Afghanistan is, as of March, 2008, the greatest illicit (in Western World standards) opium producer in the world, before Burma (Myanmar), part of the so-called "Golden Crescent". Opium production in Afghanistan has been a significant problem (or a significant business) for Afghanistan, especially since the downfall of the Taliban in 2001. Based on UNODC data, there has been more opium poppy cultivation in each of the past four growing seasons (2004-2007), than in any one year during Taliban rule. Also, more land is now used for opium in Afghanistan, than for coca cultivation in Latin America. In 2007, 93% of the opiates on the world market originated in Afghanistan. This amounts to an export value of about $4 billion, with a quarter being earned by opium farmers and the rest going to district officials, insurgents, warlords and drug traffickers .In the seven years (1994-2000) prior to a Taliban opium ban, the Afghan farmers' share of gross income from opium was divided among 200,000 families.
As the Afghan government began to lose control of provinces during the Soviet invasion of 1979-80, warlords flourished and with it opium production as regional commanders searched for ways to generate money to purchase weapons, according to the UN. (At this time the US was pursuing an "arms-length" supporting strategy of the Afghan freedom-fighters or Mujahideen, the main purpose being to cripple the USSR slowly into withdrawal through attrition rather than effect a quick and decisive overthrow.)
U.S. officials had refused to investigate charges of heroin dealing by its Afghan allies 'because U.S. narcotics policy in Afghanistan has been subordinated to the war against Soviet influence there.' In 1995, the former CIA director of the Afghan operation, Charles Cogan, admitted the CIA had indeed sacrificed the drug war to fight the Cold War. 'Our main mission was to do as much damage as possible to the Soviets. We didn't really have the resources or the time to devote to an investigation of the drug trade,'... 'I don't think that we need to apologize for this. Every situation has its fallout.... There was fallout in terms of drugs, yes. But the main objective was accomplished. The Soviets left Afghanistan.'
It was alleged by the Soviets on multiple occasions that American CIA agents were helping smuggle opium out of Afghanistan, either into the West, in order to raise money for the Afghan resistance or into the Soviet Union in order to weaken it through drug addiction. According to Alfred McCoy, the CIA supported various Afghan drug lords, for instance Gulbuddin Hekmatyar .
When the Red Army was forced to withdraw in 1989, a power vacuum was created. Various Mujahideen factions started fighting against each other for power. With the discontinuation of Western support, they resorted ever more to poppy cultivation to finance their military existence.
Some local opium dealers, looking for a safe operational hub, joined forces with the more fanatic sections of the Mujahideen supported by Arab extremists like Osama bin Laden as well as the Pakistani secret intelligence service ISI to form the Taliban movement towards the end of 1994 - see also BBC report here  .
Afghanistan saw a bumper opium crop of 4,600 metric tons in 1999, which was the height of the Taliban rule in Afghanistan. According to a Swiss security publication, 'SicherheitsForum' (April 2006, pp:56-57), this resulted in supply exceeding demand and a drop in the high-street price of heroin and morphine in the West, endangering the profitability of European drug smugglers. It has been said that European Smugglers demanded a reduction in supply to counter lower prices. 
Afghanistan briefly witnessed one of the world's most successful anti-drug campaigns when Taliban leader Mullah Mohammed Omar declared that growing poppies is un-Islamic. Some historians say the Taliban allege cynically cut production to increase the values of their own stockpiles, although never verified, the effect in the fields was dramatic: a year's crop was almost entirely wiped out and production was down to zero.
As a result of this July 2001 ban, opium poppy cultivation was reduced by 91% from the previous year's estimate of 82,172 hectares. The ban was so effective that Helmand Province, which had accounted for more than half of this area, recorded no poppy cultivation during the 2001 season.
After the September 11, 2001 attacks, a combination of U.S. CIA and military forces (US and allied powers), in support of the Northern Alliance, quickly regained control of Afghanistan from the Taliban, leaving the country "in economic ruin and political chaos.
By November 2001, the Taliban were defeated, leading to the collapse of the economy. The scarcity of other sources of revenue forced many of the country's farmers to resort back to growing opium for export.(1,300 km² in 2004 according to the United Nations Office on Drugs and Crime.)
