July 15, 2007

Opium and Heroin in Iran

Conrad Legendy

Source: http://www.helvidius.org/files/2007/2007_Legendy.pdf

Michael Barry, Advisor


می خواره اگر غنی بود عور شود
واز عربده اش جهان پر از شور شود
در حقۀ لعل از آن زمرد ریزم
تا دیدۀ افعی غم کور شود
-‘Omar Khayyâm

Princeton University

Department of Near Eastern Studies

May 9th, 2006



Introduction

Today, Iranian society suffers from a problem often overlooked in discussions of its demographic and political crises. Drug addiction, which has a long and colorful history in Iran, has reasserted itself in an unprecedented way. At the start of the new millennium, the country began to see a disturbing increase in rates of heroin-addiction. With the world’s largest opium producer next-door, this development may seem unsurprising. Yet at this same time, Afghanistan was in the midst of the most extensive and effective drug ban in history, raising questions of how such a sudden change in consumption patters were even conceivable. This paper seeks to provide answers which until now have not been attempted.


It would be inconceivable to examine drug abuse in modern Iran without Afghanistan; the two countries’ problems are too intimately intertwined. Referring to Figure 1, it is easy to appreciate the influence Afghanistan’s drug industry might have on Iranian markets. Indeed, the past twenty-five years of almost uninterrupted expansion of Afghanistan’s poppy crop have had a major impact on Iranian consumption patterns. Iran had for a long time produced all the opiates its people consumed. But just as Afghanistan began its ascent to a dominant position in the global opiate industry, Iran’s poppy fields faced extinction.

In one of history’s strange quirks, both Afghanistan and Iran’s fates simultaneously took dramatic (if opposite) turns: in Iran, a popular revolution overthrew the Shah and eventually installed an Islamic theocratic government which would from the very beginning try to cleanse its society of all involvement in drugs; meanwhile in Afghanistan, a revolt against a communist government sparked the Soviet invasion in 1979, and marked the beginning of a long and trying period of instability which would fuel the production of drugs, and which has to this day not come to an end. Although the causes of the two events were quite unrelated, they seemed to illustrate the tendency of illicit drug production never to disappear completely—but rather, like a balloon pushed underwater, to reemerge nearby, and continue to meet an established demand.

Amid all the change and suffering brought on by the political turmoil in those two countries, our ability to understand the region suffered severely. Statistics and information which came out of the young Islamic republic—particularly those tied up in any way with the regime’s ideology—have been largely unreliable. Meanwhile, the lack of effective government in Afghanistan up to and including the Tâlibân years has meant that data gathering has been essentially the exclusive domain of non-government actors such as the United Nations. But even their data are in many ways incomplete, leaving much room for confusion and misinterpretation.

This still continues to be a problem today. While different sources in Iran’s government can rarely agree on facts and numbers regarding drug consumption (or even interdiction) in the country, it is the government which supplies many of the UN’s statistics in the first place. However, when repeated by the latter, they are often accepted as facts. Additionally, data gathering has been unfortunately incomplete—key figures, such as purity levels, were never systematically collected to begin with. On top of all this, the UN Office on Drugs and Crime (UNODC) field office in Tehran faces restrictions preventing them from sharing data they have collected.

The scholarship on our topic has been far from extensive. Studies in Iran have tried to elicit a sense of the country’s drug problem (though due to their limited scopes and resources, to little avail), while the West has virtually ignored it. And though Western scholarship on the Iranian aspect of this topic has not been exhaustive, it was even less thorough with regard to Afghanistan. Following the Soviet withdrawal in 1989, the West’s focus was soon drawn elsewhere—notably the peaceful dissolution of the former Soviet Union. It took a series of terrorist attacks, culminating September 11, 2001, to force the West to pay attention to Afghanistan once again. Once it was involved, drugs would become one of the important issues the Coalition (as well as the new Afghan government) would have to deal with. But it was some time before it was realized that drugs would re-emerge as an obstacle to be overcome, much of the theory about their past was generated retrospectively. As we will see, it is likely that those who came up with some of these theories may at times have sought the easiest (but not the best) explanations, which would cloud much of the later thought on the topic.

This paper aims to refute several theories on the behaviors of Afghan and Iranian drug markets in recent years. To understand this contemporary issue though, we must first look at its historical roots. In the first section, we will briefly examine the role drugs have played in Iranian culture over the past several hundred years. It will become evident to the reader that drug addiction is hardly a curse of the modern era, although the recent changes in the Iranian market’s behavior is entirely without precedent.

In order to understand the market’s behavior, we must understand the drug from the perspectives of production and consumption. Therefore, the second section will offer a factual overview of the opiates we will deal with in the rest of the paper.

In the third section, we will examine the Tâlibân’s 2000 ban on the cultivation of opium. It has been claimed that the Tâlibân government intended this ban to drive the prices of opiates up, allowing it to release its stockpiled drugs onto the market at enormous profit. Though intriguing, we will see that this theory relies on erroneous assumptions, and an incomplete understanding of the functioning of the Afghan drug market, which we continue to examine in the fourth section. Quite counter to the theory discussed in section three, we see that the government did not exert the sort of control widely assumed, but that stockpiles inside Afghanistan were the aggregate result of individual survival-oriented decisions.

Although opium production essentially ceased in the parts of Afghanistan supplying the Iranian market, drugs continued to reach users in Iranian cities. Section five examines how choices made at every level of the supply and demand chains enabled the drugs to continue flowing, even when the source seemed to have been choked off. In the sixth and final section, we will closely examine the Iranian drug market, and see why it came to make financial sense to Iranian opium users to switch over to heroin-use.

In its examination of these issues, this paper draws exclusively on public-domain information. Due to the large information gap in Iran during those years, we cannot come to definitive conclusions about what happened there from 2000-2002. And due to the hidden nature of the illicit narcotic industry, data can usually only be gleaned peripherally—without interviews with the traffickers and smugglers themselves, we must look at the situations they faced, and the end-results of their actions. This paper draws heavily on what quantitative data are available, but in recognition of some of the data’s limitations, it avoids strict quantitative conclusions. Its goal rather, is to draw qualitative conclusions about perceived incentives and situation assessments made at every level of the chain of production, supply and demand.



Drugs fit for beggars and kings

“I can’t remember exactly when our gatherings filled with music, backgammon and laughter became filled with that unfamiliar smoke…that woozy, overwhelming brown entity, and when you smoked it… its bitter heavy vapors got under your skin.”1 These lines could have been written three hundred years ago. In fact, they were posted on a young Iranian’s blog in late 2003, complaining about the prominent role opium plays for many Iranian youths. Opium has a long history in Central Asia, India and Iran; used by rich and poor alike, it played a prominent role in the court lives of such celebrated monarchs as Shâh ‘Abbâs and Jahângîr, and is even referred to by Iran’s greatest poets.2 Stories of courtiers’ addictions abound, like that of Inâyat Khân (seen on the cover), whose portrait Jahângîr ordered painted as he lay on the verge of death from a long opium addiction.

But while opium and other drugs were used by high-level officials and royalty, abuse was far more widespread among the general population. Its low price and high availability made it known as hashish-al-fuqarâ, the hashish of the poor (or of the dervishes). Sufis, poets, and laborers ate and smoked it, and the armies of both the Safavid and Mughal empires were issued an opium ration,3 to be used both as an anesthetic for battle wounds, and to invigorate the troops before a fight. Recreational and medicinal use of opium were so widespread in Iran under the Safavids, that one 17th century observer claimed that only 20 Iranians in 1000 could be found who did not take it.4 To quote Rudi Mathee,

The majority of common people used [opium] as well [as the Shâh’s courtiers], mostly, it seems, for its soothing effect, for its capacity to produce pleasurable dreams, to make dull lives of hard labor a little more bearable and, of course, as a panacea against all and sundry aches and pains in an era when self-medication was typically the only form of medication… Opium was clearly socially accepted and altogether unremarkable inasmuch as it was integrated into the texture of life. No social or religious stigma was attached to it, although to be a taryaki, someone unable to control his intake, was perceived negatively.5

It is important to realize that widespread use does not equate to widespread abuse, as alluded to by Mathee’s exception for the taryâkîs, whose use of the drug exceeded what was socially acceptable. A 19th century observer drew the comparison between opium consumption in Iran and wine consumption in Europe, in that many people consumed it, but conspicuous abuse was rare.6 Toward the end of the 19th century though, it seems opium was more and more frequently smoked, reflecting a shift from medicinal to recreational usage.7 This increasing popularity of opium smoking coincided with the rising importance of opium as a cash crop in Iran, and in the late 19th, and early to mid 20th centuries, opium abuse began to reach epidemic levels.8

Nowhere is this illustrated better than in the life and work of Sâdeq-e Hedâyat, Iran’s most important novelist of the 20th century. His most celebrated novel, Bûf-e Kûr (The Blind Owl), is narrated by an opium addict. The book, first published in Iran in 1941 and read today as a classic of Persian literature, is framed around the narrator’s opium-induced dreams. Hedâyat was himself addicted to the drug, which was hardly out of the ordinary in his day. In 1943, there were an estimated 1.5 million addicts in the country, out of a total population of 14 million9—he committed suicide in 1951.

