Think Again

Think Again: The Afghan Drug Trade

Think Again: The Afghan Drug Trade

"The Afghan Drug Industry Mostly Benefits the Taliban."

Far from it. Today, Afghanistan essentially holds a monopoly on heroin exports to the Old World. The country accounts for more than 90 percent of global production; although drug markets evolve over time, Afghanistan’s production costs are so much lower than its would-be competitors’ that it is a safe bet to assume the country will be the leader for at least five or 10 more years.

In the popular and American political imaginations, the Taliban are thought to be the big winners from this near monopoly, and there is some truth to this. The "narcoterrorist" label is often misused, but the Taliban are the real deal. They really do use profits from the opium trade to finance terrorist attacks on civilian and military targets. Although the Taliban traffic only modest quantities entirely on their own, taxing other people’s drug deals is an important source of revenue; no one knows how much the Taliban profit from the drug trade, but whether they do isn’t up for serious debate.

But just because the Taliban benefit from the heroin business doesn’t mean the heroin business mostly benefits the Taliban. Consider the numbers (or at least the rough ones — production figures fluctuate from year to year, conversion rates are crude estimates, and price data beyond the opium bazaars are sketchy). In a typical year, Afghan farmers sell about 7,000 tons of opium at $130 a kilogram to traffickers who convert that into 1,000 tons of heroin, worth perhaps $2,500 a kilogram in Afghanistan and $4,000 at wholesale in neighboring countries. That works out to roughly $900 million in annual revenues for the farmers, $1.6 billion for traffickers from operations within Afghanistan, and another $1.5 billion for those who smuggle heroin out of the country. (2010 was atypical; a poppy blight drove opium production down and prices up.)

The Taliban’s take is subject to debate, with responsible estimates varying from $70 million to $500 million — but either way it’s not a big slice of the pie. The Taliban take 2 to 12 percent of a $4 billion industry; farmers, traffickers, smugglers, and corrupt officials collectively earn much more. It is not clear why the Taliban have been so unsuccessful at translating their power and influence into a larger share of trafficker revenues, but one thing is clear: They have nowhere to go but up. Upsetting the apple cart just to see where it lands is ill-advised; to the extent that counternarcotics efforts succeed, they are more likely to increase than to reduce the revenues and power of the Taliban.

"American Drug Addicts are Supporting the Taliban."

Hardly. In the months following the 9/11 attacks, the Office of National Drug Control Policy ran public service announcements implying that American drug users were supporting terrorists targeting the United States. In fact, while users in the United States are supporting plenty of unsavory characters, they aren’t likely to be in Afghanistan. The big money in U.S. drug markets is still in cocaine, all of which is produced in the Western Hemisphere.

The United States consumes only about 5 percent of the world’s illegal opium, and most of that comes from Colombia and Mexico. Most Afghan opiates, meanwhile, never leave Asia — they are that continent’s health problem, and to a lesser extent Europe’s. Iran and Russia may have a stake in Afghan exports, but protecting those countries’ citizens from drug abuse is not obviously a major U.S. interest unless the Russian and Iranian governments are willing to offer something of value in exchange.

"Reducing Production in Afghanistan Hurts Traffickers Everywhere, Including the Taliban."

Wrong. In December, the Guardian interpreted news of the Taliban’s attempts to stockpile opium as an effort to "manipulate street prices in the west." An economist would laugh — or perhaps cry — at this notion. As Thomas C. Schelling pointed out in the 1960s, law enforcement and organized criminal enterprises are on the same side when it comes to the price of illicit commodities: They both want them to be higher.

Yes, entirely eliminating Afghan drug production would eliminate Afghan drug revenues. It would also be impossible. And though reducing production is possible, reducing it will also drive up Afghan export prices more than proportionally, increasing overall drug revenues.

Monopolists facing inelastic demand don’t worry about production reductions — they love them. Less production means higher revenues; this is why OPEC meets to discuss how to constrain oil production, not expand it. Counternarcotics strategy solves this coordination problem for the drug traffickers, reducing exports and increasing industry revenues — as amply illustrated by this year’s blight, which reduced production by far more than the U.S. Drug Enforcement Administration (DEA) could have managed, but also drove opium prices up over $200 per kilogram. 

Retail drug demand responds to changes in retail prices — maybe not quite proportionally, but it does respond. However, even large changes in export prices produce retail price changes that are quite modest, in percentage terms. The reason is that the value of processed heroin in Afghanistan is a small fraction of its value in the countries that consume it: A kilogram that sells for $3,000 at export from Afghanistan fetches $70,000 at wholesale in Britain, and perhaps $300,000 at retail. The price of drugs at export is such a small fraction of the final retail price that the latter would register only the largest disturbances in the former.

You would have to double the Afghan export price, for instance, to bump up the retail price in Iran by 20 percent, which in turn would suppress consumption there by only about 15 percent (using a conventional estimate for the sensitivity of consumption to price). And because Western European (and U.S.) prices are five to 20 times higher than Asian wholesale prices, those markets are among the last to be shorted when supplies are tight. So even if the Western Hemisphere’s heroin exports vanished overnight, the quantity of heroin produced and exported from Afghanistan would have next to no bearing on rates of dependence or drug-related crime in the United States.

"Reducing Supply Hurts the Taliban in Particular."

Just the opposite. When military action or law enforcement reduces Afghan heroin exports, total trafficker revenues increase, but not everyone wins. Naturally, traffickers who are arrested or killed are worse off, but those who remain are in much better shape — they capture a larger slice of a bigger pie.

