WASHINGTON (BLOOMBERG) - United States President Joe Biden on Friday (Feb 11) issued an executive order to shift the US$7 billion (S$9.4 billion) in Afghan central bank assets frozen in the US banking system to compensate victims of the Sept 11, 2001 terrorist attacks and support aid efforts in Afghanistan.
The order directs US financial institutions to move Afghan central bank funds into a consolidated account held at the Federal Reserve Bank of New York, with the US seeking to tap US$3.5 billion for assistance to the Afghan people.
The other US$3.5 billion would remain in the US, pending ongoing litigation brought by the victims of the Sept 11 attacks.
"This is one step forward in the United States' effort to authorize the transfer of a significant portion of the funds to meet the needs of the Afghan people," the White House said in a fact sheet, adding that the 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".
In the wake of its withdrawal from Afghanistan in August, the US has been working with the United Nations to ensure aid groups have the necessary liquidity to provide humanitarian assistance to the Afghan people.
The US in August froze nearly US$9.5 billion in assets belonging to the Afghan central bank and stopped shipments of cash to the nation.
Besides just over US$7 billion in reserves held in the US, the rest is largely in Britain, Germany, Switzerland and the United Arab Emirates, the person said.
Taliban officials had sought access to the funds after seizing control of Afghanistan last year, but existing counterterrorism sanctions make financial transactions with the political movement illegal.
That prompted months of behind-the-scenes work by the Biden administration, which the senior administration official described as a complicated road that required hundreds of hours of legal analysis.Ultimately, Mr Biden utilised a provision of the International Emergency Economic Powers Act to direct the foreign assets be moved to a segregated account.
The funds will not actually be moved until the arrangement is signed off on by a judge overseeing the litigation brought by the terrorism victims, though administration officials said they were optimistic the proposal would be approved.
In the interim, the White House is planning to establish a third party that would administer the money designated for assistance, according to the official. The administration has already consulted with outside individuals – including Ajmal Ahmady, the Afghani central bank governor who fled the country in August, about helping facilitate the funds transfer, according to a person familiar with those conversations.
Mr Biden’s decision to split the funds carries some political risk. Some lawmakers and victims of the Sept 11 attacks have opposed returning any money to Afghanistan, while humanitarian groups have called on the US to fully distribute the Afghan funds back into the country.
Mr Biden acknowledged the dire conditions in his executive order, saying his actions were motivated by "the urgent needs of the people of Afghanistan for food security, livelihoods support, water, sanitation, health, hygiene, shelter and settlement assistance, and Covid-19-related assistance, among other basic human needs – and the potential for a deepening economic collapse in Afghanistan constitute an unusual and extraordinary threat to the national security and foreign policy of the United States".
But the senior administration official stressed that the money could not currently be distributed without accounting for the court case, despite the calls from activists who argue the money belongs to the Afghan people.
The US also determined that only a small percentage of the funds had come from exports, with the vast majority of the wealth instead derived from donations, the official said.
In addition to the litigation from Sept 11 victims, the move from the Biden administration risks discouraging other governments from storing their money in the US for fear their assets also could be seized.The administration official said the White House was hopeful that the move would instead be viewed favorably by international partners who would see the US attempting, within the confines of its legal system, to return at least some of the assets to the Afghan people.
In the wake of its withdrawal from Afghanistan in August, the US has been working with the United Nations to ensure aid groups have the necessary liquidity to provide humanitarian assistance to the Afghan people.
Late last month, United Nations Secretary-General Antonio Guterres said the nation was "hanging by a thread" and called on countries to suspend rules blocking aid operations.
"We need to give financial institutions and commercial partners legal assurance that they can work with humanitarian operators without fear of breaching sanctions," Mr Guterres told the UN Security Council.
The Treasury Department said earlier this month that international banks were allowed to transfer money to Afghanistan for humanitarian purposes, despite those sanctions.
The US also detailed how nongovernmental organisations could pay teachers or health care workers employed by the Afghanistan government without violating the law.
