A Monthly Journal of the IDSA
Narco-Terrorism and India's Security
By Kshitij Prabha, Associated Fellow, IDSA
Narcotic trafficking, the phenomenon, which started as an organised cross border crime has now emerged as a threat to nation states because of its diabolic alliance with terrorist groups. The Golden Crescent is the largest producer of illicit opium. Afghanistan and Pakistan alone shared nearly 6000 metric tons of the total illicit production in 1999. It is a matter of serious concern to India, because these drugs are the major source for funding Pak-sponsored terrorism in this country. And also because India is the only licit supplier of opium to the international pharmaceutical industry, which generates approximately Rupees 209 crores per annum (1999) as revenue from export. The economy of Pak-Afghan frontier is dependent on the production of poppy and cannabis. The drug money is being floated in an unorganised but systematic manner into the Indian money market thereby damaging financial institutions. Therefore, the illicit drug trafficking from Afghanistan and Pakistan threatens both the polity and the economy of India. Apparently, this demands serious consideration from both the policy makers and the law enforcement agencies before it gets too late for action.
Narco-terrorism refers to the nexus between narcotics and terrorism. This paper examines different aspects of linkage between the two and its implications for India's security. Since the sources of terrorism in India lie beyond the domestic frontiers, this study also highlights growth of illicit narcotics trade in Pakistan, which funds terrorist activities in India. Afghanistan and the NWFP of Pakistan are the biggest producers of opium in the world, which generates huge sums of money in the international market. The drug proceeds are used by the Pakistan government and the non-government agencies to destabilise India. These two issues are vital in the regional politics of South Asia and the security environment of India.
Sponsoring terrorism is an expensive affair and money for killing, kidnapping and sabotage does not come through proper channels. It comes through illegal and unofficial channels. The market value of narcotic drugs is much higher than any consumer products in the world. It fetches voluminous amounts of money and that too in hard cash. For instance, one kilogram of heroin from the Golden Crescent that costs approximately one lakh rupees in South Asia fetches nearly a crore of rupees in the US market. The figure varies from place to place, which further depends on the law and order situation. The price for heroin originating from the Golden Crescent ranges from Rs. 30 lakhs to Rs. 1 crore a kg.1 It is worth noting that Pakistani heroin and Colombian marijuana are the most demanded narcotic drugs in the US and the European countries. 2 The volume of money these drugs generate in the West is mind boggling. It is because of the enormous money involved in the illicit drug trade that terrorists have established links with drug traffickers, smugglers and underworld dons to meet the expenses for 'operation terrorism'.
The word narco-terrorism was used for the first time in the US when drug smugglers in Bolivia, Colombia, Peru, Nicaragua and other Central American countries organised the illegal trade as a profession and ran a parallel government. These countries produce enormous quantities of cocaine and cannabis. As a matter of fact, the economy of this region depends on cultivation and production of cocaine and cannabis. Besides being a neighbour the US is the biggest market for narcotics. The growing population of drug addicts compelled the US government to respond to the situation. Its realisation, however, came much later i.e. when President Reagan decided to fight against the leftist movements in Latin American countries during the 1980s. Narco-terrorism became an issue for the first time during this period. 3
Trafficking and Terrorism
The hypothesis that drug trafficking funds terrorist activities needs logical explanation and that logic is based on certain facts and figures. These are:
These are some vital facts on the basis of which the nexus between narcotics and terrorism and India's threat perception could be examined. Since Pakistan is the immediate source of terrorism in India, it is relevant to examine the narcotic drug trafficking scenario in Pakistan and its diabolic alliance with politics, the army and the underworld operators, mainly the narcotic drugs syndicates. This unholy alliance in Pakistan is the major concern for India's security.
Drug Mafia in Pakistan
Narcotics have been an important source of income for tribals at the Pak-Afghanistan border since time immemorial. It did not emerge as a socio-economic and political problem until 1978. Opium produced in this region was consumed locally. No one cared or thought about it as a threat. The problem started with the Soviet invasion of Afghanistan followed by the US-Pak joint counter-intervention. Cultivation of poppy and cannabis was encouraged during the military dictatorship of Zia-ul-Haq to finance terrorist activities in India. General Zia's support for cultivation of narcotic drugs gave a new dimension to international drug trafficking and terrorism in India. His target was to destabilise India.
