OPIUM IS THE ECONOMIC ASSET TODAY - CENTRAL ASIAN GAS IS THE ECONOMIC ASSET OF TOMORROW.
This article in 3 parts:
1. Economics of Opium trade (Historic + Current context)
2. State of economy in the US and Europe
ECONOMICS OF OPIUM - A SHORT HISTORICAL PERSPECTIVE:
While the Dutch introduced Indian opium in tobacco pipes to the Chinese in 1700, it's the British which through East India Company in 1750 took control of the opium trade in India by cultivating in the states of Bengal first and then Bihar.
EAST INDIA EMBLEM:
By 1767 the British East India Company's import of opium to China reaches a staggering two thousand chests of opium per year. By 1793 the British East India Company establishes a monopoly on the opium trade. All poppy growers in India were forbidden to sell opium to competitor trading companies.
In 1817, Britain sold 240 tons of opium into China. Within ten years, the level had risen to 750 tons, and by 1837, just prior to the Opium War, it exceeded 2500 tons.
TYPICAL CHINESE OPIUM DEN
Read Amitav Ghosh's SEA OF POPPIES to get a better insight into the opium world.
R. Mukerji (in Rise and Fall of the East India Company) argued that there were compelling economic imperatives that drew the European India Companies into the path of imperialism. He pointed out that although monopoly rights assured the India Companies of the exclusive privileges of buying and selling, it did not guarantee that they could buy cheap. For that, political control was essential.
A major problem for the East India Company was that their profits were in direct conflict with those of their British-based competitors. Under these circumstances, as long as the profit motive was paramount (which it was), the Battle at Plassey, and the Opium Wars could be seen as logical outcomes of circumstances where continued profits by legal and honorable means were simply not possible. But, had the East Company comprised of "Gentlemen Traders" as some historians have claimed, they could not have switched so easily from trading in Indian Textiles, to trading in Opium for Tea which, in modern language - would surely be described as a form of "drug-running"!
Had the traders of the East India Company been "men of honour", denied the right to profitable trade, they would have simply gone bankrupt, as so many do in the world of business!
Throughout much of the 19th Century the principal British export to China by this trading company was opium, grown in British colonies in India and Bengal. Opium exceeded in value the total of all other export trade commodities the British were selling in China, despite that opium was illegal under Chinese law.
The trade enriched the British at home and supported their colonies abroad. Hence The issues that sparked the Opium War were economic.
Opium wars is a different subject altogether, however the main points we can infer from the above:
1. The British used opium to profit. If they had not, they would have gone bankrupt. – and even “GOD COULD NOT HAVE SAVED THE QUEEN. THE OPIUM DID.”
2. If the British went bankrupt, they could not keep their colonies intact, or expand and maintain hegemony around the globe and expand their empire.
3. UK became the first official drug runner in the world and a good one at that.
Let us remember the above 3 points and fast forward to present and land in the country called Afghanistan.
OPIUM ECONOMIC - PRESENT:
1. Afghanistan produced 6700 tons of opium in 2006, 8200 tons in 2007 and 7700 tons in 2008. On average, the world demand of opium-based narcotics, including heroin, is only half of this production. Where is the rest of opium going? Antonio Maria Costa, head of the UNODC is convinced that is the only explanation. In a recent bulletin he issues an urgent order: 'Find the missing opium.' "As a priority, intelligence services need to examine who holds this surplus, where it may go, and for what purpose" he says. "We know little about these stockpiles of drugs, besides that they are not in the hands of farmers."
2. British and American forces – this includes all kinds of Americans such regular forces, CIA, Socom and contractors – have been buying and storing all the surplus opium. (See the movie American Gangster to figure out US military complicity in narcotics trade).
3. This report gets credence from the fact that about 70% of all opium production in Afghanistan comes from Helmand province, an area under the direct control of the British and the Americans.
4. The Taliban, when they were in control of Afghanistan, nearly eradicated the opium cultivation in Afghanistan. This was started again and in “enormous quantities” once the British & American troops took control of Hemland province.
See graph below : In 2001 the Taliban nearly eradicated opium from Afghanistan.
5. The Americans who wanted to put in Unocal pipelines when the Taliban were in power put Hamid Karzai as the President of Afghanistan. Incidentally, Hamid Karzai was a consultant to UNOCAL.
6. The biggest drug baron in Afghanistan happens to be Ahmed Wali Karzai. Incidentally, he happens to be the brother of Hamid Karzai. One of the many incidents : When Afghan security forces found an enormous cache of heroin hidden beneath concrete blocks in a tractor-trailer outside Kandahar in 2004, the local Afghan commander quickly impounded the truck and notified his boss.
