To understand why America and its allies are losing the war in Afghanistan, consider the story behind one deadly attack. On July 6, in the northern Afghan province of Kunduz, a powerful improvised explosive device, or IED, detonated under the wheels of a U.S. humvee. Four soldiers died, as did their translator and a bystander. The makeshift bomb was assembled with goods from the local bazaar. The man who placed it was probably paid the going rate of $750, according to government officials, or more if he captured video proof of dead soldiers. And though the local Taliban covered his expenses and fees, the cash very likely came from money donated by the international community to rebuild Afghanistan's roads, bridges, clinics and schools.
Just a week before the explosion, Hajji Lala Jan, a local businessman subcontracted by a local firm working for the German government — aid agency GTZ to build a road in Kunduz, handed some $15,000 in cash to a Taliban middleman to ensure that his project wouldn't be attacked, according to local officials — though Jan himself denies it. The Taliban cash flow has many sources, and it's impossible to say if German taxpayer dollars directly paid for that IED. Andreas Clausing, country director for GTZ, says such payoffs are "impossible. It is forbidden in our contracts, and we have very strict monitoring." Nevertheless, it is likely that a substantial amount of aid money from many countries — including the U.S. — has made its way, directly or indirectly, into the Taliban's coffers. "Here we have internationals and Afghans turning a blind eye to the fact that we are paying off the very Taliban that we claim to be fighting," says an adviser to the Afghan Ministry of Interior. "It becomes a self-sustaining war, a self-licking ice cream." (See pictures of the battle in Afghanistan's Kunar province.)
That war has become the most pressing overseas challenge facing the Obama Administration, which has already increased the number of U.S. troops in Afghanistan by 20,000 and is receiving pleas from top commanders to send even more. Barely a week after Afghans went to the polls to vote for a President, the results are tied up in accusations of fraud flying between the two leading candidates, President Hamid Karzai and former Foreign Minister Abdullah Abdullah. It will be several weeks before an official result is announced. But the political wrangling in Kabul is a sideshow to the increasingly lethal and effective campaign being waged by the Taliban. Drugs, contributions from private donors and — more and more — payoffs from local businessmen ensure that the insurgency stays robust. A Western official estimates that the Taliban is making more than it is spending, "and I don't want to even think about where the rest of that money is going." And as long as the money continues to flow, the war will go on.
Up to now, most explanations of the Taliban's funding have focused on its control of Afghanistan's poppy fields, which provide the raw material for heroin. Last month the CIA and the Defense Intelligence Agency released a report estimating that the Taliban receives about $70 million a year from the drug trade. But drugs aren't the whole story. "The Taliban obtains revenue from a variety of sources, including extortion of funds from both legitimate and unlawful activity," says David Cohen, the Treasury's assistant secretary for terrorist financing. Major General Michael Flynn, senior military intelligence official at NATO's International Security Assistance Force (ISAF) in Afghanistan stresses Mafia-like activities such as extortion and kidnapping for ransom. "I would say that there is more money going into the pockets of local leaders [of the insurgency] from criminal activities than there is from narcotics money," he says. (See six ways to fix the CIA.)
It's important to remember that the Afghan insurgency is not a cohesive movement but rather a loose affiliation of groups united by a common goal: the expulsion of foreign troops. Provincial rebel leaders are left largely to make their own plans and find their own funding. Drug money is more likely to go to national leaders of the insurgency, like Mullah Omar, who provide guidance and training for local groups. Local commanders, on the other hand, "absolutely raise their own funds through criminal activities to pay for food, IEDs, weapons and salaries," says Flynn. The billions of dollars spent on reconstruction projects are far too tempting a target to pass up. As a result, the Taliban, once an organization of seminary students seeking to establish a caliphate, is embracing criminal elements that feed on insecurity for financial gain. Together with poor governance, ineffective policing and a weak justice system, the nexus between the Taliban and crime is becoming dangerously entrenched in Afghan society. "The Taliban are acting like a broad network of criminal gangs that enables them to utilize different sources of income," says Ahmad Nader Nadery of the Afghanistan Independent Human Rights Commission.
See pictures of the battle against the Taliban.
See pictures of Afghanistan's dangerous Korengal Valley.
Afghans are learning the hard way how difficult it is to deal with this level of criminality. The day after the American soldiers died in Kunduz, Jan's construction site was hit. A bulldozer and 12 trucks were torched and two of the drivers caught by the Taliban and held for ransom. Jan, 72, with closely cropped hair, a thick white beard and a string of amber prayer beads, claims he was targeted in retaliation for not paying off the Taliban, even though the provincial governor and district governor say he did. Not that Jan would have refused — he says the Taliban never asked. "If the Taliban had asked for $100,000, I would have gladly paid them," says Jan. "This equipment was worth $230,000." What probably happened, says Abdul Wahid Omerkhil, district governor of Char Dara, where the attack took place, is that Jan paid off the wrong people. "It usually happens like that. You pay one group and you don't pay the other, and they will burn you."
