[Senate Hearing 107-885]
[From the U.S. Government Printing Office]


                                                       S. Hrg. 107-885
 
   NARCO-TERROR: THE WORLDWIDE CONNECTION BETWEEN DRUGS AND TERRORISM
=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON TECHNOLOGY, TERRORISM,
                       AND GOVERNMENT INFORMATION

                                 of the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 13, 2002

                               __________

                          Serial No. J-107-66

                               __________

         Printed for the use of the Committee on the Judiciary











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                       COMMITTEE ON THE JUDICIARY

                  PATRICK J. LEAHY, Vermont, Chairman
EDWARD M. KENNEDY, Massachusetts     ORRIN G. HATCH, Utah
JOSEPH R. BIDEN, Jr., Delaware       STROM THURMOND, South Carolina
HERBERT KOHL, Wisconsin              CHARLES E. GRASSLEY, Iowa
DIANNE FEINSTEIN, California         ARLEN SPECTER, Pennsylvania
RUSSELL D. FEINGOLD, Wisconsin       JON KYL, Arizona
CHARLES E. SCHUMER, New York         MIKE DeWINE, Ohio
RICHARD J. DURBIN, Illinois          JEFF SESSIONS, Alabama
MARIA CANTWELL, Washington           SAM BROWNBACK, Kansas
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
       Bruce A. Cohen, Majority Chief Counsel and Staff Director
                  Sharon Prost, Minority Chief Counsel
                Makan Delrahim, Minority Staff Director
                                 ------                                

   Subcommittee on Technology, Terrorism, and Government Information

                DIANNE FEINSTEIN, California, Chairwoman
JOSEPH R. BIDEN, Jr., Delaware       JON KYL, Arizona
HERBERT KOHL, Wisconsin              MIKE DeWINE, Ohio
MARIA CANTWELL, Washington           JEFF SESSIONS, Alabama
JOHN EDWARDS, North Carolina         MITCH McCONNELL, Kentucky
                 David Hantman, Majority Chief Counsel
                Stephen Higgins, Minority Chief Counsel







                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

DeWine, Hon. Mike, a U.S. Senator from the State of Ohio.........    59
Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................     1
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......    15
Kyl, Hon. Jon, a U.S. Senator from the State of Arizona..........     4

                               WITNESSES

Beers, Rand, Assistant Secretary of State for International 
  Narcotics and Law Enforcement Affairs, Department of State, 
  Washington, D.C................................................    22
Hutchinson, Asa, Administrator, Drug Enforcement Administration, 
  U.S. Department of Justice, Washington, D.C....................     6
Kamman, Curtis W., Former United States Ambassador to Colombia, 
  Department of State, Washington, D.C...........................    38
Newcomb, R. Richard, Director, Office of Foreign Assets Control, 
  U.S. Department of the Treasury, Washington, D.C...............    17
Olcott, Martha Brill, Senior Associate, Carnegie Endowment for 
  International Peace, Washington, D.C...........................    47
Shifter, Michael, Adjunct Professor and Program Director, Inter-
  American Dialogue, Center for Latin American Studies, School of 
  Foreign Service, Georgetown University, Washington, D.C........    41
Smith, R. Grant, Former U.S. Ambassador to Tajikistan, Department 
  of State, Washington, D.C......................................    44
Taylor, Francis X., Ambassador-at-Large for Counterterrorism, 
  Department of State, Washington, D.C...........................    23


   NARCO-TERROR: THE WORLDWIDE CONNECTION BETWEEN DRUGS AND TERRORISM

                              ----------                              


                       WEDNESDAY, MARCH 13, 2002

                              United States Senate,
     Subcommittee on Technology, Terrorism, and Government 
            Information, of the Committee on the Judiciary,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 10:12 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Dianne 
Feinstein, Chairperson of the Subcommittee, presiding.
    Present: Senators Feinstein, Kyl, Hatch, and Sessions.

OPENING STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM 
                    THE STATE OF CALIFORNIA

    Chairperson Feinstein. The hearing will come to order.
    I am very pleased to be joined by the ranking member, 
Senator Kyl, from the State of Arizona
    The subject of this hearing is the worldwide connection 
between drugs and terrorism. We are here today to discuss what 
I think both Senator Kyl and I believe to be a key component in 
the war against terrorism, and that is the connection between 
drug trafficking and terrorism.
    In some cases, terrorists may sell drugs for money, they 
may trade them for weapons. In others, organizations may 
protect drug traffickers for a fee or a tax. Either way, it has 
become increasingly clear that money spent to buy drugs on the 
streets of America may well eventually end up funding a 
terrorist attack on our country.
    Let me give you a case in point: Afghanistan. We have seen 
in Afghanistan, for instance, that the Taliban essentially 
controlled or at least profited from the distribution of more 
than 70 percent of the world's heroin. In remarks last October, 
British Prime Minister Tony Blair referred to the Taliban as 
``a regime founded on fear and funded on the drug trades.'' The 
Prime Minister was correct.
    According to the Department of State's International 
Narcotics Control Strategy it is issued last year, the Taliban 
controlled 96 percent of the territory where the opium poppy 
was grown, and promoted and even taxed the sale of this poppy 
to finance weapons purchased, as well as military operations. 
And there is little doubt that these operations, at least in 
part, supported and protected Al Qaeda and Osama bin Laden.
    Although the Taliban reportedly banned poppy cultivation in 
late 1997, opium production in Afghanistan increased through 
the year 2000, eventually accounting for a staggering 72 
percent of the world's illicit opium supply--72 percent from 
just one country.
    On July 27, 2000, the Taliban issued a second decree 
banning opium poppy cultivation. By the time of the second 
decree, the Taliban had better control of the country, and this 
time, according to almost every source, the ban was almost 
completely effective. Opium declined from over 3,000 metric 
tons in 2000 to 74 metric tons through October 2001.
    Now, some may say that it great, they succeeded. But the 
ban is just part of the story. In reality, all the ban did was 
artificially raise the price of heroin and allow the 
traffickers and the Taliban to reap record profits. This is 
because despite the ban on cultivation, there was no ban on 
storage and trafficking.
    A British spokesman estimated late last year that 3,000 
tons of opium were being stockpiled in Afghanistan, a 
significant portion of it by bin Laden personally and by his 
followers. So even though a ban on cultivation was in place, 
stored opium was still trafficked. More money was made than 
ever before and the Taliban continued to tax the opium trade at 
about 10 percent.
    Estimates are that the Taliban made between $40 and $100 
million per year from the drug trade. But United Nations 
suggested that the Taliban may have become increasingly 
involved in the drug trade, in which case they could derive 
even more money. The street value of heroin derived from Afghan 
opium is some $35 billion. The farmers get about $200 million 
of that, so there is a wide margin for additional money flowing 
to the Taliban.
    According to our own Government and the United Nations, 
virtually all of Afghanistan's poppy fields have now been 
replanted, as much as 45,000 to 65,000 hectares, for a crop of 
between 2 and 3,000 metric tons of opium, with a full harvest 
due in just a few weeks. So one question I will ask the 
witnesses today is what can be done to prevent a return to an 
Afghanistan steeped in the drug trade, using drug money to fund 
terrorism.
    Now, Colombia is another case in point, but I am going to 
save time and just put that part of the statement in the 
record.
    But some of the questions I have are, for instance, should 
we expand the Coverdell-Feinstein drug kingpin legislation, 
passed over two years ago, to also go after major terrorists? 
Is there other legislation needed to clarify our ability to use 
anti-drug assets against terrorists? Are we developing the 
proper level of resources in Afghanistan, Colombia, and other 
nations to deal with increasingly violent and interconnected 
narcotics terrorists? Should we be conditioning aid to 
Afghanistan or other nations on their cooperation in the war 
against drugs?
    These are questions I hope to ask of a very distinguished 
panel, and I will introduce them just as soon as we hear from 
my distinguished ranking member, Senator Kyl. Welcome.
    [The prepared statement of Senator Feinstein follows:]

 Statement of Hon. Dianne Feinstein, a U.S. Senator from the State of 
                               California

    ``We are here today to discuss what I believe to be a key component 
of the war against terrorism--that is the connection between drug 
trafficking and terrorism. The links between drugs and terrorism are 
often difficult to find, but they are there and we ust dedicate 
ourselves to beaking those links, and to breaking the terrorists and 
drug cartels alike.
    In some cases, terrorists may sell drugs for money or trade them 
for weapons. In others, terrorist organizations may protect drug 
traffickers for a fee, or ``tax.'' Either way, it has become 
increasingly clear that money spent to buy drugs on the streets of 
America may eventually end up funding a terrorist attack on our 
country.
    We have seen in Afghanistan, for instance, that the Taliban 
essentially controlled, or at least profited from, the distribution of 
more than 70% of the world's heroin. In remarks last October, British 
Prime minister Tony Blair referred to the Taliban as ``a regime founded 
on fear and funded on the drugs trade.'' The Prime Minister was 
correct. According to the Department of State's International Narcotics 
control strategy report issued last year, the Taliban controlled 96 
percent of the territory where poppy was grown in Afghanistan, and 
promoted and even taxed the sale of poppy to ``finance weapons 
purchases as well as military operations.'' And there is little doubt 
that these operations, at least in part, supported and protected Al 
Qaeda and Usama bin Laden.
    Although the Taliban reportedly banned poppy cultivation in late 
1997, opium production in Afghanistan increased through the year 2000, 
eventually accounting for a staggering 72% of the worlds illicit opium 
supply--72% from just one country.
    Incidentally, only about 15% of Afghan opium makes its way to the 
United States, with most of the heroin ending up on the streets of 
Europe. But the profits from those drug sales put us all at risk--for 
all we know, the September 11 attacks were funded, at least in part, by 
drug money.
    On July 27, 2000, the Taliban issued a second decree banning opium 
poppy cultivation. By the time of this second decree, the Taliban had 
better control of the country, and this time, according to almost every 
source, the ban was almost completely effective--opium production 
declined from over 3,000 metric tons in 2000 to just 74 metric tons 
through October 2001.
    Now some may say ``that's great--the Taliban cracked down on drugs 
and they succeeded.'' But the ban on cultivation was just part of the 
story. In reality, all the ban did was to artificially raise the price 
of heroin and allow the traffickers, and the Taliban, to reap record 
profits.
    So even though a ban on cultivation was in place, stored opium was 
still trafficked, more money was made than ever before, and the Taliban 
continued to tax the opium trade at about 10%. Estimates are that the 
Taliban made between $40 and $100 million per year from the drug trade, 
but the U.S. suggests that the Taliban may have become increasingly 
involved in the drug trade, in which case they could derive even more 
money. The street value of heroin derived from Afghan opium is some $35 
billion and the farmers only get about $200 million of that, so there 
is a wide margin for extra money flowing to the Taliban.
    There is also concern that the Taliban used income from the opium 
trade to fund extremists in neighboring countries such as the Islamic 
Movement of Uzbekistan (IMU) and the Chechen resistance.
    Furthermore, some reports maintain that Al Qaeda earned cash by 
protecting Afghanistan's shipments of opium bound for the West. There 
are indications that bin Laden served as a middleman for the Afghan 
opium producers, using income derived from this role to run terrorist 
training camps in Afghanistan.
    Even with the Taliban gone, there remains a strong risk that the 
drug trade in Afghanistan will be revived, and that money from the dug 
trade will make its way to terrorist groups just as it did before this 
war. According to our own government and the United Nations, much if 
not all of Afghan's poppy fields have been replanted--as much as 45,000 
to 65,000 hectares for a crop of between 2,000 and 3,000 metric tons of 
opium, with a full harvest due in just a few weeks.
    So one question I will ask the witnesses today is what can be done 
to prevent a return to an Afghanistan steeped in the drug trade, using 
drug money to fund terrorism.
    In Colombia, the situation is similar. Both the FARC and the ELN 
(guerrilla groups within Colombia) allegedly fund their operatons, at 
least in part, from income generated by the involvement in the illegal 
drug industry.
    U.S. officials estimate that some two-thirds of the FARC fronts and 
one-third of the ELN fronts have some involvement with illegal 
narcotics. These groups are involved in protecting corps, laboratories, 
storage facilities, and airfields from government anti-narcotics 
efforts, and even collecting ``taxes'' from those who benefit from that 
protection.
    Estimates of annual guerrilla income from drug trafficking have 
varied widely, but all estimates are in the hundreds of millions of 
dollars per-year--as much as $1, 2, or even 3 million dollars every day 
may be funneled from drug proceeds to the terrorist rebels.
    The right wing paramilitaries in Colombia may be funneled from drug 
proceeds to the terrorist rebels.
    The drug problem in Colombia is also our problem--according to 2001 
figures, Colombia now supplies some 90% of the cocaine consumed in the 
United States, and 75% of the heroin consumed on the U.S. East Coast. 
This is one reason that I have strongly supported Plan Colombia, a 
funding and support initiative to assist the Colombian government in 
eradicating crops, interdicting traffickers, and eliminating the drug 
trade in the country.
    In addition to the drug issue, however, the problem of terrorism is 
a problem that we must address around the world. In Colombia, that may 
mean assisting the government of Colombia in anti-terror, as well as 
anti-drug, operations. This is another issue I'd like to discuss today.
    Finally, I always approach these hearings with one burning 
question--is there anything that Congress can do--that we can do--to 
assist our government or other governments in the global war against 
terrorism and drug trafficking.

