Taliban in Advanced Talks with Russia and China to Settle Trade in Local Currencies
Azerbaijan-like shifts in regional trade policy are unfolding as Afghanistan’s ruling apparatus navigates sanctions, currency pressures, and a strategic pivot toward regional partners. The Taliban administration is pursuing arrangements with Russia to settle hundreds of millions of dollars in trade in local currencies, a move aimed at reducing reliance on the U.S. dollar and easing the country’s currency liquidity constraints amid an aid-constrained economy. Similar efforts are underway with China, reflecting a broader strategy to diversify economic ties and stabilize Afghanistan’s finances through cross-border cooperation in rubles and yuan. The discussions come as Afghanistan’s financial system remains largely cut off from global banks due to sanctions placed on Taliban leadership, even as Moscow and Beijing explore mechanisms to facilitate commerce outside dollar hegemony. This evolving dynamic highlights a challenging yet pivotal moment for Afghanistan as it seeks to secure its economic footing in a post-withdrawal, sanction-impacted regional landscape.
Afghanistan, Russia, and the push to settle trade in local currencies
The Afghan authorities, led by acting commerce officials, have indicated they are in advanced discussions with Russia to establish a framework for settling trade transactions in local currencies rather than through the U.S. dollar. The essence of the plan is to enable payments for goods and services in rubles or other domestic currencies, thereby reducing exposure to volatility and restrictions associated with the dollar-dominated global financial system. The technical dimension of these talks involves specialized teams from both countries working to design practical mechanisms for currency-based settlements that can withstand the already heavy regulatory and sanctions-related pressures on both sides of the equation.
This approach aligns with Russia’s evolving economic policy of prioritizing the use of national currencies in cross-border transactions as a means to decrease dependence on the dollar and to insulate trade from Western financial restrictions. The Afghan side argues that local-currency settlements could help stabilize bilateral trade, support price transparency, and reduce the friction that comes with cash transfers and foreign-exchange limitations in Afghanistan’s currency system. The core rationale is clear: by moving away from the dollar, Afghanistan may shield a portion of its trade-from-dollar exposure and create alternative channels that could be more resilient in the face of international constraints.
According to the Afghan minister of commerce, the existing annual bilateral trade with Russia sits around US$300 million. While this figure is modest relative to broad regional trade, it represents a foundation that could be expanded as both nations pursue greater investment and broader energy, raw materials, and manufacturing exchanges. The Afghan government expects to increase purchases of petroleum products and plastics from Russia as part of this broader economic partnership. The minister emphasized that the proposed arrangements are not merely symbolic; they reflect a strategic effort to reconfigure trade finance in a way that serves Afghanistan’s interests amid sanctions and currency disruptions.
The discussions emphasize a long-term objective: to foster a resilient trade architecture in which the Afghani economy and its Russian counterpart can transact more efficiently and with reduced exposure to external financial shocks. In practical terms, the plan would require both sides to align regulatory frameworks, settlement rails, and risk-management protocols so that banks and traders can manage settlement cycles, currency conversion risks, and cross-border compliance in a way that minimizes friction. This entails a careful balance of sanctions compliance, financial integrity, and operational feasibility, with technical teams actively mapping out the steps needed to operationalize such a system.
Beyond the Russia-Afghanistan dialogue, officials from Afghanistan indicated parallel interest in pursuing a similar currency-based settlement arrangement with China. The Afghan side notes that a working team—comprising members from the Ministry of Commerce and representatives from the Chinese embassy in Kabul—has been formed to explore the feasibility of expanding trade settlements into local currencies. This development underscores the broader strategy to diversify trust and economic ties with regional powers that have demonstrated willingness to engage with Afghanistan in ways that bypass the traditional dollar-centric banking model.
A key feature of the Russia-related discussions is the recognition that sanctions and regulatory constraints present nontrivial obstacles. The Afghan authorities are careful to frame the project within the context of regional and global economic realities, the sanctions regimes, and the specific challenges that Afghanistan faces domestically. The tenor of the discussions suggests a recognition that currency-based settlements could offer not just a payment mechanism but also a policy signal about diversification and resilience in Afghanistan’s trade architecture. The precise design of these mechanisms remains a work in progress, and both sides acknowledge that technical details—such as settlement timelines, liquidity management, and cross-border compliance measures—must be resolved through ongoing dialogue.
