Pakistan: Drug Trap to Debt Trap

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without the written permission of the publisher.

Author: Dr. Ikramul Hag

my wife


Editor: Huzaima Bukhari Edition

May 2003

Huzaima Bukhari

and sons


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Abbas Askar Published by: Lahore law Publications # 34, (2nd Floor), Sadig Plaza, 69, Shahra-e-Quaid-i-Azam, Lahore-54000, Pakistan. Tel: (92-42) 6365582-3; Fax: (92-42) 6365584 [email protected]

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behind this work

@Dif:o: Dedication


Foreword by Dr.Citha I). Maass Preface

(ix) (xiii)



Part I: Drug-trap Chapter 1 Pals-Afghan drug trade Chapter Notes:

Chapter 2

1 22

Power of 'narcocracy'


Chapter Notes:


Chapter 3 Narcopolitics


Chapter Notes:


Chapter 4 Narcoterronsm


Chapter Notes:


Part II: Debt-trap Chapter 1 Deadly debt trap Chapter Notes:

Chapter 2

167 198

IMF tranches: Bailout or deathblow?


Chapter Notes:


Chapter 3 Politics of debt complex Chapter Notes:

219 249




264 of Abbreviations





The catastrophe on September 11, 2001 has drastically changed international politics and revised global priorities. Concerns of yesterday seem to have lost their significance, while new anxieties begin to dominate our lives, interfering even in the daily routine. Security has become the overriding issue. Governments all over the world set up committees, tighten up the legal system, and empower law enforcing agencies. While all this is being done with good intentions, it may, however, create new concerns. How can one assure that the governments do not misuse their new powers for authoritarian purposes? Here, it seems, enlightened citizens, "watchdogs" of civil liberties, are, in particular, called for to scrutinize carefully the manner in which state institutions are going to use their extended authority. The new form of terrorism, as tragically demonstrated on September 11, has operated on a global level. All of a sudden, the reverse side of globalisation, its ugly face, has been brought into the international limelight. For many, it has been a shock to realize what it actually means to live in a "global village." No longer can we ignore the warning that the quarrel in our neighbour's house does, in fact, also endanger our own well-being and safety. Finally, another concern should also be taken seriously. Terrorism-related priorities certainly deserve special attention. However, they should not relegate socio-economic problems to second place. International terrorism has found a fertile ground especially in so-called weak states with disadvantaged societies. Whether it is poverty, other social deficiencies, or a state being weakened by economic malfunctioning, indebtedness or

(x) corruption, these issues should definitely remain top-ranking obligations for the international community. This is where the watchful eyes of concerned citizens all over the world are urgently needed. Whether terrorism or poverty, the most effective prevention against such threats is to empower civil society. In Pakistan, an outspoken and courageous representative of civil society has been Dr. lkramul I laq. Twelve years ago in 1991., he had already raised his voice against a threatening phenomenon to Pakistan's national and social security in his well-researched Now, with even greater book "Pakistan: From !lash to heroin." concern, he has meticulously documented a twin threat to Pakistan's very existence in his excellent study on the drug trap and the interrelated debt trap. His clearly stated intention and obligation as an advocate of a strong civil society is to alert his fellow countrymen against Pakistan's journey from "Kingdom of Heroin" to "Bankrupt-nuclear State." Dr. lkramul I lag's concern, however, is not only confined to his home country Pakistan. On the one hand, he thoroughly analyses how military and civilian leaders have led their country into a crippling debt trap and which role "narco-money" has played in this disastrous power game. On the other hand, he painstakingly reveals the external factors which have facilitated and accelerated Pakistan's fall into the debt trap. He rightly argues that Pakistan's ill-fated situation illustrates the deep problems of poor countries in general. Everyone will agree with his strong appeal that in the "global village" it is the obligation of rich countries to support the poorest ones in getting get out of their debt trap. This leads Dr. lkramul I laq to a conclusion which will certainly be shared by everyone familiar with international linkages in the "global village": 'Only when ordinary men, women and children in cities and villages around the world can make their lives better, will we know that globalisation is indeed becoming inclusive, allowing everyone to share its opportunities. That is the key to eliminating world poverty. The "Debtors' Prison" will remain intact and strong unless this goal is achieved through the collective will of the international community."

Although the book was finalized shortly before September 11, Dr. Ikramul I Iaq found prophetic words aptly describing Pakistan's current predicament. The developments since this fateful day in September strongly support his recommendation: "Pakistan needs .to be helped by the international community at this critical juncture. If democratic, antifundamentalist efforts are not strengthened in Pakistan, it will prove to be another chaotic country like Afghanistan." Dr. lkramul I laq has indicated the appropriate way to lead Pakistan out of the twin traps. His thorough analysis will help to avoid mistakes made in the past, thus paving the way for a brighter future of the Pakistani society. Dr.Citha D. Maass Senior Research Fellow (South Asian and Afghan Affairs) Stiftung Wissenschaft und Politik (SWP) German Institute for International and Security Affairs Berlin, Germany.


I started research on "narcoterrorismi" in 1979 as a young journalist working with Viewpoint, a weekly journal of Lahore, Pakistan. I contributed a number of investigative reports on the issue, which were later compiled and published in the form of a book2, by my wife Huzaima Bukhari. A vecran journalist and my Editor in Viewpoint, Mr. Mazhar All Khan, in his introduction to the book observed: "In Pakistan From Hash To Heroin, Ikramul Ilaq has

presented the results of his prolonged labours in a simple, straight forward manner. It offers a frightening picture, more frightening because it presents the harsh truth without the garnish of rhetoric. The book should be read by every concerned citizen, by all government servants connected, directly or indirectly, with law enforcement and by decision makers at the top of the pyramid, so that national effort can be mounted to halt Pakistan's drift to total ruin." I have to note with great regret and concern that the warning issued by him was not considered by anybody, especially by those "at the top of the pyramid," and Pakistan has been drifting towards "total ruin" with an accelerated pace since 1980. The successive regimes since General Ziaul Haq have paid no heed to stem the rising tide of "narcoterrorism," rather, they contributed substantially in making Pakistan a helpless victim of narco onslaught. The State was first trapped in drug trafficking-for-arms (labelled by many as "Kingdom of Heroin") and later on caught in the deadly debt-trap. Presently, it is being sucked into U.S.-planned 'war-on-terrorism-


Pakistan: Drug trap to Debt trap


trap.' I have in this book tried to trace and analyse this rather awful transition. Today, Pakistan is considered by many western analysts and American think-tank as a "failing State", which may not be able to survive as an independent nation-State. Pakistan is perceived widely as a country that has failed to cope with its internal ethnic and linguistic strives and religious sectarianism. It has never bothered to achieve provincial harmony, social distributive justice and a society based on egalitarian principles. There is a consensus that this "failing State" has a dismal economic performance and a highly unstable political system vulnerable to frequent military interventions. Pakistani official quarters and a good number of local analysts reject these views and term such an alarmist perspective an "Indo-Jewish" conspiracy to demoralize the country and to tarnish its image at the global leve13.

sustained investment — a vicious trend that has fostered a dependence on foreign loans and grants. Remittances from Gulf States — a crucial source of hard cash had all but disappeared8. The present U.S. $10 billion reserves largely constitute purchase of dollars by the State Bank of Pakistan (SBP) from the kerb market, fake remittances arranged through local money exchanges (paying them local currency) and influx of capital from abroad in the aftermath of 9/11 under the fear that the same might be confiscated by the USA and its allied countries under the pretext of "war on terrorism." People didn't want to send money home because the government in the wake of nuclear tests froze some $11 billion in Pakistani bank accounts, fearing that its economic troubles would trigger a run on the State Bank. Pakistan has been perpetually facing increasing fiscal deficit as less than 1% (registered taxpayers) of Pakistan's 146 million people pay income tax.


One may question use of the terms "terrorist", "rogue", "failing" or "failed" for Pakistani State, but it is an undeniable fact that the country is facing grim economic stagnation and rising poverty, making it difficult to emerge as a viable economic and political entity4. The "military complex", comprising a few mighty generals, poses a serious threat to the process of democratization. If Pakistan fails to restore and sustain a reliable democratic structure in the near future, there is a strong possibility of its losing the status of a sovereign and independent nation-state. The "military complex" started "herginization"5 of Pakistan in the 1980s, which destroyed the entire fabric of the society. In the 1990s this complex militarized the religious fundamentalist groups, and the result was that the society as a whole became a hostage in the hands of these terrorists, who defy any respect for human dignity and human rights. The "military complex" is also responsible for installing corrupt politicians, who resort to corruption, loot and plundering of the national wealth in a ruthless manner, in connivance with the top brass of the military. The military coral-A-ex has always been the main beneficiary of the process of loot and plundering of the national wealth8. These acts are pushing the State towards a dependent economy, surviving on domestic and external loans, which is entangling continuously in the deadly debt-trap. Today. Pakistan is among the most indebted nations in South Asia7. It spends as much as two-thirds of its annual budget — or 13% of GDP — on debt servicing and on the military For years, high domestic interest rates have discouraged

The economy's balance sheet on external debt and liability for the financial year 2000-2001 before the 9/11 episode placed the annual debt servicing liability at $7.8 billion, comprising interest payments of $1.7 billion and principal repayment of S6.7 billion. The country could actually pay $3.7 billion while a large chunk of $4.1 billion was rescheduled. What was actually paid was again through borrowing. The debt servicing liability could have been still higher, had the State Bank not purchased a hefty amount of $1.6 billion from the open market and relief was not given to Pakistan in the aftermath of 9/11. In fact, in the absence of such purchases the annual debt servicing liability would have increased by that amount and it would have touched $9.5 billion. There are only three sources of earning foreign exchange, which include merchandise exports, services exports and home remittances of workers. These fetch $10.6 billion a year. These sources have no debt servicing liability as is in the case of loans or in the case of foreign investment, requiring remitting of profit and principal. The latter amounted to $456 million in 2000. By end June 2000, the country had accumulated external debt of $32.7 billion. Adding to that, foreign exchange liability of $4.6 billion including foreign currency accounts, bonds, etc., pushes the total debt liability to $37.3 billion. Then there was external liability payable in rupees amounting to $1.72 billion. Taking a conservative view, if the debt servicing liability of the 2001 remained at the last year's


Pakistan: Drug trap to Debt trap

level, the total debt in terms of external liabilities would jump from $37.3 billion to over $40 billion by the end of 2001. The much sought for IMF assistance, in fact, will keep on increasing the debt burden of Pakistan in future. The debt problem is multidimensional in its genesis. Its root causes lie in budgetary deficit, external sector's imbalance and low growth. Multi-pronged strategy required to address this squarely is missing, even today. Trends emerging in the key variables, which are the real determinants in its matrix, are not in the right direction. There has been good improvement in primary balance as it has turned into a surplus of 1.9 per cent of GDP in the fiscal year 2000-2001 from a deficit of 0.1 per cent of GDP but the current deficit has worsened. The over all fiscal deficit has also widened. Despite extraordinary efforts during 2001, the tax-GDP ratio deteriorated. The current expenditure has grown at double the pace of GDP while development expenditure recorded an absolute decline, not to speak of even keeping pace with GDP. The total domestic debt has increased from Rs.1056.1 billion in 1996-97 to Rs.1799.2 in 2000-01, which was 52.7 per cent of GDP. 'I here is a huge financing gap in the balance of payments. The government set an ambitious export target of $10 billion for the year 2002 but this alone proved not to be adequate to finance the gap. The country has plunged head on into the debt trap because its savings have all along fallen short .of investment requirements and the shortage has been met by borrowing from abroad. For the past many years national savings have saddled in the range of 12 to 14 per cent of GDP while investment stood at around 18 per cent of the GDP. The household savings arc 90 per cent of the national total while the remaining comes from the corporate sector and other sources. No step has been taken to encourage the savings. But the irony is that since May 1999, the rate of return on the national savings schemes, which mostly tap household savings, has been reduced more than three times on the dictates of IMF. The GDP growth demonstrates a country's economic strength and is used as a denominator in measuring its propensity and potential capacity for debt repayment. The growth trend had bottomed out in 1998-99 when it was recorded at 3.1 per cent but it improved to 3.9 per cent in 1999-2000. The fiscal year 2000-01 was worst with 2.5% and slight improvement of 3.6% was



recorded in 2001-02. The State Bank had predicted a slowdown in economy in 2001 and 2002, but improvement in 2003. According to the present indications, cotton and rice arc maintaining their trends while sugarcane has slackened. The large-scale manufacturing has posted rising trends in the early months of 2003. Nevertheless the government policies arc giving lean support to the real (commodity producing) sectors. Credit advanced to the private sector has substantially reduced in the fiscal year 2000 to 2003. No net credit has been advanced to agriculture and the recoveries have exceeded disbursements. The gains of pricing policies are being lost in the absence of supportive procurement and intervention agencies in the public sector. Textile sector has been allowed some incentives and that has shown positive response but the other industries lack any tangible policy support9. An important point that is usually overlooked whenever a new loan is granted to Pakistan relates to its long-term effects on our economy. The euphoria that follows such agreements ignores the reality that only a small amount of the new loan is actually available to be made use of in the country. Pakistan has been making average repayments to its loans obtained over many decades of the order of $3.66 billion annually over the last decade alone, and yet, has seen its external liabilities almost double. Much of these repayments have been based upon increased borrowing, suggesting that a substantial proportion of new loans enacted each year do not come into the country and are used simply to pay-off old debt. The most astonishing fact about Pakistan's drug trap is that net addition to total debt outstanding in the period 1990-2000 was $15,451 billion while in the same period the total amount repaid as interest and principal was $36.611 billion. Pakistan is caught in a deep and deadly debt trap from which there seems to be no way out if the policies dictated by the IMF and others are continuously followed. Those institutions and countries, which have lent us money over the last few decades, have reaped great rewards from their investments. They are like the money lender or landlord, and Pakistan the indebted peasant, Where just to survive and pay off some of our earlier debt, we arc doomed to borrow, increasing further our debt liabilities in the Process. The United States through the lending agencies has been

Pakistan: Drug trap to Debt trap


forcing Pakistan to toe its military and foreign policy designs against the interest of humanity at large. Just as generations of peasants have been enslaved by their debts, so has Pakistan. Like peasants, we too have paid out huge sums of money in the form of interest and principal but despite this, rather than diminishing, our debt liability has increased markedly. Over the last two decades whenever the international financial institutions and donors gave us loans they had a negative impact on Pakistan's economy bringing it on the verge of bankruptcy and default on some occasions. The important question one needs to ask is then why these institutions and countries make loans to a country like Pakistan? The answer is quite obvious. Even near bankrupt and close-to-death countries, are profitable investments for the lenders. Not only do they get far more than what they had lent, the debt liability increases and countries like Pakistan are caught in a perpetual debt trap having to make repayments for years to come. A very profitable business indeed for the lenders!

the highest court of the country through party hooligans) the entire judicial system. flow Nawaz used to live like a King was narrated by a journalist in 1998 in the following words:


Since 1999 the process of democratization of society has impaired Pakistan. The army staged a coup on October 12, 1999 as a reaction against the alleged attempt by the then Prime Minister Nawaz Sharif to dismiss the Chief of Army Staff General Pervez Musharraf. On October 16, the constitution was suspended and a state of emergency was declared. However, because of the increasingly authoritarian attitude of former Prime Minister Nawaz Sharif, the demise of his government did not evoke any feeling of sadness or any negative reaction within the country. Earlier in the year 1999, the government of Prime Minister Nawaz Sharif tried to subdue the Jang Group, the country's largest media group; and to punish Najam Sethi, editor of The Friday Times, and other journalists, who had cooperated in the production of a BBC documentary investigating corruption involving the family and business concerns of the then prime minister. These episodes, which received widespread publicity within Pakistan and abroad, illustrated the range of instruments in the hands of the government to intimidate, harass and punish the press. The story of Nawaz rule and his ultimate exile from the country portrays the actual decadence of Pakistani State where the robbers and looters can beat (physically as well by attacking

"While constantly pleading with expatriate Pakistanis to send their hard-earned dollars to their motherland, former Prime Minister Nawaz Sharif caused a dent of at least Rs.110 millions to the national exchequer through the 28 foreign trips he undertook after assuming power on February 17, 1997. Official documents seen by the News Intelligence Unit (NIU) disclosed that about Rs.150 million were spent from the tax-payers money for Nawaz Shard's six Umra [Pilgrimage] trips. For almost each of his foreign visits, Nawaz Sharif used his special Boeing plane that he had promised to return to PIA for commercial use in his famous national agenda speech in June last year. "Almost unbelievably, instead of keeping his promise to return this special aircraft to government-owned air carrier, PIA, Sharif ordered an extravagant U.S. $1.8 million renovation of his aircraft that turned the Boeing into an airborne palace. While making sermons on austerity to the nation, on almost every domestic tour on this aircraft on which all the seats were in a first class configuration — Nawaz Sharif and his entourage would always be served a specially-cooked, seven-course meal. PIA's former chairman Shahid Khaqan Abbasi had, in fact, hired a cook who was familiar with Sharirs craze for a special type* of 'Cajrela' (carrot dessert). "While aboard his special plane, Sharif was always served Lassi la popular local drink] or Badami [made of almonds] milk

in a Mughal style silver glass by a crew of his choice. Even on domestic flights, Sharif and his men would be served with Perrier water, not available even to first class domestic passengers. The towels he would use on board had golden embroidery. "Not for a moment, after making his historic promise to the nation for leaving the palatial prime minister house for a modest residence in Islamabad, did Nawaz Sharif show any intention to leave the prime minister's palace. On the contrary, soon after that Speech, the Prime Minister House received fresh supplies of imported crockery and groceries.

Pakistan: Drug trap to Debt trap

"Some of the permanent in-house residents were Sharifs personal friends, including one Sajjad Shah who used to crack jokes and play songs for him. Shard's little-known political mentor Hasan Pirzada, who died while Nawaz was in office, always lived at the Prime Minister House. Sources estimate that Pirzada's daily guest-list to the PM I louse numbered around 100 people who were always served with meals or snacks. In the first year of Nawaz Sharifs second term in power, Harnid Asghar Kidwai of Mchran Bank fame, lived and operated from the Prime Minister House until he was appointed Pakistan's ambassador to Kenya. "While making unending promises of instituting merit in all appointments and selections, Sharif played havoc with the system while issuing personal directives by ordering 30 direct appointments of officers in the Federal Investigation Agency (FIA). While Sharif was ordering these unprecedented direct appointments, his crony Saifur Rahman was seeking strict punishment and disqualification of former Prime Minister Benazir Bhutto for making direct appointments in Pakistan International Airlines. "Out of these 30 people who were directly appointed on posts ranging from deputy director to inspector in the FIA — without interviews, examination or training — 28 were from Lahore and were all close to the Sharif family or his government. One of the lucky inductees was a nephew of then President Rafiq Tarar. "Nawaz Sharif had such an incredible liking for his friends from Lahore or Central Punjab, that not a single non-Central Punjabi was included in his close circle, both at the political or administrative levels in the Prime Minister's Office. At one point, during his tenure, there was not a single Sindhi-speaking active federal secretary in Islamabad. "For about the first 18 months of Sharif s second term in office, 41 of the most important appointments in Pakistan were in the hands of individuals who were either from Lahore or Central Punjab, despite the total lack of representation of smaller provinces in State affairs. Sharif stunned even his Cabinet by choosing Rafiq Tarar for the post of President. "Ills activities were almost totally I.ahore or Punjab focused,



reflected by the fact that in the first 16 months of power, he had only one overnight stay in Karachi. Conversely, he held an open Kutchoy [court] on every Sunday in Lahore, a gesture he never showed in any of the smaller provinces. "Nawaz Sharif, who had always promised a 'small government', ended up with no less than 48 people with the status of a federal minister in his cabinet. Ironically, less than fifteen per cent of the people in his 49-member cabinet came from the three smaller provinces. While anti-corruption rhetoric always topped his public speeches, Nawaz Sharif demonstrated tremendous tolerance for corruption as he completely ignored strong evidence laden corruption reports against Liaquat Ali Jatoi and his aides in Karachi. Sources said that volumes of documents on the corruption of Liaquat Ali Jatoi, his brother Senator Sadaqat Ali Jatoi, the then Sindh health secretary and several of I.iaquat's personal staff members were placed before Nawaz Sharif, but he never ordered any action. These sources said that Nawaz Sharif also ignored evidence that showed Liaquat's newly discovered business interests in Dubai and London. "Informed official sources said that Nawaz Sharif also ignored reports, even those produced by Shahbaz Sharif, about rampant corruption in the Ehtesab [Accountability] Cell (EC). Shahbaz Sharif and several other cabinet ministers had informed Sharif that Khalid Aziz and Wasim Afzal, Saifur Rahman's right-hand men in the EC were involved in institutionalized corruption through extortion from Ehtesab victims and manipulation of the Intelligence Bureau's secret funds. Sources said that the Ehtesab Cell had issued official departmental cards to one Sarfraz Merchant, involved in several cases of bootlegging and another to Mumtaz Burney, a multi-billionaire former police official who had earlier been sacked from the service for being hand in glove with a notorious drug baron. Sharif was told that these two notorious individuals were serving as middlemen between Khalid Aziz, Wasim Afzal and those sought by the EC both here and abroad. "Fully aware that Khawer Zaman and Major General Enayct Niazi were amongst the most honest and upright director generals of the HA, he booted them out only to be replaced by handpicked cronies such as Major (Retd) Mohammad Mushtaq. Sources said that while posting Rana Maqbool Ahmed as the Inspector General



Pakistan: Drug trap to Debt trap


Police, Sindh, Nawaz Sharif was reminded by his younger brother Shahbaz Sharif about his reputation as one of the most corrupt Punjab police officers and also about his shady past. But Nawaz Sharif not only installed Rana as the IGP, but also acted on his advice to remove Gen. Moinuddin lIaider as the Governor Sindh.

said that a few days before the fall of the Nawaz Sharif government on October 12, lawyers representing the Sharif family were busy in hectic behind-the-scenes negotiations with AlTowfeek executives in London for an out-of-court settlement. These sources said that negotiations in London broke down soon after the army action in Islamabad.

"In a startling paradox, right at the time when the government media campaign was at its peak about the properties of Benazir Bhutto and Ash f Ali Zardari in Britain, particularly Rockwood estate in Surrey, disclosures came to light about the Sharif family's multi-million pound apartments in London's posh district of Mayfair. The apartment No: 16, 16a, 17 and 17a that form the third floor of the Avonfield house in Mayfair is the residential base for Sharif family in London. Records show that all those four apartments were in the name of Nescoll Ltd and Nielson Ltd Ansbacher (11VI) Ltd, the two off-shore companies managed by I fans Rudolf Wegmuller of Banque Paribas en Suisse and firs Specker — the two Swiss nationals alleged to be linked with Shard's offshore fortune. 'In a knee-jerk reaction, Sharif first denied the ownership of those flats. Later, his younger son Hasan Nawaz Sharif said the family had leased only two of the flats, while their spokesmen, including former law minister Khalid Anwer, said that Sharif had actually rented those flats. But what will count with legal experts is the fact that in their tax returns; none of the Sharif family members had ever showed any foreign ownership of any properties, nor had their tax returns listed payments for any rented apartments abroad. 'With the sale of these Mayfair apartments, you can buy three Rockwood-size properties of Asif Zardari', commented a source, which added that Sharifs third party owned properties in Britain might land them in a crisis comparable only with Benazir and Zardari's cases abroad. In another example of hypocrisy, while Sharif geared up his government's campaign against loan defaulters in Pakistan, a high Court in London declared his family a defaulter and ordered them to pay US. $18.8 million to Al-Towfeek Company and its subsidiary Al-Baraka Islamic Bank as payment for interest and loan they had borrowed for I ludabiya Papers Limited. The court papers said that the Sharifs refused to make payments on the principal amount and instead directed official action against the Arab company's business interests in Pakistan. Informed sources

"While Nawaz Sharif deployed the entire state machinery and spent millions of dollars from the IB's (Intelligence Bureau, a Pakistani version of American FBI) secret fund to prove moneylaundering charges against 13enazir Bhutto and her husband abroad, his government crushed any attempt by the HA to move the Supreme Court of Pakistan against a decision handed down by the Lahore High Court absolving the Sharif family from money-laundering charges instituted against them by the last PPP governmentl o." The Nawaz-military deal of December 2000 proved to be the final nail in the coffin of Pakistan's political system". It has given rise to a host of questions. The manner, legality, and possible implications of sending into exile to Saudi Arabia Nawaz Sharif and 18 other members of his family. The first and foremost question is under what law of the land a citizen, and one who has been convicted and whose appeals are still pending before the higher courts at that, can be packed off to a foreign country in a non-transparent deal that smacks of political expediency. The quid pro quo of surrendering properties in lieu of freedom in exile for Nawaz, Shahbaz, Hussain Nawaz and other members of the Sharif family has also been questioned on the touchstone of whether the properties in question arc at the unrestricted disposal of Nawaz Sharif and company to surrender. Some cousins of Nawaz Sharif and other members of the extended Sharif clan have raised their voice against what they perceive to be a violation of their rights to the originally jointly owned properties that have been the subject of inter-family disputes and litigation for years. Also, whether these properties are clear of lien in terms of creditor banks and others12. It has been claimed by reports in the newspapers that the total value of the assets surrendered by the Sharifs is some $8.5 million. That puts the price tag on freedom for the rich and powerful, irrespective of the charges against them; in a country where the rule of law has been rampantly violated. Naturally,



Pakistan: Drug trap to Debt trap


political points and make an example of their principal enemies they were only doing what came naturally to them. They never set out to hold evenly the scales of justice. If they had any such pretensions they would have investigated the Mchran Bank scandal in which the ISI used secret money to influence the outcome of the 1990 elections. But since they were innocent of such pretensions there is little reason to get upset if in the release of the Sharifs the nation has been presented with another example of selective justice How could the people of Pakistan ever take someone like the Sharifs seriously? And how could the political wizards of the Pakistan army (and their bureaucratic henchmen like Ghulam Ishaq Khan and others of his ilk) prime the Sharifs as their political favourites? How small Pakistani leaders? But how much smaller and small-minded their shadowy creators?16"

other incarcerated politicians, especially Asif Zardari, are feeling hard done by that they have not received similar favours. Benazir Bhutto's claim that Asif was approached by the military government with just such a deal, which he firmly rejected, has yet to be confirmed. Some wags are inclined to believe that even if a similar deal was not, or is not, offered to Asif Zardari on condition that I3enazir and he stay out of politics for the foreseeable future, the regime may sec fit to release Asif and send him into exile anyway, relying on the differences between them to increase her discomfiture. This may simply be an unkind cut delivered by cynics, whose tribe after all is flourishing in Pakistan13. It has now been revealed that as part of the mediation effort, the Americans" were also involved in the affair. President Clinton is said to have discussed the issue of Nawaz' treatment when he visited Pakistan earlier this year (2000). The U.S. government is reported to have remained in touch with the military government on the issue. It is in character for the Saudis to act on American prodding. The lever used is said to have been the threat of cutting off Pakistan's sorely needed oil import credits. The unexplained brief visit of General Musharraf to the UAE on the heels of Nawaz' departure is intriguing. The UAE President, Sheikh Zayad bin Sultan Al Nahiyan, is now coming to Pakistan. What, if any, quid pro quo does this imply General Musharraf has been promised by the Gulf States in return for his 'humanitarian' gesture? It could conceivably take the form of help for Pakistan's cash-stripped public finances15."

The story of Pakistan is both bizarre and eye-opening for all those who want to learn from history. The rulers ignored principles of good governance and moral standards for a stable polity and the society that has emerged is in a perpetual state of conflict and despair. Every ruler since General Ziaul Haq tried to perpetuate his/her rule in the name of 'Islam' and/or 'security of Pakistan' and in the 'best interest of Pakistan.' Iley allowed the religious fundamentalist groups to hijack the State and create problems for its neighbours. One prime minister who was amongst the biggest beneficiaries of bank loans and a convict was allowed to leave the country by the military junta with his huge wealth plundered from the national resources. The other one who is living a self-exiled life abroad made a long angry protest saying:

There is no dearth of news stories and political comments appearing in Pakistani Press that expose the inner story of civil-military-politicians trio and its role in destroying Pakistan. A rather cynical columnist of the leading newspaper, who is very popular for his satire and venom, made the following remarks:

"The rationalization of defence expenditure could begin with putting military pension back under the military head, cutting out waste, and having a transparent procurement policy the men in uniform have been allowed two-year leave in the middle of their careers. This practice should be stopped. The PPP (Pakistan People's Party) doubled national revenues without coercion. The Musharraf regime could stop being tax lax and concentrate on revenues instead of revenge. The military regime had told Gulf News, "Nawaz Sharif was

"All politics is a partisan undertaking, its foremost purpose being self-aggrandizement and the crushing of one's enemies (democracy or not making no difference to this equation). It follows then that a government-driven accountability drive (as opposed to one carried out by an impartial institution) will always be selective and partisan. Why should it have been any different with General Musharraf and his generals? If they started their accountability drive to assuage public opinion, score




Pakistan: Drug trap to Debt trap

freed to please Prime Minister Vajpayec to facilitate the Kashmir dialogue"." The former Prime Minister, who is herself facing cases of financial crimes called upon the rulers to explain, whether the national interest today was pleasing the Indian PM by showing favouritism to a convicted political leader who had not appealed his conviction. Despite being a convict herself, she has the cheek to ask the rulers to respect rule of law. Instead of defending her position in a court of law in Pakistan she has been inviting the United Nations Rapporteur to investigate a handful of judges accused of judicial abuse. The military junta keeps on telling the people that it is the saviour of the Pakistani nation and without it being in power, the whole state structure will collapse. In practice it has given a free hand to all the corrupt politicians to hold key positions notwithstanding cases against them in courts. It is strange that their method of eliminating corruption is by installing the corrupt, who are renegades of opponent political parties but willing to "co-operate." This is where Pakistan stands today. The military junta is de facto ruler notwithstanding the so-called restoration of democracy; politicians are dancing on their tunes and judiciary is controlled and muzzled, enjoying some benefits, like extension in age of judges, under the controversial Legal Framework Order (LW). The ordinary people of Pakistan are suffering, rulers are plundering the, nation's wealth and vital security, economic, political and social interests are being compromised for self-perpetuation and self-aggrandisement. The book traces factors that brought Pakistan to the existing state of affairs. It presents the journey of Pakistan from "Kingdom of I leroin" to "powerless-nuclear State."

Notes 1

I have explained the term in great deal in Chapter 4, Part I of this book. I have tried to establish that many governments and political/religious groups use terrorism and drug trafficking to achieve their nefarious objectives.


Pakistan: From Hash to Heroin, Annoor Printers, Lahore, Pakistan, 1991.


More of the same, Dr.Hassan Askari Rizvi, Dawn 2001 Prospects, January 1, 2001, Karachi.


This was the situation prior to 9/11 incident. In the aftermath of the said incident Pakistan's economic position improved after receiving debt remission from USA and other western states and great influx of foreign remittances from abroad.



See details in chapter Heroinization and Militarization in my earlier book Pakistan: From Hash to Heroin, Annoor Printers, Lahore, Pakistan, 1991.


The country's banks and other financial institutions wrote off a staggering amount of over Rs.30 billion during the governments of Muhammad Khan Junejo, Benazir Bhutto and Nawaz Sharif. It was during the two tenures of Prime Minister Nawaz Sharif 1990-93 and 1997-99 that the major chunks of these loans were written off. Two-thirds of the total loans of Rs.22.35 billion were written off during the two stints of Nawaz Sharif. In his first tenure, a total of Rs.2.39 billion were written off and during his second, the amount went up to a staggering Rs.19.96 billion. The written off loans during the two tenures of Nawaz Sharif constituted approximately 74.5 percent of the total of Rs.30.18 billion, written off between 1986 and 1999. During the two periods that Benazir Bhutto was in power, a total of Rs.7.23 billion loans were written off, constituting 24.2 percent of the total written off loans Rs.494.97 million in her first tenure and Rs.6.74 billion in the second. — The News, March 13, 2000. According to a study the 70% of the loans written off were those taken by the retired military generals or the relatives of the serving generals, see details in Havoc Wrought by Loan Write-offs, Dawn, Karachi, June 24, 2000. Political governments in the last 15 years have used the State Bank of Pakistan (SBP) for personal ends, with the Central Bank serving as the government's handmaiden rather than being a watchdog on national assets. Since 1985, the Central Bank had increasingly become vulnerable to subtle and overt government pressure. Most of the loans extended under political patronage were obtained specifically not to return them. Overnight bogus companies were erected and lent loans without fulfilling legal requirements or providing adequate securities. — A report by Aslam Khan, The News, March 14, 2000.


Pakistan has been caught in a deadly drug trap. A critical review of this phenomena is made in Pakistan: ensnared in Debt-trap, by this author, The News, December 5, 2000, Business Recorder, December 4&5, 2000 and Dawn Business & Economic Review, December 4-11, 2000. The year 2000 has ended on a reassuring note for Pakistan's debt concerns. All through the 12 months, a number of agitating questions about Pakistan's ability to restart, by January 2001, servicing its foreign debt burden kept on nagging the minds of the people in the country. Related to this question was whether or not the country would get another round of debt relief. If it failed to obtain such a relief what would happen to our economic relations with the outside world. And if we could succeed in getting it what would be the conditionalities attached. And how would a new IMF programme underpinned by a second round of debt relief and releases of the much needed project-related assistance from other multilateral aid agencies affect the net flows of capital. Pakistan is likely to require very little commercial borrowings in the next 12 months, as the net inflows of capital at least during this period would be positive. And this perhaps would give the government the required room to plan and start implementing policies aimed at reducing the need for borrowing which on an average has gone up in recent years to as much as $3 billion a year. The debt retirement committee of Dr. Parvaiz Hasan has drawn up a comprehensive plan to attack this issue. The main thrust of this plan is to attract foreign investment and speed up the privatization process. Meanwhile, under the SBA conditionalities the SBP has been stopped from purchasing foreign exchange from the kerb market for meeting its balance of payments needs. The SBA wants the SBP to borrow from the inter-bank system for this purpose. The SBA has also fixed firm performance criteria for borrowing


both internal as well as external and linked the achievements of this criterion to the release of next tranche of the SBA. If the government fails to achieve these criteria then horrendous consequences await the country. In the very first instance the SBA will be cut off, this will be followed up by the discontinuation of the Paris and London Club agreements (which are being negotiated at the moment) and finally the hope of getting the medium term assistance under the Poverty Reduction and Growth Facility (PRGF) amounting to about $2.2 billion over the next three years would simply vanish leaving the country once again open to the vagaries of the international economic shocks. The major issue which the country faces (among others related to debt) is the government's ability to maintain a record of what is being borrowed from where, how much and for what. According to the IMF's report on Pakistan, the observance of standards and codes (ROSC) no comprehensive overview of the government's public enterprise borrowing or assets and other equity holdings are maintained. Various units of government maintain records and cover aspects of policy toward government's involvement in commercial and financial activity, but no single overview is maintained. The ministry of finance manages direct fiscal transactions with nonfinancial enterprises through its corporate wing, which also reviews government direct equity holdings from the point of view of preparing estimates of dividend payments. — The state of debt burden, M.Ziauddin, Dawn, January 1, 2001. 8 Ibid. 9


Pakistan: Drug trap to Debt trap

Stand-by facility provides a breathing space, Dr.Mushtaq Ahmad, Dawn. January 1,2001. 10 Living like a king —Sharif's litany of abuses, Kamran Khan, News Intelligence Unit, daily The News, International Edition. 11 This deal was bitterly criticised by all sections of society. The strongest comment came from the head of Jamaat-e-lslami, a strong religious party, which is very active and influential in street politics. The following comments of its head, Qazi Hussein Ahmad appeared in Dawn of December 16, 2000: "The Jamaat-e.Islami said that it would launch a campaign to force the resignation of chief executive Gen Pervez Musharraf because he is a threat to the country's security. Qazi Hussain Ahmad, head of the JI, said Musharraf had shown he could not be trusted when he let Nawaz Sharif escape a life sentence and go into exile in Saudi Arabia last Sunday." He has got absolute power in his hand and he cannot be trusted, "Ahmad told newsmen." "He has ignored public opinion, he has also ignored the laws, the constitution, the decisions of the court and he has not consulted anybody. He can do anything against the interests of the country and the nation," he said in a telephone interview from Lahore. 'This is a security risk, he is a security risk." Ahmad's plan to start the campaign from next Sunday underlined the added uncertainty the exile deal has introduced to a country already hobbled by chronically high political and economic risk. Offering the pardon has undermined Musharraf's credibility as a campaigner against corruption while Sharif's acceptance of exile has undermined the credibility of his Pakistan Muslim League, which only a week earlier had joined in an alliance of civilians opposed to military rule." There is a definite vacuum and this vacuum is to be filled through political action, and through the organized masses and through elected governments, "Qazi Hussein said. The JI chief called for the early resignation of Musharraf's military government and installation of an interim government to supervise national elections. "These elections



should be done by another administration because this administration has lost the confidence of the people," Ahmad said. 'I think this process can be done within six months." Gathering disquiet over the deal, Rashed Rahman, Dawn, December 15,

2000. 13 Ibid. 14 There have been a number of reports in Pakistani Press that due to President Clinton's personal interest Nawaz Sharif was released. Azam M. Mian, a Washington correspondent of Pakistan's leading English newspaper The News, filed a detail story, published on December 11, 2000, which says: "President Bill Clinton has fulfilled his promise "to make every possible effort for the release of Nawaz Sharif," reliable sources told The News on Sunday. The sources claimed as a result of Clinton's interest, Nawaz has been released at least a month before the expiry of his term as the U.S. president. The presidential promise was made to a member of the Sharif family during a meeting a few weeks ago. According to the sources, a member of the Sharif family had met President Clinton and sought his help in Nawaz Sharif's release. After a patient hearing, the U.S. President promised to do everything to see Nawaz Sharif released before his departure from the White House. President Clinton was working on the move with the Saudi prince, who had initiateg dialogue with General Musharraf to secure Nawaz Shraif's release. Finally, the efforts of the Saudi prince bore fruit and a deal was struck during the OIC session in Doha. The dialogue started when General Musharraf visited New York to attend the UN Millennium Summit. During a reception hosted by the President of Senegal, General Musharraf, on receipt of a message, suddenly left for a nearby hotel where he met the Saudi crown prince and discussed matters, including political situation in Pakistan. The News had reported that meeting in its issue of September 5, 2000. The next day when Chief Executive General Pervez Musharraf was asked about the unscheduled meeting with the Saudi prince, he reluctantly confirmed to The News that the meeting was held in a New York hotel and that "matters of mutual interests were discussed." However, he declined to go into the details. The Musharraf-Saudi prince dialogue concluded in Qatar after a meeting between the two, finalizing the details of the deal. It is learnt that President Clinton had also contacted Pakistan-friendly Saudi administration to persuade the Musharraf government for the release and had conveyed its desire to Islamabad through its diplomatic channels." The U.S. State Department, however, contradicted all such reports. Dec. 15, 2000. 15 Gathering disquiet over the deal, Rashed Rahman, Dawn, Karachi, December 15, 2000. Dawn, 16 History or what?, Ayaz Amir, December 15, 2000. Dawn, 17 Prime Minister Benazir Bhutto,


Pak-Afghan drug trade

The growth in global heroin supply during the last two decades could be traced, in large part, to geo-political developments around Afghanistan and two significant aspects of U.S. policy: the failure of the Drug Enforcement Administration's interdiction efforts and the CIA's covert operations. The CIA's aid to the Afghan mujaheddin (freedom fighters) in the 1980s expanded opium production in Afghanistan and linked Pakistan's nearby heroin laboratories to the world market. After a decade as the sites of major CIA covert operations, Afghanistan and Pakistan ranked respectively as the world's largest and second largest supplier of illicit heroin in 1989. In the coming decade that followed, these areas proved to be centres of international criminal activities, particularly narcotics related crimes that posed a serious threat to democratic advances and economic accomplishments in this part of the world. In view of Afghanistan's emergence as a major drug opium source country and Pakistan's role as a leading processor and exporter of heroin, the entire world is faced with a challenge to preserve and advance political stability and to improve international cooperation for counter-narcotics operations. A historical analysis of this phenomenon can serve as a useful insight to understand and combat the global threat we are facing now. In the highlands spanning Iran, Afghanistan and northwest of Pakistan, tribal farmers used to grow limited quantities of Opium for the merchant caravans bound for the cities of Iran to the west and India to the east. During the decade of cold war confrontations with the Soviet Union, however, CIA intervention Provided the political protection and logistics linkage that joined

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Afghanistan's poppy fields, through Pakistan's landmass, to heroin markets in Europe and America. Now although Soviet forces have withdrawn and CIA aid has slackened, there is every indication that Pak-Afghan heroin trade, like Burma before it, will remain a potential source of supply for the world markets notwithstanding the fact that covert operations are overl.

China. By 1767 opium exports by the British East India Company to China reached a staggering two thousand chests of opium per year. In 1793, the British East India Company established a monopoly on the opium trade. All poppy growers in India were forbidden to sell opium to competitor trading companies.

After World War II very little opium was being produced in Afghanistan. However, right wing dictatorships in neighboring countries thrived on opium production. In neighboring Iran, the powerful American and Anglo oil companies and drug dealers shared many of the country resources. Intelligence agencies estimated that Iran was producing 600 tons of opium a year and had 1.3 million opium addicts. When Mohammed Mossadegh was elected Prime Minister and the Shah was forced to flee, the new populist government moved to suppress opium trade. However, after a CIA coup placed the Shah back on the throne, drug trafficking once again prospered until 1979 when an Islamic revolution brought Ayatollah Khomeini into power2.

In 1799 Chinese emperor Kia King banned opium completely, making trade and poppy cultivation illegal. Foreign merchants then turned to smuggling. Charles Cabot, a smuggler from Boston, Massachusetts, attempted to purchase opium from the British and then smuggle it into China under the auspices of British smugglers. Another American, John Cushing, acquired his wealth from smuggling Turkish opium to Canton. For example, John Jacob Astor of New York City and owner of the American Fur Company purchased ten tons of Turkish opium which he shipped on to Canton.


In 1839 the first Opium War broke out, and the Chinese ordered all foreign traders to surrender their opium. The British responded by sending warships to China. Two years later, the Chinese were defeated by the British which demanded heavy reparations, including the cession of Hong Kong to Great Britain The Second Opium War erupted in 1856, and the British again demanded indemnities from China, forcing the emperor to legalize opium. By the turn of the century and after 150 years of failed attempts to rid the country of opium, the Chinese finally convinced the British to dismantle the India-China opium trade.

In Afghanistan under King Mohammed Zahir, feudal estates scattered throughout the country maintained small opium fields. However, after a 1978 coup Mohammed Daoud seized power, and opium traffic began to expand rapidly. Noor Mohammed TaraIci, a reformer who worked to phase out the poppy fields and replace them with consumption crops, followed him. Opium production began to plummet, but Taraki was killed in a military coup in 1979. General Zia-ul-Haq ascended to power, and he used the Inter-Service Intelligence (ISI) to oversee intelligence on the Afghan-Pakistani border3.

In the 1850s British merchants began importing Indian Opium to Burma and selling it through a government-controlled monopoly. In 1886 the British acquired Burma's northeast region, Shan State. Production and smuggling of opium along the lower region of Burma thrived despite British efforts to maintain a strict Monopoly on the opium trade.

