Thread by @JeffRigsby2

After my back-and-forth with Scott Richards last week, I realized there were things I didn't understand about the UN's shipments of dollars to Kabul.

But since no one else seems to understand either, I've tried to walk myself through this issue.

Thread.

https://twitter.com/skotrds/status/1786396958208184587

It's become a standard talking point that the UN ships $40 million to Afghanistan each week. But that claim is misleading in several ways.

For one thing, people don't always understand that this isn't "extra" money over and above the official aid figures.

It just 𝘪𝘴 the aid.

In response to inquiries from Congress, SIGAR released an analysis of the cash deliveries in January. It's clarifying but not completely accurate.

To the best of my understanding (largely based on this report, but with a few corrections from someone at DAB) it works as follows.

Suppose an aid agency—call it BCA, the Bohemian Committee for Afghanistan—gets a $1 million grant from USAID to implement a project in Khost.

USAID transfers the funds electronically into a BCA bank account outside Afghanistan. BCA then needs to get that money into the country.

Almost anywhere else this would be easy. They'd just make another transfer to their Afghan account.

But it's hard to move funds in and out of Afghanistan through normal banking channels. And many agencies can't or won't use the hawala system, which is the main alternative here.

So what BCA does instead is order cash to be delivered, like pizza.

From outside Afghanistan they wire $1 million to the United Nations, which bundles their purchase with those of other aid agencies and buys pallets of shrink-wrapped $100 bills from the New York Federal Reserve.

UNAMA collects the cash at Kabul airport and deposits it in its account at a "private bank" SIGAR doesn't name. (I've confirmed that this is Afghanistan International Bank.)

It then divides the money up among the various entities that placed orders for that particular shipment.

If BCA has an account of its own at AIB, as most UN agencies and NGOs here do, that account receives $1 million minus a processing fee. And if BCA does its banking somewhere else, AIB sends the money there.

This eliminates the need to make cross-border transfers electronically.

So for people who want to know if money sent to Afghanistan is being misappropriated, the cash airlifts have no special relevance.

You'd identify diversion of funds the same way you would if they were sent via bank transfer: by examining the books of the agencies receiving them.

(Those aren't very transparent, especially for UN bodies. But that's another story.)

The shipments started in December 2021, but it was only in January 2023 that UNAMA tried to explain how they work.

They stressed that the cash isn't "deposited" at DAB or given to the Taliban.

As SIGAR points out in its report, that's not incorrect but it's slightly misleading.

In our example BCA gets dollars from the UN, but needs afghanis to deliver aid in Khost.

So when BCA's bank exchanges the dollars for afghanis, the bank then has to buy more afghanis from DAB.

But SIGAR's more detailed explanation is also misleading, because it implies that DAB is steadily accumulating dollars through this process.

It's easy to see why that can't be true. Unlike most countries, Afghanistan doesn't have an unlimited supply of its own national currency.

Most of the Afghan money supply consists of physical currency—not bank deposits, which central banks elsewhere can create and destroy at will on their own balance sheets.

To be a continuous net buyer of dollars, DAB would have to be a continuous net seller of afghani banknotes.

But the supply of physical cash is largely fixed. Up to now DAB has found it almost impossible to import fresh banknotes to replace old ones as they fall apart—much less expand the money supply.

(This is why Afghanistan is experiencing deflation: a very undesirable phenomenon.)

So DAB holds regular public auctions to sell off the accumulated dollars and replenish its limited supply of afghanis. There's no other option, if the aid agencies are to continue receiving local currency to pay their operating expenses.

It's not a slush fund, in other words.

The UN shipments first drew public attention in December 2022, when DAB tweeted photographs of pallets of cash arriving at Kabul airport.

The tweets seem to have been paused after predictably swivel-eyed press coverage by Lynne O'Donnell et al., but they resumed soon afterward.

And DAB's Twitter account remains the most accessible source of public information about the program.

Each of the central bank's dollar auctions is announced a few days in advance in Persian and Pashto, along with the quantity of dollars being sold.

The tweets look like this:

And they're very useful in confirming the volume of the ongoing transfers.

Talking to Scott Richards the other day, it struck me that the "$40 million per week" figure had to be out of date.

I think it was roughly accurate for the first year or so after the Taliban takeover.

