CHAPTER XVI
The Spoils of War: Afghanistan’s Multibillion Dollar Heroin Trade

Since the US-led invasion of Afghanistan in October 2001, the Golden Crescent opium trade has soared.

According to the US media, this lucrative contraband is protected by Osama bin Laden and the Taliban, as well as, of course, the regional warlords, in defiance of the “international community”. The heroin business is said to be “filling the coffers of the Taliban”. In the words of the US State Department:

Opium is a source of literally billions of dollars to extremist and criminal groups …. [C]utting down the opium supply is central to establishing a secure and stable democracy, as well as winning the global war on terrorism.1

“Operation Containment”

In the wake of the 2001 invasion, the Bush administration boosted its counter terrorism activities, in response to the post-Taliban surge in opium production, which was described as being protected by “terrorists”. It also allocated substantial amounts of public money to the Drug Enforcement Administration’s West Asia initiative, dubbed “Operation Containment.”

The various reports and official statements on the matter were accompanied by the usual “balanced” self critique that “the international community is not doing enough” to contain the drug trade, and that what is needed is “transparency”.

The surge in opium production was also used as a pretext for the US-led military occupation of Afghanistan. The headlines were “Drugs, warlords and insecurity overshadow Afghanistan’s path to democracy”. In chorus, the US media accused the defunct “hard-line Islamic regime” of protecting the drug trade, without acknowledging that the Taliban—in collaboration with the United Nations— had imposed an impressive drug eradication program, leading to a complete ban on poppy cultivation. By 2001, prior the US led invasion, opium production had collapsed by more than 90 per cent.

According to the United Nations Office on Drugs and Crime (UNODC), opium production had increased from 185 tons in 2001 under the Taliban, to 4,100 tons in 2004, an impressive twenty-twofold increase. The renewed surge in opium cultivation coincided with the onslaught of the US-led military operation and the downfall of the Taliban regime. From October to December 2001, farmers started to replant poppy on an extensive basis.

The areas under cultivation soared from 7,600 in 2001 (prior to invasion) to 130,000 hectares in 2004.2

The Taliban Drug Eradication Program

The success of Afghanistan’s 2000 drug eradication program under the Taliban government was recognized by the United Nations. In the history of the Vienna based United Nations Office on Drugs and Crime (UNODC), no other country was able to implement a comparable program.

This achievement was casually acknowledged, without a word of praise, by the UNODC’s Executive Director at the October 2001 session of the UN General Assembly which took place barely a few days after the beginning of the US bombing raids on Kabul:

Turning first to drug control, I had expected to concentrate my remarks on the implications of the Taliban’s ban on opium poppy cultivation in areas under their control. … We now have the results of our annual ground survey of poppy cultivation in Afghanistan. This year’s production [2001] is around 185 tons. This is down from the 3300 tons last year [2000], a decrease of over 94 per cent. Compared to the record harvest of 4700 tons two years ago, the decrease is well over 97 per cent. …

Any decrease in illicit cultivation is welcomed, especially in cases like this when no displacement, locally or in other countries, took place to weaken the achievement.3

United Nations Cover-up

In the wake of the 2001 US led-invasion of Afghanistan, a shift in rhetoric occurred. The United Nations body was acting as if the 2000 opium ban implemented by the Taliban government, had never happened:

The battle against narcotics cultivation has been fought and won in other countries and it [is] possible to do so here [in Afghanistan], with strong, democratic governance, international assistance and improved security and integrity.4

Both Washington and the Vienna-based UN body, were now saying, in chorus that the objective of the Taliban government in 2000, was not really “drug eradication” but a devious scheme to trigger “an artificial shortfall in supply”, which would drive up World prices of heroin.

Ironically, this twisted logic, which now forms part of a new “UN consensus”, is refuted by a 2003 report by the UNODC office in Pakistan, which states that there was no evidence of stockpiling by the Taliban.5
 

Washington’s Hidden Agenda: Restore the Drug Trade

In the wake of the 2001 invasion of Afghanistan, the British government of Tony Blair was entrusted by the G-8 Group of leading industrial nations to carry out a drug eradication program. In theory, this program was to allow Afghan farmers to switch out of poppy cultivation into alternative crops. The British were working out of Kabul in close liaison with the US Drug Enforcement Administration’s (DEA) “Operation Containment”.