History of Opium in Asia Southeast Asia got its first dose of opium in 1500 when Portuguese, while trading along the East China Sea, initiated the smoking of opium. Within two centuries the Dutch were exporting shipments of Indian opium to China and the islands of Southeast Asia. In 1729 Chinese emperor Yung Cheng issued an edict, which prohibited the smoking of opium and its domestic sale, except under license for use as medicine. Nevertheless, the use of opium increased, and by 1750 the British East India Company assumed control of Bengal and Bihar, the opium-growing districts of India. British shipping dominated the opium trade out of Calcutta to

By the turn of the century, the French joined the British in monopolizing opium in Southeast Asia. In the 1940s the Golden Triangle — Burma, Laos, and Thailand — became a major player in the profitable opium trade. During the early years of World War II, Opium trade routes were blocked and the flow of opium from India and Persia was cut off. Fearful of losing their opium



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monopoly, the French encouraged Ilmong farmers to expand their opium production. After Burma gained its independence from Britain in the 1940s, opium cultivation and trade flourished in the Shan State. Pakistan was caught in the same web when it decided to become part of CIA's strategy to equip the Afghans against Soviet-occupant forces with arms purchased from drug operations. This was again a classical pattern of USA foreign policy in which war, arms and drugs play important role. Pakistan under Zia became on ally in the USA orchestrated Great Game. CIA's counterpart the ISI was the tool created to perform this

the governor of the province near the Khyber Pass and adjacent to Afghanistan. Trucks from the Pakistan's National Logistics Cell (N IC) arrived with CIA arms from Karachi and returned laden with heroin. They were protected by the ISI and therefore protected from vehicle searchess.


operation. The ISI pressured CIA into accepting Zia's policies with the Mujaheddin across his border in Afghanistan. The ISI brokered a deal which brought about an alliance between the CIA and Gulbuddin I lekmatyar, the leader of a small guerrilla unit in Afghanistan with close ties to the Pakistani government. In the next ten years half of American aid to Afghanistan went to this group. I Iekmatyar eventually proved himself brutal and corrupt, becoming one of the premier drug dealers in that rcgion4. Islamabad CIA station chief John Reagan met with Hekmatyar in May 1979, seven months before the Soviets moved into Kabul, and agreed to make the first of many shipments of arms to the rebel army. Over the next two years, CIA covert aid increased tremendously. Islamabad soon became the largest foreign CIA station to run a covert war. Within ten years the United States had funnelled in 33 billion in aid to the Mujaheddin, and the CIA had provided the rebels with $2 billion in covert aid. Sixty percent of those funds were given directly to Hckmatyar who purchased weapons in order to protect his opium fields. Pakistani General Fazle Haq was assigned to overlook military operations near the Afghan border. Haq ensured that I lekmatyar received the bulk of CIA arms shipments, and he also protected his 200 heroin laboratories. In 1982 Interpol identified I laq as a principal catalyst in Afghan-Pakistani opium trades. Very little heroin was refined in Pakistan before the rise of the Mujaheddin emerged in 1979. Then the guerrillas began to expand their opium production and shipped raw drug to Pakistan border refineries for processing into heroin. They sold it to Pakistani refiners who operated under the protection of General Fazle I laq,


The Reagan and Bush administrations frequently placed the blame for opium trade on the Soviets. However, it was the Mujaheddin and Pakistanis who were directly involved in trafficking drugs. The personal physician of Zia's daughter, Dr.Hisayoshi Maruyama, was arrested in Holland with 17.5 kilos of high-grade heroin. I-Iaji Ayub Afridi, one of Zia's associates who had served in the Pakistani General Assembly, purchased large quantities of opium from the Mujaheddin. Another Zia ally, Hamid Hasnain, vice president of one of Pakistan's largest banks, also ran a drug rine. By the 1990s American aid to Afghan rebels declined, so their leaders expanded opium production in order to maintain their armies. In southern Afghanistan, Nasim Akhundzada controlled the most fertile and irrigated areas. He became known as the "King of Heroin" and controlled most of the 250 tons of opium in his province. Meanwhile, Pakistan was nurturing the world's largest addict populations in the 1980s8. When the Mujaheddin were first engaged in Afghanistan in 1979, there were about 200,000 drug addicts in the United States. As poppy fields quickly expanded in the areas, which they controlled, that number had jumped to 450,000 by 1981. In 1989 Afghanistan and Pakistan produced and shipped 50 percent of the entire heroin in the world. Between one-third and one-half of the heroin used by addicts in the United States was imported from heroin growers in Mujaheddin controlled areas. The annual consumption of these Afghan narcotics amounted to roughly three tons, and it was valued in billions of dollars8. FIelmriatyar's chief rival in the opium business was a fellow Mujaheddin, Mulla Nasim. In 1989 Hekmatyar successfully plotted his assassination and consolidated his position as the principal Afghan drug lord10. In 1990 Time magazine ran a story claiming that the lJnited States "was embarrassed by the widely bruited connections between the drug trade and the elements of the insurgents,

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including such fundamentalist Islamic groups as Gulbuddin Hekmatyar's I lezbi-I Islami." Then the Washington Post printed a story charging that American officials had refused to investigate charges against Hekmatyar and Pakistan's ISI. Yet the CIA ignored the allegations since it would have diminished their effectiveness in running covert operations in the region.

developed in a highly independent fashion. The poppy-cultivated areas in Pakistan and Afghanistan can largely be defined as mountains, the western offshoot of the Himalayas, the Hindu Kush, with peaks often higher than 20,000 feet covering more than half of both the countries. The terrain is not only mountainous but also barren and difficult to inhabit. The other half consists of rich river valleys and plateaus, where the bulk of the country's population and agricultural sectors are located, and of border regions which are desolate and dry.


Civil war raged since the 1989 withdrawal of Soviet forces. Although the United States government withdrew military support for the Mujaheddin, various Afghan ethnic and political factions competed for power. In 1994 the extreme fundamentalist Sunni sect known as Taliban emigrated from Pakistan and settled in Afghanistan's outlying mountains around Kabul. Supported by the United States, Taliban captured the capital and declared Afghanistan an Islamic State in September 1996. The Taliban sect under MuIla Omar immediately imposed a campaign of tyranny in the areas under its control. Taliban continued to thrive on the opium business, which amounted to twice the size of the governments budget". In addition to Taliban's influence in Afghanistan, another warlord, Abdurashid Dostum, controlled large areas of the north. In May 1997 a coup within Dostum's forces led by General Abdul Malik led to Dostum fleeing the country. They immediately announced that a peace agreement had been reached to reunify Afghanistan under Taliban control, and a delegation of 60 Taliban leaders arrived to sign a peace treaty. The Taliban victory was celebrated by Pakistan. In addition, corrupt factions within Pakistan's security forces benefited by the opium trade, which increased under Taliban rule. Talibans had been hostile to Russia, Shiite Muslim Iran, the moderate Sunni Islamic countries as Turkmenistan, Uzbekistan, Tajikistan, and Turkey. Before we dig further into historical evolution of Pak-Afghan drug trade, it appears necessary to briefly scan the geographical realities of the area. It is no understatement that Pak-Afghan tribal society has been influenced by the country's rough physical environment located at a crossroads where the civilizations of China, India and the Middle East overlap. Afghanistan has been the scene of numerous invasions and movements of people. At the same time, its austere and imposing terrain has meant that those groups of people who now constitute the modern Afghan nation have


Unlike its effect in most of Asia, European colonialism had little impact on the tribal highlands that centered in and around Afghanistan. The combination of rugged terrain, a population of well-armed "martial tribes", and a deep Islamic faith that encouraged jihad, or holy war, against Western invaders made the roof of southern Asia impervious to conquest. Seeking to protect India's northwest-frontier from the threat of a Russian incursion, Britain invaded Afghanistan in 1838 and 1878, suffering humiliation and heavy casualties in both attempts. After a particularly disastrous defeat in the Second Afghan War (1878-1880), Britain decided to deal with the ruling Amir (Ruler) of Afghanistan to fix a boundary. Meeting with the Amir at Kabul in 1893, Britain's emissary, Sir Mortimer Durand, drew up a boundary of mutual convenience separating Afghanistan from India12. As this diplomatic exercise indicates, the modern Afghan State took shape as a buffer state, with frontiers drawn to please British India, Russia, and Iran13. Imposing such arbitrary boundaries over sprawling tribal areas left large portions of Afghanistan's leading ethnic groups on the wrong side of the border — many of its Pushtuns in India's North-West Frontier province and a majority of its Baluch living in Iran and India". On the British side of the boundary along North-West Frontier, now part of Pakistan, colonial rule remained tenuous. Constantly harassed by marauding Pushtun tribes along the Afghan border, Britain dispatched forty-two military expeditions into the mountains between 1849 and 1890, nearly one every year. In 1897 the British sent 30,000 regular troops into Peshawar district to fight the redoubtable Afridi tribe, with little effect. Unable to beat the Pushtun (or Pathan) warriors, the British adopted a punitive policy known in the officers' mess as "butcher and bolt" — that is, march into the offending village, butcher the

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available civilians, and bolt before the tribe's warriors could retaliate16. Unlike the peoples of Africa or the Americas, the Pushtun tribes did not fight with sword and spear. Supplied with firearms by traders from the Persian Gulf or Afghanistan, mounted tribal warriors fought effectively against British troops, first with. smooth-bore muskets and later with modern European rifles.

In 1908 a British source reported that there was opium cultivation in four Afghan districts — the Herat Valley, Kabul, Kandahar, and Jalalabad — "but not to any great extent21." At the end of the colonial era in 1947, the Kingdom of Afghanistan and the State of Pakistan were minor opium producers with small addict populations.


Instead of trying to disarm the frontier tribes, an impossible task, the British adopted a policy of conciliation and control, backed by a massive military presence. Through naval patrols in the Persian Gulf, the British tried to control the arms supply to rebellious groups by interdicting smuggling16. By contrast, the British allowed loyal tribes to trade in arms without restraint and even recruited them for military service. The British paid tribal warriors for patrolling caravan routes through the Khyber Pass, formed them into local militia such as the Tochi Scouts or the Khyber Rifles, and, by 1915, recruited some 7,500 Pushtun into the regular Indian army. At the end of colonial rule in 1947, as the British prepared to transfer the North-West Frontier to the new nation of Pakistan, their last governor reported that over half the tribal males owned firearms — no longer just muskets, but largely high-velocity, precision rifles17. In effect, the British had adopted a policy of alliance or mutual conciliation with the martial Pushtun tribes that preserved their arms and autonomy, thereby bequeathing the nevi Pakistan State few means of controlling the tribes along its North-West Frontier18.


With such weak control, Britain minimized taxes to avoid provoking the tribes. Instead of encouraging opium production for revenue as they did elsewhere in India, the British saw the drug as a destabilizing factor in the North-West Frontier and worked toward its gradual abolition. Since opium production was still limited in the area, the tribes did not resist. In 1870, for example, the districts along the Afghan border cultivated only 1,130 acres of opium19. Through a policy of gradual interdiction, the British reduced poppy cultivation until 1901, when "it had entirely ceased." The colonial regime did not ban drug use, however, and allowed imports of Afghan opium from the nearby Jalalabad Valley where the poppy harvest was good29. Although the ruling Amir did not restrict Afghanistan's opium production, the country's harvest was still, at the century's turn, rather limited.


Although opium has long existed in Afghanistan as a narcotic for consumption, usage was never widespread or socially disabling as it was in neighboring Iran (then Persia) or China during the Ching dynasty. Prior to the 1970s, Afghan opium production was linked to events in Iran. Though opium had been cultivated and used in Iran since the eleventh century, its usage became a major problem in the early twentieth century. Addiction rates grew at a rapid pace, until in 1950s it was estimated that the country had over a million addicts. This led the Shah's government to ban poppy cultivation in 1955. As local supply disappeared, entrepreneurial Afghans stepped into the breach, making use of traditional smuggling routes. In 1969, the Iranian government changed its policy and allowed a limited amount of opium cultivation. This was meant to be carefully supervised, and only government-recognized addicts were given coupons that provided them access to the State's opium supply. Despite the partial reactivation of Iran's poppy crop, Afghan opium production continued to grow with Iran as its major market in the early 1970s. Afghan traffickers found the movement of opium into Iran relatively easy and well worth the effort, despite the death penalty if caught for drug smuggling. Clashes with Iranian law enforcement forces along the Afghan-Iran border were frequent. Afghanistan's experience with the modern international drug trade commenced in the 1970s when large numbers of Westerners descended on the Asian country to "drop out" and "turn on" inexpensively. At one stage, before the 1973 coup, it was estimated that between 5,000 and 6,000 hippies lived in Kabul. After the coup, the new government tightened both visa and drug controls, forcing many Western drug users to depart. The Afghan view about drug use and trafficking in the early 1970s was summarized by Linette Albert, "Few Afghans indulge in drugs to any marked degree, and authorities regard the police problems



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associated with drug-taking and trading as a Western headache and a Western expense23." The situation was to change radically by the early 1980s.

below provide insights into the pecking order of opium production in the 1990- 1994 period.

Afghanistan's rise to the big leagues of illicit narcotics production and trafficking came from a tremendous increase in external demand. While the Iranian market was the major incentive for Afghan traffickers in the 1960s and early 1970s, the rest of the world accounted for a relatively small percent of total opium production. Small amounts transited Pakistan, making it to Western Europe and North America. These two markets were largely supplied by heroin from the Golden Crescent countries of Southeast Asia. The situation changed when the governments of Vietnam and Laos fell in the early and mid-1970s, disrupting a link between the Golden Triangle supply of Burma, Thailand, and Laos and the United States. Moreover, a prolonged drought in the late 1970s, and early 1980s reduced the ability of the Golden Triangle to supply world heroin demand. The combination of these factors placed a greater demand of the Golden Crescent countries, especially Afghanistan and Pakistan.

Table: World Opium Production (1990— 1994) in metric tons

The traditional market for Afghan opium farmers was soon disrupted, which added another factor in the changing structure of the international heroin trade. The initial chaos that followed in the wake of the Shah's fall from power in 1979 and the rise of the Islamic fundamentalist forces, temporarily disrupted drug enforcement in that country and helped stimulate local opium cultivation. The Iranian market for Afghan opium shrank at roughly the same time that traditional smuggling routes to Iran were blocked by Soviet forces in their occupation of Afghanistan. By 1980, Afghan narcotics traders were confronted by a radically changed international market. Shorn from the Iranian market and with years of record crops behind them, Afghan traffickers soon learned to refine opium into heroin and discovered new outlets in Europe and North America. The latter was usually accomplished through Pakistani middlemen, especially in the United States, Canada, and Germany. The boom in opium production in Afghanistan and Pakistan during 1990-94 confirms how both the countries entered into the global heroin trade in a big way. Figures contained in the Table






























































U.S. Department of State, Bureau of Interna ional Narco ics Matters, International Narcotics Control Strategy Report (VVashington, D.C.: March 1995)].

Structure of the narcotics industry Although Pakistan leads Afghanistan in opium production in the 1970s, Afghanistan rapidly gained ground in the 1980s. After the initial disruption caused by the Soviet invasion in 1979, Afghan peasants returned to poppy cultivation. The nature of the Soviet occupation, moreover, contributed to the development of the illicit economy due to the policy of trying to starve the mujaheddin by destroying food crops. As Afghan agriculturalist Mohammad Qasim Yusufi noted in 1988: "Because of war conditions, agricultural production factors such as labour force, fertilizers, irrigation water, improved seed varieties, agricultural


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machinery, proper farming and management, and maintenance of land have been greatly disrupted on one hand, and the government pays very little or no attention to the agricultural sector of the country on the other24." He also added that most of the country's highly educated personnel on agricultural matters left the country in the 1980s, and all Western and Muslim country assistance was stopped. Combination of these factors was suppression of the legal agricultural economy and, in a number of cases,- particularly those places beyond Soviet control, turned to opium cultivation. As a finished product, heroin brought profits that were used to purchase weapons and food in Pakistan.

not all mujaheddin groups or tribes are involved in the narcotics trade.


In the Helmand River Valley it was alleged that mujaheddin leaders and poppy growers used middlemen, including other mujaheddin factions, such as the radical Ilizbe-Islami party, and some Pakistani military officials who coordinated the guerrillas' arms supplies25. These middlemen operated on both sides of the border, though the Pakistani city of Peshawar functioned as an essential smuggling hub. An important element in the structure of Afghanistan's narcotics trade was the large refugee community in Pakistan. The brutal nature of the Soviet occupation led to a ma.ssive exodus of Afghans to nearby Pakistan. As the process commenced in the early 1980s, many Afghans settled in Pakistan. Some married locally; others purchased shops in the bazaars, started their own business, or simply transferred their trade from Kabul to Pakistan. Others embarked upon the region's other traditional cross-border activity. As noted by Edward R. Girardet, "The refugees have infiltrated two vital areas of the economy in the frontier region — the arms business and the profligate smuggling of consumer goods and cirugs26." The opium and heroin flow from Afghanistan transits Pakistan, India, and then Sri Lanka by overland and air routes. Another route transits Pakistan to Hong Kong and Malaysia and then to North America by ship. Yet other routes transit Iran, Turkey, and Lebanon by land and then to Europe by land or by sea via the Indian Ocean to the Red Sea, through the Suez Canal, and on to key markets in Europe and North America. It should be added that Afghan drug smugglers have also managed to help meet Europe's demand for hashish, especially the variety known as "black" hashish.

Afghanistan's mountainous terrain, especially its river valleys, is ideal for opium production. Analysts estimate that in 1994 around 40 percent of Afghanistan's opium crop was cultivated in the Helmand River Valley, which is an integral part of the Golden Crescent. A rebel-controlled region, the Helmand River Valley is in the country's southwest, bordering both Iran and Pakistan. The I Ielmand River Valley opium base provides insight into the structure of the Afghan narcotics industry. Because of the civil war, especially during the Soviet intervention, large parts of the country fell out of the Kabul government's control. Various U.S. and Pakistani-backed and equipped factions of mujaheddin emerged to fight the Soviets and their Afghan allies. This meant that the groups involved in drug trafficking, usually tribes, went from carrying single-shot rifles to automatic weapons and light artillery. The firepower of traffickers, therefore, was gradually getting equal to that of government authorities on both sides of the Afghan-Pakistani border. The mujaheddin also established some form of local administration in the areas where they held sway. These local administrations were responsible for local security, logistics and crop cultivation, and any type of social services that could be provided. Crop cultivation, especially that of opium, was felt to be important by some analysts because of its ability to raise funds required for the war. Poppies are planted, pruned, irrigated, and harvested by guerrilla groups, peasants, and criminal organizations. The by-product is then smuggled acrbss the porous Pakistani border. At the same time, it should be emphasized that

The ongoing incentive for Afghan narcotics traffickers is profit. "lbere is a difference between wholesale and retail prices — the price the opium farmers ask and receive for their crop in Afghanistan and what dealers in Europe and North America receive for sales at street value. As Roger Lewis explained in 1985, "One kilo of heroin purchased for 4,000 (II.S. $7,000) on the Pakistan/Afghan border may be sold as such in Britain for UK pounds 20.000 (U.S. $35,000) to 25,000. If the kilo is sold in separate ounces it can realize between UK pounds 28,000 (U.S. $43,700) to




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Part-1, Ch. 1 - Pak-Afghan drug trade

42,000. Dilution cutting may increase the profits even further, although reduction of heroin content by more than half is far less common in Britain than in the United States27."

failed to take action against Pakistan's heroin dealers "because of its desire not to offend a strategic ally, Pakistan's military establishment." The Post article said that U.S. officials had ignored Afghan complaints of heroin trafficking by Helcmatyar and the IS129, an allegation that at least one senior American official Post reported "I Ickmatyar the confirmed. Specifically, commanders close to ISI, run laboratories in southwest Pakistan" and "ISI cooperates in heroin operations38." Although the independent Pakistani press, angered by the country's own heroin epidemic, had reported many of the details years before, the international news organizations had seemed reluctant to broach the issue as long as Afghanistan had remained a flashpoint in the cold war. While Pakistani heroin flooded Europe and America in the early 1980s, the western press maintained a public silence on the origin of this new narcotics supply.

International Linkages of drug control No discussion of the Afghan narcotics trade would be complete without covering international linkages to drug control. Sadly, though opium production is illegal in Afghanistan, the law means little because the central government lacks effective control over most of the country. Additionally, the United States, the Peoples Republic of China, Iran and Pakistan spent much of the 1980s supporting opposition forces, which some analysts believe are active in narcotics cultivation and trafficking. Afghanistan's preeminence in the world narcotics trade has meant that the United States denied it certification in 1994, which prohibited any granting of economic assistance. The reasons for certification denial were stated as such: "There is no indication that the regime in Kabul has taken any action to suppress opium cultivation and heroin refining we are concerned about opium poppy cultivation in areas controlled by mujaheddin commanders. We fear that once hostilities end, refugees will turn to poppy cultivation during the period of economic disruption as they seek to rebuild a livelihood interrupted by 10 years of war28." Afghanistan's opiutn-poppy cultivation was a major concern to the United States and West in the 1990s. Some analysts felt that, as cocaine usage in North America peaked in the late 1980s and early 1990s, there would be greater demand for heroin, as drug abuse cycles often turn from stimulants, like cocaine, to depressants, like heroin. The view was underscored in a testimony before the U.S. Congress by Assistant Secretary of State Melvyn Lvitslcy in 1990: "We are seriously concerned with the potential for heroin to again become a major drug of abuse in the United States, especially if and when the crack phenomenon begins to abate." As the cold war confrontation wound down, the international press finally broke its decade of silence to reveal the involvement of the Afghan resistance and Pakistani military in the region's heroin trade. In May 1990, for example, The Washington Post published a page 1 article charging that the United States had

As the ISI's mujaheddin clients used their new CIA munitions to capture prime agricultural areas inside Afghanistan during the early 1980s, the guerrillas urged their peasant supporters to grow poppies, thereby doubling the country's opium harvest to 575 tons between 1982 and 198331. Once these mujaheddin elements brought the opium across the border, they sold it to Pakistani heroin refiners who operated under the protection of (late) General Fazle Ilay, governor of the North-West Frontier Province. By 1988, there were an estimated 100 to 200 heroin refineries in the province's Khyber district alone32. Trucks from the Pakistan Army's National Logistics Cell (NLC) arriving with CIA arms from Karachi often returned loaded with heroin — protected by ISI papers from police search. "The drug is carried in NLC trucks, which come sealed from the [North-West Frontier] and are never checked by the police," reported the Herald of Pakistan in September 1985. "They come from Peshawar to Pipri, Jungshahi, Jhimpir where they deliver their cargo, sacks of grain, to government godowns. Some of these sacks contain packets of heroin. This has been going on now for about three and a half years." The heroin boom was so large and uncontrolled that drug abuse swept Pakistan itself in the early 1980s, leaving it with one of the world's largest addict population. In the late 1970s Pakistan did not have a significant heroin abuse problem. When the region's political upheavals of 1979 blocked the usual shipment of


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Part-1, Ch. 1 - Pak-Afghan drug trade

Afghan and Pakistani opium westward to Iran, traffickers in Pakistan's North-West Frontier perfected heroin-refining skills to reduce their mounting opium stockpiles. Operating without fear of arrest heroin dealers began exporting their produce to Europe and America, quickly capturing more than 50 percent of both markets. Unrestrained by any form of police controls, local smugglers also shipped heroin to Pakistan's own cities and towns. Addiction rose to 5,000 users in 1980, to 70,000 in 1983, and then, in the words of Pakistan's Narcotics Control Board went "completely out of hand," exploding to more than 1.3 million addicts in less than three years. The present heroin addicts' population in Pakistan has crossed the figure of two million.

Ilasnain and his co-accused screamed death threats at the prosecution witness Qureshi when he took the stand, continuing their extraordinary performance for three days until Norway threatened diplomatic protests. In the end, Hasnain was convicted and sentenced to a long prison term.

With overt official complicity and heroin exports booming beyond control, it did not take a great deal of police work to grasp the political realities of Pakistan's drug trade. During an official tour of Pakistan in 1982, U.S. Attorney General William French Smith was surprised when one of his aides spotted heroin samples displayed in a public market near the Khyber Pass. Pakistan dealt with the problem by closing the district to foreigners34. In marked contrast to the seventeen DEA agents who shuffled papers without result in the U.S. embassy at Islamabad, a single Norwegian detective unveiled a heroin case that led directly to General Zia's pedonal banker. Arrested at Oslo airport with 3.5 kilograms of heroin in December 1983, Pakistani trafficker Raza Qureshi traded details about his drug syndicate for a reduced sentence. Armed with this intelligence the Oslo detective, Oyvind Olsen, flew to Islamabad in mid-1984 and confirmed many of the leads. After Norway's public prosecutor filed formal charges against three Pakistani heroin merchants in September 1985, Pakistan's Federal Investigation Agency (HA) ordered their arrest. When Pakistani police picked up Hamid Hasnain, vice-president of the government-owned Habib Bank, they searched his briefcase and found the personal banking records of President Zia. On the night of the arrest, the president's wife called from Egypt, senior FIA agents to demand Hasnain's release, a request they could not grant. As Zia's intimate family friend, Hasnain had unfettered access to the president's home and had managed his personal finances for the past five years. At the trial in June 1987,


Similarly, in May 1983, a Japanese resident of Karachi posing as a boy scout was arrested in Amsterdam with 17.5 kilograms of No.4 heroin; he named a Lahore cinema owner, Mirza lqbal Baig, as the boss of his drug syndicate. Two years later, the British Broadcasting Corporation created a national scandal in Pakistan with the release of a television documentary, The Scout Who Smuggled Heroin, naming Baig as a major drug dealer35. After three years without an arrest in the case, Islamabad's main daily The Muslim quoted a Pakistani customs officer saying that Baig was the most active dope dealer in the country." In his investigation of the case, correspondent Lifschultz found that Pakistani police were barred from arresting Baig and that American DEA agents were unwilling to press for any arrest inside Pakistan, Baig's included, with embarrassing political implications36. Soon after his arrest, DEA agents interviewed the Japanese smuggler in his Dutch prison cell and gained sufficient evidence to justify Baig's indictment. Concerned that Baig's trial might run a thread that could unravel General Zia's regime, the DEA dealt with this "delicate dilemma" by trying to lure Baig abroad to a jurisdiction where the political explosion would be more easily contained. In the end, Baig was too smart to be stung and the DEA did nothing37. There was evidence, moreover, of a major heroin syndicate inside the Pakistan military. In June 1986 Pakistani police arrested an army major driving from Peshawar to Karachi with 220 kilograms of heroin. Two months later, police arrested an air force lieutenant carrying an identical amount, indication of a tidy military mind organizing uniform deliveries. Before the two could be interrogated, both officers escaped from custody under what Pakistan's Defence Journal called "mystifying circumstances38." Significantly, these were only two of the sixteen military officers arrested in 1986 for heroin trafficking39. The blatant official corruption continued until August 1988

Pakistan: Drug trap to Debt trap


when General Zia's death in an air crash brought an eventual restoration of civilian rule. Typical of the misinformation that had blocked any U.S. action against Pakistan's heroin trade, the State Department's semiannual narcotics review in September 1988 called General Zia "a strong supporter of anti-narcotics activities in Pakistan" and speculated that his death might slow the fight against drugs". Instead of fighting drugs, General Zia's regime had of course protected the country's leading heroin dealers. Soon after assuming office through open elections, Prime Minister Benazir Bhutto, by contrast, declared war on the country's drug lords by dismissing two of ISI's top military administrators and creating a new ministry to attack the drug trade. In July 1989 police arrested General Fazle I laq, the former governor of the North-West Frontier Province and de facto commander of the Afghan war, who had accumulated a personal fortune estimated at several billion dollars. Unwilling to offend such a powerful man, prosecutors failed to present any evidence of his drug dealing. Instead they charged him with the murder of a popular Muslim cleric and promised further indictments against the general for destroying official records of drug cases against his own brother41. Moreover, police arrested the general's former pilot, air force Major Farooq I lamid, on charges of heroin smuw.., 77 Soon after Fazle I lag's arrest, Pakistan's most notorious drug dealer, Mirza lqbal I3aig, once again became the object of political controversy. In an interview with Pakistan's monthly magazine Newsliite, President Zia's son charged that I3aig had "close personal relations" with the speaker of the National Assembly, a prominent leader of Pritne Minister 13hutto's ruling Peoples Party. Only a week later, police arrested Ilaig and charged him with heroin trafficking°. Within months, however, embarrassed government prosecutors had to release him on bail, indicating that the commitment of Benazir Bhutto's government to the drug war was already compromised". Despite Prime Minister 13hutto's good intention, the outlook for an effective attack on Pakistan's highly developed heroin industry seemed bleak. After ten years of unchecked growth under General Zia, the country's drug trade was now too well entrenched in the country's politics and economy for simple police action. Conservative economists estimated that total annual

Part-1, Ch. 1 - Pak-Afghan drug trade


earnings from Pakistan's heroin trade were 58-10 billion, far larger than Pakistan government's budget and equal to one-quarter of its entire gross domestic product. With so much heroin money flowing into the country Pakistan's commentators were concerned that the country's politics would take on a Colombian cast, that is, that the drug lords would start using money and arms to influence the nation's leaders. Indeed, the first signs were not long in coming. Facing a no-confidence motion from the National Assembly in late 1989, Prime Minister Bhutto charged, "Drug money was being used to destabilize her government." When she claimed that heroin dealers had paid 194 million rupees for votes against her, many observers found the allegation credible". Moreover, the heavily armed tribal populations of the North-West Frontier Province were determined to defend their opium harvests. Police pistols would prove ineffective against tribal arsenals that included automatic assault rifles, anti-aircraft guns, and rocket launchers. "The government cannot stop us from growing poppy," One angry tribal farmer told a foreign correspondent in 1989. "We are one force, and united, and if they come with their planes we will shoot them down"." In 1986, General Zia's heavy-handed attempts at poppy eradication had produced angry demonstrations in the province's Gadoon district, in which police gunned down ten opium farmers. In the aftermath of the massacre, almost all national and local politicians were vocal in their support for the right of tribal farmers to choose their crops — opium included. By the time Benazir Bhutto took office in December 1988, there was no consensus for opium suppression in Pakistan47. Even if Pakistan did eradicate all of its 130 tons of opium, Afghanistan's harvest of some 800 tons, the world's second largest, could easily expand production to supply Pakistan's network of heroin laboratories". By early 1990 the CIA's Afghan operation had proved doubly disastrous. After ten years of covert operations at a cost of $2 billion, America was left with mujaheddin warlords whose skill as drug dealers exceeded their competence as military commanders. In 1989. as the cold war ended and the senior 13ush administration's war on drugs began, Afghan leaders like the opium warlord Ilekmatyar had become a diplomatic embarrassment for the United States. In its international edition of July 16, 1990, Time magazine claimed that the United States was "embarrassed by the widely bruited connections between the drug trade and


Pakistan: Drug trap to Debt trap

elements of the insurgents, including such fundamentalist Islamic groups as Gulbuddin I lekmatyar's Ilezbi-Islami." The magazine pointed out that these drug links "arc especially painful now that the U.S. is waging an uncompromising war against drugs else . In a front-page expose in May 1990, The where in the world49 claimed that U.S. officials had refused for many Washington Post years to investigate charges of heroin dealing by Helcmatyar and Pakistan's ISI largely" because U.S. narcotics policy in Afghanistan . has been subordinated to the war against Soviet influence there50 In mountain ranges along the southern rim of Asia — whether in Afghanistan, Burma, or Laos — opium is the main currency of external trade and thus is a key source of political power. Since agency operations involve alliances with local power brokers who serve as the CIA's commanders, the agency, perhaps unwillingly or unwittingly, has repeatedly found its covert operations enmeshed with Asia's heroin trade. By investing a local ally such as Helcmatyar or yang Pao with the authority of its alliance, the CIA draws the ally under the mantle of its protection. So armed, a tribal leader, now less vulnerable to arrest and prosecution, can use his American alliance to expand his share of the local opium trade. Once the CIA has invested its prestige in one of these opium warlords, it cannot afford to compromise a major covert action asset with drug investigations. Respecting the national security imperatives of CIA operations, the DEA keeps its distance from agency assets, even when they are major drug lords. During the ten years of the Afghan war, some seventeen DEA agents sat in the U.S. embassy at Islamabad watching — without making a major arrest or seizure — as the flood of Afghan-Pakistan heroin captured 60 percent of the U.S. drug market. Operating along the Afghan border, CIA operatives delivered several hundred millions dollars in arms to Helanatyar's heroin convoys and cooperated closely with his corrupt protectors in Pakistan's ISI. As David Musto demonstrated with his prescient questions at the start of this operation in 1980, CIA complicity in opium traffic had certain predictability to it, wherever it occurred. Over the past many years, the CIA has repeatedly denied any involvement in the Asian opium traffic. Although admitting that some of its allies might have dabbled in drugs, the agency insists that it has always avoided direct culpability. Regardless of whether these protests arc another of the agency's plausible denials, they

Part-I, Ch. 1 - Pak-Afghan drug trade


do not address the main issue. Indeed, critics who look for the CIA's agents to actually dirty their hands with drugs in the line of :duty are missing the point. In most covert actions the CIA avoids direct involvement in combat or espionage and instead works through local clients whose success usually determines the outcome of the agency's operation. Consequently, the CIA is sensitive about allegations of drug dealing by its covert action assets. In the case of its Burma operation of the early 1950s, the CIA went to extraordinary lengths to conceal its impact on the Golden Triangle opium trade, spending nearly $2 million twenty years later to stage a bonfire in northern Thailand for the "last" opium irregulars. Thus, the CIA's involvement in drugs revolves around complicity in the drug dealing of covert action assets, not involving in most instances any direct culpability. Once again with the exit of Talibans and installation of a proAmerican government, Afghanistan is a major poppy producing country and Pakistan is the leading manufacturer and exporter of heroin and hashish. Both the countries are playing a devastating role in the international opium and heroin markets. Considering the ongoing nature of civil conflict in Afghanistan and political instability in Pakistan, it is unlikely that government's efforts of both the states to enforce laws already on the books will amount to much. In coming years the Golden Crescent, including Iran and India, will remain a problem for international community striving against drug culture. An additional concern relates to the potential for political instability in Pakistan where successive military coups have destroyed the democratic base. Since 1991 strong anti-western sentiments have developed in the minds of Pakistani people due to the U.S.-led war against Iraq and subsequent toppling of the Saddam Government. Of late there has been an emergence of strong anti-Western fundamentalist religious groups in Pakistan who are openly supporting the drug trade to the United States and the West as a mark of what they call "our weapon" to combat "anti Islam" policies. Pakistan needs to be helped by the international community at this critical juncture. If democratic, anti-fundamentalist efforts are not strengthened in Pakistan, it will prove to be another chaotic country like Afghanistan. Consequently drug trade will become more extensive and may gain a broader level to meet the needs of terrorist forces.

Part-I, Ch. 1 - Pak-Afghan drug trade

Pakistan: Drug trap to Debt trap


Even if Pakistan was to close down all of the estimated 70 heroin laboratories, a significant portion of processing would more likely shift across the border into the chaotic situation in Afghanistan. Restoration of order and assertion of a democratic control in Afghanistan would do much to stem the tide of the opium coming into Pakistan, but it is unlikely that civil strife in Afghanistan will end soon. It is also unlikely that Pakistan will muster enough political courage to close the laboratories and arrest major traffickers, which beholds a murky future for improvement in the Pak-Afghan drug trade.

Chapter Notes (Annoor Printers, Lahore, 1 lkramul Haq, Pakistan: From Hash to Heroin, Pakistan, 1991). 2 Ibid. (California: Cohen & Cohen Publishers, 3 Jonathan Marshall, Drug Wars 1991). (Lawrence Hill Books, New York, 4 Alfred W McCoy, The Politics of Heroin 1991). (California: Cohen & Cohen Publishers, 5 Jonathan Marshall, Drug Wars 1991). "The Tribal Trail," Newsline (Karachi), December 1989. 6 Kathy Evans, (Annoor Printers, Lahore, 7 lkramul Haq, Pakistan: From Hash to Heroin, Pakistan, 1991). (Lawrence Hill Books, New York, 8 Alfred W. McCoy, The Politics of Heroin 1991). (Annoor Printers, Lahore, 9 lkramul Haq, Pakistan: From Hash to Heroin, Pakistan, 1991). Wars (California: Cohen & Cohen Publishers, 10 Jonathan Marshall, Drug 1991). (Lawrence Hill Books, New York, 11 Alfred W. McCoy, The Politics of Heroin 1991). Imperial Gazetteer of India: Provincial Series, North-West Frontier Province 12 (Calcutta: Superintendent of Government Printing, 1908), p.-25. Foreign Affairs 68, 13 Barnett R. Rubin, "The Fragmentation of Afghanistan," No.5(1989) pp.-150-68. (Boulder: West-view, 1984) 14 Thomas T.Hammond, Red Flag over Afghanistan pp.4-6. 1890-1908 (London: 15 C. Colin Davies, The Problem of the North-West Frontier, Curzon Press 1932), pp.-26-28. Gun-Running and the Indian North-West Frontier (London: 16 Arnold Keppel, John Murray, 1911) pp.-141-49. 17 R.O.Christensen, "Tribesmen, Government, and Political Economy on the North-West Frontier," (New Delhi: Manohar Publications, 1988), pp.-179-82.


18 Davies, Problem of the North-West Frontier, pp.-24-26. 19 Report on the Administration of the Punjab and its Dependencies for the year 1870-71 (Lahore: Government Civil Secretariat Press, 1871), p.-cxxxiii. 20 Imperial Gazetteer of India, pp.-65-66. 21 Imperial Gazetteer of India: Afghanistan and Nepal (Calcutta: Superintendent of Government Printing, 1908), p.-30. 22 Linette Albert, "Afghanistan: A Perspective," in Afghanistan in the 1970s, ed. Louis Dupree and Linette Albert (New York: Praeger, 1974), 257. 3 Ibid. 24 Mohammad Qasim Yusufi, "Effects of the War on Agriculture," In The Tragedy 2 of Afghanistan: The Social, Cultural and Political Impact of the Soviet Invasion, ed. Bo Huldt and Erland Jansson (London: Croom Helm, 1988) 212. 25 John Jennings, "Afghanistan: Efforts to End Opium Cultivation Hit New Snags," Far Eastern Economic Review, 14 June 1990, 22. 26 Edward R. Girardet, Afghanistan: The Soviet War (New York: St. Martins Press, 1985), 207, 27 Roger Lewis, "Serious Business — The Global Heroin Economy,' in Big Deal: The Politics of the Illicit Drug Business, ed. Anthony Henman, Roger Lewis, and Tim Maylon (London: Pluto Press, 1985). 28 U.S. Department of State, Bureau of International Narcotic Matters, International Narcotics Control Strategy Report, March 1994 (Washington, D.C.: Department of State, March 1994). 29 Pakistan's ISI is a formidable organization that was supported by the CIA in the wake of the Soviet invasion of Afghanistan. The CIA turned a blind eye to ISI's activities during the Afghan struggle against Soviet forces. 30 Washington Post, May 13, 1990. 31 U.S. State Department, Bureau of International Narcotics Matters, International Narcotics Control Strategy Report (1984), p.-4. 32 Kathy Evans, "The Tribal Trail," Newsline (Karachi), December 1989, p.-26. 33 Pakistan Narcotics Control Board, National Survey on Drug Abuse in Pakistan (Islamabad: Narcotics Control Board, 1986), pp.-iii, ix, 23, 308; Zahid Hussain, "Narcopower: Pakistan's Parallel Government?" Newsline (Karachi), December 1989, p.-17. 34 Richard Reeves, Passage to Peshawar (New York: Simon & Schuster, 1984), p.-159. 35 Hussain, "Narcopower," p.-14-b. 36 Lifschultz, "Inside the Kingdom of Heroin," pp.-492-95. 37 Lawrence Lifschultz, "Turning a Blind Eye?" Newsline, (Karachi), December 1989, p.-32. 38 Ibid. 39 Hussain, "Narcopower," p.-14-b 40 New York Times, September 7, 1988. 41 Far Eastern Economic Review, August 10, 1989. 42 Hussain, "Narcopower,' p.-14-b. 43 Lifschultz, "Turning a Blind Eye?," Newsline, p.-32.


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44 Hussain, "Narcopower," p.-14-b.


Power of `narcocracy'

45 Ibid. 46 Evans, "Tribal Trail," p.-24. (Karachi), Dec. 1989, p.-29. 47 Rahimullah Yasuizai, "Poppy Polls,' Newsline Bureau of International Narcotics Matters, 48 U.S. State Department, International Narcotics Control Strategy Report (1990), p.-239. 49 Time (Australian edition), July 16, 19990 pp.-28-29. 50 Washington Post, May 13, 1990.

If politics makes strange bedfellows, politics and drugs produce even stranger ones. The partnership between drug trafficking and national politics in Pakistan has taken a truly bizarre turn in the wake of Afghan War against the Soviet occupation l . The successive civilian governments, after the departure of General Ziaul Haq from the scene, provided many lucrative laundering schemes to the drug traffickers and tax evadors (although these were termed as good economic measures to dig out black money!). These schemes included Bearer National Fund Bonds and Foreign Exchange Bearer Bonds, Special Bearer Bonds, U.S. Dollar Bonds and Certificates and a host of such other instruments. The object of these instruments was to mop up black money (mainly earned through illicit drug transactions) and to bring it out in the open so that instead of remaining concealed and idle, such money could become available for augmenting resources of the State and for the utilization of social and economic planning. The said schemes, however, proved counter-productive. The bearer bonds were converted into alternate currency and exchanged hands at a premium. It is an officially admitted fact that

the instrument to render black money white was itself, used with vengeance to reconvert white money into black. The Special Bearer Bonds carried a premium in the market and an increase in the premium was witnessed as the date of maturity of those bonds came closer. Under the scheme any one could buy the bonds, present them to the Government and claim refund along with a specified interest. The source of investment in their purchase could not be questioned; whether it was white or black 25

Part-I, Ch. 2- Power of 'narcocracy' 26


Pakistan: Drug trap to Debt trap

money2 . Thus, the drug barons could get their money and assets legalized with no questions asked about the source of such income. During the last 20 years, Pakistani drug traffickers hardly needed any international channel for money laundering. All the support from the State was available at home. Even today, if anybody brings money (earned from drug trade) in Pakistan through normal banking channels, the State Bank of Pakistan and tax authorities do not pose any question about the source. Drug traffickers remit millions of rupees into the country every year from bank accounts maintained in various countries in fictitious names. This money in the hands of drug traffickers has made them invincible, besides making life harder and harder for those who earn from legitimate sources. The result is an ever increasing huge size of parallel economy of Pakistan. According to figures released by Central Board of Revenue (CIIR) on 30 May 2000, the parallel economy is growing at an alarming rate of 22.93% per annum. Every fifth rupee transacted in Pakistan is black. The volume of black money generated in the financial year 1997-98 was estimated at Rs.600 billion or 15 per cent of Gross National Product. A conservative estimate is that annually Rs.1000 billion is generated by the parallel economy, in which the share of narcotics trade is between Its.300 billion to Rs.500 billion. Total untaxed part of the overall economy is 70 percent, concludes Dr. Aqdas Ali Kazmi, Joint Chief Economist, Planning Commission in his research paper litx Policy and Resource Mobilisation in Pakistan. Dr.Kazmi has analyzed that this 70 percent part of economy consists of 36 percent 'pure' black economy, 18 percent exempted economy, 9 percent illegal economy, 4.5 percent unrecorded economy and 2.5 percent informal economy (unreported economy). His study does not separately measure the share of drug money but it gives a fair idea that it is not less than 10-15 percent. This is indeed an alarming sign. The evidence of politicians involved in drug trade was documented in the International Narcotics Control Strategy Report, released by the U.S. State Department in 1999, as under:

"The prosecution of prominent drug offenders Sakhi Dost, Jan Notezai, and Munawwar Hussain Manj3 continued to drag out in the courts. Manj is an ex-member of Pakistan's

National Assembly. He was arrested on drug charges in April 1995. His case is being tried in the court of the additional session judge in Lahore. The accused applied for bail, which was rejected by the Supreme Court. Defence attorneys were successful in delaying court proceedings. Notezai is a member of a politically and economically prominent family in Baluchistan. His case has been pending in the courts since 1993. In 1998, Notezai's appeal to the Supreme Court for a new trial was rejected, which cleared the way for a lower court in Quetta to conclude the trial. Earlier the Baluchistan High Court rejected the same appeal. The decision by the Supreme Court prompted Notezai to appeal to the Federal Shariat (Moslem Law) Court for a "de novo" trial, a request that was denied on July 2, 1999. Meanwhile, on establishment of a district court at Nushki the case has ,been transferred to a sessions judge there and further delayed." In 2001, the final court in Pakistan had sentenced to death Munawwar Hussain Manj, who was made member of Standing Committee on Narcotics by Premier Benazir Bhutto, when he was facing criminal charges on account of drug trafficking. The Lahore high Court in January 2003 set aside this punishment. The Supreme Court on State's appeal ordered a de novo appraisal of evidence against him. The editor of Frontier Post, Rehmat Shah Afridi also got death sentence, though his appeal is still pending for adjudication. Ultimately, the American authorities can heave a sigh of relief that courts in Pakistan acted strongly and two powerful men had been awarded the highest punishment, though yet not final. In 2003, Pakistan has nearly four million drug addicts. Drug dealers and addicts are also involved in smuggling and prostitution. Drug trafficking has resulted in "Organized Crime" which is different from the normal criminal activities, as it involves corruption, money laundering and criminalization of the political and legal institutions. Drug money in Pakistan is used to bribe the entire administrative, political and legal institutions, from the local police to the magistrates. There have been instances wherein the government forces have either refused to undertake anti narcotics raids or delayed the arrest of drug barons, or worse, conducted fake raids. There have also been instances in which magistrates have let the drug barons go free, and of elected representatives

Part-I, Ch. 2- Power of 'narcocracy'



Pakistan: Drug trap to Debt trap

distributing poppy seeds to the cultivators. Organized crime thus creates a state within a state posing a serious threat to the State itself. At the economic level, Pakistan, in addition to rehabilitating drug addicts, also needs to spend more on anti narcotic drives and administration. For example, the latest five-year Drug Abuse Control Master Plan that was launched during February 1999, is to cost the government Rs.2.8 billion for rehabilitation, reducing the production and supply of drugs, destruction of heroin labs, forfeiting drug related assets. Secondly, the drug money after being laundered enters Pakistan, resulting in societal imbalances and economic distortions. This money mostly has been invested in real estates, increasing the cost of land. Even though no precise studies have been carried out, it is believed that drug money forms one fourth of Pakistan's GDP. Excerpt from 'The Underground Empire — where crime and governments embrace "Few if any European countries were without examples of drug money movements," he reported. Even Austria and Hungary had movecl to get in on the bonanza. Luxembourg hotel registration cards were filled with the names of Colombians and Pakistanis _ professional money couriers _ checking in for one or two nights. In Guernsey, one of Great Britain's Channel Islands, the agent stumbled over an American drug organization, unknown to DEA, that owned fifty-four corporations and was doing a $38 million business in hashish smuggled from Pakistan and Thailand. The war on drugs was known to miss most drug loads entering the United States, but to miss an entire organization? I asked the agent how many other major international groups might be unknown to authorities? A syndicate of "legitimate Burmese businessmen and former and current Burmese government officials" is accused in one classified report of smuggling heroin directly from Burma, which produces more opium than any other country in the world, to the United States, and moving much of its profits back to Burma. The same report goes on to diagram an immense international network in which a single Hong Kong bank account, associated with the underground Chinese banking system, was used to shuffle drug money between Switzerland, Holland, Thailand, Malaysia, Singapore, Pakistan, Australia, and the United States.

