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Update No: 102 - (25/07/10)

Karzai consolidates hold over security sector
The sacking of the Minister of the Interior and of the Chief of intelligence in June forewarned of a coming effort of Karzai to bring the security sector under his direct control. In July Karzai nominated the replacement to these key posts and even changed the chief of staff of the army. Gen. Karimi, a Pashtun who served under the Soviets, becomes Chief of Staff, replacing the Tajik Bismillah Khan, suspected of disloyalty to Karzai and openly hostile to defence minister Wardak, a Karzai loyalist. Now both top positions in the armed forces are held if not by Karzai loyalists, by people who cannot afford to oppose Karzai (like Karimi). Karimi is also acceptable to Karzai’s western allies, as he is a respected professional. Bismillah Khan has instead been appointed as Minister of Interior, again satisfying westerners, who tend to like him, but also pre-empting criticism from the Tajik side as Bismillah replaces a Pashtun predecessor. The new head of the security services, Rahmatullah Nabeel, is a Karzai loyalist and a Pashtun. In this way, Karzai has achieved a little masterpiece; he has increased his influence over army and security services, without upsetting anybody too much. The Ministry of Interior is a major source of patronage and favours, if politically it cannot match the importance of the army.

And races ahead
The push to consolidate Karzai’s control over the security sector makes sense particularly if Karzai believe that he might soon be alone in Kabul, without foreign troops to back him up. Similarly when Karzai at the recent Kabul conference called for the handover of responsibility for security to the Afghans by 2014, he had in mind a scenario where the foreign forces are going to leave anyway. Why not, then, seize the mantle of patriotism and pretend that he has been driving the process? Few believe that the Afghan security forces will be ready by 2014, but Karzai tries to make a virtue out of necessity. In order to consolidate his power, Karzai also needs to have control over as many patronage resources as possible. Hence his call (again at the Kabul conference held in July) for the percentage of aid channelled through the Afghan government to be brought to 80% from the current 50%, even if the government has so far not been able to spend even that 50%.

Europe obliges
Apart from Washington, almost all the other governments involved in Afghanistan are very happy to hear that. Canadians and Germans are positioning themselves to pioneer the handover of security responsibility in their respective sector of presence, thereby paving the way to their own withdrawal. The British are more ambiguous in their statements, but their 40% increase in aid, recently announced, also seems to be meant to prepare the ground politically and psychologically for a withdrawal; there is already open talk in Whitehall about a gradual reduction in the commitment of troops. The story is different as far as Washington is concerned: should the Afghanization of the war go sour, the world will talk of an American defeat in Afghanistan, not of a European failure. Indeed the Americans are the angry ones in this context. Although UK Foreign Secretary Hague has complained about corruption in Kabul at the conference, this is little more than idle talk compared to what the US Congress has just done: cutting US$4 billion from the Afghan aid budget because of Kabul’s failure to contain corruption. Nonetheless, the hypothesis of a non-negotiated disengagement is gaining ground in Washington and is actually being tested on the ground in Eastern Afghanistan. At worst, it could be useful as way to gain some leverage vis-à-vis Pakistan and Kabul, if the effort to gain military success in the field continues to deliver disappointments.

Summary & Forecast 2010
Despite having recovered some support during the 2009 Presidential campaign, President Karzai’s weak leadership is going to be severely tested during 2010. He will continue to be under pressure from multiple quarters; he has already been coming under unprecedented pressure from his international partners to tackle the issue of corruption in the country. The growing awareness among western public opinion of the extent of graft and corruption in Kabul, is clearly undermining the war effort. Karzai has built his power base on the toleration of corruption and it will not be easy for him to tackle the issue. He will however have to at least to pay lip service to it.

Sources within the government itself estimate that about US$10 million are smuggled outside the country daily through Kabul airport alone, corresponding to about a third of the official GDP. Foreign diplomats believe that government officials and political leaders have embezzled or accumulate through corruption US$2.5 billion a year. One of the former vice-presidents was caught in Dubai two years ago with US$70 million in cash, but then let go.

Expanding and consolidating his power base, or indeed even just maintaining it, looks likely to become increasingly problematic. Karzai’s patronage-driven system has already reached its entropic stage, where more and more has to be distributed just to keep it going. Of course, the demands of the patronage system are flatly at odds with the demand for reduced corruption coming from the donors.

