Solutions for Development of Afghanistan's Economic Relations in the State of "Non-Recognition"
The relations of Taliban- ruled Afghanistan with other countries can be considered in three categories: 1) Afghanistan's close neighbors, which are the most important economic partners of this country in the current situation; 2) Neighboring, Muslim and Eastern countries (such as China and Russia) with whom the most political relations and diplomatic consultations are ongoing; and 3) Western countries that have limited and indirect relations. It seems that the Afghan Taliban government expects the first two groups to recognize it, which has not happened so far. In this situation, in order to reduce the impact of non-recognition on its economic relations, the Taliban government has to resort to tactics that are mainly used by the economies under sanctions, and that are helpful in the short term.
By: Seyed Ahmad Fatemi Nejad
Almost eighteen months have passed since the Taliban came back to power in Afghanistan, they have not yet succeeded in obtaining legal recognition from the international community. The issue of recognition/non-recognition of Taliban deserves attention from different aspects. Although recognition in the international community is mainly considered as a legal issue related to international law, it is political in nature. Recognition can be about the establishment of a country or a political system. Afghanistan as a country has been recognized and approved by the international community since the past, and what is being discussed now is simply the recognition of the Taliban government as the ruling political system in this country.
Regarding the recognition of new political systems, the international community has had a contradictory procedure; Sometimes they recognize regimes that dominate the situation of their country, and sometimes they recognize a regime only based on political motivations, without that regime dominating the conditions of its country. The Taliban has more or less dominated Afghanistan in a year and a half, but has not been recognized yet; Even countries such as Pakistan and some countries in the Persian Gulf have avoided formal recognition of the Taliban, contrary to initial expectations. One of the areas that is severely affected by the lack of recognition of the Taliban is economic relations.
Economic statistics about Afghanistan, even under the previous regime, were often scarce and unreliable. But by comparing different reports and data, we can reach a relatively reliable analysis about it. According to latest reports published by international organizations about Afghanistan's economy, there are signs of both economic opening and economic stagnation in this country. On the one hand, some reports indicate the success of the Taliban in controlling inflation, and maintaining the value of Afghanistan's national currency; and on the other hand, the existing conditions and personal experiences speak of the dire economic situation of the people, business stagnation, capital flight and economic difficulties in the country.
The same situation can be seen in the recent report of the World Bank regarding the macroeconomic data of Afghanistan. According to the report, Afghanistan's exports have grown in 2022, and Pakistan and India are the most important export destinations of this country. On the other hand, the available statistics indicate a sharp drop in Afghanistan's imports, which seems natural considering the existing sanctions and the Taliban's lack of access to financial resources. The interesting thing about the Afghan Taliban government's imports, according to the mentioned statistics, is that Iran (and not Pakistan) is the first source of Afghanistan's imports.
The most important indicators of the country's economy are the export and import statistics, along with the news of consultations and negotiations conducted regarding the use of transit capacities, mining, and the development of Afghanistan's agricultural products. Available statistics and news show that the Taliban government is working hard to improve the economic situation of this country, and in this way, it has opened a special account on the relationship with neighboring and nearby countries; in such a way that most economic relations and consultations are with these countries.
Non-recognition and its effects on Afghanistan's economic relations
However, the question that is raised here is what effect has the non-recognition of the Taliban had on Afghanistan's economic relations with the regional countries?
These effects can be divided into some categories, Including:
A) Limitation of imports: Considering that the Taliban government's access to the country's financial resources has been blocked, and international monetary aid has also been severely reduced, it is natural that the country's imports have also decreased. The most prominent victims of this situation have been countries such as Iran, which had significant exports to Afghanistan in the past system.
B) Informalization of economic relations: The economic relations of developing countries, even under normal conditions, are not limited to official statistics and a significant part of trade and other economic relations takes place through informal channels (whether legal or illegal). Considering the restrictions that have been imposed on the banking and monetary relations of Afghanistan in the new era, it seems that the amount of informal trade and other informal economic relations has also expanded greatly.
C) Use of humanitarian covers: Part of the economic relations with Afghanistan has been continued in the form of humanitarian covers. Even during the republican period, Afghanistan received significant funds for providing consumer goods and services. Even now, part of these funds have been continued, especially in the form of humanitarian, educational, health and nutritional aid.
D) Highlighting the role of businessmen and non-governmental agencies: a part of Afghanistan's economic relations with other countries, even in the previous system, was organized by big businessmen who had offices and personnel in neighboring and intermediary countries (such as the UAE). Although this group of businessmen more or less suspended and silenced their activities in the early days of the Taliban coming to power, but over time they have revived their position.