At the political level, the threat from drugs is even more serious. There have been many instances when drug barons have become members of the Provincial and National Assemblies in Pakistan. Secondly, drug money has played an important role in no confidence motions, in securing support to passage of important bills — especially during 1990-1995, when neither the Nawaz Sharif nor the Benazir Bhutto government had a clear majority. Even more significant has been the threat posed by drug money to the democratic process. With Pakistan already facing problems of governance and declining popular participation in the provincial and national political affairs, the narcotics-politics nexus is proving fatal to the democratic process. Thirdly, the narcotics small arms connection renders any attempts by the government to find a solution to law and order and separatist issues, complicated. The drug barons in the NWFP are armed with weapons, including rocket launchers, arid are willing to fight any governmental forces. Without drug money, the terrorists would never have been able to get the arms that are freely available in Pakistani society today. The situation is so grave that lethal weapons such as AK-47 and ammunition are available even for hire in Pakistan5. The concrete link of narcomoncy in every sphere of Pakistani society came to public notice when the government of interim Prime Minister Moeen Qureshi drew up a black list of more than 100 drug barons and politicians. The black list, probably written in close cooperation with the U.S. Drug Enforcement Administration (l)EA), included at least five important drug barons wanted in the United States in connection with criminal activities. I Iaji Ayub Khan Afridi (former member of Parliament), Rana Ashraf and Firoz Gittoo (businessmen), Amanullah Kundi and Sohail Zia Bukht Butt (politicians) are among those listed. These narcomillionaires were members and/or financers of Pakistan's two main political parties, Benazir 13hutto's Pakistan People's Party (PPP) and the Pakistan Muslim League, led by Nawaz Sharif, whom Qureshi replaced as prime minister. The Pakistan Narcotics Control Board (PNCB) tried to protect these elements insisting that these people were in hiding and therefore could neither be arrested nor, obviously, extradited to Europe or the United States. However, according to independent sources, the majority of those cited on the list were openly living in luxurious homes, and were seeking to negotiate the lowest price at which the interim


Pakistan: Drug trap to Debt trap

government and army would lift their threats of arrest and extradition6. In Pakistani political circles, the situation reinforced the suspicions of those who remembered numerous corruption scandals in the past involving PNCII officials at all levels. These sources suspected that the black list served principally as a means of "financial extortion and political bargaining." Pakistan's intelligence service claimed that it had brought to light a "plan," financed from seizures of drug money, designed to provoke trouble in Sindh and Punjab provinces. The plan, it was alleged, aimed at forcing the Qureshi government to cancel the upcoming elections and encourage the army to invoke martial law. The promoters of this "strategy of tension" were allegedly former officers of Inter-Services Intelligence (ISO, Pakistan's military intelligence unit, which was in danger of being publicly linked to drug trafficking (whether through direct involvement or protection of traffickers). The PPP and the Muslim League denied allegations that strikes, which paralyzed the country for a week, were "narco-financcd." They said instead that the drastic rise in the cost, of living (nearly 50%) after raising of price-controlled goods and services was the impetus behind the strikes. The IMF and World Bank demanded this measure, but neither of the two parties successively in power wanted to shoulder responsibility for its implementation. As a general rule, many Pakistani political leaders accused the government of using the drug argument primarily as a means of getting rid of potential opposition figures to the government. In fact, the law instituting death penalty for traffickers and the removal from office of elected officials convicted of using drug money to finance political organizations put them in a difficult position. Access to Parliament was thereby blocked to the leaders of both the pro-military Muslim League and the liberal PPP. Several names on the black list accused of using drug money in the 1989 elections included Asif Zardari, husband of PPP leader Benazir Bhutto. Mukhtar Avvan, Aitizaz Ahsan, Mairaj Khalid, and Nabeel Gabol, all members of the PPP and also prominent members of the Muslim League, such as ex-Prime Minister Nawaz Sharif, liaji Nadir Khan Zekakhel, Sardar Shaukat, Sardar Ali Mohammad Notezai, Sardar Rind, Syed Ghaus Ali Shah, Mir Afzal, and 'I'aj and Khanum Gohar Aijaz. One name was curiously absent

Part-I, Ch. 2 - Power of 'nareocracy'


from the list: Anwar u1-1.1aq, former deputy and provincial minister of Punjab under the Nawaz government. Second son of the late General Ziaul I laq, Anwar was arrested in 1989 for using the presidential aircraft (and its pilot, Major Farooq) for heroin trafficking. One of the major concrete effects of the "black list" was to point to the respective power of the drug barons, who were engaged in a "scoop" war carried out by journalists using information furnished by these very drug barons. The Pashtun group supporting ex-President Ishaq Khan and the ISI group supporting ex-Prime Minister Nawaz Sharif were fighting a proxy battle through the pages of the daily newspapers News and the Frontier Post respectively, each firing off revelations taken from PNCII files. Each aimed to use the media to demonstrate that the other group was the biggest drug trafficker in the country. Each denied any involvement in drug trafficking and maintained it would participate in the upcoming elections. That was a way of throwing the ball back in the court of a government that, if it truly intended to crack down, had to present some hard evidence. The specialists expressed serious reservations concerning interim Prime Minister Qureshi's declaration from Washington assuring that he would halt the use of drug money in campaigning for the October 1994 elections. They cited the extreme secrecy of Pakistan's laundering system and the difficulty experienced by the IMF and World Bank in tracing dirty money. Heroin produced in Pakistan was selling on streets throughout the world and generated sales of U.S. $80 billion. Even Qureshi, a former World Bank official, had in the past acknowledged the impossibility of tracking down the source of drug money in Pakistan. The prime minister's background had raised criticism, in particular from Sindh politicians, who interpreted his financial connections as representing direct interference by Washington in Pakistan's internal affairs. These critics argued that the appointment of Mot:en Qureshi, who conveniently came out of retirement following strong pressure on the Islamabad "establishment" by the U.S. embassy, showed that Pakistan's military — the driving force behind national politics — had decided not to stand up to U.S. pressure. The 93-page CIA Report on drugs and politics in Pakistan appeared in this context as an additional lever in giving carte blanche to Qureshi. One notorious objective of making the


Pakistan: Drug trap to Debt trap

report public was to rein in the Pakistan Army's secret nuclear research (even though the army's 60% share of the national budget was not challenged by the report). The high point in this campaign came in November 1992, when the U.S. press revealed that CIA satellite surveillance showed components of the Chinese M-11 missile being delivered to the port of Karachi. Pakistani heroin was nevertheless rare in American markets, which was more directly affected by the continuing influx of cocaine and the first signs of a heroin "boom" originating from Central and South America. American administrations have always stated that their efforts to combat narco-trafficking revolve around stopping heroin and other drugs from penetrating the United States. It was remarkable that after 10 years of silence during which overt and covert aid was extended to Pakistan's dictatorial regime and the war in neighboring Afghanistan against "Communist expansion," the CIA could discover a problem of such scope in only a matter of months7 . In recent years, a number of cases had been filed by the law enforcement agencies, especially by the Anti Narcotics Force (AN F)8, in Pakistan against politicians involved in drug trafficking many of whom were even extradited to USA. It proves beyond any doubt that narco-money has played a substantive role in Pakistani politics. During 1999, the total worth of frozen drug traffickers' assets stood at around the previous year's level of $5.8 million. 1998 marked the first year that a court ruled in favour of forfeiture of assets by the government. In Tasnim Jalal Goraya's precedent setting case, assets worth approximately $434,783 were forfeited based on Goraya's conviction in the U.S. on a narcotics offence. Goraya filed a petition in the Supreme Court requesting a stay of the order of the court. The early 1999 arrest of Rehmat Shah Afridi, owner of an English language daily and an influential politician from Lahore, was a significant test of the AN F's ability to target politically powerful traffickers. The accused was later awarded capital punishment, and his appeal against this verdict was pending at the time of writing these lines. Similarly, an influential politician belonging to the then-ruling party, Siddique Gujjar, was arrested with 5 kg of heroin. This arrest led to the detention of officials of other law enforcement agencies posted at the Islamabad Airport connected with the gang. These officials were awaiting trial on corruption charges9.

Part-I, Ch. 2 - Power of 'narcocracy'


In July 1993, the CIA released for press a 93-page Report entitled "Heroin in Pakistan: Sowing the 1Vind" alleging among many other things that drug mafia had links with politicians. The exhaustively detailed report reads like a gory who's who of the Pakistani elite involved in the drug trade, starting from lowly local level power holders right up to the family of the former Prime Minister, Nawaz Sharift° tin exile in Saudi Arabia after striking a "deal" with the military regime of General Pervez Musharrafl. CIA Report says, according to one study, Pakistani share of the world narcotic trade is about $120 billion. The report, however, conceded that it was an extremely high figure. The heroin trade in the Punjab was at the "heart of power," as per report commissioned by the Central Intelligence Agency (CIA) on the narcotics situation in Pakistan. Pakistani drug math's, the report claims, "deal with Iranians, Kurds, Turks, Indians and Thais. The Turkish underworld provides Pakistani drug mafias with access to the worldwide Sicilian distribution channels. Pakistan drug cartels garner enormous profits although figures are impossible to verify. "heroin is now bought, sold, smuggled and used throughout much of the Punjab (and) heroin gangs operate in every major city and many towns. Increasingly political groups use heroin to fund themselves and buy arms," says the report. The report suggests that manipulation by narcotics kingpins was indirectly responsible for the Cooperative Finance Companies' collapse and scandal in which an estimated 2.5 million investors lost their savings. The real estate boom in the Punjab in the 1990s was largely attributed to the enormous influx of drug money into the Punjab economy. Some experts believe the extensive new housing estate of Defence Colony in Lahore was largely financed by drug money, according to the report. It also practically attributes the collapse of the cooperative banking societies to manipulation by drug barons like I Iaji lqbal Beg. Beg bought his own share of residential and business property, but he also went into partnership with several new cooperative banking societies in Lahore. At Beg's insistence among others, the coops used their funds, the savings of hundreds of thousands of small investors, to buy heavily into real estate as well as make large loans for industrial purchases of the biggest political magnet in the Punjab


Pakistan: Drug trap to Debt trap

and "other well-connected industrial families." The report added. Beg's own land purchases and the drug money he funnelled into real estate through the cooperatives sent the price of land soaring, it alleges. "At the height of the scheme, Beg got the cooperatives to not only buy him out but also purchase at inflated prices personal holdings that Beg believed would not hold their value. A year later (in 1991) both the real estate market and the cooperatives collapsed." The report alleges that despite his imprisonment in Karachi, Beg reportedly (remained) active in bids for banks and put up by the government for sale. industrial properties in a major group, Experts believe he is a hidden partner (benami) which purchased one of the most attractive banks during the privatization process in 1991. The allegations levelled in the report were so widespread that the U.S. State Department tried to play down the report as being "one man's work." But intelligence sources said the report was "credible." The State Department was probably playing it down because it implicated almost all the prominent political figures in Pakistan. The CIA Report provided some international link of the local politicians in drug and arms trade that shocked the international community. The CIA Report was published very prominently by an English daily" , especially those parts where the narco-money linkage was alleged with Nawaz Sharif s family. The CIA Report levelled serious allegations that some very close relatives of ex-Premier Nawaz Sharif (in exile in Saudi Arabia) were involved in drug trade. It alleged that Nawaz Sharif s brother-in-law, Sohail Zia Butt, and some other close family members and friends like Aslam Butt, Haji lqbal Butt, Ch. Shaukat Bhatti, Ali Muhammad, Ayub Khan were involved in heroin smuggling. Shaukat Ali Bhatti was also alleged to have smuggled weapons to Sikh militants in India. Islamic parties, created by the Inter-Services Intelligence (ISI) and financed by heroin traffickers, bought enough votes to win scats in the National Assembly, and gained access to Prime Minister Nawaz Sharif and President Ghulam Ishaq Khan. It contends that the ISI has used heroin profits to fund the Kashmiri freedom-fighters in Indian-controlled Kashmir, the Sikh separatists

Part-I, Ch. 2- Power of 'flarcocracy


in East Punjab and the pro-ISI Afghan groups in Afghanistan. Copies of the CIA Report were sent to U.S. President Bill Clinton, Secretary of States Warren Christopher and U.S. Congress members, according to a U.S. officia112. The official said after reading the intelligence document, President Clinton gave Islamabad four to six months to prove it was not providing arms, training and financial aid to the secessionists in East Punjab and Indian-held Kashmir. Clinton's message was contained in a letter delivered on January 7 to Pakistan's Foreign Office by U.S. Ambassador to Pakistan John Monjo. Foreign Secretary Shaharyar Khan disclosed subject matter of the letter to the national press on January 9, 199313. The U.S. officials maintained that Pakistan could be declared a terrorist state by the U.S. Government if the IJI regime failed to convince the Clinton Administration it was not backing international terrorism and narcotics smuggling to the United States as alleged in the CIA document". The CIA study disclosed that one of the top suspected heroin traffickers, Sohail Zia Butt, was a brother-in-law of Prime Minister Nawaz Sharif and that in a country "where marriages were alliances of wealth and influence, Zia Butt's career had prospered along with those of the Sharif brothers, Nawaz and Shahbaz" lexChief Minister of Punjab, in exile in Saudi Arabia I. The CIA Report says that "as the Sharif family moved into the mainstream of power in Punjab under the patronage of the Army, Sohail Zia Butt used his influence and the untouchability that his associations gave him to further his (alleged) heroin enterprises." It says that Aslam Butt functioned as Sohail Zia Butt's "ambassador to other drUg mafias and that a third (alleged) heroin trafficker, I laji lqbal Butt, was regarded as a close political adviser to the prime minister. These men were all far more than casual or marginal members of the Sharif entourage," the document disclosed. Whenever the prime minister visited his home in Lahore, he and his brother (often) met with these men both for business and recreational purposes. The CIA Report says: "One heroin baron doesn't even bother to go through the ISI to fund the Sikh separatists." It claims: "A member of the Punjab Assembly, Chaudhry Shaukat Ali Bhatti, moves virtually all the heroin getting across the Punjab border into India. Bhatti keeps the Sikh militants volatile by giving them

Part-I, Ch. 2 - Power of 'narcocracy' 36


Pakistan: Drug trap to Debt trap

experts on narcotics. Sohail Zia Butt has a number of interesting associations, the most important of which are that he got his start in the smuggling empire of I laji lqbal Beg and that he is the brother-in-law of Mian Nawaz Sharif, currently the prime minister of Pakistan." As the Sharif family moved into the mainstream of power in Punjab under the patronage of the army, Sohail Zia Butt used his influence and the near untouchability that his associations gave him to advance the interests of his patron in the heroin business.

access to arms. Ilhatti last May brokered a $375,000 arms deal between merchants from Dera Adam Khel and the Sikh separatists." In its overview, the CIA Report suggests: "The narcotics money now fuels the political system, supporting party organizations and election campaigns. Narcotics money buys protection for the drug mafias at the highest political levels in Pakistan, while the privatization scheme of the Nawaz Sharif government has provided vast opportunities for drug barons to launder their profits and legitimize themselves by buying banks and industrial conglomerates." It further claims: "Known drug lords and narcotics traffickers sit in the national assembly and in the provincial assemblies of the North West Frontier Province, Punjab and Balochistan. In Sindh, the assembly is full of who protect bandit gangs involved in kidnapping, palharidars narcotics and illegal weapons. One Frontier drug chieftain, who is member of the national assembly, has access to the President's house. Narcotics traffickers reportedly sit in the inner councils of the Sharif family." The report pinpoints the following major syndicates in Punjab, the most populous province of Pakistan:

The Old City gangs "The Lahore underworld is run by six gangs," the report explains under the above mentioned heading, "all of which answer in one degree or another to the crime boss of the old city, currently Sohail Zia Butt, an extremely well connected Kashmiri (local term for who is informally known as the King of I liramandi Red-light area, "heroin has become the main stock-in-trade for these gangs charas but long before heroin arrived they were pushing 'marijuana', alcohol, and other drugs, running gambling dens and brothels and raking off percentages of bazaar profits through protection rackets."

The Kashmiri Syndicate' s "I'he old city gangs from the base of what might be called the Kashmiri heroin syndicate. Sohail Zia Butt is the key figure linking the old city gangs with men who regulate the flow of drugs, money, and influence within the syndicate, according to Pakistani


"In 1990 Sohail Zia Butt ran successfully on the IJI ticket in the Punjab Assembly elections. In 1991 when Beg was imprisoned he reportedly took control over a large slice of the Beg empire. Two others who are thought to work closely with Sohail Zia Butt in the heroin business. 110 lqbal Butt is a former MPA (1988 byelections) and is regarded as a close political advisor to Mian Nawaz Sharif and his younger brother Mian Shahbaz Sharif. Aslam Butt is another brother-in-law of the Sharif brothers. I lc reportedly also had a position in the Beg organization. Highly enterprising and widely connected, Aslam Butt was a financial expert, who also functioned as the syndicate's ambassador to other drug inafias. "These men are all far more than casual or marginal members of the Sharif entourage. Whenever the prime minister visits his home in Lahore, he and his brother meet with these men both for business and recreational purposes. In Punjab, where blood and kinship ties arc often the key factors along with wealth and power flow, it is difficult for Pakistanis to believe that Sharifs arc not involved in narcotics or at least benefiting from the enormous capital generated by the drug trade. Certainly, the Sharif brothers know that many of their converts in the Islamic Jamhoori lachad (IJI) financed their election with hidden contributions from the Beg cartel. Surely they know that a great deal of the money surfacing in the country through various bonds, foreign exchange account, and privatization scheme is drug money. "For now, there is no evidence of any direct relationship between Ittefaq Brothers and drug money. The Ittefaq fortune was not built until the military governor of Punjab, Lt. Gen. Ghulam Jilani Khan (1980-85), looking for an Islamic middle class base on which to civilianize military rule, picked out Nawaz Sharif as the credible rising political leader. The army returned Ittefaq


Pakistan: Drug trap to Debt trap

Industries, essentially small steel re-rolling mills, to Mian Sharif (father of Nawaz and Shahbaz) and his brothers in the first round of denationalization under President Ziaul Haq. Thus began the political rise of Nawaz Sharif, Punjab's Finance Minister, Punjab Chief Minister, Pakistan Prime Minister and the equally rapid expansion of Ittefaq Industries. "The rapid expansion of Ittefaq Industries to 20 major industrial units (steel, textiles, sugar) worth an estimated Rs.8 billion (U.S. $333 million) in less than a decade really occurred under Mian Muhammad Sharif and his second son, Shahbaz, who many regard as the real brains behind the family's political and industrial operations. It was predicated on access to enormous amounts of capital in the nationalized banks and cooperative banking societies. If drug money was involved in the rise of Ittefaq, it was drug money funnelled through the cooperative societies by I laji lqbal Beg organization or narcotics money that came into the banking system through the whitener bonds scheme. As Shahbaz Sharif noted in his discussions with the press and the angry legislators at the time of the coop. failures, Ittefaq operations were demonstrably legal in all respects. The Ittefaq group still owes an estimated Rs.28 billion (U.S. $113 million) on loans from the nationalized banks, one of which is now privatized. 'There is, of course, a much more skeptical view of the Sharifs and drug money, but for now it is based on hearsay and speculation. This view holds that Sharifs have used drug money to build both their political and industrial empires. The main protagonist is Shahbaz Sharif, who acts so that his brother can stand aloof from tainted deals. In this view, the Sharifs need the vast amounts available from drugs to pay off the senior generals, the corps commanders, to keep Nawaz Sharif in power. The Sharifs also need a lot of money to pay off the enormous loans they took from the national banks — some of their factories have yet to turn a profit and reimburse those who lost their savings in the coop. scam. These demands have made them dependent on narcotics money. In return, the Sharifs arc steering the sale of government industrial properties to consortia partially financed by hidden drug lords. This is done by manipulating the bid regulations enforced by the Privatization Commission. The Commission head, General (Rctd.) Saced Qadir is an old ally of

Part-I, Ch. 2- Power of 'nairocracy'


Nawaz Sharif and a man whose reputation for probity was never the brightest, even when he was in the army." The empirical data produced by national and international agencies testify to the fact that both in Benazir and Nawaz Sharif governments, the election campaigns were financed by drug traders and confirms the role of narco-money in politics. A number of members of Parliaments were either directly involved in drug trade or were financed by drug traffickers. Jack Blum, former chief counsel for the U.S. Senate Narcotics and Terrorism Subcommittee agreed that Pakistan's narcotics problems were caused by official corruption. "The most important single problem is government corruption. And from the accounts I have got from Pakistanis, the corruption is both in the civilian government and the military. And its pervasive. It goes right to the top16." The level of this "cooperation" can be guagcd from the fact that a case was even registered aginst Asif Zardari, husband of Benazir Bhutto, who was Investment Minister and Senator. In 1998, a Swiss judge indicted Asif Ali Zardari on a charge of money laundering. Zardari's case is still pending in High Court and he remains detained. Former Prime Ministers Benazir Bhutto and Nawaz Sharif, along with many other politicians and former civil servants, are being investigated on charges of corruption and as beneficiaries of naro money. It is a sad reflection on a society which had a clean image prior to 1979 in this area and where politics used to be a noble cause and being a politician was a matter of pride. Now the image has changed drastically. Politics has become a big money game; politicians make huge investments in elections, funded by drug lords, and after being elected they serve their financcrs. This is how narco-money has destroyed the entire fabric of the society in Pakistan. The judicial and adminstartive organs have been made corrupt and ineffective. Huge money in the hands of drug barons coupled with strong poliical connections bought most of the judges and government officials who were generally low-paid. The prosecutions of most criminal and narcotics cases in Pakistan are delayed because of the willingness of judges to grant continuances, the ability of the defendants to file interlocutory appeals, the difficulty of compelling witnesses to testify, and the appearance that bribery in the lower courts can influence the outcome of cases17.

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Pakistan: Drug trap to Debt trap

The situation became more grim as the military bureaucracy also showed indifference towards the cases where some high officials were arrested in the narcotic trade. It proves to a great extent their culpability in the entire process of heroinization of society. In the conversion of Pakistan into a Kingdom of Heroin, the high-ranking military officials played a significant role during the period from 1979 to 198518. A report by Aabha Dixit, published in the Indian Express of May 2, 1997, commented as under: The dismissal of the Pakistan Navy Chief Admiral Mansur-ulI laque comes close on the heels of the renewed allegations that several military equipment deals in the recent past have been tainted with kickbacks. It follows the recent busting of a Pakistan Air Force (PAP) gang of drug peddlers in the United States. These incidents, taken together, have led to a serious image crisis for the Pakistani armed forces." 'The drug scandal erupted after the arrest of Squadron Leader Farooq Khan, who was visiting the U.S. as part of an official PAP crew, which was to bring back spare parts of F-16 aircraft. The sting operation carried out by the U.S. Drug Enforcement Agency (DEA) revealed that Khan was not acting alone and a subsequent operation invplving Pakistan's AntiNarcotic Force (ANF) led to the arrest of another Squadron Leader, Qasim Bhatti, in Rawalpindi. Bhatti was reportedly the mastermind. Subsequent investigations by Pakistani journalists reveal that the arrest of Bhatti and Khan is merely the tip of the iceberg. Reports of drug chains reaching the highest offices in Pakistan are nothing new. In a study by Ilcramul Hag, l'akistan from Hash to heroin, there have been credible reports that Major I lamid from the personal crew of General Zia's helicopter was part of an international drug cartel. Similarly, Zia's banker Hamid Hasnain was also implicated in drug trafficking. Other important military personnel implicated for drug smuggling included the former Governor of NWFP, General Fazle I laq, and Lt. General Hameed Gul, who is alleged to have allowed trucks belonging to his National Logistic Cell (NLC) to ferry drugs across the PakAfghan border. Curiously, the drug scandal is not the only one to break out in recent times. The renewal of negotiations with the French for the supply of 32 Mirage 2000-5 aircraft in a $2 billion deal has brought the kickback issue to the fore. In an

un precedented move to defuse the crisis, the PAP chief Abbas Khattak gave a widely reported interview in which he claimed that the Mirage deal was being negotiated with complete transparency. The Pakistan Navy too has been facing charges that the $950 million Agosta submarine deal was also tainted with kickbacks. In a quick rebuttal, clearly aimed at damage limitation, the Navy issued a denial, exonerating the Benazir Bhutto government as well. But the sacking of Admiral Hague that apparently had the tacit backing of the other service chiefs should be seen as a oneoff decision. Admiral Hague was appointed by I3enazir Bhutto and was supposed to have played handmaiden to Asif Ali Zardari and his trusted lieutenants in the submarine deal. With the armed forces steeped in controversies, the media is arguing that Shard, who has the power of appointments in the armed forces, should re-assert his authority. Shirecn Mazari of the Pulse magazine writes: 'The arrest of a Pakistan Air Force Officer in the U.S. for heroin smuggling has brought into focus once again the question of reining in the military within the government's accountability sphere. The military's constant effort to deal with its own behind closed doors is simply not acceptable within our democratic milieu, specially since the military is so heavily involved in terms of personnel — both in service and retired — in the civilian sector as well. But it is unlikely that Nawaz Sharif will heed the advice of the media in the drug smuggling case. The media has wanted the Air Chief to be sacked for the shameful scandal. Since Pakistan's return to democracy in 1988, the military has ensured that its own turf is protected from the politicians at all costs18." The episode of Ayaz Baluch, a Pakistani employee of the Drug Enforcement Agency (DEA) of USA created a stir in Pak-U.S. relations. His arrest, involvement in trapping high-ranking officials in the Air Force and subsequent release after mounting pressure from the USA unveils yet another sordid story of narco-politics in Pakistan. In April 1997, the U.S. Drug Enforcement Administration (DEA) arrested a senior Pakistan Air Force officer on charges of smuggling 2 kgs of heroin into the U.S. aboard a Pakistan Air Force Boeing 707. Farooq Ahmed Khan was nabbed trying to sell the drug to an undercover agent in a New York McDonald's. The war against drugs frequently crossed over national borders and requires tight alliances among far-flung partners. For the most part, the U.S. and Pakistan made an effective team. The Americans


Pakistan: Drug trap to Debt trap

have been assisting Pakistani counter-narcotics efforts since the 1970s, posting DEA agents inside the Asian nation and in 1997 gave it $2.5 million in aid. But after the arrest of Pak Air Force officer in New York, rather than focusing on stopping the flow of drugs, the two sides were squabbling with each other. Washington wanted Pakistan to clean up its act, while Islamabad asked the U.S. to temper its approach. "The Americans have been overstepping the limits of legitimate activity in this country," said an editorial in Pakistan's daily The Nation. The stakes were high. While the U.S. and Pakistan were still talking of a shared commitment to combating drug trafficking and production, Farooq Khan's arrest in New York was distracting them from the job at hand. It wasn't clear whether Khan was part of a broader, military. related drug operation. Pakistani authorities swiftly launched an investigation and apprehended another air force officer in a Karachi hotel who allegedly ran a small drug ring that included Khan. But Pakistan then announced a surprise arrest of its own, which U.S. officials said amounted to revenge against the DEA. Ayaz Baluch, a trusted Pakistani DEA employee in Islamabad, was nailed April 28, 1997 for ,alleged drug trafficking and unspecified "anti-state activities," charges that, if he was found guilty, could lead to death penalty. Pakistani officials denied that Baluch's arrest was retaliatory, though the U.S. claims he was innocent. "It appears he was arrested for carrying out his responsibilities as an employee of the DEA," a senior Clinton administration official told the Washington Times. That's unacceptable. So the war on drugs turned into a skirmish between the drug busters. Many Pakistanis believed the DEA deliberately set up Farooq Khan in New York to shame Pakistan's air force, and they suspected the U.S. of using local citizens like Baluch as spies. Pakistani officials were also offended that the DEA didn't notify them of Farooq Khan's arrest before it happened. Mostly, though, they were alarmed that a U.S. agency managed to penetrate Pakistan's powerful military. "Right now there is a lot of strain in our relationship," said a Pakistan AntiNarcotics Force official. "If the DEA continues to keep us in the dark about its covert activities, this relationship may not last long." Gen. I !amid Gul, former head of Pakistan's Inter-Services Intelligence agency said: "Americans have proven again and again

Part-I, Ch. 2- Power of 'narcocracy'


that they arc unreliable, but we are so tied up with them, we have no choice." When Pakistan's then foreign minister, Gohar Ayub j(han, visited Washington in 1997, U.S. Secretary of State Madeleine Albright sought to smooth over the problems. "We ought to work together cooperatively to try to resolve the a tmosphere that produced these arrests," said State Department spokesman Nicholas Burns20. Islamabad's decision to ultimately pardon Ayaz revived bilateral cooperation between the two countries to combat international narcotics trafficking. A senior State Department official said the Pakistan government's decision to pardon the DEA's local employee Ayaz Baluch could even result in that country being given a clean chit by the White House as fully cooperating with the United States in efforts to stem illicit drug production and trafficking. Ayaz Baluch was sentenced to ten years' hard labour for persuading a Pakistan Air Force (PAF) officer to carry drugs to the United States in a DF.A sting operation. A government statement released in Islamabad said Air Chief Marshal Parvaiz Mehdi, acting on a mercy petition from Baluch's wife, ordered the remission of the remainder of Baluch's sentence. One U.S. official said: "we are very pleased and we welcome the release of the Pakistani DEA agent, Baluch." This is a very important step. The official, who was the point man for South Asia added, "I am very determined to work closely with the Pakistani officials here as well as in Islamabad to see that by this time next year, we see a full certification of Pakistan on drug cooperation." The official, however, refused to comment when asked if Baluch's release was in exchange for a promise to free a Pakistani Air Force (PAI') officer held on drug running charges in the U.S. Ile said that drug trafficking in the region was increasingly harming Pakistan itself. "Afghanistan," he said, "has become the second largest opium producer in the world after Burma, and Pakistan is feeling the effects of that and we believe that we have every reason to be working closely with the Pakistani government and we want to do that." The official emphasized that "it's a special priority that when we have that determination, that review next year, that we arc able to see full certification." This year even though Pakistan was found to be not fully cooperating with the U.S. in anti-drug


Pakistan: Drug trap to Debt trap

fighting measures, President Bill Clinton exercised his prerogative to invoke the vital national interests waiver clause and certified Pakistan along with Cambodia, Colombia, and Paraguay. This meant that these countries would continue to receive U.S. assistance despite their not fully meeting the criteria for certification. A denial of the certification would have forced the U.S. to slap economic and other sanctions on these nations, including voting against multilateral development bank loans to them. Clinton had then said that the sanctions "would vitiate the broader U.S. policy of high-level engagement, including our strong support for Prime Minister (Nawaz) Sharif s commitment to hold a dialogue with India as well as to strengthen democracy and reform the economy." Denial of certification would also have jeopardized "U.S. assistance programmes to help the government of Pakistan meet those goals," and required Washington to vote against Islamabad at the World Bank and the International Monetary Fund "at a time when Pakistan is vulnerable to a financial crisis," the U.S. President had added. "The risks posed by such sanctions outweigh the risks posed to U.S. vital national interests by the government of Pakistan's inadequate counter narcotics performance," he had pointed out. In the International Narcotics Control Strategy Report of 1998, released by Secretary of State Madeleine Albright, the Administration had listed a slew of concerns for not certifying Pakistan as cooperating with the U.S. in efforts against narcotics trafficking. Heading the list was the arrest and court-martialling of Ayaz Baluch. According to the report, Ayaz Baluch, a key DEA Pakistani employee was involved in an operation to identify corrupt government military officials , smuggling heroin to the United States. It noted that Baluch had to serve a ten-year sentence at hard labour despite strong protests by Washington that the charges were baseless and repeated requests at the highest levels to release him expeditiously. A PAP field general court martial in October 1997 convicted Baluch of persuading a PAP officer to smuggle drugs to the U.S. Ayaz Baluch was arrested after U.S. officials in April 1997 charged PAP Squadron Leader Mohammad Farooq with carrying 4.4 pounds of heroin in a PAP Boeing 707 he had flown to the U.S. to collect spare parts for the U.S.-supplied F-16 fighter aircraft21. A report entitled Pakistan: Simple Simons' Complex Logic observed: " Ambassador Thomas Simons Jr. can upset the

Part-I, Ch. 2 - Power of 'flarcocracy"


Blending his diplomatic skills with prosecutors in uniform Roman law, he conveniently mistranslated the delay in a charge s heet to seek a quick acquittal for DEA employee Ayaz Baluch, a local recruit. Simons softly pleaded for his handovcr to U.S. authorities, insisting the man was not guilty of any offence and as an argument pointed out to the inordinate delay in the official charge sheeting of Baluch by Pakistani prosecutors. The tactics are not new to defence lawyers. The call for quick indictment is often designed to offset a nerve-racking investigation for criminals always prefer shortest confessions and minimum punishments." Dr. S.M. Koreshi wrote about the incident in Pakistan Observer: "It seems that the lAyaz Baluch'sj mission was meant not only to defame Pakistan forces but also to destroy the fabric of discipline and morals of the younger generation officers as had happened in Vietnam to the American GIs and young officers. Ayaz I3aluch was apparently acting as a tool of this scheme. Why would there be such stout defence for him otherwise. A campaign is going on these days to destroy Pakistan, to destroy Pakistan's values, system, self-confidence, moral fibre and make Pakistanis doubt the viability of their country and subvert its ideology." The governments of lienazir Bhutto and Nawaz Sharif only on paper waged a war against drugs to satisfy the demand by the U.S. State Department. In reality, however, they encouraged the inflow of drug money and in the process joined hands with some drug lords who managed to win seats in the Parliaments. Both the parties not only issued tickets to such persons but also heavily relied on their financial might. One such case is that of Munawwar Manj who shifted loyalties from the Muslim League to the People's Party as and when protection was required. It is a matter of record that both the parties while in power extended him support and protection. There are reports that the infamous IIaji lqbal Beg (of BBC film fame) submitted before the U.S. authorities after his extradition that he was giving large sums of money to a number of politicians belonging to both the parties. Ile further revealed that during the election campaigns he gave his premises free of cost to Nawaz Sharif for campaigning purpose. His testimony before the Magistrate, East New York, showed that he donated Its.50 million as party fund to Asif Ali Zardari and in exchange for that he secured his transfer from Sukkur jail in Sind to a jail in Lahore. When the Americans came to know about his

Part-I, Ch. 2- Power of 'narcocracy'

"connections" with Mr. Asif Zardari, they accelerated their efforts for Haji's extradition to the USA. Mr.Zardari reportedly helped him by asking the Additional Deputy Commissioner (General) Islamabad to keep delaying his extradition orders as long as possible. It is interesting to see that on a number of dates fixed for hearing the ADC(G) used to send his leave on medical grounds. The story goes that in Sukkur jail Beg and Zardari got a chance to meet each other and after some "useful" negotiations entered into a "friendship." Mr.Zardari, after his release and becoming part of the interim government, came up to the expectation of a Punjabi saying, 'Jail di yari badi pukki hondi hai" (friendship developed in jail is everlasting). I Iaji lqbal Beg made a startling revelation that he also helped the Sharif family when they were in dire need of money as Benazir blocked all their credit limits in the nationalized banks and their consignments could not be released. Haji claimed that to avoid daily demurrage of millions of rupees, Mian Mohammad Sharif, popularly known as Abba Ji (father) in Pakistani politics, personally approached him for financial help and he extended Rs.20 million from his Dubai account. This money, he said, was returned to him after two years and that too without any interest. The episode of Haji lqbal Beg_ is a classic example of cooperation between politicians and drug lords. It also reveals the level of influence of narco-money in Pakistani politics. Starting from General Ziaul Hall to Nawaz Sharif and Benazir, they managed to influence and control all of them with impunity. The entire state structure became subservient to their interests. The power of narco-money transcended all national and international boundaries and Pakistan represents a most apt case-study country. Its transformation into a Kingdom of Heroin testifies to the well-established fact that once narco-money is allowed to flow openly in a country, it can easily sweep away the entire system like an avalanche. Chapter Notes 1 2 3


Pakistan: Drug trap to Debt trap


Pakistan: From Hash to Heroin, Annoor Printers, Lahore, Pakistan, 1991. July 18, How to Unearth Black Money?, Dr. Ikramul Haq, Business Recorder, 2000. Lahore High Court set aside the capital punishment awarded to Munawwar Manj in January 2003. While admitting the appeal of State, a full bench of


Supreme Court directed Manj to furnish bail bond worh Rs.5 million. The full bench decided to reappraise the entire prosecution evidence against the verdict of Lahore High Court. The Punjab Anti Norcotics Force recovered 35 kg of heroin and 30 kg of charas from the possession of Munawwar Manj's driver Sattar and guard Mohammad Siddique, who were allegedly taking the contraband to Lahore. A celebrated book by James Mills, Doubleday, New York, 1986. Drug Cultivation & Trafficking, D.Suba Chandra, IPCS, April 23, 1999. International Narcotics Control Strategy Report 1999, U.S. State Department.