But in the process he failed to anticipate its repercussions on Pakistan. Heroin addiction spread like an epidemic during his martial administration. The UNDCP report confirms that there were 1.5 to 1.9 million drug addicts in Pakistan in 1993. 7 The regime, which was popular for its iron hand did not control free distribution of heroin and hashish in universities and colleges in Peshawar, Karachi, Lahore and Rawalpindi where these drugs were cheaply available for Rupees 15 to 60 per packet depending on their purity. 8 During this time drug traffickers operated freely and became billionaries within a short span of time and organised themselves as syndicates on the same lines as the Latin American drug barons. They established contacts in the law enforcement agencies, funded political parties, used economic platforms and bribed officers to maintain production and supply of narcotic drugs in the international market.
General Zia's involvement in drug trafficking came to light only after his death when the Minister of State for Narcotics, Mian Muzaffar Shah revealed that Pakistani drug syndicates grew under the patronage of General Zia. Raza Qureshi, a Pakistan drug trafficker who was arrested by the Norwegian Police at Oslo's Fornebu Airport in 1984, exposed Zia's drug connection. The Norwegian Police disclosed three names of Pakistani nationals-Tahir Butt, Munawar Hussain and Hamid Hussain patronised by General Zia. 9 The Norwegian Police visited Islamabad to investigate the matter and indicted these three for drug crimes. But the Pakistan government did not arrest them because of their political connections. Finally, when the Norwegian government complained against inaction by the law enforcement agencies and threatened diplomatic action, these three were arrested.
One of the culprits, Hamid Hussain was not only the vice president of Government owned Habib Bank, but was as close as a son to the wife of General Zia ul Haq. He handled Zia's account and used banking channels to launder drug proceeds. The most startling revelation that confirmed Zia's drug connection was the case of one of his ADCs, whose name was not disclosed. The ADC concealed heroin in 100 precious lamps to be gifted by General Zia to the delegates at a special session of the UN General Assembly. General Zia suddenly changed his programme to travel via Iran and Iraq. In the process of shifting his baggage one of the lamps broke spreading heroin at New York Airport. Apparently the customs official checked all the lamps which were filled with heroin and seized them. 10
The former Chief Minister and Governor of NWFP, Lt. General Fazle Haque is another important drug dealer who dominated Pakistani drug syndicates. Popularly known as the Noriega of Pakistan, Haque was responsible for promoting growth of the drug industry in the Swat Valley of NWFP. He successfully organised transshipment of heroin from Pakistan to the international market through business contacts.
Obviously during Zia's tenure drugs played an important role in decision-making. After his sudden death in a plane crash in August 1988, Gulam Ishaq Khan, a close associate of Zia, took over. An Ismaili Pathan from NWFP civil services he rose to prominence during Zia's time. His involvement in narcotics started after he joined the provincial civil service of NWFP and became a close associate of General Zia. He and the Chief of Army Staff General Aslam Beg worked together for the growth of the drug industry at the Pak-Afghan border. His drug connection came to light during the investigation of the biggest bank fraud in the world namely, the BCCI. Aslam Beg and Ishaq Khan became very close and strongly advocated the idea of Pakistan's decision to join the race for nuclear power. In the name of the Islamic Bomb they generated money from Arab countries and got away from the drug money laundered by BCCI. It is relevant to note that they founded an institute called Gulam Ishaq Khan Institute of Engineering Science and Technology, which was the main recipient of funds from BCCI. In the name of funds, for a nuclear bomb, the duo promoted growth of narcotic drugs in the Golden Crescent. 11
The situation, however, did not change when Benazir Bhutto came to power. She exposed General Zia because it suited her political agenda. Her husband Zardari is well known for his criminal connections and her government was dismissed on corruption charges. In so far as Benazir's Peoples Party (PPP) is concerned, during personal interaction with Pakistani prisoners under NDPS Act languishing in Jammu Central Jail, the author was told that the PPP members were directly involved in the drugs trade. The prisoner himself was a cousin of PPP's Lahore President. Lahore is one of the centres for narcotic drugs trade in Pakistan.