As predicted, Karzai’s excessive promises during the 2009 electoral campaign are coming back to haunt him. His efforts to get his new cabinet approved by parliament have been frustrated by infighting among different factions and ethnic groups. In particular, Karzai’s Hazara and Uzbek allies are very upset because none of their candidate ministers has been approved by parliament; Tajik and Pashtun MPs have colluded in voting them down, although their motives are different. Karzai’s inability to get his full cabinet approved is humiliating for him because it highlights the narrowness and precariousness of his political base. His attempt to appease western critics has also achieved limited gains so far, the approval of Omar Zakhilwal won praise as Minister of Finance.

In the west there is also satisfaction that Minister of Defence Wardak and Minister of Education Farooq Wardak have been confirmed, although whether this is a sound judgment is debatable. Another couple of new ministers have acceptable reputations. Although most of the 14 ministers who managed to get confirmed before the Parliament went into recess in mid-January, were new faces, they were also inexperienced and lacked a significant base of support. It will not be easy for them to handle the jungle-like Afghan government machinery.

The approval of the ministers most appreciated in the west was read initially as a sign of the Afghan parliament awakening to its institutional role and demanding a cleaner and more effective cabinet, but a closer reading suggests more complicated manoeuvres. Although the more liberal component of the parliament might have been motivated by a demand for competence and cleanliness, it accounts for only a small portion of the votes. Elsewhere, the motivation for giving Karzai such a hard time was the desire of various factions to raise their price with the president.

Karzai also faces the challenge of keeping control on a state apparatus which is more disintegrated than ever. In the areas most affected by the insurgency, many police stations have made pacts with the rebels! The loyalty of the army to Karzai is increasingly suspect, while there are problems in controlling the intelligence services too. The major expansion programmes affecting both army and police are not likely to resolve these issues, but if anything to compound them.

Observers were almost universally surprised by the arrest in Karachi of the operational chief of the Afghan Taliban, Mullah Baradar (‘Brother’). Mullah Omar’s avowed successor. Baradar is the highest ranking catch by the Pakistani intelligence since 2001. Pakistani and American sources converge in attributing the decision to arrest him to months of very strong pressure from Washington. Two other relatively high rank Afghan Taliban were caught at about the same time. ISAF is now also claiming successes in Helmand province and elsewhere, particularly the south-west. There is some truth in these claims, together with a fair dose of propaganda, but the areas falling under relative ISAF/government control are flat pockets, where running an insurgency is very problematic. The mountainous parts of the country seem as out of reach as ever and they account for most of Afghanistan. ISAF’s calculation was that if it could strike the Taliban hard in their most cherished provinces of Helmand and Kandahar, it could then force them to negotiate a reasonable settlement. The operation around Kandahar city, however, is being thrown into doubt by the hostility of local notables and of Karzai himself. Having sought the agreement of Afghan authorities and elders before starting the operation, it is now difficult for ISAF to backtrack.

Otherwise business in Kabul continues as usual; the new cabinet is not complete yet several months after Karzai’s reshuffle, while the attention is focused on the forthcoming Kabul conference planned for June. It is hoped that this conference will finally clarify what Afghanistan’s development strategy is, following years of discussions and many kilometres of ink, but not everybody is optimistic. Karzai is increasingly at odds with the Afghan parliament, where he used to hold a majority until last year. Apart from having been unable to get his choice of ministers confirmed, Karzai was challenged on a number of other issues, including his electoral decree, which was overwhelmingly rejected. Ownership of the process leading to the parliamentary elections later this year, is becoming contentious even as far as the international community is concerned.

Karzai has appeased some of his critics by re-appointing foreign observers to the Electoral Complaints Commission, reversing his earlier decision to staff the Commission with cronies. It is a cheap price to pay for Karzai, as his election is already secured and the future wrath of the Commissioners will be reserved for the candidates to the parliament. Finally, the majority of the members of the Commission will still be Afghan appointees of Karzai, ensuring him a majority.

Karzai seems clearly to be trying to carve off an autonomous space for himself, away from his international patrons. The relationship of trust with Washington is probably spoiled forever; still Karzai is completely dependent on the Americans financially and militarily. The announcement of a date for the beginning of an American withdrawal (2011) further reduces Karzai’s leverage vis-à-vis Afghan society, because he has always been seen as the conduit to foreign money more than anything else. Few believe that he will be able to build an alternative legitimacy.
During April once again the relationship between Karzai and the Obama administration experienced more ups and downs. In his (often clumsy) efforts to shore up public support inside Afghanistan, Karzai often ends up irritating his patrons in North America and Europe. His rhetorical hyperboles, such as threatening to join the Taliban in front of a crowd of Afghan elders, are usual stuff in Afghan politics, but do not go down well in Washington. The press eagerly reports about Karzai’s behaviour, adding to western embarrassment. Although Karzai’s behaviour has become increasingly erratic and the multiple sources of pressure to which he is subjected seem to be affecting his stability, to a large extent the ‘war’ with Washington and the Europeans is a phoney war. Within certain limits, his foreign patrons understand as it being in their own interest that Karzai tries to recover some political ground and a more autonomous image, by criticising them. The worry however is that statements by Karzai, meant for internal consumption (but widely publicised abroad), might further undermine western public support for the military effort.

