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.
Adam Weinstein is Deputy Director of the Middle East program at the Quincy Institute, whose current research focuses on security and rule of law in Afghanistan, Pakistan, and Iraq.
Afghan people walk past a Kabulbank branch in Kabul September 14, 2010. Afghanistan's central bank has stepped in to take control of the troubled Kabulbank, its governor said on Tuesday, after suspected irregularities raised concerns over the country's top private financial institution. REUTERS/Andrew Biraj (AFGHANISTAN - Tags: BUSINESS)
Time is running out for Congress to pass the annual defense policy bill. After the election, lawmakers must reconcile the differences between their versions of the National Defense Authorization Act (NDAA) and set the topline for Pentagon spending in fiscal year 2025. When they do, they must strip two measures that will make it easier for contractors to engage in price gouging.
While the House abided by the spending caps Congress established in last year’s debt deal, the Senate added about $25 billion to the president’s budget request for the Pentagon — bringing the department’s topline to a whopping $912 billion. This is excessive, and the increase will not make Americans any safer. Lawmakers should communicate that to those negotiating the final NDAA.
Members of Congress cannot, however, overlook two seemingly benign provisions in the House version of the bill. If retained, Sections 811 and 812 of the House-passed NDAA would bolster contractors’ ability to price gouge the Pentagon — already a significant issue for the military. Just this week the Department of Defense (DOD) Inspector General found that Boeing overcharged the Air Force by nearly a million dollars on various products for the C-17 military transport aircraft. In one case, Boeing overcharged the military for a soap dispenser by nearly 8,000%, more than 80 times the commercial price.
A million dollars is a drop in the bucket when it comes to overall Pentagon spending. But this isn’t the first time Boeing has price gouged the department, and the practice is rampant throughout the arms industry. Two weeks ago, the Department of Justice (DOJ) announced that Raytheon will pay nearly a billion dollars to resolve a government investigation that exposed the company for overcharging on government contracts. Whistleblowers exposed both Boeing and Raytheon for price gouging. Without them, the agencies may have never discovered that the contractors overcharged taxpayers.
Unfortunately, the true scale of military price gouging is unknown. The Pentagon obligated $431 billion for military contracts in fiscal year 2023, nearly half of its total base budget. So, the government often relies on whistleblowers to alert it to potential price gouging by military contractors. Lawmakers can also request inspectors general to conduct investigations into potential misconduct. Several members are dedicated to this effort and to preventing contractors from overcharging the government in the future. Congress overall, however, has played an integral role in expanding the opportunities for price gouging.
Sections 811 and 812 of the House NDAA are part of a decades-long effort to legalize price gouging. Congress has achieved this goal, in part, by broadening the array of products and services considered to be commercial by the Pentagon. According to the Federal Acquisition Regulation, contractors are not required to submit to the Pentagon certified cost and pricing data for commercial products and services. These data include the cost of labor and the price of materials; they must be current, complete, and accurate.
More often than not, the Pentagon needs certified cost and pricing data to negotiate fair prices with military contractors. Certified data is particularly critical when the department is negotiating prices for products or services that may not be available in the civilian marketplace, or for which there is a sole source. In these cases, Pentagon officials have few other tools to ensure they are making fair deals with military contractors.
In theory, it would be easier for the Pentagon to negotiate reasonable prices for commercial products and services. Commerciality implies some level of price competition. But Congress has broadened the definition of commercial products and services to the degree that the designation has become virtually meaningless. There is no requirement, for example, that commercial products are sold to the public.
Section 811 would further expand what products and services are considered commercial, exempting an even greater portion of military contractors from certified cost and pricing data requirements. This would further erode the Pentagon’s bargaining power in negotiations with military contractors.
While Section 811 broadens the pool of so-called commercial products, Section 812 provides the Pentagon the green light to rely on uncertified cost and pricing data in certain cases. Uncertified data can be incomplete, dated, or inaccurate. Contractors can legally omit any information that may indicate to the Pentagon that they are charging 80 times the fair and reasonable price — as did Boeing for a soap dispenser.
Even the White House “strongly opposes” Section 812, asserting that it would disincentivize contractors from keeping costs under control, “creating unnecessary risk for taxpayers.” The provision would hamper some prime contractors’ ability to obtain certified cost and pricing data from subcontractors, increasing the likelihood that the prime contractors overcharge the government, which ultimately pays the bills.
The Pentagon is most capable of spending taxpayer dollars wisely when it obtains certified cost and pricing data. It helps the department assess a contractor’s costs, and thus, what its profit margins may be. Sections 811 and 812 of the House NDAA only hurt the Pentagon’s ability to negotiate fair prices on military contracts. By retaining them in the final NDAA, Congress would be acting against the best interests of both their constituents and the Pentagon.
