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The war in Afghanistan is fought not just with weapons but with money too, which is why one tactic employed by the Western nations involved there is to try to stop the flow of money to the Taliban. And they're finding that the Taliban's financial network may be shadowy, but it's also quite sophisticated. NPR's Peter Kenyon has this report on how the Taliban funds itself.

PETER KENYON: If the question is where does the Taliban get its money, the answer that first pops to mind is a blooming poppy. The Taliban and other terrorist groups have long been associated with opium trade, and Afghan farmers are prolific producers of the deadly crop with a beautiful flower.

Counterterrorism officials say the Taliban has imposed what amounts to a lucrative taxation regime on the production, processing, and transportation of opium. Hard figures are elusive, but the U.N. Office on Drugs and Crime says between 2003 and 2008, income from drug production and trafficking for al-Qaida and the Taliban reached a combined $18 billion. [POST-BROADCAST CORRECTION: $18 billion is the estimated total opium revenue in Afghanistan for the years 2003-2008, according to the UNODC. The Taliban's share is estimated at between $90 and $160 million a year over the past five years, according to the UNODC. There is no separate estimate for al-Qaida.]

But having mastered the art of taxing the poppy farmers, the Taliban has branched out, imposing taxes on wheat and other crops as well. And then there are the Muslim charities and religious institutions outside Afghanistan that wittingly or otherwise send a steady stream of cash into the Taliban's treasury.

Haroun Mir heads the Afghanistan Center for Research and Policy Studies and has studied the Taliban's finances for some time. He says much of the charity money the group relies on comes from the oil-rich countries of the GCC, the Gulf Cooperation Council.

Mr. HAROUN MIR (Afghanistan Center for Research and Policy Studies): There is a network of charities in the GCC countries which directly support institutions in Pakistan which are supporting financially these extremist movements such as the Taliban. And our estimates are in Afghanistan that between 150 to $200 million every year reaches directly to Taliban via these network of charities that exists in the Gulf countries.

KENYON: When asked what can be done to stop it, Mir says he put that very question to Bahrain's foreign minister. And the answer suggested to Mir that a lot could be done, but probably won't be, unless strong pressure is brought to bear from outside.

Mr. MIR: He recognized the problem. But he responded there is no mechanism in the region to monitor the transfer of charity funding. And I think it would be good if the United States government, in cooperation with the countries in the region, creates a mechanism in order to monitor. And he also mentioned licensing of the charity organizations.

KENYON: Analysts say in a region where NGOs and charities that operate domestically often face severe scrutiny and regulation, such lack of oversight seems a glaring omission.

Other sources of revenue for the Taliban include classic extortion rackets that target various groups - including, in at least one case, U.S. taxpayers. Resupply convoys driving through the hazardous Afghan countryside frequently hire security companies to protect them, and as often as not they do that by paying off militias that control key stretches of highway.

A November article in The Nation magazine highlighted the phenomenon, and its author, Aram Roston, told WHYY's FRESH AIR that it adds up to a lot of American money going to the enemy.

Mr. ARAM ROSTON (Author): Potentially hundreds of millions of dollars. It's a huge chunk of the security part of the logistics operation. It's really worse than irony; it's in some cases just funding the same people you're fighting.

KENYON: At a December international security conference in Bahrain, the overwhelming focus was on Iran and its alleged meddling in the region's conflicts, including Afghanistan.

U.S. Central Command Leader General David Petraeus said yes, Iran is causing trouble for ISAF, the allied forces in Afghanistan. But compared with its activities in Iraq, Petraeus said Iran's support for the Afghan Taliban is modest.

General DAVID PATRAEUS (Central Command Leader): Enough to cause problems for ISAF and Afghanistan in general, but not so much to enable the Taliban to succeed. Needless to say, it is not in Iran's interest - a Shiite-led state's interest - to see a Sunni extremist, ultraconservative movement once again take control of Afghanistan.

KENYON: On the sidelines of the same conference, Christopher Langton with the London-based International Institute for Strategic Studies said he agreed with the notion that massive financing isn't necessary for the Taliban because terrorism is relatively cheap compared with waging war. But even so, he said money can play an important role in sometimes unexpected ways.

Mr. CHRISTOPHER LANGTON (Defense Analyst, International Institute for Strategic Studies): For example, the Taliban will pay their fighters on a day-to-day basis more than the Afghan National Police pay their police. So in an area where loyalties may be divided, it might be a better deal, if you want to make money just to feed your family to do a couple of days' fighting for Taliban, or even a bit more.

KENYON: The U.S. and other governments say they're making progress in blocking some channels of the Taliban funding. But many experts point to Afghanistan's massive corruption problem as a critical and daunting obstacle.

One person who's given a good deal of thought to that is Clare Lockhart, who directs the Institute for State Effectiveness in London. In an NPR interview, she never once used the word corruption, but she didn't have to, because much of her work involves trying to tease apart the strands of the corruption snarl. It's not the kind of work that makes the evening news very often because it involves helping Afghanistan gain things that developed countries take for granted, such as a functioning public finance system, or rather regain such things.

Lockhart emphatically does not agree with those who roll their eyes at the very idea of governing a place like Afghanistan.

Ms. CLARE LOCKHART (Institute for State Effectiveness): I think one of the myths about Afghanistan is that Afghanistan is ungovernable. When I arrived and went around the country in early 2002, in most of the provinces there were functioning finance offices and civil service offices. Actually, one of the tragedies of the last few years - many of those civil servants actually left their jobs and they became drivers, assistants and translators for the aid effort instead.

KENYON: Lockhart knows it's hard to get people excited about stories whose heroes are bureaucrats, but she says Afghanistan has to get its civil servants back on the job and revitalize the public institutions that are so important to tracking the flow of money into, out of, and around the country.

For instance, Lockhart says each year hundreds of millions of dollars worth of customs revenue comes across Afghanistan's borders.

Ms. LOCKHART: And one of the reasons it's so important to have a public finance system that collects that is that if the national treasury of the government of Afghanistan isn't collecting it, then those funds are probably being collected by somebody else. So trying to get a better understanding of the legitimate flows of money, and trying to get a handle on the illegitimate flows - the proceeds of crime, of extortion, of tolls, of bribery - is really important.

KENYON: Important and seemingly straightforward, unless you're trying to fight a hot war against the Taliban and other insurgents at the same time.

But if Lockhart and those who agree with her are correct, until Afghanistan regains its public institutions and empowers them to monitor, regulate and report on the flows of money in the country, the financial war against the Taliban will not be winnable.

Peter Kenyon, NPR News.

LINDA WERTHEIMER, host:

The diplomatic effort to reach out to the Taliban has been going on quietly for about a year. For the first time, a former U.N. envoy to Afghanistan confirmed to the BBC that U.N. officials had been in contact with the Taliban until a few weeks ago. But Kai Eide says most communications stopped after the recent arrest of several Taliban leaders in Pakistan. The detainees include the group's second-highest ranking leader. Kai Eide says talks were in the early stages, but that this is a negative development.

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