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The Great Afghan Corruption Scam

Posted on Apr 3, 2013
mark sebastian (CC BY-SA 2.0)

By Dilip Hiro, TomDisaptch

This piece first appeared at TomDispatch. Read Tom Engelhardt’s introduction here.

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Washington has vociferously denounced Afghan corruption as a major obstacle to the U.S. mission in Afghanistan. This has been widely reported. Only one crucial element is missing from this routine censure: a credible explanation of why American nation-building failed there. No wonder. To do so, the U.S. would have to denounce itself.

Corruption in Afghanistan today is acute and permeates all sectors of society. In recent years, anecdotal evidence on the subject has been superseded by the studies of researchers, surveys by NGOs, and periodic reports by the United Nations Office on Drugs and Crime (UNODC). There is also the Corruption Perceptions Index of the Berlin-based Transparency International (TI). Last year, it bracketed Afghanistan with two other countries as the most corrupt on Earth.

None of these documents, however, refers to the single most important fact when it comes to corruption: that it’s Washington-based.  It is, in fact, rooted in the massive build-up of U.S. forces there from 2005 onward, the accompanying expansion of American forward operating bases, camps, and combat outposts from 29 in 2005 to nearly 400 five years later, and above all, the tsunami of cash that went with all of this.

Last month, when an Afghan court sentenced Sher Khan Farnood and Khalil Ullah Ferozi, the chairman and chief executive of the Kabul Bank, for looting its deposits in a gigantic Ponzi scheme, the event received some media attention. Typically, however, the critical role of the Americans in the bank’s murky past was missing in action.


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Founded as a private company in 2004, the Kabul Bank was promptly hailed by American officials in Afghanistan as a linchpin in the country’s emerging free market economic order. In 2005, action followed words. The Pentagon, paymaster for the Afghan National Security Forces (ANSF), signed a contract with the bank to disperse the salaries of ANSF soldiers and policemen.

With that, the fledgling financial institution acquired an impressive cash flow. Moreover, such blatant American support generated confidence among better-off Afghans. Soon enough, they were lining up to deposit their money. Starting in 2006, the surging inflow of cash encouraged Farnood and Ferozi to begin skimming off depositors’ funds as unsecured loans to themselves through fake front companies. Thus was born the world’s largest banking scam (when calculated as a percentage of the country’s gross domestic product) with the U.S. Embassy in Kabul acting as its midwife.

How It All Happened

There exists a statistical connection between the sums expended by Washington in Afghanistan and worsening corruption in that hapless nation. It is to be found in the TI’s Corruption Index. In 2005, Afghanistan ranked 117th among the 158 countries surveyed. By 2007, as American greenbacks poured into the country, only two of 179 nations surpassed it in corruption. Since 2011, it has remained at the very bottom of that index.

What changed between 2005 and 2007? By the spring of 2006, the Taliban insurgency had already gained control of 20 districts in the southern part of the country and was challenging U.S. and NATO forces in the strategic Kandahar area. With a sectarian war by then raging in U.S.-occupied Iraq, Secretary of Defense Donald Rumsfeld felt that he could increase the American military presence in Afghanistan only marginally.

This started to change when Robert Gates took over at the Pentagon in December 2006. He began bolstering U.S. combat units there. As a result, forward operating bases multiplied, as did combat outposts and military camps. Building new sites or upgrading old ones on the double meant that the Pentagon started awarding contracts to local Afghan construction companies unaccustomed to handling such tasks quickly. They, in turn, subcontracted tasks out to those who greased their palms. With the infusion of ever more piles of Pentagon dollars, corruption only spread.

Later, each of these bases and outposts had to be supplied with food, water, fuel, and other necessities as well as war materials. In addition, the Pentagon accelerated its program of bolstering the nascent Afghan security forces by covering the full cost of training, equipping, and paying its personnel, as well as building bases and outposts for them. As a consequence, contracts to Afghan transport companies ballooned, as would contracts to Afghan private security outfits to protect the trucks hauling provisions and materials in that increasingly war-torn country.

So, of course, did the opportunities for graft.

Between 2005 and 2007, when American combat forces in Afghanistan doubled, the Pentagon’s budget for the Afghan War leaped from $17.2 billion to $34.9 billion annually. ANSF personnel also doubled, from 66,000 to 125,000 troops and policemen, though at a relatively marginal cost to the Pentagon. At $16,000 a year, the burden of maintaining an Afghan soldier was a paltry 2% of the $800,000 it cost to maintain his American counterpart.

In this period, opportunities for corruption rose exponentially. Why? In part, because the Pentagon was unable to protect the supply convoys of its Afghan contractors, something that would have required tens of thousands more U.S. troops. The distance between the main supply center at Bagram Air Base near the capital Kabul and the city of Kandahar in the Taliban-infested south was 300 miles; and the Taliban heartland in Helmand Province lay another 100 miles from Kandahar. Since Afghanistan lacks railroads, the only way to transport goods and people was to use the roads.

The Bagram-Kandahar highway was peppered with roadblocks, each manned by the armed fighters of the dominant warlord, who collected an arbitrary “transit tax.” The only way the transport companies could perform their job was by buying safe passage from the rulers of the highway and so parting with bribes of approximately $1,500 per truck between Bagram and Kandahar, and another $1,500 between Kandahar and Helmand.  All of this came from the cash the Pentagon was so profligately doling out.

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