In December 2001, a number of prominent Afghans met in Bonn, Germany, under United Nations (UN) auspices to develop a plan to reestablish the State of Afghanistan, including provisions for a new constitution and national elections. As part of that agreement, the United Kingdom (UK) was designated the lead country in addressing counter-narcotics issues in Afghanistan. Afghanistan subsequently implemented its new constitution and held national elections. On December 7, 2004, Hamid Karzai was formally sworn in as president of a democratic Afghanistan."
Two of the following three growing seasons saw record levels of opium poppy cultivation. One reason for these increases may be inconsistent application of the rule of law. Afghan farmers suggested that "government officials take bribes for turning a blind eye to the drug trade while punishing poor opium growers".
Another obstacle to getting rid of poppy cultivation in Afghanistan is the reluctant collaboration between US forces and Afghan warlords in hunting drug traffickers. In the absence of Taliban, the warlords largely control the opium trade but are also highly useful to the US forces in scouting, providing local intelligence, keeping their own territories clean from Al-Qaeda and Taliban insurgents, and even taking part in military operations.
Former U.S. State Department Principal Deputy Assistant Secretary for the Bureau of International Narcotics and Law Enforcement Affairs Thomas Schweich, in a New York Times article dated July 27, 2007, asserts that opium production is protected by the government of Hamid Karzai as well as by the Taliban, as all parties to political conflict in Afghanistan as well as criminals benefit from opium production, and, in Schweich's opinion, the U.S. military turns a blind eye to opium production as not being central to its anti-terrorism mission. 
Approximately 40,000 foreign troops help manage security in Afghanistan, principally of 32,000 regular soldiers from 37 North Atlantic Treaty Organization (NATO) forces: the International Security Assistance Force. 8,000 US and other special operations forces make up the balance. To manage this turmoil, over 40,000 foreign troops still occupy Afghanistan. There is significant resistance, both from the ideological/theocratic Taliban, especially in southern Afghanistan, and also independent local warlords and drug organizations. Antonio Maria Costa, Executive Director of the United Nations Office on Drugs and Crime (UNODC), described the situation this way: "There is no rule of law in most of the southern parts of Afghanistan—the bullets rule."
The 2004 United Nations Development Programme ranked Afghanistan number 173 of 177 countries, using a human development index, with Afghanistan near or at the bottom of virtually every development indicator including nutrition, infant mortality, life expectancy, and literacy. Several factors encourage opium production, the greatest being economic: the high rate of return on investment from opium poppy cultivation has driven an agricultural shift in Afghanistan from growing traditional crops to growing opium poppy.
It must be emphasized that opium cultivation, on this scale, is not traditional. "Despite the fact that only 12 percent of its land is arable, agriculture is a way of life for 70 percent of Afghans and is the country's primary source of income. During good years, Afghanistan produced enough food to feed its people as well as supply a surplus for export. Its traditional agricultural products include wheat, corn, barley, rice, cotton, fruit, nuts, and grapes. However, its agricultural economy has suffered considerably […] Afghanistan's largest and fastest cash crop is opium."
Afghanistan's rugged terrain encourages local autonomy, which, in some cases, means local leadership committed to an opium economy. The terrain makes surveillance and enforcement difficult.
Afghanistan's economy has thus evolved to the point where it is now highly dependent on opium. Although less than 4 percent of arable land in Afghanistan was used for opium poppy cultivation in 2006, revenue from the harvest brought in over $3 billion—more than 35 percent of the country's total gross national product (GNP). According to Antonio Costa, "Opium poppy cultivation, processing, and transport have become Afghanistan's top employers, its main source of capital, and the principal base of its economy." Today, a record 2.9 million Afghanis from 28 of 34 provinces are involved in opium cultivation in some way, which represents nearly 10 percent of the population. Although Afghanistan's overall economy is being boosted by opium profits, less than 20 percent of the $3 billion in opium profits actually goes to impoverished farmers, while more than 80 percent goes into the pockets of Afghan's opium traffickers and kingpins and their political connections. Even heftier profits are generated outside of Afghanistan by international drug traffickers and dealers.
Traditionally, processing of Afghan's opium into heroin has taken place outside of Afghanistan; however, in an effort to reap more profits internally, Afghan drug kingpins have stepped up heroin processing within their borders. Heroin processing labs have proliferated in Afghanistan since the late 1990s, particularly in the unstable southern region, further complicating stabilization efforts. With the reemergence of the Taliban and the virtual absence of the rule of law in the countryside, opium production and heroin processing have dramatically increased, especially in the southern province of Helmand.