The Russian central bank and the Chinese foreign ministry did not immediately respond to requests for comment on these sensitive financial arrangements. In the meantime, Afghanistan’s leadership stresses that the conversations are ongoing and exploratory, with a view toward practical implementation if and when workable frameworks are established. The absence of official public statements from Moscow and Beijing is not unusual in the early stages of such initiatives, where technical teams are quietly evaluating risk, legal considerations, and the readiness of domestic financial institutions to participate in currency-based settlement schemes.
From Afghanistan’s vantage point, the anticipated shift toward local-currency trade settlement aligns with a broader aim to stabilize the country’s external sector and to expand the base of international trade that can be conducted in ways that are less susceptible to the volatility of foreign exchange markets and the constraints of Western financial systems. The plan could potentially ease some of the pressure on Afghanistan’s own currency, the Afghani, by reducing the demand for hard currency in daily trade. It could also foster a more predictable import and export environment, particularly for energy, plastics, and other strategically important goods that Afghan consumers and industries rely on. However, this path will not be without challenges, including aligning monetary policies, ensuring credible currency liquidity, and meeting international anti-money-laundering and counter-terrorism-financing standards.
The broader regional objective behind these currency-focused initiatives is to reconfigure economic ties in a way that supports Afghanistan’s recovery and resilience in a time of international political contention. For Russia, expanding trade in rubles or other domestic currencies is part of a larger strategy to de-dollarize its international trade and to reduce the exposure of its merchant sector to Western sanctions. For Afghanistan, the incentives are equally practical: a more diversified set of trade partners, potential reductions in transaction costs, improved access to essential goods, and a hedge against shocks to the dollar system that could disrupt cash flows or access to international markets. The interplay of sanctions, currency management, and cross-border cooperation is complex, and the path forward will require careful navigation of legal, regulatory, and financial considerations in both countries.
In sum, Afghanistan’s engagement with Russia and the parallel interest in China reflect a deliberate shift toward currency diversification as a core feature of its post-conflict economic strategy. The ongoing technical discussions are a prerequisite for any practical implementation, and the outcomes will hinge on the ability of Afghan authorities to coordinate with international partners while maintaining compliance with broader sanctions regimes and financial-security standards. The next phase will likely involve more concrete pilot arrangements, risk assessment, and the gradual scaling of currency-based settlements if technical feasibility and political consensus permit.
Afghanistan and China: expanding trade through yuan and beyond
Afghanistan’s leadership has signaled that, alongside Russia, it seeks to expand and deepen economic ties with China through practical arrangements that could include currency-based settlements as part of broader trade agreements. The Afghan minister of commerce reported that the nation’s annual trade with China is around US$1 billion, with expectations that this figure could rise as investment and trade cooperation intensify. The increase in engagement with China is framed as a deliberate effort to diversify Afghanistan’s external economic partnerships and to tap into China’s robust manufacturing base, infrastructure capacity, and potential for investment.
A working team has been formed with participation from the Afghan Ministry of Commerce and officials representing China in Kabul, described as an authorized body that is involved in economic programs. The purpose of this body is to facilitate ongoing talks and coordinate the technical and regulatory steps necessary to enable more sustainable and higher-volume economic exchange. This approach signals a long-run strategy to institutionalize closer economic ties with a major regional power, aligning with Afghanistan’s broader objective to broaden its international economic footprint and reduce dependence on a narrow set of partners or currency regimes.
The discussions with China are not limited to the idea of currency-based settlements alone. They also encompass broader cooperation in trade, investment, and possibly technology transfer, manufacturing linkages, and the development of supply chains that can support Afghan consumers and local industries. The involvement of the Chinese embassy underscores the seriousness with which Beijing views Afghanistan’s market potential and its willingness to engage through formal channels to create mutually beneficial arrangements. However, the specifics of how settlements might be denominated—whether in yuan, a basket of currencies, or in a hybrid mechanism—are still being studied by technical teams, and concrete proposals have not yet been publicly disclosed.
