U.S. - CHINA RIVALRY IN ASIA DRUG WAR

Stratfor Global Intelligence Updates

Thailand's recent call for help in thwarting drug smuggling confirms that
Southeast Asia is fast becoming a second front in the global war on
narcotics. But greater support from Washington and other nations will
deepen the political rivalry between Washington and Beijing for political
dominance in the region.

When the Association of Southeast Asian Nations met in Hanoi on July 25 to
identify new ways to cooperate to stop illegal narcotics and arms
trafficking in the region, the United States and other members of the
10-nation group agreed to Thailand's proposal to bolster action in the
Golden Triangle region of Thailand, Laos and Myanmar.

Southeast Asia is fast becoming the next front in the global war on drugs,
second only to the multi-billion-dollar effort underway in South America.
Efforts to curb the region's drug-trafficking problem will attract more
outside support, including increased U.S. military involvement. But the
region will also turn into a political battleground as Washington and
Beijing compete for regional hegemony.

With nearly 60 percent of the heroin consumed in the United States coming
from Myanmar, the U.S. government has been increasing its involvement in
Southeast Asia's anti-drug efforts in response to skyrocketing opium
production. Although similar to the U.S. government's effort in South
America, the new front lies along the southern flank of China, whose
relations with Washington have become tense this year.

Thailand has led regional and international efforts to address the
trafficking problem in Southeast Asia, especially in the poppy-rich Golden
Triangle. The Thai government recently signed an agreement with Cambodia to
strengthen military cooperation to fight cross-border crimes, according to
a news report on July 20 in the Bangkok Nation. Discussions are also
underway with Vietnam and other neighbors for joint policing along their
borders, where drug traffickers and rebel groups often operate with impunity.

Bangkok also is struggling against a massive flood of heroin and
amphetamines from neighboring Myanmar and, to a lesser extent, Malaysia.
Thailand continues to trade barbs and military threats with the communist
military junta in Rangoon. In April, Thailand and Myanmar amassed troops
along their border and placed their armies on the highest alert in decades,
according to Interfax News Agency.

But there are problems for the Thai government at home as well. Thailand
suffers from rampant corruption within elements of its security forces,
according to the U.S. Drug Enforcement Agency and local media reports.

A significant element of the current anti-drug effort in Southeast Asia is
the growing involvement of the U.S. government. This has occurred in part
because of the sharp reduction of opium crops in other global
drug-production centers. The Taliban has shut down poppy production in
Afghanistan, China is successfully cracking down in its own border regions,
and a major multi-national campaign is continuing in Colombia.

That U.S. involvement is becoming increasingly militarized under the Bush
administration. The U.S. military has had a long relationship with Bangkok,
conducting the major Cobra Gold military exercise in Thailand annually.
But, for the first time, the United States, at Thailand's request, has
dispatched Special Forces to train the Thai military in counter-narcotics
operations. Media reports say more than 40 U.S. military trainers have been
operating in the northern Thai province of Chiang Rai -- near the border
with Myanmar -- since March.

America's deepening involvement raises the stakes in its competition with
China over influence in Southeast Asia -- particularly since China's only
true ally in the region, Myanmar, has become one of the major drug targets.

Washington has long been active along the Thailand-Myanmar border,
according to the U.S. Congressional Research Service. Western anti-drug
agents consider the government-allied United Wa State Army force as one of
the largest and best-armed drug organizations in the world. The force,
consisting of 5,000 ethnic tribesmen in Myanmar's eastern Shan state, is
allied with the military rulers in Rangoon and is directly involved in drug
trafficking to the United States.

Beijing has supplied the United Wa force with weapons -- including
surface-to-air missiles -- for its fight against other ethnic groups in the
region. In exchange, the United Wa is helping construct a network of roads
that could enable Beijing to gain land access to ports in Myanmar. This
could lead to the Chinese navy gaining access to the Indian Ocean for the
first time.

Should that occur, China would be able to influence maritime operations on
both sides of the Straits of Malacca, not just in the South China Sea. It
would also significantly enhance the reach of its navy, something Beijing
has been working overtime to accomplish but which the United States has
been trying to prevent.

China-U.S. ties would also be hurt if Washington's anti-drug efforts
succeed in pushing the narcotics trade back across the Chinese border, or
if Washington's involvement results in closer ties with traditional Beijing
allies such as Vietnam.