In an ideal world, law enforcement would selectively target the nastiest of the nasty dealers, putting them at a competitive disadvantage and shifting market share toward traffickers who are merely bad in a common-criminal sense. The DEA and military understand this and try to selectively disrupt the traffickers who are linked most closely to the insurgency. But Afghanistan is not an ideal world. Even if coalition agents act sensibly on the available operational intelligence, that intelligence is far from perfect and there is good reason to fear that it can be systematically imperfect in perverse ways.

Afghan officials play a key role in obtaining and evaluating targeting information, for both cultural and legal reasons. But Afghanistan is one of the most corrupt states on Earth. Target selection is an exercise in discretion, and whenever officials exercise discretion, stakeholders have an incentive to sway those decisions with bribes or threats. Inasmuch as the most powerful insurgents are, almost by definition, the most skilled at bribing or intimidating officials, increased enforcement can specifically benefit those insurgents, even if the U.S. military and DEA do their best to avoid it.

"Destroying Afghan Farmers’ Poppy Fields Is a Bad Idea."

Often, but not always. In the early years of the Afghanistan war, coalition policy included widespread forced eradication. In June 2009, however, Barack Obama’s administration announced that U.S. and other international forces would no longer conduct eradication operations, on which the late Richard Holbrooke said the United States had "wasted hundreds of millions of dollars."

The sensible motivation for this reversal was recognition that eradication produced unintended consequences. Pulling up a farmer’s opium crop could generate ill will, perhaps enough to produce a new recruit for the insurgency. It was also geographically inconvenient. Afghanistan is a horrendously complicated place, but to oversimplify, two-thirds of the country (roughly 27 of 34 provinces) has been nearly poppy-free and relatively stable for a few years. The remaining third — in particular Helmand and Kandahar provinces — is rife with both poppies and insurgents. Eradication in those areas has a minimal and temporary effect on the drug trade, at most pushing production to the next valley or district. And angering farmers where Taliban recruiters prowl seemed like a gift to the enemy. So the Obama administration swore off direct support of eradication, though the governors of some Afghan provinces continue to pursue their own eradication programs.

But swearing off eradication everywhere has come with its own unintended consequences. Two-thirds of Afghanistan has — at considerable cost — been largely rid of poppies already. Keeping them poppy-free is not only relatively easy at this point, but will maintain a degree of normalcy for more than half the country, placate Russia — which, as one of the principal markets for Afghan drugs, is understandably irate at the prospect of a hands-off opium policy — and cement the United States’ local reputation for being opposed to drugs at a time when addiction is sweeping Afghan society. If America wants to win hearts and minds in a country whose addiction rate is among the highest in the world, there are worse things than being seen as resolutely anti-drug while reminding people that the Taliban profit from the illicit industry that has enslaved their family members. Refraining from quixotic and counterproductive measures in the south does not require sacrificing progress already made in the rest of the country.

"Everyone Would Be Better Off if Afghan Farmers Grew Something Else."

Not necessarily. Alternative development — sometimes called "alternative livelihoods" — is the kinder, gentler complement to eradication. Both target farmers, the thinking goes, but one plants crops and bulldozes roads, while the other bulldozes crops and plants resentment. Even if alternative development doesn’t meaningfully reduce worldwide drug cultivation — and it doesn’t — at least the do-gooders do no harm, right?

Wrong. The Taliban tax opium not because the Quran opposes intoxicants; they tax opium because it is taxable. In the lawless stretches of Afghanistan, the Taliban, local warlords, corrupt officials, and anyone else with enough guns all extort "protection" payments from almost any activity undertaken in their zone of control — including alternative-development projects. The Wall Street Journal reported last summer that half the electricity produced by a U.S. Agency for International Development-funded $100 million upgrade to a hydropower plant in Helmand province is effectively sold by the Taliban. Even if one dismisses such egregious examples, back-of-the-envelope calculations of the overall impact are not encouraging. Multiply the commonly acknowledged 10 to 20 percent extortion "tax" rate levied by the Taliban by the total international budget for alternative development in Afghanistan, and you get a revenue stream well in excess of what the Taliban is thought to derive from the opium trade.

No one doubts that development needs to be a major part of the agenda in Afghanistan, but there is a strong case to be made for using these programs as a reward for stabilized provinces — not a means of winning over hostile ones.

"The Afghan Drug Problem is Beyond Hope."

Not if we’re patient. If solutions must be quick or decisive, then counternarcotics in Afghanistan is no solution. But that does not mean that nothing can or should be done. Small steps are better than no steps, and even in a land in such desperate circumstances, giving up makes for bad public relations.

There are practical options. The United States could fund drug treatment in Afghanistan, a country with a horrendous heroin problem, to reduce demand and earn support from the Afghan public. It could encourage consumer countries (including Iran and Russia) to step up drug treatment; that will shrink the revenues of Afghan traffickers. Focusing alternative-development efforts on more stable parts of the country, as a reward for taking steps toward normalcy, could further erode the threat of the Taliban gaining influence there. And removing Afghan officials corrupted by the drug trade from seats of power — if it were possible — would bolster confidence in the government.

It would be foolish to expect too much from these approaches. But the limitations of feasible drug-control activities in Afghanistan do not justify continuing to pursue policies that do more harm than good. Because the natural tendency of counternarcotics efforts is to help America’s enemies, the country should pursue them as little as possible. This is a case where less really is more.