Afghanistan’s Opium Economy: Incentives, Insurgency, and International Demand

David Eisler
December 05, 2012


April is the cruelest month. Beautifully colored poppy fields spring up across southern Afghanistan, heralding the start of the harvest season and hope for thousands of farmers and workers looking to earn enough income to support their families. However, the darker side of this story—violence, power struggles, drugs, and corruption—has complicated both domestic and international antidrug and crime efforts. The fight for control of Afghanistan’s opium economy has created a powerful entity competing for influence within an already fragile state, where counterinsurgency and counternarcotic campaigns have sought to empower a weak central government. Worldwide drug use has led to a sustained demand for Afghanistan’s opium and heroin production, assuring that domestic competition for control of supply remains high.[i]

The financial benefits to anyone along the supply chain have proven irresistible for many, from individual workers and farmers who produce the opium to the warlords, commanders, and international traffickers who control its movement. Now, over a decade after the fall of the Taliban government, some analysts argue that the insurgency is no longer about religion or ideology, but rather a battle for money and wealth under the guise of a broader political movement where incentives of the drug trade continue to motivate those involved to maintain the system’s status quo. 

Afghanistan’s Opium Economy

Each spring, hundreds of Afghan farmers and laborers prepare to harvest fields of poppy that can earn them an annual income in just a few short weeks. Transient workers from neighboring provinces flock to the fields in search of opportunities in more fertile lands. While some farmers may prefer to grow legal cash crops, nothing is as financially lucrative as a field of poppy flowers.

Today, estimates put the amount of the world’s opium processed in Afghanistan around 93 percent, almost all of which is cultivated in a small selection of southern provinces near the Iranian and Pakistani borders—Kandahar, Helmand, Uruzgan, Farah, Nimroz, and Zabul. In 2009, opium was a global industry worth around $68 billion, and remains rampant today despite worldwide efforts to reduce demand. Trafficking routes run through Pakistan, Iran, and Central Asia, which then branch into Europe, Russia, Africa, and China. Each node connects to numerous points around the world, making international smuggling and trafficking one of the world’s most profitable illicit endeavors.[ii]

At its foundation are the villagers and farmers, many of whom see poppy as the path of greatest economic return in country with endemic poverty. Individual wages range from $150 to $260—depending on the season—for two weeks of manual labor. Compared to the basic monthly wage of $165 for a soldier in the Afghan National Army, poppy farming is an attractive option. Some farmers make the decision whether or not to grow poppies or legal cash crops—e.g. pomegranates, grapes, or cotton—based on economic and financial incentives. Poor farming conditions like droughts and infertile soil lead some to choose poppies because of the reliably high price. The higher return may be a farmer’s only chance to earn a livable wage for the year. Despite the legal risks associated with selling opium, the farmers consider it more valuable than gold, stockpiling their product and selling it for cash on the market when times are tough.[iii] 

The Afghan Taliban owe much of their sustained influence in the southern provinces to the opium economy.[iv] As the rest of the country struggled economically under the Taliban government, southern provinces like Kandahar and Helmand prospered.[v] During the initial days of the Taliban’s campaign for dominance in the aftermath of the 1989 Russian withdrawal, the organization gave careful attention to build relationships with the influential farming and merchant communities. They ousted local militias who had been collecting tolls and taxes along roads. The Taliban also “encouraged and protected the opium trade, which won them considerable support in Kandahar’s agricultural districts.”[vi] 

Since the fall of the Taliban government in 2001 and the birth of the insurgency that followed, insurgent military campaigns have been planned to coincide with the opium harvest each April. Most local Taliban fighters are farmers, and by defending the opium harvest against government intervention, the insurgency solidified support with the local population as well as increasing revenues from taxation and smuggling.[vii] Poppy eradication efforts, originally devised as an Afghan government solution to stem the flow of opium from Afghanistan and target the Taliban’s finances, only served to alienate a large portion of the southern population who relied on opium to feed their families. In an attempt to counter this effect, American military forces conducting counterinsurgency operations focused their economic efforts on supporting the cultivation of alternative crops while the U.S. State Department “paid provincial governors to use Afghan forces to eradicate[poppy crops].”[viii]