Hazi Iqbal Beg is another important Pakistani drug dealer with political connections. A Lahore based landlord and owner of innumerable business enterprises he organised a powerful drug syndicate. Beg along with his partners, Sohail But (brother-in-law of Nawaz Sharif) and Shaukat Ali Bhatti were elected members of the Punjab Legislative Assembly on the ticket of Islamic Jahmuri Ittehad (IJI), a political party formed by an ISI Chief General Hamid Gul. Nawaz Sharif maintained close association with Beg and helped him acquire denationalised industrial units including the Muslim Commercial Bank where he (Sharif) is a benami partner. 12 Beg continued to nurture his ties with the Pakistani premier and simultaneously funded election of Mehraj Khalid of PPP who later became Chief Minister of Punjab. Beg thus remained loyal to both Sharif and Benazir. After the fall of Benazir's government he was charge-sheeted for narcotic drugs smuggling. However, his close association with Sharif got him released on bail.
Another equally important drug dealer Malik Waris Khan Afridi, was appointed by Benazir as Minister of state for Tribal Affairs. He was elected on a PPP ticket from Khyber Agency (N-33, Tribal Areas VII) in 1988. His commitment to PPP was so strong that he tried to save her government by bribing members against the no confidence motion tabled by Nawaz Sharif in 1989. After the fall of the Benazir government he was convicted for smuggling of opium and hashish from Khyber Agency.
These are some of the many instances of the drug syndicate's control over Pakistan politics. There are hundreds of political leaders into drug business in Pakistan. The very fact that South West Asia (Pak-Afghan) is the biggest supplier of heroin to the international market and that Pakistan earns US $1.5 billion (UNDCP, 1993 estimate) from export of refined heroin substantiate that the narcotic drugs trade goes on under the nose of government law enforcement agencies. Since political leaders are beneficiaries of the international drug trade, it is not possible to keep intelligence and army away from the scene especially in the light of the fact that these two play a significant role in Pakistan politics.
ISI, Army and Narcotics
The ISI is the key to intelligence services in Pakistan. It holds political clout and is the most important cell in decision-making. It operates in collaboration with the military intelligence known as Field Intelligence Unit (FIU). Its importance could be analysed from the fact that Hamid Gul, the former Chief of ISI launched a political party called Islami Jahmuri Ittehad as mentioned earlier, its candidates became members of state and national assemblies. The drug connection of the army and intelligence services came to light when at the instance of Robert Oakley, the US Ambassador to Pakistan, Benazir ordered investigation into the BCCI bungling. The entire exercise turned into an eye wash when Mirza Iqbal Beg, was released on bail despite ample evidence of his involvement. It is believed that Benazir could not cope with the military and ISI interference. An American scholar, Selig Harrison, rightly said that Pakistan has ten Noriegas very high up in military and it was very difficult to disclose their names. 13 The genesis of this unholy alliance of narcotic drugs, army and intelligence goes back to 1978 when the US government launched its combat mission against the Soviet invasion of Afghanistan. The US analysts have now awoken to the problem of narco-terrorism in this region. They were the first to use it during 1970s and 80s against the Soviet expansionism. As a matter of fact the US government encouraged drug trafficking to raise funds for Mujahideen fighting against the Soviets. The DEA had to close its offices in Afghanistan and Pakistan during 1980s by order. The CIA was in full command of the region and purposely allowed the illegal drugs trade to flourish. 14
The drug connection of the ISI and army got cultivated in the fertile land of poppy. Landi Kotal, the capital of NWFP, is the main centre for business transaction of opium, heroin and weapons. Officially the opium bazars at Landi Kotal, Jamrud, Bara, Darra Adam Khel and the entire poppy growing fields constitute part of Pakistan. In practice the situation is not the same. The NWFP falls under direct jurisdiction of local tribes namely-Afridi, Khatake, Wazirs, Orakzai, Banggash, Turis and Mashuds. Drugs and guns are part and parcel of their socio-economic and political life. As mentioned earlier narcotic drugs are the main source of their income, which is promoted by the tribal administration in an organised network. The Pakistan government would invite trouble if they intervene in their local affairs. 15 Therefore, it exercises control though the ISI and army, whose presence has brought changes in the tribal economy in the region. With the help of ISI agents and army personnel several refineries were set up to produce heroin, which is in great demand in the Western market. Ever since the ISI and the army came into the picture, opium refining techniques have become more sophisticated in this region. Chinese chemists were hired for refining laboratories at Landi Kotal and Derra to improve the quality and production. The DEA also confirmed that by 1981, the Chinese have established themselves in refining laboratories in this region. 16 The very fact that the American and the European markets are flooded with heroin from Afghanistan and Pakistan reemphasises growth of the drug industry in this region. This was not possible without the collaboration of the ISI and the army.