Afghanistan’s desire to work with China is informed by the scale of the two countries’ bilateral trade and potential complementarities. The Afghan leadership has disclosed that Afghanistan’s annual trade with China stands at around US$1 billion, a potentially meaningful base for expansion if operational and regulatory hurdles can be cleared. The prospect of increased imports of Chinese goods, machinery, and consumer products, as well as greater Chinese investment and financing for Afghan infrastructure or industrial projects, offers a pathway to stabilize Afghanistan’s external accounts and create job opportunities for its population.
A central element of the China-related discussions is the possibility of moving toward local-currency settlements as a means to reduce exposure to the U.S. dollar and to children in the Indonesian context? (Note: disregard this parenthetical; it is an error.) The Afghan team emphasizes that currency diversification is part of a broader strategy to ensure greater resilience in international trade. This strategy is particularly relevant for an economy grappling with sanctions constraints and limited access to conventional banking channels. By discussing currency options with China, Afghanistan signals readiness to explore a multi-currency settlement framework that could eventually operate in yuan or through other agreed settlement currencies, depending on what is technically feasible and compliant with relevant financial laws and regulatory requirements.
The ongoing talks with China also reflect a recognition of the need to expand the scope of economic collaboration beyond crude materials and immediate energy imports. If successful, these talks could pave the way for broader engagement in sectors aligned with China’s global economic push, including infrastructure development, energy infrastructure, and manufacturing. This broader collaboration would align with Afghanistan’s immediate priorities—sourcing essential goods, stabilizing energy supplies, and laying the groundwork for longer-term development and reconstruction in a manner that reduces vulnerability to external shocks.
Nevertheless, the path to currency-based settlements with China, if realized, would require careful negotiation of regulatory issues, banking compliance, and currency risk management. The Chinese authorities’ involvement through the embassy and the formal formation of a working group signal Beijing’s willingness to engage on these topics, albeit with careful attention to political and financial risk. Afghanistan’s side asserts that talks are ongoing, with a focus on both the regional and global economic perspectives, sanctions considerations, and the immediate challenges faced by Afghanistan as it navigates the international system after the 2021 political transition.
As with the Russia dialogue, the China discussions are in early stages and require a robust technical blueprint before any instruments or agreements can be implemented. The objective is not merely to obtain a new payment channel but to establish a durable framework for trade that can withstand the volatility of sanctions, currency fluctuations, and supply-chain disruptions. The ultimate aim is to create a more predictable and stable trading environment that supports Afghanistan’s people and economy, while leveraging China’s scale of trade and investment to unlock opportunities in energy, manufacturing, and infrastructure development. The success of these talks will depend on the alignment of monetary policy, regulatory compliance, and the ability of Afghan institutions to participate effectively in cross-border financial activities.
In this dynamic, China’s role as a partner in currency diversification and multi-currency settlement discussions can be a significant factor in Afghanistan’s broader strategy to stabilize its economy. The potential for yuan-based settlements or other arrangements would reflect a pragmatic approach to improving trade efficiency, reducing currency risk, and integrating Afghanistan more tightly into regional value chains. It would also signal to global markets and regional players that Afghanistan seeks to diversify its economic partnerships beyond Western-dominated financial systems, aligning with a broader trend among some developing economies toward greater financial sovereignty and resilience in the face of geopolitical frictions.
The dollar under pressure: sanctions, aid cuts, and the Afghan economy
The broader macroeconomic backdrop is critical to understanding why Afghanistan is pursuing currency diversification. The dollar has long functioned as the primary invoicing and settlement currency for many commodities and global trade exchanges. However, the dollar’s dominance is increasingly scrutinized amid geopolitical tensions, sanctions regimes, and strategic efforts by major economies to diversify away from the greenback. High-level statements and policy debates in regional capitals have underscored a shift in the currency architecture of global trade. In this context, Russia’s interest in reducing reliance on the dollar and Afghanistan’s need to shield itself from the financial system’s rigidity converge on currency-based settlement ideas.
Afghanistan’s economy is deeply affected by sanctions targeting Taliban leadership and by the broader international response to the 2021 political transition. These sanctions have cut the country off from significant segments of the global banking system, limiting access to correspondent banking relationships, international payments, and normal credit lines. This has resulted in a constrained financial environment where the Afghani currency can experience volatility, and where humanitarian operations rely on cash-based transfers that are sensitive to liquidity constraints. In this environment, ensuring sufficient U.S. dollars for humanitarian and essential purchases has become more challenging, with development agencies and economists noting that the flow of dollars into the country has declined, despite the ongoing humanitarian needs.
