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From the farm to the arm

Tracking the global network of an opiate economy

by Adam Pletts

As the needle pierces Reza Etesamifard’s skin in central London, the heroin entering his blood stream is on the final stage of a journey that most likely originated in Afghanistan. The drug in his veins has traveled more than 6,000 kilometers across battlefields, mountain ranges, deserts, rivers and seas, changing hands dozens of times. Along the way it has crossed at least 10 borders, eluding customs and law enforcement agencies at every stage.

Only moments after Reza removes the syringe, the heroin starts to kick in and he begins to scratch his face irritably, a common symptom among heroin users. As chance would have it, Reza is a refugee from Iran, one of the many countries that the heroin he uses most likely passed through en route to Britain. Unlike the vast majority of the United Kingdom’s users, his path to addiction began by smoking opium when still in Iran.

Reza would be the first to attest to how addictive heroin is and confesses that he will do anything to get his next fix and avoid the withdrawal pains, which he describes as being like “ants crawling around your skeleton.”

Although the 10 British pounds [$16.20] that he pays for 0.2 grams of heroin on a daily basis may not seem like much, he is just one of more than 11 million heroin addicts across the world whose combined payments make the heroin trade a $55 billion industry. Though highly profitable to some, the trade is lethal to others, with the United Nations Office on Drugs and Crime (UNODC) estimating that as many as 100,000 people die from the use of Afghan opiates every year. Some one million people worldwide are involved in heroin trafficking alone, while as many as three million Afghans play some part in the cultivation of poppy plants that yield the raw opium from which heroin is made.

One of those poppy farmers is Wali Jon, who supplements subsistence farming with cash from poppy crops in order to help support his wife and four children. Wali is from south Helmand Province, which alone produces half of Afghanistan’s opium. If prices are similar to last year he expects to make about $250 from two acres of poppy (8,093 square meters), which he hopes will yield four kilograms (kg) of opium. Like many other farmers in the region he is fearful that the authorities will destroy his crop; when asked what he would do if they did, he to Executive, “If somebody takes away your water on a hot day, what do you do?”

Reza and Wali are both tied to opiates — one through addiction and the other through his livelihood — but the similarities end there. Reza spends roughly as much on heroin every fortnight as Wali hopes to make from his whole crop in a year, despite the fact that Wali will produce enough opium in that year to supply Reza with heroin for eight years (given that it takes seven kg of opium to produce one kg of heroin). In short, Reza pays for each hit approximately 200 times what Wali was paid to produce its raw ingredients (based on last year’s prices).

As with any commodity, prices go up and down at both ends but no matter how high they rise, the Afghan farmers only ever see a tiny proportion of the whole profit.

Reza pays for each hit approximately 200 times what Wali was paid to produce its raw ingredients

The many roads from Afghanistan

So how does Wali’s opium reach Reza as heroin? Who actually makes the profits and how did Afghanistan become the world’s leading heroin producer? Although the heroin trade is illegal, the answers lie in conventional economics that link supply to demand and more importantly, reward to risk.

Unlike most other illegal recreational drugs, which are by and large produced and consumed within the same region, the vast majority of opium production is restricted to only three areas on Earth: Afghanistan, South East Asia (mainly Myanmar) and Latin America (Mexico and Columbia). Since 2005, Afghanistan has controlled some 90 percent of the global total, at about 8,000 tons of raw opium per-year. It also accounts for 85 percent of the world’s heroin, most of which is processed here or in neighboring Pakistan and Iran.

The net result of this concentration of production is a worldwide narcotics trafficking network emanating from Afghanistan, the likes of which can only be rivaled, in both the reach and value, by Colombian cocaine trafficking. Afghan production single-handedly supplies heroin to Western Europe and Russia, by far the world’s two biggest markets, which together make up 47 percent of global heroin demand, and although Myanmar and Latin America are the major suppliers for China and the United States, respectively, small proportions of Afghan heroin also feed these markets.