As part of Iran’s drug-control efforts, a law was passed in 1968 permitting opium addicts above the age of fifty to register with the government; in 1975 the number of these was about 170,000, though estimates of additional unregistered addicts range from 200,000 to one million.10

The Iranian Revolution and the birth of the Islamic Republic spelled the end of the old government’s liberal drug control policies. Drug production, distribution and consumption were criminalized, leading to the imprisonment and execution of thousands. Opium cultivation within the country was eliminated completely. But drug use persisted. Between 1974 and 1988, over three hundred tons of narcotics were intercepted by Iranian authorities, including significant amounts of heroin. Until that point, the focus of enforcement efforts had been on traffickers and dealers; it now shifted to users, and though the government authorities struck them hard—raiding homes, jailing addicts, and bulldozing notorious drug areas—drug use has continued, unabated, into the present.11

With this brief look at the role of drugs in Iran’s past, we can examine the current drug situation, and better understand the context of the quote at the beginning of this section.

One of the best—though by now, somewhat dated—studies of the Iranian drug scene was a rapid situation assessment (RSA) conducted by the UN in 1999. With a relatively large sample of users interviewed from ten regions in the country, the survey found that 73.3 percent had used opium in the prior month, and 39.4 percent heroin;12 forty percent of users interviewed used more than one drug, and 96.2 percent were consuming drugs more than once per day.13

The actual size of the drug-using population is very difficult to gauge, particularly retrospectively. For a variety of reasons, data on drug use in Iran are limited, and often unreliable. In 1993, official Iranian estimates placed the number of opiate abusers at 500,000, including 150,000 heroin users.14 In late 2002 the head of the anti-addiction program from the nation’s anti-narcotics trafficking body claimed there to be two million users, a number he said was growing by eight percent annually.15 And though Iranian officials often give contradictory and conservative estimates, as early as 1997 an unpublished report for the World Health Organization put the number of addicts at 3.3 million.16

UNODC numbers, supplied by Iran’s Drug Control Headquarters (DCHQ) for 2002 painted a very different picture of drug use from what the Iranian government had previously been saying. DCHQ numbers indicate 1.94 million regularly used opium or opium residue, and 214,000 used heroin, while a further 2.1 million were casual opium users, and 64,000 were casual heroin users.17 While it is worthy of note that the figures claim over a quarter million heroin users, they certainly do not square with the data obtained by the RSA (whose credibility is enhanced by the transparency of its survey methods) three years earlier. Considering the total size of the drug using population claimed by these numbers (over four million), we should expect to see more than a million and a half heroin users—indeed, adjusting for the age of the RSA data, perhaps even more. We have very low confidence in any Iranian government statistics, yet from the available data, it is clear that drug users in Iran number in the millions, and that opiates are by far the most popular drugs consumed.

In a country whose GDP Per Capita is less than $9,000,18 such widespread drug consumption—by one estimate, the country consumes two tons of various drugs a day,19 while UNODC statistics claim 5.5 tons20—seems almost unimaginable. But Iranians have been able to afford these addictions because of their proximity to Afghanistan. As that country’s production has increased, the prices of opiates have steadily fallen, and with negligible domestic consumption,21 almost all of Afghanistan’s opium and refined opiates are for export. But the country is completely landlocked, so in order for its drugs to reach the lucrative markets of Western Europe, they must first travel overland In Figure 1 we saw the routes Afghan drugs take through Iran—and since the latter country’s infrastructure arose out of the population’s distribution, it is no surprise that these routes pass through and converge on its major cities. As we will see, this has important implications for the generation of a demand for opium, and later also heroin.


What are opium and heroin?

Before continuing our examination of the changing drug situations in Iran and Afghanistan, it is important to establish an understanding of the substances in question. While our focus will be the expansion of heroin addiction in Iran, it can never be viewed without considering opium addiction; likewise, we cannot study the use of drugs in Iran, without examining their production in Afghanistan.

Heroin, morphine and opium all come from the opium poppy, the Papaver somniferum. The poppy must be replanted each year, and takes about 120 days to grow. About a quarter million plants can be grown per hectare,22 and although yields are heavily dependent on cultivation methods (for instance, irrigated land versus rainfed) and environmental conditions (such as rainfall, temperature, etc), yields per hectare in Afghanistan during the period we’ll be looking at ranged from eighteen to forty-six kilograms of opium gum.23

Opium gum is obtained through a tedious and extremely labor-intensive process. About two weeks after the petals of the poppy’s blossoms fall off, the raw material for opium can begin to be harvested. Each day for about two weeks, the farmer makes a shallow vertical incision in the seed pod, which is allowed to bleed overnight. The following day, the partially sun-dried gum is scraped from the pod, and another incision made. The process is repeated daily, until the plant stops bleeding. In all, it takes fourteen men two weeks to harvest the opium from only one hectare of poppy.24 Despite the amount of time and energy which goes into extracting the opium gum, the final yield from each plant is only a small fraction of a gram.25

Before the opium gum can be consumed, it must be cleaned. This is a simple process, which just involves heating the gum in water (the alkaloids in opium, which are the “active incgredients” are water-soluble) to allow dirt, seeds and other detritus to be filtered out. The opium is once again allowed to dry, before being stored or consumed.26 Generally, the longer opium is stored, the more water evaporates off from it, which has a positive effect on its value. Not surprisingly, opium with lower water content is referred to as “dry,” while that which has not yet been stored is known as “fresh.”

Before the opium—fresh or dry—can be refined into heroin, its main active ingredient (morphine) must be extracted. This process is more complex, and more time-consuming than cleaning opium gum, but because it is not relevant to this paper, we will not explore it any further. Morphine is much more compact than opium, and a ratio of ten parts opium to one part morphine/heroin is often used. We will see later, that this is sometimes inaccurate, but all the same, it should be born in mind that “opium equivalents” for both morphine and heroin typically use a conversion factor of ten.

To convert morphine to heroin, a key ingredient called acetic anhydride is required. By weight, one part morphine typically yields one part heroin, and the purer the morphine input, the purer the heroin output—Afghan heroin is typically “brown heroin,” about sixty percent pure.27 This no-loss conversion has several implications of interest to us. Because each stage of the refining process adds value to the opium, more refined goods are typically preferred by smugglers, because the payoff is higher and risk lower—particularly when relatively small quantities are transported (we will look at risk assessments in greater detail later). It also means that when we look at drug seizure data as an indication of supplies in Afghanistan, we can equate quantities of morphine intercepted with heroin, the main distinction being that most morphine is destined to be further refined, while most heroin is already marketable.

Now that we’ve seen how opium and heroin are manufactured, let’s turn to the effects of both drugs. Opium can be eaten (or dissolved for instance, in tea) or smoked, the latter being the more direct method of consumption. When smoked, the effect is more immediate, intense, and short-lived than when eaten.

Opium (as all opiates) acts on the same receptors in the body as endorphins – indeed the word endorphin is simply a combination of two words: endogenous morphine (recall that morphine is the active ingredient in opium). Thus an opium high is marked by euphoria (and pain relief, if applicable) followed by drowsiness, and sometimes hallucination. Opium also suppresses the appetite, with the result that long-term opium users (like Inâyat Khân, pictured on the cover) tend to look malnourished or even emaciated.

Heroin which, as we have seen, is highly concentrated and refined opium, is also a much stronger and more addictive drug. Whereas opium may be consumed casually (as by the opium eaters described in Safavid and Qâjâr Iran), heroin use is by its nature all-consuming. Depending on the purity, there are a number of ways heroin can be consumed: it can be ingested orally or nasally, or it can be smoked or injected. As with opium, swallowing the drug produces a slower, less pronounced effect, and after a longer delay. Sniffing is faster and more intense, but is only possible with relatively high-purity heroin. Smoked heroin acts faster still, with similarly potent effects. Intravenously injected heroin acts within seconds, and likewise delivers a powerful high. For lower-purity heroin to have any effect, it must be injected.

Like opium, heroin produces intense euphoria in the user. Though the euphoric effect of the drug is very powerful, it is also very short-lived. After an initial rush, the user feels a pleasant feeling of drowsiness and contentment, which lasts several hours. Also like opium, use of heroin suppresses the appetite.

The body rapidly builds a tolerance to both drugs, and both are addictive—though heroin much more than opium. An opium user, deprived of his dose, begins to go into withdrawal, which is typically marked by, among other symptoms, digestive problems, insomnia, anxiety and depression. Heroin withdrawal symptoms meanwhile, are more varied, and much more unpleasant. They include, among others, intense depression and anxiety, insomnia, chills, digestive problems including intense cramps, and the sensation of pain all over the body (even in the absence of a stimulus). Withdrawal from either drug results from cessation of use, decrease in dosage, or prolonged separation from the drug—even just for a few hours. Abusers often remain addicted through the vicious cycle of using the drug to treat their withdrawal symptoms each time they try to quit.

With this understanding of the technical aspects of the drugs’ production and consumption, we can turn our attention to opium and heroin production in Afghanistan, and their consumption in Iran.