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Diplomacy Watch:
Diplomacy Watch: Ukraine and allies reeling as war heats up
October of 2024 was the most militarily successful month for Russia since July of 2022. After months of sustained pressure, and mostly stagnant front lines, Russian troops have broken through and made significant gains in the Donbas region of Ukraine. According to the New York Times, Russian forces have secured more than 160 square miles there, and are capturing strategic towns along the way.
It seems as though the next goal for Russians in the Donbas is to take the strategic rail town, Pokrovsk, which would seriously inhibit Ukraine’s ability to resupply its forces in the region. Encirclement of this strategic city is likely as Ukraine has likely lost Selydove this week, a city which is only about 20 miles south of Pokrovsk.
Experts say Russia’s advances this past month are due to several factors. Analyst at the French Foundation for Strategic Research, Vincent Tourret, says that Ukraine is losing ground due to Russia’s use of powerful guided missiles, and Ukraine’s lack of fortifications in the region. According to Tourret, “Ukraine’s defenses are more and more battered, the terrain is more and more favorable for Russian offensives and, on top of that, the Russians have a better impact, the three factors combine to explain the increase in Russian gains.”
These losses, combined with reports that Ukrainian forces are overstretched, and the fact that North Korean soldiers are now present in the conflict do not bode well for Kyiv. Additionally, Ukraine is suffering from a lack of manpower, as well as low morale among its existing soldiers. To combat this, Kyiv has introduced a new mobilization drive, hoping to recruit an additional 160,000 soldiers.
Other Ukraine News This Week:
According to Reuters, the Pentagon has declared that Ukraine would not gain additional permissions for the use of American weapons as a result of North Korean soldiers being deployed to Russia. Pentagon officials said on Monday that 10,000 North Korean troops had been deployed to eastern Russia for training, up from an estimate of 3,000 troops last Wednesday.
“In response, allies must scale up military support for Ukraine,” Ukrainian Foreign Minister, Andrii Sybiha said. “Lift restrictions on long-range strikes. Start intercepting Russian missiles and drones over Ukraine. Extend invitation to NATO. Boost investment in Ukraine’s arms manufacturing.”
For its part, the DPRK is defending its decision to assist Russia militarily. At a U.N. Security Council Meeting on Wednesday, DPRK Ambassador Kim Song asserted the nations’ right to “develop bilateral relations in all fields.”
South Korea has begun to strengthen its ties with Ukraine as a response to North Korean support of Moscow. Reuters reports that the countries are stepping up cooperation and intelligence sharing to develop future countermeasures against Pyongyang. This comes after weeks of increased hostility between the two Koreas, with North Korea demolishing connecting roads to its southern neighbor earlier this month. In addition to intelligence sharing, South Korea is contemplating sending weapons to Kyiv for the first time, which could transform the Ukrainian battlefield into a proxy conflict between Pyongyang and Seoul.
The United States unveiled a new round of sanctions on Wednesday, focusing on almost 400 individuals and entities who were accused of aiding Moscow’s war machine. According to the Agence France Presse, Deputy Treasury Secretary Wally Adeyemo said, "the United States and our allies will continue to take decisive action across the globe to stop the flow of critical tools and technologies that Russia needs to wage its illegal and immoral war against Ukraine.”
Spokesperson Matthew Miller was asked about the reports of North Korean soldiers in Russia, and if he knew how close they were to Kursk. Miller said that they were aware of around 10,000 soldiers who were sent to Russia but could not disclose if they knew how close they were to Kursk. He did say, however, that, “we have over the last few days seen a portion of those 10,000 groups move west, closer to Ukraine, In terms of an assessment, we’re concerned that they intend to use them to fight or to support combat operations against Ukrainian forces in Kursk.”
Spokesperson Miller confirmed that the State Department believed that Russia was violating international law by training North Korean troops, even though the nations have a mutual military treaty. Miller said that the United States and its partners will be evaluating the potential for new sanctions and that US delegations will continue to be sent to Kyiv.
A reporter asked Miller if the US had any concerns over China’s lack of response to North Korea’s sending troops to Russia. He said that ultimately Chinese officials can speak for themselves, but that “we have engaged directly with officials with the Government of China to make quite clear our concerns about this deepening military relationship between Russia and North Korea, and to make clear that we think this ought to be a source of concern for China as well as other countries in the region.”
The Spokesperson also said that North Korean troops in Russia did not “complicate the situation” for NATO and its allies, but that that some allies, specifically South Korea, were concerned about the development.
When asked about Ukrainian President Zeleneksyy’s claim that only 10 percent of a promised aid package had arrived, Miller directed reporters to the Pentagon, saying that he could not comment on the topic.