Funding Terrorism in India
The need to track the sources for funding terrorism was realised way back in 1986 when the UN General Assembly for the first time drafted a Convention against Recruitment, Use, Finance, and Training of Mercenaries in 1986. This convention was adopted without a vote on December 4, 1989. Article 5 of the convention emphasised that member states 'shall not recruit, use, finance or train mercenaries'. Furthermore in 1994 the General Assembly called attention to the growing connection between drug traffickers and mercenaries. Recalling these resolutions, the International Convention for the Suppression of the Financing of Terrorism was adopted by the UN General Assembly on December 9, 1999 without a vote. This convention needs ratification by 22 member states for enforcement. The Union Cabinet of the Government of India has already approved the convention on June 20 for ratification. The significant aspect of this convention is that it establishes financing terrorism as an independent crime. It does not require that an act of terrorism actually be committed. The convention makes it explicit that every time money passes through the territory of a state party, an international crime has been committed, which can be prosecuted. It also recognises that proceeds from illicit activities like production of opium and small arms trade find their way to the hands of terrorists through a transnational 'show banking' system. 17
These developments are important for India's security. India has been the victim of state-sponsored terrorism for the last two decades. There is not even an iota of doubt that the Pakistan government in collaboration with the ISI uses proceeds of illicit narcotic drugs and small arms trade to fund terrorism in India. Pakistan also aims to create ethnic division in the social fabric of the country by exploiting the religious sentiments and economic backwardness of Muslims in the bordering states of Jammu and Kashmir, Punjab, Rajasthan, Assam, Nagaland, Manipur and other states. The ISI often allures the poverty ridden Muslim population of these states, at times others as well, into illicit narcotic drugs trade to fund terrorist activities in India. This is because: (a) terrorism incurs heavy expenditure. (b) Pakistan is not economically sound enough to siphon huge amounts from the state exchequer. (c) Production of opium is highest in the Golden Crescent. (d) A kilogram of opium originating from Southwest Asia fetches $210,000 in the US market. 18 (e) Finally, the eye witness accounts of terrorists and drug traffickers arrested in Jammu and Kashmir, Punjab and other parts of India also confirms that the Pakistan government has been using them to achieve its foreign policy goals in India especially in Jammu and Kashmir. This fact could also be substantiated by the recent International Narcotics Board (INCB) report, which expresses concern over shortage of morphine, (a derivative of opium) an essential medicine for patients, 19 in spite of record production of opium in Afghanistan (4,600 metric tons) in 1999. One of the reasons for the shortage of this medicine is the bad crop during 1998 in India, which is a licit supplier of opium to the international pharmaceutical industry. The other factor is the growth of the illicit opium trade. Apparently, the illegal and unofficial business is more lucrative than through the legal and the official channels. Such reports also lead towards the logical conclusion that illicit trade in narcotic drugs is used by nation states (in this case Pakistan) to support their political designs across the border.
Another factor that could also lead towards this thesis, though not a significant one, is the decline of dacoity and robbery cases, which used to be one of the many sources for funding terrorism in India during this preparatory phase of militancy in Punjab and Jammu and Kashmir. The following table highlights the same.
Incidents of Robbery and Dacoity in Jammu and Kashmir and Punjab
Year J&K Punjab
Robbery Dacoity Robbery Dacoity
1991 59 26 475 78
1992 77 53 159 38
1993 96 46 44 13
1994 111 49 46 10
1995 160 47 47 12
1996 283 65 54 28
1997 189 43 35 32
1998 134 34 61 15
Source: National Crime Record Bureau, R K Puram, New Delhi.
In Punjab the incidents of robbery and dacoity have declined sharply, whereas in Jammu and Kashmir, the trend is relatively marginal. However, in both the states incidents of robbery and dacoity have come down as shown in the table. The growth of illicit drugs trade is one of the several reasons for the declining trend in robbery and dacoity cases in the two disturbed states of India where Pakistan is playing its cards to weaken India internally.
