HEROIN, TALIBAN & PAKISTAN
(To be read in continuation of the earlier article
dated 30-4-00 and titled "Heroinisation of The Pakistani
Economy" at www.saag.org/notes/note87.html
Pakistan's illegal heroin economy has kept its
legitimate State economy sustained since 1990 and prevented its
collapse. It has also enabled it to maintain a high level of arms
purchases from abroad and to finance its proxy war against India through
the jehadi organisations.
While no estimate of the money spent by it on its proxy
war is available, it has been estimated by Pakistani analysts
("Friday Times" March 9 to 15,2001) that about 80 per cent of
its total external debt of US $ 38 billion, that is, about US $ 30.4
billion, was incurred on arms purchases since 1990. This includes
its purchases of aircraft and missiles from China, missiles from North
Korea, for which payment was made partly in cash and partly in imported US
and Australian wheat, Agosta class submarines from France, reconditioned
Mirage aircraft from France, Lebanon and Australia and other items from
countries such as Ukraine. The clandestine procurement of nuclear
technology and material from Western countries and the Chinese-aided
nuclear power station at Chashma were also financed through external
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) of
the US, the Internal Political Division of the Inter-Services Intelligence
(ISI), headed by Brig (retd). Imtiaz, who worked directly under
Lt.Gen.Hamid Gul, the DG of the ISI during the later years of Zia-ul-Haq
and during the first few months of Mrs.Benazir Bhutto's first tenure as
the Prime Minister (1988-90), started a special cell for the use of heroin
for covert actions.
This cell promoted the cultivation of opium and the
extraction of heroin in Pakistani territory as well as in the Afghan
territory under Mujahideen control for being smuggled into the Soviet
controlled areas in order to make the Soviet troops heroin addicts.
After the withdrawal of the Soviet troops, the ISI's heroin cell started
using its network of refineries and smugglers for smuggling heroin to the
Western countries and using the money as a supplement to its legitimate
economy. But for these heroin dollars, Pakistan's legitimate economy must
have collapsed many years ago.
Not only the legitimate State economy, but also many
senior officers of the Army and the ISI benefited from the heroin
dollars. Brig.Imtiaz was sacked by Mrs.Benazir on coming to power in
1988 for interfering in internal politics, but was reinstated by Mr.Nawaz
Sharif on coming to power in 1990 and subsequently made Director of the
Intelligence Bureau (IB).
In fact, in Pakistan, Mr.Sharif is seen as the creation
of Brig. Imtiaz. It was he who, as head of the Internal Political
Division of the ISI in the 1980s, had persuaded Mr.Sharif, then a small
businessman in Dubai, to return to Pakistan and take over the leadership
of the Pakistan Muslim League (PML) in order to counter Mrs.Benazir's
Pakistan People's Party (PPP).
Mrs.Benazir again had him sacked on her return to power
in 1993 and arrested and prosecuted him on charges of indulging in illegal
activities, but he was acquitted.
After capturing power on October 12,1999, Gen.Pervez
Musharraf, Pakistan's self-reinstated Chief of the Army Staff (COAS),
self-styled Chief Executive and self-promoted President, had Brig.Imtiaz,
because of his proximity to Mr.Sharif, rearrested and prosecuted for
having assets disproportionate to his known sources of income as an
officer of the ISI and the IB.
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 US $ 20.08 million, a Pakistani rupee account in
the Union Bank with a balance of Rs.2.13 billion, a US $ account in the
Deutsch Bank with a balance of US $ 19.1 million, five residential houses,
five commercial units and three shops. This huge wealth was
allegedly accumulated by him through heroin smuggling.
It is believed that there are at least 30 such 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 US $ 1.5
billion. It is difficult to come across precise, direct evidence for
The estimate till now has been based on indirect
evidence such as the following:
* The Government of Pakistan 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,
foreign 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 tax. 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
In any analysis, 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 October,1999, till
November,2000, when the IMF resumed its stand-by credit facilities to
Quoting SBP sources, the "Business Recorder"
of Pakistan (August 1,2001) gave the following figures, which provide a
fairly accurate estimate of the US dollars available in private hands
during the financial year 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 US $
* 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
amounting to US $ 7.8 billion. Out of this, US $ 4 billion came
from the Govt. coffers and the balance of US $ 3.8 billion was purchased
from resident Pakistanis.
In other words, the total amount of US $ in private
circulation since the military regime came to power was almost equal to
that in the Govt. coffers, if not more.
The first direct piece of 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 (NWFP) of Pakistan and in
the Nangarhar province in Taliban-controlled Afghan territory. All
the Pakistani-owned refineries for heroin extraction were located in
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
refineries. It demanded that international narcotics control
agencies should reimburse to it the money lost by its farmers due to this
ban so that they can shift to other crops.
US and other foreign narcotics control officials, who
visited Nangarhar, confirmed that opium cultivation has been
stopped. However, doubts remain on the following points:
* Has the Taliban secretly shifted the opium cultivation
from the traditional areas in Nangarhar to which international experts
had access to other remote areas to which they did not have?
* Due to a bumper crop and record heroin production in
previous years, the prices of heroin in the international heroin market
had been coming down. Pakistani smugglers, supported by the ISI,
had enough heroin stocks to meet at least two years' demand of the
market. Was the Taliban merely suspending cultivation during this
period to stabilise the prices?
Despite these misgivings, the US announced a
contribution of US 1.5 million to international narcotics control
programmes for disbursement to the Afghan farmers who have stopped poppy
cultivation. The Taliban has been describing this as worse than
peanuts and demanding much more.
This was one of the subjects which figured during the
discussions of Mrs.Christina Rocca, US Assistant Secretary of State, with
Mullah Abdus Salam Zaeef , the Taliban Ambassador in Islamabad, and his
No. 2, Mr. Sohail Shaheen, at Islamabad on August 2. According 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 dollars a
year from the poppy cultivation and we have eliminated the poppy from the
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 US $ 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 development and other
activities in Afghanistan which would 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 the financial year 2001-02, the Taliban would have an estimated
expenditure of US $ 82.53 million, of which US $ 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" of Karachi (June
4,2001) estimates that the Taliban gets US $ 45 million per annum from
the heroin trade, an amount nearly equal to the Amir's Discretionary
If this figure of what the Taliban gets is taken as
reasonable, more than US $ 11 billion per annum from the heroin trade goes
to Pakistan, that is, more than Pakistani Rs. 715 billion at one US $
equal to 65 Pak rupees. During 2000-01, the Pakistani State had a
total revenue of Rs.570.6 billion, of which Rs.471.6 billion came from
taxes. That is, Pakistan's heroin economy was 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 writer is Additional Secretary (retd), Cabinet
Secretariat, Govt. of India, and, presently, Director, Institute For
Topical Studies, Chennai. E-Mail: email@example.com