The Taliban Takeover Effects On Supply Chains

The Taliban Takeover Effects On Supply Chains

The world watched as the Taliban took Afghanistan’s capital, Kabul, and leveraged themselves into power. Since the Taliban takeover, refugees have fled and the US military has completely pulled out, ending a 20-year war. Though the future of Afghanistan is uncertain, the effects on supply chains and shipping are already the topic of many discussions.

Afghanistan’s $1 Trillion Market 

The takeover comes at a critical time for battery-materials supply chain. The US and others have been seeking to cut their dependence on China for rare earth metals. China is looking to benefit from Afghanistan’s vast reserves of rare earth elements, estimated to be worth between $1 and $3 trillion. Only hours after the Taliban takeover, a foreign ministry spokeswoman said Beijing was ready for “friendly cooperation with Afghanistan.”

For any possibility of trade relations, a lot depends on the Taliban’s actions in the coming weeks. Right now, the US maintains sanctions on the Taliban, and can veto any moves by China to ease the UN Security Council restrictions. However, the Taliban recently accused the US of violating last year’s peace deal and wants the sanctions lifted. 

Washington has already frozen nearly $10 billion in Afghanistan’s reserves and the International Monetary Fund has cut off financing. To gain access, the Taliban must evacuate foreigners and vulnerable citizens, negotiate with warlords to prevent another civil war, and confront a range of human-rights abuses. 

Besides addressing these issues, the Taliban lacks skilled policy makers to lead the country into economic growth. In the past, unqualified people were appointed into specialised positions without proper qualifications. In addition, the group has shown that they’re struggling to supply basic public services. It remains to be seen if the Taliban government can engage successfully in international markets.

Changing Shipping Patterns In Central Asia

The Taliban takeover is also expected to change shipping patterns in Central Asia. Prior to the government collapse, Afghanistan was working with India and Iran to develop the Chabahar Port in east Iran. In the works for the better half of the decade, the port was an alternative to Chinese-backed port developments in Pakistan. However, now that the Taliban is back in power, it’s likely that Afghan exports and imports will go through Karachi instead. The strategic location is an important link in Beijing’s One Belt, One road strategy, a massive infrastructure project to connect East Asia and Europe.

Iranian Concern Over Exports

Iranian economists are concerned that the Taliban takeover could lead to a negative impact on Iran’s exports. Annually exporting $3.5 billion goods to Afghanistan, trade was largely in the hands of Afghan merchants and businesses who ordered goods and received them at the border. Now, many of those merchants have either left or are currently inactive. Former head of Iran’s trade expansion, Mohammad-Reza Mowdoudi, believes that if the Taliban improves ties with global markets, Afghanistan would become less dependent on Iranian imports. Although the total amount of exports is small by world standards, the income is important since Iran has lost most of it’s hard currency revenues under US sanctions. 

Supply Chain Visibility With Blacksmith

The Taliban’s control in Afghanistan is sure to shake up supply chains and international shipping. Supply chain visibility is crucial when planning your next step. However, with Blacksmith as your partner, you’ll always know the latest. Want to known more about how we keep our clients up to date? Contact us today.