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UN Office of Drugs and Crime:
Drug Trade Cash Saved Banks

Jan. 27, 2009 (EIRNS)—This release was issued today by the Lyndon LaRouche Political Action Committee (LPAC).

The world drug trade is so big, it is "the most important" of all world "agricultural" markets, worth over $320 billion on the street, UN Office of Drugs and Crime director Antonio Costa told the Austrian weekly Profil in an interview published in full today. This huge trade not only funds operations like the Taliban or Colombia's FARC, but has been used to bail out some of the world's crisis-hit banks since the second half of 2008, he said.

Costa was also very critical of the British-sponsored plan to buy Afghan-grown opium for "medical" purposes, saying this had led to a doubling of production in just one year's time.

Asked if the drug trade is one of the most important in the world, Costa told Profil: "If you look at agriculture markets, it is the most important. According to our calculations, the wholesale value of illegal drugs is more than $90 billion, in the range of world meat and grain trade. The street trade, we assess at a volume of over $320 billion."

Profil then asked if the world financial crisis was having a notable effect on a market of this size — over half a percent of world GDP. Costa answered: "Certainly. The drug trade at this time could be the only growth industry, with little unemployment. The money that is being made, is flowing only partly back into illegal activities, in parts of Asia, Africa, and South America, where it is used to bribe politicians, buy elections, or finance insurgents, such as the Talibans in Afghanistan, the Tamil Tigers of Sri Lanka, or the FARC in Colombia, for example."

The rest of the money, he said, "is fed into the legal economic circulation through money laundering. We do not know how much, but the volume is imposing. As such, seen from the macroeconomic effect, this is simply bringing in investment capital. There are indications, that these funds also ended up in the finance sector, which has been under obvious pressure since the second half of last year."

Asked how this was done, Costa answered: "It appears that interbank credits have been financed by money which comes from the drug trade and other illegal activities. It is naturally hard to prove this, but there are indications that a number of banks were rescued by this means."

This cannot be done by drug bosses depositing cash in their local banks, Profil asked. Costa responded: "In many cases, drug money is currently the only liquid investment capital, to buy real estate, for example. In the second half of 2008, liquidity was the biggest problem the banking system had, and therefore, this liquid capital became an important factor."

Asked why it is so difficult to prove these capital flows, Costa said that, "ironically," this is because of the impact of anti-money-laundering controls. "To get around the electronic surveillance of bank transactions, now criminals stash their funds in cash sums which can be up to hundreds of millions of dollars. This is the way they try to hold these funds liquid.

He named West Africa as a region where the transfers of drug money are increasing significantly. He rated the drug economy as some 30% of Afghanistan's whole GDP, because the GDP itself is so low, at less than $10 billion. In Colombia, the drug economy is a much smaller part, less than 1%, although the drug trade is worth some $10 billion.

Costa expressed his opposition to drug legalization. "We have to consider the interdependence of drugs and criminality; anything else would be irresponsible.... Legalization would inevitably send abuse way up." On the proposal to "legally" buy opium from the Afghan farmers, Costa was even more dismissive. This was tried already in 2003, he said, when the British gave out over 100 million euro to compensate farmers for the destruction of their opium crops. This did not work; "it had the opposite effect. Within one year, the cultivation doubled, because the farmers knew that if the drug traders did not buy their opium, then I'll get my money from the British." As to medical use, the infrastructure does not exist for expanded use of morphine as a medical painkiller. "On the world market, opium commands a price of $30-$32 per kilo for medical use; in Afghanistan, the drug traders pay $100 for that amount. The choice is easy for the opium farmers."

Asked about the use of crop destruction in Afghanistan, Costa responded that the "smugglers must really be punished," but the farmers handled differently. They must be supported to give up the illegal drug production. In Colombia, he said, barely 1% of farmers returned to drug cultivation, when they had themselves decided to destroy the crop, but when this was done by police or military, 30% of the fields returned to drug production only a little while later. In Afghanistan, what NATO should do is destroy drug labs and prevent drug transport.