Karzai, moreover, seems increasingly genuinely convinced that Washington might be manoeuvring behind his back to replace him, or at least undermine his already precarious hold on power. Talk of reform and negotiations with the armed opposition do not help rebuilding trust between the Kabul government and its western patrons. Some western diplomats in Afghanistan, for example, worry that Karzai might be holding some nasty surprise up his sleeve for the forthcoming Peace Jirga, planned for May, such as announcing some rushed-up and ill-considered deal with sectors of the armed opposition. This could be meant to show that he has indeed a degree of autonomy and is not just a puppet, as well as establishing new political alliances. The Obama administration, on the other hand, has repeatedly followed up its diatribes with Karzai with public statements of enduring support. Obama’s recent trip to Kabul seems to have been meant to remind Karzai of his (as yet unfulfilled) commitments taken at the London Conference in January. Karzai might well have resented the warning as undue interference. Karzai is also signalling his newly found autonomy of thought, by befriending President Ahmadinejad of Iran, at a time when Washington would like to see him as isolated as possible. Karzai visited Teheran twice in two weeks during April, including once after Obama’s short visit to Kabul.

The London Conference at the end of January did not see the bashing of President Karzai that western diplomacies seemed bent on, although Karzai was warned by the donors that they would not fund the forthcoming parliamentary elections unless the system undergoes a substantial reform. In principle, the donors have promised a further US$3.6 billion for the reconstruction of Afghanistan over the three coming years, a 32% increase over the previous three years. They also promised US$500 million for the reintegration of Taliban combatants ‘giving up the gun’, which is now the talk of the town.

Karzai’s visit to the US was hailed as a success by most observers. The relationship with Washington seems to have eased, perhaps even sorted out, with Obama hailing Karzai as a friend of America and Karzai making claims that all has been sorted out. In contrast to his rhetoric of the last year, Karzai in Washington has been praising the change in ISAF’s attitude and the shift of the focus away from violence and towards an increased expenditure on infrastructure and administration. Karzai and the Obama administration also seemed to be trying to play down differences on the issue of negotiations with the armed opposition. Karzai was afraid of direct talks between Taliban and Washington and has moved to pre-empt them by starting his own negotiations. Washington did not like the timing, nor probably does it fully trust Karzai’s intentions. Whether the contrast is fully solved or not is difficult to say, but Washington seems resigned to the fact that Karzai needs to have his own thing going. The fact that the Taliban are not responding positively to Karzai might also be reassuring the Americans. The thaw between Kabul and Washington will never probably restore the relationship that existed between the two capitals during the Bush administration, but it now seems to be more at least than mere public relations. Signs of a more substantial change can be seen on the ground, particularly in Kandahar, where after much criticism of Karzai’s half brother Ahmad Wali, now ISAF is seeking his cooperation in the effort to clean Kandahar of the Taliban presence. The allegations of abuse and of involvement in the drugs trade have been once again sidelined, but Ahmad Wali is still a very polarising figure in southern Afghanistan. Showing to his country that the relationship with Washington has been re-established is of great importance to Karzai, whose role has always been to act as the conduit for American money to Afghanistan. Without that, he has no political future.

The echo of Karzai’s successful reconciliation trip to Washington was barely over, that the news of the sacking of Interior Minister Atmar and security chief Saleh broke out. The episode triggering the sacking was a Taliban attack on the Peace Jirga organised by Karzai to launch negotiations with the opposition. The attack took place while Karzai was talking, which might have particularly upset the President, but the Taliban did not manage to inflict casualties and the attack was contained. Beyond Karzai’s fury, therefore, they might have been other reasons behind the sacking. Both officials were known for their good relations with the West; both were opposed to appeasing Pakistan and negotiating with the armed opposition. Karzai might have wanted to undermine support for policies advocated by Washington and the Europeans within the cabinet and also signal his determination to be in full control. Perhaps more importantly, the sackings might be a concession to the Pakistanis, who had been demanding a move of this kind in order to collaborate with Karzai in bringing the armed opposition to the table.

