THE OPIUM ECONOMY

A WORLD AWASH IN HEROIN

And Much Of It From One Unruly Region Of Afghanistan

THE smell of the Afghan poppy season is unmistakable, even from the
open door of a Black Hawk helicopter. NATO Soldiers in Helmand
province see the expanse of purple and pink blossoms flashing by, but
they do little to stop drug production; they worry instead about
Taliban fighters mingling among the villagers, and are grateful to
avoid being shot down.

Yet the opium economy and the insurgency are mutually reinforcing;
drugs finance the Taliban, while their violence encourages poppy
cultivation. Not surprisingly, perhaps, both problems have grown more
severe in recent years, nowhere more so than in Helmand.

According to the United Nations Office on Drugs and Crime (UNODC), the
province is set to harvest another record crop this year, producing
more opium (and from it heroin and other illegal drugs) than the rest
of Afghanistan put together. Indeed, this surge has overshadowed the
past decade's striking decline in the "Golden Triangle" -- the border
region of Thailand, Myanmar and Laos.which UNODC says is "almost opium
free".

Afghanistan has put a blot on what UNODC says is a hopeful global
picture. Its latest "World Drug Report", published on June 26th, says
that the market has largely stabilised for all classes of illicit
drugs.including heroin, cocaine, amphetamines and cannabis. The global
area under cultivation for both poppy and coca has declined over the
past decade, although improving yields mean opium production has
reached record levels while cocaine remains steady. Demand for opiates
and cocaine is stable. Moreover, UNODC reckons that a startling 26% of
global heroin production and 42% of cocaine output has been
intercepted by government authorities. Meanwhile, cannabis cultivation
in Morocco, the source of 70% of hashish in Europe, has dropped. World
production of amphetamines and similar stimulants appears to be steady.

The drugs business is by far the most profitable illicit global trade,
says UNODC, earning some $320 billion annually, compared with
estimates of $32 billion for human trafficking and $1 billion for
illegal firearms. The runaway Afghan opium trade.worth around $60
billion at street prices in consuming countries -- is arguably the
hardest problem. Heroin is finding new routes to the consumer, for
instance through West Africa to America, and via Pakistan and Central
Asia to China.

The opium market puzzles experts. They say there is now an over-supply
of opiates, but the price for farmers or drug users has not changed
much. UNODC suspects opium is being hoarded, and that traffickers are
squeezing their vast profit margins and increasing the purity of
heroin doses to maintain stability.

At the time of the 2001 war in Afghanistan, the Taliban were blamed
for presiding over widespread poppy cultivation. Yet they did impose a
successful but short-lived ban in 2000. Their Western-backed
successors have been less able to stop the inexorable spread of poppy
farming. These days, says NATO, Taliban commanders and drug smugglers
are often one and the same.

Afghanistan last year produced the equivalent of 6,100 tonnes of
opium, about 92% of the world total. There is an interesting
divergence: in areas controlled by the government, production is
either decreasing or stable (or even poppy-free); where the insurgency
is strongest, it is for the most part increasing.

Nevertheless, the impact is felt throughout Afghanistan. The opium
trade is worth about $3.1 billion (less than a quarter of this is
earned by farmers), the equivalent about a third of Afghanistan's
total economy. It has forced up the exchange rate, sucked in
unproductive luxuries and stoked a boom in construction, particularly
around Kabul. In a country as poor as Afghanistan, opium rots any
institution it touches. Some of the biggest drug barons are reputedly
members of the national and provincial governments, even figures close
to President Hamid Karzai. The whole chain of government that is
supposed to impose the rule of law, from the ministry of interior to
ordinary policemen, has been subverted. Poorly paid policemen are
bribed to facilitate the trade. Some pay their superiors to get
particularly .lucrative. jobs like border control.