A plan, a ban, Afghanistan

What has come to be known as the Tâlibân’s “opium decree” was announced on July 27, 2000. On that day, with little warning, the leadership of the Afghan regime declared that it would be illegal for the country’s farmers to grow opium poppies. The year before, a decree had been issued reducing the area under cultivation by one-third, and though the country’s production shrank following the 1999 bumper crop, there is little indication that this was a result of the ordered reductions.28

Regarding the ban, several facts are worthy of note. First, this was a ban on the cultivation of opium, not on further refinement of opium previously harvested, nor on trafficking. Also, the Tâlibân never controlled all of the territory in Afghanistan. Consequently, though its enforcement proved effective in Tâlibân areas, it had no reductive effect on those areas under Northern Alliance control. Quite to the contrary, when the ban was announced, opium producers outside of the Tâlibân’s reach recognized the value of the supply shock, and greatly increased their area under cultivation.


In 2000, Badakhshân and Samangân’s share of the opium market were very small. That year, with 2,458 hectares dedicated to poppy, Badakhshân accounted for only 2.99 percent of the area of Afghanistan cultivating opium; with fifty-four hectares, Samangân accounted for a mere 0.07 percent.29 Most likely in response to the Tâlibân’s opium ban however, both provinces planted substantially more poppy for the 2001 season. A more than ten-fold increase brought cultivation up to 614 hectares in Samangân, while Badakhshân planted 6,342 hectares.30 With 8.08 percent of the year’s crop, Samangân became the largest opium producer under Tâlibân control. But compared to Badakhshân, the increase in production was negligible. From one year to the next, Badakhshân suddenly grew over eighty-three percent of the country’s poppies. Naturally this increase looks more impressive expressed as a percentage than in absolute numbers, due to the much smaller size of the country’s total opium harvest in 2001. But the expansion of opium growing was quite clearly a move calculated to take advantage of the situation they were presented with in order to seize market share—for comparison, Badakhshân’s 2000 crop would have been less than thirty-three percent of Afghanistan’s 2001 production. And cultivation in Badakhshân continued to grow as long as prices were expected to remain high, until the prices fell again in 2004. The following year Badakhshâni production was more than halved.


Though it is impossible to know how much opium was stored, how much sold and at what price, UNDCP calculated that the farmers’ total potential income in 2001 (assuming all opium was sold, at about $301/kg) for the entire country would have declined only thirty-eight percent to fifty-six million dollars.31 Obviously those areas which stood to gain the most from this were those who produced the most, namely those over which the Tâlibân exerted no control.

We should also note that the ban came after the 2000 crop had been harvested, but still before the next one was to be planted.32 For this reason, it had a less measurable effect on the immediate price and supply of opiates in the region, and gave both farmers and traffickers time to prepare for what they expected to be a lean year in 2001. But when did it become apparent that the ban was more than a ploy?

Judging by reports in the media, this became clear to those involved in the illicit drug business—both on the production and consumption ends—much sooner than to the UN, or the rest of the international community. Less than a week after the Tâlibân announced their ban, the street price of opium had more than doubled in Pakistan.33 Yet by December 9th (by which time the next crop would normally already have been sown), the United States’ official stance on the Afghan ban was one of doubt, incorrectly assuming that the new ban would, like a similar one announced in 1994, not be enforced. In an official statement, the State Department declared that “there has been little evidence that these bans are credible.”34 In late February 2001, the UNDCP announced that preliminary surveys indicated a reduction in poppy cultivation by at least eighty-five percent.35 Less than two weeks later, the U.S. State Department’s Narcotics Control Strategy Report alleged not only that the ban had been ineffective, but that opium production had been significantly expanded36—embarrassingly, this was at the same time the price of opium was reported to have gone up by a factor of eighteen inside Afghanistan.37 Finally, on May 26th, the State Department acknowledged the UN’s findings that indeed, opium production had been virtually halted in its tracks.38 Ultimately, the UNDCP’s illicit crop survey would show in October that the total area under cultivation in Afghanistan had dropped a full ninety-four percent.

On the whole, the ban was initially disregarded by the West. Small news reports showed that the west “applauded” the Tâlibân’s dedication to the elimination of narcotic production in the territory they controlled, but the response was otherwise generally characterized by skepticism. There was good reason for the west to doubt the Afghan regime’s sincerity—the announcement had come very suddenly, and was not without precedent. It also came at a time when Afghanistan was under heavy international pressure to hand their patron, Osama bin Laden (then implicated in the embassy bombings in Africa) over to the United States. Many expected a US attack against his protectors, and while this did not materialize until after the September 11th attacks, both the U.S. and Russia were putting their weight behind sanctions which would have a direct impact on the ongoing conflict in Afghanistan, essentially cutting off the regime’s access to foreign weaponry, while giving the opposing Northern Alliance better access to the same.39

In this context, one theory held that the ban was a ploy to drum up international sympathy—a tactic not unheard of in the Tâlibân playbook. In 1994 when the Tâlibân seized Qandahar, they announced that they would “eliminate all drugs.” In response, US diplomats began talks with their leaders. But it soon became evident that this ban would come to nothing, to the great disappointment of the international community.40 Following the bombing of the USS Cole, sanctions were finally applied. Predictably, the Tâlibân demanded they be lifted, arguing that their enforcement of the ban on poppy cultivation was a sign of their goodwill for which they should not be punished.

From the perspective of propaganda, the ban would certainly give the Tâlibân government the moral high-ground in its condemnation of the West. If the UN did indeed impose sanctions on the country (as was already beginning to appear inevitable at the time the of the ban’s announcement), this could easily be spun to make the West look very bad: not only had the Afghan farmers, reliant on opium cultivation for their daily bread, been forced out of a livelihood in response to Western demands, but sanctions were now being imposed to exacerbate the suffering of the Afghan people. Even before the sanctions were imposed, this was exactly the picture the Tâlibân propagandists painted:

The Afghan nation will this time round be persecuted because they have banned opium growing. Although the false proponents of humanitarian sympathy say that the sanctions will have no impact on the people, the truth of the matter is crystal clear to all…Because the Afghans have banned poppy growing and because they have adopted a principled policy to safeguard their religion, culture and independence, for which they have made great sacrifices, they are now obliged to endure punishment for their bravery.41

After the sanctions were strengthened, the tone of the regime’s propaganda did not change much—criticism of the lack of UN aid, and calls to lift the sanctions were frequently broadcast on the radio and published in the papers, in language which painted the Tâlibân (as the true representatives of Afghanistan) as selfless heroes willing to make great sacrifices to fight the scourge of drugs in the name of Islam.

Before the decree, it had been no secret that the Tâlibân were profiting from opium cultivation. It was taxed like any other good; the proceeds from the ushr (a twenty percent levy) on opium represented a sizable portion of their budget. By Ahmed Rashid’s conservative estimate, this would bring the Tâlibân twenty million dollars per year—the bulk of their budget.42 To completely cease production—thereby eliminating the government’s chief source of tax revenue—made no sense, financially. This was why as we saw, U.S. and UN officials persisted in claims that the ban would be ineffective even after it became clear that the ban was being strictly and effectively enforced—and of those who acknowledged that the ban was real, most eyed its suddenness with suspicion.

Since the ban would remove a major source of their financing, it was reasoned that the Tâlibân must have had ulterior economic motives. As Afghanistan had risen in the past fifteen years to dominate the international illicit opium market, a cessation of its production was expected to (and did) drive prices through the roof. Theoretically, as prices soared, the Tâlibân could have slowly unloaded stored drugs at an enormous markup, earning several times what they could have through ushr alone. This theory is compelling but for one very significant oversight: in order to make sense for the Tâlibân financially, they would have to have been in control of large opium and heroin stocks. That is, in order to make money by selling marked-up opiates, they would have to have had large stockpiles of low-cost opiates on-hand at the time of the ban’s announcement. They did not.

Still, this theory was stated quite bluntly (though with no accompanying evidence) in a number of U.S. government and UN reports of the time. After the imposition of the ban, the UN claimed that opium stocks on the Afghan border were large enough to meet European demand for three to four years.43 An independent report claimed that the Tâlibân had stockpiled 220 tons of heroin in Faizâbâd,44 a figure so high it would have accounted for most of the previous year’s total production for the entire country. Even today it is a commonly accepted explanation for the Tâlibân’s somewhat baffling move, though there has still been no compelling evidence presented to show that this was a central motive behind the ban.

This theory was first discussed soon after the imposition of the ban. At the time, incomplete and almost certainly inaccurate information was drawn on to come up with a reasonable motive to explain the Tâlibân’s irrational actions. And though it is clear that drug stocks must have played a role in drug traffickers’ ability to continually export drugs despite the almost complete unavailability of raw materials in Tâlibân-controlled territory, this theory, and the basis upon which it was formulated, has not been reviewed or rethought since its conception. Rather, due to its simplicity and apparent logic, it has been accepted as a standard interpretation of the Tâlibân’s mysterious ban.



Supply shocks and drug stocks

The existence of stocks is an important issue which we must address. In lieu of hard evidence of Tâlibân-controlled stocks (such as specifically identified opium warehouses or stockpiles), we must acknowledge the possibility that they existed, but treat it with caution. There is strong evidence that stocks did play a role in Afghanistan’s opium economy, but not in a way the Tâlibân could have hoped to control.


