Despite efforts by the central government to curb them following the 2001 US-led campaign to unseat the Taliban, these economies have continued unchecked.

“In many cases they’ve increased,” said Mark Sedra, a researcher and expert on Afghanistan at the Bonn International Centre for Conversion (BICC).

One of their primary goals is to gain control over taxation and customs as Afghanistan is at the centre of a smuggling network: cheap refrigerators and tyres from Russia, petroleum products from Iran and food from Pakistan.

Iran backed

Ismael Khan, a former governor of the Western Herat province, continues to lord over one of the most decentralised economies in Afghanistan.

Khan, a Shia, has strong ties with Tehran, and the Iranian Revolutionary Guards are reported to have provided him with cash and military support.

“Maintaining an army enables these leaders to preserve control in areas and exert economic monopoly”

Mark Sedra,
researcher and expert on Afghanistan
Bonn International Centre for Conversion (BICC)

Khan generates an estimated $500,000 to $1 million daily through taxes imposed on goods crossing the border from Iran to Afghanistan, said Sedra. None of this reaches the coffers of the central government in Kabul.

According to Afghan President Hamid Karzai’s government, the national treasury received $10 million in taxes from Herat when it should have received over $100 million last year. 

Products from cars to household goods enter western Afghanistan through Herat, a key trading point that collects the largest single source of revenue in taxes in the country.

In 2002, Kabul collected $80 million nationally in taxes, less than what Khan alone collects from Herat.  

Khan, who also enjoys ties with the United States, established five filling stations, providing Turkmen natural gas to Herat supplied by Iranian company Zarin, earlier this year without the authorisation of the central government, said Sedra. 

One of the reasons Khan is able to continue these practices is because of his private army, ranging from 15,000 to 20,000 militiamen.

“Maintaining an army enables these leaders to preserve control in areas and exert economic monopoly,” said Sedra. 

Fahim's forces

Afghanistan’s Defence Minister General Muhammad Fahim, another regional strongman who generates revenues for his own treasury, has one of the most well organised forces.

Fahim (R) imposes taxes on his
constituents near Jalalabad

It is unclear how Fahim feeds his coffers, but it is widely believed that in 2001 Russia provided $100 million in military aid to Kabul, which made its way to Fahim’s forces.

Western governments have pressured Moscow to halt its alleged funding to Fahim, but say they have made little advance.

The Afghan defence minister maintains his treasury by taxing local constituents in his power base of northeast Afghanistan surrounding the city of Jalalabad, imposing duties on goods and running legitimate businesses.

Regional strongmen also generate income through criminal activities, such as setting up roadblocks and imposing tolls on travellers or robbing them, particularly in eastern Afghanistan where the central government has yet to take a firm hold.

Dostum's taxes

Deputy Defence Minister Rashid Dostum continues to operate an economy in his power base surrounding the northern city of Mazar-i-Sharif, through taxing constituents and imposing customs on goods.

Dostum (L) and Muhammad's
rival militias clashed in October

Neighbouring Uzbekistan provides Dostum, an ethnic Uzbek, with aid and a close protection unit.

Some observers believe Dostum is negotiating with Russian oil companies to resume supplies of Afghan gas to Central Asia.

Not to be outdone, experts say the CIA money pipeline continues to supply regional militias in southern and eastern provinces to fight al-Qaida.

Continued political ties with these regional commanders undermine the legitimacy of the central government, said Sedra. Karzai is too weak to isolate Dostum or Fahim and he is therefore trying to integrate the powerful commanders into the central government.

Treasures looted from archaeological sites in western Afghanistan have found their way into the markets of the Pakistani city of Peshawar, according to Sedra. There is still little government control on the Afghan-Pakistani border route leading to Peshawar, allowing illegal trade and taxation to flourish.

A World Bank study estimated that $2.5 billion worth of merchandise is smuggled between Pakistan and Afghanistan yearly, equal to half of Afghanistan’s estimated gross domestic product.