Estimates for how much revenue the opium economy generates for the Taliban vary slightly, but all are in the neighborhood of several hundred million dollars. A recent UN report estimated the Taliban raised about $400 million in 2011, of which the Taliban leadership received $275 million and the rest was “collected, spent, or misappropriated at the local level.”[ix] The United Nations Office on Drugs and Crime (UNODC) calculated that the opium contribution of that revenue was around $150 million, the rest having come from taxation of local economies in their districts.[x]

Insurgents use revenue generated through protection, smuggling, and trafficking to finance operations at the district and provincial levels. While drug profits alone are not enough to sustain the larger insurgent movement across the country, it is not surprisingly one of the primary financial factors contributing to operations in the volatile southern provinces. The costs associated with the insurgency at the provincial level are divided between salaries for fighters, transport, fuel, food, weapons, and explosives. According to a report prepared for the United States Institute for Peace, local insurgent commanders pay a percentage of the revenue collected to the district military commander and district shadow governor. District leaders in turn pay a portion to the provincial chain of command. Often, these percentages are “paid in the form of raw or partially refined opium,” which ultimately makes its way from the provincial level to the Taliban’s central financial committee.[xi] Similar to the structure of an organized crime syndicate, the insurgent command hierarchy provides ample individual opportunities for self-interest at every step of the ladder. This may partially explain the unaccounted portion of last year’s revenue. 

A closer look at the numbers is revealing—much of the total opium production in Afghanistan is smuggled through Taliban controlled territory, resulting in an estimated $250 million in payments from traffickers for armed protection, or by securing “bribes from drug-trafficking groups at checkpoints.”[xii] The actual revenue from opium cultivation itself comes from taxes and additional protection fees on farmers, local traders, and laboratories that refine opium into heroin. However, far from taking total control of the production and cultivation, the Taliban only demand 10 percent in ushr, the traditional harvest tax.[xiii] This leaves local farmers with a gross revenue of around $440 million in raw or sold opium, of which the Taliban only receive $44 million.[xiv] 

Because of the incentives and benefits associated with the opium economy, balance of power issues arise when warlords, insurgents, and corrupt government officials all vie for control of local markets. Reports of fighting between these groups have surfaced most often in areas without a clear dominant force, leading to a fierce battle for influence at the district and provincial levels.[xv] Further, the evolution of the opium industry, particularly in southern provinces, has undermined the authority and influence of the Afghan central government attempting to battle the Taliban insurgency. Initially, local drug lords “took control of district and provincial level state institutions of government with the assistance of insurgent groups,” creating a mutually beneficial relationship that maintains the influence and power of both sides.[xvi] Warlords have used revenues to purchase their own loyal militias, and in some cases have eliminated market rivals by providing intelligence to ISAF forces that led to targeted raids on their competitors’ hideouts. Attempts to overcome such balance of power struggles have been fraught with difficulty and instability, and the tension of world demand has only increased economic incentives to control domestic markets. 

Into the World Market

In the summer of 2000, the Taliban, seeking international recognition for their regime and under pressure from harsh UN sanctions, banned poppy cultivation, driving Afghanistan’s production of opium down to 10 percent of what it had been in previous years.[xvii] Farmers across the southern provinces found themselves without an income and heavily in debt. The shortage that came the following spring caused the price of opium to skyrocket from $28 to between $350 and $400 per kilogram. A little more than a year after the ban, on September 11th, 2001, a single kilo of opium would fetch an all-time high of $746.[xviii] A few months later, prior to the April harvest, the Taliban leadership lifted the cultivation ban, and poppy production in 2002 returned to its original pre-ban levels.