Before long, the commander, Habibullah Jan, received a telephone call from Ahmed Wali Karzai, the brother of President Hamid Karzai, asking him to release the vehicle and the drugs, Jan later told American investigators
7. Mr. Izzatullah Wasifi, a brother of Afghan President Hamid Karzai, was arrested by the U.S. authorities from Caesars Palace, California, along with his wife Fereshteh Behbahani on July 15, 1987, for the trafficking of high quality heroin. Wasifi was sentenced for three years and eight months while his wife was sentenced to three years probation. However after the formation of Karzai government in Kabul, Izzatullah Wasifi was made the Governor of Farah province of Afghanistan and later, last year, his brother, Hamid Karzai, appointed him as the all powerful Chief of Afghanistan’s General Independent Administration of Anti-Corruption with responsibilities to prevent the Opium growth and Heroin production and its illicit export.
Keeping in view Mr. Wasifi’s past, it is nothing less than stunning to notice that the person who a few years ago was a drug trafficker is today Afghanistan’s chief anti-drug trafficking officer. Wasifi used to be an anchor between the Afghan drug barons and the Western drug buyers and used to run a drug trafficking operations.
8. As per DEA, Dawood Ibrahim is among the top 3 drug runners in the world today. He is most likely in the business together with the people who are mentioned in point 1 (people who are stockpiling the opium). Note that the Americans and British are not at all interested in catching Dawood. And for that matter – neither is India. (yes, neither is India – a host of politicians cutting across political lines are in Dawood’s monthly payout list).
Read this article : WHY THE CIA DOES NOT WANT INDIA TO HAVE DAWOOD?
Also read this article: Dawood Ibrahim fits the billing for one of Cheney’s “unsavory” intelligence sources.
In the above article it is mentioned: "DAWOOD Ibrahim, according to our sources, played an important part in Cheney’s and Rumsfeld’s “shadow war” after 9/11. It was Ibrahim, for example, who used his criminal network to track down the killers of Wall Street Journal reporter Daniel Pearl in Pakistan. Ibrahim’s men were also used to provide protection for Afghanistan’s Hamid Karzai in Pakistan and Afghanistan, especially when the Afghan frequented gay brothels in Pakistan. Ibrahim’s enterprises, called “D-Company,” ensured that U.S. supply ships in the Arabian Sea were protected from attack, that the U.S. embassy in Islamabad was not targeted for terrorist attack, arranged for reasonable port fees to be assessed for U.S. ships in Dubai in support of the Iraq war, that U.S. sailors and contractors in Dubai were protected, and that all the kickbacks for Cheney’s Halliburton and other U.S. contractors were properly laundered through Dubai banks. Ibrahim’s network also ensured that the land route from Karachi to Afghanistan allowed U.S., Indian, and other nations’ goods to move into the landlocked country unimpeded."
9. Incidentally the Russian intelligence said the money and logistics for 26/11 came from Dawood. The contract to kill Ajmal Kazav has been given by ISI to Dawood. And the inference one can draw is that Dawood is working with the British and American intelligence on the drug trade – albeit circutatiously. After all, even after the economic downturn who has the money to buy opium at today’s prices and hoard it? It is the US.
Keep the first 3 points in mind and after reading the 9 points above, what do you think is happening? If the UK did it in 19th century, can the US + UK do it in 21st century? After all, how badly screwed is the western world financially?
Answer is YES, they can do it. The American did it in 20th century too.. (See American Gangster - the movie based on true story).
But why will they do it? It is because the economy of the western world and US is badly in a tailspin downwards. Here is a picture :
From my article on November 1st:
The official version of US debt which is USD 10 trillion. The actual US debt, including "invisibles" or off balance sheet transactions is closer to USD 58 TRILLION. This includes the staggering USD 1 trillion credit card debt that will most likely see the collapse of Bank of America and JP Morgan Chase. The sub-prime mortgage losses will be closer to USD 3 trillion and not USD 1 trillion.
Such is the extent of "greed" that is boggles the mind. This can be seen if one sees the Credit Default Swaps (CDS) markets. The CDS market is worth a staggering $ 62 trillion up from USD 900 billion in 2000. (Note: USD 1000 billion = 1 trillion). Which means that this (CDS) Wall Street speculation racket is 5 times the size of all holdings in NYSE (New York Stock Exchange).
If this debt is averaged out: EVERY SINGLE HOUSEHOLD IN THE US OWES A DEBT OF USD 500,000 ( half a million dollars) when their average yearly salary is USD 40,000.
This will lead to austerity measures, where the US citizen is going to opt for positive savings, for the first time (instead of feeding his consumption by borrowed money). MORE SAVINGS means less DISPOSABLE INCOME. This will lead to LESS CONSUMPTION, threatening to pull the US economy down further.