         For instance, should we expand the Coverdell-Feinstein 
        drug kingpin legislation passed two years ago to also go after 
        major terrorists?
         Is there other legislation needed to clarify our 
        ability to use anti-drug assets against terrorists?
         Are we devoting the proper level of resources in 
        Afghanistan, Colombia, and other nations to deal with 
        increasingly violent and inter-connected narco-terrorists?

    I will not turn over the microphone to may colleague Senator Kyl. I 
look forward to hearing his statement, and then to hearing the first 
panel address some of these issues.

  STATEMENT OF HON. JON KYL, A U.S. SENATOR FROM THE STATE OF 
                            ARIZONA

    Senator Kyl. Thank you very much, Senator Feinstein, and 
thank you for holding this hearing. We have a great group of 
witnesses here and so I will be brief and put my statement in 
the record and focus just a little bit more on the Colombia 
problem that you referred to just to make one point.
    My understanding is that bin Laden himself has significant 
connections to the poppy cultivation in Afghanistan, that he 
provided protection to heroin labs, processing labs there, that 
he was a part owner of some of those labs, part owner of at 
least one load that was shipped to the United States, and even 
tried to develop a stronger strain that would addict more 
people. To the extent any of our witnesses can talk about that, 
I think that would make interesting information for our 
citizens.
    With regard to Colombia, we have there as well, and the 
connection between the FARC, and to some extent lesser the ELN, 
and narco-trafficking is very clear; it is well-established. We 
are trying to assist the government there in eradicating those 
crops, but you have the same tension in Colombia as you do in 
Afghanistan between eradication and replacement of the crops 
with something else that can be grown, on the one hand, versus 
the diminishment of local support for the government, on the 
other. It is a very difficult situation either in Afghanistan 
or in Colombia. We understand that. I also appreciate that 
there are some things that will have to be discussed in closed 
session, and we look forward to that opportunity as well.
    I will put the remainder of my statement in the record as 
well, but it is very clear that because of the support for 
terrorism by the narcotics industry, all the way from the 
cultivation to the processing and smuggling of those products 
into Europe and into the United States--because of that 
connection between those drugs and the support for terrorism, 
just as we are trying to close off all the other avenues of 
support for terrorists, all of their financing opportunities, 
their bank accounts and all the rest of it, we have got to get 
a hold of this problem from this angle, too.
    That should never, however, confuse us to what the real 
issue is. The real issue is closing off the drug trade because 
of the people in the United States and the rest of the world 
that it damages and kills, what it does to our society. The war 
on terror is just another reason to deal with this very, very 
difficult problem.
    So I think this is a hearing that needed to occur, and 
fortunately we have some great witnesses who can help to 
elucidate this for us and I appreciate that very much, Madam 
Chairman.
    [The prepared statement of Senator Kyl follows:]

  Statement of Hon. Jon Kyl, a U.S. Senator from the State of Arizona

    Senator Feinstein, thank you for calling todays hearings on the 
link between terrorism and the illegal drug trade. Even before 
September 11, this subcommittee has worked hard to root out the sources 
of terrorism both here and abroad. I know Senator Feinstein is just as 
committed as I am to eliminating terrorism.
    Today we will focus on illegal drugs and their link to terrorism in 
two areas of the world--Afghanistan and Colombia (and their regions).
    First, Afghanistan. Examining what can, and should, be done to 
eliminate the drug trade in Afghanistan is complicated. We know that in 
2000, opium production in Afghanistan accounted for 72% of production 
worldwide. Over 3,000 metric tons of opium (to be turned into heroin) 
was produced there that years, seven to ten times more than humans 
consume annually. The Taliban benefitted from the opium traffic by 
taxing it--making upwards of $43 million. That's $43 million for an 
organization working for/with AL Qaeda. The Taliban used the funding to 
remain in power and shelter Osama Bin Laden and other AL Qaeda 
terrorists. Then in July 2000, the Taliban imposed a ban on poppy 
cultivation. Their profits, however, did not necessarily diminish. 
According to the International Narcotics Strategy Report 2002, the 
Taliban most likely benefitted from its own ban by dumping opium stocks 
at higher prices than could otherwise have been achieved. As William 
Bach, director of the Bureau of International Narcotics and enforcement 
Affairs, has said, the Taliban's share of revenues from opium ``may be 
far greater'' even than the widely cited figure of $43 million. In 
addition, we might not know the full extend of Bin Laden;s narco-terror 
connections--what we do know, however, is that he provided protection 
to heroin processing labs, was a part owner in numerous labs, part 
owner of one load shipped to the U.S., and tried to develop a stronger 
strain of heroin in order to addict more people here.
    In the months after September 11, we have become aware that poppy 
cultivation is on the rise again in Afghanistan, and that another very 
large harvest is about to begin there. I will be interested to learn 
from the witnesses their assessment of Afghanistan's efforts, worldwide 
efforts, and the efforts of our own Administration in stopping this 
poppy from making its was to market. I am also interested in learning 
about other related areas of the world, such as Burma, where drug-
trafficking and terrorism are presenting themselves as interrelated 
activities.
    In the South American region-in Colombia--I believe we must take a 
hard look at what is truly needed to effectively eliminate the 
narcoterrorist terror that has taken hold there. Colombia has been 
threatened by the FARC, and to a lesser degree the ELN, for the past 
forty years. In the past, the FARC's financing and narcotics 
trafficking were, to some degree, separate. Today, I believe that the 
FARC has completely integrated the drug trade into its terrorist 
activities. Jane's International Security News, for example, has 
reported that the FARC simplified its drug transactions by simply 
trading one kilo of highly pure cocaine for one AK-47 rifle, which can 
be parachuted into the jungle into FARC's territory. In addition, 
whether there has been a 11 percent reduction, as one source has 
reported, or a 25 percent increase, as another source has reported, in 
drug cultivation in Colombia, it is clear that the FARC's dependence on 
drug sales to finance its operations is not likely diminishing. I look 
forward to hearing the views of the witnesses today about what is 
needed to eliminate the serious and deadly narco-terrorist reality in 
Colombia.
    We have a very distinguished group of witnesses before us today. I 
am interested in their overall views--I realize, however, that for 
security reasons, some of the explanations and information that will 
shed light in this area must be shared in a classified manner. I 
appreciate the information I've received on these matters in the past, 
and look forward to gaining, in addition to the information made 
available today, additional classified information in order that I can 
to make the right determinations and decisions about terrorism and its 
link to illegal drug trafficking.
    I would like to thank Senator Feinstein again for holding this 
hearing today. We have always had an excellent working relationship and 
I look forward to examining this issue with her, with the skillful 
assistance of these witnesses.

    Chairperson Feinstein. Thanks very much, Senator.
    I will introduce the panel now. Mr. Asa Hutchinson is 
currently the Administrator of the Drug Enforcement 
Administration. He is a former Member of Congress from Arkansas 
and served on the House Judiciary Committee and the House 
Select Committee on Intelligence, just as Senator Kyl and I do 
in this House. Prior to his 6 years in Congress, Mr. Hutchinson 
practiced law for 21 years. He personally tried over 100 jury 
trials, ranging from cocaine distribution to securities fraud.
    I think I will introduce each one seriatim, so if you would 
please proceed, Mr. Hutchinson. We are delighted to have you 
here.

 STATEMENT OF ASA HUTCHINSON, ADMINISTRATOR, DRUG ENFORCEMENT 
  ADMINISTRATION, U.S. DEPARTMENT OF JUSTICE, WASHINGTON, D.C.