According to the United Nations Office on Drugs and Crime (UNODC) 2007 Afghanistan Opium Survey, Afghanistan produced approximately 8,200 metric tonnes of opium — nearly double the estimate of global annual consumption. In an April 25, 2007 op-ed in the Washington Post, Antonio Maria Costa, Executive Director of UNODC, asked "Does opium defy the laws of economics? Historically, no. In 2001, prices surged tenfold from 2000, to a record high, after the Taliban all but eliminated opium poppy cultivation across the Afghan territory under its control. So why, with last year's bumper crop, is the opposite not occurring? Early estimates suggest that opium cultivation is likely to increase again this year. That should be an added incentive to sell.
He speculated, "So where is it? I fear there may be a more sinister explanation for why the bottom has not fallen out of the opium market: major traffickers are withholding significant amounts.
"Drug traffickers have a symbiotic relationship with insurgents and terrorist groups such as the Taliban and al-Qaeda. Instability makes opium cultivation possible; opium buys protection and pays for weapons and foot soldiers, and these in turn create an environment in which drug lords, insurgents and terrorists can operate with impunity.
"Opium is the glue that holds this murky relationship together. If profits fall, these sinister forces have the most to lose. I suspect that the big traffickers are hoarding surplus opium as a hedge against future price shocks and as a source of funding for future terrorist attacks, in Afghanistan or elsewhere."
The following areas of Afghanistan play a role in the drug traffic:
The Senlis Council has proposed legalizing opium production for medical purposes. Opium can be manufactured into codeine and morphine, both legal pain-killers. They reason that this will not only solve the problem of illicit opium production in Afghanistan, but that it will also lower the price of prescription drugs worldwide, making healthcare more affordable for those requiring morphine or codeine.
Others have argued that legalizing opium production would neither solve the problem nor would it be workable in practice. They argue that illegal diversion of the crop could only be minimised if the Afghans had the necessary resources, institutional capacity and control mechanisms in place to ensure that they were the sole purchaser of opiate raw materials. For them, there is currently no infrastructure in place to set up and administer such a scheme. They reason that in the absence of an effective control system, traffickers would be free to continue to exploit the market and there would be a high risk that licit cultivation would be used for illegal purposes and that the Afghan government would be in direct competition with the traffickers, thereby driving up the price of opium, and attracting more farmers to cultivate. The Afghan government has ruled out licit cultivation as a means of tackling the illegal drug trade: however in Turkey in the 1970s, legalising opium production, with US support brought illicit trafficking under control within four years. Afghan villages have strong local control systems based around the village shura, which with the support of the Afghan government and its international allies, could provide the basis for an effective control system. This idea is developed in the recent Senlis Council report "Poppy for Medicine" http://www.senliscouncil.net/modules/publications/documents/poppy_medicine_technical_dossier which proposes a technical model for the implementation of poppy licensing and the legal control of cultivation and production of Afghan morphine.
Some believe that there is also little evidence to show that Afghan opium would be economically competitive in a global market place. Australia, France, India, Spain, and Turkey currently dominate the export market for licit opiates. Due to the high cost of production in countries where cultivation is undertaken on small landholdings, such as India and Turkey, licit production requires market support (the production costs for the equivalent of 1 kg of morphine in 1999 was US$56 in Australia, US$159.77 in India and US$250 in Turkey). The current cost of production of one kilogramme of morphine equivalent in Afghanistan is approximately US$450. However, a poppy for medicine project in Afghanistan could provide a cheap pain relief option for pain sufferers who find morphine prices extremely elevated
The price of illicit opium far exceeds that of licit, (in India, in 2000, the price for licit opium was US$13-29 per kilo, but for illicit US$155-206). Although there are many complex reasons behind the decision to grow poppy, one of them is the current economic dependence of poppy farmers on the illicit trade. Whilst traffickers continue to be free to exploit the illicit market, legalisation would not change this. Demand for illicit opiates would not disappear even if Afghan opium were used for licit purposes and a vacuum would open that traffickers could exploit. However, currently 100% of Afghan opium is diverted to the illegal opium trade and funds in some cases terrorist activities. Despite eradication efforts since the international intervention in 2001, poppy cultivation and illict opium production has increased, as UNODC figures show. A licensing system would bring farmers and villages into a supportive relationship with the Afghan government, instead of alienating the population by destroying their livelihood, and provide the economic diversification that could help cultivators break ties with the illicit opium trade.