Supping with the Devil
The situation in Char Dara, just 18 miles (about 30 km) from the provincial capital, Kunduz, has gotten so bad that Omerkhil doesn't even spend nights there. Taliban members openly walk the streets and demand usher, a religious tithe, in exchange for adjudicating disputes. From Char Dara, the Taliban is expanding throughout Kunduz. The Taliban's success in the province is attributable to the fact that it can raise money there. In the spring, Mullah Omar dispatched a Taliban "shadow governor" to Kunduz along with a handful of Uzbek, Chechen and Arab fighters, with the intent of threatening the transit of NATO supplies to Kabul. The arrival of Mullah Salam, the Taliban governor, coincided with the return of a local man, Shirin Agha, who had fled to Pakistan after he got into a gunfight at a wedding. While the commanders work independently, they share common tactics, demanding usher, kidnapping for ransom and taking cuts of construction projects. Sitting in the dilapidated foyer of his mansion, Mohammed Omer, the provincial governor of Kunduz, marvels at the scale of the two Taliban leaders' rackets. By his estimate, Salam and Agha amassed at least $100,000 in a month through kidnappings for ransom and protection payments from contractors, who in turn had been paid by international donors. "The problem is that the people here are demanding a school or a road or a bridge, and the foreigners want to help," Omer says. "If we don't build, the people complain, but if we do, this problem arises. Either way, the Taliban benefits." A foreign official in Kunduz who asked not to be identified says, "No one is going to come save these construction companies. The Taliban know that the international community is concerned about security, but they also know it wants to pursue development as much as possible. So extortion is the easiest crime."
It's not just the big foreign-aid projects that get hit. Local businesses are victims too. In Kandahar, says a businessman who asked for anonymity out of fear of Taliban retribution, even the smallest shops pay a "business license" to the Taliban. In his company, which builds towers for mobile-phone transmitters, he estimates that 20% to 30% of total costs go to protection payments. The going rate to protect a transmitter tower runs about $2,000 a month, he says. "You have no choice but to pay these guys. You don't want to do it, but there is no government in these areas, no security, so you have to do what you can to protect your business."
That analysis is confirmed by Sargon Heinrich, a Kabul-based U.S. businessman in construction and service industries. Heinrich says some 16% of his gross revenue goes to "facilitation fees," mostly to protect shipments of valuable equipment coming from the border. "That is all revenue that will ultimately be shared by the Taliban." As an American, Heinrich is troubled by the implication that he may be funding the insurgency. "All of this could be seen as material support for enemy forces," he muses. "But you have to weigh that against everything that is being done in that project. Are you aiding and abetting the enemy if you have to pay to get a school built? It's the cost of doing business here." In fact, protection payments are so widespread that one contractor I interviewed responded incredulously to questions about how the system worked. "You must be the only person in Afghanistan who doesn't know this is going on," he said.
Read "Why Obama's Afghan War Is Different."
See pictures of the U.S. Marines' new offensive in Afghanistan.
Taking the Long View
U.S. and Afghan government officials certainly know about the protection rackets. Afghan Deputy Minister of Public Works Mohammad Rasooli Wali freely admits that the contractors he has hired to help build the multibillion-dollar ring road around Afghanistan — funded by the World Bank, USAID and other nations' development programs — probably pay off the Taliban to protect their sites and equipment. For his part, Colonel Thomas O'Donovan, the departing head of the Army Corps of Engineers in Afghanistan, which is responsible for about $4 billion worth of U.S. government contracts a year, admits that there is little the Corps can do to stop subcontractors from paying the Taliban. "If we catch them, then they are done. But how do you catch them? It's not like the Taliban give receipts."
So what can be done? Cohen, at Treasury, says an interagency task force has recently been convened on the issue of funding extremists, hoping this will help "protect the critically important work of humanitarian agencies in the region." Flynn, who came to ISAF two months ago with General Stanley McChrystal, the organization's new U.S. commander, thinks the old laissez-faire attitude toward protection money has got to change. "This is happening on battlefields across Afghanistan," he says, "and we have to fix it. Because if we can't fix that, then we can't tell the government of Afghanistan to get its act together." Hanif Atmar, Afghanistan's Minister of the Interior, says increased financing, particularly through extortion, is emboldening the enemy and admits that part of the fault lies with his government. "Yes, I blame [contractors and construction companies] for the fact that they are paying these insurgents, but at the same time, I sympathize with them because they are not doing it out of their own accord but because they are forced to. It is our responsibility as the government of Afghanistan and the international community to provide a secure environment for them to work. And so far, we have not been able to do so." (Read TIME's interview with McChrystal.)
That's in part because some Afghan officials think cracking down on protection rackets would be too difficult and costly, when an easier solution could be found in more development. Deputy Minister Wali says, "If the contractors pay the Taliban — well, that is only for a year, and the road is good for many years. And that brings security." Once the road is completed, he argues, it brings hospitals, police, schools and education. "And once the people know what the peace in the area is like, they will leave their guns and do some agriculture."
But that argument hasn't been borne out elsewhere. The Revolutionary Armed Forces of Colombia, or FARC, for example, has become so entrenched in the cocaine trade that it is now difficult to isolate the true ideologues from the criminals that keep the movement alive. The adviser to the Afghan Ministry of the Interior says the costs of enabling the Taliban's protection racket outweigh the benefits of any reconstruction that might come out of it. "It both prolongs the war and feeds criminality, which in turn turns more people against the government." His solution is to encourage local participation. "If you want a school, then make the locals build the school. You want a road, bring in local labor. It might be more convenient to pay off the Taliban, and it might be faster. But the community will protect what the community has built."
Such an approach would take time to bear fruit. The first step would be to shield local populations from the Taliban's threats — mission impossible without more Afghan and Western boots on the ground. Omerkhil, the beleaguered district governor from Char Dara, says there are only 27 police in his district of 80,000 residents "and 3,000 Taliban. The alternative to paying the Taliban is easy. If we had more soldiers, more police and more checkpoints, then I can guarantee you that the Taliban wouldn't be able to do anything."
In the end, only a thriving — and legal — local economy will turn off the Taliban's faucet. "If you have people making more money in a criminal organization than they can [make] working for the government or in the private sector," says a U.S. Treasury official involved in the issue, "it is an indication that we need to do a lot more to create a viable Afghan economy." Correct — and sadly, not something likely to be put right anytime soon.
— With reporting by Shah Mahmood Barakzai / Kabul
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