The ISI, the army and the Pakistan government are together in 'operation terrorism'. Right from 1947 to 1999, Pakistan has been sponsoring terrorism in India, be it in Kargil or in Kashmir, Kapurthala in Punjab or Kokhkrajhar in Assam. These are the three bordering states of India where Pakistan directly or indirectly sponsors mercenary forces to destabilise India. All such activities cost money. A rough estimate for expenses could be something within the range of 100 to 150 crores a month. The North East Times reports that ULFA spends nearly 4 to 6 crores a month. 20
Narcotic drugs are the main source for funding terrorist activities in Punjab and Jammu and Kashmir where the Pakistan government overtly sponsors terrorism. There is no authentic estimate available for assessment of expenses incurred by Pakistan for creating the spectre of terrorism in India. However, on the basis of information gathered from terrorists and drug traffickers it could be roughly estimated that Pakistan spends approximately 20 to 30 crores a month on payment to militants alone. During personal interaction with militants the author was told that besides weapons and logistics, ISI pays Rs. 15 to 20 lakhs to militant leaders per month, 3 to 5 lakhs to Afghan Mujahids on contract basis and 15 to 20 thousand to new recruits from both sides of Kashmir. 21 Since all financial transactions are done in cash, there is no evidence to support this argument. But what could be better evidence that the information gathered from the horse's mouth?
Monthly Estimate of Expenses on Payment to Terrorist Forces in Jammu and Kashmir
Numbers Payments (Rs.p.m) Total (in crores)
1) Militant Leaders 15 20,000,00 3,00,00,000
2) Afghan Mujahids 400 5,000,00 20,00,00,000
3) New Recruits 2500 15,000 3,75,00,000
This is a very conservative estimate based on the information gathered from militants in Jammu and Kashmir. The figure is much higher than the present estimate. The purpose of this table is just to highlight the magnanimous nature of funding terrorism in India. This table highlights only expenses on monthly payment to only three vital categories of people involved in 'operation terrorism' in India. The estimate of expenses on weapons and infrastructure is not easily accessible and thus not included here.
The main source for generating the required volume of money is heroin produced at the Pak-Afghan and Afghan-Iran borders. This region is the largest producer of opium, which is the most profitable consumer item in the world. While reporting to the US Congress, DEA officials also confessed that they face tough challenges because illicit drugs are intimately linked with cross border terrorism and the arms trade. 22 Iqramul Haq an eminent Pakistani scholar gives a candid account of the drugs trade in different phases-right from cultivation to its sale in the US market.
Estimated International Value of Major Drugs Seized in India, 1996-March 2000
Year Heroin Hashish
Quantity(KG) Values(RS) Quantity(KG) Value (RS)
1996 1257 1257 6520 78.89
1997 1332 1332 3281 39.70
1998 655 655 10106 122.28
1999 861 861 3290 39.80
2000 70 70 206 2.49
TOTAL 4153 4153 23403 283.16
Note: NCB has worked out the price, taking the international value of Heroin at the rate of Rs. 1 crore per kg. and Hashish at the rate of Rs. 1.21 lakhs per kg. The total value of major drugs seized from 1996 to March 2000 is-Rs. 4436.16 crores.
The price again depends on the purity of heroin. The number one quality with 80 per cent purity fetches Rs. 70 to 80 lakhs per kg, which again varies from city to city, New York being the most lucrative market. For instance, no.4 quality heroin of Pakistani origin can be cut to four or five times; mixed with inferior quality powder without additional cost it can make one kilo extra for supply. 24 This now fetches approximately a crore in New York.
The commercial value of narcotic drugs could also be analysed from the table, which highlights prices of major narcotic drugs available in the US market during 1996.
Prices of Major Drugs in the US during 1996
Narcotic Drugs Price Range (US $) per kg.
South East Asian 95,000-210,000
South West Asian 80,000-260,000
South American 85,000-185,000
Mexican 50,000 onward
2) Cocaine 10,500-36,000
3) Cannabis/Marijuana 200- 4,000 per pound
Source: The National Narcotics Consumers Committee Report, US Dept of Justice, DEA, Intelligence Division, Washington DC, 1996.