The International Narcotics Control Board states that an over production in licit opiates since 2000 has led to stockpiles in producing countries 'that could cover demand for two years'. Thus, some say Afghan opium would contribute to an already oversupplied market and would potentially cause the supply and demand imbalance that the UN control system was designed. However, the World Health Organisation points out that there is an acute global shortage of poppy-based medicines such as morphine and codeine. This is largely due to chronic underprescription (especially in countries where morphine is extremely highly priced). The International Narcotics Control Board which regulates opium supply throughout the world enforces the 1961 Single Convention on Narcotics Drugs: this law provides that countries can only demand the raw poppy materials corresponding to the use of opium-based medicines over the last two years and thus limits countries who have low levels of prescription in terms of the amounts they can demand. As such, 77% of the world's opium supplies are being used by only six countries, leaving the rest of the world lacking in essential medicines such as morphine and codeine (See Fischer, B J. Rehm, and T Culbert, "Opium based medicines: a mapping of global supply, demand and needs" inSpivack D. (ed.) Feasibility Study on Opium Licensing in Afghanistan, Kabul, 2005. p.85-86. http://www.senliscouncil.net/modules/publications/008_publication). A second-tier supply system, that complements the current UN control system by supplying opium-based medicines to countries currently not receiving the poppy-based pain relief medicines needed, would maintain the balance established by the UN system and provide a market to Afghan-made poppy-based medicines.
Given the fact that a third of the combined legal and illegal Afghan economy is based on the illegal opium industry, counter-narcotics policy is currently one of the most important elements of domestic politics. Despite law enforcement measures with a dominant focus on crop eradication programmes, Afghan opium production has doubled in just two years. This has shown that currently there is no correlation between poppy crop eradication and the level of poppy cultivation or opium production. The reason for this is the underlying economic nature of the opium problem. Poverty and structural employment are the main reason for 3.3 million Afghans' full dependence on poppies.
Poppy crop eradication could even have damaging side-effects for Afghanistan's process of stabilization and reconstruction. Director of policy research for the Senlis Council, Jorrit Kamminga, says:
the poppy eradication campaign has been ineffective, counterproductive and could well give the Taliban the decisive advantage in their struggle for the hearts and minds of the Afghan people.
He is referring to US-inspired aerial fumigation campaigns, planned for spring 2008. So far, crop eradication is done manually or mechanically from the ground. Chemical spraying could further destabilize rural areas and risk losing support for NATO's stabilization mission.
While the Taliban were considered a threat both to the human rights of Afghans, and to other areas of the world by providing a sanctuary for transnational terrorists, they also demonstrated an ability to strictly enforce a moratorium on opium production. Since their overthrow in 2001, stopping their enforcement with methods including beheading, opium poppy cultivation has been steadily increasing for over the past two decades. There is evidence that the Taliban ban carried the seeds of its own lack of sustainability, due to a many-fold increase in the burden of opium-related debt (locking many households into dependence on future opium poppy cultivation), forcing asset sales to make ends meet, etc. It also appears that the opium ban weakened the Taliban politically. Thus the sustainability of the ban beyond the first year was highly doubtful, even if theTaliban had not been overthrown in late 2001.
"Even though the Karzai government made opium poppy cultivation and trafficking illegal in 2002, many farmers, driven by poverty, continue to cultivate opium poppy to provide for their families. Indeed, poverty is the primary reason given by Afghan farmers for choosing to cultivate opium poppy." With a farm gate price of approximately $125 per kilogram fordry opium, an Afghan farmer can make 17 times more profit growing opium poppy ($4,622 per hectare), than by growing wheat ($266 per hectare). "Opium poppy is also drought resistant, easy to transport and store, and, unlike many crops, requires no refrigeration and does not spoil." With Afghanistan's limited irrigation, transportation and other agricultural infrastructure, growing alternative crops is not only less profitable, but more difficult.
In 2006, opium production in the province increased over 162 percent and now accounts for 42 percent of Afghan's total opium output. According to the UNODC, the opium situation in the southern provinces is "out of control."