Despite this gap year in production, world supply remained constant. In fact, variations in yearly production within Afghanistan appear to have no major effect on global consumer markets. According to a 2011 report by the UNODC, local decreases in opium production due to disease or other adverse growth conditions have not led to the worldwide shortages that would be expected given the heavy reliance of world supply on Afghan production.[xix] Major price increases, however, did occur, indicating that stockpiles are likely kept along the supply chain by those who have the most to gain financially, typically traders and traffickers linking Afghanistan to the world market. 

Only a few weeks after the attacks on the United States, opium prices dropped to $95 per kilo, “indicating that owners were dumping stockpiles in anticipation of a U.S.-led invasion.”[xx] In 2009, the global opium trade was valued at $68 billion, with the highest market shares in Russia, Western and Central Europe, the United States, and China. The financial profitability of the opium market even has led some international drug traders with an interest in protecting and encouraging the Afghan opium economy to make cash “investments” with the Taliban senior leadership, giving some “powerful smugglers real influence in the Quetta Shura’s decision-making process” and complicating an already fragile power balance within the insurgency.[xxi] 

Motivating the Insurgency

Despite the profits associated with the global opium business, there is no evidence to suggest that the Taliban has any control or influence on the international trade once the opium leaves Afghanistan.[xxii] Whether this is intentional or merely reflects the system’s international structure is difficult to say. Current opinions differ on what is currently driving the Taliban insurgency, particularly focusing on ideological and monetary incentives. One survey of Afghan villagers by the U.S. Institute for Peace reported that more than 80 percent of the respondents believed that Taliban commanders were fighting for profit rather than for religion or ideology.[xxiii] Some Taliban commanders have reportedly become more personally involved with the drug trade independent of their roles in the insurgency, likely keeping a cut of local profits for themselves. Insurgent battlefield tactics have also shifted from the pursuit of tactical gains to “protecting drug shipments.”[xxiv]

These developments may explain the evolution of the insurgency in the southern provinces that have a deep historical and economic relationship with the opium trade, but the explanations fall sort when generalized to the rest of the country that does not depend as heavily on drugs for financial support. If profits were the sole objective, we would likely expect more reports of insurgent infighting over control of the opium trade, or at the very least more attempts to involve themselves in the business internationally. In spite of the focus that drugs receive as a major characteristic of the insurgency, some analysts believe that even without the drug trade, the Taliban “would still be a powerful insurgent force seeking to overthrow the Karzai regime.”[xxv] 

Ties With International Terrorism

While the Taliban’s continuing motivations as a movement may be unclear, the evidence does point to limited global involvement. On the other hand, the profitability of the global opium market suggests that international terrorist organizations may also have influence and gain financially from the drug trade. A few years after the 9/11 attacks, a government-funded study called The National Commission on Terrorist Attacks Upon the United States devoted a portion of their findings to Al Qaeda’s “means and methods to raise, move, and use money.”[xxvi] They concluded that there was “no substantial evidence to suggest that Al Qaeda played a major role in the drug trade or relied on it as an important source of revenue either before or after 9/11.” Considering the tenuous relationship reported between the Taliban government and Al Qaeda in Afghanistan, such a conclusion may not come as surprising. However, the former chief of operations for the Drug Enforcement Agency (DEA), Michael Braun, stated in 2009 that he believed Al Qaeda was in fact heavily involved in Afghan opium trafficking, then and now. [xxvii]

These analytical discrepancies appear to rely on differing assumptions about the nature of the opium business rather than specific evidence linking Al Qaeda to trafficking either inside or outside Afghanistan. While some reports name Osama bin Laden as having had a hand in the protection of opium shipments leaving Afghanistan, many analyses rely on the circumstantial evidence of the Taliban’s protection of Al Qaeda in Afghanistan prior to 2001, and infer from it some level of cooperation on the drug trade.[xxviii] However, there is limited solid evidence to suggest that Al Qaeda has any involvement or influence in the Afghan drug trade today, particularly with Al Qaeda’s waning influence in the region in the last few years. 