By the very nature of illicit drug trafficking there is no way of saying with certainty how heroin has been smuggled from one place to another. The routes are fluid and change frequently, with traffickers taking advantage of loopholes as they appear. There are, however, established flows that have been identified by law enforcement agencies and bodies such as the UNODC and the European Monitoring Center for Drugs and Drug Assistance (EMCDDA).

Essentially heroin and opium take one of three routes out of Afghanistan; either the “Northern Route” through central Asia and into Russia, the “Southern Route” through Pakistan, or the “Balkan Route” via Iran and then onwards through Turkey and the Balkans to Western Europe. Much of the drugs that transit through Pakistan subsequently also pass onto the Balkan Route.

The UNODC estimates that some 25 percent of all Afghan heroin (95 tons) leaves via the Northern Route, 40 percent (150 tons) via Pakistan and around 35 percent (130 tons) via Iran. From the combined Iranian and Pakistani routes around 37 percent of Afghanistan’s total heroin production continues onto Europe via the Balkan Route (see map page 37).

The vast majority of the 95 tons of heroin that leaves via the Northern Route is consumed within Russia, while the Southern Route’s supply satisfies Pakistan’s demand (19 tons) and that of other destinations, including Iran (35 tons), South East Asia (25 tons), Africa (20 tons) and the United Arab Emirates (11 tons), the

latter of which is almost exclusively for onward shipment, mostly to China and South Africa. Of the Balkan Route heroin, after accounting for seizures and consumption in the countries en route, some 88 tons make it to the high-value sales in Europe, where four countries alone are thought to account for more than half the market, namely the UK (19 tons), Italy (18 tons), France (10 tons) and Germany (7 tons).

The Balkan Route carries the largest volume the greatest distance and to the highest value market. Heroin was smuggled along the Balkan Route well before Afghanistan became the chief producer, during the period when it originated from Pakistan and Burma.

Laurent Lamiel, an analyst at the EMCDDA, described the route as “the illegal version of the silk road.”

“Heroin was travelling on [the Balkan Route] even when the Iron Curtain was in place, which shows how strong this route is and how developed, protected and historical the networks are,” he said.

Afghan production single-handedly supplies heroin to Western Europe and Russia, by far the world’s two biggest markets

1. In the backstreets of west Kabul, two addicts ‘chase the dragon’ under a scarf used to trap heroin vapors

2. In order to get their next hit, many of Kabul’s addicts make what little they can by begging

3. An impromptu musical performance by one of the patients at a residential heroin

rehabilitation clinic in Kabul

4. A patient in withdrawal at a residential heroin rehabilitation clinic in Kabul

5. Members of the Afghan National Army in Khost province, eastern Afghanistan, who made no secret of the fact they were high, probably having smoked hashish. Opium and hashish use are a significant problem within the Afghan security forces, compounding the fight against illegal drugs

Control of the routes

“The thing that is very important to understand is that the big players on the Balkan Route are Turkish criminals and traffickers,” Lamiel explained. “[They] are able to concentrate a large amount of heroin produced in Afghanistan into their hands and act as wholesalers to the British market as well as other European markets.” The UK’s Serious Organized Crime Agency (SOCA) backs this assertion, believing that some 140 Turkish networks control the heroin supply to Europe.

That Turkish criminal groups have taken dominance over other criminal organizations along the route is hardly surprising, not only because the route traverses some 1,600 kilometers of Turkish territory but also because Turkey controls the Bosphorus Straits, the most direct access point to Europe from South Asia without having to pass north of the Caspian and Black Seas. Turkey also shares a long land border with Iran, where heroin can be bought at prices similar to those in Afghanistan, and there are extended communities of Turks in London and elsewhere in Europe, particularly Germany, who can facilitate connections and legitimize travel. In a similar way, Pakistani groups that smuggle direct from Pakistan to the UK, by air or sea, exploit their connections within the UK and their close proximity to the Afghan market, cutting out middlemen to maximize profits on a route where they can buy at around $3,000 per kg and sell at $30,000 per kg; that route only accounts for small volumes of traffic, however, at most some five tons between ships and flights from Pakistan to the UK or the Netherlands.

