In mid-August 2021, news feeds were overwhelmed with reports of dramatic events in Afghanistan. The president’s swift flight and the desperate attempts of ordinary people to leave the country, clinging to planes taking off, speak for themselves. Another shocking fact was the speed with which the until recently existing system of government in Afghanistan capitulated.
We will not go too deeply into the chronicle of recent events, as well as into their military aspects. From a practical point of view, the investor and speculator are more interested in how the current turmoil in Afghanistan will affect the financial markets and the economies of neighboring countries. From this point of view, it is worth paying attention to the significant fundamental factors related to this state.
State of Afghanistan
First of all, we recall that according to the results of the “pre-coronavirus” 2019, Afghanistan took 113th place in terms of nominal GDP among 195 countries of the world, according to the World Bank. And in terms of purchasing power parity (PPP) per capita, this state took 172nd place among 187 participants in the rating. For Afghanistan, this figure was $ 2294. For comparison, the value of GDP per capita in terms of US PPP for the same 2019 was $ 65,281, which is 28.5 times higher; for Russia, this figure is fixed at $ 29,181.
Afghanistan possesses deposits of coal and a number of ore minerals. In particular, the Ainak copper deposit, one of the largest in the world, is located on its territory. However, a project to develop it by a consortium of Chinese companies was frozen due to political instability in the country. In other words, the attractiveness of Afghanistan’s mineral resources is almost completely offset by high country risks.
Afghanistan is also not an attractive market for multinational corporations. With a population of just over 40 million people, the average salary there is only about $ 200 a month. According to expert estimates, the unemployment rate in this country in 2019 reached 24%.
In my opinion, it is not surprising that in such conditions its inhabitants are inclined to join various terrorist and criminal organizations, as well as to produce such an “export” agricultural crop as the opium poppy. According to media reports, the annual “selling price” of Afghan opiates is about $ 2.8 billion. This is a serious figure for a country with a nominal GDP of about $ 20 billion. However, this amount still does not make the difference in the global economy.
Thus, in a rough approximation, Afghanistan clearly does not represent a significant value on the economic map of the world. It is quite indicative that the “big three” international rating agencies have not yet assigned credit ratings to this country. Attempts by enthusiasts to launch a stock exchange in Afghanistan were unsuccessful. There is no stock index for Afghanistan. But this country still could not do without a currency exchange (Prince Market) – it is a physical trading platform in Kabul where cash is exchanged.
Summing up the interim result, we venture to assert that even a serious improvement or deterioration in the state of the Afghan economy in the coming years is not able to have a significant impact on the financial markets. In addition, the specified country does not have access to the sea. It is not an oil-producing state, and events in it are not yet capable of influencing the stability of oil supplies to the world market from the neighboring Middle East region.
At the same time, one should in no way underestimate the multiply increasing geopolitical risks associated with this country. Let’s not forget that the pretext for the introduction of US troops and their allies into Afghanistan in 2001 was a series of high-profile large-scale terrorist attacks in the United States. Strong mid-term fluctuations in financial markets were also linked to this event.
Thus, the possible upheavals for the financial markets and the economies of other states in connection with the events in Afghanistan are directly related to how strong and aggressive the new government of the Taliban representatives will be. Further strengthening of the Taliban will mean the threat of the subsequent expansion of their influence on the territory of neighboring countries. In addition, current events have already formed the preconditions for the influx of a new wave of refugees to all neighboring states. And the risks of increased terrorist activity against developed countries after the withdrawal of the international coalition troops from Afghanistan are only growing. Here we move into the area of predictions and assumptions.
It should be understood that the Taliban movement is officially recognized as a terrorist organization in the Russian Federation and a number of other countries. Since the official religion of the Taliban is one of the radical directions of Islam, this movement is characterized by uncompromisingness in a number of fundamental issues. In particular, economic interests and considerations of self-preservation recede into the background for its representatives in comparison with an ideology based on rejection of everything Western and modern.
This means that purposeful and spontaneous attempts to further expand the influence of the Taliban outside Afghanistan are inevitable. They can be held back only for some time and only for tactical reasons.
In addition, it should be borne in mind that this is not the first time the Taliban have come to power in Afghanistan. They already ruled the country from 1996 to 2001. The Islamic Emirate of Afghanistan, proclaimed by them, was recognized diplomatically by only three states, such as the United Arab Emirates, Pakistan and Saudi Arabia. Perhaps the leaders of the movement learned important lessons from that defeat.
One of the characteristics of the Taliban is its complete disregard for international law. Taking into account a long and complicated background, the current international status of the new government in Afghanistan seems extremely vague.
On the one hand, the Taliban is a recognized terrorist organization in the eyes of the world community. At the same time, he is expected to restrain the activity of even more radical terrorist groups in his sphere of influence. This became one of the conditions during the negotiations on the withdrawal of US troops from Afghanistan.
Thus, the Western countries and some other states in the current realities are forced to pursue a policy of appeasement in relation to the Taliban, which in the current situation is quite satisfactory for the representatives of this movement. In fact, the beginning of such a policy was laid by US President Donald Trump and allowed the Taliban to achieve their current success.
Such an uncertain and ambiguous international status of the growing movement is clearly visible in the financial aspect.
In mid-August, the United States stopped the massive supply of cash dollars to Afghanistan and blocked the Taliban’s access to the Afghan government’s American bank accounts.
The IMF also suspended the possibility of using its funds by Afghanistan. At the same time, German Chancellor Angela Merkel has already decided to allocate € 600 million to Afghanistan as humanitarian aid.
And the representative of the PRC Ministry of Foreign Affairs Wang Wenbin said that the imposition of sanctions against the Taliban would be a counterproductive measure that would not be able to solve the problems of this country.
Thus, the Taliban are at a kind of existential fork. This movement has become a force to be reckoned with in the international arena. Coming to power puts him in front of the need to govern an entire country, which raises the bar for decisions and responsibility, and also requires a strategic approach.
In this regard, it is quite appropriate to draw a historical parallel with the formation of the USSR. Before continuing the world revolution, it was decided to build communism in a single country. Later, this goal seemed to have been forgotten. It is possible that over time, Afghanistan will turn into a kind of analogue of such closed, but still well-established states like Iran, Cuba, Venezuela, North Korea and the like.
In conclusion, it is worth noting that the Taliban’s current success may well be short-lived. This movement was already gaining and losing power.
Now the Taliban are clearly rushing to declare the end of the war in the country. They even announced a general amnesty for their opponents. At the same time, there is evidence in the media that their persecution has not actually stopped.
Meanwhile, the last internal pockets of resistance in Afghanistan have not yet been suppressed. The former partisan movement, having achieved its rise to power, may face similar forms of resistance against itself. In this regard, the likely future weakening of the Taliban’s positions in the country is capable of hardening and radicalizing this movement in the struggle to maintain the achieved positions.