To kickstart the economy, the US Govt will have pump in huge Investments, CROWDING OUT private investments. Lower interest rates will give the catalyst for the investments. This is the begining of a worldwide recession that is expected to last until at least late 2009 (Paul Krugman is saying 10 years). Keep an eye on 3 things:
1. CDS Market : It is currently at US $ 62 TRILLION. The higher it goes, longer will be the pain.
2. PRICE OF GOLD: If the price of Gold is US $ 700 or begins to go down, then US will be in DEFLATIONARY PERIOD.
3. DOLLAR INDEX : If this index holds above 70 - the US can prints its way out of the recession (pretty much what it had been doing). However, if the index falls below 70, future growth will be killed as this will lead to higher interst rates and inflation (hence no crowding out effect as govt will not be able to raise cheap debt)
To avoid a long recession, deflation - the US is fighting on many fronts.
Bretton Woods I gave rise to NATO - the hedge against a Russian invasion. Bretton Woods I became a political program and not an economic one. When loans to fund Western Europe's re-development failed to stimulate growth - the LOANS became GRANTS - aka the MARSHALL PLAN. Today , the US cannot afford any Marshall Plans.
The question naturally arises on the primacy of the dollar. Can EURO take over. The answer is NO. The EURO is only a DECADE old and is not backed either by i) SOVREIGN TAXING POWER or by ii) A CENTRAL BANK WITH VAST AUTHORITY. Relying on a currency (EURO) that is dependant on the will of 15 disparate countries DOES NOT MAKE FOR A RELIABLE RESERVE CURRENCY. Hence CHINA, JAPAN, GERMANY, FRANCE etc will ensure that the PRIMACY OF THE US DOLLAR REMAINS.
As on Feb’09 – the US Fed is pumping in money into the US economy in double digits clearly opening it to hyper inflation if things go out of hand. However as stated in point 3 above, as long as the dollar index holds above 70 the US can print its way out of trouble.
BUT: "The Fed is sending a message that it will print money to an unlimited extent until it starts to see the economy expanding," William Poole, former president of the St. Louis Fed said.
Well, it's about time that Ben "Printing Press" Bernanke lived up to his moniker. With a Fed rate cut to zero percent, the ZIRP (Zero Interest Rate Policy) era begins. But Japan has already tried that and all they got was a "lost decade" of deflation, and a yen carry trade that contributed to a bunch of grand global distortions after that.
A US commentator stated: The USDX has crashed below the critical level of 80 in what looks like a classic if not very pronounced head-and-shoulders formation. That has pulled gold prices up to $850, which is also a critical level, being the famed Jan 1980 resistance level. We are balanced on the proverbial knife edge now, with gold and the US dollar sitting at over 20-year resistance/support levels.
This is the trigger event that many in the contrarian community have been waiting for. The community has called for US hitting zero interest rates years ago in advance of the fact. What happens next is the trillion-dollar question. The deflationists are pointing at Japan, while the inflationists are pointing at Zimbabwe. The community consensus for now seems to be Japan-style deflation for the short term, *followed by* Zimbabwe-style hyperinflation further out.
Let me present : Gerald Celente, the CEO of Trends Research Institute.
I may not believe all that Celente says but he is hard to dismiss as another crackpot doomsdayer. He comes with serious “credibility”.
He is renowned for his accuracy in predicting future world and economic events. The man who predicted the 1987 stock market crash and the fall of the Soviet Union is now forecasting revolution in America, food riots and tax rebellions - all within four years, while cautioning that putting food on the table will be a more pressing concern than buying Christmas gifts by 2012.
Celente, who successfully predicted the 1997 Asian Currency Crisis, the subprime mortgage collapse and the massive devaluation of the U.S. dollar, told UPI in November 2007 that the following year would be known as "The Panic of 2008," adding that "financial giants (would) tumble to their deaths," which is exactly what we have witnessed with the collapse of Lehman Brothers, Bear Stearns and others.
He also said that the dollar would eventually be devalued by as much as 90 percent. (WOW – 90%)
His interview in Fox News
Fox is a neo-con channel and Celente is anything but a neo-con. American pay a huge premium to background for interviews. By interviewing Celente in a pub, Fox is trivializing the message Celente gives. All this is, of course, deliberate.
Now, if what Celente says has a probability of 10% - then it’s a huge financial conundrum that US and Western world is looking into. (we will not look at effect on China and India to complicate this article).
Also read The Telegraph article of 16th Feb, written by KP Nayar: DESOLATE & DEVASTATED IN AMERICA.
Suffice to say, does the opium trade and US & UK complicity now make “economic” sense?
Hence Opium is the economic asset of today, the Central Asian gas is the economic asset of tomorrow (Central Asian gas has been covered extensively in Great Game and Ultimate Game articles, earlier).
The US & UK are not going to move out of Afghanistan, come what may and see the collapse of their empire exacerbated.