That's because the volume of humanitarian aid was much higher in late 2021 and 2022, when the international community believed—rightly or wrongly—that Afghanistan was on the brink of famine.

Much less aid is coming now, as SIGAR shows in this chart from its new quarterly report.

Those figures are for US assistance alone, but the US is the main source of official aid here. And this year's budget works out to just over $5 million per week.

So it didn't seem possible that the NGOs and aid agencies were still ordering $40 million in weekly cash deliveries.

An easy way to double-check is to search DAB's account for all tweets mentioning a given calendar year. Only the dollar auction announcements have dates, so that's all you'll get.

The central bank helpfully gives auction dates according to both the Islamic and Iranian calendars.

So if you search for "1445", you get all the auction announcements since Eid ul Fitr (10 April).

But I always go the extra mile for my Twitter audience, so instead I searched for "1403" and pulled up all the auctions since Nowruz (20 March).

See the resulting spreadsheet below:

The average inflow since Nowruz—remember, these are dollars that get delivered to the aid agencies, sold to DAB and then resold at auction—has been just over $16 million per week.

And lately it seems to be even lower, although perhaps some of that reflects the pause for Eid.

What I don't understand, though, is why the latest figures are well above what this year's US aid budget can explain. Some of the extra is money from other donors, but I think not all of it.

As SIGAR notes, most aid to Afghanistan is disbursed through multilateral trust funds.

Cutbacks in aid from Washington, and indeed from other donors, may not be immediately reflected in lower inflows if there's still money left in those accounts. That's one possibility.

It's also possible that some of the UN cash shipments are funds from another, unknown source.

Since there's been a lot of conspiratorial discussion about that topic, it's important to be as clear as possible about the evidence here.

UNAMA says that only a limited number of preapproved buyers (established NGOs and UN agencies) can make use of its dollar delivery service.

So in a formal sense all the recipients are accounted for. But it's conceivable that one of the approved entities could be making funds available for something other than a humanitarian purpose.

Tracking the 𝘴𝘰𝘶𝘳𝘤𝘦𝘴 of the funds, on the other hand, is probably impossible.

When an approved entity orders a delivery of dollars by air, it pays the UN from a bank account outside Afghanistan. And I doubt the UN knows where the money in the account came from.

Scott Richards is very sure that the GDI receives $10 million per week from the US government.

I heard that rumor too, but in my version it was the Defense Ministry.

The US and the IEA have an obvious interest in cooperating on counterterrorism, and their strengths are complementary. The Taliban don't have satellites or drones, and the US doesn't have boots on the ground.

So it's not an outlandish claim. And if US funds were being provided to the Afghan government, they'd presumably come from an undetectable source like the CIA's "black budget".

But that probably has nothing to do with the UN cash shipments. The CIA has better options available.

Sending covert military assistance this way would require the cooperation of a "cutout" NGO on the ground, and it would also require sharing information with both UNAMA and Afghanistan International Bank.

It's more likely that such aid (if there is any) would come in via hawala.

Unlike aid agencies, hawaladars can't purchase cash through the UN. But they routinely pay out large dollar sums to people collecting cross-border transfers at Saray Shahzada.

As I understand it, they can do this because the UN flights aren't the only source of physical dollars.

I'm told that many Pakistani importers pay for Afghan goods in Pakistani rupees, which causes the currency to be slightly cheaper here since it doesn't have local exchange value.

Dollars come in via Torkham and Spin Boldak to take advantage of the rate and buy the rupees back.

(And if some importers pay directly in dollars, that would save a step.)

So it's not a problem for Kabul's hawaladars to settle transfers in dollars. If you wanted to send money secretly to the Taliban, which has good connections with many of them, they'd be the obvious choice.

Like a lot of conspiracy theories, the idea that the UN flights are hiding covert aid in plain sight is too complex to be plausible.

US intelligence agencies already have the relationships they'd need to make those transfers without involving either the UN or the banking system.

Whether the alleged aid is anything more than a diaspora fever dream is a separate question, well above my pay grade ($0).

But some of the rumor's persistence must come from failure to understand why the UN cash is coming in. So I thought a simple explainer wouldn't hurt.

[end]

(thread slightly edited from yesterday)

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