5 6 7 The Geopolitical Drug Dispatches, September 23, 1993. 8 "The Anti-Narcotics Force (ANF) is Pakistan's principal narcotics law enforcement agency. In 1998 the Government of Pakistan (GOP) began to examine ways to strengthen the institutional capacity and performance of the ANF. Although the ANF has an authorized personnel strength of 1932 it is currently operating with 1270. The problem of unfilled slots in the ANF was partially overcome when the GOP decided to lift the ban on new hiring which had been imposed earlier as an austerity measure. The ANF has initiated steps to recruit 292 personnel. But performance incentives also need to be improved, and with this in mind, the incentive structure for ANF personnel is being revised. Personnel in the higher echelons of the ANF are temporarily assigned from the army or the police. New recruits arrive without counternarcotics training and remain with the ANF for only three years. This limits the effectiveness of specialized training. A major accomplishment was the establishment of a so-called "Vetted Unit," the Special Investigative Cell (SIC), accomplished with DEA assistance. The purpose of this move was to improve intelligence collection and investigative capacity and improve esprit and reduce corruption and intelligence leaks. With donor assistance, the ANF was also able to improve ground mobility and communications capability"— International Narcotics Control Strategy Report 1999, U.S. State Department. 9 International Narcotics Control Strategy Report 1999, U.S. State Department. 10 The Newsday, New York, February 23, 1993. A government official on condition provided the official a draft of the CIA Report to New York Newsday and the author of the report remained anonymous. The Newsday, an American newspaper published from New York City, printed the findings of and excerpts from the CIA Report in its 23 February 1993 issue. The American newspaper used the following headlines for its story, which was written by the paper's Washington correspondent Mr.Knut Royce: "CIA: Heroin Rules Pakistan." "CIA Report says heroin is Pakistan's lifeblood." In its story about the CIA's report on Pakistan, The Newsday quoted Zahoor Malik, press attache at the Embassy of Pakistan in Washington, DC, as saying: "If you don't mind, this is a stupid report totally baseless. The President of Pakistan is one of those few people in the Third World who is totally clean." Malik blamed the heroin problems on Pakistan's role in Afghanistan. The paper also quoted Malik saying: "America used us like a condom," and then turned its back on Pakistan by cutting off U.S. military aid and economic assistance to Islamabad on October 1, 1990. Zahoor Malik's remarks about the CIA's report infuriated several U.S. officials. One U.S. official said: "We want to maintain trade and aid relations with Islamabad. We have not dumped Pakistan. We have given millions of dollars to the government of Pakistan in U.S. aid for anti-narcotics programme. However, America is very concerned about reports which confirm that certain Pakistani officials are working against American interests and pushing Pakistani-made heroin into

Pakistan: Drug trap to Debt trap


The Newsday, the United States to poison American children." According to the CIA study was conducted by the CIA's Counter-narcotics Centre and was written by "the best" intelligence officer who spent much of his career in Pakistan and who has attributed most of his information contained in the report to narcotics experts. Pakistani and foreign journalists and underworld sources whom he interviewed inside Pakistan. On its completion, the report reportedly generated much internal debate within the CIA on whether or not the findings of the report should be made public. However, A Pakistan claimed, the then U.S. ambassador to English newspaper The Frontier Post Pakistan, Nicholas Platt, advised the state department against any such action on the grounds that, "it is not in our interest to embarrass people in high places in Pakistan." Mr.Platt was believed to have advised the prudent and quite behind the scenes use of the information to convince Pakistani claimed that all high ups into taking the required actions. The Frontier Post American personnel involved in preparing this report were transferred from Pakistan by August 1993 out of concern for their safety. The 93 page secret report, covers the heroin and related drug business of the entire country in detail and while revealing the inner workings of the Pakistani drug mafia also takes an analytical look of the drug trade's origins in Pakistan and its future prospects and possible remedial options available to the American

3 Narcopolitics

authorities. 11 The Frontier Post, August 18, 1993. 12 Ibid. 13 Dawn, January 10, 1993. 14 The Frontier Post, August 19, 1993. 15 One of the most interesting chapters of the CIA's report starts off, as a record of Sohail Butt's achievements but in reality is more of an unofficial record of the Sharif family's indirect involvement with the drug racket. 16 Ibid. 17 Ibid. Hendinization & Militarization in Pakistan: From Hash to Heroin, 18 See Chapter Annoor Printers, Lahore, Pakistan, 1991. 19 Pulse, September 1988. Asia Time, June 2, 1997. 20 A Skirmish Over Drugs, by Hannah Bloch, 21 U.S., Pakistan to revive bilateral campaign against drug trafficking, by Aziz (Internet Edition), April 13, 1998. Haniffa, International News


In effect, American drug policy has been crippled by a contradiction between DEA attempts to arrest major traffickers and CIA protection for many of the world's drug lords. This contradictibn between the covert operations and drug enforcement, seen most recently during Pakistan's heroin boom of 1980s, has recurred repeatedly. The CIA's protected covert action assets have included Marseilles Corsican criminals, Nationalist Chinese opium warlords, Afghan heroin manufacturers, and Pakistan's leading drug lords — Alfred W. McCoy in The Politics of Heroin, Lawrence Hill Books, 1991 Edition. Pakistan's democratic process, which remained fragile and prone to military's interferences, has been facing serious threats since 1979 due to growing influence of narco-money. The successive civilian governments since the revival of civilian rule, after General Zia:s death in an air crash, proved to be helpless before the mighty power of Pakistan's leading drug lords. The beneficiaries of colossal drug money, during the Afghan war, were not ready to allow the democratic forces to have a real control over the state institutions. The phenomenon of narco-politics that emerged during Pak-Afghan collaboration, military as well as economic, during the fight against the Red Forces, backed by CIA, culminated in ruining the socio-political structures of both the countries. In the year 2003 one is paralyzed due to American-backed controls and continuous infighting and the other is on the verge 49

Tir Part-I, Ch. 3- Namopolitics 50


Pakistan: Drug trap to Debt trap

of socio-political collapse with the breakdown of civilian rule and frequent military takeovers. Recently, both Pakistan and Afghanistan bitterly criticized USA alleging that their great sacrifices during the Afghan War were ignored and in the days of difficulties they were left alone. Speaking at a gathering in UK, the Foreign Secretary of Pakistan accused Washington of betrayal. A senior Afghan spokesman in a press statement alleged that both USA and USSR were involved in drug trafficking and since the Talibans refused to join hands with them, Afghanistan was made a victim of international sanctionsl. The drug situation in both the states remains grim. After exit of Talibans. Afghanistan is again becoming the largest opiumproducing country and Pakistan as a major consumption and exporter State. In 1999, Afghanistan, according to independent estimates, produced 4,600 tons of opium (though official figures released by U.S. State Department estimate it at as low as 1670 MT). In 1998 it was 2,100 tons - a 100% increase in one year! A 100% increase every year of heroin in Afghanistan played havoc in the international heroin market. The bumper supply now under the Karazi government having full support of USA is capable of adversely affecting the balance of demand and supply in the global heroin market, both in terms of prices and consumption. If this trend remains unchecked what is going to happen to the international heroin price? If the entire production of Afghanistan alone floods the market, heroin may become as cheap as chewing gum. The Golden Triangle never had such a rate of growth, not even somewhere near 20% to 25%. It is a matter of record that , 100% growth rate was not achieved even throughout the Vietnam War when almost every party in the conflict, including the CIA, was involved in drug trade. The supply line of heroin from Afghanistan and Pakistan combined is posing once again a serious challenge to the law enforcement agencies the world over. From the consumption angle, the situation is equally depressing, as prices plunge down, more and more people are likely to get hooked. The figures available about heroin addiction in this region are simply alarming; 2.4 million in Pakistan, 2.8 million in Iran, nearly 3 million in China and although statistics arc not available for Central Asia, it is apprehended that heroin addiction is on the rise there as well. Pakistan and Afghanistan are meeting this enormous

demand, meaning by that tons and tons of money is creeping into politics and society. The rise of fundamentalism is directly connected to this phenomenon, which explains the real tentacles of narco-politics. Pakistan Statistics2 (1991-1999) _ 1999




1995 . 1994










6,280 8,170
















Potential Yicld(mt)










































Opium Potential 1 larvest(ha)



7,136 9,147




Hashish/ Marijuana(mt) Labs Destroyed Acetic Anhydride(hr) Arrests

36,665 37,745

108.50 201.55








• 51,119 59,081 48,296

39,763 15,984


Users (thousands) , Opium! Clreir n






1,000 1,000


Opium (since 1995)





Heroin (since 1995)

















Cannabis Other Drugs





Pakistan: Drug trap to Debt trap

Part-I, Ch. 3- Narcopolitics

Afghanistan Statistics (1991-1999)

from Afghanistan. Pakistan is finding it difficult to cope with its own growing addiction problems. Pakistan has emcged as an important transit country for the precursor chemical, acetic anhydride (AA), destined for Afghanistan's heroin laboratories. Chemical controls are adequate, but there is still diversion of AA from licit imports. Pakistan is not a major money laundering country, but, given the level of drug trafficking, smuggling, and official corruption, money laundering almost certainly occurs, mostly by means of unofficial, traditional money transfer facilities, known as hawala (an alternate remittance system not using the normal banking channels). A dangerous situation is emerging in this country wherein the divisive forces, militant organizations, social organizations backed or infiltrated by the ISI are gaining a stranglehold on the administration and state machinery by virtue of its financial power engendered by drug money. If such a situation continues, plagued by unemployment and other evils, it will destroy the very essence of the Pakistani social fabric to cause ultimate destruction of this country.

1993 11992 I 1991 1999 I 1998 1 1997 1 1996 I 1995 1 1994 1

1 Opium Potential liarvest(lia)

51,500 41,720

Eradication(ha) Cultivation(ha) Potential. Yield(mt)


39,150 37,950 38,740 29,180











29,180 51,500 41,720 39,150 37,950 38,740


21,080 19,470

21,080 19,470





DEA believes based upon foreign reporting and human sources, that opium production in Afghanistan may have exceeded 900 metric tons in both 1992 and 1993.


International Narcotics Strategy Report 1999, U.S. State


Afghanistan, according to a U.S. State Department Report, became the world's largest producer of opium poppy in 1999. Traffickers of Afghan heroin route most of their production to Europe but also target North America. There was no single central government in Afghanistan where the Taliban and Northern Alliance factions (there are others) .vie for national control. Despite UNDCP and NGO assistance, efforts at crop eradication, drug supply reduction, counter narcotics law enforcement, and demand reduction completely failed. In fact; these factions, especially the Taliban, who controlled 97% of the territory where poppy was grown, promote poppy cultivation to finance their war machincs. Those in positions of authority made proclamations against poppy production but otherwise evinced no political will to fight narcotics. Rather, they were in active collusion with smugglers and criminal elements to manufacture and export heroin. Cultivators who had lived through twenty-two years of civil war generally view opium as their only means for survival in a hostile and uncertain environment. Institutional framework, or capacity, and resources to deal with problems at national, provincial and local levels as well as across different sectors simply did not exist in Afghanistan3. Pakistan faces major challenges caused by the flow of opiates


Both cannabis and opiates transit through Pakistan. Afghanistan is the primary source of opiates passing through Pakistan. Afghanistan produced an estimated 1670 MT of opium in 1999. Afghan opiates trafficked to Europe and North America enter Pakistan's Baluchistan and NWEP provinces and exit either through Iran or Pakistan's Makran Coast, or through international airports located in Pakistan's major cities. They also transit land routes from Baluchistan to Iran and from the tribal agencies of NW1,13 to Chitral area where they re-enter Afghanistan at Badakhshan province for transit through Central Asia. It is estimated that Pakistan uses 98 MT of opium a year to meet the needs of Pakistani addicts; however, decreasing production of opium in Pakistan means that more Afghan opium is destined for the Pakistani market. Some opiates cross Pakistan enroute to India. An estimated 80 percent of heroin smuggled out of Southwest Asia is destined for the European market. The balance goes to the western hemisphere or elsewhere in Asia. Couriers who were intercepted were attempting to travel to Africa, Nepal, Europe, Thailand and the Middle East. Due to increases in drug production and border tensions between Afghanistan and Iran, the volume of opiates entering Pakistan from Afghanistan in 1999 increased's.

Part-I, Ch. 3- Narcopolitics 54


Pakistan: Drug trap to Debt trap

There is a strong possibility of Pakistan becoming again a victim of shortsightedness of its policy makers who always go for short-term gains. In case they fail to act prudently, the time is not remote when the forces of obscurantism take over the entire state apparatus with the help of their friends who are active in and outside Pakistan. The future of democracy now rests with decriminalizing our political structure. A document of the Swiss Government, obtained way back in 1980, revealed details of the secret deposits held by Pakistani nationals in Swiss banks. Many of these deposits were held by serving and retired officers of the Pakistan Armed Forces and the money had been deposited in the banks in their numbered accounts by the narcotics barons of Pakistan, in return for the Army protection which they received in their smuggling operations of heroin. Gen. Musharraf on assuming control on 12 October 1999 started a drive against those who had defrauded Pakistani banks over the years by borrowing billions of rupees without a collateral or with bogus ones. The drive was subsequently slowed down on the ostensible ground that it was affecting the business morale of the investors, but the real reason was that the investigations made by the Pakistani agencies into the details of the bank defaulters brought out that amongst the major defaulters were many serving and retired officers of the Pakistan Army, including Lt. Gen. Nasir. Not only had Lt. Gen. Nasir borrowed large amounts himself for his personal use, but he had also borrowed billions of rupees in the name of the ISI to augment its secret operational funds. I le had also recommended the cases of many Pakistani businessmen to the banks, which gave them loans without satisfactory collateral. Consequently, the agencies were ordered to hush up the entire case. Pakistan's Chief Executive also set up an Accountability Bureau to investigate complaints of corruption against political leaders and other civilians and prosecute them. Initially, he had exempted the Judges of Pakistan's Supreme Court and the provincial High Courts and the military from the purview of the Accountability Bureau. Ile justified the exemption granted to the armed forces on the ground that the principle of accountability was strictly enforced in the Armed Forces. Subsequently, when the then Chief Justice of the Pakistan Supreme Court, and some

other Judges refused to take a new oath prescribed by Gen. Musharraf in order to prevent them from questioning the legality of his regime, he ordered an investigation by the Accountability Bureau into their assets in order to harass them for their defiance of the military regime. Many reputed non-governmental organizations (NG0s) of Pakistan strongly criticized the Chief Executive for exempting himself and other officers of the Armed Forces from the purview of the Accountability Bureau. In the face of their criticism, he conceded that the Accountability Bureau could investigate complaints of corruption, money-laundering etc. against retired, but not serving officers of the Armed Forces. Taking him seriously, Lt. Gen. Syed Mohammad Amjad, the former Chief of the Accountability Bureau, had started an investigation not only against a former Chief of the Naval Staff, who was removed from office by Nawaz Sharif on charges of corruption and who had since taken shelter in the U.S., but also into the cases of the unpaid bank loans of Lt. Gen. Nasir. Annoyed by this, Gen. Musharraf removed IA. Gen. Amjad from his post and sent him to Multan as Corps Commander. Lt. Gen. Khalid Maqbool, replaced IA. Gen. Amjad as the Chairman of the Accountability Bureau, and said to be a close friend of U. Gen. Nasir. Lt. Gen. Maqbool is a Punjabi belonging to the Baluch regiment. Ile was GOC 4 Corps till his transfer to the Accountability Bureau. The way Nawaz Sharif, before October 1999, had been using heroin money to prevent Pakistan's economy from collapsing had received due attention in the media and there were many allegations to this effect, though all the reports were unconfirmed and not supported by any documentary evidence. Since 1990, tax collection in Pakistan in real terms has been steadily going down since the people do not feel the need for paying taxes to a Government, which only indulges in wasteful expenditure and does not care about the economic and social conditions of the people, who do not belong to the new class of uniformed plutocrats. Consequently, the State has been obliged to borrow more and more from domestic and foreign banks and, after the suspension of the IMF assistance in May 1999, it has been struggling to keep itself afloat in a sea of unrepaid debts. The IMF has now resumed assistance to Pakistan after getting strict assurances from the Government of General Pcrvez Musharraf.


Pakistan: Drug trap to Debt trap

According to all known economic laws, the Pakistani economy prior to 9/11 should have collapsed, due to mounting debts and interest payments, decrease in industrial production and widening trade deficit, but it survived on Pakistan's joining the Bush camp. While all the economic indicators point to a comatose state, the State managed to pay the salaries and pensions of all public servants, civilian as well as military, and there had also been no instance of the private sector not paying the wages of the workers. If one goes purely by economic indicators, Pakistan's economy was in as bad a shape as that of Russia, or even worse. Russia had been in receipt of Western and IMF assistance, whereas Pakistan had not, since the nuclear tests. It baffled even the donors as to how Pakistan managed to sustain without defaulting in the repayments of interest on debts. The U.S. Government stopped economic assistance to Pakistan, but a negligible impact was visible as millions of dollars were still pouring in from sources not known to anybody, might be to somebody. There have been allegations in the international media that the Pakistani State has been kept afloat despite U.S. economic sanctions and the suspension of IMF assistance by narcotics money. The News, English daily newspaper of Pakistan, had published on March 16, 2000, a report on how the State had been managing, despite a negative flow of money from abroad, for two years in succession. Quoting State Bank of Pakistan sources, it said: "There was excess liquidity (of U.S. dollars) available in the kerb market of foreign exchange which is being fully absorbed by The present inflows of exports, remittances the central bank and foreign direct investment are not enough to meet the international trade gap and the cost of debt servicing. The difference is being covered through open market buying to maintain a reserve level of around U.S. $1.5 billion. The SBP has done this since June 1999. The foreign trade deficit continues to widen; the remittances from overseas Pakistanis have been declining since the military seized power; foreign investment flows have practically stopped; Japan, the most important supplier of economic assistance in the past, and the \Vest have refused to lift economic sanctions; the foreign banks are no longer lending to Pakistan; and the IMF assistance remained suspended for 16 months. Despite this, there are so many millions of U.S. dollars —

Part-I, Ch. 3- Narcopolitics


genuine dollars and not counterfeit — circulating in private hands that the State Bank of Pakistan has been able to buy from them over a billion dollars." Where did this private hoarding of U.S. dollars come from? Presumably from drug and narcotics trade as there is no other visible source. The forces of terror and obscurantism are gaining more and more control of the society with each passing day, as enormous money, through arms and drug trafficking, is becoming a lethal weapon in their hands. The situation is becoming more painful as corrupt politicians; ever-greedy civil and military bureaucracy and profit hungry traders are also doing their best to pave the way for virtual control over political institutions by such forces. Its a great tragedy that no leadership is available which can stem the rising tide of orthodox insurgence and put an end to criminal culpability of civil-military-politico trio. It is an undeniable fact that over the period of time, this trio has cemented its bonds by cross marriages of their children. Today it is common that a civil servant is related to an army general and one son or daughter is also married into a political family5. This has been done under a well thought for plan to further the process of self-aggrandizement, providing a chance to forces of obscurantism to win public sympathy against the trio. The political scenario is fast changing where in the absence of democracy, the orthodox forces are winning more electoral support. The centres of conflict around Pakistan have one clear modus operandi: arms are traded for drug money, which goes in the hands of merchants of death. The beneficiaries of narcomoney are forces of obscurantism who enjoy full support and backing of those who want to impose a new world order. On the one hand they are benefiting from the real profits of narco-trade and arms dealings, and on the other they are using their partners to terrorize the liberal and democratic forces. The spectre of fundamentalism is their brainchild as a replacement of the erstwhile Marxism. They want to keep the Muslim world in the Dark Ages and economically enslaved, through IMF and the World Bank, leading to its total subjugation. Narco-politics is a means to achieve this twin purpose. In this game, their friends in arms are drug lords and arms dealers. In


Pakistan: Drug trap to Debt trap

every sphere of life they arc getting control mainly because of the weakening of political organisations due to corruption and mismanagement. The political leadership was allowed by donor agencies to indulge in corruption, as the aim was to discredit them in the eye of the common man. Their corruption was exposed by turning a blind eye so that after weakening of their public support, the orthodox forces could automatically start getting an upper hand. On the economic front, the indigenous industry was purposefully destroyed through smuggling of consumer goods via the medium of Afghan Transit Trade. Mr. Ahmed Rashid, a prominent journalist and author of Taliban: Militant Islam, Oil and Fundamentalism in Central Asia, observed: "The drugs connection is extremely important to all Drugs are these external groups that are operating funding many of their own efforts inside Pakistan, the radical programmes they may espouse. Unfortunately, this has not been significantly exposed, but in Pakistan by having the veneer of Islam, it's very difficult for these parties to be discredited or to be able to explain their criminalization. I've done a lot of work on the smuggling of consumer goods between Afghanistan, Pakistan, Centi-al Asia, and Iran and what we see there is the tremendous influence of the Pakistan's Islamic parties in the smuggling of consumer goods. What you have now is a criminalization of elements of these groups based in Afghanistan Actually the main source of income for the Taliban is actually not drugs, but the smuggling of consumer drugs. Afghanistan is a land locked country that has historically been allowed to import duty free goods from Karachi. This trade now extends, with the complicity of the Pakistani authorities, between Pakistan, Afghanistan, Central Asia and the I have talked to truck drivers who have Caucasus even been up to Moscow with goods. No one is doing work on this and there is veiy little written, but my own estimate is that the Pakistan-Afghanistan cross border trade was worth an estimated 2.5 billion dollars of the total trade and i [you bring in the other

Part-I, Ch. 3 - Narcopolitics


countries, it brought in about 4.5 billion dollars. If you look at that, there is an economic black hole in the region. The Taliban takes a tax on that profit and it all has to go through their state and that is their largest source of income. One of the reasons it has been such a setback for Masud being pushed back into the far northeast, is that northern alliance has lost that source because it controls no border checkpoint with either Tajikistan or Uzbekistan. It has been a major loss of revenue for them. I'm sure Bin Laden does have a share in this. Up to the UN sanctions imposed in November, there were more than a dozen flights leaving Afghanistan for Dubai. Dubai is one of the main drug-heroin transit centres. The Taliban was using it in particula76." The relationship of drug money with economy, its regeneration in the form of smuggled consumer goods and great power to buy politicians, civil servants and law enforcement officers have made Pakistan a banana republic; where people have great affluence but the state treasury is empty. This phenomenon itself testifies to the fact how narco-money and narco-politics converted this country into a sinking ship. A number of studies have been conducted proving empirically how this State because of a nefarious design got trapped in arms and narco-trade. Dr. Ayesha Siddiqa Agha, a prominent researcher and security analyst, is of the opinion: "The growers and the drug mafia adopted two means of serving their interest. First, officials were bribed to provide advance information of such operations and the contents of an opium poppy later used to produce morphine base were extracted beforehand. The financial kickbacks were extended not only to the local officials such as the Political Agent, who was made in charge of such operations, but also to DIA officials. As a result, one could see a pattern in these operations. Growers were not taken to task at the time of plantation or growth of the poppy but at the time of harvest and even then they were warned prior to an administrative action. Interestingly,, growers and smugglers started to draw double benefits: (a) from

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Pakistan: Drug trap to Debt trap

the proceeds of the illicit crop and (h) from funds provided after the crop was apparently destroyed. Second, rapid shifting of the cultivation location. When there were problems in Afghanistan they would move to Pakistan and vice versa7." The generation of drug money was for a dual purpose: first, to cripple the politico-administrative structure of Pakistan through bribes; and second, to destroy the local manufacturing units by dumping the markets with smuggled goods. The entire process was documented in a study as under: evolution of the process and system of the I lundi was strongly affected by political events in Afghanistan in 1970 with the establishment of a Communist Government in Kabul. Prior to 1970, the centre of underground banking in the region was Peshawar, where Afghans cornered much of the market. Before 1970, the main outside contact point was Kabul. This axis did about 60% of the total business, even for European destinations. The reason was the narcotics trafficking through Landi Kotal and later Ram. When the Afghan Transit Trade (as was and is the euphemism for smuggling) fell after the Russians invited themselves into Afghanistan, drug smuggling, often in exchange for arms, supplied a need for the I lundi trade. There was also a new and generous supply of U.S. $ to trade." This replaced many of the indigenous dealers in Lahore, Rawalpindi and eventually Karachi. They also took over or developed their own counterparts in Dubai and the Middle East. Pakistan is a significant money laundering centre, primarily due to its prominence in the production and trafficking of heroin and hashish. Pakistan does not yet meet the goals and objectives of the UN Convention. While Pakistan is making understandable efforts to channel funds from underground currency movement systems into mainstream banking, its relaxation of currency controls and other steps, which can be exploited by drug traffickers, combined with its failure to update its narcotics control legislation and practices, heightens the potential for money laundering. Undercover investigations into Pakistani drug traffickers and

money launderers have revealed the international scope of their operations. Pakistani heroin networks have laundered their profits through banks throughout the United States and Middle Eastern nations. Strict hard currency laws inhibit the outward flow of cash, but Pakistanis usc the worldwide underground networks, known as I lundi in Pakistan, to overcome outgoing currency exchange restrictions, evade taxes, or move their illicit proceeds. One official estimates that as much as U.S. $2 billion a year flows through Pakistan's I lundi system, and a significant part of this money may be derived from drug trafficking. Gold smuggling is also a means of laundering money. The Government is encouraging its banks with offices in the Middle East to establish money-changing operations in countries with large Pakistani populations, who might otherwise use the I lundi system. An estimated U.S. $1 billion has flowed into Pakistan since the foreigri exchange controls were liberalized. In March 1992, attempting to attract foreign capital, Prime Minister Sharif announced the issuance of interest bearing bonds, denominated in U.S. dollars. The bonds were advertised, "No questions asked about source of funds" and no identification of the purchaser required. The Government admitted that the bond scheme was an effort to make "black" money "white." Under pressure from the international community, the Pakistani Government withdrew the bond issue five days after the advertisements appeared. Money laundering is not a criminal offence, and there have been no arrests or prosecutions for money laundering. Under 1991 regulations, banks arc no longer required to maintain records of large currency transactions, or to report the identity of customers engaged in large cash transactions. And, controls on the amount of currency moving in or out of Pakistan were removed. Foreign exchange assets in the Pakistani banking system have increased significantly since the new foreign exchange regime came into being. According to some sources, these assets may have grown by as much as 400 percent. Government officials have recognized the money laundering potential of these regulations and have begun to consider ways of removing this defect, but no plans exist at present. "Prudential Banking Regulations' exist, but do not adequately address the problem. The law provides for forfeiture of drug-related assets,


Pakistan: Drug trap to Debt trap

but requires a life sentence before being invoked. An amendment under review would lower the minimum sentence triggering forfeiture from life sentence to two years, whether the conviction is handed down in Pakistani or foreign courts. The United Arab Emirates (UAE), particularly Dubai, is a widely used repository for Pakistani drug proceeds. In Pakistan, invoice manipulation can benefit drug traffickers, as it allows them to defraud the government, which offers export incentives. Ulundi transactions and invoice manipulation have been used to launder money through Dubai8." The BCCI episode unveiled a well-organized international network of money laundering, which involved all the big actors of the Great Game. The C-Chase indictment against BCCI in October 1988 proved that MCI represented much more than a drug money laundering case. The U.S. Attorney's office chose to bring, and not to supersede, a limited, money-laundering case against the bank in Florida and indicted several mid-level BCCI officials, throwing out possible Racketeering Influenced and Corrupt Organizations (RICO) case that would have enabled it to have gone after all of BCCI's assets in the United States — possibly including any interest it had in the First American Bank. The U.S. Attorney in Tampa then made its second strategic mistake as it allowed the bank to plead while prosecuting the individual bankers. BCCI mounted a S20 million defence in Florida and provided for the legal costs and living expenses of its former employees throughout their trials. The bank's strategy was obviously to blunt out any attempt by the U.S. Attorney's office to "flip" individual defendants, causing them to plead out of the case and to agree to provide damaging testimony against the institution itself. BCCI's strategy largely succeeded when in January, 1990, the U.S. Attorney and Justice Department agreed to permit the bank to avoid trial, and plead guilty to the narrow set of offences contained in the indictment, mid thereby end investigation and prosecution of BCCI in the only judicial district where any such activity existed. The October 1988 indictment had charged BCCI as an institution having a corporatie pone)/ of soliciting drug money. Following the plea, prosecutors changed their underlying theory of the case to suggest that the real guilt lay not with the bank, but with the individual bankers at BCCI who happened to fall into the net of the Customs' sting.

Part-I, Ch. 3- Narcopolitics


The result was that the Justice Department permitted BCCI to sever its Florida operations and sacrifice a handful of bank employees and thereby continue its worldwide criminal activity. Soon after the January 1990 plea agreement, the Justice Department stopped investigating BCCI entirely. Despite the fact that hundreds of leads had not been followed up on in the CChase investigation, and that law enforcement officials in the field recognized the importance of those leads, the Justice Department took, which government agents later characterized as a "time-out." There did not appear to have been anything sinister that prompted this decision. Rather, the decision to stop investigating BCCI appeared to be an example of poor communication, overwork, understaffing, inadequate understanding of the meaning of information in the possession of Justice, and a flawed prosecutorial and investigative strategy,. It was also the unintended consequence of the BCCI case arising as a Treasury Department investigation brought by Customs and IRS agents only, without the involvement of the FBI. Given the focus of Treasury agents on crimes pertaining to issues such as money laundering and customs violations, the failure to bring the FBI into the case may have contributed to the lack of follow through on the broader criminality pertaining to BCCI. During the remainder of 1990 and the first half of 1991, it became increasingly clear from the Subcommittee's investigation, New York District Attorney Morgcnthau's investigation and media investigations that BCCI was an international criminal organization. Throughout that period, the Justice Department found itself in the apparently uncomfortable position of having to give the public impression that it was aggressively moving against BCCI, at a time when it was doing very little concerning the bank, and investigators and prosecutors involved in the Tampa case were no longer working on matters pertaining to BCCI. Instead of immediately renewing their investigation, the Department sought to impede the investigations of others through a variety of mechanisms, ranging from not making witnesses available, to not returning telephone calls, to claiming that every aspect of the case was under investigation in a period when little, if anything, was being done. Only after regulatory agencies around the world seized the bank on July 5, 1991, did the Justice Department begin to give the


Pakistan: Drug trap to Debt trap

BCCI investigation an unprecedented urgency and importance. Under Assistant Attorney General Mueller, the Department assigned nearly three dozen attorneys to the case. During 1992, the Department brought several indictments, which remained narrower and less detailed through a variety of mechanisms, ranging from not making witnesses available, to not returning telephone calls, to claiming that every aspect of the case was under investigation in a period when little, if anything, was being done. The following are some facts relating to BCCI investigation in USA: Federal prosecutors in Tampa, handling the 1988 drug money laundering indictment of BCCI failed to recognize the importance of information they received concerning BCCI's other crimes, including its apparent secret ownership of First American. As a result, they failed adequately to investigate these allegations themselves, or to refer this portion of the case to the FBI and other agencies at the Justice Department who could have properly investigated the additional information. * The Justice Department, along with the U.S. Customs Service and Treasury Departments, failed to provide adequate support and assistance to investigators and prosecutors working on the case against BCCI in 1988 and 1989, contributing to conditions that ultimately caused the chief undercover agent who handled the sting against BCCI to quit Customs entirely. * The January 1990 plea agreement between BCCI and the U.S. Attorney in Tampa kept BCCI alive, and had the effect of discouraging BCCI's officials from telling the U.S. what they knew about BCCI's larger criminality, including its ownership of First American and other U.S. banks. * The Justice Department essentially stopped investigating BCCI following the plea agreement, until press accounts, Federal Reserve action, and the New York District Attorney's investigation in New York forced them into action in mid-1991. * Justice Department personnel in Washington lobbied state regulators to keep BCCI open after the January

Part-I, Ch. 3 - Narcopolitics


1990 plea agreement, following their lobbying by former Justice Department personnel now representing BCCI. Relations between main Justice in Washington and the U.S. Attorney for Miami, Dexter Lehtinen, broke down on BCCI-related prosecutions, and key actions on BCCIrelated cases in Miami were, as a result, delayed for months during 1991. Justice Department personnel in Washington, Miami, and Tampa actively obstructed and impeded Congressional attempts to investigate BCC' in 1990, and this practice continued to some extent until William P. Barr became Attorney General in late October 1991. Justice Department personnel in Washington, Miami and Tampa obstructed and impeded attempts by New York District Attorney Robert Morgenthau to obtain critical information concerning BCC! in 1989, 1990, and 1991, and in one case, a federal prosecutor lied to Morgenthau's office concerning the existence of such material. Important failures of cooperation continued to take place until William P. Barr became Attorney General in late October 1991. Cooperation by the Justice Department with the Federal Reserve was very limited until after BCCI's global closure on July 5, 1991. Some public statements by the Justice Department concerning its handling of matters pertaining to BCD were more cleverly crafted than true. Although the Justice Department did not indict BCCI until 1988, there were rumours about the bank virtually since its inception. BCCI officially first came to the United States as a branch in New York during the 1970's. New York State banking officials subsequently denied BCCI's takeover of a small bank. Furthermore, bank regulators and law enforcement agencies in other countries, such as the United Kingdom, had reservations about the bank. The British, in fact, refused to grant BCCI full banking status. According to U.S. banking regulators, they routinely made inquiries from the Justice Department about BCCI. In September 1991, the House Subcommittee on Crime and Criminal Justice issued a report detailing federal law enforcement's


Part-I, Ch. 3 - Narcopolitics

Pakistan: Drug trap to Debt trap

handling of allegations involving BCCI. According to the report, "IF lederal authorities had scores of contacts concerning BCCI as far back as 1983," and the government had enough information on IICCI by the mid-1980's to have put BCCI on the most wanted list9." Among the findings of the House Subcommittee: The DEA had a plethora of case information which, taken in totality, led to the inevitable conclusion that "IICCI is the place to launder money19 ." The report stated that: (Al Review of the files has, so far, revealed 125 cases that have been identified "as having something to do with BCCI." Most of the cases are undercover storefront operations which lead to warrants seizing BCCI bank accounts containing suspected drug proceeds". Senior IRS officials refused to begin an undercover investigation of BCCI despite the fact that the criminal division had developed important information about the bank. The report states: IRS special agents in IRS's Miami office interviewed former BCCI employee Aziz Rehman in April 1984 shortly after he was fired by BCCI for refusing to transport large volumes of currency, which he believed to be in violation of existing Federal laws. He provided them with documentation of deposits to a nonexistent BCCI branch in Nassau, Bahamas„ and described his role as a former courier for large cash deposits to BCC' accounts of "customers" and other banks12. The Customs Service had information as far back as 1983 concerning the illegal smuggling operations of one of BCCI biggest customers, a Jordanian arms merchant named Munter Bilbeisi. According to the House Subcommittee report, "Any reasonable investigation into Bilbeisi's operations would have uncovered that Bilbeisi's coffee business had established a financial relationship with BCCI in 1983, and that BCCI had issued phony letters of credit from 1983 to 1986 to finance smuggling"13.


Representatives of the Government of India provided the IRS with evidence of a money-laundering scheme involving BCCI. However, according to the report, because India did not have a tax treaty with the United States, the allegations were not followed-up on14. Abdur Sakhia, the former regional manager for 13CCI in the United States, testified before the Subcommittee on Narcotics, Terrorism and International Operations that he met with Justice Department officials in the autumn of 1984 in the office of former Senator Paula Hawkins to discuss allegations of BCCI's involvement in drug money laundering. Sakhia testified that he was told by the President of BCCI, Agha Hassan Abedi, to meet with Senator I Iawkins after the Senator, on a trip to Pakistan, told President Zia that she was concerned about drug money laundering by a Pakistani bank in the Cayman Islands, which she subsequently identified as BCCI. According to Sakhia, he was told by the Justice Department that BCCI was not under investigation and that he subsequently learned that the U.S. Department of State had communicated the same message to the Pakistani government15. The Subcommittee had been unable to determine the source for Senator I lawkin's information, although it noted that she was at the time the Chairman of the Subcommittee on Narcotics, Terrorism and International Operations and would have had access to classified material from both the DEA and the CIA. There was also evidence that the regulators had passed on information about BCCI to the Justice Department in 1987. Robert Forrestal, President of the Federal Reserve of Atlanta, testified before the House Banking Committee on September 1992, and stated that "while participating in an April, 1987 examination of BCCI Miami, our examiners discovered possible money laundering transactions that appeared to be structured to evade reporting requirements. The transactions were detected in a review of checks and money orders sent from BCCI Panama to BCCI Miami for payment. A criminal referral concerning the activities discovered at the Miami agency was filed with the U.S. Attorney's office in Miami and with the Federal Bureau of Investigation in North Miami 13each on May 18, 1987."

Operation C- Chase In 1986 undercover Customs agent Robert Mazur wrote a

Pakistan: Drug trap to Debt trap Part-I, Ch. 3- Narcopolitics

memorandum to his superiors proposing an undercover money laundering operation called Operation C-Chase. According to Mazur, the proposal sprung from almost two and one half years of undercover work in Florida on international money laundering. Mazur's proposal was accepted and the Customs Agency notified the Justice Department, which provided strategic and tactical assistance16. Mawr, who coordinated the undercover operation, posed as a businessman coordinating a number of investment and mortgage businesses, which were used as a cover for the laundering of drug proceeds. According to Mazur, after the front was established, an informant approached members of a Colombian drug ring based in Medellin. Cartel members slowly gained confidence in Mazur and his team and over a period of time began to provide him with substantial amounts of drug money to be laundered. Mazur testified that in an "effort to ultimately obtain a Panamanian account" he opened an account at BCCI because it was the only bank with which he was familiar and which had international . Mazur testified that he had not been "armed with any branches17 particular information that liCCI was involved in that 'money laundering etc.1 type of activity." Operation C-Chase ultimately proved an extremely successful undercover operation and helped to shed light on the massive drug money laundering taking place in the United States. Mazur testified that one of the money launderers ensnared in Operation C-Chase had gross receipts in the United States of roughly $200 million per month in currency that needed to be removed from the United States on his behalf. While the early stages of the investigation focused on the cartel and drug money laundering, as Mazur learned more about BCCI, he began to focus his efforts on the hank's complicity in money laundering. From his very first meeting with officials at BCCI, Mazur was everything struck by the hank's "polished marketing approach fit to have an institution that might have art ulterior motive for its locations. After Mazur checked with local prosecutors in Tampa and discovered that the bank showed up in another drug-related investigation, his suspicions were heightened. Directing the activities of his undercover team, Mazur set about to investigate BCCI and he quickly discovered that the bank was all too willing to assist him in the laundering of funds."


Mazur testified that after he opened his account in Panama: "the bank came back to have a broader relationship an operations officer recognized the nature of the transactions and called me, unsolicited, to inform me that he would be in the United States and that he felt the bank, being a full service bank, had the types of abilities to keep my transactions conducted in a very confidential way that would enhance the businesses 1 was involved in." According to Mazur, the bank provided him with a sophisticated means for laundering money which entailed receiving the cash at "either their Panama branch or their 1.uxembourg branch and several locations in the Middle East." Mazur described in Subcommittee testimony how an officer at liCCI, Sayed I Iussain, advised him not to repeat the mistakes that other drug money launderers had made in Operation Pisces, a previous U.S. government undercover money laundering sting which had traced the proceeds of drug money laundering to 1SCC1 accounts in Panama. BCCI clients had been implicated in that government undercover operation and apparently I lussain believed that there were better ways to conceal a client's funds. Mawr told the Subcommittee that his undercover operation handled "roughly S14 million through BCC! on behalf of clients." 13CCI earned banking fees on these transactions totalling in excess of $250,000, but according to Mazur the bank was much more interested in getting large deposits so as cause "their balance sheets to look very strong." During the winter of 1988, a tentative date was established for the takedown of BCCI. That date was altered slightly during the ensuing months but remained within a two-week time frame at the beginning of October. In July, an implementing plan was put into effect with the October time frame in mind. However, it became increasingly evident to agent Mazur that there were significant leads and evidence that could not be followed up on by October. Moreover, Mazur testified that he was on the verge of meeting with the "inner circle" at BCCI, which could have potentially unlocked many of the criminal secrets about the bank. Senator Kerry asked agent Mazur if the predetermined date in October, which seemed increasingly arbitrary to the agents, was

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politically motivated:

Did you have any discussion with Senator Kerry: anybody about whether or not October was the date? Because October 1988 was a Presidential election year. And by having an October takedown it would make Customs be able to present the administration with a sort of present on a platter. There certainly was mere speculation that Mr.Mazur: played a part by people at low levels like mine. But beyond that! cannot say more. But it went through your head that Senator Kerry: might have been a reason that there was such a compulsion to terminate this thing in October. Mr.Mazur: I was at a loss for understanding why October. 1 would say that for sure18.

Mark Jackowski, the Assistant U.S. Attorney overseeing the case testified to the Subcommittee, however, that the decision was predicated on other considerations. He testified that his office had made a decision that "if there came a point in the investigation where we continued to launder funds on behalf of old clients without developing evidence against additional defendants, we would attempt to terminate the operation." Jackowski added that the date had been originally set — in February — with the expectation that they would be able to make a case by the fall against BCCI officers and that, in fact, they had accumulated the requisite evidence18. By the summer of 1988 Mazur had compiled enough evidence to indict the bank and several of its officers. But Mazur believed that the corruption went much higher than the mid-level officers with whom he had been dealing. As he explained to the Subcommittee, "It appeared to me that the knowledge of the source of the funds and the method of seeking out drug proceeds as a source of deposits for the bank was something that was promoted at every level of senior management within the bank." On September 9, 1988, one month before the sting operation against BCCI was scheduled to be taken down, Mazur, in his undercover role as drug-money launderer Robert Musella, had met Amjad Awan, BCCI's personal banker to Panamanian General


Manuel Noriega, at the Grand Bay Hotel in Miami, Florida, where he engaged in a conversation with Awan that was wired and recorded by Federal agents. In that conversation, Awan told Mazur that the Foreign Relations Committee of the U.S. Senate had subpoenaed him in connection with his handling of Noriega's accounts, and the accounts of others in Panama. Ile also told Mazur about his understanding of BCCI's secret ownership of First American, about the political implications of Clark Clifford's chairmanship of First American, and about alleged obstruction of the Subcommittee's investigation into Noriega and BCCI by BCCI lawyer Robert Altman. As the transcript of the wiretap showed, Awan told Mazur: "What's happened is that we were served a subpoena last month. The bank was and Mr.Shafl our general manager was. I was supposed to have been served also This is why I've been going up and down to London with our attorneys in Washington On a personal level, last Friday, I was told that, ah, our lawyers, Mr. Altman was there, and he suggested to the bank that I should be immediately transferred from the U.S. to Paris So, they duly transferred me Friday to Paris I'm not too, too happy on, on what our attorneys are telling us to do. I think that's they're doing a very stupid thing. As long as I am an employee of the bank, I can be anywhere, I can, I can be in Timbuctu, if they throw a subpoena on me, they can demand that the bank produce him So I think that's a very stupid policy to take. "I went to, ah, I met with the counsel to the Foreign Relations Committee I've got a good rapport going with them. And ah, without really damaging the bank or without, without ah, disclosing anything about, uh, business, I think I can, with a bit of luck, I can extricate myself from the whole situation quite cleanly I think they're going to go through BCCI's records with a tooth comb if anything gets released there that BCCI is being investigated, BCCI is dead no customer is going to keep an account with BCCI I don't think the bank could stand up to any sort of publicity. It's gonna, it's going to, it's gonna hit them bad "Our attorneys are, are, they're heavyweights, I mean Clark Clifford is, is sort of the Godfather of the Democratic Party. I mean, when he calls Jesse Jackson for dinner, that means Jesse Jackson can receive us for dinner

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Pakistan: Drug trap to Debt trap

"I have, I have totally different, uh, uh, assessment of the situation. And it might be far-fetched, it might sound stupid, but my assessment is, that we own a bank in Washington ..... We own a bank, uh based in Washington, it's called the First American Bank. The holding company is in Washington, and there are 5 banks actually. First American of New York, First American of Washington, 1) C., First American of Virginia, Maryland, Tennessee and Georgia. There are six banks. Six large banks, they are $10 And BCCI billion banks. Bought out by BCCI about 8 years ago was acting as advisor to them, but truth of the matter is that the bank belongs to BCCI. Those guys are just nominee Clark Clifford and his, uh, law partner Bob Altman shareholders are the chairman and capital holders. 1 personally feel it would and they just take over that entire suit them if BCCI withdrew I wouldn't at all be surprised if, you know, if part of the bank they're totally screwing BCCI to take over this bank. I, I don't know, but this is the way I see it. Because the advice he's giving, He, he knows a lot, and in my opinion, 1, I just don't respect it uh, that's why I don't want him to represent me. That's why I've gone on to another lawyer20 ." Awan had provided Mazur with sufficient background information regarding violations of federal law to enable another agent assigned to the case, IRS Spectal Agent David Burris, to conclude that seven separate federal criminal statutes had been apparently violated. In addition to the money laundering charges already being contemplated. Awan had now alerted the C-Chase agents to an apparent conspiracy to obstruct a Senate investigation by BCCI and its lawyers, and to BCCI's possible illegal ownership of First American. Accordingly, Burris set down the relevant facts from the Awan wiretap, and drafted an affidavit stating that he believed there was sufficient evidence to make out a case that these statutes, including obstruction of the Senate, had . Burris understood the meaning of Awan's been violated21 statements, describing them in Paragraph 4 of his affidavit in the following terms: "Awan said that BCCI has bought and controls First American Bank and National Bank of Georgia through private individuals. The banks were bought through individual names rather than BCCI because BCCI could ." not buy the banks and run them due to U.S. law 22

Nevertheless, in the weeks that followed, the prosecutors directing Operation C-Chase made no effort to broaden the case against BCCI, or to investigate any of the new allegations raised by the Awan wiretap. There was no attempt to interview Clifford or Altman, no attempt to seek further information from the Subcommittee to determine whether its investigation had been nterfered with, no subpoenas prepared to be issued against First i American, and, even after the take-down of the sting, no investigation of any links between BCCI and First American. Against the desires of Mazur, who wanted to keep the C-Chase operation going longer, the takedown was set in motion on October 8, 1988. A phony wedding had been arranged between Mr.Mazur and another undercover agent posing as his fiance. The ruse of the wedding successfully lured BCCI officers and narcotics traffickers into the United States who'. believed they were attending the marriage of an important customer. At a phony bachelor's party for Mr.Mazur, federal agents swooped in and made numerous arrests. The operation had been coordinated with law enforcement authorities in the I1K and France who also conducted searches and made arrests23. With the arrests, the effort to make the money-laundering case against BCCI and the BCCI officials indicted in Tampa took precedence over any further investigative efforts concerning broader issues of criminality regarding BCCI. The small team of agents and attorneys, who soon became grossly outnumbered by the defence team retained by BCC', and selected and coordinated by Clark Clifford and Robert Altman, soon had all they could do to prepare for trial on the specific money-laundering counts brought in the October, 1988 indictments. Months before the takedown of Operation C-Chase, many of those most involved in investigating and prosecuting BCCI had concluded that BCCI was a quintessential example of corporate organized crime, and suitable for being prosecuted under the Racketeering Influenced and Corrupt Organizations Act (RICO), whose provisions contained powerful tools for prosecutors, including broad forfeiture possibilities. Under RICO, any business that is convicted of investing the proceeds of two or more criminal acts, constituting a pattern of racketeering activity, in a legitimate business, is subject to having


Pakistan: Drug trap to Debt trap

all of the proceeds of its criminal activity, including the legitimate businesses, forfeited to the government. RICO would have an especially powerful tool against BCCI, because once the government proved that BCCI committed two or more acts of money laundering, the government might be able to take the entire bank. Given BCCI's actual secret ownership of First American, a RICO case against BCCI would have had a devastating impact on BCCI, and might well have blown open BCCI's core secrets. A series of memoranda from early 1988 detail the discussions within the Justice Department and among the agents about the basis for a RIC() prosecution of BCCI. By March 1988, high-level Customs officials were reporting to Commissioner Von Raab that several BCCI officials were indictable under RICO. On April 6, 1988, another Customs memorandum stated that it was the opinion of the U.S. Attorney's Office in Tampa that "probative evidence exists to establish corporate criminality against BCCI as an institution," and that "current plans for prosecution are to indict BCCI as an institution under the provisions of the RICO statutes." This recommendation was reiterated in a second memorandum, May 10, 198824. Mazur and the other undercover agents involved in Operation C-Chase strongly supported the bringing of a RICO case against BCCI, because if the bank were convicted of racketeering, they could "seek forfeiture of a lot of the bank's assets that would be located in the United States25." Yet, for reasons that were never explained to the Customs agents, the Justice Department in the fall of 1988 did not give approval to a RICO prosecution, and the RICO case against BCCI was abandoned. Robert Genzman, the U.S. Attorney for Tampa, told the Subcommittee that it was his view that RICO charges would have complicated an already complicated case. According to Genzman: "Put simply, we believed that RICO charges would have added nothing, and would have greatly complicated the case. It is absolutely, untrue, as has been suggested, that the entire bank could have somehow been forfeited out by the U.S. government had RICO charges been brought in Tampa. There was simply insufficient evidence to

Part-I, Ch. 3 - Narcopolitics


support such a sweeping international forfeiture." Thus, according to Genzman, "RICO charges would not have placed additional pressure on BCCI and would not have created the risk of significant additional assets at the bank being forfeited to the government, beyond the $14 million at stake in the narrower case ultimately brought." Genzman's statements again suggest the blindness of the U.S. Attorney's office to the broader evidence already developed by Mazur and the other Customs agents. This material included, but was not limited to, the Awan allegations contained in the Burris memorandum. Genzman's position also fails to take into account the obvious potential, if Justice had indeed decided to make a RICO case, of seeking plea agreements with the individual officers as a means of securing a broader RICO case against the bank itself in a superseding indictment. Such a strategy, unlike the strategy actually pursued by the U.S. Attorney in Tampa, could well have resulted in a forfeiture of BCCI's assets in the U.S., and led to the uncovering of its ownership of First American as well. In addition, a RICO case could have permitted the United States to achieve the critical objective for Operation (2-Chase defined by Customs agents in March, 1988 — establishing the corporate culpability of BCCI's involvement in the laundering of "literally hundreds of millions of dollars in drug proceeds," rather than the mere $14 million handled in connection with the sting26. In a RICO case against the bank, one or another of BCCI's officers could have been turned to help make the larger case against BCCI that was so important. During the entire post indictment investigation, Mazur and the entire investigative team were strapped for resources. According to Mazur, "I was confronted with some 1,200 tapes that needed to be perfected for the benefit of the defendants I and a small number of other agents, two or three, spent at times literally twenty-four hours in a given day transcribing and trying to meet deadlines." When asked by Senator Wofford if he felt "outgunned" by the BCD defence team, Mazur replied "tremendously," noting that BCCI had investigated him personally, and that there were threats to the lives of agents and witnesses22. As Mazur advised his superiors: The problems created by defence tactics have resulted

Part-I, Ch. 3- Narcopolitics Pakistan: Drug trap to Debt trap

in the need for resources to be expended to document improper conduct (i. c., misleading business associates of government witnesses, improperly issuing subpoenas, intimidating government witnesses28. Mazur recalled a pretrial hearing at which AUSA Mark Jackowski appeared alone on behalf of the government and 23 lawyers appeared on behalf of BCCI. In recalling the incident to the Subcommittee, Jackowski offered, "it was a fair fight." Subpoenas and searches related to the takedown had also produced some 16,600 documents from individual defendants, and another 100,000 documents from BCCI itself. These documents, some of which have since been reviewed by the Subcommittee staff, contained significant information concerning BCCI's broader criminality. But more than six months after the takedown, the government had yet to review a single page29. In an effort to keep the investigation and prosecution of BCCI on track, Mazur and his colleagues in Tampa made numerous requests to their superiors for help, requests, which were largely ignored. As Mazur testified: "After the undercover operation was concluded, the Government was confronted with a massive task. Records had been seized fromi BCCI in Miami, from the homes of several officers in Miami, from the BCCI offices in London and Paris, from the homes of traffickers. And a tremendous task with a tremendous potential benefit faced the Government in using those records And very little resources of those that were available could be used to deal with those matters because of the tremendous resources that were needed just to attend to pretrial motions and the upcoming trial in Tampa "For one reason or another it was impossible for the Government to locate people who could fill that void or it was in the opinions of those who had the authority to make that decision an unnecessary use of resources, one or the other. "And I think a lot of follow up in contacting witnesses and reviewing records that was lost would have been a great advantage to us all to see the things that arc happening in the BCC' case happen more quickly and smarter I think that that


was, that time out, was a costly time out30." On April 11, 1989, Mazur wrote to superiors to remind them that Operation C-Chase was being severely damaged by the inability to add resources to the case, noting that the problem had been discussed repeatedly since November 1988 without improvements, and that a much bigger case could yet be made against BCCI if additional resources were provided: "The network of the bank is awesome. Since they have over 14,000 employees and operate in 74 countries, the viable leads are endless. Attempts to supercede [sic] the indictment to include a nucleus of evidence that would reveal BCCI's criminal enterprise is a monumental task, in view of the bank's magnitude. There are inadequate resources to follow up professionally relative to: (next half page of text deducted by Justice Department 131." Mazur summarized the conditions under which he worked as being a soldier on a forward mission in a war zone, backed up by a government that refused to send in reinforcements when they were needed: were somewhat of a reconnaissance squad that had been out in the middle of the desert and encountering the enemy, and sent word back to the fort that we needed some help. And waited and fought and fought and fought but no help came.