A clear indication of the existence of opium stocks is found in relation to the specific areas in which poppies were grown in 2001. As we have seen, the largest opium producing area that year was the province of Badakhshân, followed by Samangân. Both of these provinces lie in the north of the country, and drugs produced there exit primarily to the north. After transiting through Tajikistan, Turkmenistan, or Uzbekistan, they supply Central Asia, Russia, and the Caucasus with drugs. If ninety percent of Afghanistan’s drugs produced in 2001 were destined to be sold in these areas, most of the opium (or morphine which would ultimately be destined for Europe) seized in Iran after the 2001 harvest had to have been stocked from previous years’ harvests.

Analysis of seizure-versus-production statistics done by UNDCP over twenty years has revealed a noticeable time-lag in heroin seizure figures, which can be taken to indicate some role played by stocks either in heroin production or its trafficking. Prior to the Tâlibân ban of 2000, UNDCP data revealed two particularly convincing cases-in-point. If you refer to Figure 5, you will observe the delay between higher opium production in Afghanistan and higher seizures in neighboring countries in the two recent bumper crops of 1994 and 1999.45 According to a 2003 UNODC report which examined this phenomenon, there is a correlation between production and seizures of 0.83 for the same year, but 0.93 for the following year.46 In plain English: heroin seizures reflect the size of the previous year’s opium crop more strongly than the present one. This discrepancy became evident once again following the opium ban, when 2001 and 2002 seizure levels for heroin remained stable at about two-thirds their pre-ban levels, while opium seizures continued to decline from about forty-five percent to forty percent of their pre-ban levels (see Table 1).47


Many claimed that the Tâlibân (probably meaning also the various warlords who aligned themselves with the same) controlled the country’s opium stocks to such an extent as to make it economically viable to saw-off the proverbial branch on which they sat. But as I have suggested, this argument is flawed with some significant oversights.

To a limited extent, the Tâlibân would certainly have been expected to control opium supplies—after all, ushr could be (and probably typically was) collected in kind. Even so, this would have left them with no more than about of twenty percent of each year’s crop. But from this, enough had to be sold off to support the war with the Northern Alliance and run the state (to the extent they did so). We will take a closer look at payment-in-kind schemes and their implications later in this paper.

More realistically, we can assume that the bulk of the country’s stocks took the form of small caches dispersed relatively thinly amongst the population. Steven Casteel, the intelligence chief for the Drug Enforcement Agency in 2001 seemed to be of the same mind when he said, "a stockpile is a suitcase full of opium,” rather than something along the lines of a Tâlibân-run warehouse.48 It was the country’s farmers who controlled the opium reserves. Lacking a functional banking system, and with a rapidly inflating currency, it was in every farmer’s best interest to keep as much of his harvest for himself as possible. Because of the long shelf-life and commodity-status of opium, it represented an ideal form of savings. The UNDCP reported in 2000 that Afghan farmers typically keep sixty percent of their crop for themselves, to be sold at a later time as dry opium.49 According to Bernard Frahi, then director of the UN Office on Drug Control and Crime Prevention (UNODCCP) field office in Pakistan, “even the poorest Afghan farmer will have five to ten kilograms of opium. Wealthy families may have as much as 40kg.”50 If we were to accept the lower figure, and multiply it by the 200,00051 farmers estimated to be involved in Afghanistan’s opium production, over half the opium crop from each year would be retained by the growers themselves. Perhaps Frahi overestimates their retention rate, but it is clear from this that Afghan opium is not controlled so exclusively by one party as to make a nationwide ban on production worthwhile.

In its 2001 survey of the Afghan opium crop, the UNDCP briefly noted that there was evidence that farmers’ practice of storing opium was changing. That is, farmers were either stocking less opium, or indeed releasing their reserves from years past onto the market. Farmers in several provinces that year were unable to quote prices for fresh opium (presumably because they were adhering to the ban), but offered surveyors prices on dry (i.e. stored) opium instead.52 This comes as no surprise. Despite being considered an illicit crop, it is fundamentally no different from any other. If it weren’t for the existence of grain silos, poor harvests would always translate into famine. Moreover, being that there is a year-round demand (and, as evidenced by seizure data, supply) of opium in Iran (and indeed, in all parts of the world supplied by the Afghan crop)—were it not for (at least temporary) stocks, we would expect market prices always to drop dramatically at harvest time, and continue to climb steeply throughout the rest of the year.

It is important to point out that while the farmers probably control the bulk of the country’s stocks, the very existence of their stocks indicates a willingness and need eventually to sell or trade them. That is, if they are saving it, it is because they plan to spend it, one way or another. However they sell it, within Afghanistan opium has value not primarily as an intoxicant but as an object of international trade. It can be used within Afghanistan to secure loans or pay for basic living needs. But no matter how many hands it changes inside Afghanistan, it does not truly gain value until smuggled across an international border. With the notable exception of refugees and asylum-seekers fleeing their country with their savings in the form of opium, farmers could not be expected to make such a crossing with their opium on their own. There has to be a middleman.

Farmers certainly release their personal stocks onto the market. There would be no other reason for the farmers to hold onto sixty percent of their crop—in a country as poor as Afghanistan, money hoarding is an activity very few may engage in. To pay for their basic living expenses, part of the farmers’ stocks must be continually released (perhaps indirectly) to cross-border opium smugglers, in a process which maintains the constant flow of unrefined drugs out of Afghanistan. We also know that about eighty-five percent of farmers have at one point taken out some kinds of loans to pay for household and planting supplies.53 Reading between the lines, this indicates that at some point, the overwhelming majority of opium farmers have sold off all their stocks and were in need of more money.

In truth, we don’t know who gets what portion of the drugs and when, but if heroin stocks exist (as indeed they must as a corollary fact to the uninterrupted, year-round flow of heroin into neighboring countries before, during and after the ban despite the short production season), we have to assume that the heroin producers maintained certain opium stocks as well. If the average factory produces ten kilograms of heroin per day and runs for four months at one hundred percent efficiency,54 it will require two tons of opium per year. For the same reasons it makes sense for farmers to stockpile it—long shelf-life, low cost of storage—we can assume the heroin producers do too; sadly, we once again lack the data to estimate the extent to which this occurs.

Using data from price differentials between Afghanistan and Pakistan from before and after the ban, we can deduce evidence of significant, real-world heroin stocks. Two competing idealized models for the increase in the price of drugs as they travel farther from their source exist. The first believes costs to be cumulative: each person along the production and supply chain takes a set profit from the drugs, so the ultimate price reflects the sum of all these markups, plus the cost of raw materials. The other model believes prices to be multiplicative: each person in the production and supply chain charges a fee as a percentage, meaning the size of the fee is dependent on the price paid per unit of drugs—ultimately, this means the fee is determined by the cost of the raw materials. In the additive model, changes in the price of raw materials have little effect since the markup at each level is constant. In the multiplicative model, the percentages tacked-on at each level greatly magnify any changes in the price of raw materials. Usually, real prices fall somewhere between the predictions of the two models. After the ban however, both of these models predicted wholesale prices significantly higher than those observed in Pakistan.55 This calculation is made purely based on the price of opium in Afghanistan and heroin in Pakistan, ignoring the discrepancy between the opium and heroin prices in the latter country. Therefore, the lower-than-expected price of heroin might be taken as an indication of the existence of Afghan stocks of refined heroin.56 Such stocks would presumably be major contributing factors to the higher correlation coefficient for heroin seizures with opium production after a delay of one year.

We should also recall that for there to have been any export of opiates from Afghanistan in 2001, opium stocks must have played a role. While the increase in opium production in Badakhshân meant a windfall for the traffickers in that province, it did nothing to help those in other parts of the country. The smuggling routes exiting the northeastern parts of Afghanistan move through Tajikistan (and, partly also through Uzbekistan), and primarily feed the Russian and Central Asian demand. Moreover, as these regions were under the control of the Northern Alliance, it is exceedingly unlikely that the warlords under whose protection the farmers grew the poppies would have allowed Tâlibân sympathizers access to them. And yet opium was exported throughout the year.

From various peripheral indicators, it is clear that opium was stockpiled somewhere in Afghanistan. The easiest explanation is that this was done simply because the country produced more drugs than the world was consuming. But while this may be partially true, the form the stocks took reflects rather individual survival considerations than awareness of the dynamics of the global drug trade. Because opium was a handy substitute for a failing Afghan currency, farmers had a major incentive to keep as much of their production to themselves as possible; a move which enabled Afghanistan to keep exporting large amounts of drugs even during a year in which almost none were produced.



Maintaining the flow of drugs

Now that we’ve explored the issue of stocks, we should look at other reasons heroin seizures could have remained at such a high level. We have already seen that there is a delay between the production of opium and the seizure of heroin, and that stocks play an important role by slowly releasing opium onto the market. Although opium production is quite difficult, it is straightforward, and the most important link in the supply-chain is the farmer. Because the heroin refinement process is so much more involved, the main actor in the heroin supply-chain is the factory/refinery. If post-ban opium demand was met by farmers releasing their stocks from previous years, how was the heroin demand supplied?

Considering the high conversion factor from opium to morphine/heroin, it is rather surprising that Afghanistan heroin factories continued to produce such large quantities for export. The factories were forced to adapt to the market shock, but in fact, their compensation only accounts for part of the mechanism which maintained the flow of drugs. In the UNODC’s 2003 The Opium Economy in Afghanistan: an International Problem, this question was addressed quite thoroughly. According to its authors, there were a number of reasons heroin trafficking was not as sharply reduced as expected: the higher morphine content of Afghan opium versus other types (e.g. South American or Southeast Asian), increased efficiency of factories, and increasing adulteration of refined heroin outside of Afghanistan.