Despairing of the failure of the anti-narcotics effort, formally led
by Britain, which has focused on seeking alternative livelihoods for
poppy farmers, the United States has been pushing for a more
aggressive eradication campaign with aerial spraying. Its experts say
that incentives alone will never work when farmers can earn eight or
nine times more from poppy than from wheat. .You need a stick as well
as a carrot,. says one senior American official. To show that aerial
spraying works, the Americans point to UNODC's estimated 52% reduction
in coca cultivation (but not cocaine output) in Colombia since 2000.
However, European governments and many military commanders strongly
oppose such draconian measures, fearing they will drive even more
Afghans into the arms of the Taliban.

American officials were outraged last April when British commanders
used a local radio to tell Helmand villagers that foreign and Afghan
troops .do not destroy poppy fields. and .do not want to stop people
from earning their livelihoods.. At military checkpoints, British
soldiers assure passing Afghans they are there for reconstruction, not
eradication, and they often turn a blind eye when they find opium.

President Karzai has so far allowed only limited destruction by hand
or with tractors. But this cautious approach has arguably made matters
worse in places like Helmand. The discretion allowed to local
government and police officials to choose which fields should be
destroyed turned last February's eradication effort into a .harvest of
money. as some Afghans called it. Wealthier or better connected
farmers bribed police to spare their crops. Poorer farmers bore the
brunt, while some of the nastiest warlords-cum-druglords were hardly
touched.

Some 500 police officers, backed by American security men with
helicopters, raked in about $3m, according to some officers. They were
supposed to destroy 12,000 of the estimated 100,000 hectares of poppy
in Helmand. They claimed 7,000 hectares had been ripped up, but the UN
verified only half this amount. Ordinary policemen averaged $1,000
each in backhanders. "We do a dangerous job and we get $70 salary a
month," said one, "If we are killed there is no money for our
families. We just have to make money while we can." One police colonel
is said to have treated himself to a new Lexus car.

Can Afghanistan learn from the successes of other countries? Thailand
rid itself of poppy by an active policy of encouraging alternative
economic development. But through the 1980s and 1990s it enjoyed
strong economic growth driven by tourism and exports, and a fairly
stable government. A lobbying group known as the Senlis Council says
Afghanistan should copy Turkey and India in licensing legally poppy
farming to make painkillers, such as morphine and codeine. This would
draw farmers away from the drug barons and the Taliban, provide a
source of income and improve skills by helping farmers to make
painkiller tablets in their own villages.

The Senlis Council argues that a large unmet need for painkillers
could be filled by Afghanistan, particularly if it undercuts other
producers. UNODC disagrees. It says there is no shortage of such
drugs; the problem is poor distribution and many countries' lack of
medical experience in using opiates. In any case, says UNODC, the
inability to punish those who break the rules means licensing could
increase demand for illegal poppies.

Romesh Bhattacharji, India's narcotics commissioner until 2001,
supports the Senlis Council. Pointing to the millions of new cancer
cases every year, he argues that too many patients are dying in
unnecessary agony. But he also enumerates the difficulties: in India,
the government must survey 70,000 farms, suppress illicit cultivation,
resolve countless disputes over allocations and prevent the theft or
diversion of crops. This may be beyond the ability of a fragile state
like Afghanistan.

Another option under discussion is to stimulate licit agriculture,
perhaps by guaranteeing prices for non-poppy crops. Afghanistan is,
after all, within striking distance of the lucrative markets in the
Gulf. But such measures might encourage smuggling of produce from
neighbouring countries. In any case, encouraging agricultural exports
requires more than higher prices, not least refrigeration, reliable
electricity, safe roads, finance, marketing skills and access to
markets. Dry opium, by contrast, can be stored almost indefinitely and
often acts as a family's store of wealth.

UNODC officials propose some partial steps, including targeting
laboratories that convert opium to heroin, taking action against some
of the best-known drug smugglers to signal the government's
seriousness, and rotating police officers frequently, particularly
those in bribery-prone positions such as border posts. Ultimately,
though, halting Afghan opium production means reducing demand in
Europe and other drug-consuming states. Progress in Afghanistan, if it
comes, is likely to be incremental and will involve a mix of
eradication, development, stimulating agriculture and licensing poppy.
But all these measures require the same elusive ingredient: a stable
government that controls its own territory and borders.