Mazur continued to work for the U.S. Customs Service on the BCCI prosecution through to the conviction of the BCCI officers indicted in the case in August 1990. But the experience had left him frustrated and angry. In April 1991, Mazur resigned from the U.S. Customs Service in a letter to Customs Commissioner Carol Hallett, to whom he wrote the following: I know that my formally advising you of the deplorable conditions in Tampa could cause some individuals in a professional circle to question my loyalty. But it is simply out of my love for this country and our critical need for ethical government that I think its appropriate to respond to a request for my candor If it had not been for the nearly two years of achievement prior to March 1988, the ultimate outcome would also have been lost. The outcome of


Pakistan: Drug trap to Debt trap

the case, while notable, was considerably less than it could have been. The indictment of additional defendants and the seizure of substantially more drug proceeds were lost, directly as a result of the application of inadequate 7'esources to the investigation. Individuals meaningfully involved into the successes preserved within Operation C-Chase, including the lead prosecutor, share this opinion32. Mark Jackowski, the assistant U.S. Attorney in Tampa who worked most closely with Mazur on Operation C-Chase, expressed his own unhappiness with the handling of the C-Chase investigation in a memorandum, attached to the Mazur letter, which the Justice Department withheld from the Subcommittee. Jackowski testified about the memorandum, however, in response to questions from Senator Kerry, as follows: was My unhappiness with the C-Chase investigation that there were a number of documents that were seized as a result of searches conducted in Miami and other places. It was my view that included within those records were leads to other narcotics traffickers and money launderers. It was my furthOr view, as of the time I wrote my memorandum, which was at the end of January 1991, that-those documents had not been adequately teviewed to pursue all those leads. That was the nature of my unhappiness. In direct contradiction to Customs Special Agent Mazur and Jackowski, an assistant U.S. attorney from his own office, Robert Genzman, the U.S. Attorney in Tampa, testified that the BCCI substantially impeded by investigation and prosecution were not the lack of resources, arguing that the case was extremely successful, because BCCI pled guilty and its officers were convicted, and BCCI paid what was then the largest fine ever imposed on a financial institution in a money-laundering case — $14 million. But while characterizing the results of the Tampa prosecution as superb, Genzman acknowledged that the investigative and prosecutorial resources in Tampa had indeed been stretched to the breaking point by the case, due to the complexity of the money-laundering sting; the "scorched earth"

Part-I, Ch. 3- Narcopolitics


strategy of BCCI's lawyers, who "filed hundreds of motions and briefs on every imaginable subject," and the need to transcribe some 2,000 taped conversations between the undercover agents and their targets. This situation was typical of the kind of conditions faced by government prosecutors, Genzman testified, and nothing unique to the BCCI case: "More resources could always be added to a case of this magnitude and complexity. While agents and prosecutors had to put in very long hours and work under severe time constraints along the way to bring the case to a successful conclusion, that is a regular, albeit unfortunate, fact of law enforcement. Robert Genzman, the U.S. Attorney in Tampa, told the Subcommittee that 'It was never our intention to simply stop investigating BCCI after the first indictment'34." But Genzman's own assistant, Mark Jackowski, told the Subcommittee that the grand jury investigation of BCCI had to be suspended "due to a lack of available leads and the pressure of the upcoming trial." A dearth of leads, however, was clearly never a problem in the case. As Mazur told the Subcommittee, the "time-out' consisted of leads that were not followed up, bank officers who were not interviewed and superseding indictments which were not issued. When Senator Kerry suggested that "there was not a follow up and there was not really a continuation of investigation into the leads that existed at the time," Mazur responded, "To a limited extent there was, but not in effect, no. In fact, the 'time out' lasted for full thirteen months," by the calculation of Tampa prosecutor Jackowski. Mazur testified that among the things not followed up because of the resource crunch were criminal activity involving other BCCI officers and the subpoena of records which could have lead to additional indictments of others or broader, superseding indictments of BCCI. In all, there were hundreds of leads not followed up, including BCCI's involvement in illegal arms transactions, what Mazur described as "the association between BCCI, First American, and National Bank of Georgia," and possibly on payoffs to government officials.


Pakistan: Drug trap to Debt trap

Part-I, Ch. 3- Narcopolitics

In fact, by mid-1989, the U.S. Attorney's office in Tampa had information on BCCI's alleged ownership of First American in four instances from two separate sources. Initially, the Tampa office took a few steps to follow-up on this information. AUSA Jackowski moved to subpoena the Federal Reserve for First American documents. But following this action, the pressure of preparing for trial against BCCI and the inability to get additional resources allowed the effort to peter out without further efforts being made.


was First American Bank; we simply put it aside. however, as Senator Kerry pointed out: "That is the problem. It was not a money laundering case. It was a case that was much bigger than that37." What appears to have happened is that some members of the Operation C-Chase team were never able to move conceptually beyond the original goal of Operation C-Chase, namely, to target drug money laundering. The team of agents working on Operation C-Chase did not include anyone from the FBI with a broader perspective on criminal investigation or a background in major financial fraud.

Various officials at the Justice Department provided different explanations as to why the information was not followed-up. Assistant Attorney General Mueller "passed the buck" to the Federal regarding the Reserve, noting "the essence of the information

The plea agreement reached between BCCI and the U.S. Attorney for the Middle District of Florida (Tampa) in January 1990 came as a surprise to many. On November 17, 1989, Price Waterhouse informed BCCI's directors that the lawyers for BCCI "will attempt to come to a pre-trial settlement with the prosecution, but the lawyers do not expect the prosecution to be amenable. As such there is now a real prospect of a tria138." Similarly, BCCI officers indicted in the Tampa case were told by BCCI higher-ups up to the day of the agreement that they should expect no agreement, but if there was one, the settlement would include bank and officers alike39.

allegations of secret ownership was passed on to the Federal Reserve after the October 1988 takedown of the undercover case." Quoting from the Federal Reserve General Counsel Virgil Mattingly's testimony before the Subcommittee, Mueller claimed "the Federal Reserve disregarded the information as the kind of allegation I that' they had heard before35." Kehoe explained to the Subcommittee that once the U.S. Attorney in Tampa had indicted Awan, one of the sources of the allegations regarding First American, it became difficult for him "to point to the documents to corroborate that piece of information." But even on this narrow point Kehoe's -testimony is at odds with his colleague, AUSA Jackowski, who told the Subcommittee, "we obtained information from Mr. Awan throughout the course of the case concerning that [First American's"

During 1989 mid-December, a series of meetings took place among BCCI's lawyers and representatives of the U.S. Attorney's office in Tampa, together with representatives of the Customs Service, Internal Revenue Service and Drug Enforcement Administration, Representing BCCI were two prominent former federal prosecutors from Washington, D.C., Lawrence II. Wechsler and E. Lawrence Barcena, Jr. The lawyers for BCCI were anxious to avoid a trial, and offered a guilty plea by BCCI to money laundering and the complete cooperation of the bank in helping to convict other drug money launderers, if they could in return obtain a commitment by the U.S. Attorney that this would end BCCI's criminal problems for all offences then known to the government.

In the view of the Subcommittee, none of the officials provided an adequate explanation as to why the Justice Department did not follow-up on the evidence it received relating to the secret ownership of First American. Jackowski perhaps best summed up the myopic strategy of the U.S. Attorney's office in Tampa when he told Senator Kerry, "This, our case, was a money laundering case." As Jackowski testified: We were at dinner, and the first course was to cat the money laundering plate. And when you look at the evil behind this bank the alleged evil is that they facilitated the cartel. That was what was on our plate. We ate that meal. We did not ignore the dessert, which

The offer was intriguing to the prosecutors, but they wanted to make sure that 13CCI would not be seen as getting off lightly. The trial judge had indicated during a pre-trial conference that he was of the opinion that BCCI's participation in laundering drug



Pakistan: Drug trap to Debt trap

money would be insufficient to prove to him that BCC' and its officers were also guilty of drug trafficking. As a result, given the state of the government's evidence, BCCI could not be convicted on any drug offence itself, but only for laundering drug money. As a result, the most the government might gain if it convicted BCCI was a $28 million fine, twice the amount which the government had moved through BCCI. In practice, however, the judge would be unlikely to impose much more than the $2.5 million fine, imposed against another bank in Puerto Rico the previous year. Accordingly, if BCC! was willing to pay a substantially larger fine — such as the $14 million fine it ultimately agreed to pay, to be characterized as forfeiture so that it would go to law enforcement instead of back to the U.S. Treasury — the prosecutors were willing to deal. 13CCI's lawyers, after consulting with the bank, agreed, and the plea agreement was struck. According to everyone involved, those making the decision on behalf of the government were in Tampa, not Washington40. As Robert Genzman, the Tampa U.S. Attorney, testified: [als a We made that determination in the district courtesy, we advised the Department of Justice of what °. we were about to do, and received no opposition Genzman explained that the plea agreement was entered into for several reasons: First, the Government secured the conviction of the bank, one of its principal objectives. Second, eliminating the corporation from the trial' prevented a recurrence of a problem confronted in the 1986 case against the Bank of New England, where the corporation was convicted, but all the individual defendants were acquitted. Third, BCC' agreed to a number of substantial terms beyond the plea of guilty, including cooperation with the government and a probation condition, which incorporated the terms of its consent decree with the Federal Reserve. Most importantly, the Government had been threatened with an adverse legal ruling, which would have substantially reduced the amount of any financial penalty that could be imposed against the bank, had it gone to trial. The $14 million was forfeitable only

Part-I, Ch. 3 - Narcopolitics


if the bank was convicted of drug conspiracy42. This rationale was correct, to the extent that one viewed the case against BCCI to be no bigger than the amount of drug funds it demonstrably moved. But the indictment had alleged something larger — that BCCI itself had a corporate policy of drug money laundering — and as a result of the plea, there would be testimony about this practice, and no further exposure of what BCCI was doing. As Mazur testified, the Justice Department and Jackowski "went out of their way" to solicit the opinions of those involved in the case, including him, before agreeing to the plea. Unlike Genzinan, Mazur saw advantages to keeping BCCI in the case. Mazur testified, "I was, in the long run, of the opinion that we may as well go to trial 'against 13CCI itself', in view of the terms43." There was one obvious and foreseeable consequence of permitting BCCI itself to plead out, while prosecuting the nine individual officers of BCCI and its commodities trading affiliate, Capcom, involved in the indictment. With BCCI having taken a plea, there was no incentive for the individual officers to negotiate a plea based on their offering information about 13CCI's other criminality. The basic notion of using lower-level employees of a company to go after higher-ups was effectively lost, as the lowerlevel officers felt betrayed and abandoned, while the prosecutors in Tampa had given up any right to go after 11CC1 for other crimes. Thus, Genzman's rationale, while understandable from a technical point of view, missed the underlying point. Long before the trial, the Tampa prosecutors had before them information that BCCI secretly owned First American, that I3CCI's lawyers, Clark Clifford and Robert Altman, might well have committed crimes, and that 'ICC! itself might well be a host for criminal activity on a global basis. Amjad Awan, Akbar Bilgrami, Nazir Chinoy, and likely several others of the Tampa defendants could have provided the information to lead to the swift indictment of BCCI on an array of offences far more serious than those on which the bank was indicted in Tampa. According to Bilgrami and Awan, they and perhaps several of the other defendants would have been receptive to providing information about BCCI's larger criminality if they had ever been informed by the government that there was a possibility that I3CCI itself would plea bargain and leave them in the lurch, and that if they talked, the government would agree to


Pakistan: Drug trap to Debt trap

reduce their sentences". The decision to permit BCCI to plead out of the case, while continuing to prosecute its individual officers, effectively put an end on that rather obvious and important, prosecutorial strategy. While it is always easier to be critical in hindsight, Senator Kerry, among other members of Congress, was harshly critical of the plea bargain at the time and went so far as to write a letter to the Judge. First, while the $14 million fine represented three times the largest money forfeiture ever, was, as Senator Kerry said at the time, a drop in the ocean of the proceeds BCCI had derived from criminal activity. Ultimately, that fine was dwarfed by the $200 million assessment later made against BCCI on these larger issues by the Federal Reserve. Anticipating this criticism in his testimony. Genzman told the Subcommittee that: "Those who used the $200 million fine figure imposed by the Federal Reserve in July as an example of that the Justice Department should have obtained are confusing apples with oranges. These are simply two cases for which BCCI has been punished separately according to the law that applied in each offence"." What Genzman appears to tit! saying is that the Justice Department brought a narrow case and received an appropriate fine. The issue, of course, is whether a broader indictment should have been brought, and whether anything was lost by the plea agreement, which ended the ability of the Tampa prosecutors to take further action against BCCI. U.S. Attorney Genzman testified that "BCCI did, in fact, cooperate, and its cooperation during the seven-month trial against individual defendants in 1990 was utilized in obtaining the convictions and the resulting jail sentences against those

Part-I, Ch. 3 - Narcopolitics


Indeed, other information obtained by the Subcommittee suggests that BCCI may have used information it obtained from the government in the course of "cooperation" to alert foreign money. launderers of U.S. law enforcement interests, goals, and strategies, providing the criminals important information used to evade the U.S.47. Genzman's argument that it was more important to convict the individuals than prosecute the bank was incorrect. The strategy was wrong, not only in hindsight, but clearly flawed at the outset given that the investigators understood that the corruption in the bank reached the highest levels, and that sworn affidavits by one of them, David Burris, articulated other important crimes involving BCCI's lawyers that cried out for investigation and prosecution. Perhaps the most controversial aspect of the plea bargain relates to the question of double jeopardy or possible future prosecution of the bank. Justice Department officials repeatedly denied that the plea agreement between the li.S. Attorney in Tampa and BCCI did anything more than preclude the federal prosecutor's office from undertaking further action against BCCI. In no case, according to the Justice Department, did the entering of the plea by BCCI result in any limitation being placed on any other office of the Justice Department in investigating or prosecuting BCCI. As U.S. Attorney Genzman testified: The plea agreement contained relatively standard language, committing the U.S. Attorney's office for our district not to prosecute I3CCI for any other Federal criminal offence then known to the government It does not prevent the U.S. Attorney in Tampa, or any other prosecutor. State or Federal. from prosecuting any individual from the President of BCCI on down. I Nor does it I bar any other prosecutors. State or Federal, from prosecuting IICCI for offence"

individuals." Genzman may not have been aware that while the bank was

Genzman's first assistant, Greg Kehoe added that the issue

allegedly cooperating, it was also paying the astronomical lawyer's fees — reaching upwards of S20 million — for the defendants.

had been discussed at length within the Department," and had concluded that it would not be an impediment.

providing for their housing, and working to ensure that they could

Notwithstanding the testimony of Genzman and Kehoe, the plea bargain apparently did cause double jeopardy problems for the only other federal prosecutor then looking into BCCI. the U.S.

continue to stay silent about what they knew concerning the bank". Nor is there evidence that BCCI has provided meaningful assistance in helping Justice make any significant criminal case

Part-I, Ch. 3- Narcopolitics 86


Pakistan: Drug trap to Debt trap

to provide such cooperation to the government on every matter. Obviously, the real beneficiary of Miami joining Tampa in the plea would be BCCI, whose attorneys were aggressively pushing the concept. As the then U.S. Attorney for the southern district, Dexter Lehtinen, told the Subcommittee:

Attorney in Miami, Dexter Lehtinen. In testimony before the Subcommittee, Lehtinen, who in 1991 was set to indict BCCI on tax fraud charges, stated: I couldn't indict "By the middle of September (1991) The statement and we set the grand jury each Friday made to use each Friday, was the statement made to us from the Department of Justice that you are blocked from bringing the indictment because of the Tampa plea and the Tampa double jeopardy. You can't do it, during

in In the normal course of events, the defendant order to gain a benefit form a plea agreement would want as much of the government estopped or barred from prosecuting again50.

According to Lehtinen: "In this particular case, we saw no benefit to the Government by our participation51." The Miami's office refused to join the plea agreement, which went forward without the Southern District of Florida's participation.

this period"." Following the plea agreement, some Justice Department officials adopted an inexplicably benign attitude towards the bank, taking at least two separate actions to help BCCI. First, Justice Department officials asked another U.S. Attorney's office not involved in the negotiations to join in the plea agreement, and thereby be utterly barred from taking any further action against BCCI. Second, another Justice Department official asked state regulators in Florida, New York and California to keep BCCI open when they were considering closing it, and a few days later, on being asked to explain this request, denied having made it. Each of these requests were made by the Justice Department officials involved at the explicit behest of BCCI's lawyers, who themselves were former prominent federal prosecutors. They raised the question of whether the revolving door, and personal relationships among prosecutors, may have influenced certain Justice Department officials to assist BCCI in contravention of ,

At the time of the plea agreement, I3c,:Cl's attorneys became aware of the possibility that BCCI's guilty plea on drug money laundering charges might well result in BCCI's closure by the various state banking regulatory agencies that had licenced it to do business in Florida, New York, and California. The BCCI lawyers pointed out to prosecutors that if BCCI were closed, it would be more difficult for BCCI to cooperate in making cases against other criminals. Accordingly, the attorneys asked the Tampa prosecutors to send a letter to the state regulators asking the regulators to keep the bank open. Within the U.S. Attorney's offices, there was some sentiment that Justice should recommend that BCCI be closed down entirely. Dexter Lehtinen told the Subcommittee that "Tampa [the U.S. Attorney for the Middle District of Florida] wanted to know our position with respect to BCCI's license, and that BCCI's lawyer's wanted to know my position." According to Lehtinen, he told both groups that "we were of the opinion that a license should be in jeopardy if we made a successful prosecution52."

sound public policies. In January 1990, after negotiating the plea agreement, at BCCI's request, the Tampa prosecutors entreated the U.S. Attorney's office in Miami to join them. This was an odd request. At the time, the U.S. Attorney for the Southern District of Florida had its own investigation of BCCI. It had not participated in the negotiations over the plea agreement and if it joined the Tampa plea it would be completely precluded from prosecuting BCCI further. Arguably, there could be some benefit to the Miami office for entering such a plea, in that it would facilitate that office's receipt of BCCI's cooperation in making cases against other criminals. On the other hand, BCCI was already legally required under its plea agreement with Tampa

Despite U.S. Attorney's I.ehtinen's recommendation, U.S. Attorney Genzman decided to adopt a neutral position regarding the revocation of the licence. The Tampa prosecutors accordingly on January 31, 1990, wrote state regulators to advise them that the Tampa U.S. Attorney's office had no position whatsoever as to whether BCCI should be closed down, or stay open. BCCI's lawyers, principally former federal prosecutors Lawrence Wechsler, Lawrence I3arcella, and Raymond Banoun,



Pakistan: Drug trap to Debt trap

dissatisfied with this result, decided to talk to others in the Justice Department to bring about a different result. Two weeks later, they achieved their goal. Chuck Saphos, head of the narcotics section of the Criminal Division of Justice in Washington, D.C., agreed to write a letter to the state regulators urging them to keep IICCI open. In return, 13CCI would be able to cooperate with Justice. IICCI's lawyers contacted the state regulators' office in Florida, and told the regulators that a letter would be coming from Washington, asking them to keep BCCI open. Soon afterwards, the letter did, in fact, arrive, signed by Saphos, stating that BC:C:1's cooperation was important to the Justice Department and that keeping it open would allow the Department to monitor BCCI's customer accounts: "We are, therefore, requesting that BCCI be permitted to jurisdiction, with the understanding operate in your that certain accounts may be maintained by the bank, at the request of the Department of Justice, which otherwise would be closed to avoid legal and regulatory violations 53." In addition to the regulators, Saphos sent copies of his letters to the Federal Reserve, and to BCCI lawyers Banoun and Wechsler. The rationale for keeping the bank open was in fact, very weak. First, there were likely to be few significant drug money launderers still using BCCI following its highly publicized indictment in October 1988. Second, to the extent such accounts existed at the time of the indictment, 13CCI's lawyers had systematically sought to shut them down or refer them over to law enforcement as part of its consent decree entered into with the Federal Reserve in early 1989 as a result of the indictment. Finally, the plea agreement, and promise to cooperate with the government, would be as public as the indictments had been. It would be hard to imagine that any drug money launderers could still be enticed to use BCCI under such conditions. Saphos' letter had adopted IICCI's position about the case, rather than recognizing the true facts at the time. Greg Kehoe, U.S. Attorney Genzman's First Assistant testified that when he first learned about Saphos' letter to the state regulators, he was upset. As Kehoc testified, "10Ibviously the

Part-I, Ch. 3 - Narcopolitics


attorneys for 13CCI were talking to Mr.Saphos" and "'they] tried to go behind my back." Yet Kehoe, who negotiated the plea agreement, seemed indifferent to the incident, testifying that in his view, "Saphos' efforts were with the best intentions of law enforcement involved," while acknowledging that, "nothing surprises me in the murky world of criminal law enforcement54." In testimony before the Subcommittee, U.S. Attorney Genzman did little to clarify this bizarre chain of events. The U.S. Attorney told the Subcommittee that this case we told the Comptroller's office that we were taking no position" relative to the reissuing of I3CCI's license to operate in Florida. The obvious explanation for what happened is that Saphos was personally lobbied by people he knew who had formerly been with the Justice Department and now represented BCCI on the outside, and agreed to do them a favour There is no record of any other person within the Justice Department signing off on Saphos' letter, and it appears likely that he sent it without the letter having gone through any formal approval process. When his recommendation to keep BCCI open became an issue, he retreated from it. By the latter part of 1989 another investigation of BCCI had been launched, in the Southern District of Florida under the direction of U.S. Attorney Dexter Lehtinen55. The Miami investigation centered on the theory that BCCI could be indicted for various tax frauds. It was Lehtinen's belief that this case would not be barred by double jeopardy, because it involved different facts from the Tampa case, and because the Miami office had refused to participate in the plea agreement with BCCI. Lehtinen testified that the investigation was "an important matter a priority matter." At the time I.ehtinen was also investigating David Paul's dealings in Miami's largest Savings & Loan, CenTrust, which had a variety of tics to IICCI and in which BCCI held a secret interest of 25 percent through its nominee, Ghaith Pharaon. Lehtinen described to the Subcommittee the strategy behind his two-track investigation and the aggressiveness with which his assistants moved to make the case against the bank: "CenTrust was alleged to have had some relationships to BCCI, and so we had two teams which would issue

Part-I, Ch. 3 - Narcopolitics


Pakistan: Drug trap to Debt trap 90

what you would call BCCI subpoenas. One team would issue IWO subpoenas on behalf of its CenTrust investigation, one would issue BCC! subpoenas on behalf of its MCI investigation57." Lehtinen explained that the case was "records intensive58," which made the subpoenas vitally important. By early November, the concerns over evidence and double jeopardy previously expressed by the Justice Department had all but vanished. On November 6, 1991, Deputy Attorney General, George J. Terwilliger, wrote Lehtinen that he was "prepared to defer to your prosecutorial judgment on this matter.".. When asked by Senator Kerry if the state of his evidence had changed from August, Lehtinen responded, "No, it was the same evidence." Lehtinen implied to that the reversal by the Department of Justice was the result of Congressional and media pressure: There had been significant, Time Magazine and New York Times articles, very critical of the Departnient. I know Congressman Schumer sent staffers to Miami and to various districts on behalf of the House Judiciary Subcommittee on Crime. While it is difficult to sort out precisely what went wrong between the U.S. Attorney for Miami and main Justice in Washington, it is obvious from the above account that two important cases involving BCCI in Miami were frustrated, if not paralyzed, by inaction at main Justice in Washington during much of 1991. In part, that outcome may have been the result of continuing attempts by the Justice Department to defend the plea agreement in Tampa, and to steer any further activities pertaining to BCCI to the Tampa office. Additionally, the Justice Department may have been uncomfortable dealing with the possible preclusion of investigation or prosecution in Miami arising out of the double-jeopardy problems created by BCCI's plea in Tampa, problems that had to date not surfaced even in interviews with Congressional investigators In March of 1988, months before the takedown of Operation C-Chase in Tampa, the chief investigator for the Foreign Relations Committee, Jack Blum, contacted the Justice Department with startling information about BCCI. In the course of his investigation into narcotics trafficking in Panama, Blum had come

into contact with "a very senior BCCI officer who was in the process of disengaging from the bank59." According to Blum, the BCCI banker provided him with a substantial amount of information about the bank's criminality. Blum proceeded to seek authorization from the Foreign Relations Committee to issue subpoenas to the bank, which were granted. Before issuing the subpoenas, however, Blum contacted the U.S. attorney's office in Miami and Tampa, which asked him not to proceed. Blum told the Subcommittee: I talked to Joe Maigre, who was then the deputy in Tampa, who told me there was an undercover operation underway the well-advanced Operation CChase I was not told the nature of the operation. What I was told was that agent's lives were in danger, and that he — and that he was followed-up by the Department of Justice in a formal way — requested that we defer the issuance of a subpoena until we get a go-ahead. Blum did defer issuance of the subpoenas until late July 1988. At that time, he contacted Tampa, and asked if he had clearance for issuing the subpoenas. fie was told there was no objection. Blum's next contact with the Department of Justice occurred in March 1989. The contact was precipitated after Blum received a telephone call from a former client who knew a highly placed BCCI officer who claimed that the Senate investigation "almost brought the house down and there was a full court press to make sure that it didn't get anywhere.".... Blum had his friend convince the BCCI officer to talk to Blum. Blum then arranged to have Customs and IRS secretly "wire" a hotel room in Miami to secretly record their conversation. Blum debriefed the BCCI official over the course of the next three days. lie testified that the BCCI official "laid out in exquisite detail the false capitalization of the bank, the question of straw men holding stock, the use of the bank to purchase First American, National Bank of Georgia, Independence Federal in Encino, CA According to Blum, he then: "flew up to Tampa and met with a team that consisted of other Customs and IRS agents and two representatives

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of the U.S. attorney's office. The agents were quite

We were disappointed at any public proceeding because Mr.Blum had led us to believe that the witness

excited. They seemed ready and eager to go forward. I had lengthy conversations with at least one of the

could provide firsthand information relative to the bank's involvement in money laundering and other

assistants, Mark Jackowski. Ile was eager to go



In justification of this failure to act, Jackowski, in sworn

Two weeks later, after Blum had left the Subcommittee, he

testimony, raised questions about Blum's credibility and even his honesty. Jackowski testified that he discounted what Blum told him about BCCI because Blum had made several wild accusations about the Subcommittee and asked for money for the information he was providing the Justice Department. In staff interviews prior

made arrangements with law enforcement to secretly tape the BCCI official who had originally provided him a great deal of information about the bank. Again, Blum secretly met the individual in a hotel room in Miami and debriefed him for several hours. And, again, Blum believed that the Justice Department 66. would use the information in its investigation of the bank

to his testimony, Jackowski claimed ilium had made even more outrageous statements — that Senator Kerry had been paid one million dollars by BCCI, and that as a result Blum was fired from , did not believe these his job63 . Jackowski contended that he claims, any more than lie believed the other information Blum had . Jackowski acknowledged that he failed to make provided him64 any contemporaneous memorandum of the alleged conversations

Following the taping, Blum had further contact with the Tampa investigators and prosecutors, providing further information over the course of a lengthy conference call. However, according to Blum, the Justice Department did not follow-up on the information:

during which Blum supposedly made the statements cited by Jackowski, failed to investigate Blum's alleged wrongdoing, failed

"I waited for something to happen and, and what happened was, I started getting calls from the two guys I took to Tampa who said they're Ithe justice

to investigate Kerry's alleged wrongdoing, failed to inform the Subcommittee of Blum's alleged remarks, first raised the

Departmentl not following up. Then, I talked to the No agents, and the agents said, :lief!, we're very busy follow-up. And I began to wony that something was very wrong with this case. In — I now believe it was late May, I decided that I would bring this matter to another jurisdiction, and that was New York ..... talked to Bob Morgenthau and essentially told him what I knew. On the basis of the same evidence essentially, and he ultimately communicated with the same witnesses, he produced the indictment


Mark Jackowski, the principal assistant United States attorney

allegations 30 months later, in interviews with Congressional staff and at the public hearing, some five months after Blum had made his public criticisms of Justice. Blum took the same information that he had presented to ,

Jackowski to the Manhattan District Attorney's office some weeks later after his BCCI informants had told him that Justice Department officials in Florida were not following up on the information. According to the Manhattan District Attorney's office, which provided the Subcommittee with a letter dated November 21, 1991: At no time did Mr.Blum ever seek or request money

in Tampa handling the prosecution of BCCI from 1988 through

from this office for his assistance to us in the investigation of BCC!, nor did he receive any money

1990, presents a very different version of events:

from this office for his out-of-pocket expenses.

The ex-BCCI official, who had been portrayed by Blum as having direct, firsthand knowledge concerning various matters, either did not have such information, or was unwilling to admit it. The ex-official's information appeared to be primarily hearsay, gossip, rumor and innuendo. lie was also unwilling to testify

At no time did Mr.Blum ever ask for or suggest that he wanted, employment with this office. At no time, during this office's dealings with Mr.Blum, did he ever accuse you, Senator Kerry, of misconduct65.

Part-I, Ch. 3- Narcopolitics 94


Pakistan: Drug trap to Debt trap

seems highly illogical and unlikely that Blum would make It the kind of representations to Jackowski, which Jackowski has asserted, and then, only weeks later, adopt an entirely different demeanor with the Manhattan District Attorney's Office. What is more likely is that Blum did complain about not being able to complete the investigation of BCC1 that had begun to develop in and may have offered to his final months with the Subcommittee, assist the U.S. Attorney's office on the case if they wanted his help. It is notable that both of the witnesses who were taped with Blum by Justice, and who Jackowski viewed to have no useful information, were in fact placed before a grand jury by the New York District Attorney, to provide the testimony they had originally offered the Justice Department. That testimony became part of the record on which the grand jury then voted to indict BCC1 on July 29, 1991. The Subcommittee finds Jackowski's testimony not merely unconvincing, but given the severity of the charges, malicious. The Subcommittee believes Jackowski's testimony may stem from a personal dislike of Blum, who has not only been critical of the Justice Department, but who garnered significant media attention for having broken open the case when Jackowski had laboured long and hard for months as the principal Justice Department official dedicated to Operation C-Chase. Jackowski deserves significant credit for his work, but not for his testimony. Notably, in response to questions from Senator Brown, Jackowski acknowledged that the tape recordings made by the U.S. Attorney's office, involving Blum and his BCC1 informant, focused on the issue of BCCI's use of nominees in the course of its secret take-over of U.S. banks. As Jackowski acknowledged: The tapes, Sir, contained information with respect to First American that is correct. They contained information relative to NBG that is correct. They contained information relative to Independence. With respect to Independence, the first witness said that he had in fact gone to a law firm because he suspected that Independence Bank might be owned by BCCI through Gbaith Pharaon66. Because the witness did not have what Jackowski regarded as sufficient first hand information concerning these issues,

Jackowski and the other Tampa prosecutors considered the information offered to be of little value, and shrugged off the witnesses Blum had believed to be so important. Inexplicably, at times in the investigation the Justice Department has provided halting or reluctant cooperation with other law enforcement and regulatory bodies. In some instances the cooperation was non-existent, and in others, the Subcommittee has concluded that the Justice Department actually tried to frustrate or delay the provision of witnesses and documents to other law enforcement. In testimony before the Senate Banking Committee, the General Counsel of the Federal Reserve, Virgil Mattingly, described to Senator Kerry the cooperation that his office was receiving from law enforcement: Senator Ken)'.. "What kind of cboperation is the Fed receiving from the New York District Attorney who is investigating both CrAl and CCA11.?" Mr.Mattingly. "Superb." Senator Ken)'. "What kind of cooperation have you received from the Justice Department?' Mr.Mattingly. "We have cooperated fully with the Justice department. We have given them everything we have on this matter." Senator Ken)'. 'What kind of cooperation are you receiving from them?' Mr.Mattingly. "We are actively working with them67." What Mattingly did not state in his public testimony is that over the past year, the Justice Department had actually been refusing to provide assistance to the Federal Reserve, and to some extent, had actually misled the Federal Reserve about the existence of important information.

Justice and the CIA From early 1985 on, the CIA possessed and disseminated to other governmental agencies detailed and important information about BCC1's plans in the United States, and its secret ownership of First American That information was made available initially to the Treasury and to the Comptroller of the Currency, neither of

Part-I, Ch. 3- Narcopolitics


Pakistan: Drug trap to Debt trap


which passed the information on to anyone else. In 1986, a broader group of agencies received the same information. In neither case did the CIA's memoranda trickle down to the agents or prosecutors responsible for investigating and prosecuting BCCI, until after the takedown of Operation C-Chase, when information in a third memorandum from the CIA did reach Tampa Customs agents. Undercover Customs agent Mazur testified that during Operation C-Chase he never received any information from his superiors "about information the CIA might have." According to Mazur, information from the CIA was brought to his attention "after the conclusion of the undercover operation." Assistant Attorney General Mueller told the Subcommittee that while the CIA may have known about BCCI's criminality and illegal ownership of First American dating as far back as 1985, "regrettably, the Justice Department was not on the CIA's dissemination list until 1990 and therefore the Department never received this 1986 report at the time it was disseminated." Mueller is correct that no component of DOJ ever received the 1986 report, but the May 1989 report, which contained many of the same facts, including BCCI's ownership of First American — in some cases with more detail provided — was provided to both the DEA and the FBI. As Assistant Attorney General Mueller testified: At no time, go my knowledge, has anyone from the CIA, or any agency, attempted to obstruct or interfere with the Department of Justice's investigation and prosecution of BUY. For the record, assistant U.S. Attorney Mark Jackowski, who oversaw the undercover operation and prosecuted the case, has provided a variety of answers on this subject. When asked by a journalist whether he had uncovered any CIA involvement in BCCI or whether the agency had ever interfered with Operation C-Chase or the ensuing prosecution. Jackowski responded "no comment." When asked the same question by Subcommittee staff, Jackowski replied, "I read a lot of spy novels. Let's leave it at that." When asked by Senator Kerry in a public hearing. Jackowski, under oath, stated that he did not come into contact with the CIA.

Through much of the Subcommittee's four-year investigation into BCCI, the Justice Department treated the Subcommittee's investigation with visible disdain, at times bordering on contempt. As Jackowski testified, the Tampa prosecutors viewed the principal Subcommittee investigator of I3CCI in 1988 and 1989, Jack Blum, to be unreliable at best, someone who wished to trade his information for money, and who had produced little of real value for them. In interviews with Senate staff in the fall of 1991, Jackowski characterized Blum as a "vvacko," who had done little more than provide him with "bullshit." Accordingly, after initial interviews of his witnesses, Jackowski and his colleagues did nothing further with the information and leads he had provided. Following Blum's departure, other Senate staff efforts were treated equally cavalierly. In the fall of 1989, the Subcommittee sought to depose a Colombian money-launderer who was also cooperating with the Tampa prosecutors, and who had used BCCI in Panama. The Tampa prosecutors office and the Justice Department, without prior notification to Subcommittee staff, began making telephone calls to other Senate offices, not involved in the investigation, in an effort to prevent the deposition. The Justice Department told these offices, and Subcommittee staff that even staff interviews with the witness would inevitably prejudice the federal prosecution of 13CCI and of Manuel Noriega, and that the government could be forced to provide to the defendants any material the Colombian provided to the Subcommittee. Staff advised the Justice Department that the deposition would be held by the Committee as confidential, and was in any case constitutionally protected against disclosure. However, because of the level of concern the Justice Department expressed, and the implicit threat by Justice that the Subcommittee would be blamed if something did go wrong with the Noriega prosecution in connection with the Colombian, the deposition was halted. As a result, the important information possessed by the witness concerning 13CCI's criminal activity in Panama was never provided to the Subcommittee on the record. To make matters worse, the communications by Justice seeking to stop the deposition with other Senate offices not involved in the investigation resulted in a leak that the Colombian was cooperating with the government, imperiling his family and


Pakistan: Drug trap to Debt trap

property in Colombia. As a result of this leak, generated through incautious actions by Justice, the Colombian refused to cooperate further with the Subcommittee. Ironically, the Colombian, far from being essential to the government's criminal cases against BCC! and Noriega, was never used by the government in either trial. During the spring of 1990, when the Subcommittee was seeking to obtain documents from BCCI directly, lawyers for BCC' took the position that they would gladly provide documents they were making available to the Justice Department from overseas if the Justice Department would in turn provide copies to BCCI's lawyers in the United States. In response, Justice attorneys advised the BCCI lawyers on May 25, 1990, that the Subcommittee staff should contact Justice directly for the documents involved, which came from Panama. Subcommittee staff contacted federal prosecutors in Tampa and Miami about the documents, who did not return telephone calls or reply to letters for many weeks. In early July 1990, a prosecutor from Tampa advised the Subcommittee staff to ask main Justice in Washington for its position regarding the documents. Following repeated telephone calls, the Justice Department finally advised the Subcommittee in mid-July, 1990, that it could not provide the Subcommittee any documents whatsoever from any location whatsoever, other than the materials entered into the record in the BCCI trial in Tampa. The decision was made by Justice following a meeting between Subcommittee staff and Chuck Saphos, the head of Justice's narcotics section who had six months earlier written the state regulators to recommend that BCCI be kept open. In the meeting with the Subcommittee, Saphos took the position that any question the Subcommittee might ask about BCC! would inevitably prejudice ongoing matters at the Justice Department. Saphos told staff that there was no matter pertaining to BCCI that could be discussed without prejudicing the Noriega trial. Accordingly, the Justice Department could not consent to testify concerning any aspect of the BCCI case, nor would it provide any information concerning any aspect of the BCCI case apart from what was on the public record in the Tampa trial. Following the meeting between Subcommittee staff and Saphos, Deputy Assistant Attorney General Bruce Navarro advised Senator Kerry in a letter dated July 24, 1990:

Part-I, Ch. 3- Narcopolitics


Your questions about the nature of BCCI's cooperation under the plea, BCCI's potential involvement in the handling of assets of Antonio Noriega and the possibility of further investigative efforts by the United States concern matters upon which the Department cannot comment without jeopardizing any future prosecutions that might be undertaken Many of the specific questions you have raised may be addressed by BCCI itself. The Department simply cannot testify on matters, which are under investigation or subject to pending litigation68. As is now made clear by the record, this was during a period in which law enforcement had taken an acknowledged "time-out" from its investigation. Even after the global closure of BCCI, the Justice Department continued to impede attempts by the Subcommittee to gather information concerning BCC!, and its own handling of the BCCI case. The Subcommittee had requested copies of Customs Service memoranda related to Operation C-Chase. As the Customs Service is an agency of the U.S. Treasury — not the Justice Department — it would have been the Treasury's decision as to whether to release them. Treasury had no objection to their release. however, after conferring with Justice, Treasury explained to the Subcommittee that it would not release them without Justice's permission, and that Justice had not granted permission. The Subcommittee then asked Justice to explain its refusal to release the documents. The reason provided by the Department was that the memoranda contained information that would jeopardize ongoing investigations. After considerable wrangling, and after the Justice Department was advised that any additional delays in providing the documents could result in equal delays in a Senate vote on confirmation Acting Attorney General Barr in a permanent position. When the documents had been produced, few revealed anything about ongoing investigations. Many referred to embarrassing criticisms by Customs agents of the handling of the BCCI investigation, including the lack of resources that had been devoted to Operation C-Chase, internal discussions concerning the advisability of bringing a RICO case and the advisability of pursuing a plea agreement with the bank.

