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Heroin, Taliban and Pakistan

B. Raman

PAKISTAN'S illegal heroin economy has kept its legitimate economy sustained since 1990 and prevented its collapse. It has also enabled it maintain a high level of arms purchases from abroad, and finance its proxy war against India through the jehadi orga nisations.

While no estimate of the money spent by it on its proxy war is available, according to Pakistani analysts (Friday Times, March 9), about 80 per cent of its total external debt of $38 billion, that is, about US $30.4 billion, was incurred on arms purchase s since 1990.

The use of the heroin dollars for such purposes started after the withdrawal of the Soviet troops from Afghanistan in 1988. In the 1980s, at the instance of the Central Intelligence Agency (CIA), the Internal Political Division of the Inter-Services Inte lligence (ISI), headed by Brig (retd). Imtiaz, who worked directly under Lt Gen Hamid Gul -- who was Director-General, ISI, during the later years of Zia-ul-Haq and the first few months of Ms Benazir Bhutto's first tenure as the Prime Minister (1988-90) -- started a cell for the use of heroin for covert actions.

This cell promoted the cultivation of opium and the extraction of heroin in Pakistan as well as in those parts of Afghanistan under Mujahideen control for being smuggled into the Soviet-controlled areas to get the Soviet troops addicted. After the withdr awal of the Soviet troops, the ISI's heroin cell started using its network of refineries and smugglers to send heroin to the West and use the money to supplement its legitimate economy.

Not only the state economy, but also many senior officers of the Army and the ISI benefited from the heroin dollars.

After capturing power on October 12, 1999, Gen Pervez Musharraf had Brig Imtiaz, because of his proximity to Mr Nawaz Sharif, arrested and prosecuted for having assets disproportionate to his known sources of income as an officer of the ISI and the Intel ligence Bureau.

He was convicted by a court on July 31, 2001, and jailed for eight years. According to evidence produced in the court by the National Accountability Bureau (NAB), Brig Imtiaz had foreign exchange bearer certificates worth $20.08 million, a Pakistani rupe e account in the Union Bank with a balance of Rs 2.13 billion, a dollar account in Deutsche Bank with a balance of $19.1 million, five residential houses, five commercial units and three shops. This huge wealth was allegedly accumulated by him through he roin smuggling.

It is believed that there are at least 30 Army and ISI officers, serving and retired, who have accumulated similar wealth through heroin smuggling.

The present estimate of Pakistan's annual earnings through heroin dollars, including by this writer, is about $1.5 billion. Direct, precise, evidence for such estimates are difficult to come by. The figures are based on indirect evidence such as the foll owing:

* The Pakistani Government releases its foreign exchange reserves position in two parts. The first part gives the figures of reserves maintained by the State Bank of Pakistan (SBP). These are the amounts earned through foreign trade, investment flows, fo reign aid and loans and remittances by overseas Pakistanis.

The second part gives the figures of reserves available with other banks. These are the deposits of resident Pakistanis who are allowed to maintain dollar accounts with no questions asked about the origin of the money and about its liability for income t ax. Under Pakistan Government orders, these amounts cannot be used by the Government for its purposes, though Mr Sharif froze them temporarily after the Chagai nuclear tests in 1998 in order to be able to use them if the economic sanctions hit the state economy hard.

* US dollars kept by private citizens in their possession without being deposited in the banks. The SBP periodically purchases these dollars to meet debt-servicing and other governmental needs.

It would be reasonable to presume that the dollars kept in the bank accounts of resident Pakistanis and the dollars in private circulation must have been largely, if not totally, derived from the heroin trade. There cannot be any other explanation for it because Pakistan has been having a trade deficit for many years in succession, there has been a 73 per cent decline in foreign direct investments and a negative flow of portfolio investments, and there was no international assistance forthcoming from Oc tober 1999 till November 2000, when the IMF resumed its stand-by credit facilities to Pakistan.

Quoting SBP sources, Pakistan's Business Recorder (August 1) gave the following figures which provide a fairly accurate estimate of the US dollars available in private hands during 2000-01:

* The SBP had $1.7 billion, which was the official foreign exchange reserve of the state. In addition, resident Pakistanis had deposits in various commercial banks amounting to $1.5 billion.

