President Biden is starting to clear a legal path for relatives of victims of the Sept. 11, 2001, attacks to pursue $3.5 billion that Afghanistans central bank had deposited in New York before the Taliban takeover, while also seeking to steer a roughly equal amount toward spending to aid the Afghan people.
Beginning that process, Mr. Biden issued an executive order Friday morning invoking emergency powers to consolidate and freeze all $7 billion of the total assets the Afghan central bank kept in New York. The administration said it would ask a judge for permission to move $3.5 billion to a trust fund it would set up to support the needs of the Afghan people, like for humanitarian relief.
The highly unusual set of moves, which The New York Times had first reported was expected, is meant to address a tangled knot of legal, political, foreign policy and humanitarian problems stemming from the attacks and the end of the 20-year war in Afghanistan.
When the Afghan government dissolved in August with top officials, including its president and the acting governor of its central bank, fleeing the country it left behind slightly more than $7 billion in central bank assets on deposit at the Federal Reserve Bank in New York. Because it was no longer clear who if anyone had legal authority to gain access to that account, the Fed made the funds unavailable for withdrawal.
The Taliban, now in control of Afghanistan, immediately claimed a right to the money. But a group of relatives of victims of the Sept. 11 attacks, one of several sets who had won default judgments against the group in once seemingly quixotic lawsuits years ago, sought to seize it to pay off that debt.
Meanwhile, the economy in Afghanistan has been collapsing, leading to a mass starvation that is in turn creating an enormous and destabilizing new wave of refugees and raising a clear need for extensive spending on humanitarian relief.
Against that backdrop, the White Houses National Security Council led months of deliberations on the central bank funds involving top officials from departments including Justice, State and Treasury, according to people who spoke on the condition of anonymity to discuss a sensitive matter that had not yet been made public.
The money belonging to the Afghan central bank known as Da Afghanistan Bank includes assets like currency, bonds and gold.
Much of it came from foreign exchange funds that accumulated over the past 20 years a time when the United States and other Western countries were donating large sums to Afghanistan, helping generate that activity. Alex Zerden, a former top U.S. Treasury Department official in Afghanistan, characterized the central bank reserves as a kind of rainy day fund for the Afghan people.
In addition, about half a billion dollars of the banks assets correspond to the reserves of commercial banks in Afghanistan, which by law must keep a certain amount of their deposits including the savings of ordinary Afghan people at the central bank. Those assets are owned by Da Afghanistan Bank, but it owes the same amount to the commercial banks.
After the Taliban took over Afghanistan, they appointed their own official to lead the central bank and demanded the immediate release of the money held in New York. But under longstanding counterterrorism sanctions imposed by the United States, it is illegal to engage in financial transactions with them.
Another option has been to let the assets sit untouched, gathering interest for what is likely to be years before the Taliban perhaps again lose power and a more normal government arises.
But in September, a group of about 150 relatives of Sept. 11 victims, who years ago won a default judgment after suing targets like Al Qaeda and the Taliban in a case known as Havlish, persuaded a judge to dispatch a United States Marshal to serve the legal department of the Federal Reserve of New York with a writ of execution to seize the money.
After The Times reported on the matter in November, a number of other Sept. 11 groups who filed similar lawsuits after the attacks stepped forward to ask for a share of the Afghan bank assets.
By then, the Biden administration had intervened in the Havlish litigation, invoking a law that permits it to step into lawsuits to inform the court what is in the national interest. The deadline for it to file that statement had been postponed until Friday.
Mr. Biden has now decided that the government will not object to any court decision to devote half of the money for the Sept. 11 claims. The Justice Department is instead expected to tell the court later Friday that victims of the attacks should have a full opportunity to have their claims heard, according to people familiar with the matter.
But if the judge agrees to partly lift the writ of execution, Mr. Biden will seek to direct the remainder toward a trust fund to be spent on assistance in Afghanistan while keeping it out of the hands of the Taliban, according to people briefed on the decision. Setting up that fund and working out the details is expected to take several months, the people said.
It is highly unusual for the United States government to commandeer a foreign countrys assets on domestic soil. Officials are said to have discussed a two-part legal process for Mr. Biden to engineer that outcome.
First, in his executive order on Friday morning, he used emergency powers under the International Emergency Economic Powers Act to consolidate all Da Afghanistan Bank assets in the United States in a segregated account at the Federal Reserve Bank of New York. That has blocked them, but the Afghanistan central bank still owns them.
Second, officials have discussed then using a provision of the Federal Reserve Act that permits disposing of property belonging to the central bank of a foreign nation so long as it has the blessing of someone the secretary of state has recognized as being the accredited representative of that foreign country.
But deciding who qualifies as such a person, at a time when Afghanistans former government no longer exists, has raised significant complications. It remained unclear what solution Biden administration officials had settled on and whether the name of any person or people they deem as such would be disclosed for security reasons, like possibly endangering family members still in Afghanistan.