Report

Leaky Borders

Millions collected on goods coming into Afghanistan isn’t making it to state coffers.

Corruption at border crossings in Afghanistan is so rampant that it threatens the customs revenue on which the government depends, raising questions about whether the country will be able to fund itself after U.S. troops withdraw.

Even though the United States spent $120 million to improve the Afghan customs system over the past three years, a new report by the watchdog overseeing U.S. reconstruction efforts in Afghanistan says corruption is still the biggest threat to the import system, and it could grow.

Fees and taxes on goods crossing the Afghan border make up nearly half of all the revenues (44 to 48 percent) that the Afghan government brings in. But the government could be making twice as much if fraud were eliminated, according a report released Tuesday by the Special Inspector General for Afghanistan Reconstruction (SIGAR).

"Afghanistan remains poorly positioned to develop a self-sustaining economy because of corruption, mismanagement, and continuing instability along its borders," the report said.

The watchdog has long pressed the U.S. government to make cleaning up fraud and abuse in the Afghan government a higher priority in Afghanistan. "Allowing corruption to continue unabated will likely jeopardize every gain we have made over the last 12 years," Inspector General John Sopko said in a speech last month.

The report highlights graft as one of the key problems facing Afghanistan's new leadership, as the country faces a post-war future with a lot less international money flowing into state coffers. Import duties that could contribute more to the state budget are being syphoned off by corrupt officials. One Afghan governor made as much as $4 million a month collecting unauthorized taxes at a major border crossing in 2012, the Wall Street Journal reported. That money could go a long way toward helping the Afghan government stand on its own. Kabul has at times over the past 10 years generated as little as 10 percent of its own budget, while the rest has been made up from outside donors, principally the United States. Those contributions are expected to dwindle as international forces leave the country.

President Hamid Karzai didn't build a track record for rooting out corruption, and it's unclear whether his successor, who is expected to be in place by this summer, will make it a priority, either. Many U.S. officials see the election as an opportunity to redefine Washington's relationship with Kabul, but that could be difficult considering many of the experienced diplomats in Afghanistan are packing it in and heading home.

It's difficult to know exactly how much revenue is lost through goods smuggled into the country without paying official taxes and fees at the border; customs data is so unreliable that it's hard to tell what goods are coming in and out of the country, according to the report's authors. Goods smuggled into the country illegally through one checkpoint alone cost the government about $25 million a year, according to the report.

A mentorship program administered by U.S. Customs and Border Protection made some progress teaching Afghan customs agents how to properly collect fees, the report found. But that didn't stop some agents who followed the U.S. advice from being kidnapped or threatened by smugglers.

U.S. efforts to automate customs payments hit a snag when an Afghan official wanted to allow only one bank to process electronic transactions, creating further opportunity for abuse, the report found. Attempts to streamline the customs system by requiring fewer steps in the process "met with resistance because each step allows for the associated official to demand payment from an importer."

The report said that U.S. programs run by Customs and Border Protection, as well as the U.S. Agency for International Development, could be further stymied by the deteriorating security situation after the U.S. leaves. It's already made it harder for auditors to measure the extent of graft and corruption. In the course of collecting information for their report, SIGAR inspectors were unable to visit some customs sites because of bombings or the threat of violence.

In response to the report, USAID acknowledged that reforming the Afghan customs system still faced "major challenges." The agency said it would direct the contractor charged with improving the system, Chemonics Inc., to "put forth its best effort" to combat corruption. After past reports, the State Department and Pentagon have complained that SIGAR's criticism is unwarranted.

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Report

Just Stopping By

CIA Director John Brennan made a surprise visit to Kiev amid threats of further sanctions against Russia.

Top officials in Washington and Europe threatened expanded sanctions against Russia on Monday for its alleged involvement in separatist uprisings in eastern Ukraine. Meanwhile, CIA Director John Brennan visited the capital Kiev over the weekend and met with officials there as the Obama administration stepped up its efforts to support the imperiled country in its face-off with Moscow.

Brennan's visit, which was first reported in Russian media and confirmed Monday by the White House, comes amid more calls from U.S. lawmakers to share intelligence about Russian troop movements and special operations forces with Ukraine. The intelligence agencies have been warning for weeks that a Russian military invasion of eastern Ukraine could be imminent, but concerns that Ukraine's intelligence service is penetrated by Russian spies had kept the U.S. from sharing highly-classified intelligence that could end up in Russian hands, officials said.

A CIA spokesman didn't discuss the purpose of Brennan's trip but refuted reports in the Russian press that the director had urged Ukraine to conduct military operations against Russian forces and dissidents in the eastern part of the country. "The claim that Director Brennan encouraged Ukrainian authorities to conduct tactical operations inside Ukraine is completely false," said CIA spokesman Todd Ebitz. "Like other senior U.S. officials, Director Brennan strongly believes that a diplomatic solution is the only way to resolve the crisis between Russia and Ukraine."

