Normative Narratives

Transparency Thursday: “Ghost Money” Flows From the U.S. to Afghani President Karzai

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A true transparency piece, aimed at making common knowledge formerly secret financial transactions between the C.I.A. and Afghani President Hamid Karzai, was released last Sunday:

“For more than a decade, wads of American dollars packed into suitcases, backpacks and, on occasion, plastic shopping bags have been dropped off every month or so at the offices of Afghanistan’s president — courtesy of the Central Intelligence Agency.

All told, tens of millions of dollars have flowed from the C.I.A. to the office of President Hamid Karzai, according to current and former advisers to the Afghan leader.

‘We called it ‘ghost money,’’ said Khalil Roman, who served as Mr. Karzai’s deputy chief of staff from 2002 until 2005. ‘It came in secret, and it left in secret.’”

“…there is little evidence that the payments bought the influence the C.I.A. sought. Instead, some American officials said, the cash has fueled corruption and empowered warlords, undermining Washington’s exit strategy from Afghanistan.

‘The biggest source of corruption in Afghanistan,’ one American official said, ‘was the United States.’”

“…the C.I.A. has continued to pay, believing it needs Mr. Karzai’s ear to run its clandestine war against Al Qaeda and its allies, according to American and Afghan officials…’We paid them to overthrow the Taliban’, the American official said.”

 “The cash does not appear to be subject to the oversight and restrictions placed on official American aid to the country or even the C.I.A.’s formal assistance programs, like financing Afghan intelligence agencies. And while there is no evidence that Mr. Karzai has personally taken any of the money — Afghan officials say the cash is handled by his National Security Council — the payments do in some cases work directly at odds with the aims of other parts of the American government in Afghanistan, even if they do not appear to violate American law.”

“While intelligence agencies often pay foreign officials to provide information, dropping off bags of cash at a foreign leader’s office to curry favor is a more unusual arrangement.”

“Afghan officials said the practice grew out of the unique circumstances in Afghanistan, where the United States built the government that Mr. Karzai runs. To accomplish that task, it had to bring to heel many of the warlords the C.I.A. had paid during and after the 2001 invasion.

By late 2002, Mr. Karzai and his aides were pressing for the payments to be routed through the president’s office, allowing him to buy the warlords’ loyalty, a former adviser to Mr. Karzai said.”

“Some of the cash also probably ends up in the pockets of the Karzai aides who handle it, Afghan and Western officials said, though they would not identify any by name.

That is not a significant concern for the C.I.A., said American officials familiar with the agency’s operations. “They’ll work with criminals if they think they have to,” one American former official said.”

Leaving out the little bit about how Iran was also attempting to buy influence, this seems like it may pretty much be common practice for the C.I.A.

I am admittedly torn on this issue.

The money is not a big deal in terms of the U.S. fiscal position. Tens of millions of dollars, over the course of a decade, amounts to a little more than a drop-in-the-bucket for American defense and intelligence expenditures.

If this money has gone to financing fighting that would otherwise have involved U.S. defense forces, it may well have saved money and American lives. From the American point of view, we may have been backing the lesser of two evils:

“Mr. Salehi, though, is better known for being arrested in 2010 in connection with a sprawling, American-led investigation that tied together Afghan cash smuggling, Taliban finances and the opium trade. Mr. Karzai had him released within hours, and the C.I.A. then helped persuade the Obama administration to back off its anticorruption push, American officials said.

After his release, Mr. Salehi jokingly came up with a motto that succinctly summed up America’s conflicting priorities. He was, he began telling colleagues, “an enemy of the F.B.I., and a hero to the C.I.A.”

 The fact that we have to buy influence in Afghanistan, on top of billions in official aid, shows just how costly and unsustainable nation-building can be, especially when that nation does not particularly want us there. What happens when the money stops, does the Karzai government lose control of the factions it was paying? Does the U.S. lose whatever little influence it does have over Afghani politics? Does the C.I.A. continue paying President Karzai indefinitely until the intractable “War on Terror” is won or abandoned?  

These are not easy questions; one thing I am sure of is that future payments to Karzai will come with stricter conditions of anonymity.

While the practical side of me says perhaps this money was needed, and indeed may have saved money and American lives compared to not paying it, the political and developmental economist in me is unabashedly opposed to this money.

Any time a government collects “rents”, be it from natural resources, official development aid, or secret financial transactions, that government further tightens its grip on the country. Similar to the “natural resource curse”, this money insulates the government from having to invest in human capital and infrastructure needed to raise the standard of living and productivity of the average Afghani, and put the country on a path to long term sustainable human development. Most governments, like the U.S. government, rely on tax revenue to operate, which is why the U.S government has stake in investing in the American peoples’ productive capacities (beyond the obvious moral and ethical considerations).

If the desired end result is true democracy in Afghanistan, then this money undoubtedly undermined U.S. interests. If the desired end result is a geopolitical ally who we know we can pay off, then the money has arguably served its purpose (although you can certainly argue U.S. influence in Afghani politics is minimal, considering how much we have invested in the country).

How do you feel about this? Do the ends justify the means, or is the U.S. thinking way too short-sighted and simply financing the next autocratic-anti-American regime in the Middle-East? I look forward to hearing some of your thoughts on the matter in the comment section.


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