Washington is trying to starve the insurgency of funds before handing over to Afghan forces in 2014
Haji Khairullah Barakzai is the ultimate Afghan success story: illiterate village boy makes a fortune thanks to a lifetime of hard work, unerring street smarts and God’s favour. But to the U.S. Treasury Department, he is one of the biggest bankers to the Taliban, the architect of an underground network that converts opium grown in the poppy fields of his native southern Afghanistan into cash.
A Treasury statement accused Khairullah of “donating money and providing financial services to the Taliban”, which used his cash transfer service “in support of the Taliban’s narcotics and terrorist operations”.
Treasury’s evidence is classified, but Afghan sources and Western officials familiar with Khairullah painted a portrait of a man with long-standing ties to the Taliban and the drug trade alongside significant legitimate businesses.
Khairullah’s friends and associates describe an entirely different figure, a patriarchal pillar of the community who in the murky world of Afghan currency trading cannot always be expected to know the true identity of his customers.
“My life has become hell. I have lost my credibility and reputation. I have been declared guilty without any verdict from a judge,” he said. He was speaking by telephone from Quetta, the city in southwest Pakistan where he sought sanctuary after Washington named him as a key Taliban financier.
The showdown between Khairullah and his pursuers opens a rare window into another kind of war, where financial intelligence trumps firepower, and captured territory is measured in frozen accounts.
My life has become hell. I have lost my credibility and reputation. I have been declared guilty without any verdict from a judge
Haji Khairullah Barakzai
Since sanctioning Khairullah and his business partner Haji Abdul Sattar Barakzai, the U.S. government has stepped up its campaign to disrupt the insurgents’ revenue streams. Washington has hit militant groups, guerrilla commanders and other currency dealers with a slew of similar measures.
U.S. officials acknowledge it is hard to rank the significance of any one of a core group of suspected Taliban money men with precision, but they believe Khairullah is integral to the movement’s funding structure.
Proponents say squeezing the cash pipelines that pay for fighters and weapons is a smart way to pressure the Taliban while the vast majority of foreign combat troops is being withdrawn.
The approach could also be used to exert leverage over Taliban hardliners, if halting attempts to foster peace talks gain momentum. Tentative contacts between the United States and the Taliban suffered a setback in March when the two sides could not agree on a proposed prisoner swap. But the White House remains keen to pursue dialogue. The hunt for Khairullah’s presumed millions points to the sheer difficulty of choking Taliban funding channels.
“Everything is done on a phone call and a handshake,” said one U.S. official. “The record system or the paper trail that allow you to connect the dots is not as clear as the Western system.”
In Kandahar’s seven-storey money market, where turbaned dealers haggle over bricks of well-worn notes, Khairullah’s colleagues leapt to the defence of a respected member of their age-old fraternity.
“When we went to his office, we only saw people changing money or drinking tea or eating sweets,” said Haji Qandi Agha, a regallooking trader who is the market’s president. “There was no talk of the Taliban or heroin.”
Agha gestured to a man with a closecropped beard and embroidered skull cap who had just approached his counter.
“For example, this man is sending money,” he said, after the customer produced a sheaf of grubby bills from his waistcoat. “What if the government or America captures him and says he’s Taliban? Is it my crime?”
The man, counting with deft thumbs, did not look up.
SELLER TO CURRENCY KING
Khairullah was born into a modest family in Afghanistan’s southern Helmand province, where he revealed his entrepreneurial streak as a boy by selling sweets from a handcart, according to two politicians who knew him.
Khairullah, now about 50, said he built his empire from humble beginnings, starting out by trading goods within Afghanistan and the region. Later, he invested in properties whose value soared exponentially after the Taliban was overthrown in 2001. He diversified into scrap metal and rice exporting in Pakistan and owns a freight company in Dubai.
Above all, Khairullah is a king of the hawala trade. U.S. officials believe his network of more than a dozen currency counters spans Afghanistan, Pakistan, Dubai and Iran.
The hawala trust-based money transfer system, which pre-dates the time of the Prophet Mohammed, is the banking system of choice in Afghanistan’s cash-based economy.