E) Hardening of access to Western currencies: Afghanistan's largest monetary and financial resources in the past system were mainly American and European sources, and the resources flowing to Afghanistan from these countries played an important role in Afghanistan's economy. With the sanctions caused by the non-recognition of the Taliban, access to dollar and euro in the Afghan economy has become more limited.
Some solutions to reduce the impact of non-recognition
Therefore, in the new situation due to the lack of recognition of the Taliban, Afghanistan's relations with other countries can be divided into three parts, including Afghanistan's relations with (a) its close neighbors who are the most important economic partners of the country in the current situation; (b) Neighboring, Muslim and eastern countries (such as China and Russia) with which Afghanistan has the most political relations and diplomatic consultations; and (c) Western countries that have limited their relations with Afghanistan mainly to humanitarian issues, and to the activities of the offices of international organizations and non-governmental organizations in the country. However, it seems that the Afghan Taliban government expects the first two groups to recognize it.
But at least this has not happened yet. In this situation, the Taliban government can resort to the following tactics to reduce the impact of non-recognition on its economic relations. Most of these tactics are mainly used by the economies under sanctions, and although it cannot completely solve the problems, it is a solution in the short term.
Use of private actors: businessmen, companies and non-governmental organizations can be helpful especially in small business cases. It seems that during the recent period, a significant part of the burden of Afghanistan's economic relations is borne by this group.
Use of bartering methods: Given the organization and growth of Afghanistan's exports, especially in the field of agricultural products, the Taliban government can use this privilege to expand its economic relations with regional countries; That is, it can import its needed minerals and intermediate goods in exchange for the export of agricultural products.
Focusing on local currencies: Part of the restrictions that the US and its allies have imposed on the Taliban government is through the mechanisms of the international monetary system and the control of the transfer of currencies such as dollar and euro. The Afghan Taliban government can promote and manage its economic relations with regional countries through local currencies.
Focusing on domestic capacities: One of the first solutions that are proposed for under- pressure or inward-looking economies is to focus on domestic capacities instead of imports. Apart from saving available currencies, this method also leads to the development of the domestic economy. But it is obvious that in today's interconnected global economy, this method cannot be a complete solution to problems.
Expanding relations with small companies: One of the methods used by large economies to limit international economic relations is to use the capacities of their own national economy. Countries like the United States try to make big companies align with their policies by setting rewards or punishments. The way to avoid this tactic of big economies is to use medium and small companies that do not have extensive economic relations with the big economies of the world and can be safe from their punishment. The Afghan Taliban government can also benefit from these companies.
Highlighting the security advantages: During the last two decades, the lack of security was the Achilles heel of Afghanistan's economy, and despite international financial and political support, significant development did not occur in this country and huge foreign capital was not attracted. Now the Taliban can encourage foreign investors to invest in this country by highlighting Afghanistan's security. Recently, companies from China have started activities in Afghanistan, the main driver of which is probably this security score.
Intermediary trade: Some trading states, such as the United Arab Emirates (UAE), have played an important role in mediating global economic relations in recent decades. Although this mediation mainly occurs in the context of international trade laws and mechanisms, it can also provide a breathing space for countries under sanctions. This is also one of the methods that can facilitate Afghanistan's economic relations with the countries of the region.
Highlighting the victims: For the Afghan economy, international aid has always played an important role in advancing the country's affairs. Given that the government's economic weakness also harms public sectors such as health, infrastructure, education, etc., the Taliban can still attract international aid in these fields by highlighting these damages and its non-governmental/civilian victims. Of course, this is happening more or less now, and even Mullah Mohammad Hassan Akhund has emphasized this aspect in many meetings, but there is still room for more diplomatic work and media activity in this field.
In general, it can be said that despite all the above solutions, if the Taliban government cannot gain international recognition, it cannot expect a fundamental improvement in the country's situation and a complete control over its situation. Especially, the economic restrictions along with dissatisfactions that are gradually formed from other areas will cause even the internal governance of the Taliban to face fundamental challenges. In this context, the international pressures that are caused by the lack of recognition, along with the growing dissatisfaction caused by the social and religious restrictions imposed by the Taliban, as well as the security challenges caused by the possible resistance by the opposition and militia groups will be a prominent pest for the continuation of the Taliban rule.
Seyed Ahmad Fateminejad, is a PhD in International Relations, and a professor at Ferdowsi University of Mashhad, Iran.