In 1999, President William Clinton issued an executive order that declared a national emergency to address the threat of the Taliban. This order was issued in accordance with the International Emergency Economic Powers Act, National Emergencies Act, and 3 U.S.C. § 301 (2021). The order prohibited trade with the Taliban and territories of Afghanistan that were controlled by this group. Unlike most U.S. trade and economic sanctions, the order did not target trade with or investment in an entire country; it was instead limited to the Taliban as a political and military group.

The Taliban is viewed by many governments as a terrorist organization due to its inhumane treatment of Afghans, including massacres, destruction of homes, religious intolerance, and violations of the human rights of women. The Taliban Sanctions Regulations, issued pursuant to the order by the Treasury Department’s Office of Foreign Assets Control, 31 C.F.R. pt. 545, prohibits specific exports to and imports from Afghanistan, trade-related activity, financial correspondence with persons in territories controlled by the Taliban, and certain non-governmental organization (NGO) activity.

The significance of the Taliban Sanctions Regulations diminished after 2001, when the United States and its allies overthrew the Taliban regime and installed a democratic government.  However, the decision by President Donald Trump to withdraw U.S. troops from Afghanistan, followed by actual withdrawal by President Joseph Biden this year, led to the overthrow of the Afghan government and control of the country by the Taliban.  The Financial Action Task Force, the world’s terror-finance organization, has encouraged countries “to freeze the assets of the Taliban … to ensure that no funds or other assets are made available, directly or indirectly to them.” 

The Taliban Sanctions Regulations now have a much broader application due to Taliban control over Afghanistan’s government.  U.S. assets of the government of Afghanistan, estimated at $9.4 billion, have been frozen.  Payments owed to persons in Afghanistan may now have to be canceled by banks and other financial institutions, and sales or purchases of goods may need to be canceled.

As a result, the economy of Afghanistan is facing the risk of a major recession. For almost two decades, Afghanistan has received foreign aid, which now “accounts for nearly half its legal economy.” An element of whether Afghanistan will experience financial ruin is whether countries including the U.S. identify the Taliban as the legitimate government of the country.  The value of the Afghani, the currency in Afghanistan, has plummeted, which is likely to result in food shortages.

The World Bank has also provided financing to the country for development projects, since the fall of the Taliban in 2002, but the Bank has been silent regarding its intent to continue development projects there. Experts hypothesize that if the Taliban deemphasizes focus on projects such as public health and education, the World Bank is likely to suspend funding. Currently, the Taliban is viewed around the world as financially unstable due to its financing being “derived from criminal activities such as drug trafficking, opium poppy production, extortion, kidnapping for ransom and mineral exploitation.”  In consequence, the prospects for the normalization of trade and investment in Afghanistan, and the financial stability of Afghanistan, are dim.