$850 Million Stolen from Kabul Bank. Is Afghanistan Ready to Lead?

June 9th, 2011 - by admin

James Blitz, Daniel Dombey and James Lamont / The Financial Times – 2011-06-09 01:12:47


Afghanistan: Lined Up to Lead
James Blitz, Daniel Dombey and James Lamont / The Financial Times

(May 31 2011) — Standing atop the ancient Citadel fortress, Daud Saba looks out across a bustling city bathed in early evening sunshine. “The time has come for us to stand on our own feet,” says the 46-year-old who is the leading politician in Herat, Afghanistan’s third largest city, and governor of the province of the same name. “Things are not always easy in this part of our country. But the moment has arrived when some of us need to start taking control of our own affairs.”

Nearly 10 years after the US and its allies invaded Afghanistan in the aftermath of the September 11 terrorist attacks, men such as Mr Saba, who runs all aspects of government in his province, are at the heart of western policy. In a month’s time, NATO troops in Herat and six other provinces or districts will hand security responsibility to the Afghan National Army and police, giving them control of an area covering one-quarter of the country’s 26 million population.

The event will be a milestone — the first step in a transition that by 2014 should lead to Afghans running security throughout the country, in turn laying the foundation for the pull-out of western combat forces, almost 2,500 of whom have died in the conflict.

The importance of next month’s transition should not be exaggerated. On Monday, Herat city was the site of a vicious Taliban attack that killed five civilians and wounded 30. But generally speaking this area — like others to be transferred to Afghan security control next month, such as Bamiyan and Panjshir provinces — has been largely free of Taliban for decades.

By contrast, the Afghan army would struggle to contain the insurgency in much of the rest of the country, especially in the south. At the same time, Afghanistan continues to be afflicted by a string of other problems that have long made westerners doubtful about whether NATO’s mission can ever succeed — most notably the reputation for corruption and poor governance that hangs over the Kabul administration of President Hamid Karzai.

However, western leaders argue that the fraught mission is at a turning point. The security handover is not the only reason for hope. In the next few weeks, the US will signal that a corner is being turned by modestly reducing its 100,000-strong force. There are hopes, too, that the killing of Osama bin Laden has dealt a powerful psychological blow to the Taliban leaders with whom he was once allied.

Above all, the US and its allies are pinning their hopes on a peace deal between the increasingly debilitated insurgents and the Afghan government. As Barack Obama, US president, told the BBC last month: “There needs to be a political settlement. Ultimately, it means talking to the Taliban.”

If there is confidence at NATO headquarters in Kabul about the prospects for Afghanistan, it is because of the successful build-up and training of the Afghan national security forces. After a faltering few years, this is now meeting targets. The country’s services — army, police and air force — are 290,000-strong in total and will be at 305,000 by December.

Some US politicians are concerned by the cost of building up the ANSF. Mr. Obama, after all, is requesting $12.8 billion for the next US fiscal year to equip and sustain the armed forces of a country with a gross domestic product of less than $17 billion. But within NATO there is delight at the way the ANSF faced down an attack last month government offices in Kandahar.

“It was a spectacular Taliban attack that ended in spectacular failure, thanks to the Afghan forces,” says Anders Fogh Rasmussen, NATO’s secretary general. The damage done to the insurgency by US military operations in the past year is a second cause of confidence. The insurgents’ strength will be tested in the next few weeks as they continue their annual spring offensive.

NATO officials say an unprecedented increase in night raids by US Special Forces on mid-level Taliban leaders has done much damage. They note, too, a sudden rise in the number of Taliban fighters — now about 1,700 — joining a reintegration scheme run by the government, which invites them to put down their weapons and take up other jobs. The increase “is a good sign of how the Taliban is coming under pressure”, says Mr Rasmussen. “The Taliban is finding it harder to launch complex attacks.”

For all that, few western political and military leaders are complacent. Top of the list of concerns for many are suspicions about the corrupt nature of parts of Mr Karzai’s regime. Still a central worry among diplomats in the capital is a fraud last year at Kabul Bank, in which $850 million disappeared.

“This is still a major issue for the Karzai administration,” says one. “We still don’t know who stole this cash and we need to find out.”

Allied to worries about high-level corruption is a second concern — the lack of good governance. The fear here is that the Karzai government’s poor administration of its budget, in particular the US and European Union-funded aid program, means many provinces are not developing strong civil structures.

“Budgetary execution is a real concern,” says a senior US official. “The central government does not get development funds out to district and governor level. They have no problem paying everyone’s salary. But they have distributed only 45 percent of the western aid money that they are supposed to.”

Others fear the failure to distribute development aid will mean advances made by NATO forces will prove only temporary. “The gains that have been made on the battlefield are being undermined by a lack of analogous efforts in the fields of aid, development, governance and counter-narcotics,” says a recent report by the International Council on Security and Development, a think-tank.

Ultimately, however, one question dominates discussion in Kabul today: it is whether peace talks between the government and the insurgents can succeed. Last week, Burhanuddin Rabbani, leading the Afghan effort, told NATO he was now in direct talks with the main Taliban groups; the Haqqani network, the Quetta Shura and Gulbuddin Hekmatyar.

