 take out loans from organisations such as the International Monetary Fund.

“We have made clear that in order for the international community to engage with the central bank, it’s important that it establishes independence, putting in a third party to validate that independence and get the kind of technical assistance that is needed to ensure that they’re able to put in place basic standards for the prevention of illicit finance — similar to what was done prior to August of 2021,” said the first senior official.

In the meantime, the US is working with several other countries to establish a temporary financing mechanism for Afghanistan.

The second senior official said that “we’re looking to be absolutely sure that on its governance, as well as the potential uses of this money — which is Afghan reserves for the benefit of the Afghan people — that we are talking to professional Afghans in this space".

In addition, the official noted that the Taliban has “not interfered in the delivery” of the $500 million in humanitarian aid to Afghanistan that the US has sent since the Taliban takeover — though the Biden administration continues to monitor the funds.