The UK-sponsored crop eradication program was an obvious smokescreen. The presence of occupation forces in Afghanistan did not result in the eradication of poppy cultivation: quite the opposite.

Global Trade in Narcotics

Based on recent figures, drug trafficking constitutes “the third biggest global commodity in cash terms after oil and the arms trade”.6

Supported by powerful interests, heroin is a multibillion-dollar business, which requires a steady and secure commodity flow. But, the Taliban prohibition caused “the beginning of a heroin shortage in Europe by the end of 2001”, as acknowledged by the United Nations Office on Drugs ands Crime (UNODC).

One of the hidden objectives of the war was effectively to restore the CIA sponsored drug trade to its historical levels and exert direct control over the drug routes. Immediately following the October 2001 invasion, opium markets were restored. Opium prices spi-raled. By early 2002, the domestic price of opium in Afghanistan (in dollars/kg) was almost 10 times higher than in 2000.

At the height of the opium trade during the Taliban regime, roughly 70 percent of the global supply of heroin originated from Afghanistan. In the wake of the US-led invasion, Afghanistan accounts for more than 85 percent of the global heroin market. In turn, the latter represents a sizeable fraction of the global narcotics market, estimated by the UN to be of the order of $400-500 billion a year.7

What distinguishes narcotics from legal commodity trade is that narcotics constitute a major source of wealth formation not only for organized crime but also for the US intelligence apparatus, which also represents a powerful actor in the spheres of finance and banking.

Intelligence agencies and powerful business syndicates, which are allied with organized crime, are competing for the strategic control over the heroin routes. The multi-billion dollar revenues of narcotics are deposited in the Western banking system. Most of the large international banks, together with their affiliates in the offshore banking havens, launder large amounts of narco-dollars.

This trade can only prosper if the main actors involved in narcotics have “political friends in high places”. Legal and illegal undertakings are increasingly intertwined; the dividing line between “business people” and criminals is blurred. In turn, the relationship among criminals, politicians and members of the intelligence establishment has tainted the structures of the State and the role of its institutions.

Behind the trade in narcotics, there are powerful business and financial interests. The productive system underlying the Golden Crescent heroin market is protected by a US-sponsored regime in Kabul. US foreign policy serves these interests. Geopolitical and military control over the multibillion dollar drug routes constitutes a (hidden) strategic objective, comparable, in some regards, to the militarization of oil pipeline routes out of Central Asia. (See Chapter VI.)

Multibillion Dollar Trade

Where does the money go? Who exactly benefits from the Afghan opium trade?

A complex web of intermediaries characterizes this trade. There are various stages of the drug trade, several interlocked markets, from the impoverished poppy farmer in Afghanistan to the wholesale and retail heroin markets in Western countries. In other words, there is a “hierarchy of prices” for opiates.

According to the US State Department,“Afghan heroin sells on the international narcotics market for 100 times the price farmers get for their opium right out of the field”.8

The UNODC estimates that in 2003, opium production in Afghanistan generated “an income of one billion US dollars for farmers and US $ 1.3 billion for traffickers, equivalent to over half of its national income.” Consistent with these UNODC estimates, the average price for fresh opium was $350 a kg. (2002); the production for that same year was 3400 tons, rising to 4100 tons in 2004.9

Wholesale Prices of Heroin in Western Countries

The total revenues generated by the Afghan narcotics trade are substantially higher than those estimated by the UNODC. One kilo of opium produces approximately 100 grams of (pure) heroin, which was selling wholesale in New York in the late 1990s for $85,000 to $190,000 a kilo, in contrast to $3500 per ten kilos of fresh opium paid locally in Afghanistan by traffickers.10

The Hierarchy of Prices

The narcotics trade is characterized by a hierarchy of prices, from the farmgate price in Afghanistan, upwards to the final retail price on the streets of London, Paris and New York. The street price is 80-100 times the price paid to the farmer.

Opiate products thus transit through several markets from the highlands of Afghanistan, by land and sea to the so-called “transshipment countries”, where they are transported to their final destination in the “consuming countries”. Here there are wide margins between “the landing price” demanded by the drug cartels at the point of entry and the wholesale and retail street prices, protected by Western organized crime.

