- The Taliban has “almost no chance” of obtaining the nearly $US10 ($AU14) billion in reserves in Afghanistan’s central bank, an expert said.
- “It’s all but impossible, to tell you the truth, both practically and legally,” Cornell University professor Robert Hockett told Insider.
- The majority of Afghanistan’s reserves are reportedly held by the Federal Reserve Bank in New York.
- See more stories on Insider’s business page.
The Taliban has “almost no chance” of getting its hands on the nearly $US10 ($AU14) billion in reserves in Afghanistan’s central bank – and it’s likely that most of the assets could remain frozen in US bank accounts for decades to come, a legal and financial expert said.
“It’s all but impossible, to tell you the truth, both practically and legally,” Robert Hockett, a Cornell University professor of law and finance, told Insider on Wednesday of the likelihood that the Taliban obtains those reserves.
Hockett explained,”It’s basically legally impossible because [the Taliban is] not recognized as a legitimate government by the United States. And the United States has the legal authority to freeze assets that were held by a government when that government is replaced by a non-government.”
The “only way” that the Taliban could possibly see the billions of dollars in reserves, according to Hockett, is “if it ceases to be the Taliban.”
“Because only if they were to cease being the Taliban, might they come to be viewed as a legitimate government of Afghanistan,” Hockett said.
Shortly after the Taliban seized control of Afghanistan following the stunning collapse of the Afghan government last month, the US froze most of the country’s central bank’s roughly $US9.5 ($AU13) billion in assets.
And the majority of those reserves are reportedly held by the Federal Reserve Bank in New York where many governments and foreign central banks hold assets.
The former acting governor of the Afghan central bank, Ajmal Ahmady, previously told the New York Times that a stash of about $US7 ($AU9) billion of the central bank’s reserves was held by the Federal Reserve Bank of New York, while $US1.3 ($AU2) billion was held in international accounts.
Those assets, Hockett said, could sit frozen by the US “indefinitely.”
“There’s no sort of time, date or limit on how long that can be. It could literally be for hundreds of years, legally speaking,” Hockett said.
He added, “Afghanistan held assets in other countries too, and they’re without a doubt all doing the same thing.”
Hockett pointed to how the US froze billions in Iranian assets after Iran’s 1979 Islamic Revolution when Ayatollah Khomeini took control of the government. Iranian assets, in that case, were frozen for decades.
“With Iran, of course, it has gone on for decades,” Hockett said. “And with the Taliban, it could also go on for decades, if the Taliban itself goes on for decades.”
Another probable possibility with regards to Afghanistan’s reserves, Hockett said, is that the frozen assets may one day be used to pay damages resulting from potential lawsuits filed by Afghan refugees who were airlifted out of the country by US and allied forces in the lead up to the completion of the US military withdrawal from the region.
“I think it’s more likely than not that a bunch of those refugees will end up becoming plaintiffs in suits brought against the Taliban,” Hockett said. “I can imagine class action suits…brought against the Taliban, or the sort of Taliban-controlled Afghanistan, in US federal courts, and seeking compensation out of those assets.”
It is likely potential lawsuits would “succeed,” said Hockett, “given that the US hasn’t even recognized the Taliban as a government, as distinguished from a sort of terror group.”
“I don’t think there’s any chance at all that the Taliban gets this money back through any kind of legal argumentation or legal process,” Hockett said.
Meanwhile, Afghanistan is left in dire economic straits as the Taliban moves to form a new government there.
The cash-strapped Taliban could “finance themselves in the way that they have over the last 20 years, which is through the illicit drug trade” or rely “on some sort of financing help from rogue elements in the world that have money,” Hockett noted.
Additionally, the US could use the frozen assets “as a kind of bargaining chip in negotiations with the Taliban to prevail on the Taliban to do certain things,” said Hockett.
“This is yet another case in which the importance of the US in the global financial system ends up conferring a great deal of power on the US,” Hockett said. “It’s exactly in cases like this where you see just how important or how much power that role the US in the global financial system plays.”
The US Federal Reserve and the US Treasury Department did not return requests for comment for this report.
A New York Fed official told Insider in a statement, “As a matter of policy, we do not acknowledge or discuss individual account holders.”