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Afghanistan and Iran Sanctions

The International Organisation for Migration has estimated the number of undocumented Afghan returnees to 752,325 for 2018, 721,633 of whom are coming from Iran.

Contrary to the UN’s expectations, Afghan returnees overwhelmingly come from Iran and not Pakistan, which has only seen 30,692 Afghans return home in 2018. This large exodus is mainly explained by Iran’s economic nosedive following the re-establishment of US secondary sanctions which culminated on the 5th November. Not only has demand for work in Iran’s informal economy dwindled, the value of rial remittances sent to Afghanistan has also suffered from a heavy devaluation exceeding 70% of the currency’s value. Not seeing any benefit in staying in Iran as illegal migrants, many Afghans have therefore decided to return home.

This return is likely to negatively impact Afghanistan’s economy, which already suffers from an unemployment rate of 40% and a severe drought season hitting the western regions close to Iran: Badghis, Ghor and Herat. After 17 years of continuous conflict, the landlocked country is experiencing an increase in violence with the rise of the Islamic State in Khorasan and the continuation of insurgency by the Talibans. The influx of impoverished men into the country therefore risks to inflame the security situation in Afghanistan, in addition to Iran’s possible increase in covert support for some branches of the Taliban as a way to trouble the US.

In addition to this indirect consequence of American sanctions, Afghanistan’s economy is likely to be hit more directly. Iran has increasingly become Afghanistan’s prime trading partner, reaching a record $2 billion of bilateral trade in 2017, against $1.2 billion in Afghan-Pakistani commerce. With a greater economic interconnectedness to the Iranian economy, Afghanistan could also be considered a prime target of US sanctions. However, American officials understand this well and have adopted measures to avoid negative consequences on Afghanistan.

This is why they have allowed India and Iran to continue developing and operating the Chabahar port, as well as permitting Iranian petroleum shipments to Afghanistan and railway constructions tying the two countries. Although palliative, these measures are meant to bolster India’s role in Afghanistan’s economy and allowing the latter to export agricultural and mineral products worldwide, without relying on Pakistan. A more globally integrated Afghan economy would make Afghanistan less dependent on the foreign aid which has failed to develop the country, and would also steer the country’s economy away from poppy seeds, whose illicit trade accounts for a massive $2 billion a year according to the IMF. Yet, sanctions and insecurity in southeastern Iran make that possibility highly unlikely. Due to financial and trade sanctions, Iran is an increasingly difficult country to trade with, and the recent terror attack in Chabahar raises the possibility that investors leave this project for good.

There are around 3.6 million Afghans in Iran according UNHCR, 950,000 of whom only are documented as legal migrants and refugees. Iran has traditionally been a prime destination for Afghans seeking to escape war and extreme poverty. Their living conditions in the country however has never been without drawbacks, as Afghans in Iran are known to face legal and widespread discrimination, as well as being mainly cornered into Iran’s informal economy and construction sector. Since Iran increased its role in Syria’s conflict, undocumented Afghans have also been reported to have been forced into joining foreign brigades to defend Shia sacred sites and support IRGC forces in Syria.

Yet, several legal improvements catering for Afghans have been made during Rouhani’s presidency. In 2015, the government issued a decree guaranteeing undocumented families that enrolling their children would not lead to deportation procedures, thus allowing more than 450,000 Afghan children to access Iranian schools. A few years later, Iran also became one of the only countries applying its social security system to refugees. In 2017, nearly 110,000 Afghans benefitted from the Universal Public Health Insurance which enables registered refugees to benefit from the same health insurance enjoyed by ordinary Iranians. Finally, a draft law is currently being considered by Iranian legislators, which could address decades of legal discrimination against Iranian women marrying foreign men. Presently, Iranian law does not recognise children born to Iranian mothers and foreign fathers as bearing the Iranian nationality. However, if this draft is passed in Parliament -something difficult to imagine due to its controversial character-, this would allow Iranian women who married Afghan men to request Iranian nationality for their children. This request could also be done by the child when reaching 18 years of age.

On a more general level, Iran’s economy has already greatly suffered from US sanctions and economic mismanagement as it is believed that its growth level in 2018 is minus 1.6% and in 2019 minus 3.5%. Iranian officials are waiting for the Europeans to operationalise their special purpose vehicle (SVP), in order to see whether their staying in the JCPOA makes sense. Iran’s Foreign Minister recently said that he was guaranteed by European officials that the SVP was already prepared but that its characteristics were not yet made public in order to escape American scrutiny. Iranian legislators have on Wednesday passed an amended version of their counter-financing of terrorism (CFT) bill which was rejected by the Guardian Council on the 4th November. It is likely that this time, the Council will allow the bill to pass, thus permitting Iran to implement four crucial pieces of legislation in accordance to the Financial Action Task Force (FATF) requirements.

However, the country still grapples with acute economic mismanagement and the failure of government policies. Lately, Iran’s student press agency has written that nearly €15 billion out of €28 billion worth of non-oil exports were not deposited in the NIMA index, which is required of exporters since July 2018. The NIMA index is the government-designed foreign currency market where exporters and importers are meant to trade foreign currencies like the euro. The fact that nearly 2/3 of foreign currency earnings have escaped this market shows the inefficacy of the Iranian government’s monetary policy and its inability to enforce laws. While it remains to be seen where exporters have placed this €15 billion, it is likely to assume that a large part of it has been sold on the free market, where rates are much higher than in the NIMA index.

Sources:

Euronews, 26 October 2017, Undocumented Afghan refugees get a chance at school in Iran”

ISNA, 4 December 2018, “15 billion euros lost!”

ISNA, 20 November 2018, “The government’s bill is merged with the draft on the nationality of children of Iranian women and foreign men in the Legal Commission”

Reuters, 5 December 2018, “Iran moves closer to adopting law against funding terrorism”

Reuters, 5 December 2018, “More than 700,000 Afghans leave Iran as economy slows”

Reuters, 20 May 2018, “US sanctions on Iran threaten vital Afghanistan trade project”

UNHCR, 4 May 2018, “Trailblazing health scheme benefits refugees in Iran”

 

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