Seeds of Terror – Then narcotics trade as a form of finance

July 18, 2009

Seeds of Terror: How Heroin Is Bankrolling the Taliban and al Qaeda Gretchen Peters Thomas Dunne Books, Published: May 2009, 320 pages.

An excerpt is available here.

“Terror groups have every incentive to seek financial independence.” (p  11)

If, as a research movement, the ‘social studies of finance’ is going to tackle all kinds of financial systems – and not just air-conditioned financial marketplaces – then we’re going to have to pay attention to books like Seeds of Terror.

Gretchen Peters painstakingly documents a link between drug trafficking, governance in Afganistan and the terrorist organization, al Qaeda.  With an eye towards influencing U.S. foreign policy makers her message is as simple as it is incisive: If the U.S. wants to put a stop to terrorism originating in Afganistan, they must disable the drug trade that finances terrorist activities.  In Peters’ assessment, Afghanistan’s instability is more similar to that of a narco-state like Columbia than it is to Iraq.  As one of her sources remarks of the latest generation of Taliban, “What you realize is that most of these guys are not ideological. They are just paid off.” (p 136)  [Question: Is this lack of ideology true of today’s Wall Street bankers as well?]

Peters’ primary purpose is to document how drug finance works in just enough detail to make her policy case convincing.  She is more interested in exposing who the key operatives are than in describing precisely what they are doing to generate money.  As such, Seeds of Terror touches upon the mechanisms of narco-finance, but leaves open plenty of venues for further investigation of how this system really works, in practice.  The book gives every indication that a detailed examination of drug finance would be tremendously relevant to contemporary political life, and would be potentially as exciting from a financial perspective as unpacking the trading rooms, algorithmic devices, financial products, indexes and exchanges we currently study.

The importance of the book to anthropologists of finance is that by following intricate conversions between moving drugs and flows of money Peters begins to provide a robust description of how drug trafficking serves as a genuine financial system.  Having concluded that it is permissible under Islamic laws to produce and sell, but not to consume drugs, she argues that the Taliban services the drug trade, by encouraging poppy farming and making profit by taxing product in exchange for safe passage.  Poppy crop refined and converted into concentrated substances is sold and thereby transformed into state sponsored currencies used to fund far reaching global activity.

What I found fascinating was that to be effective at producing value, drug markets are not totally out of bounds. Instead, they are seamlessly intertwined with the kinds of financial institutions and instruments we study.  Sophisticated money laundering schemes that convert capital that has passed into the black market and been accumulated, back out the licit realm again. For example, Peters argues that the peculiar volatility of the Karachi Stock Exchange (KSE) is both incited and exploited by money launderers.  She points out that eventually “the money does end up in western banking institutions” (p 219).

At a lower but equally important level, drugs can serve as a currency medium in and of themselves.  Stories of Afghans paying for groceries with a chunk of opium illustrate the ways in which, as a value sustaining non-perishable commodity, drugs have become a thing that can be converted into other things; like money, drugs circulate and flow.  In this situation drugs are not unlike the Ithaca Hours and other forms of charismatic local currencies so celebrated by activist-critics of state-sponsored capitalism.  Circulating narcotics can defy— if only in particular spaces— the hold of national governments over production and exchange.

In her book Fiscal Disobedience anthropologist Janet Roitman has suggested that what is more interesting than enforcing distinctions between, say, the licit and illicit when it comes to understanding economic activities, is to understand mechanisms of value production.  Roitman’s value-centred approach demands that we trace the processes of how value  in all its forms – regulated and not, monetized and not – is being generated.  Such an approach could be useful to Peters who despairs at U.S. administration’s difficulties in seeing the financial link between drugs and terror.  As she reports, the Pentagon has continued to see these as two separate issues, insisting “that the Afghan insurgency was the military’s responsibility, defining the opium trade as a problem for law enforcement”.

[Warning – what follows is a bit of a spoiler]

The climax of the book comes at the beginning of the final chapter. “After reading the data that field researchers compiled for this book” writes Peters, “readers could almost be forgiven for concluding (as the U.S. government has) that the best way forward is to launch an aggressive aerial spraying campaign to wipe out Afghanistan’s poppy crop.  This way” she pointed asks her reader, “we deny the insurgents and terrorists much-needed funds, right?”  [Right?]  Wrong!  The author’s startling conclusion is that “Wiping out poppy fields would actually drive up poppy prices and put more money in the pockets of drug dealers and terrorists.  It’s basic economics…” (p 215).

The situation Peters can describe in terms of ‘basic economics’ has been materially brought into being in the following way: “Unlike the United States [America’s enemies] appear to be squirreling away nuts for the future.  UN and law enforcement officials began to notice in late 2008 that Afghanistan had been producing about twice the amount of opium that the world’s addicts smoke, eat, or shoot for several years now.”  Where is all of it?  Stockpiled. As commented on earlier in the book, “Taliban commanders are known to maintain stockpiles where they can deposit and later withdraw quantities of poppy as if using an ATM” (p 122).  These durable and hidden stockpiles of narcotics are, in Peters’ terms, the equivalent of the Federal Reserve.

If the economic rationality for why decimating drug piles and crops won’t work is not enough, Peters asks us to consider the hard consequences of such an action.  She reports that a previous ban on poppy planting instituted by the Taliban in 2001 caused a humanitarian disaster among Afghan farmers: “Hundreds of thousands” she writes, “defaulted on loans or were unable to make it through the winter months without credit and fled to the Iranian and Pakistan border areas.  Many sold of land and livestock, even trading their unmarried daughters to poppy merchants to settle their arrears.” (p 94-5)  This, more than any other fact in the book substantiates the generative role of narco-finance as a life-sustaining economic system.  Meanwhile, in a win-win situation for the Taliban, international aid money poured into the country on one end, while the price of opium increased, pushing up the value of narcotic stores on the other.

[Hmmm. Destroyed objects of value, massive losses sustained by the population at large, an influx of money from the state, increased value within financial repositories… Now why do some elements of this description smack of the familiar?]

To her credit, changes in U.S. policy strikingly similar to the ones Peters recommends have been brought about since the publication of this book.  For some recent updates see herehere and here.

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