Pakistan: Drug trap to Debt trap

Prior to the warning concerning a delay in the Barr nomination, the Justice Department also refused to allow Senator Kerry to meet one-on-one with DEA agent Mazur, formerly the lead Customs agent in Operation C-Chase. The Department insisted that a member of the Justice Department be present in the interview, contending that any private interview between a Senator and a Department of Justice employee was precluded by "Attorney General Order 504-73," which charges the Assistant Attorney General for Legislative Affairs "with the responsibility of coordinating all Department of Justice activities relating to the Congress." The Assistant Attorney General for Legislative Affairs stated that a private meeting between a United States Senator investigating BCCI and the undercover agent who exposed the bank, without the presence of officials from Justice's legislative relations office, would prevent him with "fulfilling the 69." As a responsibilities charged to him by the Attorney Genera1 result, despite numerous requests from Senator Kerry to meet with Mazur personally, the meeting did not take place. Senator Kerry therefore decided to simply request Mazur to testify publicly, without any prior debriefing of what he might have to say to either the Senator or the Senator's staff. Senator Kerry also decided to seek testimony from Mark Jackowski as the chief prosecutor in the Tampa case. On September 16, 1991, September 18, 1991, and October 16, 1991, in response to a series of requests from the Subcommittee, the Justice Department expressed its refusal to accede to Subcommittee requests for the testimony of Jackowslci and Mazur before the Subcommittee concerning BCCI. At the time, neither of them was involved in further activities concerning BCC'. On September 16, 1991, the Justice Department suggested that the Subcommittee's requests would not only compromise ongoing cases, but also put Mazur's personal safety at risk: Department's policy on provision of Departmental representatives for Congressional hearings is that attorneys and investigative personnel do not represent One effect the Department in Congressional hearings of having Mr.Mazur testify in an open Congressional hearing on his role in the undercover operation which led to the successful prosecutions in the BCCI matter, even with safeguards such as attempting to disguise

Part-I, Ch. 3- Narcopolitics


his identity, would increase the possibility of drug traffickers attempting to seek revenge by harming Mr. Mazur or his family70. Mazur's personal attorney advised the staff that Mazur believed his identity could be protected through the mechanism of having him testify behind a screen with his voice altered, an approach that was ultimately adopted by the Subcommittee. Later, Mazur personally advised staff of the Subcommittee that he had no reason to believe his testimony before the Subcommittee, with those precautions, would create any risk to him or his family. The Justice Department also advised the Subcommittee that if Mazur testified, he could never be used again in an undercover assignment. Later, after Mazur testified before the Subcommittee, he in fact returned to an undercover role, without incident. Finally, the Justice Department, reiterating a line that it had previously taken on several occasions with the Subcommittee, said that the Subcommittee's requests threatened to prejudice ongoing matters. At this point, having delayed hearings concerning the Justice Department's handling of BCCI for months in 1991, and for more than a year since the Subcommittee's original request for its testimony in July, 1990, the Justice Department agreed to produce the witnesses in order to prevent confrontation between the Senate and the Justice Department that would ensue should a subpoena be issued71. In summary, between March 1988 and October 1991, the Justice Department repeatedly requested delays or halts to action by the Subcommittee concerning BCCI, criticized Subcommittee staff and information concerning BCCI, refused to provide assistance to the Subcommittee concerning BCCI, and, on occasions, made misleading or false statements to the Subcommittee concerning the status of investigative efforts concerning BCCI. This pattern shifted substantially after Senator Kerry advised the Justice Department that its handling of the Subcommittee could impede the Barr nomination. While some differences of opinion concerning Congressional access to documents have taken place, following Attorney General Barr's confirmation, the Justice Department has generally demonstrated a dramatically improved responsiveness to Subcommittee


Part-I, Ch. 3 - Narcopolitics

Pakistan: Drug trap to Debt trap


of dismemberment of USSR, Afghanistan went to the narcofundamentalists, which even posed a greater security threat to USA itself. It was a backlash of USA's own policies. So, the world witnessed brutal invasion of Afghanistan and Iraq in recent times by the USA to establish its complete hegemony.

inquiries and requests concerning matters relating to 1%CC1. On August 26, 1992, some weeks after the date of the drafting of this chapter of the report, the Justice Department delivered to the Subcommittee chairman and ranking member a response to a request made to Justice by the Subcommittee one year earlier, on August 1, 1991, and reiterated on November 21, 1991, for a rebuttal by the Justice Department to any of the statements made by former Subcommittee investigator Jack Blum before the Subcommittee which the Justice Department

Afghanistan continues to play a key role in the heroin trade, the proceeds of which appear to be laundered outside the country, particularly in the United Arab Emirates, or through the bawala (alternative remittance system). The Taliban, the Northern Alliance, and other factions were involved in narcotics trafficking. But as soon as the Taliban decided to eliminate poppy cultivation even before a deal in this regard could have been concluded with 11.S. State Department, the CIA waged a war against it using "terrorism" and 9/11 as excuses.

considered incorrect72. The rebuttal provided on August 26, 1992 consisted of a thirteen page statement challenging the August 1, 1991 sworn testimony of former Customs Commissioner William Von Raab, an eleven page statement challenging the August 1, 1991 sworn testimony of former Subcommittee investigator Blum, and a cover letter apologizing "for any inconvenience our delay in responding

The hawala (or hunch) alternative remittance system is known to be used to remit money to Afghanistan. Although most remittances represent money being sent home by Afghan expatriates, some may represent the sale of narcotics produced in or moved through Afghanistan as part of a larger money laundering scheme. Contraband smuggling, including the smuggling of narcotics, generates funds. Private investment of drug trafficking profits reportedly contributed to a surge in building construction and other licit commercial activity in Kandahar City during 1998. Profits are also invested in improving trafficking capabilities by purchasing fast, all-terrain vehicles and acquiring more potent weaponry73.

may have caused you." Justice Department officials previously made nearly all of the statements contained in the rebuttals either in prepared statements or in sworn testimony before the Subcommittee on November 21, 1991 and May 18, 1992. Editorial writers in America commenting on the Justice Department's handling of BCCI frequently described its response as "sluggish," an assessment, which the Justice Department termed unfair. The delay of over nine months by the Justice Department before providing the Subcommittee the requested response unfortunately provided some ironic further demonstration of the underlying problem. Given the lack of celerity of this response, and the repetitious character of its rebuttals, the Subcommittee, rather than attempt to incorporate these further statements at the last minute in the body of its report, included them, without comment or further

The nefarious designs against Pakistan are aimed at crippling its nuclear capability. The policies to convert it into an IMP-dependent economy through narco-politics have been employed by those international forces that want to see the Muslim World incapable of defending itself. The time has come where as a nation we need to unveil these forces and combat them through restoration of democratic process. If the present regime wants to protect the vital interests of Pakistan, it must pave the way for design and reform of democratic institutions, standards, norms and moral values without which instability will further intensify. There is a genuine apprehension that any further disintegration of our political, legal and fiscal institutions may culminate into a complete disaster. The effective war against narco-politics cannot be waged unless the forces of obscurantism

analysis. The story of prosecution of BCC1 in USA reveals the criminal culpability of the CIA and other forces that were directly involved in narcopolitics in Afghanistan and Pakistan. The BCC1 was a tool in the hands of these forces. Once they achieved their nefarious designs they eliminated it as they had done in the case of Noricga, modus operandi of these Zia and many others. It is a well-known forces. What bothered them was that after they achieved the aim


Part-I, Ch. 3- Narcopolitics 104

and their hidden agenda are unveiled. A mass awareness movement coupled with pre democratisation of society should be initiated to save Pakistan from threat of subjugation and external aggression.

Cha ter Notes 1 2 3 4


Pakistan: Drug trap to Debt trap

The News, November 29, 2000. Dawn, December 1, 2000 and U.S. State Department. International Narcotics Strategy Report 1999, Source:

Ibid. Ibid. Rehmat Ali Razi, a columnist, has cited many such instances in daily Urdu 5 newspaper, JANG, Lahore. A lecture by Ahmad Rashid at CACI, 13 April 2000. Ahmed Rashid worked as 6 correspondent for several prestigious international journals. He also writes for several Pakistani newspapers and magazines, in addition to regular broadcasts on TV and radio stations around the world, including the BBC World Service, ABC Australia, Radio France international, and German Radio. Rashid has written extensively on the international competition for oil and gas pipelines in Central Asia, China, and Iran, on the drug and smuggling trades, and on Islamic fundamentalism in that region. Rashid has The Resurgence of Central written or co-authored several books, including on the breakup of the Soviet Union from the Asia: Islam or Nationalism, Fundamentalism Reborn: Afghanistan and the perspective of Central Asia, Taliban: Militant Islam, Oil and Fundamentalism in Central Asia. Taliban, and Light Weapons and Drugs in Pakistan. The author, 7 Ayesha Siddiqa-Agha, Ayesha Siddiqa-Agha, was working as a Ford Fellow with the International slier the Pakistan Navy's Director Centre for Conversion in Bonn. She was eaof Naval Research. She has also worked for the Institute of Strategic Studies in Islamabad. Having taken her Bachelor and Master's degrees at the University of the Punjab in Lahore, Ayesha completed her Ph. D. in 1996 from the Department of War Studies at King's College, London. Underground Banking & National Security. 8 Larry B Lambert in 9 Federal Law Enforcement's handling of Allegations Involving the Bank of Credit and Commerce International. Staff Report Issued On September 5, 1991 by the Committee on the Judiciary. September 1991, p.2. 10 Ibid. 11 Ibid. 12 Ibid. 13 Ibid. 14 Ibid, p.8. Washington Post, May 29, 1991, 15 See e. g. editorials, "Why So Slow on BCCI," Washington Post September 9, 1991, "What the U.S. Knew About BCCI: Post, November 1, 1991; "Greed, Influence and BCCI," The Washington November 12, 1991; "What Took Washington Post, "Questions For Mr.Barr," So Long?: New York Times, August 3, 1991. 16 Ibid. 17 Ibid.

18 U.S. Senate Hearing, Page 689. 19 !bid, Page 732. 20 Transcript, federal wiretap of conversation between Robert Musella, undercover agent and Arnjad Awan, September 9, 1988, 5:05 p.m., Grand Bay Hotel, Miami, Florida. 21 U.S. Senate Hearing, 102-350 Pt.-1, p.-52. 22 U.S. Senate Hearing, 102-379, Subcommittee on Consumer and Regulatory Affairs, Senate Committee on Banking, Housing and Urban Affairs, May 23, 1991, p.-231. 23 Ibid. 24 Ibid. 25 Ibid. 26 Customs Memorandum from Mazur to Group Supervisor, March 15, 1988. 27 Ibid. Memorandum from Mazur to [redacted by Justice Department], April 11, 28 1989, Subject: Current Resource Needs of Operation C-Chase. 29 U.S. Senate Hearing, 102-.350 Pt.-3, p.-753. 30 S. Hrg. 102-350 Pt.-3, p.-696. 31 Mazur Memorandum to [redacted by Justice Department] April 11, 1989, Subject: Current Resource Needs of Operation C-Chase. 32 Ibid. 33 S. Hrg. 102-350 p.-746. 34 !bid, p.-719. 35 36 Ibid. Ibid. 37 Ibid. 38 S. Hrg. 102-350 Pt.-1, p.-279. 39 Staff interviews, Amjad Awan and Akbar Bilgrami, July 20-29, 1992. 40 Testimony of Deputy Assistant Attorney General Paul Maloney, S. Hrg. 102379 pp.-222-223. 41 S Hrg 102-379. p.-233. 42 S. Hrg. 102-350. Pt.-3, pp.-718-719. 43 Ibid. p.-694. 44 Staff interviews, Bilgrami and Awan, July 20-29, 1992. 45 Ibid. p.-719. 46 Staff interviews, Amjad Awan and Akbar Bilgrami, July 20-29, 1992. 47 Oral communication, June, 1992, U.S. government official. 48 Ibid. p.-720. 49 Lehtinen testimony, p.-64. 50 Ibid. p.-13. 51 Ibid. 52 Ibid. 53 Ibid. p.-768. 54 S. Hrg. 102-350 Pt.-3 p.-768.


Pakistan: Drug trap to Debt trap

55 S. Hrg. 102-350 Pt.-5, Lehtinen testimony, p.-11.

4 Narcoterrorism

56 Ibid. 57 Ibid. 58 Ibid. 59 S. Hrg. 102-350, Pt.-1, p.-27. 60 Ibid. 61 Greg Kehoe, First Assistant U.S. Attorney in Tampa testified that District Attorney Morgenthau's indictment was based on Price Waterhouse audit reports. However, District Attorney Morgenthau credits Blum with providing him the evidentiary foundation for beginning his investigation that led, months later, to New York's securing the audit reports. 62 Ibid. 63 Winer memo to files, Jackowski interview, September 23, 1991. 64 Ibid. 65 Letter to Senator John Kerry, signed Michael Cherkasky, District Attorney of the County of New York, November 21, 1992, Id. p.-770. 66 S. Hrg. 102-350 Pt.-3, p.-759. 67 Ibid. In testimony later in the day, Robert Genzman explained that With regard to cooperation with the Federal reserve, let me mention one problem If we gave certain information to the Federal Reserve, that information could become subject to the regulatory scheme under which the Federal Reserve works." 68 Letter, Navarro to Senator Kerry, July 24, 1990. 69 Letter to U.S. Senators Hank Brown and John Kerry from Assistant Attorney General W. Lee Rawls, September 18, 1991. 70 Letter to U.S. Senators Hank Brown and John Kerry from Assistant Attorney General W. Lee Rawls, September 18, 1991. 71 Letter, W. Lee Rawls, Assistant Attorney General, to Senators Kerry and Brown, November 4, 1991. 72 U.S. Senate Hearing. 102-350 Pt.-4, p.-778. Released by the Bureau for 73 International Narcotics Strategy Report 1999, International Narcotics and Law Enforcement Affairs, U.S. Department of State, Washington, DC, March 2000.

Narco-terrorism is a term of considerable dispute and ambiguityl. I have used it in a limited and narrow perspective to explain a rather strange political phenomenon wherein drugs, arms and terrorism have been employed a`s tools in the hands of governments and political organizations to advance their objectives of complete control over the state apparatus. In Pakistan, since the Afghan war against the Soviet occupant forces, money from drug smuggling has been supporting terrorism. The terrorists in turn have provided assistance to States for implementing their international political agenda of establishing a New World Order. Organized crime has always worked hand in hand with other outlaws for their own benefit. The link between terrorism and narcotics trade in Pakistan presents a challenging study. It unveils the politicians, top civil-military bureaucrats and law-enforcement agencies, both national and international. The process started in April 1979 when President Carter's National Security Advisor, Zbignicw Brzezinslci2 pushed through a decision to support the Afghan rebels3. In May 1980, two concerned members of President Carter's White House Strategy Council on Drug Abuse, cut off from the classified information that the law entitled them to receive, warned NEW YORK MIES in a dissident editorial note: "We worry about the growing of

opium poppies in Afghanistan and Pakistan by rebel tribesmen who apparently are the chief adversaries of the Soviet troops in Afghanistan4." Drug enforcement at that time took second place to international geopolitics. The Carter administration interpreted


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the Soviet invasion as a threat to vital U.S. interests all over the globe. Organizing the support from Saudi Arabia and Peoples Republic of China to contain Soviet aggression, the White House ranked drugs low on its list of priorities. However, at the same time someone was fully conscious of the potential of the embarrassment. A high-level law enforcement official in an in 1980 said: interview to Philadelphia Magazine 'You have the administration tiptoeing around this like a land mine. The issue of opium and heroin in Afghanistan and Pakistan is explosive Why aren't we taking a more critical look at the arms we are now shipping into gangs of drug runners who are obviously going to use them to increase the efficiency of their drug smuggling operations 8." The U.S. policy of supporting Afghan resistance, with the produced help of Pakistan's Inter Services Intelligence (ISI)6 devastating effects in the aftermath of dismemberment of the USSR. It managed to achieve its main goal, but left Pakistan and Afghanistan in the doldrums7. A mafia emerged during the Afghan resistance persisted in drug smuggling for arms even after the withdrawal of the Russian forces from Afghanistan. The apprehension of two Congressmen, quoted above, proved in time as the U.S. once again committed the same mistake as it did in Laos when Air America (chartered by the CIA) helped transport crude opium from central tribal areas. One of the co-authors recalled ten years later: "There was a wall of silence. We got not a single response to the article8." Mr.Musto was right as in Washington the issue of heroin trade vis-a-vis involvement of Afghan rebels and ISI became the great "unmentionable." The 'support programme' (covert operations through CIA channels; in 1990 alone, the CIA had $36 ) was the main concern billion at its disposal for such operations6 to fight Soviet aggression and no one was in the mood to discuss the ramifications even for the U.S. itself. CIA allies in Afghanistan and Pakistan opened a much larger drug pipeline than in Central America. In the process they gave an enormous boost to their trafficking intermediaries: powerful Sicilian crime syndicates who because of this boom managed to entrench in the United States and numerous other countries around the world16. Jack Blum,

who investigated Contra connection for the Kerry Sub-committee, calls the Afghanistan drug scandal "one of the biggest uncovered stories in the foreign policy arena. The scale and duration of the connection between drug trafficking, gun running and foreign policy are far larger even than the Central American affairs11." The figures bear him out. The CIA was shipping more than a billion dollars worth of arms into Pakistan and Afghanistan. The guerillas who were receiving these consignments suddenly managed to boost the opium production from 250 tons in 1982 to about 800 tons in 1989. The region supplied most of the heroin for the infamous "Pizza Connection," a Sicilian Mafia network partially busted (with great fanfare) by the DEA in 1984. According to USA's own official estimates, by 1985 as much as 62% of all American heroin came from Afghanistan and Pakistan12. The official silence of the U.S. government was in the form of non-mentioning of Afghanistan in the State Department's Annual Narcotic Report for 1985. In the 1986 edition, all of a sudden, the State Department acknowledged that Pakistan and Afghanistan were the world's largest producers of heroin. It was claimed that 80% of the heroin reaching the U.S. and Europe originated from these two sources. As to possible rebel involvement in the drug traffic, it only stated: "The Mujahideen organizations have condemned opium production and use13."

The U.S. ambassador Deane IIinton who supervised U.S. covert aid to the rebels told a Congressional study mission that "no hard evidence" existed of Afghan freedom fighters exchanging opium for arms. The same sort of hedged denial heard for years about Panama's General Manuel Noriega. IIinton thus preserved the fig leaf needed to maintain the arms aid programme intact14. Glimmers of truth occasionally poked through this U.S. official blackout. David Melocik, the DEA Congressional liaison, admitted in 1983 that there was no doubt that the rebels made their money out of sale of heroin and opium. Mclocik indicated that no less than half of all U.S. heroin came from the area of the world making American support for the Mujahideen, in his candid words, a "double-edged sword16." A few intrepid reporters and academics broke through the wall of silence and deception late in the game to pinpoint some of the top rebel commanders engaged in the opium and heroin trade. The available literature shows that perhaps the most notorious of them was Gulbuddin Hekmatyar

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who may accurately be described as an assassin and terrorist responsible for murdering hundreds of dedicated rcsistancc fighters, political workers and intellectuals who refused his 16." demands for accepting him as supreme leader of the movement

hook Drug Wars: Corruption, Counterinsurgency and Covert Operations in the Third World

Jonathan Marshall, in his

narrated a long story of narco-terrorism inflicted on Pakistan and Afghanistan by the forces of obscurantism who had the backing and support of CIA. lie alleged that Gulbuddin even made alliances with communist forces in Kabul to advance himself as his Islamic Party. It was entirely within character, therefore, that Gulbuddin reportedly emerged as a leading figure in the heroin trade, using his long standing Pakistani military connections to arrange protection and transportation (another party of the same name, led by Gulbucklin's fundamentalist rival Younus Khalis, reportedly also owned heroin laboratories in the border town of Ribat al Ali)17. Marshall, quoting authentic sources documented that Gulbuddin fought a two years war with another powerful rebel commander, Nasim Akhundzada for control of the rich poppy fields of I lelmand, a province on Afghanistan's southern borders with Pakistan. Nasim, a warlord, became deputy defence minister with the Afghan Interim Government after the Soviet withdrawal. His awesome opium farms, stretching colorfully for miles, were watered by a pre war irrigation project built by U.S. to make Helmand Valley, the bread basket of Afghanistan. According to Marshall, in 1989 Nasim entered into negotiations with Robert Oakley, the then American ambassador in Pakistan, to curb opium production in return for millions of dollars in aid payments. Washington reportedly declined the request but continued to finance and arm him through his Islamic Revolutionary Movement. Nasim succeeded in holding off not only Gulbuddin but also Mohammad Yahya of the Islamic Union for the liberation of Afghanistan, who fought a bitter battle in September 1989 for control of a strategic opium shipment route. In March 1990, however, Nasim's luck ran out. Assassins gunned down the rebel opium lord and six bodyguards near Peshawar. Many experts point to Gulbuddin as the likely culprit18. The criminal culpability of the U.S. created a permanent

source of irritation for Pakistan and Afghanistan in the form of these drug barons who work under the garb of Islamic movements. Since backing of Afghan resistance, Washington never openly admitted its blunder in aiding these forces of darkness and merchants of death. Explaining why Washington chose not to confront these unsavory Afghan allies or their Pakistani patrons for flooding the world with heroin and cross-border terrorism, one U.S. official told the Washington Post, "You can't look at [drugs l in a vacuum separated from the overall policy19." Marshall further alleged that U.S. official silence did not only serve to maintain public support for the Mujahideen cause, it also smoothed relations with the regime of General Mohammad Ziaul I laq, which channelled CIA support to the rebels across the borcler2°. According to him the Zia regime was in fact thoroughly corrupt. Opium grown. in Afghanistan was shipped out and refined in Pakistan under the watchful eye of powerful Pakistani commanders, the ISI, the army's National Logistics Cell (NIC), which transports goods between Karachi and Afghan refugee camps and on the border free from the prying eyes of the law enforcement agencies. Close associates of President Zia implicated in the heroin trade included his Chief Minister, personal banker, personal pilot and daughter's physician21. The value of drug trade during Zia's rule estimated at U.S. $8 billion a year, almost double the country's budget22. Details of this corruption emerged from official U.S. sources only after the Soviet began pulling out of Afghanistan and after Washington had grown disenchanted with the ISI's manipulations of U.S. aid to support fundamentalist, anti-western rebel leaders like Gulbuddin. In 1988, the general accounting office of USA acknowledged, "Pakistan has a corruption problem" and cited the complaint of U.S. officials that not a single significant Pakistani trafficker had been imprisoned before 1984. Subsequent arrests, those officials added, were for sure and the culprits were usually quietly released after serving only a few months. The boom of drug trade could be gauged from a single fact that more than hundred heroin labs were operating in Pakistan near the Afghan border in one single year that was 198923. It is pertinent to mention that in 1989 at least seventeen U.S. drug enforcement officers, including some from the CIA, who worked closely with the ISI, were working in


Pakistan: Drug trap to Debt trap

Islamabad. That is the reason why they never made a public confession. "Symbiotic relationship" between the CIA, Pakistani military intelligence and forces of obscurantism was the most unusual, unexplainable and unholy phenomenon. It is still largely shrouded in mystery as to how CIA was working closely with the forces that U.S. State Department wanted to eliminate or at least control. It appears as if U.S. government itself proved ineffective before the powerful elements that were thriving within the USA on this drug money and their great supply line of arms was dependent on narco-moneY. The state of affairs has not changed much even today. The forces of terror are still thriving on narcomoney and posing even a larger threat to the democratic forces in and around Pakistan. It further confirms my point that narcoterrorism is in fact a tool in the hands of certain forces who want to impose the New World Order. How did Pakistan become a victim of narco-terrorism? The answer to this question can only be found by studying international perspective of the U.S. foreign policy in which drugs played a significant role. This is not a recent phenomenon. Since the earlier part of the twentieth century, the U.S. leaders have been using narco-terrorism as a tool to advance their foreign . The "multinational" business of drug policy objectives24 trafficking can be traced back to the 1940s, even before the CIA was created following World War Ii in 1947, when Allen Dulles assembled the Flying Tigers, an inner clique within the Office of Strategic Services (OSS). Dulles had close ties with Eastern billionaire families, and he was able to run clandestine operations out of the White House25. The OSS-mafia alliance emerged soon after the agency was formed. Earl Brennan who helped plan the Allied invasion of Sicily and Italy in World War II first headed the OSS. During the war, he had close ties with the head of the Vatican's Vessel Operation, Monsignor Giovanni Batista Montini who was also an aide to Pope Pius XII. Montini suggested that Brennan recruit Italian exiles such as Mason's business leaders, and mafia members to corroborate with the Allies in their invasion. In 1963, Montini become Pope Paul VI. Colonel Paul Hellwell of the OSS smuggled heroin from Burma and sold it in ghettos in the United States. Grown in Burma and processed in Shanghai, OSS agents ran across this bonanza while

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attempting to bolster the right wing regime of Chiang Kai-shek and to prevent Mao Tse Tung from ascending to power. Flying Tigers were OSS mercenaries who were financed with secret funds. I Iellwell observed how Chiang sold opium to Chinese addicts and used the revenue to purchase weapons for his troops. Hellwell created Sea Supply, an ()SS proprietary company, out of Miami and used it to carry guns across the ocean to China. The opium was grown in Burma, so I lellwell moved on to Southeast Asia in order to consolidate his operation. In the late 1940s Ilellwell was named the Burmese consulate in Miami and was able to secure a monopoly over opium in Burma. Opium was taken to Shanghai where it was processed and then exported to the United States on Sea Supply boats. In return, I lellwell shipped guns back to China. The OSS used the mob to distribute heroin in big cities throughout the United States26. Another OSS conneCtion was the German Gestapo. Dozens of leading Gestapo figures and OSS spies were used. Their spy networks and personal war records could be used to survey and control the Soviet Union. After these Nazis arrived in Georgetown, the newly-created CIA in a drug running role used them. They were educated at Fort Henning and then used extensively in Latin America by local militaries. They were partially funded by the revenue generated from Burmese heroin exported to China for refining, and then exported to ghettos in the United States. After Mao solidified his power in 1949 revolution, drug trafficking in China began to diminish, partially because the death penalty was carried out against convicted dealers27. The OSS did not confine itself only to the Far East. While the bulk of American heroin originated in Asia, the Corsican syndicates produced smaller amounts in Marseille in the 1940s. Drug trafficking was certainly not at a premium during World War-II. Transoceanic shipping was disrupted during the war years as a result of submarine warfare. Consequently, the power of Marseilles' Corsican syndicates was weakened. In addition, Sicily's mafia was smashed by two decades of Mussolini's repressive regime. During the Cold War, American leaders played the theme of the "Red dope menace" in their propaganda against China, Cuba and Nicaragua under the Sandinistas. After World War-ll the OSS created a situation, which helped revive the Sicilian-American mafia and the Corsican underworld.

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The alliance with the mafia was maintained by the CIA in order to check the growing strength of the Italian Communist Party. For example, the Corsicans in Marseilles smuggled raw opium from Turkey and refined it into high-grade heroin for export to the United States. Marseilles relied on a handful of expert chemists who were able to produce high-grade number four heroin. After the transformation of the OSS into the CIA, Marseille's Corsicans fell under the protection of the French intelligence service, which allowed heroin trafficking to operate for another 20 years. By 1965 Marseilles' syndicates were able to double their production and operated between 20 and 25 laboratories, which produced 50 to 150 kilograms of heroin each month. It was estimated that 4.8 tons of pure heroin was exported to the United States in 1965 alone. The American government was concerned that both the French and Italian communist parties would rise to power in free elections in their respective countries. On the homcfront, the government was concerned with the rising strength of the New York Longshoremen's union and a series of strikes which threatened to erupt a year after World War II ended. To counter the communist parties' influence in France and Italy as well as to stamp out the longshoremen's power in New York, the newly formed CIA turned to the mafia's drug traffickers. The mafia connection assured CIA the resources which they critically needed: hit men to help carry out their illicit operations and 29. additional funds to help finance their activities The CIA armed and funded the Corsican syndicates to break up longshoremen's strikes in 1947 and 1950. Harry Bridges had been known for his leadership in general strikes in San Francisco in 1934, and he moved on to New York City where he worked to unionize dock workers. The CIA paid the mafia to assault and harass union leaders and workers. Some were even murdered. The CIA also used psychological .warfare against the unions. Anti-union pamphlets, radio broadcasts, and posters discouraged EUTOpC the CIA workers from continuing the strike. Meanwhile in continued to work with drug traffickers in its war to thwart the election of communists in democratic elections. By the late 1940s, Marseilles had become the postwar heroin capital of the Western world. And Italy's mafia still maintained its strength as the most powerful component in Europe.

After spending 10 years of a 3040-50 years' sentence in prison for drug trafficking, New York's mafia leader Lucky Luciano given clemency and released from Albany's Great Meadows Prison in 1946. In exchange, he promised to cooperate with American authorities. He returned to Italy and was able to build a black market, which had been abandoned by the Genovese family. He then expanded his operations by forging close tics with the Marseilles syndicate. He imported raw opium from the Middle East and processed it in laboratories in Italy. Luciano's top deputy was Meyer Lanslcy who had first contacted Cuban dictator Fulgencio Batista. Luciano initially purchased 200 kilos of heroin and shipped it on to Cuba. Lanslcy was given a monopoly on Cuba's gambling operations plus assurances that Sicilian heroin could be shipped from Marseilles to Havana and on to the United States. In return Batista and his assistants received half the profits from the casinos. Lanslcy and Luciano chose Sicilian-born Santos Trafficante of Florida to run the Cuban gambling and drug business. Luciano made sure that Havana's prostitutes were addicted to heroin and paid them with diluted forms of the drugs as wel139. After the defeat of the French at Dienbienphu in 1954 the United States quickly moved to fill the void. In that decade, over a thousand tons of opium was being cultivated in the Golden Triangle — Laos, Burma, and Thailand. This amounted to 70 percent of the entire world's illicit opium supply. In addition, this marked the first time that No. 3 heroin (three to six percent pure) was being refined. As a result, the Thai government launched an opium suppression campaign, which compelled most of the planters to switch to heroin. In the 1960s large quantities of No. 3 heroin was being refined in Bangkok and northern Thailand. It was during this decade that both ShacIdey and Clines were transferred from Florida to run CIA operations in the heart of Southeast Asia as well as in the heart of the world's largest heroin region31. During the Vietnam War, Lucien Conein who once had tics to Corsican drug dealers in Southeast Asia and Marseilles headed the White House drug team. The CIA urged Concin and the White House to accept a plan to carry out a series of assassinations against drug kingpins. According to a White House memo, "With 150 key assassinations the entire heroin-refining industry can be

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thrown into chaos32 ." I lovvever, the CIA's list included a handful of names of drug dealers in Southeast Asia, and nonc of them were the principal players. Additionally, the White House decided to concentrate in Turkey where less than 5 percent of the world's opium supply was grown. During the heated cold war in Southeast Asia in the 1950s, the CIA in its Langley, Virginia headquarters made large-scale decisions. The agency's operants were given a large scale of autonomy in the field. The agency did not ask questions as long as those on the payroll produced results. One of the major objectives of these factions was to gain control of opium trade in their regions. A large amount of duplicity, which included tortures, and murders, occurred among various groups: CIA headquarters 33. its operants in the field, and drug lords In 1950 President Truman implemented the Office of Policy Coordination (OPC), which approved a CIA invasion into southern China. This meant that CIA operants needed to infiltrate various local tribal units particularly in the Golden Triangle — Burma, Laos, and Thailand. The CIA recruited agents such as William Colby who years later was elevated to CIA director. When CIA operants moved into the Shan States in the Golden Triangle region of northern Burma, opium growers operated only randomly. However, the region soon was transformed into one of the largest growing opium region's in the world. The CIA needed an alliance with the KNIT, which had just been driven out of China by Mao Tse-tung a year before, and the Thai police in order to 34. bolster its position in the region In 1951 Operation Paperclip, a joint CIA-KMT effort to reconquer China's Yunnan province, was approved. The CIA's first objective was to accomplish an intelligence-gathering mission inside China. In addition, the CIA trained and funded 10,000 KMT forces. Unmarked C-46 and C-47 transport planes began making supply drops into northern Burma. The next year KM'f troops and some CIA operants crossed 60 miles into China but were forced to turn back after facing fierce resistance. The CIA also realized the importance of funding other smaller factions in the Shan states, so that no one element could consolidate absolute power in that region. Maintaining instability in the Golden Triangle prevented 35 . any one group from controlling and regulating opium trade however, American aid to the KNIT soon dropped of{

significantly when drug lord Khun Sa began to extend his influence in the mountainous region of the Shan States just south of China. Khun Sa began his military career with the KMT when he was 18 years old and was trained in both arms and opium by the CIA-supported army. As Khun Sa extended his influence into the Shan States, the CIA was slowly edged out along the Burma-China border, and was no longer able to use that area to stage subsequent attacks into Yunnan province. In the 1960s thousands of KNIT mercenaries made their way across the mountains of the Golden Triangle to eastern Burma. Khun Sa's army was defeated by KMT General Ouane Itattikone in the 1967 Opium War, and his troops fled into central Laos. Khun Sa was arrested and released at a later date, but by that time the size of his army had dwindled to about one thousand. Khun Sa not only suffered major casualties among his troops, but he also lost his monopoly on opium trade in the Shan States. The Opium War left Rattikone and the KMT in control of 80 percent of the opium trade in Burma36. During the period of KMT's dominance in northern Burma — from the end of World War II to 1960s — his CIA subsidized army increased opium production by nearly 500 percent from 80 tons to 500 tons annually. The Golden Triangle provided approximately 33 percent of the world's illicit opium trade. The severe drought of 1978-80 took a heavy toll on illicit drug trafficking in the Golden Triangle. however, by the 1980s, opium trade became the most prosperous ever business in that region. Even though Thai and Burmese military operations increased, heroin laboratories in the mountains in the two countries managed to operate without serious incidents. The Shan leaders became more splintered, and the Burmese Communist Party (BCP) collapsed. This opened the door for Khun Sa to return to the Shan States37. By the early 1970s he recovered his lost territory in the central Shan States, but the BCP quickly moved into the mountain areas just south of the China border, posing a big threat to Khun Sa expansionist policy. Three factions began to position themselves: Khun Sa, Chinese warlord Lo Using-han, and the Shan State Army (SSA). Like Khun Sa, Lo I Ising-han began his army career in the KMT and emerged as one of the principal opium dealers in Shan province. In 1972, the Nixon administration branded him the "kingpin of the heroin traffic in Southeast Asia."

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After Khun Sa was defeated in the 1967 Opium War, Lo Using-han became the largest single opium merchant in the province. The SSA was founded in 1958 and was political in nature. Its chief concern was to regain Rangoon and to abolish Shan authority in that region. It was not directly involved in opium trade. The size of its army was 2,700 and the troops were armed with American weapons, which were purchased from the black market. In 1973 the Burmese government disbanded its militia groups in Shan province. In an effort to consolidate his power in the region, Lo Hsing-han turned to moderate elements in the SSA for support in controlling the region. The two groups proposed that officials at the American embassy in Bangkok be informed that they intended to sell 400 tons of Shan opium for $20 million. The two groups also requested American support for the purchase of all opium controlled by smaller Shan factions in the Golden Triangle at a fixed price. They insisted that this would eliminate all heroin trade in the area. However, Lo lising-han was arrested in 1973 by Burmese officials who charged him with — not drug trafficking — but high treason and rebellion. The following year, the Burmese government released Khun Sa, who had spent five years in solitary confinement, and returned him to his troops in Shan province. Now Khun Sa easily replaced Lo Hsing-han as the drug kingpin in the Golden Triangle38. Opium production plummeted after 1975. After the United States withdrew from Vietnam, black market operations dwindled, making it difficult for Shan rebels to purchase weapons. In addition, between 1978 and 1980 the Golden Triangle was hit, with two droughts. This was followed by two seasons of intense monsoon rains, reducing the region's opium production to a record low. The usual 600-ton opium harvests were cut to 160 tons in 1978 and 240 tons in 1979. Recovering from this two year failure, the region began to produce a bumper crop in the 1980s. Sa stated that Richard Armitage,39 at that time an envoy in the American embassy, financed drug smuggling in Vietnam and Bangkok from 1975 to 1979. CIA agents Daniel Arnold and Jerry Daniel trafficked weapons and drugs with Khun Sa. The operation was believed to be at its peak in 1975 and 1976 under George Bush. In a letter to George Bush, Gritz maintained that Khun Sa claimed that he had once engaged in narcotics transactions with Richard Armitage, who later became the Assistant Secretary of Defence, Shackley, as well as other American officials. Bush was

head of the CIA in 1976 when Khun Sa said that he was selling drugs to top CIA officials. Gritz says that, strangely, nobody in the American government was interested in an investigation and later testified before the House Foreign Affairs Committee's International Narcotics Control Task Force°. In 1988 the government of Burma fell into the hands of the State Law and Order Restoration Council (SI,ORC). Its goal was to bolster the nation's economy by doubling opium exports, and within two years 60 percent of the world's heroin — valued at $40 billion a year — was exported from Burma. Also in 1988 the single largest heroin seizure was made in Bangkok. The 2,400-pound shipment of heroin, en route to New York City, originated from Khun Sa in the Golden Triangle. Two years later in a meaningless gesture an American court indicted Khun Sa in absentia on heroin trafficking. He was charged with importing 3,500 pounds of heroin into New York City over the course of 18 months, as well as holding him responsible for the source of the heroin seized in Bangkok. Specifically, he was charged with being the owner of a 2,400-pound shipment, which was intercepted in Bangkok en route to New York City in 1988. This was the largest single heroin seizure ever41. In Laos the CIA's complicity in drug trafficking resulted from its alliance with the I Imong tribes who, since the 1950s, had been used by the French to fight Vietnamese leftists. As early as 1959, CIA operative Lucien Conein stated that eight teams were training Hmong tribesmen on the Plain of Jars. In 1960 the CIA began recruiting units to patrol the border with China and even to send Yao and Lahu tribesmen into Yunnan province to monitor traffic and to tap telephone lines. Operating out of Vientiane, the CIA also sent recruits to patrol the Vietnam border as well as to send Green Beret commando units into North Vietnam to sabotage the Ho Chi Minh Trail. By far the largest goal of the CIA was to wage its secret war against the Pathet Lao in northern Laos. From 1960 to 1974, the CIA maintained a secret army of approximately 30,000 tribesmen in the mountains of northern Laos. This originated with Vientiane CIA station chief Shackley and Clines, his assistant42. The first mission of the CIA was to place a puppet in power. The CIA needed to forge alliances with tribes and warlords inhabiting the northern Laos. In order to maintain its relationship with the warlords while continuing to fund the struggle against


Pakistan: Drug trap to Debt trap

nationalistic Marxist movements in Laos and North Vietnam, the CIA first had to choose a career military official. The agency decided upon a career military leader, Lieutenant Vang Pao. Next, the CIA used several tactics to gain respect and support among the I lmong. Immediately elevated to a general, Vang Pao's power had to be solidified in order for him to gain political support among the tribesmen in Laos' scattered villages. First, the agency found a way for Vang Pao's son and daughter to marry the children of Touby Lyfoung, a prominent and popular Ilmong cabinet member. Second, the CIA usually chose a popular limong leader, with whom the agency could work, for every tribal area as its commander43. To gain support from the Ilmong, the CIA supplied the tribesmen with rice. This enabled them to concentrate on growing the cash crop of opium. The Ilmong relied on support from Air America for their rice supplies. Thus, the air power became the essential factor that allowed the CIA to keep Vang Pao in power. After Vang Pao was able to consolidate his power, the CIA helped him to sustain an army of 30,000 men from a tribe of only 250,000 people. The CIA relied on the villagers to supply the manpower to continue to replace the wounded and killed. By the early 1970s, 30 percent of the Ilmong recruits were 14 years old; another 30 percent were 15 and 16; and the remaining 40 percent were over 45. In return for providing recruits, the Ilmong opium growers received CIA support and their economy flourished. Also, Vang Pao's control over the opium industry gave him more authority, especially when he needed to recruit young soldiers. Thus, the , CIA relied on Vang Pao to supply soldiers in its secret war, and the CIA supplied his tribesmen with rice while opium was grown and frequently flown on CIA planes. CIA operant Tony Poe was assigned as the chief adviser to Vang Pao and to supervise his secret army's operations. Poe promised Ilmong soldiers one dollar for a Pathet Lao's ear and ten dollars for a severed head. On the one hand. Poe frequently refused to allow opium to be transported on Air American planes. On the other hand, he ignored the prospering heroin factories and never stopped any of Vang Pao's officers from using American facilities to manage illicit drugs". Another CIA operant, Edgar Buell, was assigned to the Plain of Jars where a large portion of the secret army was trained. Buell

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became in charge of dispatching Air America planes to drop rice and other necessities to the Hmong. In addition Buell used his expertise in agriculture to improve the Hmongs' skills in the cultivation and production of opium. While the United States was at its peak involvement in the Vietnam War, morphine base was being processed in the Golden Triangle and then exported to Hong Kong and Europe. In 1968 Shackley met in Saigon with Trafficante, Clines, and warlord Vang Pao, setting up a heroin smuggling ring to the United States. A Green Beret official speaking to Green Beret officers stated, "Shackley had been responsible for 250 political killings in Laos45." None of the opium refineries mastered the technique to produce high-grade number four heroin that is 90 to 99 percent pure. By 1969 expert chemists from Hong Kong were brought into the Golden Triangle region, and they produced limited amounts of high-grade heroin for tens of thousands of American Gls in South Vietnam. By 1970 the amount of heroin available to Americans was unlimited. The opium harvests were transported by Vang Pao's officers and then flown on Air America IJI1-111 helicopters to processing plants in Vientiane and Long Tieng46. However, with the beginning of Nixon's Victnamization policy in the months to follow, the market for heroin drastically dropped. Then Chinese, Corsican, and American syndicates began sending large shipments of number four heroin directly to the United States. As a result of these massive exports to the United States, the wholesale price for a kilogram of number four heroin in the processing plants in the Golden Triangle actually increased by 44 percent — from 51,240 to $1,780— in less than one year. At the same time, the price of raw opium in the villages jumped from $24 to $45 per kilogram. In 1970 the number of heroin addicts in the United States reached 750,000. More than a thousand tons of opium was being raised in the Golden Triangle. By 1973 the United States was losing in Vietnam and in Laos as well. The CIA was forced to import approximately 20,000 Thai mercenaries in order to replenish the exhausted Ilmong troops who could not provide additional recruits. That year the Laotian government signed a truce with the Pathet Lao, ostensibly ending the CIA's secret war. Slowly, the CIA abandoned over 300 landing strips and turned over its aircraft to the Laotian government. In 1974 on orders from the Laotian government, Air America abandoned its

