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).
TEXT BOX 16.1
Heroin Retail Prices in Britain and the US
The New York Police Department (NYPD) notes that retail
heroin prices are down and purity is relatively high.
Heroin previously sold for about $90 per gram but now
sells for $65 to $70 per gram or less. Anecdotal
information from the NYPD indicates that purity for a
bag of heroin commonly ranges from 50 to 80 percent but
can be as low as 30 percent. Information as of June 2000
indicates that bundles (10 bags) purchased by Dominican
buyers from Dominican sellers in larger quantities
(about 150 bundles) sold for as little as $40 each, or
$55 each in Central Park. DEA reports that an ounce of
heroin usually sells for $2,500 to $5,000, a gram for
$70 to $95, a bundle for $80 to $90, and a bag for $10.
The DMP reports that the average heroin purity at the
street level in 1999 was about 62 percent.11
The NYPD and DEA retail price figures are consistent.
The DEA price of $70- $95, with a purity of 62 percent,
translates into $112 to $153 per gram of pure heroin.
The NYPD figures are roughly similar with perhaps lower
estimates for purity.
It should be noted that when heroin is purchased in very
small quantities, the retail price tends to be much
higher. In the US, purchase is often by “the bag”; the
typical bag according to Rocheleau and Boyum contains 25
milligrams of pure heroin.12
A $10 dollar bag in NYC (according to the DEA figure
quoted above) would convert into a price of $400 per
gram, each bag containing 0.025 gr. of pure heroin.13
For very small purchases marketed by street pushers, the
retail margin tends to be significantly higher. In the
case of the $10 bag purchase, it is roughly 3 to 4 times
the corresponding retail price per gram ( $112- $153).
United Kingdom Drug Prices
The retail street price per gram of heroin in the
United Kingdom, according to British police sources,
“has fallen from £74 in 1997 to £61 [in 2004].” [i.e.,
from approximately $133 to $110, based on the 2004 rate
of exchange].14 In some cities it was as low as £30-40
per gram with a low level of purity.15 According to
Drugscope, the average price for a gram of heroin in
Britain was between £40 and £90 ( $72- $162 per gram).
The report does not mention purity. According to the
National Criminal Intelligence Service, the street price
of heroin was £60 per gram in April 2002. |
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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