Although Turkish and Pakistani groups largely control the Balkan and direct air and sea routes, respectively, individuals and groups from many other countries are also involved, as the arrest figures for heroin traffickers attest. In the Netherlands, for example, which could be considered the end point of the Balkan Route and is a key hub for onwards shipment to various European countries including the UK, Dutch citizens account for 20 percent of arrests, followed by Nigerians (19 percent), Turkish (16 percent), British (5 percent), Brazilians (5 percent) and Americans (5 percent). 

Similarly, at several points along the route ethnic groups that straddle national borders, or have large diaspora populations, facilitate trafficking, examples being Kurds along the Iran-Turkey border, Aziris along the Iran-Azerbaijan border across which a sub-route branches north from Iran into Russia or Europe, and Albanians who are particularly visible in the trade in Greece, Italy and Switzerland.

Afghanistan has a near monopoly on global opium and heroin production yet makes far from the lion’s share of revenues

The economics of the trade

Even though Afghanistan has a near monopoly on global opium and heroin production, the economics of the trade conspire such that the country makes far from the lion’s share of revenues. At retail prices the total world opiate value is approximately $65 billion — $55 billion for heroin and $10 billion for opium. The market with the highest value, Western Europe, accounts for approximately $20 billion of the global total, followed by the Russian federation ($13 billion), China ($9 billion) and the US ($8 billion). At best Afghanistan makes a small fraction of the profits. In 2009 the combined total paid to Afghan farmers was an estimated $400 million. When opium trafficking and opium processing into heroin are factored in, the value of the opium/heroin industry to the Afghan economy was some $2.4 billion, which is roughly 3.5 percent of the global market value. Antonio Maria Costa, the executive director of the UNODC, quoted Afghan President Hamid Karzai as telling him: “We take 3 percent of the revenue and 100 percent of the blame.”

Nonetheless, to a poor country like Afghanistan this revenue is still substantial. To put it in context, recent projections for Afghan government expenditure this year estimate it at $4.5 billion, of which the government can only raise $1.9 billion itself, the remainder being provided by international donors. Afghan heroin revenues are one-seventh the size of the nation’s licit gross domestic product, which according to the International Monetary Fund was $16.6 billion in 2010, although even this figure is inflated by international donor money, with an estimated $5 billion in annual aid fuelling the economy.

In general, the further away from Afghanistan, the higher the potential profits from heroin. Along the Balkan route, the wholesale heroin price varies from just $2,400 per kg in Afghanistan, to $11,000 per kg at the approximate mid-point in Turkey, to $30,000 per kg in the UK (see map page 37). Part of the explanation for this is that, in broad terms, the route travels up two gradients: firstly from less developed to more developed countries, where higher prices can be charged, and secondly from an area of abundance to one of relative scarcity. There is also the fact that the further the heroin travels, the more hands it passes through and the more costs are incurred, which must be recouped in the eventual sale price.

“Although the UK is the highest value market in Europe, with some of the highest street prices for heroin anywhere in the world, there is more money flowing into Afghanistan from opiates consumed in Iran than there is from the UK,” explained a SOCA financial specialist who requested only to be identified as ‘Richard’ due to the sensitive nature of his work. To understand this, one must break down the price and look at where the revenues from street sales go.

At approximately $30,000 per kg the UK’s wholesale heroin price is below the European average of $36,000 per kg. This perhaps reflects the fact that, barring Russia, the UK has the single highest consumption in Europe and the pull of the market pushes the price down even after factoring in the risk to dealers, which is considerable given that the UK makes among the highest number of seizures in Europe. However, the street value of about $80 per gram is above the European weighted average of $77 per gram, so that UK dealers are in a privileged position of buying at lower-than-average prices and selling at above-average prices.

The majority of the street value stays in the UK, with criminals making $50,000 for every kg of heroin sales, albeit most of these sales at street level will be in very small quantities, typically of 0.2 grams. Most of the wholesale import price of the heroin has to be paid down the chain of traffickers to pay costs incurred on the way, with any significant profits being retained well before Afghanistan by the controlling criminal groups.