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Top photo credit: Damage at the site of overnight Israeli airstrikes that targeted Beirut's southern suburb of Hadath in Beirut, Lebanon, on October 27, 2024 (Photo by Fadel Itani/NurPhoto)
The Knesset’s vote this week to ban the United Nations Works and Relief Agency (UNWRA), the principal humanitarian aid group in the Palestinian territories, is the latest Israeli enormity in its year-long war in Gaza.
This move, which will impact two million civilians under siege in Gaza, underscores a central point: the Israeli government’s expectation that the Biden administration will acquiesce in whatever Tel Aviv wants to do in this war — even starvation tactics — and now also in Lebanon.
The State Department said that if the Knesset did not reverse its vote there “could be consequences under U.S. law.” But judging from U.S. behavior, any consequences will be limited to words, not limits on American military or political support.
The timing of this ban on UNWRA, fostered by Prime Minister Benjamin Netanyahu and his most extreme cabinet members, was not happenstance. He knows he has “free play” in anything he wants to do, at least until the elections on Tuesday. But he can’t be sure that afterwards, during his lame-duck tenure, President Joe Biden won’t find the necessary gumption to tell Israel that “enough is enough.” Given Biden’s career-long support for Israel’s behavior, that is most unlikely to happen, but Netanyahu has been taking no chances.
At the same time, the Biden administration is looking at polling numbers regarding the election in swing states, notably Michigan and Wisconsin. These states are home to large Muslim-American constituencies. During last February’s Democratic presidential primary in Michigan, because of President Biden’s unstinting support for Israel in Gaza, many tens of thousands of these voters either stayed home or cast “uncommitted” ballots against him. It is unknowable whether that electoral behavior will be repeated on November 5, and whether it could tip the vote in one or two swing states, thus potentially denying Kamala Harris the presidency. Recent polling suggests that Trump is gaining support from Arab-American voters in the days before the election.
At the same time, the Democratic party, and presumably their voters, too, are split on Israel’s case. Again, how the numbers will add up is unknowable.
The Biden-Harris administration is clearly focused on keeping this issue from sinking their chances to keep the White House. Secretary of State Antony Blinken just completed his 11th visit to the region since October 7th. While there, his talks included efforts to renew negotiations to at least pause military operations in Gaza and gain release of some of the Hamas-held hostages. On the face of it, it’s a fool’s errand; thus likely designed to reassure those voters — especially in Michigan and Wisconsin, whose votes in the election might be swayed by developments in the Levant — that Biden is still laboring to stop the war.
Meanwhile, U.S. envoy Amos Hochstein and CIA Director Bill Burns were in Israel and Egypt, respectively, on Thursday to promote last ditch efforts for ceasefires in Gaza and Lebanon. These too had little hope of success.
Another event likely timed with our election in mind was Netanyahu’s decision to attack Iran last week for its missile strikes on Israel. Indeed, Biden had publicly given him a green light.
But unlike in Gaza and now Lebanon, the Biden administration had something more visceral to fear. First, Israel might have attacked Iran’s nuclear facilities and thus virtually guaranteed that, at some point, Tehran would find a way to get the bomb. Second, more importantly, Israel might have attacked Iranian oil fields, leading Iran to spasmodically respond by closing the vital Strait of Hormuz to all regional states’ oil and gas exports.
The result would have had a major, perhaps catastrophic, impact on the global oil trade. Even the risk that Iran would take this step would have caused panic in oil markets just a week or so before Americans go to the polls.
Israel did agree to U.S. demands on limiting targets in Iran to military sites — it was self-deterred by understanding that even an otherwise complaisant Biden administration could not tolerate such a bold action. Of course, Israeli caution also comported with its own self-interest in not getting at loggerheads with the region’s other petrochemical-producing nations, including all those with Abrahamic Accords with Israel.
Such limits on attacks have not led Israel to stop attacking Gaza and Lebanon, however, with major civilian casualties.
On October 13, the U.S. did warn Israel that failure to increase the flow of aid to Gaza, “may have implications for U.S. policy under NSM-20 [related to US arms supplies in conflict situations] and relevant US law.” But the notional deadline only expires on November 12, and it’s not clear that the veiled warning about cuts in military support is enough to force Netanyahu even to permit humanitarian aid.
If Israel does accede to this US request on aid, however, Washington will still almost surely continue its limitless support for Israel’s military actions, other than against Iran. The U.S. reputation for intelligent exercise of power and commitment to humanitarian principles would thus continue taking a hard knock.
President Biden, in consultation with the new president-elect, must finally use America’s levers of power to act and not just talk to promote an end to fighting which, among other things, is the only route to return of hostages and, in the future, to forging stability and peace in the region. At heart, American leadership must be restored.
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