“It is true that 35 to 40 years ago I had nothing,” Khairullah said. “Maybe I couldn’t even have raised 100,000 rupees ($1,000) back then. But God bestowed me with two eyes to see and a mind to think.”
Current and former officials ascribe Khairullah’s wealth to a different source: Afghanistan’s burgeoning heroin trade.
A source in Pakistan’s Anti-Narcotics Force also said Khairullah was suspected of involvement in trafficking. “He is rich and resourceful, therefore no one can touch him,” he said.
In 2012, the farm-gate value of opium – the actual cut farmers receive from the trade – accounted for 4 percent of Afghan gross domestic product, or about $700 million, according to U.N. data. Afghanistan provides 90 percent of the global supply of heroin and other illegal opiates, which has an estimated annual street value of $68 billion.
The accusations against Khairullah date back to the austere era of Taliban rule in the late 1990s. Then, he mingled with a coterie of heroin exporters who thrived under the patronage of Mullah Mohammed Omar, the movement’s enigmatic leader, according to two people from Kandahar familiar with the trade.
“He became close to the Taliban,” said one of the sources. “He bought drugs and sold them and made lots of money.”
In the summer of 2000, the year before his ouster, Mullah Omar banned poppy, causing opium prices to skyrocket. That made fortunes for Khairullah and others who had amassed stockpiles, according to a member of Kandahar’s provincial council.
Khairullah, who denies ever meeting Mullah Omar, said reports he was connected with the drug trade were concocted by his business rivals.
“I will be here five years from now, 10 years from now or 15 years from now,” he said. “If they can prove their allegations against me with concrete evidence, then they can and should hang me for it.”
For much of the West’s 11-year campaign, the art of tracking sources of insurgent funding was a neglected discipline at the Kabul headquarters of ISAF, the NATO-led force in Afghanistan.
The U.S. military, stretched in Iraq, resisted calls to pursue Afghan drug lords, fearing that “mission creep” into counter-narcotics would be a further drain on resources.
Investigators suspect Khairullah stands at the centre of an “iron triangle” locking hawala dealers, heroin kingpins and militants into an increasingly profitable symbiosis.
Taliban commanders would collect opium from poppy growers, then hand it over at his shops in farming communities in return for instant payments, a Western official said.
If they can prove their allegations against me with concrete evidence, then they can and should hang me for it.
Haji Khairullah Barakzai
“He would take opium and give you cash,” he said.
Khairullah would then gather bulk quantities of opium in hidden storehouses to sell to traffickers for a lucrative margin, the official alleged.
“As of 2010, Khairullah was a hawaladar, or hawala operator, for Taliban senior leadership and provided financial assistance to the Taliban,” the Treasury statement said.
Khairullah denies the allegations. “I am an illiterate man,” he said. “I have never been part of a political organisation either in Afghanistan or in Pakistan. My sole concern has been my business.”
High opium prices are likely to benefit the Taliban, who raise millions of dollars each year from trafficking opiates. This year’s crop in Afghanistan is worth an estimated $700 million.
AFGHANISTAN OPIUM PRICES
Avg weighted farm-gate price at harvest
Esmatullah Helmand, a Khairullah relative who runs his Kabul branch, said far from being in cahoots with the insurgents, his boss had feared being attacked for moving money on behalf of trucking companies supplying ISAF.
“When we saw this thing on the news – that we were blacklisted – we were shocked,” Esmatullah said.
Any hope Khairullah may have had of keeping the sanctions quiet was shattered when Afghan television broadcast reports of his designation on the U.S. Treasury and U.N. websites.
Like Western banks, hawala dealers run highly leveraged businesses with paper assets many times larger than the cash they hold. Shocks can tip them into bankruptcy.
Khairullah had faced an earlier crunch in 2010 after several of his partners incurred huge losses. The sanctions triggered a new crisis as hundreds of his remaining customers scrambled to retrieve their funds.
“People who would deposit their money with me for years are now standing outside my door,” Khairullah said.
