Opium is the New Gold Standard in Afghanistan

KABUL, April 5 (Reuters) – Opium is emerging as a new gold standard in Afghanistan, where traders and farmers are hoarding the drug as a source of ready cash to hedge against the risk of a power vacuum when foreign troops leave, the country’s U.N. drugs tsar said.

Fear is mounting amongst Afghans and foreign governments alike that the planned pullout of most NATO combat troops by the end of 2014 and Afghan national elections in the same year could see the country engulfed in more conflict.

“You see suddenly people are rushing to opium and cannabis as in the euro zone we were rushing to the Swiss franc before the euro,” Jean-Luc Lemahieu, head of the U.N. Office of Drugs and Crime in Afghanistan, told Reuters in an interview.

“It is hedging for a very insecure future indeed, it’s basically an economic reflex, understandable by itself, toward a very insecure question mark, what will I be, where will I be, how will I be and my family too,” he said.

Afghanistan supplies about 90 percent of the world’s opium, from which heroin is made. Corruption also infects many aspects of life and the buoyant drug trade flourishes.

The poppy economy in Afghanistan, which provides an income for insurgents, grew significantly in 2011 with soaring prices and expanded cultivation, according to a U.N. report.

In 2011, the farm-gate value of opium production more than doubled from the year previously to $1.4 billion and now accounts for 15 percent of the economy, the UNODC said.

Despite a recovery in the poppy crop after an outbreak of disease in 2010, opium prices remain high even as supplies increase without a rise in demand because Afghans throughout the drug supply chain fret over future stability, Lemahieu said.

“A lot of people were buying the opium and the cannabis as a kind of gold standard, as a kind of security, financial guarantee for a very insecure future,” Lemahieu said.

“Wall Street principles are being applied by the Kandahar farmers every day,” he said of one of Afghanistan’s top poppy producing provinces.

With foreign combat forces leaving by end-2014, and with much of their cash and air power expected to go with them, the Afghan government will need more help fighting poppy cultivation, experts say.

Afghanistan holds national elections in 2014 but President Hamid Karzai is barred from standing again, upping the stakes for political elites vying for power in a society riven by ethnic divisions and myriad feuds.

That uncertainty will help fuel an expected increase in opium production over the coming years as people seeking to influence politics scramble for more cash to fund patronage networks, Lemahieu said.

“The unclear political transition post 2014 is a major driver for an increase of the informal, illicit economy, in which the narco industry forms an essential part,” he said.

“That insecurity, that instability, that uneasiness with this big question mark post 2014 is driving so many people towards making sure that they have the war chests filled, because we just don’t know what the future is to bring.” (Editing by Alison Williams)

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