    Mr. Hutchinson. Thank you, Madam Chairwoman. I appreciate 
the fact that you are holding this hearing and bringing 
attention to this important issue. Senator Kyl, thank you for 
your leadership as well.
    I want to begin my testimony today by commenting on the 
recent advertisements during the Super Bowl sponsored by the 
ONDCP. These ads accurately depict the connection between drug 
use, drug trafficking money, and terrorism. As has been pointed 
out, we have to understand that by reducing the demand for 
drugs we will also reduce the financial structure that supports 
terrorist groups and violence against civil society and 
government.
    In February of this year, less than a month ago, I was in 
Mexico and met Mario Roldom-Querro. He was a special 
prosecutor, and within one hour after I departed Mexico City 
this prosecutor was assassinated and the police reports show 
that he was shot 28 times. This prosecutor was not the first, 
nor will he be the last public official killed in Mexico for 
going after the drug traffickers.
    In the first few months of 2002, 13 law enforcement 
officers have been murdered in Mexico. According to the Mexican 
press, during the first 30 days of this year 50 murders had 
occurred in one state, Sinaloa, which was reported to be the 
center of drug-related violence. And even though these acts of 
terror may not fit within the traditional concept of terrorism, 
they constitute some of the most vicious attacks on the 
judicial system and the rule of law, and are intended to 
intimidate and destroy legitimate government authority.
    The arrest last weekend of Benjamin Arellano Felix shows 
that the law can triumph over lawlessness, and President 
Vicente Fox and his administration should be congratulated. I 
know this committee has been very instrumental in encouraging a 
higher level of cooperation with Mexico.
    If you go to Colombia, since 1992 terrorist organizations 
in Colombia have kidnapped over 50 Americans and murdered at 
least 10 Americans. In the past 5 weeks, there have been more 
than 120 separate terrorist attacks committed by the 
Revolutionary Armed Forces of Colombia, or the FARC.
    Seven members of the Colombian congress have been killed in 
the last four years. Most recently, Colombian presidential 
candidate Ingrid Bettencourt and her chief of staff were 
kidnapped by the FARC, and Congresswoman Martha Catalina 
Daniels was kidnapped, tortured and assassinated.
    In Colombia, the drug traffickers, the terrorist groups and 
the illegal self-defense groups, some of which are terrorist 
organizations themselves, all carry out the most extreme 
attacks on society. The two major insurgency groups, the FARC 
and the National Liberation Army, or the ELN, have divided the 
territory and they are carrying out acts of violence against 
citizens and public officials.
    Likewise, paramilitary members have raised funds through 
extortion or by protecting laboratory operations in northern 
and central Colombia. The Carlos Castano organization is 
directly involved in processing cocaine. In addition, the DEA 
has a credible body of reporting that the Castano organization, 
or the AUC, is involved in exporting cocaine HCL from Colombia. 
In recent years, DEA has characterized Carlos Castano as a 
significant drug trafficker in his own right.
    Clearly, there are many links between the Colombian 
trafficking groups and the terrorist organizations. These 
groups--the FARC, the ELN, and the AUC--raise funds through 
extortion or by protecting laboratory operations. In return for 
cash payments, the groups protect cocaine laboratories in 
southern Colombia. They also encourage coca planting, and of 
greatest concern they discourage legal alternative development.
    In 2001, three members of the IRA, the Irish Republican 
Army, were arrested in Colombia for collaborating with the 
FARC. Some terrorists groups apparently have assisted drug 
trafficking groups in transporting and storing cocaine and 
marijuana within Colombia. Particularly, they protect 
clandestine air strips in southern California.
    We are very concerned about the 16th Front commander Thomas 
Molino, who has engaged in lab operations which are linked to 
Brazilian trafficker, Louis D'Acosta. So there is great concern 
about the connection, and overwhelming evidence of the 
connection between terrorist activities and drug trafficking 
activities.
    But violent activities of the FARC and other groups are not 
limited just to Colombia. The information we have is that it is 
starting to destabilize along the northern border of Ecuador 
because of the violence in coca processing activities. 
Similarly, their activities have spread to Panama. Venezuela, 
too, has experienced increased violence, causing cattle 
ranchers to hire additional security personnel to counter the 
FARC's efforts.
    Moving on to Peru, historically the Shining Path, the 
Sendero Luminoso, has been engaged in both drug trafficking as 
well as a separatist group that has been very violent in 
nature. Their influence has diminished, but they are still 
active and are continuing to extract a revolutionary tax from 
the cocaine base operators.
    Senator Feinstein, you talked about Afghanistan and pointed 
out that it is a major source of heroin production for the 
world, and the connection historically between the Taliban and 
the revenue that they have received from drug traffickers. As 
Senator Kyl pointed out, there is multi-source information that 
Osama bin Laden himself has been involved in the financing and 
facilitation of heroin trafficking activities.
    With the removal of the Taliban as the controlling force in 
Afghanistan, the farmers, traffickers and other elements have 
resumed their activities. It is of great concern to the United 
States, and particularly to the DEA. The cultivation and 
production estimates indicate that Afghanistan has the 
capability to return and continue as one of the largest opium 
producers in the world.
    Even though the chairman of the provisional government has 
supported the eradication of opium poppy cultivation and a ban 
on that cultivation, the estimates from the United Nations drug 
control program estimate that the area currently under 
cultivation could reach up to 65,000 hectares, potentially 
producing up to 2,700 metric tons of opium. This should send 
alarm bells to Europe particularly, but also to every nation 
that is impacted by the heroin trade.
    If you move to the country of Turkey, we have the Kurdistan 
Workers' Party, which is involved in the taxation of drug 
shipments and the protection of drug traffickers through that 
country. Less than a week ago, I was in Bolivia at an 
international drug enforcement conference in which I met with 
General Director Kimal Onal, of the Turkish National Police. 
Both General Onal and Director Kalistan voiced their concerns 
regarding the PKK's drug trafficking activities, which includes 
the taxation of drug shipments and the protection of drug 
traffickers. Of course, this group is on the terrorist list as 
well.
    In Burma, Southeast Asia, the United Wa State Army, an army 
of 16,000 armed combatants, is supported through 
methamphetamine production and heroin production. They are 
located in Myanmar, formerly Burma, and certainly are of great 
concern to us because of their massive production of illegal 
drugs.
    I could talk about the tri-border area in South America, 
the Hizballah, and other areas of the world that reflect the 
combination between drug traffickers, money that is produced, 
and terrorist organizations.
    One case I wanted to mention here in the United States was 
Operation Mountain Express. It was in three phases, resulting 
in the arrest of over 300 individuals involved in the 
pseudoephedrine trade that brought pseudoephedrine largely from 
Canada down into California for the production of 
methamphetamine.
    Many of the individuals arrested--in fact, almost 100 of 
them--were of Middle Eastern origin, and we have determined 
that much of the drug profit generated from the pseudoephedrine 
trade has been sent back to the Middle East. The DEA continues 
to investigate this organization and where the proceeds have 
returned and how they are benefitting and to the extent they 
are benefitting terrorism.
    I want to emphasize, in conclusion, the importance of our 
international operations. The international operations of the 
DEA are essential to our enforcement efforts here in the United 
States. It is essential to our intelligence-gathering 
activities and reducing supply, which is a major goal.
    In response to the concerns that have been expressed about 
Afghanistan and the connection between drugs and terrorism 
across the globe, our response is included in our budget 
submission to the United States Senate and to the Congress that 
asks for a reprogramming of funds that have been left over from 
previous years that will allow us to increase our operations in 
Afghanistan, in Uzbekistan, in Turkmenistan, and in Turkey, in 
these areas that are of greatest concern.
    We have tried to build international support for 
interdicting the anticipated flow of heroin coming out of 
Afghanistan, and our presence there is needed to help in this 
coordinated international effort. This reprogramming will allow 
us to put resources there, as well as build the sensitive 
investigative units that will work with the national police 
organizations of these countries to interdict these drugs, and 
also to build a law enforcement community there in Afghanistan.
    In conclusion, there is clearly a historic connection 
between drug trafficking and terrorist activities. It is 
destabilizing many regions of the world, and therefore any 
targeting of terrorist activities must also simultaneously go 
after the drug trafficking that supports that horrific impact 
of terrorist organizations.
    Thank you, Madam Chairman.
    [The prepared statement of Mr. Hutchinson follows:]

     Statement of Asa Hutchinson, Administrator, Drug Enforcement 
                             Administration

                           Executive Summary
    As the tragic events that occurred on September 11, 2001 so 
shockingly demonstrated, terrorist organizations are a threat to the 
national security of the United States. One of DEA's priorities is to 
target the powerful international drug trafficking organizations. Some 
of these groups have never hesitated to use violence and terror to 
advance their interests, all to the detriment of law-abiding citizens. 
While DEA does not specifically target terrorists, we will target and 
track down drug traffickers and drug trafficking organizations involved 
in terrorist acts.
    DEA employs a global approach to attacking drug organizations that 
fuel some terror networks. These drug organizations come from locations 
as far away as Afghanistan and as close as Colombia, but all utilize 
violence in order to achieve their goals.
    Most recently, Colombian presidential candidate Ingrid Betancourt 
and her chief of staff, Clara Rojas were kidnapped by the Revolutionary 
Armed Forces of Colombia (FARC), and Colombian Congresswoman Martha 
Catalina Daniels was kidnapped, tortured and assassinated. Colombia 
continues to be plagued by complex crime and national security issues 
that are, in part, fueled by the drug trade.
    DEA maintains offices around the world; these offices are in a 
unique position to direct human drug intelligence sources and 
contribute to the formation of more effective cooperative law 
enforcement relationships in that area. To improve the effectiveness of 
DEA, several initiatives have been proposed. These initiatives include 
Operation Containment, a proposed DEA initiative that includes opening 
a DEA office in Kabul, Afghanistan and the expansion of existing 
offices in Asian and European cities, as well as the growth of DEA's 
communications intercept and intelligence capabilities in support of 
agencies conducting counter-terrorism investigations in America.
    Chairwoman Feinstein, Ranking Member Kyl, and distinguished members 
of the Subcommittee, it is a pleasure for me to appear before you for 
the first time in my capacity as the Administrator of the Drug 
Enforcement Administration (DEA). The Subcommittee's leadership and 
support in our fight against international drug trafficking and 
terrorism is deeply appreciated by DEA and all Americans. I look 
forward to a successful, productive, and cooperative relationship with 
the Subcommittee on this most important issue.
    I appear before you today to testify on the nexus between 
international drug trafficking and terrorism, commonly referred to as 
narco-terrorism. As the tragic events that occurred on September 11, 
2001 so shockingly demonstrated, terrorist organizations and the 
dependence on and relation of some of these organizations to 
international drug trafficking poses a threat to the national security 
of the United States. Consequently, the DEA has directed enforcement 
and intelligence assets to identify, investigate, and dismantle all 
organizations, including terrorist groups, engaged in the drug 
trafficking trade. The degree to which terrorist organizations utilize 
drug profits to finance their horrific activities is of paramount 
concern to the DEA.
    DEA defines narco-terrorism as a subset of terrorism, in which 
terrorist groups, or associated individuals, participate directly or 
indirectly in the cultivation, manufacture, transportation, or 
distribution of controlled substances and the monies derived from these 
activities. Further, narco-terrorism may be characterized by the 
participation of groups or associated individuals in taxing, providing 
security for, or otherwise aiding or abetting drug trafficking 
endeavors in an effort to further, or fund, terrorist activities.
    One of DEA's priorities is to target the powerful international 
drug trafficking organizations that operate around the world, which 
employ thousands of individuals to transport and distribute drugs to 
American communities. Some of these groups have never hesitated to use 
violence and terror to advance their interests, all to the detriment of 
law-abiding citizens. While DEA does not specifically target 
terrorists, we will target and track down drug traffickers and drug 
trafficking organizations involved in terrorist acts.
    My testimony will focus on the connection between drug trafficking 
organizations, terrorist groups and the illegal drug profits used to 
support their activity.
    According to the U.S. Department of State, between 1996 and 2000, 
over 600 terrorist incidents occurred against the United States of 
America. Starting in October 1997 and continuing every two years 
thereafter, the U.S. Department of State designated approximately two 
dozen foreign terrorist organizations, or FTOs. As a result of the most 
recent round of designations, there are currently 28 FTOs. DEA has 
identified several of these terrorist groups that are associated with 
or directly engaged in drug trafficking. The events of September 11, 
2001 graphically illustrate the need to starve the infrastructure of 
every global terrorist organization and deprive them of the drug 
proceeds that might otherwise be used to fund acts of terror.
                             Southwest Asia
             afghanistan, the taliban, and osama bin laden
    The DEA has not maintained a presence in Afghanistan since January 
1980, when the office was closed for security reasons, as a result of 
the Soviet invasion in December 1979. Following the withdrawal of 
Soviet troops 10 years later, civil strife has ensued in Afghanistan. 
The Islamic State of Afghanistan is a major source country for the 
cultivation, processing and trafficking of opiate and cannabis 
products. Afghanistan produced over 70 percent of the world's supply of 
illicit opium in 2000. Morphine base, heroin and hashish produced in 
Afghanistan are trafficked worldwide. Due to the warfare-induced 
decimation of the country's economic infrastructure, narcotics are a 
major source of income in Afghanistan. Afghanistan is a party to the 
1988 UN Drug Convention but lacks the governmental resources to 
implement the country's obligations.
    U.S. intelligence confirmed a connection between Afghanistan's 
former ruling Taliban and international terrorist Osama Bin Laden and 
the al-Qa'ida organization. DEA has received multi-source information 
that Bin Laden has been involved in the financing and facilitation of 
heroin trafficking activities. While the activities of the two entities 
do not always follow the same course, we know that drugs and terror 
frequently share the common ground of geography, money, and violence. 
In this respect, the very sanctuary previously enjoyed by Bin Laden was 
based on the existence of the Taliban's drug state, whose economy was 
exceptionally dependent on opium.
    According to the official U.S. Government estimates for 2001, 
Afghanistan produced an estimated 74 metric tons of opium from 1,685 
hectares of land under opium poppy cultivation. This is a significant 
decrease from the 3,656 metric tons of opium produced from 64,510 
hectares of land under opium poppy cultivation in 2000.