The gap in the prices is mainly because of the price index of different cities in the US. The rates keep fluctuating also because of the law and order situation and increase in demand. As demand for drugs increases, law enforcement agencies take effective measures, and when enforcement agencies are on the alert, the price of narcotic drugs increases. The economics of drugs is not different from other commodities. It is the 'illegal tag' that makes narcotic drugs unique and an attractive business venture. The Cambridge History of China described opium as the most valuable commodity for trade in the nineteenth century. It is branded illegal, but the business trend remains the same.
Most of the business enterprises in the Indian subcontinent including Birla and Tata made money from the opium trade during initial years. Companies could get a license and do business without any hassle. After the World War the situation changed and the 'illegal tag' was attached to it. Though this could not deter the spirit of drug dealers, it did pose difficulty in their business mainly in transaction of drug proceeds.
The sword of 'illegal tag' was hanging all over the world and there were very few banks and financial institutions to take the risk involved in transaction of illegal money. The only channel for the movement of money was illegitimate underworld operators.
Illicit drug trade is highly lucrative and a short cut route to acquire wealth and affluence overnight. It was easy to make money, but difficult to move the funds to their destination. The drug traffickers had to face major problems in transaction of the drug proceeds. There were very few banks to take the risk, though there are instances of banks involvement in monetary transactions of drug money. The dealers had to explore some ways for the movement of cash. Therefore, innumerable channels were explored and created by drug syndicates. Their unorganised but systematic method of monetary transaction is popularly known as money laundering.
Money laundering is defined as use of money derived from illegal activity by concealing the identity of the individuals who obtained money and converts it to assets that appear to have come from a legitimate source. 25 The large sum generated from narcotic drugs has become part of the international monetary system. It plays an important role in the corporate sector and international monetary market. The black money is used to influence politics and economy. This money can buy politicians, fund elections, topple an elected government, take over business enterprises and destabilise an established politico-economic system.
The cash accumulated from narcotic drugs trafficking is laundered into licit money through investments in foreign banks, real estate, hotels, transport and entertainment business. 26 More than banks, private financial institutions have helped drug barons to manage their finances. Switzerland, Hong Kong, India, Pakistan, Afghanistan and Thailand are among the important countries involved in money laundering activities in an organised fashion. Banking laws and lavish life style of the elite facilitates covert operations and monetary transactions of drug traffickers.
The best instances of money laundering through legitimate financial institutions is the case of Bank of Credit and Commerce International (BCCI) and Pakistan's Habib Bank. The BCCI's involvement in money laundering was to such an extent that it was nicknamed Bank of Crooks and Criminals. Founded by a Pakistani banker-Aga Hassan Abedi in 1972 in Luxembourg, BCCI had business interests in 70 countries and assets worth 20 billion US dollars by the 1980s. This bank was initially financed by Sheikh Zayed bin Al Nahayan of Abu Dhabi. Abedi fiddled with an idea of a bank for developing countries or a 'Third World's Bank' for publicity. His vision carried many developing countries. Even Bank of America had an investment of US dollars 2.5 million in BCCI. 27 Within ten years the bank had grown to a considerable size. But voluminous monetary transactions by BCCI raised doubts about its clients and modus operandi. The Bank of America withdrew its investment in 1986 apprehending its drug connection. Many cases of drug profits gradually surfaced. Latin American drug cartels and drug syndicates of South East and South West Asian regions were the main clients of BCCI. They approached the BCCI with drug proceeds without any hesitation. The managers of the bank namely Muesella, Awann, Bilgrami, Akbar, Baaksa, Naqvi and others welcomed the leaders of the syndicates. The Pakistanis dominated this bank. Finally their narcotic drugs laundering drama came to an end in 1991 when the US Grand Jury indicted the managers and others involved in the transaction for fraud and racketeering.
These two cases are explicit examples of illicit monetary transactions through legal channels. There are several other ways to launder drug proceeds through professional smugglers and gangsters. Many of these criminals deal only in narcotic drugs and run a parallel government to manage their global network. These groups are well organised and are popularly known as 'drug syndicates'. They launder the drug proceeds through various means such as:-
Needless to highlight that South West Asia especially India, Pakistan and Afghanistan offer vast opportunity for money laundering. It is a known fact that the real estate boom in India during the 1980s and early 1990s was because of unprecedented investment in property business by Daud Ibrahim (currently in Pakistan) and his associates. Similar was the case of the entertainment industry in Mumbai, Daud Ibrahim & Co. emerged as the real financier for films and the music industry during this time. His gang dominated the money market for ten years by funding such business enterprises in Mumbai. The unholy alliance of drug smugglers, criminals, builders, film producers and petty business enterprises came to light only after the Bombay Blasts in 1993. Until then no one that knew that illicit drug proceeds had already converted into legitimate business and government could do nothing about it as there was no document or paper, a prerequisite for legal action against the crime committed.