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Pakistan: Drug trap to Debt trap

facilities. As Pathet Lao soldiers increased their presence in Laos, yang Pao's military had dwindled to 6,000 troops. Usually, Yang Pao retreated rather than fight, and eventually the Pathet Lao marched into Vientiane. yang Pao finally agreed to flee to Thailand, and the CIA provided transportation for him and his top officers47. In the 1970s drug profits from the secret war in Laos were funnelled into the Nugan Hand Bank. ShacIdey denied that he maintained a secret account in this Australia-based bank, which was founded by Michael John Hand and four officials from CIA-owned Air America. In Chiang Mai Thailand's branch office, the director of the bank claimed that he handled $2.6 million in drug revenues in less than six months. Ile maintained that the money was laundered for Laotian Meo tribesman and other heroin dealers. According to the Australian Royal Commission, Nugan Hand was the principal conduit for laundering money for major narcotics transactions from the Golden Triangle and importing heroin into Australia in the 1970s. The Nugan Hand Bank also moved money globally for the CIA. In 1980 the Nugan Hand Bank collapsed with $5 billion in debt. The Nugan Hand Bank had several branches in Saudi Arabia, Europe, Thailand, and South America. Several of the bank's officials had CIA connections. The former CIA chief of that city ran the larger Bangkok office. In Sydney it was a CIA bank in all but name. Among its officers were a network of United States generals, admirals and CIA employees, including former CIA Director William Colby, who served as one of its attorneys. Some of its branch managers included Air Force General LeRoy Manor„ who later corroborated with Air Force General Richard Secord and Colonel Oliver North on covert actions to liberate the 52 American hostages taken in Iran in 1979. In addition Patry Loomis, a CIA operative who worked under CIA station chief Shackley in Saigon, was a close associate of Nugan Hand's representative to Saudi Arabia, Bernie Houghton. Loomis also helped Ed Wilson, later to be implicated in Iran-Contra, recruit Green Berets to train Libyans. Wilson was also an associate of Houghton. In the mid-1970s Wilson used the Nugan Hand Bank and worked with Houghton to supply 3,000 weapons and 10 million rounds of ammunition to the CIA-backed rebels in Angola". In 1975 Wilson went to work for Task Force 157 which was set up by Henry Kissinger as a mini-CIA in an attempt to topple

the left-leaning Labour government of Gough Whitlam. It was actually separate from the CIA and was probably set up by Kissinger so he could deny any connection between what the Task Force 157 was doing and the CIA. The personnel of Task Force 157 included Wilson with his numerous connections to Nugan Hand Bank officials and Shackley. Michael Hand, an ex-American Green Beret, went on from the Green Berets to work in intelligence work for the United States government. The concept of Task Force 157 was two-fold: first, to set up operations against the Whitlam government and second, to go ahead with using Australia as a base for certain clandestine United States operations such as arms dealing and smuggling of contraband goods and using the Nugan Hand Bank as the cover". On two occasions Admiral Bobby Inman, former deputy director of the National .Security Agency ahd deputy director of the CIA, expressed deep concern that investigations of Nugan-Hand would lead to disclosure of a range of dirty tricks played against the Whitlam government. CIA operant Christopher Boyce said: "If you think what the agency did in Chile was bad, in which they spent 80 million dollars overturning the government of Chile there, the Allende government, you should see what they are doing in Australia50." In April 1982, Bush met with Australian Labour leader Hayden to discuss the CIA's role in the Nugan Hand Bank. Many Australians could not understand why the CIA wanted to bring down the government of a loyal ally, whose Labour party was striving to make social reforms, especially since it was the wartime Labour administrations, which had built up the special relationship with America51 . During the last three decades, drug issues have also strained U.S. relations with a number of countries, which never had communist leanings, such as France, Germany, Turkey, Mexico and the Bahamas. The use of narco-terrorism in U.S. foreign policy became a subject matter of Kerry Report52, which has been termed as The Truth but Not the Whole Truth by Peter Dale Scott and Jonathan Marshall in their masterpiece Cocaine Politics: Drugs, Armies and the CIA in Central America. After the Iran-Contra scandal broke out in 1986, the Senate's Kerry Committee convened in April 1986. Its primary focus was on the illegal transportation of weapons to the Contras. Yet mounting evidence began to surface that the CIA was also involved in

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narcotics trafficking, originating with Colombian cartels. An immense amount of evidence indicated that high-level Contra leaders as well as CIA operatives were involved in drug trafficking. As it turned out, the United States government had information regarding its involvement either while it was occurring or immediately afterwards. Government attorneys attempted to prevent drug trafficker George Morales from testifying. The DOJ offered him a lighter sentence if he refrained from divulging his ties to the Contras54. In a 1166-page Report the Kerry Committee concluded that Contra members, pilots and business people were involved in drug trafficking. The report said that drug dealers contributed cash, weapons, planes, pilots, air supply services and other materials to the Contras. Also, the Contras moved their funds through narcotics drug trafficking and money laundering operation. Many of the drug dealers were informed that their actions were either on behalf of, or sanctioned by, the United States government55. The Committee also stated, "the (United States) military and intelligence agencies running the contra war turned a blind eye to the trafficking" United States officials involved in Central America failed to address the drug issue for fear of jeopardizing the war effort against Nicaragua. In addition, the report stated that the State Department paid over $806,000 to known traffickers to carry humanitarian supplies to the Contras including pilots who flew supplies for the Contras, mercenaries who worked for the Contras and Contra supporters throughout Central America. However, the Kcrry Committee refused to address the issue of widespread drug trafficking through the war zones of northern Costa Rica. They did not find a single case, which was made on the basis of a tip or report by an official of an American intelligence agency. This was despite the fact that an executive order required intelligence agencies to report drug trafficking to law enforcement officials and despite direct testimony that drug trafficking on the Southern Front was reported to CIA officials. American officials involved with the Contras knew that drug traffickers were using the Contra infrastructure and that the Contras were receiving assistance from drug profits. None of this was reported to the appropriate law enforcement agencies57. The Kerry Committee Report included a litany of drug


operations out of various Latin American countries. Contra and CIA officials directed most of the narcotic traffic. Morales testified before the Kerry Committee that Gary Betzner, his best pilot, flew arms to the Contras from Fort Lauderdale Airport to Costa Rica. Morales stated' that his planes returned frequently loaded with "about 400 or so kilograms of cocaine." Morales rewarded the Contras with $400,000 in cash and checks in October 1984. By the end of 1985, he swore that cash contributions to the Contras were $4 million to $5 million. When Kerry asked about the origin of the cash, Morales said that "about 100 percent" was drug money. The Kerry Report concluded: "There was substantial evidence of drug smuggling through war zones on the part of the Contras, Contra suppliers, Contra pilots, mercenaries who worked for the Contras, and Contra supporters throughout the region." At a 1986 Costa Rican drug trial CBS News reported that the United States government presented Wiretapped telephone conversations with contra leader I I uachen Gonzalez. He discussed the large amounts of cocaine which the contras were sending from Costa Rica to the United States. Also in 1986 the Costa Rican government arrested a Cuban exile carrying 204 kilograms of cocaine from an airstrip. He denied any role in these operations but stated that the Contras had asked him to smuggle in arms. In July 1983 Hull travelled to Washington, D. C. to convince members of Congress that Pastora could not be trusted since he was a front for the FUN. One of the offices, which he visited, was that of Senator Dan Quayle of Indiana He was introduced to Quayle's assistant, Robert Owen, and to North. Subsequently, Owen resigned from his position with Quayle and started the United Nicaraguan Opposition (UNO). One of Pastora's former pilots, Gerald° Duran, told the Kerry Committee that he had been arrested in 1986 in Costa Rica for flying drugs to the United States. When the CIA dropped Pastora in 1984, it had to find another source through which to work. That turned out to be Jorge Morales who conspired with an American, John Hull, who owned a multi-acre farm in northern Costa Rica59. A leadership struggle within the FDN developed early in the Contra war. Eventually Pastora, leader of the Southern Front

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Pakistan: Drug trap to Debt trap

operating out of Costa Rica, broke ranks with Adolfo Calcro who was the White house's choice to run the Contras. As a result of a leadership struggle in the FDN, Pastora soon fell out of good grace with the umbrella Contra organization which operated out of Honduras. Two Americans, William Crone and Ian Kniloch, the chief of the Contras air logistics, also aided Hull. Both worked with a paramilitary group known as Huerta Norte. Another Hull neighbor was Bruce Jones who owned a 55-acre ranch next door. Jones testified that Hull received 5,000 rifles, 5 million rounds of ammunition, hand grenades, mines, and mortars from the contras. Jones was a liaison between the CIA and Contras for whom he was supplying millions of dollars in arms. Ile testified that between May 1982 and May 1984 he and Hull coordinated approximately 100 deliveries of arms and supplies. These supplies were kept on Ilull's ranch. Jones maintained that when the planes arrived, he would help unload the drugs and arms in five or ten minutes. In the 1960s Ronald Martin worked for the CIA in Miami along with James McCoy, another ex-attache to Nicaragua. When the Boland Amendment legally cut Contra aid in 1984, Martin began organizing North's role in raising arms for the Contras. However, Martin was shut off when North began to use Richard Secord as the arms broker. According to Calero, Martin and McCoy received $2,095,000 for arms from North. Martin's attorney . stated that the amount was closer to $15 million or $20 million60 At least five witnesses testified to the Kerry Committee that , cocaine was loaded onto planes at John Hull's ranch. The Committee also was told that hull received $10,000 a month as a courtesy from Oliver North. Yet the Justice Department took no action against Hull for either obstruction of justice or for drug trafficking. In 1989 Hull was arrested in Costa Rica, but the charges against him for trafficking 2,500 kilograms of cocaine were dropped. lie was declared a persona non grata and moved to Miami. After 1988 the Justice Department reluctantly indicted some people working for Hull, but soon afterwards these too were dropped61. Felipe Vidal and Rene Corvo were Cuban-Americans involved in transporting arms to Hull's ranch in return for drugs. Revenue from the cocaine was used to purchase military equipment,

ammunition, and explosives for the Contras. Corvo testified to the Justice Department that paramilitary supplies were stored in the home of Frank Chanes in Miami and in the garage of Corvo. However, no charges were ever brought against Corvo. Witnesses testified that Corvo stored loaded guns on his premises and that he told friends that he flew clothing and medical supplies to refugees in El Salvador62. Ex-CIA agent Jose Fernandez testified to the Kerry Committee that Vidal and Corvo were agency operants. He stated that both were involved in the illicit drug business and that the CIA's duty was to protect them. Vidal was called a CIA contract agent who had been arrested numerous times in Miami on narcotics and weapons charges. All this evidence gave the Kerry Committee adequate evidence to implicate Vidal, Corvo, North, and others as being part of an arms-for-drugs conspiracy. Between 1983 and 1986 numerous pilots made flights out of Hull's ranch and returned to the United States with millions of dollars in drugs. Many flights landed at Ilopango Air base in El Salvador and at Hull's ranch. A convicted drug smuggler admitted flying 500 kilograms of cocaine from Hull's ranch to the United States. "It was arms down, cocaine back with full knowledge of the CIA and DEA63." According to the Kerry Report, the main front set up by the CIA that operated out of Florida was SETCO Air. This was a CIA-operated company which ran arms down to Honduras and returned with cocaine. The Kerry Report stated that SETCO was the principal company used by the contras to transport supplies and personnel to the FDN, carrying at least a million rounds of ammunition, food, supplies, uniforms, and other military supplies for the Contras from 1983 through 198564. Peter Glibbery, a mercenary hired by Hull to train contras on his ranch, told a Costa Rican court that he was arrested after Hull asked him to set up a Contra training camp on his ranch. Ile was convicted and imprisoned for violating Costa Rican neutrality laws and illegal possession of explosives. Glibbery said that Hull informed him of a proposed bombing plot at the American embassy in San Jose. According to Glibbery, hull claimed that mines were needed to do the job. However, Glibbery's account of his experience on the Hull ranch changed.

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During a trial in a suit brought by Hull against the two American journalists Avirgan and Honey, Glibbcry refused to discuss Hull's

In 1994 Castillo said that large quantities of cocaine were being brought into the United States to support the Contras. We claimed that he witnessed cocaine shipments and boxes full of money. Castillo maintained that he knew the names of traffickers as well as their destinations, flight paths. tail numbers, and the date and time of each flight66.


involvement in the assassination plot. Glibbery told a Costa Rican court that he had met Ilu11 and Posey in March 1985. The next day, Glibbery said that he flew to Costa Rica with hull and the mercenaries. He said Hull identified himself as the liaison officer between the CIA and the FDN. Glibbery told honey and Avirgan that in April 1987 hull had threatened to kill him if he did not repudiate the evidence which he had given to the United States federal investigators. In May 1987 an Iran-Contra select committee team went to San Jose, Costa Rica but failed to interview Hull. It turned out that they merely called him on the telephone from San Jose, just 30 miles from his ranch. Hull never testified to either congressional committee. However, he could have told the congressional committee who ran the operation and who authorized it. Hull could also have responded to allegations that those running the supply lines through his ranch were engaged in drug trafficking. Hull received $10,000 a month from Contra leader Calero, according to public testimony by Owen. hull also received $800 a month from the CIA to pay for bodyguards during a time the agency was prohibited from using funds to supply the Contras. Thus, no legitimate congressional. investigation was ever launchec166. In 1979 Castillo was hired by the DEA, and after a successful conviction, he was transferred to Central America. After Reagan launched his war against the Sandinistas two years later, Castillo immediately became involved with numerous drug dealers, most of them were also hired to run arms to the Contras. Castillo's first encounter was with Socrates Amaury Sofi-Perez, a former Bay of Pigs veteran, who operated a shrimp business in Guatemala City. He smuggled drugs packed in frozen shrimp into Florida and laundered the profits for the Contras. Castillo also had ties to Gerard I,atchinian, an international arms dealer. In 1984 Latchinian was arrested for using proceeds from a $10 million cocaine deal to help finance the assassination of Honduran President Roberto Suarez Cordoba. Latchinian's partner was General Jose flues() Rosa who helped train Contra soldiers in Ilonduras.


According to the Kerry Report a March 1987 memorandum stated that a number of people, who supported the Contras and who participated in contra activity in Texas, Louisiana, California, and Florida, as well as in Honduras, Nicaragua, and Costa Rica, claimed that cocaine %'as being smuggled into the United States. They stated that it was part of the same infrastructure which procured and transported weapons for the Contras67. In the early 1980s Morales was a well-known contra drug trafficking, transporting cocaine and marijuana from Latin America northward into the United States. In May 1986 Morales was to meet with Vice President Bush to discuss a secret operation. However, the appointment was cancelled when the Iran-Contra scandal was about to be leaked to the public. Morales was dismissed from the CIA and was later indicted68. Morales testified before the Kerry Committee that he was well known to Colombian drug traffickers and that his ranch was the key base of an operation which sent cocaine to Miami in exchange for contras arms. Morales also testified that he had delivered 40 M-79 grenade launchers which were flown from Miami to Ilopango Air Base in El Salvador. Morales also told the Kerry Committee that he sent approximately S4 million in drug money to the contras. Morales' story is corroborated by his pilots such as Gary Betzner who made several runs in 1984 from Florida to airstrips in Costa Rica. On one occasion, Betzner unloaded weapons for Pastora's Contras and proceeded to load his plane with "seventeen duffle bags and five or six two-foot-square boxes filled with cocaine." Additionally, pilots Gerald° Duran and Marcos Aquado flew arms missions into Costa Rica between 1982 and 1985 and both cited examples of Morales' drug connections. In 1986 Duran was arrested in Costa Rica for exporting drugs to the United States. Another pilot who was recruited by Morales was Fabio Ernesto Carrasco who was subpoenaed to testify in a drug trial in Oklahoma City in 1990. Carrasco said that between 1984 and 1985, he flew over five drug

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missions for Morales and that he carried between 300 and 400 kilos of cocaine into the United States on each flight. Carrasco also testified that he and Betzner flew down weapons for the Contras from Florida and that they returned from Costa Rica loaded with cocaine which had been purchased by Contra leaders Octavian° Cesar and Mario Calera. Many of these missions from the United States ended at the Costa Rican ranch of Hull who Morales said was heavily involved in drug smuggling. Carrasco also said that Morales gave millions of dollars in drug money on 30 to 40 different occasions to Contra leader Adolfo "Popo" Chamorro, the nephew of Violetta Chamorro who was later elected president of Nicaragua69. Morales also testified that he gave airplanes and cash to the Contras because Popo Chamorro promised to help hitn with his legal bills in the United States. Morales offered Popo Chamorro an old DC-3 to carry food, arms, boots, and uniforms to Pastora's Contra soldiers who were isolated in Costa Rica and needed air support to receive supplies. Pastora was desperate, since Calero and White !louse had severed relations with him in his struggle for power within the I:DN. In 1986 Morales was convicted in prison and died five years later 70 . Rodriguez began his CIA career in the late 1950s in Florida. After the aborted Bay of Pigs invasion, he was moved to Vietnam where he worked for Gregg and Shackley. Rodriguez returned to the Western Hemisphere in the early 1980s when Reagan launched his covert war in Nicaragua. Ile was assigned to oversee 71. the Contra supply effort in El Salvador from 1982 to 1986 In November 1982 Ramon Milan Rodriguez, involved with the Colombian cocaine cartels, made a $3,690,000 payment to the Contras at the request of Felix Rodriguez, in exchange for protection from prosecution. The next year, Gustave Villolda received a letter of recommendation from Gregg as "combat advisor" to the Contras. Villolda worked along side Rodriguez during the Bay of Pigs invasion and the CIA track down and execution of Che Guevara in Bolivia. In 1984 Gerald Latchinian, co-director with Rodriguez of Giro Aviation, a CIA proprietary airline, was arrested for smuggling $10.3 million in cocaine to finance the assassination of Ilonduran President Roberto Suarez 72. Cordoba. I.atchinian contended that this was a CIA operation Rodriguez was a Cuban exile and was the principal

accountant for the Medellin cartel, handling $200 million a month in drug profits. His business took him from Colombia to Panama and Florida. Ile claimed that in the 1972 he carried $200,000 in cash from CIA operant Manuel Artime to some of the burglars arrested at the Watergate hotel. In 1982 he was recruited by Felix Rodriguez to join the contra network for which he contributed approximately $10 million between 1982 and 1985. When Milian Rodriguez was arrested in 1985, his financial papers were seized. In a column under the heading of "CIA," Rodriguez had recorded $3.69 million in expenditures. Rodriguez used his Ocean Hunter frozen shrimp company, based in Florida, but owned exclusively by his Costa Rican Frigorificos de Puntanenas firm, to move around about $200,000 in this time frame 73. The Sanchez family's first involvement in drug trafficking dated back to the San Francisco "frogman" case in 1983. This operation netted 430 pounds of cocaine from a freighter outside San Francisco Bay. Its crew admitted that it was running drugs from the Contras in Costa Rica. One was an ex-Somoza air force officer who stated that the profits belonged to the Contras. Another stated that he had given thousands of dollars from the drug smuggling to Costa Rican Contra groups and helped to arrange for the shipment of arms to a small Contra group headed by Fernando Chamorro. The United States returned $36,020, which was seized as drug money, after one of the defendants, Zavala, submitted letters from Contra leaders claiming that the funds were really their property74. The Kerry Committee found that two of those arrested had ties to the Contras and had received the cocaine from Colombian sources. The Committee report implicated higher up Contra leaders who were involved in narcotics traffic. Several members of the Sanchez family were indicted. Court records showed that the cocaine ring's source of supply included one of the family members, Troilo Sanchez. lie was a relative of Aristides, a member of the FDN directorate who earlier had been caught trafficking cocaine. The "frogman" case resulted in the demise of the Sanchez family75. Honduras had been the classic example of a banana republic. United Fruit and Standard Fruit controlled most of its economy. New Orleans ran its economy, and soon banana trade routes became drug routes. In 1975 Honduran President General

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Pakistan: Drug trap to Debt trap

Oswaldo Lopez Arellano received 51.5 million in bribes from the American multinational companies, and in return never paid export taxes amounting to S7.5 million /6. In the 19805 Honduras accounted for approximately 20 percent of the cocaine imported by the United States. Costa Rica supplied about 10 percent of America's cocaine. Between 1982 and 1987, the Reagan administration pumped in $335 million in military aid and $836 million in "economic" aid to Honduras. A Christian Democrat in I londuras Congress stated that Washington -R. would merely ignore any questions about drug trafficking Reagan administration officials interceded on behalf of Jose Bueso Rosa, a I londuran general who was heavily involved with the CIA's Contra operations and faced trial for his role in a massive drug shipment to the United States. In 1984 Bueso and co-conspirators plotted to assassinate I londuran President Roberto Suarez Cordoba. This was to be financed with a $40 million cocaine shipment to the United States, which the FBI intercepted in Elorida /8. According to declassified e-mail messages North led an effort to seek leniency for Bueso. The messages indicated the efforts of American officials to "cabal quietly" to get Rues() a "pardon, clemency, deportation, (or) reduced sentence." Eventually they succeeded in getting Bueso a short sentence in "Club Fed," a white-collar prison in Florida 79. The Kerry Committee report reviewed the case and noted that Bueso was involved in a conspiracy that the Justice Department deemed the most significant case of narco-terrorism ever discovered80. Another arms for drugs caper emerged in 1983 when Cater° was placed in charge of the contras operating out of I londuras. It was at this time that Eden Pastora in Costa Rica was cut off the CIA payroll. Juan Ramon Matta Ballesteros was a well-known drug dealer who spent part of the 1970s in a Colombian prison. Ilc returned to I londuras in 1986 after bribing his way out of jail Nvith $2 million. The DEA knew about Matta by 1978 when he was arrested at Dulles airport with 54 pounds of cocaine. However, by 1983 SETCO, Matta's airfreight company was used by the Contras to run arms to the Contras in Ilonduras. According to the Kerry Report SETCO was being used as the Contras' main supplier of

weapons in 1984. For these services, Matta was paid by North. The Kerry Report also stated: "One of the pilots selected to fly Contra mission for the FDN (Contras) for SETCO was Frank Moss, who was under investigation as an alleged drug trafficker since 1979." Two years after Iran-Contra broke in the United States the justice Department extradited Matta who was a suspect in the murder of DEA agent Enrique Camarena in Mexico61. "In July 1985 Michael Tolliver, a convicted American drug smuggler who was at a Georgia halfway house, was contacted by Barry Seal. Seal had contacts with the CIA and was released from prison early. Ile was told that he would receive $75,000 a trip if he were to fly arms from Miami's airport into Honduras. According to Tolliver, Seal had 28,000 pounds of marijuana when he arrived at I lomestead Air Base in Florida. Upon returning front Central America, Seal met. "I lernandez" at the Eountainbleau I lotel and was paid $75,00082." "In October HU agents seized 763 pounds of cocaine with a wholesale value of $IO million in southern Florida. Among those arrested was Honduras' former chief of staff of the army, General Bueso Rosa. In 1987, United States officials confiscated two shipments of cocaine weighing 6.7 tons. United States government investigators stated that it went directly to the doorstep of the Ilonduran military. The cocaine originated from the Cali cartel with whom Matta dealt directIv83." In 1987 the DEA had information that linked five top londuran military officers with drug trafficking but was persuaded not to act since it may have endangered Honduran cooperation in the Contra war. By 1987, it was estimated that Honduras accounted for 20 to 50 percent of all cocaine which entered the United States from Latin America84. Several groups of Miami-based Cuban-Americans provided direct or indirect support to the Contras when the Boland Amendment prohibited it. Rene Corm was one who provided supplies and training with funds in part from drug money. Sandinistas captured two other Cuban exiles, Mario Rejas Lavas and Ubaldo Hernandez Perez, in 1986. They were reportedly members of UNO/FARN, which was headed by Fernando "F.I Nego" Chamorro. When the Kerry Committee requested information on these Cuban-Americans, the Justice Department refused to provide any information on the grounds that the

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Committee was merely carelessly rambling through its open investigations. The Justice Department advised this Committee that the matter had been fully investigated and that the Committee's allegations were untrue85. Before he seized power as head of state, Manuel Noriega was first recruited by the United States Defence Intelligence Agency in 1959 while studying in Peru. By 1967 he was placed on the CIA payroll. At this time, he worked in conjunction with the United States military, which used Panama as a listening post in Latin America. After a failed coup in 1971 General Omar Toriilos, who later became dictator, fled to Miami where he stated that Noriega had "operational control" of the narcotics trade through Panama88. The Justice Department dropped the idea to attempt to indict Noriega. In 1976 Noriega was placed on the CIA payroll again, this time at $110,000 a year. When Carter was elected, Noricga was again dropped from the CIA. Carter's major objective was to pass the Panama Canal Treaty; so all allegations against Noriega were suppressed. However, once the Senate ratified the treaty, the Panamanians got the word that America was open for drug trade. In 1980 Noriega was given full control over a special Panamanian intelligence unit. Noriega supplied at least seven pilots to run 87. arms down from Florida. The pilots returned with cocaine When Reagan took office in 1981, the CIA immediately brought Noriega back. His salary was increased, and his salary jumped to $185,000 a year, and by 1985 it reached $200,000. The CIA deposited Noriega's illegal payoffs in the Bank of Credit and Commerce International (BCCI), whose name made front-page 88. news in the summer of 1991 for laundering money CIA Director Casey began meeting with Noriega in 1981. Noriega was paid $100,000 for the use of Panama as a middle country to run drugs from Colombia to the United States. His personal pilot, Floyd Carlton, stated that he received $400 per kilogram to run cocaine from Colombia into Panama. However, things turned sour for Carlton in 1985 when $3 million in cocaine was missing on flights into Costa Rica88. Noriega supplied pilots and urged Pastora to unite with the Contra organization in Honduras. By 1985, Noriega promised to train Contras in Panama. Noriega met with North in London to

discuss plans to set up training for booby-trapping, night operations, and sabotage activities against Nicaraguan targets. Noriega stated that he would try to obtain Israeli commandos to work with the Contras90. The Kerry Report stated: "Noriega put his pilots to work flying weapons from Panama to Costa Rica for the Contras Many of the pilots moved mixed cargoes of guns and drugs to bases in Costa Rica, dropped off the guns and flew on to the United States with drugs91." In 1986 the Iran-Contra scandal broke out, now making Noriega expendable. The next year his personal pilot. Carlton, was extradited to the United States. In 1988 Noriega himself was indicted by the Justice Department and was linked to drug trafficking for the first time. The following year the United States invaded Panama, and Noriega was kidnappifd and taken to Miami for his trial. The CIA never turned his files over to the Justice Department92 After Noriega was brought to the United States, the Bush administration placed Guillermo Endara in power. Endara was director and secretary of Banco Interoceanico which had been targeted by the DEA and FBI, and he named Carlton as a major person who laundered money through that bank from the Medellin and Cali cartels. The CIA also used Banco de lbereoamerica as a front through which to launder money in Panama. Through this dummy company, North purchased arms from a Syrian drug and arms dealer, Manzer al-Kasscr, who had ties to the Medellin cartel". In 1988 the CIA hired General Ramon Guillen Davila to investigate Venezuela's drug enterprises, primarily the Cali cartel. With the help of the CM, Guillen set up a drug smuggling operation that involved Venezuelan National Guardsmen. They purchased cocaine from the Cali cartel in Colombia, imported it to Venezuela, and stored it in warehouses, which were run by Guillen and funded by the CIA. One CIA agent said, "let the dope walk;" that is, to ship it northward into the United States. Another agent, Mark McFarlin, testified in Miami federal court in 1989 that he had informed the Caracas CIA agent chief that 3,000 pounds of cocaine had just been shipped to the United States. When the agent chief was informed that the DEA was unaware of the operation, he

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94." responded by telling McFarlane, "Let's keep it that way Between 1989 and 1992, 22 tons of cocaine flowed from the Guillen network into the Miami. In 1990 DEA agents in Caracas were informed of the illicit activity and made no attempt to intervene. Finally in 1992 United States Customs in Miami terminated the operation when they seized an 800-pound cocaine shipmcnt. One of Guillen's dealers, Adolfo Romero, was arrested and convicted on drug conspiracy charges. No action was taken against Guillen's organization, and he simply dropped out of contact with the CIA95. In November 1996 the Justice Department indicted Guillen on charges of importing cocaine into the United States. Guillen headed Venezuela's anti-drug unit while smuggling over 22 tons of Cali and Bogota cartel cocaine into the United States and Europe. After he learned of his indictment, he went into seclusion in Caracas where he received a federal pardon. Guillen contended that the CIA authorized Venezuelan cocaine shipments to the United States. lie said, "Some drugs were lost and neither the CIA nor the DEA want to accept any responsibility for it96." The Kerry Committee learned that Southern Air Transport of Miami had provided the plane. Southern Air denied any knowledge, and no charges were brought against this front. The CIA denied any knowledge of Hasenfus and also stated that he was working outside the jurisdiction of the federal government. After several weeks, Hasenfus was released and returned to the United States where he subsequently received no aid or support by the government97. Illegal money and weapons flowed in from North's backroom cowboys in the White House basement as well as frond four fronts, which were set up by the State Department. Narcotics traffickers who provided weapons for the Contras operated them. And in return, large shipments of narcotics flowed northward into the United States98. In 1987 the two Iran-Contra investigatory committees determined what evidence would be made available for the hearings. The National Security Archive obtained the hand-written notebooks of Oliver North, the National Security Council aide who helped run the contra war and other Reagan administration's covert operations, through a Freedom of Information Act lawsuit

filed in 1989. The notebooks, as well as declassified memos sent to North, recorded that North was repeatedly informed of Contra ties to drug trafficking99. As a member of the NSC, North had compiled 2,848 pages of notes in spiral notebooks between 1984 and 1986. North kept records of correspondence, meetings, and activities involving the NSC. However, after the Iran-Contra committees subpoenaed his diary, he was allowed to censor his notes. North and his attorneys either totally or partially censored over 1,269 pages — nearly half of his diary. 155 pages were totally "blacked out." Potentially damaging to North were 500 pages of notes, which presumably referenced drug trafficking activities, and Iran-Contra investigators never received these. A White house committee scrutinized his censored diary and determined that 104 pages were "not relevant to the investigation." North did not delete a significant amount of evidence, which linked him to drug trafficking during the Contra war. Numerous entries in North's diaries linked him to drug traffickingi co. North was given limited immunity when he testified before the Iran-Contra committee. Walsh presumably did his best to prevent this, and therefore his convictions were overturned upon appeal. Since North denied in his public testimony that he had any direct or indirect involvement in drug trafficking, his immunity should not have covered such improprieties. Ile may have told members of Congress in executive session, but that should not have tainted any witnesses. May 12, 1984 w/drugs."

"contract indicates that Gustavo is involved

June 26, 1984. "DEA" — (followed by two blocks of text deleted by North). June 27, 1984. "Drug Case — DEA programme on controlling cocaine — Either cutoff — Colombians readjusting — possible negotiations to move refining effort to Nicaragua — Pablo Escobar — Colombian drug czar — Informant (Pilot) is indicted criminal — Carlos Ledher — Freddy Vaughn." July 9, 1984. "Call from Clarridge — Call Michael re Narco Issue — RIG at 1000 Tomorrow — DEA Miami — Pilot went talked to Vaughn — wanted A/C to go to Bolivia to p/u paste — want A/C to piu 1500 kilos — Bud to meet w/Group."

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July 12, 1984. "Gen Gorman — Include Drug Case Call from Johnstone — (White house deletion) leak on Drug." July 17, 1984. "Call to Frank M. — Bud Mullins Re — leak on DEA piece — Carlton Turner Call from Johnstone — McManus, IA Timcs-says/NSC source claims W. 11. has pictures of Borge loading cocaine in Nic." July 20, 1984. "Call from Clarridge — Alfredo Cesar Re DrugsBorgc/Ow(n leave Hull alone (Deletions)/Los Brasiles Air Field' Owen off Hull." July 27, 1984. "Clarridge: — (Block of White House deleted text follows) — Arturo Cruz, Jr. — Get Alfredo Cesar on Drugs."

Owen reports that the officials in the new Southern Front FDN units include "people who are questionable because of past indiscretions," such as Jos Robelo, who is believed to have "potential involvement with drug running" and Sebastian Gonzalez, who is "now involved in drug running out of Panama." August 9, 1985. "Honduran 1)C-6 which is being used for runs out of New Orleans is probably being used for drug runs into U.S." North summarized a meeting with Owen ("Rob"), his liaison with the Contras. They discussed a plane used by Mario Calero, brother of Adolfo Calero, head of the FDN. to transport supplies from New Orleans to Contras in llonduras." Aug. 10, 1985. "Mtg. w/A.C. — name of DEA person in New Orleans re Bust on Mario/DC-6."

July 31, 1984. "Finance: Libya — Cuba/Bloc Countries — Drugs ..... Pablo Escobar/Frederic Vaughn. Staff queries re (White house deletion) role in DEA operations in Nicaragua." Dec. 21, 1984 "Call from Clarridge: Ferch (White house deletion) — 'l'ambs-Costa Rica — Felix Rodriguez close to (White House deletion) — not assoc. W/Villoldo — Bay of Pigs — No drugs." Jan. 14, 1985. "Rob Owen — John Hull — no drug connection — Believes." July 9, 1985. "Went and talked to (Contra leader) Vaughn, (who) wanted to go to Bolivia to pick up paste, wanted aircraft to pick up 1500 kilos." July 12, 1985. "S14 million to finance (arms) came from drugs." In this memo, North noted a call from retired Air Force general Richard Secord in which the two discussed a I londuran arms warehouse from which the Contras planned to purchase weapons. According to the notebook, Secord told North that $14 million to finance the Contras came from drugs. July 21, 1985. "110 (Honduras) plans to seize all mat'l when supermarket comes to had end." April 1, 1985. North (code-name: "The Hammer") received a memo from Robert Owen (code-name: "T.C." for "The Courier"), describing Contra operations on the Southern Front. Owen tells North that FDN leader Adolfo Calero (code-name: "Sparkplug") has picked a new Southern Front commander, one of the former captains to Eden Pastora who has been paid to defect to the FDN.

February 10, 1986. Robert Owen ("IC') wrote North (this time as "HG,' for "Blood and Guts") regardirig a plane being used to carry "humanitarian aid" to the Contras that was previously used to transport drugs. The plane belonged to the Miami-based company Vortex, which was run by Michael Palmer, one of the largest marijuana traffickers in the United States. Despite Palmer's long history of drug smuggling, which led to a Michigan indictment on drug charges, Palmer received over 5300,000 from the Nicaraguan Ilumanitarian Aid Office (NHAO) which helped to supply the Contras and was overseen by North, Assistant Secretary of State for Inter-American Affairs Elliott Abrams, and CIA officer Alan Hers." Feb. 27, 1986. "Mtg. w/Lew 'l'amb- DEA Auction A/C seized as drug runners. — S250-260K fee." Undated. "Necessary to give Mr.I lull protectionml." In March 1985 Reagan stated on national television, "top Nicaraguan government officials are deeply involved in drug trafficking." Ironically, on the same day as the speech, the United States government returned funds seized in a 430-pound cocaine bust after a defendant • stated that Contra leaders claimed they were theirsl°2. In 1995 press accounts of illegal drug trafficking led to an investigation in Congress the following year. Within the executive branch State Department officials told Congress in 1986 that it had evidence of a limited number of incidents in which known drug traffickers tried to establish relations with Nicaraguan

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resistance groups. According to the State Department drug traffickers were attempting to exploit the desperate conditions in which the Contras found themselves. The department even conceded that there were some members of the Contras who were running cirugs103. Months later the Foreign Relations Committee reported that there was evidence to link various elements of the FDN to drug trafficking. In 1986 the Justice Department and other federal agencies failed to respond to any of these allegations. In May 1986 members of the Kerry Committee met with officials of the Justice Department, State Department, FBI, CIA, and DEA. The official DOJ report stated that the FBI had conducted an inquiry into all these charges and none of them had any substance or accuracyloa. In 1987 the CIA's Central American Task Force chief conceded that the Contras on the southern front in Costa Rica had links to drug trafficking and that it was much broader than what had been reported by the State Department. lie told the Kerry Committee that many people were involved in illicit drugs including higher leaders like Pastora. In June 1998 new evidence surfaced, suggesting that the Reagan administration's tolerance of drug trafficking by the Nicaraguan Contyas and other clients in the 1980s was premeditated. The corporate media ignored a 1982 letter, which was introduced into the Congressional Record revealing how CIA Director Casey secretly engineered an exemption, which spared the OA from a legal requirement to report on drug smuggling, by agency assetsl°5. Attorney General William French Smith granted die exemption in February 1982, only two months after Reagan authori7ed covert CIA support for the Nicaraguan Contra army and some eight months before the first known documentaq evidence revealing that the Contras had started collaborating with drug traffickers. The exemption suggested that the CIA's tolerance of illicit drug smuggling by its clients during the 1980s was official policy anticipated from the very beginning, not just an isolated series of illicit activities. If this is true, Casey foresaw the legal dilemma, which the CIA would encounter should federal law require it to report on illicit narcotics smuggling by its agents. DOJ regulations state that "reportable offences" included assault, homicide, kidnapping, Neutrality Act violations, and

communication of classified data, illegal immigration, bribery, obstruction of justice, possession of explosives, election contributions, possession of firearms, illegal wiretapping, visa violations, and perjurylm. In 1982 Casey attempted to exempt the CIA from the need to add narcotics violations to the list of reportable non-employee crimes. In March 1982. Smith granted Casey his wish, and drug trafficking offences were dropped from the list. This Casey-Smith exchange of letters stands as important historical evidence bolstering the long-denied allegations of CIA complicity in drug trafficking. Worse yet, the documents are evidence of premeditation107. In May 1998 California Congresswoman Maxine Waters introduced the damaging evidence from the Casey-Smith letters into the Congressional Record. Waters state that the Casey-Smith arrangement "allowed some of the biggest drug lords in the world to operate without fear that the CIA would be required to report their activities to the DEA and other law enforcement agencies These damning memorandums are further evidence of a shocking official policy that allowed the drug cartels to operate through the CIA-led Contra covert operations in Central America108." Cocaine shipments from Latin America into the United States increased during the Contra War in the 1980s. But American authorities badly underestimated the flow of cocaine out of drugproducing countries over the last two decades of the twentieth century. When a new variety of coca in Colombia was discovered in the 1990s, the American government tripled its estimate of cocaine production in Colombia alone. By the late 1990s, the United States was spending $17.8 billion annually for its "war on drugsl°9." These higher estimates conflicted with numbers which General Barry McCaffrey, head of the White House Office of National Drug Control Policy, had released to the public. McCaffery claimed that the flow of cocaine into the United States would drop by 25 percent in 2002 and by 50 percent in 2007. For years, American officials said that most of the coca grown in Colombia was of a variety, ipadu, whose leaves yield relatively small amounts of cocaine. A higher-yield variety. E. coca, has been

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grown in Peru and Bolivia and thcn shipped to Colombia for processing and export. Thus, when satellite photos in mid-1999 showed acre upon acre of new fields of coca in Colombia, American intelligence officials assumed that they were growing the same low-yield coca plants — approximately 165 metric tons annually — which they had always cultivated. By the end of 1999, American officials determined that a third of the new variety of coca, which yielded higher amounts of cocaine, took just one year ll° — rather than three years — to cultivate This higher estimate of cocaine shipments into the United States, along with the increase of border confiscations of the designer drug Ecstasy, indicated that American laws and anti-drug strategies were failing. The confiscations of Ecstasy at the American border soared by 700 percent in 1999, according to Customs Service figures111 . These higher figures of drug flow into the United States came at a time when federal authorities began using technological means of tracking the flow of drugs northward from Latin America. American authorities increased the use of satellite photos to track the shipment of illicit drugs. Yet it became obvious in October 1999 that law enforcement was failing when American and Colombian authorities broke up a major Latin American cocaine ring. It was discovered that "Juvenal" network was exporting approxitnately 30 metric tons of cocaine a month to the United States. That amounted to more cocaine than that of all other cartels combined. An American official said, "There was just amazement that one organization would have the ability to distribute that much cocaine a month. The whole Juvenal thing really just illustrates why we have to get our act together in terms ." of reconciling these numbers112 Some American government officials believed that the Latin American cartels were not only stepping up shipments to the United States but they were increasing their exports to Europe or stockpiling large supplies of the drug. Anti-government rebels gained access to an increasing amount of the narcotics trade by the end of the century, thus allowing for the cultivation and movement of cirugs113. The arms-for-drugs operation also thrived in Costa Rica. When the Southern Front against the Sandinista government was established in 1983, Costa Rica was ill equipped to deal with the

threat posed by the Colombian drug cartels. Costa Rica had no military and its law enforcement remained limited. Its radar system was so poor that contra planes could fly in and out undetected. The government of Costa Rica only employed civil guards who were underpaid and easily purchaseable114. By 1985 Associated Press was running stories that stated that the CIA and contras were involved in drug trafficking. Two years later in 1987, CIA chief for Central America, Alan Hers, testified that numerous people were involved in drug trafficking. hers was largely responsible for cutting off CIA aid to Eden Pastora in 1984 when it appeared impossible that he would fall in with the rest of the contras hers testified before a Congressional committee in 1991 that other higher up military and White House personnel were well aware of drug trafficking by the Contras. hers testified: "With respect to (drug trafficking) by the Resistance Forces It is not a couple of people. It is a lot of peoplel 15." George Bush always claimed that he knew nothing of the CIA involvement in drug trafficking. In 1988 Bush's top drug aide, Admiral Daniel Murphy, stated that he never saw any intelligence reports that associated Noriega with the drug trade. lie said that Noriega was always upheld as a "model" in terms of cooperation with the United States in the war on drugs116. Iran-Contra became more than a George Bush affair. It became a Bush family affair. Bush's older brother, Prescott, was also linked to covert actions. lie appeared to have aided the Reagan administration's clandestine support of the Contras. In the 1980s he served on the advisory board of Amcricares, the United States-based relief organization with ties to prominent right-wing Republicans and the intelligence community. In 1985 and 1986 after Congress cut off American aid to the contras, Americares donated more than $100,000 worth of newsprint to the pro-Contra newspaper La Prensa in Managua. Amcricares supplied $291,383 in food and medicine and S5,750 in cash to Mario Calero, who was a New Orleans-based quartermaster and arms purchaser for the Contras, and to the brother of Contra leader Calero117. George Bush's second oldest son, Jeb, acted as a liaison to the anti-Castro riots and to clandestine schemes in support of the Contras. Soon after congressional prohibition of aid to the contras in late 1984, Jcb became linked to Leonel Martinez, a Miami-based right wing Cuban-American drug trafficker. Martinez, who was

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linked to the southern front's Contra leader Eden Pastora, was involved in efforts to smuggle more than 3,000 pounds of cocaine into Miami in 1985 and 1986. Ile was arrested in 1989 and later convicted for bringing 300 kilos of cocaine into the United States. Ile also reportedly arranged for the delivery of two helicopters, arms, ammunition, and clothing to Pastora's Costa Rica-based Contras119 . Federal prosecutors in Miami had a photograph of Jeb Bush and Martinez shaking hands but would not release the photo to the public. Martinez made a $2,200 contribution to the Dade County Republican Party four months after Jeb became the chair of Florida's GOP. It was also known that Martinez wrote $5,000 checks to then-Vice President Bush's Fund for America's Future in both December 1985 and July 1986 and made a $2,000 contribution to the Bush for President campaign in October 1987. Martinez's construction company gave $6,000 in October 1986 to Bob Martinez, the GOP candidate for governor in Florida. Before that time, he was governor from 1987 to 1991119. The war on drugs may have been successful had the United States government made an effort to get Asian and Latin American countries to be equally tough on drug traffickers as it was on the peasants and workers in their countries. American policy was less concerned with fighting a war against drugs than it was in using drug traffickers. For the CIA to target international drug networks, it would have to dismantle prime sources of intelligence, political leverage, and indirect financing for its Third World operations. During Reagan's presidency, a one-third out of federal law enforcement funds for fighting organized crime was made available. DEA funds were reduced by 12 percent, resulting in the dismissal of 434 DEA employees120. Drug trafficking resumed in Nicaragua under the Chamorro regime after the defeat of the Sandinistas in 1990- Colombian drug dealers established connections with various government officials, the most notorious being Roger Ramirez, a Nicaraguan policeman turned arms dealer. After leaving the police in 1993, Ramirez opened a law practice and successfully defended several drug trafficking suspects121 . Ramirez was arrested and charged with possession of narcotics and illegal weapons in October 1999 after authorities saw suspicious Guatemalans and Colombians visiting the ranch


belonging to his father Officers discovered the illegal arms, including rocket launchers, at the ranch, and then they searched the home of his former wife and found 275 pounds of cocaine. Ramirez testified that he decided to sell the weapons to the Colombian self-defence forces because "their current struggle is similar to that of other military forces in the past decade that struggled against a dictatorial government." According to court documents, Ramirez told the judge, "I sold them for a nominal price to the commanders of Colombia's self-defence forces, and I had planned to join their struggle." Ramirez testified that he had obtained the weapons in 1990, during the transition from the Sandinistas government to the Chamorro regime when he was the Sandinistas Interior Ministry delegate in the eastern port city of Bluefields where drug trafficking flourished after the defeat of the FS 1.N122 After George Bush succeeded William Colby as the head of the CIA under President ford, Bush appointed Shackley to be his "Chief of Covert Operations Worldwide." As the Vietnam War was ending, Shackley left Southeast Asia in 1972 to head CIA activities in the Western Hemisphere. One of Shackley's first assignments was to send Ed Wilson and Manuel Artime to meet ‘‘,9 t h right-wing dictator Anastasio Somoza of Nicaragua. however, Somoza's totalitarian regime lasted only another seven years before being overthrown by the Sandimstas123 In the 1980s, 150 tons of cocaine a year was flowing through Latin America. That generated a business of $29 billion a year and was 12 to 13 times more than America's largest corporations Prior to the creation of the Contra drug pipeline, the first to profit from drug trafficking were Bolivia's "cocaine coup" government of 1980-82. They were followed by the Medellin cartel, the Panamanian government, the Ilonduran military and Miami-based anti-Castro Cubans124 . Two months after Reagan's inauguration in 1981 the CIA launched its secret war in an attempt to overthrow the Sandinista government Soon thereafter, the arms-drug caper began. The drug of choice in the 1960s and 1970s was heroin — imported from Southeast Asia. Then in the 1980s, the primary addictive drug became cocaine, and its source was Latin America, the new hub of CIA activities125. In December 1981 Vice President Bush met with the National