----------------------------------------------------------------------------------------------------------------
                       2001            2000            1999            1998            1997            1996
----------------------------------------------------------------------------------------------------------------
         USG               74           3,656           2,861           2,340           2,184           2,099
       UNDCP              185           3,276           4,581           2,102           2,804           2,248
----------------------------------------------------------------------------------------------------------------


    Opium prices in Afghanistan currently range from nine to eleven (9-
11) times higher than in 2000 (February 2000: $30-43/kilogram, March 
2002: $333/kilogram). Cultivation and production estimates for the 
spring 2002 opium crop differ widely, but even under the most 
conservative estimate, Afghanistan has the capability to return as one 
of the largest opium producers in the world.
    The head of Afghanistan's provisional government, Hamid Karzai, 
supports the eradication of opium poppy cultivation. Interim president 
Karzai renewed the Taliban's ban on poppy cultivation and drug 
production in January 2002, and called upon the international community 
to support his efforts.
    In 2001, the United States Government estimated that 74 tons of 
opium was produced, down from over 3,600 metric tons (75% of world 
production) in 2000. The U.S. Government and the UNDCP estimate that 
the area currently under cultivation could reach up to 65,000 hectares, 
potentially producing up to 2,700 metric tons of opium. Harvesting of 
the first poppy crop will begin in late April and early May 2002.
[GRAPHIC] [TIFF OMITTED] 85660.001

    DEA sources have reported the observation of numerous inactive 
laboratory sites in Afghanistan and Pakistan, a number of significant 
opium dealers, large stockpiles of opium, and active opium markets in 
Jalalabad and Ghani Khel. The laboratories known to this point are 
concentrated in the regions bordering the Northwest Border Province of 
Pakistan, especially in Nangarhar, Laghman, and Konar Provinces in the 
Konduz and Badakhshan Provinces. As outlined below, the nexus between 
drugs and terrorism extends to other areas of Central and Southeast 
Asia as well.
Kurdistan Workers Party (PKK)
    DEA information indicates that the PKK is involved in the taxation 
of drug shipments and the protection of drug traffickers throughout the 
Southeastern Region of Turkey.
The United Wa State Army
    Methamphetamine and heroin trafficking finances the efforts of the 
16,000-strong United Wa State Army (UWSA). The UWSA exists primarily as 
a separatist organization, seeking autonomy from the central government 
in Burma. It funds its separatist activities by being the major 
international drug trafficking organization in the region.
                             South America
                  the colombian narco-terrorist threat
    On February 23, 2002, Colombian presidential candidate Ingrid 
Betancourt and her chief of staff, Clara Rojas were kidnapped by the 
Revolutionary Armed Forces of Colombia (FARC). Other acts of terrorism 
include Colombian Congresswoman Martha Catalina Daniels' torture and 
assassination. Colombia continues to be plagued by complex crime and 
national security issues that are, in part, fueled by the drug trade.
    In Colombia, drug traffickers, terrorist groups, and illegal self-
defense groups all carry out attacks of the most extreme violence on 
society. Colombia's two major insurgent groups are the Revolutionary 
Armed Forces of Colombia (Fuerzas Armadas Revolucionarias de Colombia 
or FARC) and the National Liberation Army (Ejercito de Liberacion or 
ELN). The FARC controls large areas of Colombia's eastern lowlands and 
rain forest, which are the primary coca cultivation and cocaine 
processing regions in the country. The ELN operates primarily along 
Colombia's northeastern border with Venezuela and in central and 
northwestern Colombia, including Colombia's cannabis and opium poppy 
growing areas.
[GRAPHIC] [TIFF OMITTED] 85660.002

    Right wing ``self-defense groups'' emerged in Colombia during the 
1980s in response to insurgent violence. Hundreds of illegal self-
defense groups--financed by wealthy cattle ranchers, emerald miners, 
coffee plantation owners, drug traffickers, etc.--conduct paramilitary 
operations throughout Colombia. The loose coalition known as the AUC 
(Autodefensas Unidas de Colombia), is the best known of these self-
defense groups. Carlos Castano is the most well recognized leader of 
the AUC.
    What DEA can show about the links between these terrorist groups 
and drug trafficking is identified below:

         Some groups raise funds through extortion or by 
        protecting laboratory operations. In return for cash payments, 
        or possibly in exchange for weapons, the groups protect cocaine 
        laboratories in southern Colombia. They also encourage coca 
        planting and discourage licit alternative development.
         In 2001, three members of the Irish Republican Army 
        (IRA) were arrested in Colombia for collaborating with the 
        FARC. The three men were charged with travelling on false 
        passports and providing the FARC with weapons instruction.
         Some terrorist groups apparently have assisted drug 
        trafficking groups in transporting and storing cocaine and 
        marijuana within Colombia. In particular, some groups protect 
        clandestine airstrips in southern Colombia.
         Elements of some FARC units in southern Colombia are 
        directly involved in drug trafficking activities, such as 
        controlling local cocaine base markets. At least one FARC front 
        has served as a cocaine source of supply for one international 
        drug trafficking organization.
         Although there is no evidence that the FARC or ELN 
        have elements established in the United States, their drug 
        trafficking activity impacts the United States and Europe.
         Several self-defense groups also raise funds through 
        extortion, or by protecting laboratory operations in northern 
        and central Colombia.

