New sanctions relief for Afghanistan is a 'game changer'

Today the U.S. Treasury Department announced a general license (read: sanctions exemption) that permits the payment of taxes, fees, import duties, or the purchase or receipt of permits, licenses, or public utility services for all transactions–even commercial ones–so long as they aren’t for luxury goods or services that do not support basic needs.

Ok, why is this a big deal?

In practical terms, General License No. 20 opens up commercial transactions and cross-border trade in Afghanistan by allowing for the kinds of incidental payments listed above that are necessary to conduct business. This allows for commercial transactions related to imports from and exports to Afghanistan, including financial transfers to governing institutions such as Da Afghanistan Bank (central bank of Afghanistan). 

Previously these types of payments were only permitted for non-commercial humanitarian activities. For example, General License No. 19 permits certain transactions and activities involving the Taliban so long as they are “ordinarily incident and necessary” to carry out specified humanitarian and development projects which includes the “payment of taxes, fees, or import duties, or the purchase or receipt of permits, licenses, or public utility services.” This implied that similar payments related to commercial activities were still subject to sanctions. This severely reduced critical cross-border trade between landlocked Afghanistan and its neighbors.

Is this going to attract big international banks or projects to Afghanistan anytime soon? Probably not. Afghanistan isn’t that lucrative for them to begin with and now that they’re left with Afghanistan’s real economy, it just doesn’t make sense from a business perspective. But this will be a game changer for regional traders and Afghanistan’s domestic commercial sector. The Biden administration has clearly recognized that Afghanistan cannot stay afloat through aid alone.

U.S. sanctions that were intended to limit the Taliban and Haqqani Network as non-state actors have now extended far beyond this limited scope to effectively sanction the de facto Afghan government. Today’s general license will reduce some of this harm but more still needs to be done to inject liquidity into Afghanistan’s economy and assuage the chilling effect of sanctions that no longer serve a purpose.