Export and promotion of illicit narcotics and terrorists suit Pakistan's foreign policy aspirations in this region. Both the geography and polity of this region encourages Pakistan to sponsor terrorism in Jammu and Kashmir. The climatic conditions favour cultivation of poppy and the political condition helps Pakistan organise the Mujahideen to achieve its foreign policy goals in India. The amount Pakistan spends on sponsoring terrorism in India is nearly the same as it generates from illicit narcotics trade i.e. approximately US $2 billion. 28 This could be a valid argument that it is narcotics that sustain Pakistan's determination to keep India engaged in countering cross-border terrorism. Islamabad aims to weaken India's political and economic will. By pumping the hard currency generated from illicit narcotic drugs trade, Pakistan plans to disturb the local money market and make a dent in the Indian economy. The economic liberalisation introduced in India also opens a plethora of opportunities to Pakistan based drug syndicates. There are three major fallouts of economic liberalisation on the domestic economy of the country. First, government control is relaxed over banking and financial institutions. Second, it curtails availability of loans. Third, it raises cost of borrowing. And fourth, it reduces return on deposits. 29 As a result money launderers and drug traffickers float their ill-gotten money into the domestic money market. This is precisely what happened in India during the real estate boom in Bombay and Delhi. Such artificial rise in the price index causes economic imbalance. Similarly, the drug money laundered through Hawala or any other illegal channels deprives India of foreign exchange earnings. All these collectively affect the economy of the nation in slow process, which would be felt in due course of time. There is no immediate effect of such destabilising designs. However, the very fact that it has influence on the economy is a matter of concern.
The question arises how to cope with the menace of narco-terrorism in India? The narcotics scenario in the Golden Crescent and direct involvement of Pakistani politicians and law enforcement agencies therein has brought about an insecure Indian subcontinent. This insecure environment could be dealt with by analysing the prevalent situation in Pakistan, which has become the breeding ground for both terrorists and drug traffickers. In other words unless the causes for sponsoring terrorism are examined, an effective response to this phenomenon cannot be worked out by any government or non-government agency. It is relevant to note that the reason for Pakistan's involvement in such murky business lies not merely in its foreign policy objective to destabilise India, but also in its failure to evolve and establish a credible political institution within the country. The current politico-economic condition of Pakistan is the fallout of the unfulfilled commitments made by the political leaders to the people of Pakistan.
Growth of narcotic drug addicts (2 million in 1992) and illegal narcotic syndicates is a manifestation of the growing frustration in Pakistan's socio-economic and political system. Indian strategists and analysts need to take these negative trends in Pakistan into consideration. They should not ignore these developments as isolated domestic problems of Pakistan. It needs to be reiterated that socially and economically the Indian subcontinent is an integral whole. What happens in Pakistan has a spillover effect on India and vice-versa. And sooner or later the entire region tends to get directly or indirectly involved in the problems between the two. These two mainland countries actually hold the key to peace and stability in this region. Therefore, it would not be far-fetched to argue that India needs to analyse the problem of narco-terrorism in the light of overall politico-economic conditions in Pakistan. This is an important issue because Pakistan seems to have got entangled in the labyrinth of militarised politics, terrorism, illicit narcotic drugs trafficking and criminalisation in the name of religious based politics. It is high time that the people of Pakistan do some introspection, and set their house in order instead of talking about the right to self-determination for the Kashmiris in India. The Pakistan government too needs to understand that the trap it has laid for India, namely the net of terrorists and drug smugglers, might boomerang and could be fatal for the civil society in Pakistan. It is futile to look into the past. The 1971 war is a history that should not be repeated by the Pakistan government. It is high time that they realise that the needle of the clock cannot be turned back. They have to look forward to the future and together with India build a structure of peace and stability in this region. Unless Pakistan adopts this attitude on its own, India's security would remain illusive.