The consequences of reduced external aid and restricted access to financial channels include a more fragile macroeconomic trajectory for Afghanistan. Aid cuts—especially from Western governments and international organizations—have shifted the funding mix away from large, predictable inflows toward more ad hoc, donor-driven or humanitarian support. This change has implications for government budgets, public services, and the ability to stabilize prices for essential goods. The Afghani currency has, thus far, demonstrated relative stability in the face of these pressures, but analysts warn that this stability could be tested if aid flows remain suppressed or if import needs rise rapidly without commensurate inflow of funds.
A key issue is the role of the Afghani in trade and payments, particularly for major imports such as gas, oil, and wheat, for which Russia has become a significant supplier since the Taliban returned to power. The shift toward Russian and potentially Chinese-enabled settlement mechanisms could influence how Afghanistan accesses and pays for these critical imports, potentially easing liquidity constraints by enabling local-currency settlements and reducing the demand for hard currency. However, this transition would require robust coordination with foreign banks, local financial institutions, and regulatory authorities to ensure that settlement systems are credible, transparent, and compliant with anti-money-laundering standards.
Officials emphasize that currency stability in Afghanistan hinges on multiple factors beyond the central bank’s control. The Afghan administration’s plan to bolster international investment, including engagement with the Afghan diaspora, is framed as a strategy to diversify sources of foreign exchange and to broaden the base of remittance inflows and investment. By engaging with the diaspora and encouraging investments from Afghans living abroad, policymakers anticipate a stabilizing effect on the demand for U.S. dollars in the domestic economy. Diaspora remittances can act as a cushion during periods of external stress, providing a steady stream of foreign exchange and helping to finance imports and service external obligations.
At the same time, the Afghan economy remains exposed to broader global shifts in commodity prices and energy markets. The country has imported gas, oil, and wheat from Russia since 2022, representing a major economic channel that interacts with the macro policy environment. If currency diversification and new settlement arrangements with Russia are implemented effectively, Afghanistan could improve its ability to manage import costs through more predictable pricing and settlement terms. Yet, these potential gains depend on the successful navigation of sanctions regimes, regulatory approvals, and the capacity of Afghan financial institutions to facilitate cross-border settlements in a sanctions-compliant manner.
From a stability perspective, the Afghan authorities argue that the currency’s resilience, supported by a combination of macroeconomic policy, governance reforms, and enhanced investment activity, can prevent a sudden shortage of U.S. dollars in the country. They assert that maintaining currency stability will require continued efforts to attract investment, strengthen the role of the Afghan diaspora in financing development, and ensure that the financial system remains capable of supporting higher volumes of cross-border trade in local currencies or mixed currency arrangements. The balance is delicate: any misstep in policy signaling or in the execution of currency-based settlement arrangements could raise inflationary pressures or create liquidity gaps in the short term.
Analysts note that the shift toward currency diversification is not unique to Afghanistan; it is part of a broader strategic conversation among global economies that are evaluating the relative benefits and risks of the dollar-centric system in light of sanctions, geopolitical risk, and shifts in global demand. While the dollar remains a dominant currency for commodity trading and international liquidity, mounting questions about its long-term dominance—and the viability of alternatives such as the euro, yuan, or a yuan-ruble settlement mechanism—are shaping policy discussions in many countries. For Afghanistan, this conversation offers the possibility of more resilient trade finance and a platform for negotiating more favorable terms with its major trading partners, provided that the necessary institutional and regulatory capacities can be built.
The Afghan government’s stance is that currency diversification, backed by international investment and diaspora engagement, will help prevent a future dollar-shortage scenario. The authorities frame currency resilience as a multi-faceted effort: it requires not only capital inflows and stable macroeconomic management but also a credible and inclusive strategy to engage with regional partners, ensure payment system reliability, and align with international standards on anti-money-laundering and counter-terrorism financing. They argue that with a more diversified framework for settlement and payments, Afghanistan can better navigate the uncertainties of sanctions and external shocks while continuing to meet the humanitarian and development needs of its population.
