Bank Runs in Kabul Spell Political Trouble in Afghanistan

Last week, Afghanistan’s frail banking sector endured its greatest crisis since the country emerged from Taliban rule in 2001. The country’s largest private bank, Kabul Bank, experienced bank runs after Afghani investigators revealed bank leaders purchased expensive properties in Dubai and distributed them to friends and members of President Karzai’s government. 60 percent of the bank’s cash deposit were withdrawn after the its two leaders were ousted over allegations of corruption.

Kabul Bank was a major supporter of Karzai’s reelection campaign, pouring millions into the president’s war chest and partnering him up with an ethnic rival to form a cross-cleavage of ethnic lines to maximize voter support. Two of the bank’s major shareholders were Karzai’s brother Mahmoud and Hasim Fahim, brother of the president’s running-mate.

The real crisis, however, is not the unraveling of the country’s banking system but of the political shake up it may cause, and the growing sense of empowerment Karzai is displaying.

Karzai has sought to limit American and other foreign inquiries into the graft that is a common fixture in Afghani governance. His chief of staff told interviewers earlier this week foreign officials will facilitate "training and coaching, but not decision-making” in investigating the latest charges of questionable ethics.

Specifically, international observers are looking into the arrest and reversal of charges for Mohammad Zia Salehi. He is a presidential aide who bribed internal monitors with 10,000 dollars and a car to not look into a money-exchange firm that is alleged to have shipped over three billion undeclared dollars out of the country. Karzai intervened, bemoaning the use of wiretaps against Salehi went against “human rights principles." Before Karzai’s chief of staff announcement, the investigative bodies received funding and personnel suggestions from the US.

Already Afghanistan is regarded as the second most corrupt country in the world, after Somalia, according to Transparency international. Allowing Karzai to handpick the internal auditors of his government gives him carte blanche to pursue an unchecked campaign of self-aggrandizement, undermining the democratic experiment the U.S. has been conducting in the Asian country. While that spells cronyism, another facet of the bank cataclysm creates a wedge between the Karzai family and the Fahims.

With the Central Bank the only vehicle capable of couching Kabul Bank’s losses, Afghans may begin to wonder the degree of political favoritism involved. Public funds are likely to be used, and to many it may seem as if the powerful are protecting its own. With so much media attention latched onto the web of players involved, the additional spotlight could strain relations between President Karzai and his vice-president. If the bank suffers serious losses, or an investigation reveals even more faulty transactions, family coffers could take a hit. And as one onlooker noted, “In Kabul, politics is all about money,” meaning the inter-ethnic alliance crucial to Karzai’s administration can be unraveled over money squabbling.

This should cause worry to United States and NATO forces in Afghanistan. A country at the mercy of inter-ethnic conflict cannot afford any new battle lines drawn. When it comes to Afghanistan, it’s the mess that keeps on giving.

Mikhail Zinshteyn is a staff writer for Campus Progress. You can e-mail him at mzinshteyn@googlemail.com.

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