The capture of Kabul: What the Taliban takeover will mean for Iran’s economy

August 25, 2021

Author: 

Esfandyar Batmanghelidj

Author's Title: 

Visiting Fellow

Publication: 

European Council on Foreign Relations

Related Country: 

  • Afghanistan

Over the last year, Iranian leaders have kept lines of communication open with the Taliban, anticipating the eventual US withdrawal. They now appear to be seeking some kind of accommodation with the Taliban, and are concerned by the prospect of rising instability in Afghanistan. For the moment, the outlines of any political agreement between the two remain wholly unclear, although Tehran is likely to focus on preventing new refugee flows and weapons and drug smuggling.

What is certain is that the economic consequences of the Taliban takeover will be significant for Iran. The two countries are more economically interconnected than is widely appreciated. The strengthening of these ties has come about in a largely unplanned way, caused by Iran’s search for economic opportunities in its own region as US sanctions cut it off from the global economy. In particular, the role that Afghanistan plays in Iranian currency markets, and the status of Afghanistan as a primary destination for Iranian non-oil exports, suggest that Iran is set to pay an economic price for the Taliban’s success.

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Read the rest of the commentary at the European Council on Foreign Relations.