The final withdrawal of US troops on August 30 ended the 20-year war in Afghanistan. This comes as part of Biden’s foreign policy plans promised during the election campaign. Regional powers had been in consultation with Taliban leadership to prepare for the withdrawal of US forces and are now focused on the normalization of airport activity. The Taliban rapidly gained control of provinces in Afghanistan, both from clashes with government forces and by government forces simply retreating without any military altercation. Afghan President Ashraf Ghani fled Kabul to the UAE when aides were on a lunch break, believing militants had entered the presidential palace and intended to assassinate him. The Taliban agreed to an evacuation grace period with foreign powers and pledged to form a new government swiftly. The Taliban have said they are “consulting all stakeholders to form a government that has broad support from a variety of Afghan populations.” However, the transitionary government will likely be formed exclusively of Taliban members despite earlier promises to include all 26 members of the existing shura Cabinet into its lineup.
Our View
The Taliban face a complex task in rebranding and establishing a unified, inclusive governing body that can gain the support of the diversified population and its tribal, ethnic, and ideological factions. The Taliban seek diplomatic ties with the outer world to boost the leadership’s legitimacy. For the wider region, the developments in Afghanistan raise the risk of terrorism attacks (albeit very slightly), with more country-specific implications in Iran, Pakistan, and in the GCC. For Iran, the Taliban takeover provides a new customer for its energy exports given the previous government’s aversion to violating US sanctions. Despite ideological differences that could spill over from sectarian friction in Iraq, Iran sees the Taliban as a potential regional partner. Nevertheless, the Afghanistan developments pose a risk of delays in US-Iran nuclear deal talks. The Iranian government has been vocal about “the US’s clear failure of its foreign policy in MENA.” The Biden administration will likely toughen its negotiation tone with Iran to compensate. This comes at a time when FrontierView expects the new hardliner government in Iran headed by Ebrahim Raisi to resume talks with a tougher negotiating stance, resulting in delays to a new deal. However, FrontierView continues to expect an agreement to be reached. For Pakistan, the impact of the Taliban’s victory in Afghanistan raises the risk of seeing more US relationship frailty, heightened domestic security risks, and a delay in the removal of the Pakistan rupee from the FATF grey list. As for the GCC, given Qatar’s role in mediating talks between Taliban and regional/global powers, the risk of diplomatic friction protracting with the UAE rises marginally.
Business Implications
MNCs will find it difficult to access the Iranian market until H2 2022 due to expected delays in US-Iran talks. The severity of economic damage from the pandemic and US sanctions necessitates long recovery timelines. As for the wider region, MNCs should monitor various governments’ stances on the anticipated Taliban Cabinet as a signpost to any increased risk of terrorism threats.
At FrontierView, our mission is to help our clients grow and win in their most important markets. We provide the research, data, and insights you need to outperform the competition. Subscribe to our weekly newsletter The Lens published by our Global Economics and Scenarios team which highlights high-impact developments and trends for business professionals. For full access to our offerings, start your free trial today and download our complimentary mobile app, available on iOS and Android.