    There is deep concern in DEA about the role that profits from the 
drug trade plays in financing the terrorist activities of the FARC and 
other armed groups in Colombia. The Colombian government is now engaged 
in responding to this armed challenge with its military and law 
enforcement assets.
    The violent activities of the FARC and other groups have not been 
limited to the country of Colombia. DEA information indicates the FARC 
has become a destabilizing force along the northern border of Ecuador, 
where violence and coca processing activities have increased. 
Similarly, the FARC's violence and coca processing activities have also 
spread to Panama. Venezuela, too, is experiencing increased violence, 
causing cattle ranchers to hire additional security personnel to 
counter the FARC's efforts.
Peru's Sendero Luminoso: The Shining Path
    Sendero Luminoso is an extremely violent armed group that sought to 
overthrow the Peruvian government and establish a communist agrarian 
state from the 1980's to the mid 1990's.
    Sendero Luminoso operated from bases in remote regions of Peru that 
also held the main coca growing areas. DEA reporting indicates that the 
group probably extracted a revolutionary tax from the cocaine base 
operators.
Drug-Related Money Laundering:
    Money laundering is the process used by drug traffickers, terrorist 
organizations and others to convert bulk amounts of illicit profits 
into legitimate money. In Afghanistan, the unsophisticated banking 
system that previously existed has been damaged by years of war. Money 
laundering activity is completely unregulated. The DEA has received 
credible information indicating drug traffickers also use the informal 
banking system used extensively in the region, referred to as the 
hawala or hundi system. This system is an underground, informal network 
that has been used for centuries by businesses and families throughout 
Asia. The hawala or hundi system leaves no ``paper trail'' for 
investigators to follow.
    In South America, efforts to legitimize or ``launder'' drug 
proceeds by Colombian trafficking organizations are also subject to 
detection because of intense scrutiny by U.S. law enforcement and our 
financial system. Colombian drug trafficking organizations have also 
developed a number of money laundering systems that subvert financial 
transaction reporting requirements. One such form of money laundering 
is known as the Black Market Peso Exchange (BMPE). The BMPE is a 
complex system currently used by drug trafficking organizations to 
launder billions of dollars of drug money each year.
The International Role of DEA:
    DEA maintains offices around the world; these offices are in a 
unique position to direct human drug intelligence sources and 
contribute to the formation of more effective cooperative law 
enforcement relationships in that area. In Pakistan, for example, DEA 
has established a Sensitive Investigative Unit (SIU) composed of 
officers from the country's Anti-Narcotics Force (ANF). These well-
trained and highly motivated individuals are the bedrock of DEA's 
overseas initiatives and are painstakingly vetted through a stringent 
selection and review process that includes periodic polygraph 
examinations to ensure sustained integrity. The existence of a trusted 
cadre of counterparts such as Pakistan's SIU is an invaluable asset for 
DEA in any arena of operations, and the concept appears to be one that 
is well suited for expansion in the region. These operations are best 
presented within the framework of DEA's overseas role.
    With the support of the Congress, DEA has implemented its SIU 
program in nine countries to include Mexico, Colombia, Ecuador Peru, 
Bolivia, Brazil, Pakistan, Thailand, and the Dominican Republic. The 
SIU program has effectively enhanced international cooperation and 
institution building within the host government's infrastructure.
DEA Program Initiatives:
    DEA has requested substantial increases to strengthen resources for 
drug related financial investigations to enhance assets of domestic 
field offices, with emphasis on the financial hubs of New York, Miami, 
and Los Angeles. Money laundering is becoming more sophisticated. DEA 
has been successful in investigating and dismantling money laundering 
organizations, but we are limited in our resources. DEA must improve 
its ability to monitor and track the financial holdings and 
transactions of drug trafficking organizations, especially with the 
demonstrated nexus between the profits from drug trafficking, terrorist 
activities, and violence.
    The President's FY 2003 Budget Proposal also includes $35 million 
and 73 positions (including 12 Special Agents and 33 Intelligence 
Analysts) requested in the Attorney General's Counter-Terrorism Fund to 
enhance DEA's communications intercept and intelligence capabilities in 
support of agencies conducting counter-terrorism in America and 
overseas. An additional $7.7 million and 45 positions is also included 
in the FY 2003 Federal Bureau of Investigations' (FBI) Budget to 
reimburse DEA for its counter-terrorism support.
    In the course of conducting daily investigations against 
international drug trafficking organizations, the DEA often uncovers 
information of other related crimes, including money laundering and the 
financing of terrorist activities. The DEA will continue to expand its 
efforts to target the telecommunications infrastructure of 
transnational narco-terrorist organizations; rigorously pursue Title 
III investigations; and provide intelligence in support of counter-
terrorism efforts to other agencies, including the FBI and the 
Department of Defense (DoD).
    The DEA Financial Investigations Section has personnel assigned as 
DEA liaisons to both the Financial Crimes Enforcement Network (FinCEN) 
and to the Federal Bureau of Investigation's Financial Review Group, 
responsible for tracing terrorist-related monies.
    The DEA Intelligence Division has temporarily created a six-person 
Intelligence Response Team that can deploy worldwide to provide 
intelligence support related to narco-traffickers and other trafficking 
groups. This intelligence support includes but is not limited to, 
source debriefings, document exploitation, and site analysis. Efforts 
are underway to fully fund this unit.
    Operation Containment is a proposed DEA initiative which includes 
opening a DEA office in Kabul, Afghanistan and the expansion of 
existing offices in Asian and European cities, as well as the growth of 
DEA's communications intercept and intelligence capabilities in support 
of agencies conducting counter-terrorism investigations in America. The 
collection of intelligence, examination of regional trafficking trends 
and the identification of host nation requirements will be paramount, 
as will the development of a Confidential Source program and the 
creation of a chemical control program.
    The DEA Islamabad Country Office (ICO) has established a program to 
identify opium-to-heroin processing laboratories in Afghanistan and in 
the Northwest Frontier Province of Pakistan. The objective of the ICO 
program is the identification of laboratories and operators while they 
are reorganizing, following the cessation of hostilities. DEA is 
pursuing regional initiatives jointly with other countries to combat 
the heroin trade initiating in Afghanistan.
    DEA is working with the governments of Russia, Germany, and Romania 
to connect three regional law enforcement networks and databases based 
in those countries, in order to create a region-wide communication and 
information-sharing network. When these are linked, the net effect will 
be to link all of Europe, Central Asia, and the states of the Former 
Soviet Union into a law enforcement information sharing network focused 
on combating drug trafficking in the regions surrounding Afghanistan.
                              conclusions
    The new breed of narco-terrorist will challenge the resilience of 
all law enforcement agencies, including DEA. The Drug Enforcement 
Administration will continue to identify, investigate, and build cases 
against criminal and terrorist groups involved in drug trafficking 
wherever they may be found. DEA will continue to work with our law 
enforcement partners around the world to improve our cooperative 
enforcement efforts against international drug organizations.
    Thank you for the opportunity to testify before the Subcommittee 
today. I will be happy to respond to any questions you may have at the 
appropriate time.

    Chairperson Feinstein. Thank you very much, Mr. Hutchinson.
    We have been joined by the ranking member of the full 
committee, Senator Hatch.
    Senator if you would like to make a statement now or wait 
until after we finish with--
    Senator Hatch. Well, if I could, because I have so many 
conflicts this morning.
    Chairperson Feinstein. Please, go right ahead.

STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM THE STATE 
                            OF UTAH

    Senator Hatch. Thank you, Madam Chairperson. I want to 
commend you, Senator Feinstein and Senator Kyl, for the 
tremendous work you are doing on this subcommittee and on the 
Judiciary Committee as a whole. You are both key people on the 
committee and I just appreciate both of you, and especially 
holding this hearing to focus our attention on the nexus 
between narcotics trafficking and terrorism.
    I applaud you and this subcommittee's ranking Republican, 
Senator Kyl, for your unfailing commitment to crime and drug 
issues both at home and abroad. Your support of judicial 
nominees who are anti-crime and pro-victim, Madam Chairman, 
demonstrates your dedication to these issues. I am committed to 
joining you, Senator Kyl, and all of our colleagues in 
continuing the fight to stem the growth of narcotics 
trafficking and terrorism throughout the world.
    Since the end of the Cold War, analysts and policymakers 
have struggled to understand the challenges that affect our 
foreign policy. As we have learned, the challenges of today--
drugs, terrorism, and international organized crime--are very 
different from the challenges that we have faced previously.
    Today's problems are transnational, cross borders at will, 
and are not subject to control by nation states. The actors are 
sub-state actors; they are terrorists, they are criminal 
organizations. And these problems affect us at all levels, in 
our homes, in our streets, and in our communities. While our 
attention to narcoterrorism has been heightened by the 
September 11 attacks, we should all remember that virtually all 
our local communities have been suffering for years from the 
ill effects of illegal drugs.
    I commend this administration for its prompt, creative and 
comprehensive response to the attacks of September 11. It has 
used this tragic event as an opportunity to reestablish our 
alliances throughout the world. I wish to compliment especially 
Mr. Newcomb, Director of the Office of Foreign Assets Control 
of the Department of the Treasury, for using the powers of his 
office, including those authorized by the USA PATRIOT Act, to 
pursue terrorist funds, and most importantly the sources of 
those funds.
    Willie Sutton once said, when asked why he robbed banks, 
``because that is where the money is.'' We have heard of Yemeni 
honey producers and Saudi charities being sources of funds for 
terrorists, but the real money is in narcotics. For that 
reason, it is appropriate that this hearing highlights the 
nexus between narcotics and terrorism.
    As you all know, I passionately supported the confirmations 
of both Asa Hutchinson and John Walters. One of the reasons I 
so strongly supported their nominations was that I believed, in 
light of their accomplished records, that they would work 
closely with law enforcement and intelligence authorities to 
ensure that this Nation's international drug policy is designed 
not only to prevent drugs from being trafficked into America, 
but also to prevent drugs from being used to finance and 
further terrorist activities both here and abroad.
    While we have learned that some countries have succeeded in 
reducing the production of certain types of narcotics, that is 
simply not enough. Unless governments take bold steps to 
eradicate narcotics of all types at every level of the 
trafficking chain, at the packaging, transportation and 
distribution, as well as the production stage, profits from 
narcotics dealings will continue to soar and be used to fuel 
and finance terrorists and other criminal organizations.
    To counter the ever growing threat of narcoterrorism, we 
must take a proactive approach. As we have learned through our 
experiences in South America and Mexico, there are no short-
term fixes. I have also learned recently that over the last few 
years, a new opium problem has arisen in Southern California, 
particularly in Los Angeles. I am told that Mexican traffickers 
are the source of this opium, and I would like to learn more 
about what the DEA is doing, if anything, to combat this new 
drug problem.
    Madam Chairwoman, we need to continue to educate ourselves 
and build international coalitions as we have in the war 
against terrorism. If America and its allies want to halt 
terrorist activities, we must continue to expose the havens for 
money laundering and we must attack narcotics trafficking as 
well. Doing so will serve the dual purpose of cutting off a 
significant source of terrorist funding and preventing 
dangerous drugs from making their way into our communities.
    We are all impressed with the steps the administration has 
taken in the war against drugs and terrorism. From the very 
beginning, the administration recognized that it needed to 
update stale policies and stiffen criminal laws, particularly 
with respect to money laundering. It fought for those changes, 
which are incorporated in the USA PATRIOT Act, and I have no 
doubt that these tools will prove useful in the fight against 
narcoterrorism.
    I commend Mr. Hutchinson for the hard work that he is doing 
at the DEA and the relationships he is forging with our anti-
drug partners in Mexico and South America, in particular. I 
look forward to learning more from him and our distinguished 
witnesses about how they believe we as a country can best 
combat narcotics trafficking and terrorism, and the clandestine 
link between them.
    I am optimistic that we can, with assistance from our 
allies and greater intelligence, aggressively pursue and 
restrain these illicit activities. I am committed to working 
with the administration and my colleagues on both sides of the 
aisle to eradicate these interrelated threats to our Nation and 
to world peace.
    I want to thank all three of you for being here today. 
Ambassador Taylor, I appreciate you as well, and I just want to 
commend you for the work you are doing and tell you we are 
going to back you in every way we possibly can, and hope that 
you will continue to press forward and let's win not only the 
war against terrorism but the war against narcotics trafficking 
as well.
    Thank you, Madam Chairwoman.
    Chairperson Feinstein. Thanks very much, Senator Hatch.
    I neglected to ask the witnesses if you could possibly 
confine your statements to about five minutes, summarize them, 
it will give us a chance to ask more questions, and I think we 
have a large number of questions.
    Our next witness is Richard Newcomb, from the Department of 
the Treasury. He is Director of the Office of Foreign Assets 
Control at the United States Treasury Department. Mr. Newcomb 
was of great assistance to me and Senator Coverdell as we 
drafted and eventually passed the Coverdell-Feinstein drug 
kingpin legislation a couple of years back. He is an expert on 
the flow of money to and from narcotics traffickers.
    Mr. Newcomb, we look forward to your testimony and whether 
you can tell us if there is anything we can do with the drug 
kingpin legislation that relates to the area of drugs and 
terror.
    Thank you.

 STATEMENT OF R. RICHARD NEWCOMB, DIRECTOR, OFFICE OF FOREIGN 
 ASSETS CONTROL, U.S. DEPARTMENT OF THE TREASURY, WASHINGTON, 
                              D.C.

