Ghani corruption plus Biden incompetence = fall of Kabul

By Matein Khalid

The horrific fall of Kabul to the Taliban is an indictment of both the systemic corruption that plagued the Ashraf Ghani government and the policy incompetence of the Biden White House in a critical stage of the war.

In retrospect, the US had no business negotiating with the primitive savages of the Taliban who have never severed their links with Al Qaeda and ISIS terrorists still on Afghan soil.

This geopolitical shock will not derail the Wall Street bull market as Afghanistan is an economic pigmy and plays no role in world finance, other than the lucrative opium/heroin money laundering business. Yet it could have second round effects if the erosion of Biden’s political capital also erodes his legislative agenda, notably the infrastructure bill.

The immediate impact should be a higher US dollar as safe haven buying of US Treasury notes continues, flows also stimulated by the spike in global delta variant cases and the weak Chinese industrial production data. This will mean pressures on energy and metal stocks but should not have a major impact on sectors like technology or consumer discretionary.

The other impact of geopolitics could be a higher risk premia on Taiwan assets as the US abandonment of Afghanistan has gone unnoticed in Taipei, under existential threats from a PRC that still calls the islands its renegade province.

Second loser of the events in Kabul is Pakistan as its military intelligence agency ISI which created and armed the despicable Taliban since the mid 1990’s. It is only a matter of time before the Taliban regime in Kabul exports terrorism and secessionist violence to Pakistan’s own 25 million Pashtuns and makes a mockery out of the Durand Line that not even Mullah Omar ever recognised.

The Pakistani Taliban (TTP) created a reign of terror that caused Islamabad 70,000 lives and more than $100 billion in economic losses. It would be a tragedy if Pakistan was again engulfed in civil war and a Pashtun revolt as the military is still deployed in Waziristan.

The Taliban victory could also harden Western attitudes to funding Pakistan via the IMF and the FATF could blacklist the state for terror financing. Pakistani Prime Minister Imran Khan has been a consistent apologist for the Taliban and shares some of its misogynist attitudes on women, despite his playboy past in Annabels and Stringfellows.

Russia and China both celebrate the Taliban’s victory in Kabul but I am certain that their leaders will regret the day they embraced these religious fanatics as they will foment political dissent in Central Asia and Sinkiang.

I feel really sorry for the millions of Afghan men and women who believed in the promise of rational, liberal values under the ages of Uncle Sam. They were betrayed by Trump and Biden at the altar of political expediency. Thousands of American, Brit, Australian, German and Afghan combat troops died fighting the “forever war” in Afghanistan. What did they die for? Sadly, they died for nothing.

Matein Khalid is Chief Investment Officer with Asas Capital