The attack on the Peace Jirga symbolised the fact that the Taliban are not ready to negotiate yet. Indeed the Jirga was a disappointment from a number of points of view. Hopes had been entertained that the fighting wing of Hizb-i Islami, led by Gulbuddin Hekmatyar, would offer some concrete proposal at the Jirga, but after some negotiations earlier in the year, the flirtation with Kabul evaporated. Hizb-i Islami demands the delisting of Hekmatyar from the UN list of wanted individuals in order for the negotiations to proceed. The Taliban, for their part, seem even less in a hurry than Hizb-i Islami to negotiate. The Pakistani military hints that it could get them to the negotiating table, but it wants to play a key role in designing a settlement in its own interest. While Karzai has been going some way towards the Pakistani position, he is still far from having met all the conditions. The time is therefore not yet ripe for negotiations, but it might be so by the late autumn, once the current fighting season is over and the different sides will take stock of their respective position. So far the result of the military operations in Helmand province has been rather disappointing from the ISAF point of view: the Americans admit that Marja is not under control yet, despite the massive concentration of force. The Kandahar operation is being postponed and redesigned on the basis of the lessons of Marja, but unless the Kandahar phase of the offensive delivers more convincing progress on the ground, in autumn Washington’s negotiating position will not be stronger than it was last winter.

While the Americans discuss with great fanfare and dubious results how to salvage their Afghan operation, the Chinese are quietly moving in to strengthen their position in Afghanistan’s economy. In March Chinese President Hu Jintao and Karzai signed deals concerning economic cooperation, technical training and the granting of preferential tariffs for some Afghan exports to China. China is already investing in the largest ongoing mining project in Afghanistan and is interested to bid in other, forthcoming projects. There are rumours already that the Chinese have offered President Karzai training for the Afghan army and for his intelligence services, in the event of a NATO disengagement. There might well be some truth in this, as Afghanistan seems to be turning into ‘the Congo of the 2010s’: apart from the already well established Pakistanis (on the Taliban and Hizb-i Islami side) and the omnipresent Iranians, the Indians reportedly have offered to send troops (sheer poison to the Pakistanis), while Turks are already deploying a small contingent in the north-west, to protect their fellow Turkic speakers from the infiltration of the Taliban.

Karzai is focusing his political campaign over the issue of reconciliation; he achieved the de-listing of five Taliban figures already reconciled with the government from the UN list of proscribed Taliban leaders and is now seemingly accelerating the pace of reconciliation compared to what Washington thinks is desirable: he talks of involving the Taliban leadership in negotiations, but this is too early for Washington, which amongst other things has to convince a hostile public opinion in the US.

The messages coming from Washington concerning Karzai are not fully reassuring for the embattled Afghan President. When American Special Envoy Holbrooke says that there is more to Afghanistan than Karzai, he seems to hint a desire to reduce Karzai’s role. The battles of the spring and summer, pitting Karzai against American diplomats are over, but the trust has gone.

Washington is still divided between alternative options concerning Afghanistan. At the Department of State Clinton still argues that the US have to hang on to an idea of ‘nation-building’ in Afghanistan, which means elections, women’s rights and the like. Obama, Vice-President Biden, the Pentagon and the CIA are all more inclined to seek a settlement which protects their geopolitical and strategic interests and forget about the rest. Signals however uncertain, are slowly emerging that Clinton is gradually losing ground on this: Americans, Pakistanis and Saudis are converging towards some kind of idea of a deal with the Taliban, and that the Taliban leadership itself is not uninterested.

Afghanistan cannot afford more instability. In August-October, government revenue collapsed by about 30% because of the instability and uncertainty deriving from the post-election diatribe. Revenue recovered in November, where in fact it reached a record because many delayed payments took place. So far in the current year total revenue is up by a third compared to the previous year, to US$1.2 billion. This is in part due to the fall in the value of the American dollar, but also to a continuing rise in imports, driven by foreign presence and foreign funded projects. The ministries, however, remain paralysed by the 2009 electoral mess. In the first quarter of the Afghan financial year, only 3% of infrastructure projects were awarded, a figure which fell further in the second quarter. Everybody in the ministries is waiting to know his own fate as Karzai is expected to replace or reshuffle almost all the ministers. Now Afghan businessmen are even less keen than before to invest because they have heard President Obama say that disengagement from Afghanistan will start in 2011 and they have no faith that the Karzai regime would survive more than a few days after an American withdrawal.