This model is widely applicable to the high-value European markets, meaning the largest revenues from heroin sales are retained within the countries of final sale, even if they may be distributed between large numbers of dealers. Richard makes the point that, “When you go back to the cultivators and the processors in Afghanistan the price has nothing to do with the destination market, so they’re getting as much for each jirib [approximately 2,000 square meters] of land that they’ve cultivated whether the opium is smoked in Pakistan or the UK.”

Like so many things in life it’s a question of who you know.

“In reality if [Afghan traders] could get [heroin] to the UK themselves they would,” Richard said. “They’re entrepreneurs to a degree, but they can only sell it to the people they know who will buy it from them and they tend to be across the first border in Iran or Pakistan.”

The UK is the highest value market in Europe, with some of the highest street prices for heroin anywhere in the world

Mechanisms of trade in Afghanistan

It is widely understood that the majority of Afghan opium farmers make very modest profits and are simply trying to make a living. In fact, many are stuck in an economic trap not dissimilar to that of coffee plantation laborers in various parts of the world who, after working hard in the fields, only receive a fraction of the profits that up-market Western coffee shops reap. The difference is that poppy crops are illegal and there will likely never be a “fair heroin trade” campaign. To this end the UNODC, together with most organizations, do not generally consider that the line of criminality has been crossed until the opium or heroin reaches the hands of substantial traders. Nonetheless, Afghan farmers stand the risk of having their crops eradicated by the Afghan National Security Forces (ANSF) and are often suspected of having links with the Taliban who, although not necessarily in control of the opium trade, do facilitate and profit from it.

Often Afghan farmers have turned to opium as a last resort in areas where the government provides very few services or even basic security. In such places, the Taliban or other anti-government elements can be an attractive source of support, especially in relation to poppy cultivation. At a grass roots level they provide poppy seeds and small loans to farmers to prepare for the harvest, as well as organizing collection of the opium. It’s in the Taliban’s interest to do so because the farmers in turn pay a tax on their opium, known as ushr, direct to the Taliban, which is usually levied at 10 percent.

Further down the chain, the Taliban are more closely involved with traders and lab processors, who pay for protection, facilitation and, where necessary, logistical assistance in heroin processing, storage and packaging. They also charge a zakat tax on traders, generally set at 2.5 percent. Wherever they can, the Taliban levy these taxes on all goods, but with illegal crops they generally take payment in kind, knowing they can get higher prices beyond Afghanistan’s borders. However, contrary to what is often portrayed, the model is more one of the Taliban taking advantage of pre-existing trade than their having direct control of it.

The Taliban are known to apply pressure on farmers to grow opium but their decisions to do so are affected by a broad range of factors. Although it is true that opium usually fetches higher prices than alternative cash crops, other practical considerations must be taken into account. In the first place, with other crops farmers would have to get their produce to market by their own means, which can be difficult given the state of infrastructure in Helmand, or indeed most locations in Afghanistan. Secondly, raw opium acts as a form of currency, which is particularly important in under-developed rural areas where no banking facilities exist.

Some sort of transferable savings are especially valued during times of war and uncertainty, as Jean Luc Lemahieu, the UNODC’s representative in Afghanistan, explained: “Many people have been displaced, but if they are able to take their raw opium with them and their opium seeds, they have an income which will stay good for 10 years. Try to do the same with pomegranates, which only keep well for three weeks, after which they’re rotten in your pockets.”

To give some idea of the increase in earnings that opium can bring to farmers, according to the UNODC the average income of non-opium growing farmers in 2006 was $2,370, while that of opium growing farmers was $5,055. That said, the reality on the ground in Helmand and other poppy producing locations changes radically from one place to another. According to Richard of SOCA, “It’s very much a moveable feast. Village by village, prices change [and] intentions change, as does the role of authority and whether the local tribal leader or key person is sympathetic to the government or the Taliban.”

Raw opium acts as a form of currency in under-developed rural areas where no banking facilities exist

Price fluctuations and their causes

This year the average raw opium price in Afghanistan is estimated to be much higher than last — some $280 per kg compared to just $80 per kg in 2010. A very small portion of this rise can be attributed to successful eradication, which reduces supply and hence pushes up prices. However, there are two much more significant factors in the price increase: the first being that widespread disease triggered a blight in the crops last year and tightened supply, second and more importantly, is speculation.