But it's not clear that the Obama administration has settled on entirely diplomatic means. An even more sensitive issue than intelligence sharing is Kiev's request for U.S. military aid, on which the Obama administration has sent mixed signals.

For weeks, Ukraine's interim government has asked the U.S. for mine-resistant military vehicles, small arms, and intelligence support, according to a Congressional aide. On Monday, senior State Department diplomat Thomas Shannon told reporters the U.S. may approve parts of that request. "Obviously we are looking at that as an option," he said. However, hours later, State Department spokeswoman Jen Psaki said the U.S. is not considering military aid at this time. "Our focus remains on our economic and diplomatic efforts," she said.

The administration's reluctance to militarize the conflict and impose harsher sanctions on Russia has angered hawks in Congress who are demanding more intelligence-sharing between Washington and Kiev as well as weapons transfers. "We ought to at least, for God's sake, give them some light weapons with which to defend themselves," Sen. John McCain (R-Ariz.) told Face the Nation on Sunday. "They won't even share some intelligence with the Ukrainian government."

But Brennan's visit appeared to raise the level of American involvement, even if not in the form of military aid. In the past few weeks, Ukraine has boasted of its success in rounding up Russian agents and provocateurs, particularly in the south of the country, where Russian forces are in control of Crimea, and in the east, where protesters believed to be working in coordination with Russian security forces have stormed Ukrainian government buildings. Former U.S. intelligence officials said that Ukraine has a generally credible and sophisticated domestic security service. But the sudden surge in arrests of suspected Russian agents signals a greater level of information-sharing from the Americans, former officials said.

The White House sought to downplay the CIA director's travel, which is ordinarily not disclosed or discussed publicly. White House spokesman Jay Carney said Monday that Brennan met with his Ukrainian counterparts while on a trip to Europe. "Senior level visits of intelligence officials are a standard means of fostering mutually beneficial security cooperation including U.S.-Russian intelligence collaboration going back to the beginnings of the post-Cold War era," Carney said.

Among the items that the U.S. could share with Ukraine without much fear of revealing sensitive sources and methods are satellite images reproduced at a lower resolution than usual so as not to tip off Russia to American capabilities, said a former intelligence official. Intercepted Russian communications that might help Ukraine better understand how many troops are in the country and their location could also be shared, the former official said.

Most U.S. intelligence about Russian troop movements has come from satellite imagery, according to two senior U.S. intelligence officials.

On both military and economic fronts, Western officials have sought to avoid escalating the crisis while conveying strong disapproval of Russia's actions. It remains unclear if the collective desire to punish Russia will trump the influence of Western business interests, which have much to lose from a protracted economic war.

Washington is "fully prepared to impose additional significant sanctions on Russia as it continues to escalate the situation in Ukraine," Treasury Secretary Jack Lew said Monday. In a separate press event at the State Department, spokeswoman Jen Psaki confirmed that additional sanctions targeting "individuals and entities" in Russia's financial services, energy, metals and mining sectors were under consideration. However, Psaki said the Obama administration is not yet warning of broader sanctions targeting entire sectors of the Russian economy, merely individuals and businesses.

In Luxembourg, European Union foreign ministers met to discuss a third, deeper round of sanctions following its blacklisting of 51 Russian and Ukrainian political and military operatives. "I will be arguing today that further sanctions have to be the response to Russia's behavior," said British Foreign Secretary William Hague.

After the meeting, French Foreign Minister Laurent Fabius said the E.U. may hold an emergency summit next week to impose tougher sanctions against Russia if Moscow does not make progress with Kiev at talks scheduled for Thursday. "If it is necessary, there may be a meeting of heads of state and government next week at European level, which may adopt new sanctions," Fabius told reporters.

But expectations that Europe will impose substantial energy export-related sanctions on Russia are low given the continent's reliance on Russian gas. According to analyses by Goldman Sachs and Citigroup obtained by Bloomberg News, Europe could only displace Russian gas imports for two months before gas prices began to soar. "A stoppage of Russian oil and gas flows to/via Ukraine or to Europe as a whole could be hugely impactful for oil and gas prices, especially if it is long-lasting," said Citigroup.

Despite Washington's guarded response, military tensions continue to escalate on the continent. On Monday, Ukraine's acting president asked the United Nations for peacekeeping forces to quell the unrest in the country's east, where pro-Russian mobs continue to occupy government buildings. But an international peacekeeping force would require a Security Council resolution, which Russia, a permanent member, would almost certainly veto. According to the Kremlin, President Vladimir Putin discussed the crisis in Ukraine with President Barack Obama in a phone call on Monday, but fundamental differences between the two sides remained.

Further heightening tensions, the Pentagon confirmed on Monday that a Russian fighter jet flew over a U.S. warship in the Black Sea several times. "This provocative and unprofessional Russian action is inconsistent with international protocols and previous agreements of a professional interaction between our militaries," Pentagon spokesman Col. Steve Warren said.