    Mr. Newcomb. Thank you, Chairwoman Feinstein, Senators Kyl 
and Hatch. It is certainly my pleasure to be here this morning 
and have the opportunity to testify about the programs 
administered by Foreign Assets Control of the Treasury 
Department to respond to the threat posed by international 
narcotics trafficking.
    We administer over 21 economic sanctions programs against 
target countries, regimes and grouped named as falling under 
these programs. We began administering international 
counterterrorism sanctions in January 1995 and now administer 
five counterterrorism sanctions programs. Sanctions against 
international narcotics traffickers centered in Colombia were 
first imposed in October of 1995. In 1999, the Coverdell-
Feinstein kingpin legislation provided the opportunity to 
impose similar sanctions on a global basis.
    Our implementation of the counterterrorism and narcotics 
trafficking sanctions programs has led to the identification 
and exposure of hundreds of individuals, businesses and other 
entities engaged in international narcotics trafficking and 
terrorism.
    Economics sanctions program involving foreign narcotics 
traffickers rely principally on the President's broad authority 
under the International Emergency Economic Powers Act and the 
Coverdell-Feinstein Kingpin Act to prohibit commercial 
transactions involving specific individuals and entities. These 
powers are employed to freeze or block foreign assets by 
prohibiting transfers of those assets located in the United 
States or in the possession or control of U.S. persons, as well 
as prohibiting transactions such as bank lending, imports, 
exports and related transactions.
    On October 21, 1995, then-President Clinton signed an 
executive order imposing sanctions on named narcotics 
traffickers centered in Colombia. The objective of this program 
was to identify, expose, isolated and incapacitate the 
businesses and agents of Colombia drug cartels, to deny them 
access to the U.S. financial system, and to deny them the 
benefits of trade and transactions involving U.S. businesses 
and individuals.
    The principal tool implementing this EO is the OFAC's list 
of what are called SDNTs, developed in close coordination with 
the Justice and State Departments. Since the inception of this 
program in October of 1995, we have identified over 575 
businesses and individuals, including 10 drug cartel leaders, 
230 businesses, and 335 other individuals. Four of the most 
notorious Colombian drug cartel leaders were identified in the 
executive order itself.
    We have designated six additional drug cartel leaders since 
that time, including four leaders of Colombia's powerful North 
Valle drug cartel in 2000 and 2001. United States persons are 
prohibited from engaging in financial transactions or business 
dealings with these 10 kingpins and the 565 other SDNTs.
    Consequences of sanctions against Colombian drug cartels 
have been swift, clear and compelling. Other targeted front 
companies are forced out of business; others are suffering 
financially, and numerous targets have been isolated 
financially and commercially.
    In May of 2001, more than 60 of these SDNT companies, with 
an estimated annual aggregate income of more than $230 million, 
have been liquidated or were in the process of liquidation. 
They have been denied the advantages of access to the U.S. 
financial infrastructure in the United States and the benefit 
of trade and transactions in the U.S. with U.S. businesses. 
They have been denied visas or have had their visas revoked.
    This list, recently coined by one major daily as the 
``lista antimafia,'' has heightened the sensitivity in Colombia 
to the risks of doing business with these named parties. One 
prominent financial institution told us that this list has 
created a sort of iron curtain between the SDNTs and the banks. 
U.S. compliance with the requirements of the program has been 
excellent. U.S. businessmen in Colombia have called this 
program a good preventive measure to facilitate the avoidance 
of the drug cartels, fronts and agents.
    We also administer the Foreign Narcotics Kingpin 
Designation Act, the Coverdell-Feinstein Kingpin Act, passed 
into law in December of 1999, modeled after the program I have 
must described. This Act's objective is two-fold. First, it is 
intended to in a sense decertify the foreign drug lords rather 
than the foreign governments and countries. Second, it is 
designed to deny significant foreign narcotics traffickers and 
their organizations, including related businesses and 
operatives, access to the U.S. financial system and all trade 
and transactions involving U.S. companies and individuals.
    The Kingpin Act operates on a global scale and authorizes 
the President to impose sanctions upon a determination that a 
foreign narcotics trafficker presents a threat to the national 
security, foreign policy, or economy of the United States. All 
these assets of these foreign persons, both businesses and 
individuals, designated under the Kingpin Act subject to U.S. 
jurisdiction are then blocked. This includes bank accounts, 
other financial property, any commercial or financial 
contracts, and any other real or personal property or interests 
in property.
    On June 1 of last year, President Bush invoked the Kingpin 
Act to announce the names of 12 foreign persons that he 
determined were significant foreign narcotics traffickers or 
kingpins. President Clinton named the first group of 12 
kingpins on June 1, 2000. President Bush is required by the 
Kingpin Act to designate additional kingpins June 1 of this 
year. Redesignations of kingpins are not required by the 
legislation.
    On January 31 of this year, pursuant to this Act, the 
Office of Foreign Assets Control, in consultation with the 
Department of Justice, the FBI, the DEA, the Defense 
Department, the Department of State and the CIA, identified 12 
foreign businesses and 15 associated foreign individuals in the 
Caribbean and Mexico, or so-called Tier II designees; that is, 
persons who act or provide assistance or support for a kingpin.
    We determined that these 27 individuals and entities were 
acting as fronts or agents for kingpins previously named by the 
President. We have authority under this Act to make these so-
called Tier II derivative designations of businesses under 
control by the kingpin or acting as their agent. The Act does 
not target a particular region or country. It is directed at 
significant foreign narcotics traffickers and their 
organizations and operatives wherever in the world they 
operate.
    These 27 newly-designated Tier II businesses and 
individuals located in the Caribbean and Mexico include, for 
example, a drug store chain, a pharmaceutical distributor, an 
air courier service, a hotel, a resort complex, as well as real 
estate, economic security and consulting firms.
    The drug store chain, Farmacia Vida, and associated 
pharmaceutical distributor Distribuidora Imperial de Baja 
California, 7 associated businesses and 12 associated 
individuals, comprise a network of front companies located in 
Mexico that have been under the control of the Benjamin and 
Ramone Arellano Felix organization, leaders of the Mexico 
Tijuana drug cartel named as significant foreign narcotics 
traffickers on June 1 of 2000; another network comprising 
Manuel Aguirre Galindo, also a member of Mexico's Tijuana drug 
cartel. The hotel and resort complex Oasis Beach Resort and 
Convention Center and one other associated individual were also 
designated. Finally, in the Caribbean, an air courier service 
and one associated foreign individual located in St. Kitts and 
Nevis were named because they were operated by the kingpin 
Gilroy Vingrove Matthews, named in 2000.
    Implementation of the Coverdell-Feinstein Kingpin Act has 
produced results mirroring those of the Colombia SDNT sanctions 
programs. Companies under control by kingpins have been damaged 
and isolated financially and commercially. They have been 
denied access to banking services in the United States and to 
the benefits of trade and transactions in the U.S. or involving 
U.S. businesses.
    Mexican and European companies have terminated business 
relationships with the Tijuana drugstore chain and related 
pharmaceutical distributors. It has been reported that some 
Mexican banks have canceled loans used for purchases of 
pharmaceuticals.
    The United States Customs Service has assisted by notifying 
all travelers at the busy San Ysidro border crossing in 
California that all medicines purchased at the Farmacia Vida 
drugstore chain in Tijuana will be seized. Press accounts of 
the resort hotel designated indicate that its business has 
declined significantly. Finally, a recent Washington Post 
article described this Oasis Beach Resort, usually crammed with 
U.S. tourists, as practically deserted on a recent weekend.
    Thank you, Madam Chairwoman, for giving me the opportunity 
to tell you about this program.
    [The prepared statement of Mr. Newcomb follows:]

  Statement of R. Richard Newcomb, Director, Office of Foreign Assets 
           Control, Department of Treasury, Washington, D.C.