“Rabbani’s message, again and again, was they have a desire for peace,” says a senior NATO official. “He believes, too, that on some key conditions, most notably the need to get the Taliban to recognize human rights and in particular women’s rights, there are reasons to be hopeful.”

The US is also shifting on peace talks. This year, Washington has signaled renewed eagerness to talk to the Taliban. “For the insurgents, this is crucial,” says a senior UN official in Kabul. “While all the talk at the moment may be with the Afghans, they want to know that at some stage in the process there will be dialogue with the big power, the US. That’s vital for them.”

Dubious loans as funds take flight The US and its allies have long had concerns about allegations of corruption and poor governance relating to the government of Hamid Karzai, Afghan president, writes James Blitz. But no recent event has triggered as much anxiety as the disappearance of hundreds of millions of dollars from the privately owned Kabul Bank.

The bank has been in turmoil since late last year when it was discovered that some of its shareholders, who include relatives or backers of Mr Karzai, had borrowed from it without collateral or documentation. The money was allegedly invested in property in the United Arab Emirates and in risky domestic projects such as an airline and shopping malls.

A commission set up by Mr Karzai to investigate the scandal issued its report last week, which did little more than blame regulators. The inquiry led by Azizullah Lodin, the head of Afghanistan’s anti-corruption office, did not specify who had been responsible for taking out the loans. According to news reports, Mr Lodin said “three or four” sitting cabinet members had received dubious loans. But he did not name the individuals concerned and also absolved Kabul Bank’s two most politically prominent borrowers — Mahmoud Karzai, the president’s brother, and Abdul Hassin Fahim, brother of the powerful first vice-president.

The commission made clear that it was up to the president to decide whether anyone should be prosecuted. Those involved in the international mission in Afghanistan — the US, NATO, the UN and the European Union — are watching what action he will take.

“How the Karzai government deals with the entire Kabul Bank issue is going to be a litmus test of where he stands on economic governance and on accountability,” says one senior western figure in Kabul. “Anything up to $900 million has disappeared from the bank. We do not know how that money has disappeared and who has responsibility for it. The Karzai government needs to make sure that the shareholders who robbed the bank are liable for prosecution.”

Western diplomats say the scandal has created uncertainty among donor governments and investors as they consider future funding for the Afghan economy. US President Barack Obama has told Mr. Karzai that US funds would not be used to bail out the bank.

The crucial party in making peace talks happen is not the US, however, but Pakistan. For years, it has been widely accepted that Pakistani authorities — notably the Inter-Services Intelligence — have backed the Afghan Taliban in order to avoid the emergence of a strong Afghan state backed by India. If peace talks are to succeed, it is, therefore, essential that Pakistan changes its tune.

Many Pakistani leaders believe there are good reasons why Islamabad can, and should, play a pivotal role in shepherding a political settlement to end the 10-year war. Success would cool off conflict in the Pashtun areas along the border between Afghanistan and Pakistan.

Moreover, a joint effort to accelerate a diplomatic settlement offers the best chance to overcome the severe strains in the US-Pakistan relationship following the killing of bin Laden in Abbottabad last month….

But while Islamabad is proposing a role for itself to assist negotiations with the Afghan Taliban, there are several reasons to doubt Pakistan will force the insurgents to talk. One problem is that many Pakistani politicians see US strategy as two-faced. In their view, there is a contradiction between American and NATO talk of negotiations and continuing aggressive Special Forces attacks.

At NATO, Mr. Rasmussen is adamant that strong military pressure is the only way to bring the Taliban to the bargaining table. But Abida Hussain, a Lahore-based former parliamentarian, says a considerable gap needs to be bridged between Washington and Islamabad for talks to succeed. “The big trouble is that some of the groups that Pakistan regards as assets, the US regards as targets,” she says.

Another stumbling block is Pakistan’s pride. The leadership has suffered a serious loss of face at the hands of the US as a result of the bin Laden raid. Recent remarks by Leon Panetta, outgoing head of the Central Intelligence Agency and future defense secretary, that Pakistan was not trustworthy enough to share intelligence, have inflicted deep hurt. This is discouraging leaders from entering into negotiations with the US over Afghanistan’s future.

Finally, many Pakistani leaders will want to negotiate with the US on wider issues before they enter into a deal on Afghanistan. One prominent issue is the need to ensure that any peace agreement with the Taliban should be followed by full withdrawal of the US from Afghan territory.

Khurshid Mehmood Kasuri, Pakistan’s former foreign minister, believes Washington will be open to this. “America can’t stay indefinitely. It’s costing $2 billion a week,” he says. “They want to leave but not like Vietnam, when people were hanging under the tires of the helicopter.”

In short, Pakistan’s role in resolving the Afghan conflict is, as ever, fundamental. If, as US military officials expect, it fails to crack down on the Afghan Taliban — and to force them to negotiate — then there may be no easy way out of the conflict for the US and its allies.

Alternatively, as it watches the decimation of insurgents on the ground, Pakistan may decide that its main asset in the country is eroding anyway and force the Taliban to sue for peace. In Herat, Mr. Saba certainly wants peace to be the direction in which events now go. “Across Afghanistan, we have to take charge and put the past behind us,” he says. “The fighting has gone on for too long. I am sure I am not alone in hoping these next few months mark a new start for all Afghans.”

Additional reporting by Farhan Bokhari

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