“The military operations mean that a lot of farmers are very uncertain about their future prospects and so they start to stockpile opium because in times of war it’s one of the best commodities to have,” said Lemahieu, pointing out the similarities to the classic economic model of the ‘Dutch tulips’.

Essentially the opium farmers are asking the same questions that any Afghan observer asks: “Is the troop surge going to work?” The farmer, however, must think beyond this to ask: “If the surge does work, will I be able to plant opium in the future and should I stockpile some of what I have?”

As Lemahieu notes, “It’s Wall Street all over again — except in Helmand and Kandahar — and these are not high paid bonuses for bank executives, these are poor farmers thinking ahead and saying ‘in this uncertainty, I’m not selling. I want to sit on it and see what happens to the price’.” The recent price rises are substantial enough so as to have provided many farmers who had previously abandoned poppy crops with the extra incentive to renew cultivation. The UNODC estimates that of the 20 provinces (from a total of 34) in Afghanistan that were for all intents and

purposes ‘opium free’ by 2010, thanks to eradication efforts, at least four will see renewed cultivation in 2011.

Generally speaking, as the volume of opium production has increased over the years, from just 1,000 tons in 1980 to a peak of 9,000 tons in 2007, prices have decreased, but previous large price fluctuations at the supply side are not unheard of. Following the Taliban’s ban on opium cultivation in early 2001 prices rose from less than $50 per kg in July 2000 to nearly $700 per kg in August 2001. The ban was strictly enforced, making it probably the quickest and most effective, albeit short lived, drugs eradication program in history. The Taliban partly put the ban in place to appease Western governments in the hope that they would recognize the regime, not then aware that the move would be rendered redundant by the events of September 2001, which led to Western military intervention, the removal of the Taliban regime and a resumption of opium production.

Although the supply side prices may be prone to fluctuations given shortages in production, this is no different from any other commodity. The farm gate price of opium, however, is so low compared to the eventual market prices of the heroin that these fluctuations have negligible effect on heroin markets in distant locations, where the bulk of the price is driven by high risks to the dealers, combined with covering the costs of transport. Furthermore, the local mid-level traders take up some of the slack in the market, as Lemahieu explained: “[They] act as a price cushion in between the demand and the production so that some of their inflated profits from the past have gone down over the last months because they are paying for the extra cost on the production side while higher prices are not really reflected in the consumer side.”

Afghan production of opium has become so high that if it were all converted into heroin it would outstrip global demand three times over. From what has become such a strong and steady supply, European prices have gradually dropped, with the average heroin wholesale price falling from $100,000 per kg in 1990 to just $36,000 per kg in 2011. It suits the wholesale suppliers — in other words the larger organizing criminal groups — to keep the prices steady.

“They’re no different to other commodity brokers, which is essentially what they are, in terms of the ways they absorb price fluctuations and try to manipulate the market and the supply,” said Steve Coates, deputy director of SOCA.

Afghan production of opium has become so great that if it were all converted into heroin it would outstrip global demand three times over

Becoming the sultan of smack

It is only since the early 1990s that Afghanistan became the world’s dominant opium and heroin supplier (see figure page 36) and, effectively, the current war in Afghanistan has only consolidated its position. There had always been some opium production in Afghanistan but it wasn’t until the Soviet war through the 1980s that it became a major supplier. Previously, Pakistan had been the world leader in opium and heroin production, but as the Afghan mujahedin who were fighting the Russians began to use opium to fund their resistance, Afghanistan’s annual production started to increase.

As weapons were smuggled into Afghanistan, largely by Pakistan’s Inter Services Intelligence (ISI) and partly funded by the American Central Intelligence Agency (CIA), opium would be brought back and refined to heroin in Pakistan. In the early 1990s Pakistan clamped down on its production, virtually ending Pakistani poppy cultivation, but elements within the ISI continued to turn a blind eye to Afghan opium traders using the preexisting routes and processing infrastructure within Pakistan.