Regional dynamic implications and next steps
The conversations with Russia and China highlight a broader regional trend toward financial diversification and strategic realignment in the wake of sanctions and shifting global power dynamics. For Afghanistan, the potential to settle trade in local currencies with major partners offers a path to economic stabilization, improved liquidity, and greater resilience against external financial restrictions. The practical success of this approach will depend on multiple variables: the speed with which technical teams can design workable settlement mechanisms, the regulatory alignment among partner countries, and the ability of Afghan financial institutions to participate safely and efficiently in cross-border settlements.
The role of the diaspora and strategic investment will be central to sustaining any currency-based settlement model. If Afghanistan can mobilize remittances and investments from Afghans abroad, this could create a more stable base of foreign exchange and help balance the current account. However, harnessing diaspora capital will require policy frameworks that encourage investment, protect investors, and align with international financial standards. It also depends on the political environment and the capacity of Afghan institutions to guarantee predictable and reliable investment channels.
In sum, Afghanistan’s push for currency-based trade settlements with Russia and China reflects a pragmatic strategy to navigate a sanctions-impacted economy, diversify its trade partners, and build a more resilient financial and trade architecture. While the technical and regulatory challenges are nontrivial, the potential benefits include reduced exposure to the dollar, improved import stability, and enhanced access to essential goods and energy. The coming months will be decisive as technical teams report on feasibility, as governments assess risk and compliance considerations, and as Afghan policymakers determine how best to balance sovereignty, security, and economic development goals in a highly contested and rapidly shifting regional order.
Strategic considerations for implementation and risk assessment
As these currency-based settlement discussions advance, several practical considerations must be addressed to translate high-level intent into functioning, reliable trade finance.
First, the technical architecture for cross-border settlements will require robust banking cooperation, standardized settlement cycles, and transparent liquidity management. Banks involved in bilateral trades must be able to process payments in local currencies or through a seamlessly integrated settlement interface that can handle currency conversion, settlement mismatches, and risk controls. This implies a need for capacity-building within Afghanistan’s financial sector, including training for bankers, risk managers, and compliance personnel, as well as establishing clear regulatory guidelines that align with international standards.
Second, regulatory compliance is essential. The sanctions landscape remains complex and subject to change. Any currency-based arrangement must maintain strict adherence to anti-money-laundering (AML) and counter-terrorism financing (CTF) requirements. This means implementing rigorous know-your-customer (KYC) processes, monitoring suspicious transactions, and ensuring that counterparties—whether banks or corporate customers—are properly vetted and monitored. The involvement of foreign embassies and central banks adds another layer of regulatory complexity, requiring clear legal frameworks and intergovernmental agreements to govern risk-sharing, dispute resolution, and enforcement.
Third, currency risk management will be a central challenge. Settlements in rubles or yuan introduce new exchange-rate volatility and funding requirements. The participating institutions will need to manage currency liquidity, hedge exposures, and coordinate with central banks to ensure that there is sufficient liquidity in the local currencies to meet settlement obligations. In practice, this could involve establishing currency swap lines, pre-authorized credit facilities, or multi-currency liquidity pools that can be tapped for settlement cycles.
Fourth, political risk and policy continuity are critical. The success of currency-based settlement schemes is not only a technical feat but also a test of policy consistency and geopolitical alignment. Any shifts in domestic policy, changes in government, or alterations in sanctions regimes could impact the feasibility and attractiveness of these arrangements. Maintaining continuity across different administrations and safeguarding the long-term viability of these agreements will require durable legal frameworks, cross-border cooperation, and ongoing dialogue among the parties involved.
Fifth, demand-side considerations will shape the viability of currency-based trading. Afghanistan’s import reliance on energy, petrochemical products, and essential goods from Russia and potentially China will influence the scale and timing of any settlement arrangements. If currency-based settlements can secure more predictable pricing and reduce transaction costs, they could become attractive to Afghan buyers and suppliers. However, this potential must be weighed against the risk of reduced access to global liquidity and the ability of Afghan companies to manage the operational complexities of cross-border payments in alternative currencies.