Typically, purity of the heroin produced in Afghanistan ranges from forty to eighty-five percent, with sixty percent being typical.57 You will recall that the conversion of opium to heroin is generally considered to call for ten parts opium to produce one part morphine, which after being treated with various chemicals, yields one part heroin. This formula comes from the southeast Asian opium fields, whose morphine content was found to average 11.4 percent (thus if all the morphine were extracted, it would take a little less than nine kilos to produce one kilo of refined morphine), whereas Afghan opium was found to average seventeen percent morphine (about a six-to-one ratio of opium to morphine).58 The first implication is that more heroin could have been being produced all along than previously estimated, since the ten-to-one ratio is so commonly used to compute the heroin potential of an opium crop; this is particularly evident when we consider the sixty percent average purity of Afghan heroin— it would take only about 3.5 kilos of average morphine-content Afghan opium to produce one kilo of average-purity Afghan heroin.

But the process of refinement, particularly as it is done in South Asia is not an incredibly precise one. The estimates of the preceding paragraph would hold true only if the extraction process were perfectly efficient, which it is not. The UNODC report suggests that simply by recycling the residues from earlier stages of refinement, the factories could have brought their efficiency close to one hundred percent.59 On first glance this does not seem to imply that heroin seizures should drop more slowly, since they are still using the same amount of input (or rather less, given the size of the 2001 harvest). What we have to bear in mind is that the owners of the heroin factories needed to maximize their profits, which could only be done by maximizing the amount of heroin produced. Though the amount of opium refined into heroin was not increased, the effect of the ban on the amount of heroin which could be made available for export was dampened. The amount of heroin seized in the region was surprising not because it was so large, but because it was not as small as expected.

Though previous analysts have made much of the timing of the Tâlibân’s opium ban, nothing has been written on how it would have affected the productivity of the heroin industry. The timing is most commonly referenced as an explanation for the success of the ban. Because it came soon after the harvest and before the sowing season, the farmers had ample warning not to plant the next opium crop, and (theoretically) had an opportunity to make arrangements to cultivate other crops. The farmers were not the only ones who were given advance warning about hard times ahead. Because heroin is refined in the months following the harvest, the timing was perfect for the factories. With the 3700 tons of opium cultivated in 2000 potentially available to them, the owners of heroin refineries had an excellent opportunity to amass as much opium as possible, knowing that it might have to last them a long time.

Per unit, the production and sale of heroin is more profitable than that of opium. Based on data from 1993 and 1998,60 the UNDCP estimated production costs including opium and precursor chemicals to account for approximately half the price of heroin.61 Thus until the effects of the ban became reflected in the price of opium, converting it into heroin remained about one hundred percent profitable. After the ban, those producers who improved their efficiency still stood to make a sixty-five percent profit, amounting to some one thousand dollars per kilogram of heroin.62

First and foremost, this can explain part of the discrepancy between opium and heroin seizures for 2001 (see Table 1)—since heroin is more profitable and easier to transport and smuggle, profit-maximizing traffickers would be expected to rely more on heroin as a source of income than on plain opium. Therefore, besides trying to make their operations more efficient, the first thing they would have done was buy up as much opium as possible. If they expected the price of raw opium to rise in the coming months, the incentive was to acquire as much, as quickly as possible. In addition to setting themselves up to keep their factories in operation for longer, building up their own stocks had the effect of drawing much of the raw opium away from the retail market, and into the heroin refineries. The profitability of producing heroin over morphine may also account for the greater drop in morphine seizures from 2000 to 2001 (fifty-eight percent), than opium (fifty-five percent) or heroin (thirty-five percent). If we look at Iran’s seizures over time, we see this dramatically illustrated: from 1993-1999, heroin accounted for twenty-one percent of opiates seized; from 2000-2001, it accounted for thirty-eight percent.63

It is crucial to recognize that the opium purchased during this time was bought at 2000 prices, not at 2001 prices. In other words, the opium, a significant amount of which had been bought in advance through salaam loans to the farmers (see below), got to the heroin refineries long before the price-hike of 2001. We’ve seen that the drug market responded to the ban almost immediately—if street-level dealers recognized the trend, we can be sure heroin traffickers did too. Expecting rising costs in the near-future, they would have implemented the efficiency improvements described by the UNODC report as early as possible.

A similar (if inverse) cost calculation would have prevented all the opium from being immediately refined into heroin. To convert morphine into heroin, the most important chemical is acetic anhydride, and according to a 1993 UNDCP study of Pakistani heroin manufacture, it accounted for ninety-five percent of the non-opium costs of heroin manufacture. In 2002, acetic anhydride cost only one-third what it did in 1998;64 if producers had reason in 2000 to believe the price of precursor chemicals would continue to decline, it would make sense only to refine as much opium into heroin as would be sold in the coming year. Maintaining an opium stockpile would make sense for a number or reasons: opium can be stored cheaply, and for long periods of time; more heroin could be refined at any time, independently of the harvest; the cost of manufacture of heroin produced at a later date would be lower as precursor chemical prices fell and consequently profit per unit produced would increase. Also, we must recognize that though opium was produced in 2001, as discussed earlier, it was not available in Tâlibân-controlled territories. So whatever opium was bought up by heroin factories must have been purchased the year before, or from stocks held from previous years.

A salaam arrangement is the term used to describe a type of loan typical in Afghanistan. A landlord, money lender, or trader advances the farmer money, to be repaid as a set portion of the future harvest. The terms are extremely unfavorable to the farmer—the lender typically offers a very low price for the crop (which the farmer is forced to accept, since without the loan, he cannot grow anything), and the lender’s share is not reduced when the harvest is smaller than expected. Overall, for farmers taking out salaam-type debts, the cost of the advance accounts for thirty-nine to fifty-three percent of their total annual income.65 Although about sixty percent of traders were found to engage in salaam arrangements, only about five percent of the total trade is paid for this way.66 Still, interest on these loans is well over one hundred percent (up to three hundred percent) over the course of only three or four months,67 meaning the trader’s overall higher profit margins come directly at the farmer’s expense.

When the price of opium went up, the profit per kilogram went up too—by a factor of more than four.68 And if we consider the UNODC estimate that refining opium into heroin continued to add sixty-five percent profit,69 it is quite clear why traffickers would have preferred refining heroin to selling regular opium. The limited production in 2001 meant they would have to make the best of the supplies they had on-hand.

Whether or not they recognized the situation they found themselves in, producers faced a significant obstacle which prevented their flooding the market with heroin. That is, though its production time is short compared to opium (which must first be allowed to grow, then requires about 196 man-days of labor, per hectare cultivated),70 producing one kilo of heroin still requires two man-days of labor.71 For most factories, this means heroin is produced at a rate of ten kilos per day,72 in other words, far too slowly to quickly create a noticeable spike in seizures in neighboring countries. But beyond this, if we assume that many producers did indeed recognize the Tâlibân’s determination to enforce the ban in time to buy up opium, they would also have recognized that selling their heroin off as they produced it would put them at a severe competitive disadvantage relative to all others, who would wait for the heroin consumers in other countries to become desperate, and willing to pay higher prices for the drugs they needed. This of course is what the Tâlibân are claimed to have done, and here we see the logic of such a move—provided one controls the drugs in the first place.

In terms of smuggling, there are distinct advantages to producing heroin. We have already looked at the profit considerations of the heroin producers in Afghanistan and Pakistan. Based on the existence of heroin wholesale prices from within Afghanistan for the period in question, we will assume that most smugglers did not work with or for producers. As middlemen between the producers and the consumers (even the foreign wholesalers), they stood to earn a substantial amount in exchange for the risk of making the high-risk cross-border journey.


Figure 5 – Opium seizures in Iran. Note that during the 1990s, as Afghan production continued to climb, so too did Iranian seizures. Following the announcement and enforcement of the opium decree, seizures fell dramatically, as well as the share of Iran’s seizures opium represented. (Statistics from UNODC field office, Tehran)

Looking at price figures alone, there seems to be no reason a smuggler would want to transport heroin rather than opium. UNODC figures for 2002 show that a kilogram of opium sold at almost three times the price it did in Afghanistan the same year,73 while a kilo of heroin sold at just over one-and-a-quarter times the Afghan price.74 But based on data from the 1990s, it appears that heroin sold on the Iranian wholesale market tends to have an average purity of about twenty percent, versus the sixty percent purity of that sold within Afghanistan.75 We have reason not to believe that the purity on the Iranian market would have increased during the period in question (on the contrary, it likely decreased), but this is a question which will be examined in further detail later in this paper. If we assume, conservatively, that the heroin that crossed the Iranian border was three times as pure as that for sale to Iranian wholesalers, the Iranian price is about 3.8 times the Afghan price. Per kilogram of pure heroin smuggled to Iran, the smuggler stood to earn up to $12,550 in 2002.

Although offset by the much more severe penalties Iran assigns those caught smuggling heroin (anyone carrying more than thirty grams is eligible for the death penalty), opium smuggling is considered a higher-risk activity. It is very difficult to hide a consignment of opium: it is bulky and has a strong smell, making it easy for the authorities to detect.76 This risk perception particularly makes sense in Iran, where the government anti-drug efforts are much more aggressive than anywhere else in the region. On the other hand, as seen above, even a small amount of relatively high-purity heroin successfully moved over the border can be enormously profitable.