* During the financial years 1999-2000 and 2000-01, despite the suspension of credit facilities by the IMF and other multilateral institutions after the military coup, the Government fulfilled debt-servicing (debt and interest payments) obligations amoun ting to $7.8 billion. Out of this, $4 billion came from the government coffers, and the balance of $3.8 billion was purchased from resident Pakistanis.

In other words, the total amount of dollars in private circulation since the military regime came to power was almost equal to that in the Government coffers, if not more.

The first piece of direct evidence about the total value of the heroin money being pumped into the Pakistani economy every year has come from an unexpected source -- the Taliban. Before 1998, opium was being grown in the North-West Frontier Province (NWF P) of Pakistan and in the Nangarhar province in Taliban-controlled Afghan territory. All the Pakistani-owned refineries for heroin extraction were located in Taliban-controlled territory.

In 1998-2000, the Pakistani authorities stopped the cultivation of opium in the NWFP. In 2000-01, the Taliban too, under international pressure, ostensibly banned opium cultivation in its territory, but did not dismantle the Pakistani-owned heroin refine ries. It demanded that international narcotics control agencies reimburse to it the money lost by its farmers due to this ban so that they can shift to other crops.

Narcotics control officials from the US and other countries, who visited Nangarhar, confirmed that opium cultivation had stopped. However, doubts remain on the following issues:

* Has the Taliban secretly shifted the opium cultivation from the traditional areas in Nangarhar that international experts could reach other remote areas they did not have access to?

* Due to a bumper crop and record heroin production in previous years, the prices of heroin in the international market had been coming down. Pakistani smugglers, supported by the ISI, had enough heroin stocks to meet at least two years' demand of the ma rket. Was the Taliban merely suspending cultivation during this period to stabilise the prices?

Despite these misgivings, the US announced a contribution of $1.5 million to international narcotics control programmes for disbursement to the Afghan farmers who have stopped poppy cultivation. The Taliban is describing this as peanuts and is demanding much more.

This was one of the subjects that figured during the discussions of Ms Christina Rocca, US Assistant Secretary of State, with Mullah Abdus Salam Zaeef, the Taliban Ambassador to Pakistan, and his No. 2, Mr Sohail Shaheen, in Islamabad on August 2. Accord ing to the Frontier Post of Peshawar (August 3, 2001), while briefing pressmen after the discussions, a spokesman of the Taliban said: ``We have told the US team that Afghanistan was earning $12 billion a year from the poppy cultivation and we have elimi nated the poppy from the country.''

How much of this amount was going to the Taliban and how much to the Pakistanis and the ISI, who owned all the refineries? No direct evidence is available, but one can estimate roughly that out of this at least $11 billion per annum was going to Pakistan from the following circumstantial evidence:

* There are no reports of large amounts in US dollars circulating in private hands in Taliban-controlled Afghanistan, whereas Pakistan is awash with them.

* There are no large-scale developments and other activities in Afghanistan that indicate the availability of large funds in cash. There is so much poverty due to lack of development that thousands of Afghans have been migrating to Pakistan.

* Since its capture of Kabul in September, 1996, the Taliban had not been publishing its budget figures. Some details are now available for the first time. According to these figures, during 2001-02, the Taliban would have an estimated expenditure of $82 .53 million, of which $43.53 million is shown as the Discretionary Fund of Mulla Mohammad Omer, the Amir.

The balance is to be spent by various departments. Quoting a study of the New York University Centre, the Dawn (June 4, 2001) estimates that the Taliban gets $45 million per annum from the heroin trade, an amount nearly equal to the Amir's Discretionary Fund.

If what the Taliban gets is taken as reasonable, more than $11 billion per annum from the heroin trade goes to Pakistan, that is, more than Pakistani Rs 715 billion at one dollar equal to 65 Pakistani rupees. During 2000-01, the Pakistani state had a tot al revenue of Rs 570.6 billion, of which Rs 471.6 billion came from taxes. That is, Pakistan's heroin economy is 30 per cent larger than its legitimate state economy.

Is it any wonder that its economy does not collapse despite the worst predictions, and that it is able to defy international pressure on its sponsorship of terrorism against India and on its support to the Taliban and Osama bin Laden?

(The author is a former Additional Secretary, Cabinet Secretariat, Government of India.)