Finally, the broader regional landscape matters. Russia’s and China’s willingness to accommodate alternative settlement currencies will be influenced by their own strategic priorities, macroeconomic conditions, and alignment with international trade norms. The success of Afghanistan’s diversification efforts will depend not only on bilateral arrangements but also on whether other regional actors participate in similar schemes or if new frameworks emerge that facilitate multi-party trade in local currencies. The evolving regional currency diplomacy could, over time, contribute to a more multipolar financial order, reshaping how developing economies approach trade finance and external financing in the context of geopolitical frictions.
As Afghanistan advances these discussions, the government emphasizes that currency diversification is not a rejection of the dollar but a strategic hedging mechanism designed to ensure that the Afghan economy remains functional and capable of meeting its people’s needs even amid sanctions, aid shifts, and external pressures. The focus remains on practical steps—completing secure, compliant, and scalable settlement arrangements that can be rolled out in a phased manner, with careful monitoring and evaluation to confirm that they deliver tangible benefits in terms of liquidity, price stability, and access to essential goods.
Outlook, risks, and the path forward
Looking ahead, Afghanistan’s currency diversification efforts will be tested by the realities of sanctions enforcement, the integrity of its financial institutions, and the external demand for Afghan goods. The success of currency-based settlements with Russia and China will hinge on the ability to translate high-level policy intents into robust, operational systems that can withstand regulatory scrutiny and market volatility. The potential gains include improved liquidity for imports, reduced exposure to dollar fluctuations, and a more resilient trade framework capable of supporting Afghanistan’s humanitarian and development needs in a challenging geopolitical environment.
The regional implications of Afghanistan’s approach are noteworthy. If successful, these arrangements could inspire similar discussions among other sanction-affected economies seeking to diversify their currency risk and to foster closer ties with regional powers. Conversely, any missteps or setbacks could heighten financial exposure or trigger unintended regulatory complications, underscoring the need for meticulous execution, transparent governance, and sustained international engagement to maintain the integrity of these agreements.
The Afghan authorities’ confidence in currency diversification as a viable strategy for economic stability is tempered by realism: there are no quick fixes, and the road to robust, multi-currency settlements will require disciplined financial management, legislative support, and a credible, long-term commitment to building a more inclusive and diversified economy. The push to diversify away from the dollar is part of a broader effort to create a more resilient economic architecture—one that can weather sanctions and geopolitical frictions, while continuing to serve the needs of the Afghan people for stable prices, reliable energy and food supplies, and opportunities for investment and growth.
Conclusion
In the evolving landscape of international finance and regional commerce, Afghanistan’s engagement with Russia and China to explore currency-based trade settlements marks a strategic effort to insulate its economy from the volatility of sanctions and dollar-centric trade flows. The discussions—centered on settling hundreds of millions of dollars in local currencies, expanding bilateral trade, and establishing cross-border settlement frameworks with technical teams—reflect a deliberate pivot toward diversification, resilience, and regional integration. The conversations with Russia emphasize a pathway to reduce dollar dependence and improve liquidity for essential imports, especially in energy and plastics, while the engagements with China underscore the aim to deepen a substantial trade relationship and to explore yuan-based settlement mechanisms that could stabilize Afghan trade relations and broaden investment horizons.
Across both partnerships, Afghanistan faces a complex set of challenges: ensuring regulatory compliance, building robust financial infrastructure, managing currency risk, and coordinating with international partners who operate under different legal and political constraints. The Taliban administration acknowledges these obstacles and frames currency diversification as a necessary, proactive strategy to secure Afghanistan’s economic interests in a difficult environment. The emphasis on technical discussions and multi-stakeholder involvement—including government ministries, embassies, and central banks—signals a careful and methodical approach aimed at long-term viability rather than rapid, untested shifts in monetary policy.
Ultimately, the success of Afghanistan’s currency-based settlement initiatives will hinge on the seamless integration of policy design, financial infrastructure, and regulatory oversight. If implemented effectively, such arrangements could provide the Afghan economy with greater liquidity, more stable import costs, and a broader horizon for international investment. They could also contribute to a broader regional shift away from exclusive reliance on dollar-based trade toward a more diversified, multi-currency ecosystem in which strategic partners like Russia and China play pivotal roles. As the discussions progress, the international community will watch closely how Afghanistan navigates this transition, balancing sovereignty, security, and economic development needs for its people in a challenging era of sanctions and geopolitical flux.