The Global Proceeds of the Afghan Narcotics Trade

In Afghanistan, the reported 4100 tons of opium produced in 2004 allowed for the production of approximately 410,000 kg. of pure heroin. The gross revenues accruing to Afghan farmers (according to the UNODC) were roughly of the order of $1.13 billion, with $1.5 billion accruing to local traffickers (UNODC’s had estimated $1 billion to farmers and $1.3 billion to traffickers for 2003, corresponding to 3600 tons of raw opium. The corresponding figures for 2004 are based on an extrapolation of these figures, assuming no changes in farmgate prices).
 

When sold in Western markets at a heroin wholesale price of the order of $100,000 a kg (with a 70 percent purity ratio), the wholesale proceeds (corresponding to 4100 tons of Afghan raw opium) would be of the order of 58.6 billion dollars. The latter constitutes a conservative estimate based on the various figures for wholesale prices mentioned above.

But this amount of $58.6 billion does not include the highly lucrative retail trade in Afghan heroin on the streets of major Western cities. In other words, the final retail value is the ultimate yardstick for measuring the contribution of the multibillion-heroin trade to the formation of wealth in the Western countries.

A meaningful estimate of the retail value, however, is almost impossible to ascertain. Retail street prices vary considerably within urban areas, from one city to another and between consuming countries, not to mention variations in purity and quality.

There is a significant markup between the wholesale and the retail price of heroin. More generally, the lion’s share of the proceeds of this lucrative contraband accrues to criminal and business syndicates in Western countries involved in the local wholesale and retail narcotics markets. Moreover, “corporate” crime syndicates invariably protect the various criminal gangs involved in retail trade.

More than 90 percent of heroin consumed in the UK is from Afghanistan. Using the British retail price figure from UK police sources of $110 a gram (with an assumed 50 percent purity level), the total retail value of the Afghan narcotics trade in 2004 (4100 tons of opium) would be the order of 90.2 billion dollars. The latter figure should be considered as a simulation rather than an estimate.

In other words, slightly more than a billion dollars gross revenue to farmers in Afghanistan (2004) would generate global narcotics earnings—accruing at various stages and in various markets—of the order of 90 billion dollars. This 1-90 ratio is consistent with the DEA’s assessment that one dollar of opium production in Afghanistan generates $100 dollars in terms of retail value.

These global proceeds accrue to business syndicates, intelligence agencies, organized crime, financial institutions, wholesalers, retailers, etc., involved directly or indirectly in the drug trade. In turn, the proceeds are deposited in Western banks, which constitute an essential mechanism in the laundering of dirty money.

What these figures suggest is that the bulk of the revenues associated with the global trade in heroin are not appropriated by “terrorist groups” and “warlords”. In fact, a very small percentage of the total turnover of the drug trade accrues to farmers and traders in the producing country. Bear in mind that the net income accruing to Afghan farmers is but a fraction of the estimated $1.13 billion. The latter amount are the gross proceeds accruing to the farmer, according to UNODC, which do not take into account the payments of farm inputs, interest on loans to money lenders, political protection, etc.16

The Laundering of Drug Money

A large share of global money laundering is directly linked to the trade in narcotics. Money laundering, according to IMF estimates for the 1990s, was between 590 billion and 1.5 trillion dollars a year, representing 2-5 percent of global GDP.17

The proceeds of the drug trade are deposited in the banking system. Drug money is laundered in the numerous offshore banking havens in Switzerland, Luxembourg, the British Channel Islands, the Cayman Islands and some 50 other locations around the globe. It is here that criminal syndicates involved in the drug trade and the representatives of the world’s largest commercial banks interact. Dirty money is deposited in these offshore havens, which are controlled by major Western banks and financial institutions. The latter, therefore, have a vested interest in maintaining and sustaining the drug trade.18

Once the money has been laundered, it can be recycled into bona fide investments not only in real estate, hotels, etc, but also in other areas such as the services economy and manufacturing. Dirty and covert money is also funneled into various financial instruments including speculative stock exchange transactions (derivatives), primary commodities, stocks and government bonds.

Narcotics and the “War on Terrorism”

US foreign policy and the “war on terrorism” support the workings of a thriving criminal economy in which the demarcation between organized capital and organized crime has become increasingly blurred.