"Corruption associated with the opium economy has spread to all levels of the Afghan government from the police to the parliament, and is eroding the rule of law. Farmers routinely bribe police and counternarcotics eradication personnel to turn a blind eye. Law enforcement personnel are also paid off by drug traffickers to ignore or, in some cases, protect their movements. Afghan government officials are now believed to be involved in at least 70 percent of opium trafficking, and experts estimate that at least 13 former or present provincial governors are directly involved in the drug trade...In some cases...[local leaders] are the same individuals who cooperated with the United States in ousting the Taliban in 2001.
"Working with the UK and the Afghan government, the United States developed its own strategy to counter the opium problem in Afghanistan, which has the following five pillars:
The Department of State (DoS), the U.S. Agency for International Development (USAID), the Department of Defense (DoD), and the Department of Justice (DoJ) are the primary organizations involved in carrying out this counternarcotics strategy for the US. The role of the CIA has not been mentioned. UNODC's executive director believes these measures are insufficient: "What can be done? Since NATO forces are wary of making enemies out of opium farmers by being associated with eradication, and since the Afghan government is opposed to spraying poppy fields, rounding up the major traffickers may be the best available option for disrupting Afghanistan's lucrative opium market."
Both demand and supply reduction are important. "the consuming countries need to get serious about curbing drug addiction. If there was less demand for heroin, the bottom really would fall out of the opium market." Farmers economically dependent on opium must have viable alternatives that give sustainable income. On the supply side, identifying the most-wanted traffickers and subjecting them to international arrest warrants with extradition, asset seizure, and travel bans could help. While it is not easy to destroy opium storage and heroin production laboratories, it is far easier to destroy drugs at the source than in transit.
"Afghanistan's neighbors are either accomplices or victims in the opium trade, so they need to be part of the solution. They could, for example, improve intelligence-sharing and border security to ensure that more opium is seized. At the moment, less than a quarter of the world's opium is intercepted, compared with around half of global cocaine output."This complicates, of course, the complex US relations with Pakistan and Iran.
There is an important nexus between drugs and hawala (informal money transfer system) in Afghanistan. The UN analysis is based on interviews with a sample of 54 hawala dealers in the main centers of hawala activity of Afghanistan as well as during a visit to Peshawar, Pakistan. In addition, interviews were conducted with users of the hawala system (drug dealers, businessmen, traders, international aid workers), regulators (government officials, central bank personnel), and formalservice providers (bankers, accountants). In addition to hawala, they found protection payments and connections, by which the drug industry has major linkages with local administration as well as high levels of the national government.
See informal money transfer systems to support clandestine activity, including terrorism, drug trade, and intelligence collection.
Different localities studied by the UNODC give different views of the laundering of drug funds. It is difficult to get a solid sense of the overall economy. In Faizabad, for example, indicated that during certain times of the year close to 100% of the liquidity of the hawala system in the province is derived from drugs, whereas in Herat,the Northern Alliance stronghold, it was estimated that only 30% of the hawala market's overall transaction volume is directly linked to drugs. Analysis of data gathered in places like Herat was complicated by confirmed links between drug money and legitimate imports. The southern region (Helmand and Kandahar provinces) is also a key centre for money laundering in Afghanistan (about 60% of the funds are drug related and 80-90% of the hawala dealers in Kandahar [the former Taliban stronghold] and Helmand are involved in money transfers related to narcotics).
Helmand has emerged as a key facilitator of the opium trade, both between provinces and exports, while overall estimates of the local hawala markets' drug-related component are of a similar order of magnitude to those in Kandahar. This findingadds weight to the notion that the major trading centers in these two neighboring provinces should be treated as essentially one market. Bearing this in mind, the study calculated that Helmand could account for roughly US$ 800 million of Afghanistan's drug-related hawala business and that Herat is the second largest contributor, with in the range of US$300-500 million of drug money laundered annually.
Furthermore, Dubai appears to be a central clearing house for international hawala activities. In addition, various cities in Pakistan, notably Peshawar, Quetta, and Karachi, are major transaction centers. It appears that even in the case of drug shipments to Iran, payments for them come into Afghanistan from Pakistan...the hawala system has been key to the deepening and widening of the "informal economy" in Afghanistan, where there is anonymity and the opportunity to launder money.