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Security Planning Group in the White house. They discussed and approved $19 million expenditure to Argentina for the creation of a 500-man anti-Sandinista Contra force. In April 1982, Bush met with Australian Labour leader Hayden to discuss the ClA's involvement with the Nugan Hand Bank in Australia. Nugan hand was a money-laundering machine for the Southeast Asia heroin operation that began during the Vietnam War. Defence Department spokesman Richard Armitage acted as bagman, 126 carrying cash from Bangkok, Thailand, to Australia The first publicly known case of contra cocaine shipments appeared in government files in an October 22, 1982 cable from the CIA's Directorate of Operations. The cable passed on word that American law enforcement agencies were aware of "links between (a United States religious organization) and two Nicaraguan counter-revolutionary groups (which) involve an exchange in (the United States) of narcotics for arms." The material in parentheses was inserted by the CIA as part of its declassification of the cable. The name of the religious group remained secret127. Over the next several years of the Reagan administration, the CIA learned of other suspected links between the Contras and drug trafficking. Ironically, "the war on drugs" became an important part of Reagan's domestic .genda. While the United States sent military aid southward to its surrogates fighting the Sandinista government, the rate of cocaine transported northward into the States quickly escalated. The CIA was involved in a variety of ways — by air, land, and sea — in bringing cocaine into the United States126. CIA operative Gunther Russbacher, who was highly opposed to drug capers, stated that he was at high-level meetings, which involved drug dealers in Colombia. Russbacher stated that drug kingpins divided their territory into two large groups, the Cali and Medellin cartels. Operation Snow Cone was the CIA's primary trafficking operation in Latin America. Under this umbrella, Operation Watch Tower was formed. This consisted of low frequency radio beacons, which allowed aircraft, loaded with cocaine, to navigate undetected at low altitudes between Colombia and Panama. The CIA used both Boeing 727s and C130s which were flown by CIA or commercial pilots. According to Russbacher, two captains from United Airlines and one Pan

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American pilot supplemented their base salaries by flying drugs into the United States129. In 1984, CIA Inspector General Richard !Litz reported that the CIA even intervened with the Justice Department to block a criminal investigation into a suspected Contra role in a San Francisco-based drug ring. In December 1985, Robert Parry and Brian Barger wrote the first news article disclosing that virtually every Nicaraguan contra group had links to drug trafficking. In that Associated Press dispatch they noted that the CIA knew of at least one case of cocaine profits filtering into the Contra war effort, but that DEA officials in Washington claimed they had never been told of any Contra tie-in. After the AP story was released, the Reagan administration attacked it as unfounded and the rest of the Washington press corps largely ignored the article. however, it did help spark an investigation by Kerry. Years later in 1995 the Clinton administration quietly rescinded Casey's narcotics exemptionl 30. In Pakistan and Afghanistan, as in Indochina and Central America, the White I louse and the CIA chose to look the other way while their allies engaged in massive drug deals for arms. Ralph Blumenthal, a New York Times reporter, made the same point in his book on the infamous "Pizza Connection" heroin ring. The missing link in all such studies is the role of certain forces that have survived even the strongest antinarcoticcs operations and crackdowns by the U.S. Government inside and outside America. There arc a number of books written in the USA during the last few years that uncover the role of CIA and the White House in drug trafficking, but none of these unveil the forces who were (and still are) the real beneficiaries of the colossal money that was and is being generated through these covert operations the world over. During the Afghan resistance to Soviet forces large-scale consignments of arms were sent to Pakistan to be delivered to rebels through the network of IS1. The arms factories in Tel Aviv were working twenty-four hours to supply replica Kalshnikovs to the Mujahideen (the holy warriors). The real beneficiary was thus the State of Israel, which is considered as the most wanton enemy of Islam. In Iran Contra scandal as well, it was uncovered that Iran, a bitter enemy of Israel, was buying its weapons to annihilate another Muslim State, Iraq. This is the inside story of narco-terrorism. The


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Muslim States made victims of their own shortsightedness, indirectly became instrumental in strengthening the Jewish State. Israel earned enormous profits by selling arms to Muslim rebels in Afghanistan and the money was paid either through drug trade or financed by Saudi Arabian Government. The beneficiaries of the drug sales were also drug cartels, controlled by the Jews, in New York. The real profit of heroin from Pak-Afghan labs went to them when under their control it was sold in value added form in the streets of New York. They benefited in two ways; one, real profits of heroin proceeds accrued to them in retail sale and two, out of the meager share that went to the local drug dealers in Afghanistan and Pakistan, Israel snatched the major chunk of the money by selling arms to resistance forces in Afghanistan at highly inflated prices. A high-ranking official of Israel's Foreign Ministry revealed that during the CIA involvement in Afghanistan, lsraeli consented to the sale of arms to be used against the Government Soviet forces131. The Israeli government did the same in Colombia as early as February 1989 when according to the prestigious the Colombian authorities had officially Hebrew daily !Marelz complained about the activities of one Klein who became the centre of a scandal involving a large shipment of Israeli arms to . had ordered the arms on the Medellin cartel. Ile admitted that he behalf of a CIA-backed Panamanian group. Although on the complaint of the Government of Colombia, the Israeli Government followed by sending a Mossad agent and foreign ministry official to discuss the situation, for months it took no action against Klein, who, like other Israelis working in the security field depended on , the licences from the Defence Ministry to stay in business132. Only after Colombia suspended an immigration treaty with Jerusalem did an Israeli court finally charge Klein with illegally supplying arms to a Colombian organization. But the Colombian investigators continued to complain that Israeli authorities were providing no real help in tracing arms shipments. Israelis served a similar function for drug-linked armsreported sales in Iladashot

Afghanistan as they did in Peru and Bolivia. that elements linked to the drug dealers in Afghanistan spent approximately U.S. 819 million on arms from Israeli weapon dealers in 1980 after the invasion of Soviet troops in Afghanistan. 133. The figure for Peru for such deals in 1987 was U.S. 89 million


Reliable reports were published in a number of reputed journals of the world that Israeli military experts joined other foreign mercenaries during this period in giving advice and weapons to teach the Russians a lesson. however, the underlying motive was money they made out of these activities134. Israel's true role in selling arms to the drug traders was never made public for a long time. Both Congress and the Reagan and Bush administrations suppressed the facts especially as they pertained to the Contras. Rafael Eitan, former Chief of Staff of the Israeli army, hardly softened the blow of these revelations when he told the Jerusalem Post, "Some day, perhaps, if it is decided that the stories can be told, you will see that the State has been involved in acts which are a thousand times more dirty as long as the government decides to do somethint.;, something that the national interest demanded, then it is legitimate135." Senior U.S. sources in both branches of government told the London Sunday Telegraph that: "Hundreds of documents revealing Israeli work on behalf of the Contras was so sensitive that they were not declassified, they were not even shown to members of the Congressional committees which investigated the Iran-Contra scandal in 1987, it is said. The documents contained information about Israeli mercenaries who, with the knowledge of the Israeli and the U.S. governments, flew weapons and ammunition to Honduran capital, at a time when Congress had banned military aid, the arms were then distributed to Contra bases on the Nicaraguan border136." One Congressional source who saw the documents called them "crucial to understand the whole scandal" and added, "The American public never knew. It is a cover-up137." All this remains in mystery and intrigue as to what extent Israelis played a role in the Afghan war against the Soviet aggression. I however, there is no doubt as confirmed by James Mill in his masterpiece The Underground Empire: Where Crime and Governments Embrace that U.S. and Israel had multiple interests in such conflicts. These interests included expansion of arms markets, control over drug money and avoidance of scandals

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significant roles in America's Islamic Card Policy against the Soviet occupation of Afghanistan. Incontrovertible evidence is available

I's 5250 million a journalist (that's me) that ljazu1 were peanuts compared to what he owned. Won elections riding the Nawaz Sharifs bandwagon, spending millions of dollars that drained every hard earned rupee out of the poor Aitizaz Ahsan this opponent candidate, a leader of Pakistan People's Party. Never been able to explain his millions and never been touched by any government to account for his riches. The owner of Pepsi Cola franchise which works well to provide cover

in Pakistan in the shape of sons of two powerful generals who were involved in the entire game, whose worth is in billions and

for his financial inheritance. Always quick to dump his political boss for a new and promising onel 38 ."

by minimizing direct involvement. Dependable sources reveal that Mossad, like most successful intelligence agencies, played its role very cautiously in Afghanistan as elsewhere. The mighty warlords, drug barons and ISI people were not be seen as puppets but rather as important actors in a larger milieu of mercenaries, drug smugglers, arms salesmen and intelligence agents who played

who are still playing a vital role in Pakistani politics as representatives of the armed forces. In the recent break-up of Pakistan Muslim League, headed by the deposed and exiled Prime Minister, Nawaz Sharif, Mr.Ejazul I laq, son of General Ziaul Haq and Mr.I lumanyun Akhtar Abdur Rehman, son of General Akhtar Abdur Rehman played a decisive role on behest of the army clique. It also confirms beyond any doubt that Pakistan is a perpetual victim of narco-terrorism. The money made by generals involved in the Afghan war is still a weapon in the hands of their sons who are continuously in war against the democratic forces as were their fathers. A prominent journalist of Pakistan, Shaheen Sehbai, made the following observations about them: "Ejazul Haq: A petty bank& and apolitical son of a military dictator who turned every stone to prolong his rule at the cost of demolishing all national institutions, parliament, judiciary and the executive; inherited millions and millions of dollars left over by his crusading father who milked the Americans and the West to the last drop during the Afghan resistance against the Soviet Union. Was pushed and promoted by 'intelligence' agencies of yesteryears to join politics and support another of their creation, Nawaz Sharif. has never been asked a single question about the immense wealth that he throws around in politicking. Always defends the interests of the khakis, no matter who was the political boss, elected or nominated. The handsome scion of the ilumanyun Akhtar Khan: late general who handled most of the billions invested by the West in the Afghan war. Got the popular nickname I lumanyun Dollar Khan. Once claimed before

Pakistan became a victim of narco-terrorism in 1979. At that time heroin was virtually unknown in the country. The Afghan war changed all that. By 1984, the year, Vice President Bush graced Pakistan with an official visit, the border. area with Afghanistan supplied roughly 50% of the heroin consumed in the United States, and 70% of the world's high grade heroin; and there were 6,50,000 heroin addicts in Pakistan itself. Heroin was shipped out in the same Pakistan army trucks that brought in arms to the Afghan guerillas. The drugs-arms-nexus represented a worst form of narco-terrorism any State could bear. The U.S. policy of supporting Afghan resistance, with the help of Pakistan's Inter Services Intelligence (IS!) produced devastating effects in the aftermath of dismemberment of the USSR. It managed to achieve its main goal, but left Pakistan and Afghanistan in the doldrums. Former ISI Chief and a minister in President-General Pervez Musharrafs government, J axed Ashraf Qazi, in an exclusive interview with daily fang of 1st November 2001, defended the Pakistan's Afghan Policy of supporting the Afghan rebels and CIA's arms supplies and covert operations. People like Qazi have failed to realise how the Americans had used Pakistan and Afghanistan for their own long-term nefarious designs. A mafia, emerged during the Afghan resistance, persisted in drug smuggling for arms even after the withdrawal of the Russian forces from Afghanistan. The USA's main concern was to fight Soviet aggression but no one was in the mood to discuss ramifications even for the 11.S. itself. CIA allies in Afghanistan and Pakistan opened a much larger drug pipeline than in Central America. Reliable reports published in a number of reputed journals of the world stated that Israeli

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Pakistan: Drug trap to Debt trap 152

military experts joined Other foreign mercenaries during this period in giving advice and weapons against the Russians a lesson. *However, the underlying motive was the money that they were making out of these activities. The criminal culpability of the U.S. created a permanent source of irritation for Pakistan and Afghanistan in the form of drug barons who had been working under the garb of Islamic movements. In backing the Afghan resistance, Washington never openly admitted its blunder as to aiding these forces of darkness and merchants of death. There is nothing secret about why Washington chose not to confront these unsavory Afghan allies or their Pakistani patrons for flooding the world with heroin and arms. This state of affairs remains largely unchanged even today. Forces of terror are still thriving on narco-money and posing even a larger threat to the states in this region It further confirms the point that narcoterrorism is in fact a tool in the hands of certain forces that are bent upon imposing the New World Order. The 1 I th September 2001 events of New York and present campaign of the Bush Administration may be viewed in this perspective. The moment Taliban regime agreed to eradicate poppy cultivation in lieu of aid in millions of dollars (though the deal remained VICiOUS campaign inconclusive), certain forces in the USA started a against them. A real threat appeared in certain circles (underground mafia through which the U.S. empire operates) that shortage of supply of opium and heroin to major cities of USA would have disastrous impact on their business of arms-for-drugs. These proponents of arms industry practically pushed the USA government to war so that their enormous profits from sale of arms remain undisturbed. The Carlyle Group, in which the Bush family has substantial interests with two-thirds of its holding in defence and telecommunication industries, was actually behind this campaign. This group started making arms deals worth billions of dollars even before commencement of military action against Afghanistan and Iraq. Pakistan represents a State that has been rendered derelict by its benefactors. Repeatedly the rulers of Pakistan committed the same mistake of "appeasing" the Americans at the cost of national interests. A most disturbing aspect was collaboration of all the four successive military regimes of Ayub, Yahya, Zia and Musharraf with the U.S. in its Great Design of first, dismemberment

of the once super power Soviet Union and next containment of China. Pakistan has paid a heavy price for this collaboration as democracy failed to gain roots due to unjustifiable U.S. backing of military regimes. It is shameful that the world's only super power propagates passionately about its role as champion of democracy, protector of human rights and peace-maker, whereas in practice it has been supporting anti-people and anti-peace forces not only in Pakistan but elsewhere in the world. The U.S. in reality has been playing a destructive role by supporting forces of obscurantism and terrorism that have deliberately been nurtured, protected and promoted through covert CIA operations. Even after joining the Bush Camp in the aftermath of 9/11, Pakistan today is no more the American darling state of Zia's era as U.S. security and economic perception has undergone a radical change. The Americans are now openly preferring India over Pakistan and lending it strategic support in the hope that it will play an effective role in containing China, both economically and militarily. Pakistan does not fit in this scheme of things being a close friend of China. A sinister design is in the offing where a confederation of India, Pakistan, Afghanistan and Central Asian States appears to be forced by the Americans to create a formidable challenge for China. This federation is envisaged to be economically much larger than China; giving the U.S. an enormous consumer market and militarily, a strong entity challenging China's war capabilities. The first step of the Americans towards this goal would be forcing Pakistan to forge "friendly ties" with India and "resolving" the Kashmir issue. Both India and Pakistan possess nuclear weapons, but the Americans are putting pressure only on Pakistan to surrender its nuclear capability by dubbing it as a fundamentalist state guilty of cross-border terrorism. In fact, the forces of obscurantism in Pakistan are being promoted and supported by the USA clandestinely so that Pakistan remains an unstable state vulnerable to its pressure for achieving that hidden agenda. India was never criticized for pursuing hard-line proHindu policies at the State level accompanied with mass-scale genocide of Muslims and other minorities whereas Pakistan was never once spared even on minor issues. The Americans never bothered about restoration of democracy during Zia's 11-year long rule, but during 1999 to 2003

-91 Part-I, Ch. 4 - Narcoterrorism Pakistan: Drug trap to Debt trap 154

they have altered their strategy for Pakistan, pushing Pervez Musharraf to hold elections, asking for capping the nuclear programme and surrendering of first-strike control, settlement of disputes with India 'interestingly the recent map of India released by CIA shows Indian-occupied Kashmir as part of Bharat' and economic enslavement at the hands of IMF and World Bank. The main purpose behind all these demands appears to be to ensure that Pakistan ceases to be a threat for Israel and should become part of the grand alliance for establishment of the New World Order. The rulers in Pakistan are toeing the policies of IMF and World Bank to please the U.S. in the hope of getting the status of a favoured nation without giving a damn that in the process they are making the life of their own people miserable. The U.S. has not only crippled Pakistan through narcoterrorism but also forced it into debt enslavement at the hands of international donor agencies. In the 1980s the strategy was drug-trap and the 1990s it-death was debt-trap. In the 2000s it appears to be terrorism-cum trap i.e. complete surrender of the State's sovereignty and nuclear capability by using forces of obscurantism in the Muslim World. Pakistan, unfortunately caught in the drug and debt traps is now heading towards the third one, which is perhaps the deadliest of all three, the death trap. The more the rulers support USA and its allies, the greater the chances will be for forces of obscurantism to capture State apparatus. This is the core of U.S. strategy in this part of the world: to use Islamic militants for threatening forces of peace and democracy and at the same time to use them for future combat operations, if required, against China, Iran or any other state that refuses to adhere to its policies. In this process the main purpose to blunt the nuclear power of Pakistan will be achieved using the religio-militant groups as excuse that nuclear weapons in their hands are a serious threat to humanity at large. Like the Islamic Card Policy of the 80s, which helped the U.S. to dismantle the hostile Marxist USSR Empire, the new Afghan-lraq War Game is aimed at the containment of economically and militarily strong China and neutralization of "Islamic bomb" state of Pakistan. Pakistan, unfortunately a potential victim of this deadly U.S. trap, is now struggling for survival, threatened from both sides, by India and any-time-hostile government in Afghanistan. One thing is very


clear that the wars against Afghanistan139 and Iraq140141 achieved everything for USA and its allies (narco-arm mafias and big corporations) but nothing for Pakistan and the Muslim World except destruction, further dependence on the U.S. and another long and painful dark era for the Muslim community around the world.

Chapter Notes 1

The term 'narco-terrorism' is as yet not clearly understood. Terrorism, funded by drug money is a simplistic version of the problem. The full impact and effect of the menace relates to the total stranglehold that is established to make a State subservient to certain political agenda e.g. New World Order. The society wherein a parallel form of administration is set up to govern and where society and the state itself are held to ransom. Narcoterrorism has become the foundation of organized crime. No other commodity can generate the kind of money, which can literally challenge the might of state power. The tactics used by the drug smugglers to bend the state machinery to their will is simple. All kinds of illegal activity from distribution of territory to pickpockets to extortion, flesh trade; bootlegging is effectively controlled by the narco-traders. Metropolises the world over are exposed to this phenomenon. Thus today's underworld is an underworld of narcotics. The law and order machinery, the political parties and the bureaucracy are successfully infiltrated or subjugated by the awesome power of the sheer volume of money involved. The industrialists often work as partners, along with the bankers, as the money generated must find legitimate expression. Real estate, foreign exchange rackets, import-export transactions, films, stock markets, all forms of trading where the money involved is large are the secondary operations of the Narco-terrorists. Money laundering is an essential part of the narcotics trade, which is often ignored by the enforcement agencies. Professor Peter A. Lupsha in his book Towards an Etiology of Drug Trafficking and Insurgent Relations: The Phenomenon of Narco-Terrorism suggests that currently it is a badly defined and politically contaminated term. A number of other authors have also strongly objected on its use because they consider it elusive. See also Drug Addiction: National and World Perspective and Drugs in South Asia: From Opium Trade to Present Day by M. Emdad-ul Haq, Professor of Political Science, University of Chittagong, Bangladesh. He did a PhD in 'The Politics of Narcotic Drugs in South Asia' from La Trobe University, Australia in 1998. His research interests include narcotics policies of Bangladesh, India and Pakistan. 2 Zbigniew Brzezinski, Power and Principle (New York: Farrar, Straus & Giroux, 1983), 427. 3 The role of opium in financing the Afghan resistance was first time reported in details by the Canadian journal Macleans, April 30, 1979. Feudal landlords whose buildings were threatened with confiscation by the Taraki government started bringing the produce from their poppy fields into Pakistan; the proceeds were used to buy. rifles, explosives and other weapons. The arms dealers in Darra Adam Khel, a big arms manufacturing and selling market in Pakistan, reported that new customers started coming on daily basis and their business were booming.

Part-I, Ch. 4 - Narcoterrorism Pakistan: Drug trap to Debt trap 156


27 Ibid. 28 Ibid.

H. Lowinson and David F. Musto, New York Times, May 22 1980. 4

August 1980. 5 Philadelphia Magazine, 6 General Hameed Gul, former head of ISI, in an interview with leading Urdu published in its weekly magazine (14-20 January 2001) admitted Jang, daily that the Afghan Mujahedeen failed to capture Kabul after the exit of Russian troops due to reduced supply of arms by CIA. He revealed that CIA was supplying between 4000 to 6000 tons of armament at the peak of war, which was later on reduced to only 100 tons. He also made a number of startling revelations about the CIA-ISI connections during the Afghan war against the soviet occupation and how some generals. including Gen. Ziaul Haq and Gen. Hamuyyun Akhtar Khan. made huge fortune by selling the arms meant for the Mujahedeen to some Muslim States. (Lahore, Pakistan: Annoor Pakistan: From Hash To Heroin, 7 See details in Publishers, 1991) 8 David F. Musto. statement at May 12 1990 conference at University of Wisconsin. Unholy Wars: Afghanistan, America and International 9 John K. Cooley, (London. Pluto Press, 1999). Terrorism, Octopus (New York: WW Notion, 1990). The 10 Claire Sterling, Wars (California: Cohen & Cohen Publishers, 11 Jonathan Marshall, Drug 1991), 47-48. Drug Control: U.S. supported efforts in Burma, Pakistan and Thailand. 12 GAO, FebruarY 1988. (v-I, 1986, International Narcotics Control Strategy Report, 13 State Department, 232-233). December 16, 1983. 14 San Francisco Chronicle, International Narcotics Control Study Missions, 15 HSCNAC, Report, (Washington: USGPO, 1980). 161. (California Cohen & Cohen Publishers, 16 Jonathan Marshall, Drug Wars 1991), 50. 17 Ibid.

Far Eastern Economic Monitor. December 28, 1988; Science March 26, 1990; Newsline, Christian 18 Washington Times. September 14, 1989; Review, Karachi, December 1989; Barnett Ruben. testimony before The Commission on Security and Cooperation in Europe. May 3, 1990. May 13, 1990. 19 Washington Post. (California: Cohen & Cohen Publishers, 20 Jonathan Marshall. Drug Wars 1991). 51 21 Ibid.

April 30, 1989. November 14, 1988; London Observer, 22 Nation, (California: Cohen & Cohen Publishers, 23 Jonathan Marshall, Drug Wars 1991), 52. (Basic Books. Harper Collins Publishers, Narcoterrorism, 24 Rachel Ehrenfeld. USA. 1990). 25 Ibid. Unholy Wars: Afghanistan, America and International 26 John K. Cooley, (London, Pluto Press, 1999). Terrorism,

2 39 lbid. 0 John Davis, Mafia Kingfish, (McGraw-Hill, New York, 1989. 31 Ibid. 32 Ibid. 334 Ibid 3 Ibid. 35 lbid. 36 John K. Cooley, Unholy Wars: Afghanistan, America and International Terrorism. (London, Pluto Press, 1999). 37 Ibid. 38 John Davis, Mafia Kingfish, (McGraw-Hill, New York, 1989). 39 Richard Armitage is presently U.S. Deputy Secretary of State and is on a conciliatory mission in Indo-Pakistan which is aimed at forcing an alliance against China. 40 Rachel Ehrenfeld, Narcoterrorism, (Basic Books Harper Collins Publishers, USA, 19901. 41 John Davis, Mafia Kingfish, (McGraw-Hill, New York, 1989). 42 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991). 43 Ibid. 44 Ibid. 45 Ibid. 46 John K. Cooley. Unholy Wars: Afghanistan, America and International Terrorism, (London. Pluto Press, 1999). 47 Ibid. 48 Ibid. 49 Ibid. 50 Ibid. 51 Ibid. 52 Senate Committee on Foreign Relations, Subcommittee on Terrorism, Narcotics and International Operations, Report on Drugs, Law Enforcement and Foreign Policy (commonly known as Kerry Report), (Washington DC: U.S. Government Printing Office. 1989). 53 The University of California Press published the book in 1991. 54 Rachel Ehrenfeld. Narcoterrorism. (Basic Books, Harper Collins Publishers, USA. 1990). 55 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991). 56 57 58 Ibid. 59 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America. (University of California Press, 1991).

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Pakistan: Drug trap to Debt trap


(Basic Books. Harper Collins Publishers,

60 Rachel Ehrenfeld, Narcoterrorism, USA, 1990). Cocaine Politics: Drugs, Armies and 61 Peter Dale Scott & Jonathan Marshall. (University of California Press, 1991). the CIA in Central America,

62 Ibid. (Basic Books, Harper Collins Publishers, 63 Rachel Ehrenfeld, Narcoterrorism, USA, 1990). Cocaine Politics: Drugs, Armies and 64 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America,

65 Ibid.

the C/A in Central America. (University of California Press, 1991)

d biili ci 7 9 lillbb 868 888 dddd bbi bliid 213 Iiiib 9 990

94 95 House Foreign Affairs Committee hearing, Narcotics Review in Central America (Washington DC; U.S. Government Printing Office, 1988).

August 5, 1988. 66 Central American Report, Cocaine Politics: Drugs, Armies and 67 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991).

96 Ibid. 97 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991.

68 Ibid. -Honduras Drug 69 Central American Report. August 5, 1988; Robert Collier, May 20, 1988; Los Angeles Traffic Quarterly Outlook': Pacific News Service, New York Times, April 15 1988. Times. February 13, 1988,

98 Ibid. 99 Ibid. 1 Ibid. Ho u 100 se Foreign Affairs Committee hearing, Narcotics Review in Central 101 America (Washington DC; U.S. Government Printing Office, 1988).

70 Ibid . (Basic Books, Harper Collins Publishers, 71 Rachel Ehrenfeld. Narcoterrorism, USA, 19901.

102 Rachel Ehrenfeld, Narcoterrorism. (Basic Books, Harper Collins Publishers, USA, 1990).

the CIA in Central America,

72 Ibid. Cocaine Politics: Drugs, Armies and 73 Peter Dale Scott & Jonathan Marshall, of California Press, 1991). the CIA in Central America, (University (Basic Books, Harper Collins Publishers, 74 Rachel Ehrenfeld, Narcoterrorism, USA, 1990). 74 !bid Cocaine Politics: Drugs, Armies and 75 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America,

"Honduras Drug

76 Central American Report, August 5, 1988; Robert Collier, May 20, 1988; Los Angeles Traffic Quarterly Outlook"; Pacific News Service, April 15 1988. New York Times. Times, February 13, 1988; 77 Ibid. (Basic Books, Harper Collins Publishers, 78 Rachel Ehrenfeld, Narcoterrorism, USA. 1990). -Honduras Drug 79 Central American Report, August 5, 1988; Robert Collier, May 20, 1988; Los Angeles Traffic Quarterly Outlook': Pacific News Service, New York Times. April 15 1988. Times, February 13. 1988

Cocaine Politics: Drugs, Armies and

80 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America.

'Honduras Drug

81 Central American Report, August 5, 1988; Robert Collier, Service, May 20, 1988; Los Angeles Traffic Quarterly Outlook"; Pacific News New York Times, April 15 1988. Times, February 13, 1988; 82 Ibid. 83 Ibid. (Basic Books, Harper Collins Publishers, 84 Rachel Ehrenfeld, Narcoterrorism. USA, 1990). Cocaine Politics: Drugs, Armies and 85 Peter Dale Scott & Jonathan Marshall,

Ibid. u 103 104 Ho House Foreign Affairs Committee hearing, Narcotics Review in Central America (Washington DC: U.S. Government Printing Office, 1988) 105 Rachel Ehrenfeld, Narcoterrorism, (Basic Books, Harper Collins Publishers, USA, 1990). 106 Ibid. 107 Ibid. 108 Ibid. 109 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991). 110 Central American Report, August 5, 1988; Robert Collier, 'Honduras Drug Traffic Quarterly Outlook"; Pacific News Service, May 20, 1988; Los Angeles Times. February 13, 1988; New York Times. April 15 1988. 111 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991) 112 Ibid. 113 Ibid. 114 Ibid. 115 Ibid. 116 John Davis, Mafia Kingfish • (McGraw-Hill, New York, 1989). 117 Ibid. 118 Ibid. 119 Ibid. 120 Ibid. 121 Peter Dale Scott & Jonathan Marshall, Cocaine Politics: Drugs, Armies and the CIA in Central America, (University of California Press, 1991). (Basic Books, Harper Collins Publishers, 122 Rachel Ehrenfeld, Narcoterrorism,

Pakistan: Drug trap to Debt trap

160 USA, 1990).

(McGraw-Hill, New York, 1989). 123 John Davis, Mafia Kingfish, Cocaine Politics: Drugs, Armies and 124 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America, (McGraw-Hill, New York, 1989). 125 John Davis, Mafia Kingfish, 126 Ibid. Cocaine Politics: Drugs, Armies and 127 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America, (McGraw-Hill, New York, 1989). 128 John Davis, Mafia Kingfish, 129 Ibid. Cocaine Politics: Drugs, Armies and 130 Peter Dale Scott & Jonathan Marshall, (University of California Press, 1991). the CIA in Central America, 131 Israeli Foreign Affairs, October 1990. 132 Israeli Foreign Affairs, October 1989. September 3, 1989. 133 Hadashot, Los Angeles Times, August 6, 1980; Stern, June 7, 1984; New York Times, December 12, 1982. The political 134 August 31, 1980; Washington Post, New York Times, December 5, scientist, Amos Permutter, in his article in 1986, revealed that Israeli officials conceived of turning Argentina into a south Atlantic power in the aftermath of Falklands War by selling it weapons


worth billions of U.S. dollars. Telegraph (London, May 13, 1990.

136 Sunday Telegraph,

March 5, 1989.

137 Ibid. November 25, 2000, by Shaheen Sehbai in daily DAWN, 138 A// the King's Men, page 3. 139 "President Bush appointed a former aide to the American oil company Unocal, Afghan-born Zalmay Khalilzad, as special envoy to Afghanistan. The nomination was announced December 31. nine days after the U.S.-backed interim government of Hamid Karzai took office in Kabul. "The nomination underscores the real economic and financial interests at stake in the U.S. military intervention in Central Asia. Khalilzad is intimately involved in the long-running U.S. efforts to obtain direct access to the oil and gas resources of the region, largely unexploited but believed to be the second largest in the world after the Persian Gulf. As an advisor for Unocal, Khalilzad drew up a risk analysis of a proposed gas pipeline from the former Soviet republic of Turkmenistan across Afghanistan and Pakistan to the Indian Ocean. He participated in talks between the Oil Company and Taliban officials in 1997, which were aimed at implementing a 1995 agreement to build the pipeline across western Afghanistan. Unocal was the lead company in the formation of the Centgas consortium, whose purpose was to bring to market natural gas from the Dauletabad Field in southeastern Turkmenistan, one of the world's largest. The $2 billion project an involved a 48-inch diameter pipeline from the Afghanistan-Turkmenist border, passing near the cities of Herat and Kandahar, crossing into Pakistan near Quetta and linking with existing pipelines at Multan. An additional $600 million extension to India was also under consideration. Khalilzad also lobbied publicly for a more sympathetic U.S. government policy towards the Taliban. Four years ago, in an op-ed article in the

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Washington Post, he defended the Taliban regime against accusations that it was a sponsor of terrorism, writing, "The Taliban does not practice the antiU.S. style of fundamentalism practiced by Iran." "We should.., be willing to offer recognition and humanitarian assistance and to promote international economic reconstruction," he declared. "It is time for the United States to reengage' the Afghan regime. This "reengagement" would, of course, have been enormously profitable to Unocal, which was otherwise unable to bring gas and oil to market from landlocked Turkmenistan. "Khalilzad only shifted his position on the Taliban after the Clinton administration fired cruise missiles at targets in Afghanistan in August 1998, claiming that terrorists under the direction of Afghan-based Osama bin Laden were responsible for bombing U.S. embassies in Kenya and Tanzania. One day after the attack, Unocal put Centgas on hold. Two months later it abandoned all plans for a trans-Afghan pipeline. The oil interests began to look towards a post-Taliban Afghanistan, and so did their representatives in the U.S. national security establishment. Born in Mazar-eSharif in 1951, Khalilzad hails from the old ruling elite of Afghanistan. His father was an aide to King Zahir Shah, who ruled the country until 1973. Khalilzad was a graduate student at the University'of Chicago, an intellectual center for the American right-wing, when the Soviet Union invaded Afghanistan in 1979. Khalilzad became an American citizen, while serving as a key link between U.S. imperialism and the Islamic fundamentalist mujahedin fighting the Soviet-backed regime in Kabul -- the milieu out of which both the Taliban and bin Laden's Al Qaeda group arose. He was a special advisor to the State Department during the Reagan administration, lobbying successfully for accelerated U.S. military aid to the mujahedin, including hand-held Stinger anti-aircraft missiles which played a key role in the war. He later became undersecretary of defense in the administration of Bush's father, during the U.S. war against Iraq, then went to the Rand Corporation, a top U.S. military think tank. After Bush was installed as president by a 5-4 vote of the U.S. Supreme Court, Khalilzad headed the Bush-Cheney transition team for the Defense Department and advised incoming Defense Secretary Donald Rumsfeld. Significantly, however, he was not named to a subcabinet position, which would have required Senate confirmation and might have provoked uncomfortable questions about his role as an oil company advisor in Central Asia and intermediary with the Taliban. Instead, he was named to the National Security Council, where no confirmation vote was needed. At the NSC Khalilzad reports to Condoleeza Rice, the national security advisor, who also served as an oil company consultant on Central Asia. After serving in the first Bush administration from 1989 to 1992, Rice was placed on the board of directors of Chevron Corporation and served as its principal expert on Kazakhstan, where Chevron holds the largest concession of any of the international oil companies. The oil industry connections of Bush and Cheney are well known, but little has been said in the media about the prominent role being played in Afghan policy by officials who advised the oil industry on Central Asia. "One of the few commentaries in the America media about this aspect of the U.S. military campaign appeared in the San Francisco Chronicle last September 26. Staff writer Frank Viviano observed: 'The hidden stakes in the war against terrorism can be summed up in a single word: oil. The map of terrorist sanctuaries and targets in the Middle East and Central Asia is

Part-I, Ch. 4 - Narcoterrorism Pakistan: Drug trap to Debt trap 162 also. to an extraordinary degree. a map of the world's principal energy sources in the 21st century... It is inevitable that the war against terrorism will be seen by many as a war on behalf of America's Chevron, Exxon. and Arco France's TotalFinaElt British Petroleum; Royal Dutch Shell and other multinational giants, which have hundreds of billions of dollars of investment in the region." This reality is well understood in official Washington, but the most important corporate-controlled media outlets the television networks and major national daily newspapers -- have maintained silence that amounts to deliberate, politically motivated selfcensorship. The sole recent exception is an article which appeared 15 in the the WarDecember Shifts Alliances, Oil business section, headlined. "As New York TimesThe Times reported. "The State Department is exploring the Deals Follow." potential for post-Tafiban energy projects in the region, which has more than 6 percent of the world's proven oil reserves and almost 40 percent of its gas noted that during a visit in early December to Times reserves." The Kazakhstan. -Secretary of State Cohn L. Powell said he was particularly impressed' with the money that American oil companies were investing there He estimated that $200 billion could flow into Kazakhstan during the next 5 to 10 years." Secretary of Energy Spencer Abraham also pushed U.S. oil investments in the region during a November visit to Russia, on which he was accompanied by David J O'Reilly, chairman of ChevronTexaco. Defense Secretary Rumsfeld has also played a role in the ongoing oil pipeline maneuvers. During a December 14 visit to Baku, capital of Azerbaijan, he assured officials of the oil-rich Caspian state that the administration would lift sanctions imposed in 1992 in the wake of the conflict with Armenia over the enclave of Nagorno-Karabakh. Both Azerbaijan and Armenia have aligned themselves with the U.S. military thrust into Central Asia, offering the Pentagon transit rights and use of airfields. Rumsfeld's visit and his conciliatory remarks were the reward. -e administration had reached Rumsfeld told President Haydar Allyev that th agreement with congressional leaders to waive the sanctions. On November 28 the White House released a statement hailing the official opening of the first new pipeline by the Caspian Pipeline Consortium, a joint venture of Russia. Kazakhstan. Oman, ChevronTexaco, ExxonMobil and several other oil companies. The pipeline connects the huge Tengiz oilfield in northwestern Kazakhstan to the Russian Black Sea port of Novorossiysr. where tankers are loaded for the world market. U.S. companies put up $1 billion of the $2.65 billion construction cost. The Bush statement declared. The CPC project also advances my Administration's National Energy Policy by developing a network of multiple Caspian pipelines that also includes the Baku-Tbiiisi-Ceyhan. Baku-Supsa, and Baku-Novorossiysk oil pipelines and the Baku-Tbilisi-Erzurum gas pipeline" There was little U S. press coverage of this announcement. Nor did the media refer to the fact that the pipeline consortium involved in the Baku-Ceyhari plan. led by the British oil company BP. is represented by the law firm of Baker & Botts. The principal attorney at this firm is James Baker III, secretary of state under Bush's father and chief spokesman for the 2000 Bush campaign during its successful effort to shut down the Florida vote recount"----CorpWarch, San Francisco, CA 94129 USA, -L2M'' thmg, Email: cor watcr URL:_21/_w-c htt: ww iatc 140 Dr. Mubashir Hasan, a redical thinker of Pakistan, who was Finance Minister during the Zulfikar Ali Bhutto's government and presently heads Pakistan The People's Party (Shaheed Bhutto faction) Punjab, in an interview with published on 11th May. 2003, anlyses the situation as under News,


"American invasion of Iraq and support by the West European Resolution 441 need to be seen as the necessity of their economic system led by the corporate world of business and finance. Before Bush took over as president, it had become evident in the last year of Clinton's administration that all was not well with world's economic order. Economic structure had become quite imbalanced. Only 12% of the entire capital of great economic powers was involved in productive activities, while 88% was speculative capital. The 12% speculative capital was required to produce profit for 100% capital of the world. That had become an impossible task, which could not be continued for a long time. Fear about economic downturn made America extremely nervous, and as recorded in history, on such occasions capitalist economy always opts for expenditure on war-making equipment. You may also call them defense expenditures. This has been happening since 1946. In the last year of Clinton's administration, a commission was set up for chalking out the defense strategy for the 21st Century. This commission presented its report in the early days of 2001 when Bush had taken over as the president of the country. The chairman of the commission was no other than Donald H Rumsfeld. The commission predicted that another Pearl Harbour awaited America. It suggested enormous expenditure on high-tech defense. Bush appointed Rumsfeld as Secretary of Defense. It was thus clear that Bush administration came into office with a plan for sophisticated wars against other nations." On the other hand. America's economic plan was to control resources of other nations. The whole world, in America's view, should be open for investments of the MNCs. There should be freedom to move capital and no restriction on trade. To achieve these economic objectives, which were not new in any case, old methods had been failed. Until 1960, America managed to control the economies of Third World countries with the help of dictators They ruled over the countries by means of great shares of public sector. This system failed. The decade of 1970 saw a deep recession in the economies of the world. By the 1980s, Americans changed their strategy. Blind democracies replaced the dictators Privatisation, deregularisation and globalisation became the order of the day. "American economy picked up during Reagan's tenure but during first 5-6 years of Clinton's administration a dark cloud appeared over the economic horizon, which forced the Americans to change their strategy--a strategy that was aimed at total control of the world. In order to achieve that end, a new kind of political system became necessary. "In pre-9/11 era. America unleashed wars in former Yugoslavia and Iraq 9/11 incident gave the Americans an opportunity to interfere in other countries' affairs in the name of 'War against Terror'. In the name of combating terrorism and disarming 'Weapons of Mass Destruction', an easy way had been found to change and remodel the governments of Third World countries. Therefore. America is trying to fulfill its economic objectives through war. "America invaded Afghanistan in the name of eradicating terrorism. It invaded Iraq in the name of eradicating WMDs. Pakistan, India and Iran are also on America's hit list States are now thrown open for extensive investment by the Western world it is important that South Asian countries put their hands together and


Pakistan: Drug trap to Debt trap

evolve a political and economic strategy to face yet another re-conquest by imperial states after a lapse of more than one century." Oily Americans: Why the world does not trust the U.S. about petroleum: A 141 The TIME, May 19, history of meddling by Donald L. Barlett and James B. Steele, 2003. The authors have remarkably exposed the dark side of American oil policy from classified government documents and oil industry memos, involving a pair of Iraq's neighbours, Iran and Afghanistan. The aim of controlling Iranian oil forced Americans for 25 years to spend more than $20 billion in U.S. taxpayers' money as military aid and subsidized weapons sales for the Shah's most undemocratic rule, its oppressive armed forces and ruthless intelligence apparatus SAVAK. These policies lead to takeover of Iran by anti-U.S. forces in 1979. Resultantly for two decades, American oil companies were barred by the U.S. government from doing business with Iran. "Now the Shiites are seeking to turn Iraq into an Islamic republic." In Afghanistan the story was even more bizarre as in 1977 the CIA "sounded an alarm on the Soviets' faltering energy prospects in a secret 14-page memo President Jimmy Carter, in the wake titled: The Impending Soviet Oil Crisis." of Soviet invasion of Afghanistan, concluded that the Soviet Army was passing through Afghanistan to seize the Middle East oil fields and "any outside attempt to gain control of Persian Gulf region will be regarded as an " Soon after assault on the vital interests of the United States of America Reagan took office the CIA began one of its largest, longest and most expensive covert operations, "supplying billions of dollars in arms to a collection of Afghan guerrillas fighting the Soviets. The arms shipments included Stinger missiles, the shoulder-fired, anti-aircraft weapons that were used with deadly accuracy against Soviet helipopters and that are now in circulation among terrorists who have fired such weapons at commercial airliners. Among the rebel recipients of U.S. arms: Osama bin Laden." "At the same time the U.S. was moving into the Persian Gulf militarily and supplying Afghan rebels, all based on a faulty CIA oil assessment, it was also in 1982 when the State Department secretly supporting Saddam Hussein The root of all removed Iraq from its list of countries supporting terrorism this folly was the U.S. government's officially sanctioned version of faltering In fact, Russia today Soviet oil production, which was at odds with reality is the world's second largest [oil] producer, after Saudi Arabia. Instead of becoming a major buyer of Middle East oil, as the CIA had warned, Russia ships 3 million bbl. a day to other countries, including the U.S. As all this makes clear, the former Soviet Union was not running out of oil. Neither is the world. The one exception: the U.S., which was the Saudi Arabia of the first half of the 20th century, is finally running out. As a result, thanks in part to American policy that put an emphasis on foreign intervention rather than domestic conservation, American are more dependent than ever on imported oil."

Part II: Debt-trap