It is no surprise then that the size of the average seizure fell dramatically following the ban. In previous years, importers could reckon with an essentially unlimited supply of opium and heroin from Afghanistan. If one shipment was interdicted, another would surely make it through; if most shipments were caught, next year one could hope for better luck. After the ban, the second part of this sentence was no longer perceived to be true. If large shipments were interdicted, the damage done to their owners was much greater. To hedge against this, smugglers began to be sent with less and less heroin with them on each trip.77 Though more of them would be caught, the importers could rely on many others to make the trip safely, keeping the flow of drugs into Iran, and money into their pockets, relatively constant. This trend is reflected in the average size of drug seizures, which declined from 22.4 kg in 1999 to 20.8kg in 2000 and 5.7 kg in 2001, though they began to increase again in 2002, to 7 kg.78 Of course, on the aggregate level, it makes little difference how large or small the shipments are, since, in accordance with the law of large numbers, the portion of drugs seized should remain approximately the same.

Judging from seizure data, the strategy worked. If we were to assume that Iranian demand for heroin continued to be met throughout this time period, and that seizures reflect an approximately unchanging proportion of the total amount of drugs imported, the total seizures inside Iran would reflect the success of the smugglers. From 1999 to 2000, interdictions increased marginally, and then decreased, though significantly less substantially than opium interdictions from 2000 to 2001.79 Most importantly, from 2001 to 2002, there was virtually no change in total seizures.

The effect of the greater number of small-time smugglers was a subtle one. As a general rule, more actors participating on the supply side of a market creates greater competition and thus lowers the price paid by the consumer. If we consider this greater competition along with all the other factors we’ve already discussed, we have a good idea of the forces which conspired to prevent a major increase in the price of heroin in Iran in 2001. Higher factory efficiency, lower opium supplies (due to factories’ accumulation of stocks) and higher heroin exports (due to the release of previously held stocks), and the increasing adulteration of drugs coming in from Afghanistan meant that heroin consumers were protected from the opium price shock which some claim the Tâlibân intended to capitalize on. Rather, though opium prices in Iran did increase quite significantly during this period (see Figure 7 in the following section) heroin prices changed much less dramatically, which as we will see, gave a strong monetary incentive for many Iranian opium users to switch drugs.



Iranian consumption

As Afghan opiates pass through Iranian territory – as approximately fifty percent do – their volume decreases significantly. This happens primarily for two reasons: consumption and interdiction. We have already looked at some figures for drug seizures (for more, see Appendix A), reflecting the fact that Iran seizes the most opiates in the world. What we have not yet discussed, is that of all the drugs that pass over Iran’s roads and through its cities, roughly forty percent are consumed by Iran’s millions of drug users.80 Data from the 1999 RSA showed that fifty-seven percent of Tehran’s drug users used heroin, and nearly twenty-seven percent were intravenous drug users (IDU).81 Referring to Figure 1, it is clear why this is so: the capital lies on the main route drugs take from Afghanistan to Turkey. Yet, with respect to pricing, Iran is a very unattractive market in comparison to Western Europe—so why do international cartels allow their profits to take such a hit by releasing drugs onto the Iranian market?

The answer to this question is by no means simple, and must be approached from several perspectives. First, we will examine what drove many of Iran’s opium users to make the switch from opium to heroin. Their decision, as we will see, seemed to make financial sense: the highly-adulterated heroin hitting Iran’s streets after the ban, was in fact significantly less expensive than opium. To understand how such a volume of cheap drugs makes it onto the Iranian market in the first place, we will conclude with a look at the effects of payment-in-kind of the foot soldiers of the Iranian drug trade. Those working at the lowest levels of drug smuggling (so-called “mules”), when paid-in-kind, must find a balance between maximizing their profit on the drugs they’ve been paid with, and minimizing the risks they take to obtain that profit. Using very simple behavior modeling, we’ll see how this analysis leads them to release their drugs onto the Iranian market, rather than carrying them further (e.g. to Turkey) for greater profit.

The previous section of this paper focused on the phenomenon of the large supply of heroin despite the virtual cessation of opium production. The opiate market reacted as other commodity markets would, to try to maintain constant supply to loyal customers. Thus the trends we examined earlier, which resulted in a dampening of the effect of the Tâlibân’s ban on the wholesale price of heroin, had effects reaching far beyond the profits of the heroin factory owners and the smugglers.


We saw the tremendous decrease in seizures of opium from 2000 to 2001. These are naturally a reflection of the decreasing amount of drugs entering the country during that time. As supply went down, the wholesale price of opium went up from about four hundred dollars per kilogram in 2000, to a peak of $2,750 in March of 2001.82 This sharp increase in the price of opium was so great in fact, that heroin (whose wholesale price rose from about $2,500 per kilogram in 2000 to a peak of $5,550 in May and June, but returned to about $3,900 by the end of the year)83 became more affordable than opium. Throughout 2001, heroin could be bought in Tehran for about one dollar per gram, while already in the first three months of that year, the price per gram of opium rose almost threefold to about $1.80.84 It should be noted that this heroin was much lower quality than that being delivered to Iran’s dealers, its purity ranging from about three to five percent.85 Besides being more easily-available and more affordable, drug abusers reported (unsurprisingly) that heroin use gave them a more satisfying high.86

Although price is an important consideration, it is only one facet of affordability. To truly appreciate what made heroin so attractive to Iranian drug-users, we have to consider not just the price per unit of the drugs, but the direct price of maintaining the habit. According to data from Iran’s DCHQ, in 2002 the average regular opium smoker was consuming about three grams per day.87 Meanwhile, in March 2001, the retail price of opium had increased from fifty cents to $1.80 per gram.88 Those same statistics indicated the average heroin user was using between one and one-and-a-half grams per day. In late 2000, a gram of heroin cost about $2.30 in Tehran—in March 2001, it was down to about $0.80.89 Assuming that consumption behavior remained relatively constant, while the weekly cost of an opium habit rose from $10.50 to $37.80 during that time, the weekly price of a one gram per day heroin habit plummeted from $16.10 to $5.60.

Naturally, the decision to begin using heroin was not made out of simple financial considerations. Heroin addiction—even using cheap drugs—is much more costly than opium addiction, since heroin users are often incapable of any occupation but heroin use. As we saw earlier, opiate addictions are incredibly hard to overcome. Withdrawal symptoms from opium can be very painful—especially for long-term users, like many of those in Iran. As it became more and more difficult to obtain opium, the only thing dealers were selling which could ease the discomfort of withdrawal was heroin. Interestingly, a similar trend of worsening addiction habits was observed among established heroin users and reported by a number of journalists as the crisis developed: as the shortage wore on, the heroin sold on the streets became more and more impure; as purity levels dropped, it became necessary for addicts to use progressively more direct methods of consumption. Many went from eating (or dissolving in a drink), to sniffing, to smoking, and finally to injecting. The alarming increase in injection as a means of heroin consumption was widely noted in the media; in 2001, a seventy percent increase in the number of addict deaths reportedly resulted from the injection by inexperienced, desperate users, or consumption of drugs so diluted as to be lethally poisonous. This rise in injecting drug use has also contributed substantially to the country’s growing HIV/AIDS problem, but while this has and will continue to do considerable harm, it is beyond our scope in this paper.


Let us return to the idea of drugs used as currency. We have already gotten an idea of how opium was used in place of (and in exchange for) cash in Afghanistan. In the rest of this paper, we will see how it is used as currency in Iran, but with very different results. In Afghanistan, payment-in-kind functioned almost like trading in gold in an otherwise destroyed economy. Because other resources were extremely scarce in the Afghan economy, it was necessary for opium to be traded to other countries, rather than being consumed domestically. But Iran is a much wealthier country, one which can afford a drug problem. And while payment-in-kind schemes in Afghanistan worked to supply countries such as Iran with the drugs they craved, a similar system in Iran has the effect of generating precisely that demand which Afghanistan feeds.

For our purposes, we can assume that most if not all drugs which pass through Iran and are not consumed along the route, are destined for Turkey (whether or not that is their final destination is of no consequence). Based on limited information, it appears that the smuggling of Afghan opiates is usually broken up into relatively short segments. One person or group will bring it from the farmgate (or factory, as the case may be) to the drug bazaar, one will bring it from there to the border, another will make the border crossing, and yet another will carry it on from there.90 In the Afghanistan-Iran heroin transport chain, it is typically Baluchi tribesmen who make the border crossing into the latter country, and Kurdish traders who transport the drugs into Turkey.91 Based on the high risk of the journey, it is likely that the trade through Iran is similarly segmented into a number of smaller routes, each possibly reaching from one major city to the next.

