Economic sanctions against Iran and Afghanistan have cost Afghanistan millions

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[Editor’s note: The following is the fifth in a series of occasional columns, written by Shannon Pettypiece, about the United States foreign policy and domestic challenges of the present and future, from the perspective of countries most directly affected. Read previous columns here.]

In Afghanistan, World Bank employees researching the consequences of economic sanctions told me that reestablishing them would be far more challenging than ever before. Related to the temporary embargo imposed by the United States on Islamic Republic of Iran in response to Iran’s nuclear program, it affected the revenues of both Afghanistan and Pakistan by limiting travel and trade among the two countries’ multi-national companies. As Afghanistan’s economy has continued to grow in size and capabilities, two decades after the United States overthrew the Taliban, the consequences of sanctions continue to deprive the country of resources necessary to help it recover from devastation and to deal with the colossal, long-term challenges ahead.

Foreign aid has long been the primary method of mobilizing political support for reconstruction of Afghanistan. A centerpiece of U.S. military assistance has been a “strategic alliance” with the Afghanistan government led by its president, Ashraf Ghani.

A balanced and humane transition in Afghanistan from war to development of sustainable institutions has become even more urgent with the continued polarization of a troubled Afghan society, exacerbated by the country’s harsh political and social conditions. The recovery has also relied on financial support from major donors such as the United States and the European Union.

The intensification of sanctions, however, has been a source of considerable frustration. Existing economic sanctions, which have been in place since the sanctions on the Taliban after 9/11, have deprived the Afghan government of vital capital from the interlocking supply chains of Afghan and international companies — critical for sustaining the nation’s economic development. It has also made many of the many infrastructure, water and sanitation projects required for recovery that were well underway by 2003, a slow and expensive process to complete.

Sanctions against Iran have especially affected Afghanistan, and reduced already weak revenue streams. Economists believe that economic sanctions against Iran’s pharmaceutical and textile manufacturing sectors have had a negative impact on production. Since Afghanistan relies on Iran for almost a third of its crude oil and natural gas exports, any problem in these two sectors could reduce the revenue stream to finance other reconstruction programs, making development that much more difficult.

Until sanctions are removed, there is little incentive for Afghans to initiate long-term economic reforms or accept new opportunities for growth that they face.

Like businesses around the world, Afghans have been sitting on a massive amount of unrealized capital and unutilized capital, foreign and domestic. However, they cannot access it without receiving sanctions relief. For decades, the country’s arid desert has limited its economic and agricultural potential to growth based on subsistence farming. Any major effort in agriculture would require undertaking major irrigation projects and increasing its supply capacity. As a result, such efforts have been completely neglected, and without a proper legislative framework for the ministries of Agriculture and Finance, any attempt to address these needs will be uncertain and delayed.

Allowing Iran and others to freely circulate their financial transactions across borders, as opposed to paying a luxury tax on these transactions, would allow Afghanistan to mobilise the vast untapped resources of its people by increasing its productive capacity.

Existing sanctions pose the greatest risk to the United States’ effective stewardship of the country’s reconstruction. The United States’ sense of achievement as a result of its defeat of the Taliban requires new efforts in implementing a multipronged strategy toward reconciliation, counterinsurgency and the long-term reconstruction of Afghanistan. In short, it requires renewed engagement.

From a global perspective, sanctions can be an instrument for maintaining foreign political influence and keeping other nations weak and vulnerable. If properly implemented, sanctions are powerful tools, but they are hollow if they are implemented by a decision-making regime that is indifferent to the results they are causing for the people of a country. For Afghanistan, that means that economic sanctions are keeping the Afghan people poor, and depressing development and policy choices.

This piece originally appeared in the May 12, 2017 edition of Politico.

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