                            I. Introduction
    Chairwoman Feinstein and members of the Subcommittee,
    Thank you for inviting me to testify today on the programs 
administered by the Treasury Department's Office of Foreign Assets 
Control (OFAC) that respond to the threat posed by international 
narcotics trafficking.
    OFAC administers economic sanctions and embargo programs against 
specific foreign countries, regimes, or groups of entities and 
individuals to further U.S. foreign policy and national security 
objectives. Sanctions are usually imposed pursuant to a Presidential 
declaration of national emergency under the authority of the 
International Emergency Economic Powers Act or the Trading with the 
Enemy Act, or may be imposed by Congress as in the case of the Foreign 
Narcotics Kingpin Designation Act (the Kingpin Act).
    OFAC administers 21 economic sanctions programs against target 
countries, regimes, or named groups and individuals. OFAC began 
administering international counterterrorism sanctions in January 1995, 
and now administers five counterterrorism sanctions programs. Sanctions 
against international narcotics traffickers centered in Colombia were 
first imposed by the President in October 1995. In 1999, the Kingpin 
Act provided the authority to impose similar sanctions on a global 
basis. OFAC's implementation of the counterterrorism and narcotics 
trafficking sanctions programs has led to the identification and 
exposure of hundreds of individuals, businesses and other entities 
engaged in international narcotics trafficking or terrorism.
    Economic sanctions programs involving foreign narcotics traffickers 
rely principally on the President's broad powers under the 
International Emergency Economic Powers Act (IEEPA) and the Kingpin Act 
to prohibit commercial transactions involving specific entities and 
individuals. These powers are employed to freeze, or block, foreign 
assets by prohibiting transfers of those assets located in the United 
States or in the possession or control of U.S. persons, as well as to 
prohibit financial transactions (such as bank lending), imports, 
exports, and related transactions.
         II. Specially Designated Narcotics Traffickers (SDNT)
    On October 21, 1995, President Clinton signed Executive Order (EO) 
12978, imposing sanctions on named narcotics traffickers centered in 
Colombia. The objectives of this program are to identify, expose, 
isolate and incapacitate the businesses and agents of the Colombian 
drug cartels, to deny them access to the U.S. financial system, and to 
deny them the benefits of trade and transactions involving U.S. 
businesses and individuals.
    The principal tool implementing EO 12978 is OFAC's list of SDNTs, 
developed by OFAC in close consultation with the Justice and State 
Departments. Since the inception of the program in October 1995, OFAC 
has identified 578 business and individuals as SDNTs, including ten 
Colombian drug cartel leaders, 231 businesses and 337 other 
individuals. Four of the most notorious Colombian drug cartel leaders 
were identified in the Executive Order itself. OFAC has designated six 
additional Colombian drug cartel leaders since 1998, including four 
leaders of Colombia's powerful North Valle drug cartel in 2000 and 
2001. United States persons are prohibited from engaging in financial 
or business dealings with the ten drug kingpins and the 568 other 
SDNTs.
    Consequences of the sanctions against Colombian drug cartels have 
been swift, clear, and compelling. Many targeted front companies have 
been forced out of business, others are suffering financially, and 
numerous targets have been isolated financially and commercially. By 
May 2001, more than sixty SDNT companies, with an estimated annual 
aggregate income of more than U.S. $230 million, had been liquidated or 
were in the process of liquidation. SDNTs have been denied the 
advantages of access to the financial infrastructure of the United 
States, and the benefits of trade and transactions in the U.S. or 
involving U.S. businesses. SDNT individuals have been denied U.S. visas 
or had their visas revoked.
    The SDNT list, recently coined by one major Colombian daily as the 
``lista antimafia'' [anti-mafia list], has heightened sensitivity in 
Colombia to the risks of doing business with named SDNTs. One prominent 
financial institution told OFAC, the SDNT list has created an ``iron 
curtain'' between SDNTs and banks. U.S. compliance with the 
requirements of the SDNT program has been excellent. U.S. businessmen 
in Colombia call the SDNT program as ``a good preventive measure'' that 
facilitates avoidance of the drug cartels' fronts and agents.
    OFAC's Bogota office coordinates the sanctions against narcotics 
traffickers in Colombia and conducts research on specially designated 
narcotics traffickers and their front companies and agents. The OFAC 
Attache in Bogota maintains excellent liaison with the U.S. Embassy, 
Colombian government agencies, and the Colombian banking and private 
sectors that has led to widespread compliance with the narcotics 
sanctions program. OFAC staff travel regularly to Colombia in support 
of the sanctions program, and have extensive knowledge of Colombian 
front companies and individuals. OFAC will continue to identify 
businesses and other property owned or controlled by the Colombian drug 
cartels and to expand the SDNT list to include additional drug 
traffickers and their organizations.
    III. Foreign Narcotics Kingpin Designation Act (``Kingpin Act'')
    OFAC also administers the Foreign Narcotics Kingpin Designation Act 
(``Kingpin Act''), passed into law in December 1999 and modeled after 
OFAC's Colombia SDNT program. The Act's objective is twofold. First, it 
is intended to ``de-certify'' foreign drug lords rather than foreign 
governments and countries. Second, it is designed to deny significant 
foreign narcotics traffickers and their organizations, including 
related businesses and operatives, access to the U.S. financial system 
and all trade and transactions involving U.S. companies and 
individuals. The Kingpin Act operates on a global scale and authorizes 
the President to impose sanctions upon a determination that a foreign 
narcotics trafficker presents a threat to the national security, 
foreign policy, or economy of the United States.
    All assets of foreign persons, both businesses and individuals, 
designated under the Kingpin Act and subject to U.S. jurisdiction are 
blocked. This includes bank accounts and other financial property, any 
commercial or financial contracts, and any other real or personal 
property or interests in property. U.S. persons and companies are 
prohibited from engaging in any transaction that evades or avoids the 
prohibitions of the Kingpin Act. Corporate criminal penalties for 
violations of the Kingpin Act range up to $10,000,000; individual 
penalties range up to $5,000,000 and 30 years in prison. Civil 
penalties of up to $1,000,000 may also be imposed administratively.
    On June 1, 2001, President Bush invoked the Kingpin Act to announce 
the names of 12 foreign persons that he determined were significant 
foreign narcotics traffickers, or kingpins. President Clinton named the 
first group of 12 kingpins on June 1, 2000. President Bush is required 
by the Kingpin Act to designate additional kingpins by June 1 of this 
year. Redesignation of kingpins is not required.
    On January 31, 2002, pursuant to the Kingpin Act, the Office of 
Foreign Assets Control, in consultation with the Department of Justice, 
Federal Bureau of Investigation, Drug Enforcement Administration, 
Department of Defense, Department of State, and the Central 
Intelligence Agency, identified 12 foreign businesses and 15 associated 
foreign individuals in the Caribbean and Mexico as derivative (or 
``Tier-II'') designees, that is, persons who act for, or provide 
assistance or support to, a kingpin. OFAC determined that these 27 
individuals and entities were acting as fronts or agents for kingpins 
previously named by the President.
    OFAC has authority under the Kingpin Act to make derivative (Tier-
II) designations of businesses owned or controlled by a kingpin and of 
those acting as a kingpin's agent. The Kingpin Act does not target a 
particular region or country; it is directed at significant foreign 
narcotics traffickers and their organizations and operatives, wherever 
located throughout the world.
    The 27 newly designated Tier-II businesses and individuals, located 
in the Caribbean and Mexico, include a drugstore chain and 
pharmaceutical distributor, air courier service, a hotel and resort 
complex, as well as real estate, electronic security, and consulting 
firms. The drugstore chain, Farmacia Vida, an associated pharmaceutical 
distributor, Distribuidora Imperial de Baja California, seven 
associated businesses and 12 associated individuals comprise a network 
of front companies located in Mexico that have been under the control 
of Benjamin and Ramon Arellano Felix, leaders of Mexico's Tijuana drug 
cartel named as significant foreign narcotics traffickers on June 1, 
2000. Another network comprising Manuel Aguirre Galindo, also a member 
of Mexico's Tijuana drug cartel, the hotel and resort complex Oasis 
Beach Resort & Convention Center and one other associated individual, 
were also designated. Finally, in the Caribbean, one air courier 
service and one associated foreign individual located in St. Kitts & 
Nevis were named because they were operated by Kingpin Glenroy Vingrove 
Matthews, named on June 1, 2000.
    Implementation of the Kingpin Act has produced results mirroring 
those of the Colombian SDNT sanctions program. Companies owned or 
controlled by kingpins have been damaged and isolated financially and 
commercially. They have been denied access to banking services in the 
United States and to the benefits of trade and transactions in the U.S. 
and involving U.S. businesses. Mexican and European companies have 
terminated business relationships with the Tijuana drugstore chain and 
related pharmaceutical distributor. It has been reported that some 
Mexican banks have cancelled loans used for the purchase of 
pharmaceuticals. The U.S. Customs Service has notified all travelers at 
the busy San Ysidro border crossing in California that all medicines 
purchased at the Farmacia Vida drugstore chain in Tijuana, Mexico will 
be seized. Press accounts of the Mexican resort hotel designated by 
OFAC indicate that its business has declined significantly. A recent 
Washington Post article described the Oasis Beach Resort, usually 
crammed with U.S. tourists, as ``practically deserted'' on a recent 
weekend.
    OFAC will continue to identify businesses belonging to significant 
foreign narcotics traffickers on a worldwide basis and to expand the 
kingpin list to include additional drug traffickers, their fronts and 
agents.

    Chairperson Feinstein. Thanks very much, Mr. Newcomb.
    We will now turn to Mr. Rand Beers, of the State 
Department. Mr. Beers has been Director of the State 
Department's Office of Narcotics and Law Enforcement since he 
was confirmed by the Senate in 1998. He has been with the 
Department since 1971 and he served on the National Security 
Council three times, one of those three times as Director for 
Counternarcotics and Counterterrorism.
    Mr. Beers is a familiar face, not quite with that necktie, 
but a familiar face before this committee. He has testified 
many times and we welcome him this morning.

   STATEMENT OF RAND BEERS, ASSISTANT SECRETARY OF STATE FOR 
INTERNATIONAL NARCOTICS AND LAW ENFORCEMENT AFFAIRS, DEPARTMENT 
                   OF STATE, WASHINGTON, D.C.

    Mr. Beers. Thank you, Madam. The necktie is in honor of my 
team, D.C. United, which is playing a game this evening at RFK 
Stadium. I always wear it when they play.
    Chairperson Feinstein. Well, good luck.
    Mr. Beers. Madam Chairman, as you are aware, I had not 
known precisely when I was going to be arriving, and I 
appreciate your indulgence for my late arrival, as I had a 
diplomatic requirement to at least participate in the opening 
session of our cooperative talks with the Chinese which 
Ambassador Taylor undertook yesterday.
    I had not prepared to make any opening remarks myself. I 
have a statement for the record which I have submitted and I 
look forward very much to answering any and all of your 
questions on this absolutely critical subject.
    Thank you.
    Chairperson Feinstein. Thank you very much.
    Ambassador Taylor, are you testifying?
    Ambassador Taylor. Yes, ma'am.
    Chairperson Feinstein. All right, let me introduce you.
    Francis Taylor was sworn in as coordinator for 
counterterrorism at the State Department last July. He is a 
retired Air Force general with 31 years' service and we welcome 
him.
    Please proceed.

    STATEMENT OF FRANCIS X. TAYLOR, AMBASSADOR-AT-LARGE FOR 
    COUNTERTERRORISM, DEPARTMENT OF STATE, WASHINGTON, D.C.

    Ambassador Taylor. Thank you very much, Madam Chairwoman 
and Senator Kyl, for the opportunity. We are here in tandem 
with Rand, since we didn't know when he was going to come. So I 
have oral remarks, and as Rand mentioned, he has requested his 
statement be entered in the record as the statement from the 
State Department.
    The attacks against the United States six months ago on 
September 11 stunned us all. It is now clear that to fight 
terrorism we must look at the spectrum of crime that supports 
terror to counter the criminal and narcotics-based support that 
some terrorists use.
    In the past, state sponsors provided funding for terrorist 
groups, and their relationships with terrorists organizations 
were used to secure territory or provide access to arms 
networks. Lately, however, as state sponsorship of terrorism 
has come under increased scrutiny and greater international 
condemnation, terrorist groups have looked increasingly to 
other sources of funds, including drug trafficking.
    Trafficking often has a two-fold purpose for the 
terrorists. Not only does it provide funds, it also furthers 
the strategic objectives of the terrorists. Growing pressure on 
state sponsors of terrorism has increased the likelihood that 
terrorists will become involved in the drug trade. Interdiction 
of terrorists' finances and shut-down of charitable and other 
non-governmental front organizations have also contributed to 
this convergence.
    There is often a nexus between terrorism and organized 
crime, including drug trafficking. Links between terrorist 
organizations and drug traffickers take many forms, ranging 
from facilitation, protection, transportation and taxation, to 
direct trafficking by terrorist organizations themselves in 
order to finance their activities.
    Traffickers and terrorists have similar logistical needs in 
terms of material and the covert movement of people, goods and 
money. Relationships between drug traffickers and terrorists 
benefit both. Drug traffickers benefit from terrorist military 
skills, weapons supplies and access to clandestine 
organizations. Terrorists gain a source of revenue and 
expertise in the illicit transfer and laundering of proceeds 
from the illicit transactions.
    Both groups bring corrupt officials whose services provide 
mutual benefits, such as greater access to fraudulent 
documents, including passports and customs papers. Drug 
traffickers may also gain considerable freedom of movement when 
they operate in conjunction with terrorists who control large 
amounts of territory.
    The methods used for moving and monitoring money for 
general criminal purposes are similar to those used to move and 
support terrorist activities. It is no secret which countries 
and jurisdictions have poorly regulated banking structures, and 
both terrorist organizations and drug trafficking groups have 
made use of online transfers and accounts that do not require 
disclosure of the owners. Moreover, bulk cash smuggling methods 
and informal networks such as hawala and the Black Market Peso 
Exchange are easy and efficient ways to launder money.
    The State Department has worked with the Departments of 
Justice and Treasury and with nations around the world to 
strengthen controls that will thwart drug traffickers' attempts 
to launder their funds and to investigate and prosecute those 
who are involved in moving criminal proceeds. These same law 
enforcement controls also help prevent the movement of funds of 
terrorist organizations.
    We are working on the diplomatic front, both multilaterally 
and bilaterally, to strengthen our counternarcotics and law 
enforcement cooperation with governments, with a special focus 
on bringing these tools to bear in the fight against terrorism.
    For example, in the G8 we have, since September 11, 
combined the efforts of the Lyon crime experts and Roma 
counterterrorism expert groups to enhance cooperation on a 
range of specific issues, including counternarcotics, in 
relation to Afghanistan.
    Moreover, many of the skills and types of equipment needed 
to attack organized crime are applicable to combatting 
terrorism. In our prepared statement, we list by geographic 
region terrorist organizations that are known to have 
connections to drug trafficking. Most of these organizations 
have been officially designated as foreign terrorist 
organizations by the Secretary of State.
    Madam Chairwoman, that concludes my oral remarks and we 
would welcome any questions that you or other Senators may 
have.
    [The prepared statement of Mr. Beers and Mr. Taylor 
follows:]

Statement of Rand Beers, Assistant Secretary of State for International 
Narcotics and Law Enforcement Affairs, Department of State, and Francis 
  X. Taylor, Ambassador-at-Large for Counterterrorism, Department of 
                        State, Washington, D.C.