Hawala, however, also contributes positively to the regional economy. It has been central to the survival of Afghanistan's financial system through war. According to Maimbo (2003), "integral to processes of early developmentand vital for the continued delivery of funds to the provinces.""The hawala system also plays an important role in currency exchange. It participates in the Central Bank's regular foreign currency auctions, and was instrumental in the successful introduction of a new currency for Afghanistan in 2002-2003."
Afghanistan has seen a high rate of opium addiction among refugees returning from Iran and Afghanistan. Afghan filmmaker Jawed Taiman in his film Addicted In Afghanistan attributes this to the presence of U.S. troops, claiming that opium addiction was significantly lower under Communist and Taliban rule.
While Herat is not the highest-volume area of opium trade, Herat, and the other Iranian border areas of Farah, and Nimroz, have some of the highest prices, presumably due to demand from the Iranian market. "Opium prices are especially high in Iran, where law enforcement is strict and where a large share of the opiate consumption market is still for opium rather than heroin. Not surprisingly, it appears that very significant profits can be made by crossing the Iranian border or by entering Central Asian countries like Tajikistan."
"The UNODC estimates 60 percent of Afghanistan's opium is trafficked across Iran's border (much of it in transit to Europe). Seizures of the narcotic by Iranian authorities in the first half of this year are up 29 percent from the same period last year, according to the country's police chief, as reported by Radio Free Europe/Radio Liberty (RFE/RL)...The Washington Post reports that Iran has the world's highest per capita number of opium addicts ... Experts say those affected most are the millions of unemployed Iranians and youth chafing under the restrictions placed on them from the Islamic government and basij, or civilian morals police. The Iranian government has gone through several phases in dealing with its drug problem.
First, during the 1980s, its approach was supply-sided: "Law-and-order policies with zero tolerance led to the arrest of tens of thousands of addicts and the execution of thousands of narcotics traffickers." "There are an estimated 68,000 Iranians imprisoned for drug trafficking and another 32,000 for drug addiction (out of a total prison population of 170,000, based on 2001 statistics)"
Beehner said "Tehran also has spent millions of dollars and deployed thousands of troops to secure its porous 1,000-mile border with Afghanistan and Pakistan... a few hundred Iranian drug police die each year in battles with smugglers. Referring to the head of the UNODC office in Iran, Roberto Arbitrio, Beehner quoted Arbitrio in an interview with The Times. "You have drug groups like guerrilla forces, [who] ... shoot with rocket launchers, heavy machine guns, and Kalashnikovs."
A second-phase strategy came under President Mohammad Khatami, focused more on prevention and treatment. Drug traffic is considered a security problem, and much of it is associated with Baluchi tribesmen, who recognize traditional tribal rather than national borders. Current (2007) reports cite Iranian concern with ethnic guerillas on the borders, possibly supported by the CIA.
Iranian drug strategy changed again under President Mahmoud Ahmadinejad, who took office in 2005. Iran's drug policy has been reconsidered and shifted back toward supply interdiction and boosting border security. It is unclear if this is connected to more wide-ranging concerns with border security, perhaps in relation to Baluchi guerillas in Iran.
Samii's 2003 paper described Iran's "primary approach to the narcotics threat [as] interdiction. Iran shares a 936 kilometer border with Afghanistan and a 909 kilometer border with Pakistan, and the terrain in the two eastern provinces—Sistan va Baluchistan and Khorasan—is very rough. The Iranian government has set up static defenses along this border. This includes concrete dams, berms, trenches, and minefields...
A small number of Guantanamo detainees in the Guantanamo Bay detainment camp claim that they were not terrorists and were in Afghanistan because they were involved in the drug trade. However, almost none of the Afghans in Guantanamo acknowledges growing opium.
|555||Abdul Majid Muhammed||Iran|
|586||Karam Khamis Sayd Khamsan||Yemen|
|664||Rashid Awad Rashid Al Uwaydah||Saudi Arabia|
|703||Ahmed Bin Kadr Labed||Algeria|
|798||Sahib Rohullah Wakil||Afghanistan|
The United States Department of State issued a press release that stated the arrest of Baz Mohammed: "... demonstrated a strengthening collaboration between the United States and the newly democratic Afghanistan."