Sunday, 20 February 2011

A Question For Swamination S Anklesaria Aiyar re: Dumping Opium in Afghanistan

Renowned journalist Swaminathan S Anklesaria Aiyar addresses an interesting question in his Times of India column. According to Aiyar, “one reason for the Taliban’s resilience in Afghanistan is the big money they make from the opium trade.” Destroying the poppy crop hasn’t worked. Neither have other options such as getting pro-western mullahs to denounce opium as unIslamic or promoting grapes, saffron and high-yielding wheat as alternatives to poppy.

How does one cut off the Taliban's revenues from drugs? Aiyar says that “since all proposed remedies so far have failed, we need to think out of the box and come up with a totally new approach. Forget any military or religious approach to the problem. Instead, let us understand what the laws of supply and demand imply in the opium context.” Aiyar goes on to put forth an ‘out-of-the-box’ solution. Which is to dump opium in Afghanistan. As a result, “Afghan opium prices will crash and farmers will turn to other crops.” Will it really?

Let’s see if we understand this. The idea is to cut off the Taliban’s source of funding and not that of poppy cultivators in Afghanistan. To quote Aiyar, “the Taliban levy a tax on Afghan farmers and also buy opium to be processed and smuggled abroad.” Afghan opium is smuggled into Iran either directly or through Pakistan. Middle-men take over and send it to Turkey and various Central Asian countries where it is processed into heroin. The processed heroin then makes its way to Europe and the USA. If opium is dumped in Afghanistan, it may reduce opium prices in Afghanistan. The Taliban will have to spend less money to buy the opium which they ship to Iran. How does that cut-off the Taliban’s source of revenue? On the contrary, the Taliban stand to make a handsome profit since it will cost them less to buy the opium they smuggle into Iran and Pakistan and sell to drug dealers there.

Let’s assume the dumping continues for many years. During this time the Taliban continues to make money hand-over-fist. Afghan farmers stopping cultivating poppies and switch to grapes or saffron. The US then stops dumping opium in Afghanistan and then what happens? Won’t the demand for opium cause Afghan farmers to re-start poppy cultivation?

If the Taliban are clever, they could also buy the opium dumped in Afghanistan and hoard it rather than sell it to drug dealers elsewhere so that prices don’t collapse. When the US gets tired of dumping opium, the Taliban could start selling the hoarded opium in easy stages, so that prices remain stable.

More importantly, how does one dump opium in Afghanistan? Is the US army expected to set up way-side stalls to sell opium at prices below market value? Or will CIA agents be expected to contact intermediaries who will discreetly offer the opium to the Taliban at cheap rates? In other words, who will bell the cat?

I don’t wish to belittle Aiyar and I should confess that I am not an economist. However, the issue raised by Aiyar is one that interests me greatly and the suggested solution doesn’t appear to hold water.

Aiyar suggests a second alternative. Aiyar says that “an alternative strategy could be for the US to legalize drug use. Once heroin becomes legal , its street price will plummet, and so will the Afghan price. However, political and religious opposition to legalizing drug use in the US is very strong.” I fully agree with Aiyar on this.

A third solution mentioned by Aiyar, but dismissed by him is to have ”the US to buy the entire poppy crop in Afghanistan, and then destroy it.” In my opinion, this is the only solution which even comes close to cutting off funding for the Taliban. Buying opium from the Afghan farmer will not wean him off poppies, but the Taliban will not make money by buying opium from farmers and smuggling it to Iran. However, Aiyar feels this approach will not work since it is contrary to the laws of economics. “Today, the Afghan poppy crop is grown mainly in southern provinces like Helmand. If the US or some medical council tries to buy up Helmand’s poppy production, opium will become scarce in the black market and prices will skyrocket. This will induce other provinces to take up poppy cultivation. Indeed, cultivation will also spread rapidly to neighbouring countries (Iran, Pakistan, Turkmenistan , Uzbekistan and Tajikistan) and the resultant opium will be smuggled into Afghanistan. The Taliban will, of course, profit handsomely from this illicit trade. Basic economics says that any strategy that makes opium scarce will fail, since it will encourage further cultivation. The solution lies in increasing the supply of opium so greatly that its price crashes, making cultivation unprofitable.”

If the US army in Afghanistan were to openly buy opium from farmers, whichever part of Afghanistan they may be in, and destroy it, the Taliban will not be able to play a role in the drug trade. The price of street heroin in the West will temporarily skyrocket, though the shortfall in supply will soon be met by drug dealers in Central America or Central Asia or the Golden Triangle (around Myanmar, Laos, Vietnam and Thailand) and prices will stabilise. I repeat: This solution, which is dismissed by Aiyar, will work to a limited extent. Furthermore, it is the only feasible solution on the table, short of legalising drug use in the West. Some opium may be smuggled back into Afghanistan for domestic consumption since Afghanistan has many drug addicts, but it is silly to say that if the US army buys up all available opium in Afghanistan, opium will be smuggled into Afghanistan from neighbouring countries for sale to the Taliban, who will then smuggle it back to Iran or Pakistan or Central Asia.

Another solution which occurs to me (taking a leaf out of Aiyar’s book) would be to dump opium in Iran and Pakistan, instead of in Afghanistan as suggested by Aiyar. If the CIA can make very cheap opium available to good, able and honest drug traffickers in Iran and Pakistan (and may be even throw in some heroin processing units for free), the Taliban will not find buyers for the opium they procure from Afghan farmers. This would cut off the funding for the Taliban and also force Afghan farmers to cultivate something else. Goodbye for now and let me go back to my pipe.


Anonymous said...

Why not just subsidize the purchase of other crops? Or pay people not to farm (as is done in the US!). Or create works programs with high paying alternative employment.

People are growing opium because it is really remunerative.

LOL @ "good, able and honest drug traffickers".

Winnowed said...

Anonymous, that's a very good suggestion, though it is possible farmers growing other crops against the Taliban's diktat may be targetted