Breaking the Chains

Afghanistan’s relationship with the opium economy has complicated counterinsurgency and counternarcotics strategy over the last decade. Rampant corruption, competition for power, and limited agricultural alternatives have combined with tempting economic incentives to sustain a dangerous and destructive business. 

Low global interdiction rates—between 2 and 16 percent—have ultimately shown predominantly international solutions to be ineffective.[xxix] With such a high volume of the world’s supply coming from Afghanistan, other attempts to address the problem at its source by curbing domestic production have also met with limited success. Without an economically viable alternative to poppy and opium, farmers have little incentive to change. 

The motivations behind planting poppy or joining the insurgency stem from the same source—poor economic conditions. Many ground-level Taliban fighters are farmers, returning home each April to harvest their crops. Moonlighting as an insurgent is a way for them to earn a living and provide for their families. Warlords, commanders, and government officials, on the other hand, have both the position and the incentive to gain financially by controlling local markets. Whatever their ideological motivations, the opportunities for fortune and power are often too alluring to ignore. 

Ultimately, breaking the chains that bind the people and the insurgency to the opium economy must focus on incentives at all levels to promote positive change, including international efforts to reduce world demand. Like many profitable illicit markets, the opium business survives because there are people who want what is offered, and are willing to pay a high price to get it. As long as this holds true, domestically and internationally, the chain will remain unbroken. 

David Eisler is a first-year master of international affairs candidate at Columbia University's School of International and Public Affairs.  Previously, he was a captain in the U.S. Army where he served in Germany, Iraq, and Afghanistan.


[i] William A. Byrd and Olivier Jonglez, “Prices and Market Interactions in the Opium Economy”, in Afghanistan’s Drug Industry: Structure, Functioning, Dynamics and Implications for Counter-Narcotics Policy (Report, UNODC and The World Bank, n.p., n.d.), 117.

[ii] Hakan Demirbüken, Hayder Mili , Renée Le Cussan, “Global Afghan Opium Trade,” (Report, UNODC, Vienna: 2011), 7.

[iii] Byrd and Jonglez (n.d.), 27.

[iv] Gretchen Peters, “How Opium Profits the Taliban” (Peaceworks no. 62, United States Institute for Peace, Washington, DC: 2009), 5.

[v] Carl Forsberg, “The Taliban’s Campaign for Kandahar” (Afghanistan Report no. 3, Institute for the Study of War, Washington, DC: 2009), 16.

[vi] Forsberg (2009), 16.

[vii] Peters (2009), 35.

[viii] Alissa J. Rubin and Matthew Rosenberg, “U.S. Efforts Fail to Curtail Trade in Afghan Opium,” New York Times, 26 May 2012.

[ix] Reuters, “Insurgent Taliban Rake in $400m from Different Sources: UN Report,” Express Tribune, 11 September 2012.

[x] Byrd and Jonglez (n.d.), 8.

[xi] Peters (2009), 19.

[xii] Seth G. Jones, “Counterinsurgency in Afghanistan” (Monograph, RAND Corporation, Santa Monica, CA: 2008), 47.

[xiii] Peters (2009), 18.

[xiv] Byrd and Jonglez (n.d.), 30.

[xv] Peters (2009), 18.

[xvi] Jones (2008), 48.

[xvii] Peters (2009), 14

[xviii] Ibid.

[xix] Demirbüken (2011), 26

[xx] Peters (2009), 14.

[xxi] Ibid., 23.

[xxii] Ibid., 25.

[xxiii] Ibid., 6.

[xxiv] Ibid., 21.

[xxv] Justin Mankin, “Gaming the System: How Afghan Opium Underpins Local Power,” Journal of International Affairs 63, no. 1 (Fall/Winter 2009), 195.

[xxvi] National Commission on Terrorist Attacks Upon the United States, “Al Qaeda's Means and Methods to Raise, Move, and Use Money, ” (2004), 22.

[xxvii] Peters (2009), 24.

[xxviii] Jones (2008), 23.

[xxix] Demirbüken (2011), 5.