Large-scale smugglers face a number of obstacles as they ply their trade. The most formidable one is the Iranian border crossing. As we saw in the first section of this paper, Iran’s battle with Afghan drugs has been a long one. Although the effectiveness of government drug-control efforts is reflected in Iran’s extremely high seizure numbers, it has come at a high price. By the period in question, over three thousand Iranian soldiers had been killed in armed confrontations with narco-traffickers. The government of the Islamic Republic has taken extensive measures against smugglers, creating a veritable Maginot line of defenses along the border with Afghanistan and Pakistan. As one may expect, most firefights between government security forces and drug traffickers occur in this area. As it is the most dangerous stretch in the Afghanistan-Turkey smuggling route, those who traverse it charge a hefty price for the risk they take. In 2001 and 2002, crossing the border meant a quintupling of the value of opium,92 while the price paid for heroin increased by a factor of seven.93

Drug smugglers face a number of dangers in border areas. If they meet a border patrol, they risk being shot, or losing some (or all) of their precious cargo. If they are forced to surrender, they may face the death penalty. Even if caught by a customs inspector, their fate may be the same. To protect themselves against the military, many convoys are accompanied by large armed escorts. But customs agents are a different story. Some, though certainly not all, can be bribed. For obvious reasons, there are no extensive statistics on this, though we know that in 2004, five hundred law enforcement personnel were relieved of duty in relation to corruption.94 There is no way to know whether these five hundred account for the bulk of the corrupt portion of the police force, but to judge from neighboring countries, they may be just the tip of the iceberg. In Central Asia, an estimated fifty percent of customs officials may be involved in the drugs trade.95 Such bribes, like any other, may be paid in cash or kind, but no data exist on which form is more common. For this reason, we cannot assume such bribes played a significant role in the exacerbation of the Iranian drug problem, but the same is not so for the various smaller operators in the trade.

It appears that small-time smugglers (such as those most common in 2001 and 2002) were also often paid-in-kind. I found no information on this practice in Iran, but this seems to have been the common practice throughout the region, including in Afghanistan and Turkey,96 which bracket Iran on the “Balkan Route” to Western Europe. It may have come about for a number of reasons. For those crossing into Iran from Afghanistan, Afghan currency was worthless—besides having low value and a high rate of inflation, its fungibility within Iran was very limited. It was also an attractive option for the cartels sending the smuggler: if the courier were caught, the cartel lost no money beyond the drugs he was sent with. Since we know the amount paid to small-time couriers was quite small, this practice almost seems illogical on a case-by-case basis. But if we recall that many more smugglers made the trip during 2001 and 2002—about 1,100 shipments were intercepted (versus about 560 from 1999 to 2000)97—the total savings would have been appreciable.

Such payment schemes give the recipient—truck driver, guard or drug mule—a vested interest not only in the safety of their shipments and the continued health of the trade, but a direct involvement in drug distribution. For those who are not themselves users, payment-in-kind leaves them empty-handed until they have sold their share. Because most do not operate across borders, this means that Afghan smugglers must find a market for their opium within Afghanistan, while Iranians sell theirs in Iran; of course this is no problem in Afghanistan where, as we have seen, opium is as good as gold. But those based in Iran must somehow turn their drugs into cash.

For men and women carrying small cargoes, particularly over short distances, their payment can be expected to be equally small. Again we are frustrated by a lack of data to fall back on, but can reason that the exporter will try to take advantage of the courier’s typically desperate situation and offer him the cheapest deal possible. The importer also has an interest in paying him as little as possible: the smaller the shipment he carries, the larger the percentage accounted for by the courier’s cut, and the less is left for the importer to sell.

As a result, smugglers end up with amounts of drugs large enough to make their risk worthwhile (as indicated by their acceptance of the arrangement in the first place), but still too small for sale on the wholesale market. If they accept wholesale prices, the value of their share is dramatically reduced (by a factor of at least two). On the other hand, the larger their share, the harder it becomes to find someone willing to pay retail for the whole thing. So if they want to maximize their fee for making the trip, they must either retail the drugs themselves, or do so through a friend or an acquaintance.

If further incentive were needed to sell the drugs to their own communities, consider the following. Since drug prices rise the further they are sold from their countries of origin (particularly, as we have seen, when they cross borders), in the case of the drug trade transiting through Iran, there would be a strong incentive for a recipient of payment-in-kind to make his way toward Turkey to sell his drugs there. Two things prevent this from happening. First, depending on where the smuggler is, making the trip to Turkey can take up a significant portion of his drugs to pay for food, lodging, transportation, etc. Second, whatever the cost is, it is multiplied by whatever factor the price of drugs increases by across the border.

To explain this better, imagine a hypothetical situation where the price of opium in Turkey is twice what it is in Iran, and a smuggler is paid with $400 worth of opium in Mashhad. In order to get to the Turkish border, he must sell of $100 of it to pay his various expenses. When he sells his opium in Turkey, it now has a value of only $600—still double the $300 he had on the Iranian side of the border, but also only fifty percent more than he could have earned in Mashhad.


Figure 1—Risk assessment of a small-time smuggler. Because the amount left over after travel expenses decreases with distance, so too does the value of the risk taken. The formula graphed is where p is the value of the drugs given to the smuggler in payment for his services, r is the cost per kilometer traveled (as total cost divided by total distance) and d is the distance to the border. The graph is in-tersected by the line fx where f is a coefficient corresponding to the risk-aversion of the smuggler. The higher the riskaversion,the less likely he is to make the trip, particularly at a low initial p. r(d) be-comes important over larger distances: when r(d) = p, the line inter-cepts the x-axis, indicating zero-profit.

This brings us to the second and more important factor discouraging him from going. Making the trip to Turkey involves taking on the additional risk of getting to the border. This is no insignificant cost in Iran, particularly considering the pay-off at the end is only the amount the drugs appreciate by making the trip. The longer the trip (and thus, risk) the lower the payoff. Before embarking, he must decide whether the substantial additional risk he takes on by making the long trip is worth that comparatively small gain. In this hypothetical example, the smuggler was paid a relatively large amount; in practice, his share likely would be smaller, often smaller even than the cost of making his way to the border.

We can actually model this risk evaluation mathematically. If we divide the initial amount of drugs (as a dollar amount) minus the cost of getting to the border (expressed average price per kilometer times distance) by the distance to the border, we get a graph reflecting the likelihood that the smuggler will make the journey to the border (though this does not illustrate his decision to cross it). The smuggler’s risk increases with the distance he must travel, but because there is no unit for risk, we can equate the two. In Figure 10, we see the graphs of the risk assessments of three hypothetical smugglers (the slope of each line corresponds to the level of risk aversion), offered three different amounts of drugs as payment (the curves represent the cost of the trip as a function of profit over distance). The intersections of each of the two graphs represent the maximum risk the smuggler is willing to accept at a given price.

As we see, the greater the distance, the lower the smuggler’s profit per kilometer. On the small scale, as seen in Figure 9, the cost of the trip is a minor factor, eclipsed by the value of the drugs the smuggler is given. However, over greater distances, the cost of travel becomes more and more significant. The smaller the value of the initial p, the more significant r(x) becomes, indeed reducing profit per kilometer to zero. It is accepted that the worse a person’s socio-economic position or current financial situation, the greater the risks they are willing to take, likewise, the higher their degree of desperation (for whatever reason), the greater the risks they are willing to take. In other words, individuals must be willing to accept higher risk and lower reward the lower their p and the higher their d.

Because the value of the drugs typically paid to a smuggler is small, and the distance to the Turkish border quite large, the choice generally made is to stay in Iran. Because this calculation is carried out by large numbers of smugglers, the end result is an increase in the number of small-time drug dealers inside Iran. By their very nature, drug dealers create demand around themselves for the drugs they sell, otherwise they would not be able to earn the money they need to survive—this is particularly true for smugglers paid-in-kind for whom there is an urgency to sell the drugs (since as we have seen, they remain, in effect, unpaid for their trip until they have sold their share).

After Afghanistan’s opium ban, the greater number of dealers in Iran, each endowed from the very first with a small supply of drugs, coincided with the other conditions we’ve discussed, all of which conspired to make heroin an attractive alternative to opium for the desperate users who could not find enough on the market to satisfy their habits.



Conclusion

Despite the scarcity of accurate numbers describing Iran’s drug-using population before and after the ban, we have identified many of the factors contributing to the expansion of heroin use in that country.

Drugs have a long past in Iran. From paupers and dervishes to poets and kings, drug use has been an important part of Persian history for centuries, continuing into the present day. Although the political situation has changed beyond recognition since the time Hedâyat wrote The Blind Owl, the central importance of drugs in Iranian society has not. Since the creation of the Islamic Republic, the government has become quite proactive about preventing drugs from entering the country, but despite strong repression against drug users and a bloody war against traffickers, the consumption of drugs has quite apparently not ceased. What has notably changed is the source of the drugs Iranians are taking: once grown domestically, Iran’s opiates now come from Afghanistan.

Despite starkly different political and economic situations in the two countries, the consequences of the use of opiates as currency on both sides of the border conspired to change the face of drug use in Iran. In Afghanistan, drugs were more valuable, and a safer investment than the country’s currency. For this reason, rather than make their various financial arrangements (from loans, to savings to food purchases) using cash, those involved in the drug trade—particularly farmers—used drugs instead. The result was that a large amount of each year’s opium harvest was not immediately released onto the market, but rather stored for a rainy day. So in July 2000, when the Tâlibân announced the end of opium growing in the country, drugs released onto the market by those who held small stocks served to dampen the immediate effect of the ban on opium prices.

