My colleagues at GZERO Media have written about how the Taliban will look to finance itself now that it controls Afghanistan, but how did it fund its way to power in the first place? How did the Taliban bankroll its resurgence from nearly obliterated to running the country?
As it turns out, the US unwittingly helped.
For most of modern history, opium poppy cultivation has been one of Afghanistan most profitable industries.
Then, in 2000, the Taliban banned poppy cultivation in an attempt to gain international recognition and sanction relief (despite it representing a meaningful share of the group’s income). Opium production dropped by 94% and poppy fields in Afghanistan’s south virtually disappeared. Soon enough, the Taliban faced strong backlash from its rural constituencies and eventually reversed the ban.
After invading Afghanistan in 2001, the US set out to suppress opium poppy cultivation in order to reduce the production of heroin and other opiates. The idea was that by eradicating crops directly and encouraging alternatives, poppy cultivation would decrease, prices would increase, and opiate consumption at home would be reduced. This policy was conceived both as an important battle front in America’s "War on Drugs" and as a way to undermine a major source of Taliban funding.
However, despite spending an estimated $8.6 billion to stamp it out, poppy cultivation has grown significantly over the last 20 years, especially in poorer areas where insurgencies were more widespread. By 2014, Afghanistan was producing three times as much opium poppy as it did in 2000. Today, Afghanistan is by far the world’s largest opium producer, capturing 85% (!) of global supply according to the UN.
As GZERO has reported, the flourishing opium trade has been a boon for the Taliban:
Multiple sources have documented how the Taliban is able to rake in hundreds of millions of dollars a year by taxing every stage of the opium production process, from cultivation to smuggling. Illicit drugs represent one of the largest sources of income for the Taliban, with some estimates putting the share as high as 60% of annual revenue.
A few days ago, I came across a fascinating Twitter thread by Jeffrey Clemens, an associate professor of economics at UC San Diego:
As Clemens explains in a set of papers, Econ 101 teaches that the effort to reduce opium production in Afghanistan was doomed to fail, because demand for opiates is not very responsive to changes in the "farm-gate" price of opium poppy (i.e., the price fetched by farmers). This happens for two main reasons:
The price of opium poppy at Afghan farms accounts for only a small share of the production cost of opiates; the vast majority is due to processing, trafficking, and distribution costs, while high profit margins further inflate retail prices. Since much of the value of heroin and other opiates is added at later stages, even large increases in the price of poppy have very modest effects on the final retail price.
Most heroin and opiate users are relatively insensitive to changes in the price of drugs, so increases in retail prices have little effect on consumption.
And higher quantities sold at higher prices equals more tax revenue for the Taliban...
But that's not the worst of it. The effort to curb opium output and deny the Taliban funding didn’t just fail—it backfired spectacularly. As the US ramped up its suppression efforts, poppy cultivation not only increased—it shifted towards areas largely controlled by the Taliban, increasing the insurgents' share of opium revenue.
As the maps show, before the US campaign began around 2005, poppy cultivation was scattered across 32 of the country's 34 provinces. By 2009, US eradication policies had caused the vast majority of poppy cultivation to shift away from areas controlled by the Afghan government toward southern and southwestern regions under Taliban control.
While 16 provinces became poppy-free, Clement found, "neither the elimination nor significant reduction of poppy cultivation occurred in Taliban-heavy provinces." In fact, "production in Taliban-heavy provinces rose substantially." According to a different study, by 2008 about 98% of Afghanistan’s opium yield was grown in Taliban regions, generating close to half a billion dollars a year in revenues for the group.
As Clemens concludes, “in effect, the US eliminated competition from government-friendly regions of the country, which INCREASED the Taliban’s ability to profit from the drug trade.” In turn, this drug money helped the Taliban grow in military strength and territorial control, eventually enabling their takeover of the entire country.
Add that to the list of unforced errors that plagued America's longest-ever war.