Of US$5.3bn privately invested in Afghanistan over the past seven years, only 27% was foreign investment and the percentage is falling fast. The inability of government and donor agencies to achieve anything in the economic field, adds to the frustration. The provision of electricity seemed to have been addressed at least in Kabul earlier this year, but now most families are back in the dark. Many power projects are not functioning properly. The distribution network is badly designed and managed even worse.

Much of the talk in June was about the American announcement that Afghanistan has huge mineral deposits, which if exploited could turn the economy of the country around. In reality all of this was known already, but the American Army seems to have pushed for the official release of the data in order to show that Afghanistan after all, is worth fighting for. Some observers see here a rift between the Army, which wants to fight on in Afghanistan until it can leave with honour, and the Washington politicians, who want to disengage as soon as possible. However, even if Afghanistan’s mineral riches can be dug out, it is likely that it will not be US companies to do it. The 1.8 billion tonne Hajigak iron ore mines bidding process sees the participation of five Indian companies and two Chinese ones. On a separate note the first stretch of Afghanistan’s first railroad has been inaugurated in northern Afghanistan, connecting it to Uzbekistan. Once it becomes fully operational, it will dramatically reduce the costs of transport to and from Central Asia. Completion is expected by the end of 2010.

The big Kajaki dam project is now postponed indefinitely because the contractors refuse to work in the insecure environment of Helmand.

With the American troops’ surge still going on, and more and more money being pumped into the country, it is likely that throughout 2010 violence will continue to escalate. The Taliban send ‘messages’ through their raids in Kabul that there is plenty of room for them to strike wider, in a sense reminding their enemies that after all, they have been relatively well behaved so far, considering how civil wars and insurgencies go. Certainly the expectation among Afghans at large is for worse to come. Significantly, last year just 54,000 refugees have returned to Afghanistan from Iran and Pakistan, the lowest number since 2001. There are no statistics concerning how many have crossed the border in the other direction, but they are very likely more. 2009 thus is the first year of the post-2001 phase which saw ‘exits’ from Afghanistan exceeding ‘entries’.

After the economy almost ground to a standstill last summer, some signs of limited recovery are evident. Customs revenue in such places as Torkham is exceeding expectations as trade is flourishing once again. This is not surprising as the ever increasing foreign presence in the country has a major stimulating impact on commerce. By May it was obvious that strong and well distributed rainfall delivered a bumper harvest in 2009-10, more than doubling agricultural output and contributing to a 22.5% GDP growth. The services sector also keeps growing, boosted by aid expenditure and the ever growing foreign presence. The only non-agricultural productive sector which shows growth is mining, which over the last two years has expanded by 30%. Tax collection as a result has also been growing, although an improved administrative structure also contributed by reducing leakage. Tax collection was up 68% in 2009/10, while custom duties grew by 48%. Doing forecasts is always difficult because agricultural output, dependent as it is on rainfall, is unpredictable. The World Bank sees GDP growth at over 8% in 2010/11, while inflation is expected to be around 5%. On the other hand a poor poppy harvest is expected this year, because of a disease affecting the plants; this could affect the legal economy indirectly.

Faced with Iranian ‘noise’ concerning the possibility of a gas pipeline supplying Pakistan and maybe even India, the on-off-on Turkmens have resurfaced to re-propose their TAPI pipeline through Afghanistan, but their chances faced with the more advanced Iranian project seem slim, despite the international political turmoil surrounding that country. The production of opium is expected to fall again this year, as a result of low prices.. There is also a bacterial problem affecting plant growth. Despite the decline, there continues to be overproduction of opium in Afghanistan and stocks are huge, a fact which explains the low prices.

A couple of recent incidents highlighted how the emerging sector of the Afghan economy is deeply affected by cronyism and favouritism. The bidding for the Hajigak iron ore deposit has now to restart from scratch, because of alleged malpractice affecting the first round of bids; several companies withdrew from the process and only one actually presented a bid, a Saudi company with a branch in Pakistan. The suspicion that the Hajigak mine might be well on its way to becoming another case of crony capitalism is not unwarranted, given how things go in Afghanistan. Political loans to members of the Afghan elite are common in Afghanistan; usually the money is used to buy villas in Dubai. Kabul bank, the country’s main bank, was campaigning in favour of Karzai in the elections as well as conceding favourable loans to his family members. What the gain is for Kabul Bank in all this is not yet clear.

 

 

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