Following the Soviet withdrawal in 1989, a fierce civil war was fought between different Afghan factions, all of whom used opium revenues to some extent to fund their war effort. The Taliban, who had conquered all but the furthest northern reaches of Afghanistan by 2001, were no different in their use of opium as fuel for war, a fact that continues to this day.

What has changed is that opium production has roughly doubled since 2005 and has become increasingly concentrated in Afghanistan’s embattled southern areas, while it was not until the last decade that the majority of heroin began to be processed inside Afghanistan.

“If the government provided any services or alternatives, I wouldn’t grow poppy”

An end in sight

The extent to which the Taliban profit from the opium and heroin trade is often misunderstood. Of the $2.4 billion value of the opiates trade that is retained in Afghanistan, the UNODC estimates the Taliban’s total share would be around $125 million, with other less conservative estimates suggesting it to be as high as $400 million. Even the higher figure gives the Taliban only a 0.6 percent share of the total revenue generated from foreign sales of Afghan opiates. As a portion of Afghanistan’s share of the global spoils, it is only 17 percent. Nonetheless, in a country where entry-level police salaries are less than $100 per month, this allows the Taliban to compete with, and often out pay, state security forces’ salaries.

Successfully ending the opium trade would cut off a significant source of insurgent funding, but eradication is a double-edged sword that can sometimes act to alienate Afghan farmers, pushing them closer to the insurgents. In the past this has led US forces to back away from tackling the drugs problem, which they haven’t considered part of their main mission. Thanks to a change of policy in recent years, a slow decline in cultivation is beginning to take place.

“The real change [regarding opium] came about two years ago when the US military decided to go after the drugs, which they had not been doing for nine years,” said journalist and Afghanistan expert Ahmed Rashid. “If [former US Secretary of Defense Donald] Rumsfeld had not had that policy for so many years there wouldn’t have been such an awful situation.”

This year was the first that the US marines had a permanent presence in Marjah, previously one of the centers of the opium trade in Helmand. Although the farmers had been warned that eradication would go ahead many still planted poppy. As the harvest period approached, government tractors began to plow up the fields with marines providing security. Usually the harvest is the last quiet period before the Taliban’s yearly spring offensive begins, but this year in Marjah hostilities got off to an early start. No sooner had the tractors been sent into the fields than the drivers found themselves under fire from angry locals, some of whom had just crossed the line from farmer to insurgent. In a classic Catch-22, the eradication that is necessary to end the insurgency has also fueled it.

Until stability returns to Afghanistan it will continue supplying the world with the deadly by-product of its wars. It is estimated that there are more than 10,000 deaths per year from heroin overdoses in NATO countries, more than four times the total number of NATO troops that have been killed in Afghanistan since hostilities began in 2001. As Rashid sees it, “You cannot eradicate drugs until the war comes to an end. That’s the bottom line. When that happens, you can talk about a nationwide policy but you can’t really effectively tackle the problem until the war is over.”

The problem, however, is not simply to defeat the insurgents but to extend the government’s reach throughout Afghanistan. In many parts of Southern Helmand the first real evidence that the farmers had seen of any government action was the eradication of their precious poppy crops, before alternatives were put in place or any significant services provided. As Wali Jon, the poppy farmer, insists, “If the government provided any services or alternatives, I wouldn’t grow poppy.”

That certainly doesn’t seem like a reality in the near future and in the distant streets of London, Reza Etesamifard, has little concern that supply will dry up. As he strolls comfortably around his adopted city he points out the many locations where it’s easy to score heroin, from Soho back alleys to upper class suburbs. 

“In every part of London there are dealers; it’s an epidemic and nobody is dealing with it,” he said. “Plenty of users hold onto a job — its only the ones who have lost everything that you notice.”

Reza is frank about his addiction; he knows he’s lost everything. Although young, bright and energetic, he is homeless, penniless and without a friend he can trust, willingly confiding that the addicts he spends his time with would put heroin before their friendship, no matter the cost. The only thing forming any structure to his life is the acquisition of his next pain-staving, euphoria-delivering fix.

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