Because so many livelihoods in Afghanistan depended on various parts of the drug industry, it was of crucial importance that the business remain profitable, even as the raw material for the major opiates exported from Afghanistan became extremely scarce. To maximize their profits (or rather, minimize the damage done to them by the ban), drug traffickers had to add as much value to the opium in the country as they could, which in effect meant refining more heroin, and exporting less opium and morphine. The accumulation of opium stocks by the owners of heroin refineries drew a large amount of opium away from consumers in Iran, helping to elevate opium prices, while keeping heroin surprisingly affordable.

Meanwhile, those in charge of exporting drugs out of Afghanistan apparently became more risk-averse. Rather than sending a few large drug consignments across the border to Iran, they instead sent many small shipments through couriers whom they paid with a portion of the drugs they carried. But after performing their own risk-assessments, these individuals were far more likely to sell their portion of the smuggled drugs to their own communities than continue on the smuggling route to Turkey. From the Iranian perspective, in the face of a desperate shortage of opium on the market, suddenly heroin was easily available, and significantly cheaper than its weaker precursor.

Taken together, the increase in the prevalence of heroin abuse in Iran during the opium ban years was a direct result of the different effects of the use of drugs as a form of payment on opposite sides of the Afghan-Iranian border. In Iran, smugglers’ payment in drugs fueled an increase in the demand for drugs whose supply was maintained by Afghan farmers’ stocks. In the coming years, both countries will have to come to terms and deal with their drug problems, or else be destroyed by them.



Appendix A: Drug seizures in the Islamic Republic of Iran, and opium production in Afghanistan



Year Iran98 Afghanistan99
Total Drug

Seized (kg) Opium Seizure (kg) % of Total Hectares

cultivated Production

(metric tons)
1979 10,712 5,217 48 - -
1980 12,326 5,808 47 - 200
1981 32,615 26,712 82 - 225
1982 46,905 40,184 86 - 275
1983 43,270 35,413 82 - 488
1984 39,973 30,151 75 - 160
1985 24,592 17,633 72 - 450
1986 30,443 23,511 77 29,000 350
1987 42,805 36,800 86 25,000 875
1988 45,945 39,400 86 32,000 1,120
1989 34,053 26,292 77 34,000 1,200
1990 32,300 20,800 64 41,000 1,600
1991 37,648 23,483 62 51,000 2,000
1992 53,938 38,254 71 49,000 2,000
1993 96,208 63,941 66 58,000 2,300
1994 138,523 117,095 84 71,000 3,400
1995 155,529 126,554 81 54,000 2,300
1996 173,875 149,577 86 57,000 2,200
1997 194,421 162,414 83 58,000 2,800
1998 194,015 154,454 79 64,000 2,700
1999 252,186 204,485 81 91,000 4,600
2000 237,098 179,053 75 82,000 3,300
2001 138,500 79,747 56 8,000 200
2002 150,514 72,850 48 74,000 3,400
2003 188,194 96,542 51 80,000 3,600
2004 278,184 174,091 62 131,000 4,200
2005 311,181 225,095 72 104,000 4,100





Appendix B: Opium and heroin wholesale prices in Iran100

Opium ($US) Heroin ($US)
Dec-00 400 2500
Jan-01 700 -
Feb-01 1300 -
1-Mar 2750 1500
Apr-01 1650 4800
May-01 1300 5550
Jun-01 1550 5550
Jul-01 1550 4800
1-Aug 1450 3313
Sep-01 1525 3450
Oct-01 1575 3675
Nov-01 2025 3900
Dec-01 2015 3900
1-Jan 2015 4325
Feb-02 1550 4900
Mar-02 1300 5200
Apr-02 1250 5125
May-02 1158 5000
1-Jun 1900 5100
Jul-02 1950 5200
Aug-02 2050 5225
Sep-02 1735 4950
Oct-02 1650 4600




Sources Cited


"Afghanistan: Sanctions Seen As "Punishment" For Ban on Opium Poppy." Shari'at (via BBC Worldwide Monitoring), December 5 2000.

Alavi, Nasrin. We Are Iran. Brooklyn, NY: Soft Skull Press, 2005.

Bureau for International Narcotics and Law Enforcement Affairs. International Narcotics Control Strategy Report (Incsr). US Department of State, 2001.

Burrell, Ian. "Supply - Almost All Routes Lead Back to Afghanistan." The Independent, October 6 2001.

CIA. The World Factbook: Iran. 1 November 2005 2005. Accessed 2 November 2005 Website. Available from http://www.cia.gov/cia/publications/factbook/geos/ir.html.

Coates, Stephen. "Afghan Taliban Wipe out Poppy Crops: Undcp." Agence France Presse February 20 2001.

"Drugs and Decay." The Economist, March 31 2001.

"Foreign Help Needed in Fighting Drugs." IPR Strategic Business Information Database, February 5 2001.

Hidayat, Sadegh. The Blind Owl. Translated by D. P. Costello. London,: J. Calder, 1957.

ICG. Central Asia: Drugs and Conflict. Osh/Brussels: International Crisis Group, 2001.

INCB. Report of the International Narcotics Control Board. International Narcotics Control Board, 2002.

Kohn, David. Taliban Collapse May Help Heroin Trade. December 5, 2001. Eurasianet.org, 2001. Accessed.

Legendy, Gabriel. "The Abcs of the International War on Drugs " Senior Thesis, Princeton University, 2005.

Matthee, Rudolph P. The Pursuit of Pleasure : Drugs and Stimulants in Iranian History, 1500-1900. Princeton, N.J.: Princeton University Press, 2005.

Mužík, Tomáš. Coutry Factsheets, Eurasian Narcotics: Iran 2004. Sweden: Silk Road Studies, 2005.

"Nine Million Drug Addicts Nationwide by 20 Years: Iranian Official." Agence France Presse, October 31 2002.

"Opium Price 18 Times Higher since Taliban Ban on Poppy in Afghanistan." Deutsche Presse-Agentur, March 12 2001.

"Opium Prices Shoot up in Pakistan after Taleban Ban." Global News Wire, August 3 2000.

Pietschmann, Thomas. "Price-Setting in the Heroin Market." Bulletin on Narcotics LVI, no. 1 and 2 (2004): 105-139.

Raisdana, Fariborz. "The Drug Market in Iran." Annals of the American Academy (2002): 149-166.

Rashid, Ahmed. Taliban : Militant Islam, Oil, and Fundamentalism in Central Asia. New Haven: Yale University Press, 2000.

Reid, Gary, and Genevieve Costigan. Revisiting the 'Hidden Epidemic': A Situation Assessment of Drug Use in Asia in the Context of Hiv/Aids. The Centre for Harm Reduction and The Burnet Institute, 2002.

Saleh, Jehan S. "Iran Suppresses Opium Production " UNODC Bulletin on Narcotics, no. 3 (1956).

Shah, Amir. "Sanctions Fears Panic Afghans." United Press International, November 30 2000.

"Taliban Stockpile Heroin for Europe." Far Eastern Economic Review2001.

"Un Official Warns of Huge Stockpiles of Narcotics in Afghanistan." IRNA, February 21 2001.

UNDCP. Afghanistan: Annual Opium Poppy Survey 2000. Islamabad, Pakistan: United Nations International Drug Control Programme, 2000.

________. Annual Opium Poppy Survey 2001. Islamabad: UN Drug Control Programme, 2001.

________. Global Impact of the Ban on Opium Production in Afghanistan. United Nations International Drug Control Programme, 2001.

________. Drug Situation in the I.R. Of Iran. Tehran: United Nations International Drug Control Programme, 2002.

UNODC. The Opium Economy in Afghanistan: An International Problem. New York: United Nations Office on Drugs and Crime, 2003.

________. 2004 World Drug Report. UN Office on Drugs and Crime, 2004.

________. The Opium Situation in Afghanistan as of 29 August 2005. United Nations Office on Drugs and Crim, 2005.

________. Summary Findings of Opium Trends in Afghanistan, 2005. United Nations Office on Drugs and Crime, 2005.

UNODC Field Office, Tehran. "Comparison of Number of Regular and Irregular Drug Users in Iran, Year 2002." ed. Conrad Legendy. Tehran, 2002.

________. "Comparison of Total Drug Seizures in Iran." ed. Conrad Legendy, 2002.

________. "Profile of Drug Abuse among Regular Users in Iran, Year 2002." ed. Conrad Legendy. Tehran, 2002.

UNODCCP. Afghanistan Opium Poppy Survey 2002. United Nations Office for Drug Control and Crime Prevention, 2002.

________. Illicit Drugs Situation in the Regions Neighboring Afghanistan and the Response of the Odccp. United Nations Office for Drug Control and Crime Prevention, 2002.

"Us Confirms Poppy Eradication in Afghanistan." Global News Wire, May 26 2001.

"Us Says Taliban Claims on Curbing Opium Poppy Not Credible." Agence France Presse, December 9 2000.

Zubrzycki, John. "Opium Banks the Wall St of Afghanistan." The Australian, October 15 2001.


Contents



Abbreviations used in this paper

DCHQ – Iran’s Drug Control Headquarters

DEA – Drug Enforcement Agency

IDU – Injecting drug user

IRI – Islamic Republic of Iran

RSA – Rapid situation assessment

UNDCP – United Nations Drug Control Program

UNODC – United Nations Office on Drugs and Crime

UNODCCP – United Nations Office on Drug Control and Crime Prevention

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