The heroin business is not “filling the coffers of the Taliban” as claimed by the US Government and the international community.

Rather, the proceeds of this illegal trade are the source of wealth formation outside Afghanistan, largely reaped by powerful financial and business/criminal interests within Western countries. This process of wealth accumulation resulting from the drug trade is sustained and supported by the US “War on Terrorism”. Decision-making in the US State Department, the CIA and the Pentagon is instrumental in supporting this highly profitable multibillion dollar trade, third in commodity value after oil and the arms trade.

Notes

1. Statement of Assistant Secretary of State Robert Charles. US House of Representatives Congressional Hearing, 1 April 2004.
2. United Nations Office on Drugs ands Crime (UNODC) at http://www.unodc.org/unodc/index.html.
3. Remarks on behalf of the United Nations Office on Drugs ands Crime (UNODC) Executive Director at the UN General Assembly, Oct 2001, http://www.unodc.org/unodc/en/speech_2001-10-12_1.htm
4. Statement of the UNODC Representative in Afghanistan at the February 2004 International Counter Narcotics Conference, http://www.unodc.org/pdf/afg/afg_intl_counter_narcotics_conf_2004.pdf, p. 5.
5. Deseret News, Salt Lake City, Utah, 5 October 2003.
6. The Independent, 29 February 2004. At the time these UN figures were first brought out (1994), the (estimated) global trade in drugs was of the same order of magnitude as the global trade in oil.
7. Douglas Keh,“Drug Money in a Changing World”, Technical Document No. 4, Vienna UNDCP, 1998, p. 4. See also United Nations Drug Control Program, Report of the International Narcotics Control Board for 1999, E/INCB/1999/1 United Nations, Vienna, 1999, p. 49-51, and Richard Lapper, “UN Fears Growth of Heroin Trade, Financial Times, 24 February 2000. There are no reliable estimates on the distribution of the global narcotics trade between the main categories: Cocaine, Opium/Heroin, Cannabis, Amphetamine Type Stimulants (ATS), Other Drugs.
8. US State Department, quoted by The Voice of America (VOA), 27 February 2004.
9. See http://www.poppies.org/news/104267739031389.shtml. The Afghan farmer receives a very small percentage of the global turnover of the trade in Afghan opiates, which the United Nations Office on Drugs ands Crime (UNODC) estimates at US $ 30 billion.
10. The US Drug Enforcement Administration (DEA) confirms that SWA [South West Asia meaning Afghanistan] heroin in New York City was selling in the late 1990s for $85,000 to $190,000 per kilogram wholesale with a 75 percent purity ratio. See National Drug Intelligence Center, http://www.usdoj.gov/ndic/pubs/648/ny_econ.htm.
According to the US Drug Enforcement Administration (DEA) “the price of SEA [South East Asian] heroin ranges from $70,000 to $100,000 per unit (700 grams) and the purity of SEA heroin ranges from 85 to 90 percent”. The SEA unit of 700 grams (gr.) (85-90% purity) translates into a wholesale price per kg. for pure heroin ranging between $115,000 and $163,000. Whereas there was competition between different sources of heroin supply, the US heroin market, at the time these figures were collected, was largely being supplied out of Colombia.
In Britain, where more than 90 percent of the heroin originates from Afghanistan, the wholesale price of (pure) heroin in London, was of the order of 50,000 pounds sterling, approximately $80,000 a kilo (2002). See The Guardian, 11 August 2002.
11. National Drug Intelligence Center, http://www.usdoj.gov/ndic/pubs/648/ny_econ.htm
12. See Office of National; Drug Control Policy, The White House, http://www.whitehousedrugpolicy.gov/publications/drugfact/american_users_spend/appc.html
13. National Drug Intelligence Center, op cit.
14. The Independent, 3 March 2004.
15. AAP News, 3 March 2004. See Drugscope (UK): http://www.drugscope.org.uk
16. See also UNODC, “The Opium Economy in Afghanistan”, Vienna, 2003, http://www.unodc.org/pdf/publications/afg_opium_economy_www.pdf, p. 7-8.
17. Asian Banker, 15 August 2003.
18. For further details, see Michel Chossudovsky, “The Crimes of Business and the Business of Crimes”, Covert Action Quarterly, Fall 1996.

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