At the same time, he began working his phones. Haji Najeebullah Akhtary, president of Kabul’s Sarai Shahzada currency market, was among the first to receive a call.
“Immediately, he called me and said he was going to meet President Karzai,” Akhtary said.
Approaching the president would have been a natural step. Karzai’s family hails from Kandahar, and the president has tended to sympathise with community leaders nursing grievances against ISAF.
Shah Wali Karzai, one of the president’s brothers and a prominent Kandahari, said he had hosted Khairullah’s partner Sattar at a meeting aimed at settling a land dispute in February, before the pair were sanctioned.
Khairullah’s hopes of winning a similar audience with the president came to nothing. Instead, Karzai ordered security chiefs to investigate him, a presidential spokesman said.
Undeterred, Khairullah sent another relative to Kabul to lobby Afghanistan’s National Directorate of Security, the intelligence agency, an NDS official said.
He must have had some tip-off, some knowledge that it was coming.
Mohammad Mustafa Massoudi
The NDS offered to work with the family to investigate the U.S. claims and inform Washington if they were unfounded, but the relative declined, the official added.
Mullah Sayed Mohammed Akhund, a lawmaker from Kandahar, also fielded frantic calls from his long-time friend.
“I guarantee that he hasn’t paid even one penny to the Taliban,” Akhund said. “He has lost his way and he doesn’t know what to do.”
As Khairullah called his contacts, the Afghan financial intelligence unit, FinTRACA, moved to freeze his assets.
Although hawala dealers can shift large sums purely by cooperating with fellow hawaladars, big players also rely on the formal banking system to help reconcile elaborate cross-border transactions that can involve millions of dollars.
FinTRACA did not provide the names of the banks.
“A couple of months prior to the sanctions, he had stopped transferring money via these accounts,” said Mohammad Mustafa Massoudi, FinTRACA directorgeneral. “He must have had some tip-off, some knowledge that it was coming.”
Nevertheless, Khairullah said the sanctions had forced him to auction property to raise cash. A real estate agent in Kandahar said an agitated-looking Khairullah had visited him in August to try to cut a quick deal to sell 24 plots in a new development on the edge of the city for $360,000.
“His face told me he was very worried,” the agent said.
As Afghan officials pondered the whereabouts of Khairullah’s elusive hoard, Luke Bronin, the U.S. deputy assistant secretary for terrorist financing, boarded a plane for the Pakistani commercial capital of Karachi in early September.
U.S. officials say they consulted closely with Pakistan before sanctioning Khairullah, Sattar and HKHS, their hawala company, mindful of long-standing Pakistani resentment of pressure to crack down on the Taliban.
The Americans and the United Nations have persecuted me
Haji Khairullah Barakzaii
Bronin hammered home the importance of putting the two men out of business in two days of meetings with financial and security officials in Karachi and Islamabad.
“They have been designated not only by the U.S. but also by the United Nations,” Bronin told Reuters. “So we have every expectation that Pakistan will take the necessary steps to shut them down.”
Pakistan’s central bank said it routinely implements U.N. freeze orders, but does not divulge details.
Fuming at his adversaries from his Quetta headquarters, Khairullah seems anxious as well as angry. A fellow hawala merchant, Haji Mohammed Qasim, was arrested by Afghan and U.S. forces in Kandahar in mid-September.
Haji Agha Jan, another currency trader, said his business had collapsed after ISAF detained him for 25 days last year to interrogate him over his client list. “People are afraid that the Americans will arrest me again,” he said, chewing green tobacco in his empty shop.
Resentment of the U.S. sanctions in Kandahar’s money bazaar is echoed by the wider business community In Kabul.
“They are destroying the image of individuals and businesses,” said Mohammad Qurban Haqjo, the Chamber president. “In other countries, nobody is allowed to do that.”
On a recent afternoon in the city’s currency market, no customers called at shop 237, Khairullah’s counter. A storefront sign emblazoned with his name had been effaced with blue paint. Only a Koranic inscription above the door had been left untouched. It read: “And God is the Best of Providers.”
“The Americans and the United Nations have persecuted me,” Khairullah said. “They will have to compensate me for my losses.”