    Madam Chairperson and Members of the Committee, thank you for the 
opportunity to speak to you today on this important subject.
    The attacks against the United States on September 11 stunned us 
all. They also made it very clear that the mission of the Bureau for 
International Narcotics and Law Enforcement Affairs (INL)--to provide 
support to counternarcotics and other anti-crime efforts worldwide--is 
more important now than ever.
    While INL does not have the lead in the war on terrorism, we 
strongly support these efforts through our counternarcotics and crime 
control activities, which provide training, equipment and institutional 
support to many of the same host nation law enforcement agencies that 
are charged with a counter-terrorist mission. We are also working on 
the diplomatic front, both multilaterally and bilaterally, to 
strengthen our counternarcotics and law enforcement cooperation with 
other governments with a special focus on bringing these tools to bear 
in the fight against terrorism. For example, in the G8 we have since 
September 11 combined the efforts of Lyon (crime) and Roma 
(counterterrorism) experts groups to enhance cooperation on a range of 
specific issues, including counternarcotics in relation to Afghanistan.
                         SYMBIOTIC RELATIONSHIP
    There often is a nexus between terrorism and organized crime, 
including drug trafficking. Links between terrorist organizations and 
drug traffickers take many forms, ranging from facilitation--
protection, transportation, and taxation--to direct trafficking by the 
terrorist organization itself in order to finance its activities. 
Traffickers and terrorists have similar logistical needs in terms of 
materiel and the covert movement of goods, people and money.
    Relationships between drug traffickers and terrorists benefit both. 
Drug traffickers benefit from the terrorists' military skills, weapons 
supply, and access to clandestine organizations. Terrorists gain a 
source of revenue and expertise in illicit transfer and laundering of 
proceeds from illicit transactions. Both groups bring corrupt officials 
whose services provide mutual benefits, such as greater access to 
fraudulent documents, including passports and customs papers. Drug 
traffickers may also gain considerable freedom of movement when they 
operate in conjunction with terrorists who control large amounts of 
territory.
                         SIMILARITY OF METHODS
    Terrorist groups and drug trafficking organizations increasingly 
rely on cell structures to accomplish their respective goals. While 
there may be a strong central leadership, day-to-day operations are 
carried out by members of compartmentalized cells. This structure 
enhances security by providing a degree of separation between the 
leadership and the rank-and-file. In addition, terrorists and drug 
traffickers use similar means to conceal profits and fund-raising. They 
use informal transfer systems such as ``hawala,'' and also rely on bulk 
cash smuggling, multiple accounts, and front organizations to launder 
money. Both groups make use of fraudulent documents, including 
passports and other identification and customs documents to smuggle 
goods and weapons. They both fully exploit their networks of trusted 
couriers and contacts to conduct business. In addition, they use 
multiple cell phones and are careful about what they say on the phone 
to increase communications security.
    The methods used for moving and laundering money for general 
criminal purposes are similar to those used to move money to support 
terrorist activities. It is no secret which countries and jurisdictions 
have poorly regulated banking structures, and both terrorist 
organizations and drug trafficking groups have made use of online 
transfers and accounts that do not require disclosure of owners. 
Moreover, bulk cash smuggling methods and informal networks such as 
``hawala'' and the black market peso exchange are easy and efficient 
ways to launder money. Criminal networks are in a perfect position to 
use methods that require doctoring of passports or customs declaration 
forms. These methods are unlikely to change in the near term. Though 
many countries have been quick to update their regulations, few have 
the law enforcement structure in place to carry out interdiction. If 
law enforcement capabilities improve globally, in the long term 
traffickers and terrorists may increasingly use trusted individual 
couriers, or more complex balance transfers in informal networks.
    INL has worked with the Departments of Justice and Treasury and 
with nations around the world to strengthen controls which could thwart 
the drug traffickers' attempts to launder their funds and to 
investigate and prosecute those who are involved in moving criminal 
proceeds. These same law enforcement controls also help prevent the 
movement of funds of terrorist organizations.
    Moreover, many of the skills and types of equipment needed to 
attack organized crime are applicable to combating terrorism. Much of 
INL's assistance--such as the provision of equipment for forensic labs; 
assistance with drafting asset forfeiture and money laundering 
legislation; and provision of basic training in investigation 
techniques, maritime enforcement and port security--applies to both 
counternarcotics and counterterrorism. Migrant smuggling, document 
fraud, arms trafficking, auto theft, smuggling of contraband, and 
illegal financial transactions are tools for terrorists as well as 
narcotics traffickers.
               FROM STATE-SPONSORSHIP TO DRUG TRAFFICKING
    In the past, state sponsors provided funding for terrorists, and 
their relationships with terrorist organizations were used to secure 
territory or provide access to gray arms networks. Lately, however, as 
state sponsorship of terrorism has come under increased scrutiny and 
greater international condemnation, terrorist groups have looked 
increasingly at drug trafficking as a source of revenue. But 
trafficking often has a two-fold purpose for the terrorists. Not only 
does it provide funds, it also furthers the strategic objectives of the 
terrorists. Some terrorist groups believe that they can weaken their 
enemies by flooding their societies with addictive drugs.
    Growing pressure on state sponsors of terrorism has increased the 
likelihood that terrorists will become involved in the drug trade.
    Interdiction of terrorist finances and shutdowns of ``charitable'' 
and other non-governmental front organizations have also contributed to 
their convergence. Terrorist groups are increasingly able to justify 
their involvement in illicit activity to their membership and have 
largely abandoned the belief that it can damage the moral basis for 
their cause.
    Listed below, by geographic region, are terrorist organizations 
that are known to have connections to drug-trafficking. Most of these 
organizations have been officially designated as Foreign Terrorist 
Organizations (FTOs) by the Secretary of State.
                             latin america
    In the Western Hemisphere, there is an historic link between 
various terrorist groups and narcotics trafficking. The Shining Path 
cut a brutal swath through Peru from the 1980s to the mid-1990s, 
largely funded by levies the group assessed on cocaine trafficking. In 
Ciudad del Este, Paraguay, and along the loosely controlled region that 
it borders with Brazil and Argentina, members of radical Islamic groups 
are reported to be engaged in money laundering, intellectual property 
rights piracy, alien smuggling, and arms trafficking.
    The Andean region is the source of virtually all the world's 
cocaine. Colombia, Peru and Bolivia, in that order, are the primary 
producers of coca and the final products. The presence of terrorist 
organizations in Colombia and Peru--and their need to finance 
operations--establishes a natural symbiotic relationship to exploit 
drugs as a revenue source.
    The linkage between drugs and terrorism in Colombia is one that 
particularly concerns us and one that we watch carefully. In the 1990s, 
the international drug cartels operating in Colombia embarked on a 
campaign of violence that severely challenged the authority and even 
the sovereignty of the Colombian state. The September 11 attacks 
illustrate in graphic detail the serious threat posed by forces hostile 
to the United States operating under the cover and protection of a 
narco-terrorist state. In light of recent events in Colombia, the 
potential for increased violence between the government and terrorist 
groups, and the growing linkage between terrorism and drug trafficking, 
we are reviewing our policy options there. At present, there are three 
terrorist groups operating in Colombia including the FARC, ELN, and 
AUC.
Revolutionary Armed Forces of Colombia (FARC)
    Although the FARC-controlled safe haven, or ``despeje''--which is 
situated between two of Colombia's largest coca cultivation areas--is 
not considered a major area for coca cultivation or drug trafficking, 
many FARC units throughout southern Colombia raise funds through the 
extortion (``taxation'') of both legal and illegal businesses, the 
latter including the drug trade.
    Similarly, in return for cash payments, or possibly in exchange for 
weapons, some FARC units protect cocaine laboratories and clandestine 
airstrips in southern Colombia. In addition, some FARC units may be 
independently involved in limited cocaine laboratory operations. Some 
FARC units in southern Colombia are more directly involved in local 
drug trafficking activities, such as controlling local cocaine base 
markets. At least one prominent FARC commander has served as a source 
of cocaine for a Brazilian trafficking organization. There are strong 
indications that the FARC has established links with the Irish 
Republican Army to increase its capability to conduct urban terrorism. 
In July 2001, the Colombian National Police arrested three members of 
the IRA who are believed to have used the demilitarized zone to train 
the FARC in the use of explosives.
National Liberation Army (ELN)
    The ELN operates primarily along Colombia's northeastern border 
with Venezuela and in central and northwestern Colombia. The 
territories under ELN influence include cannabis and opium poppy 
growing areas. Some ELN units raise funds through extortion or by 
protecting laboratory operations. Some ELN units may be independently 
involved in limited cocaine laboratory operations, but the ELN appears 
to be much less dependent than the FARC on coca and cocaine profits to 
fund its operations. The ELN expresses a disdain for illegal drugs, but 
does take advantage of the profits available where it controls coca 
producing areas.
United Self-Defense Groups of Colombia (AUC)
    The AUC umbrella group, which includes many Colombian paramilitary 
forces, admittedly uses the cocaine trade to finance its 
counterinsurgency campaign. The head of the AUC, Carlos Castano, stated 
in 2000 that ``70 percent'' of AUC operational funding was from drug 
money and described it as an undesired but necessary evil. AUC elements 
appear to be directly involved in processing cocaine and exporting 
cocaine from Colombia. In 2001, the AUC claimed publicly that it was 
getting out of the drug business, but it will be very difficult for 
this umbrella group to keep its many semi-autonomous units from 
continuing in the lucrative drug business.
Shining Path (Sendero Luminoso SL) (Peru)
    The SL historically has operated in remote areas of Peru where 
central government authority is least prevalent--a condition conducive 
to drug producers, drug traffickers and terrorists. The geographic 
coincidence and reliance on violence to protect safe havens made the SL 
a natural to engage in protection and extortion rackets involving coca 
and cocaine. The SL cut a brutal swath through Peru from the 1980s to 
the mid-1990s, largely funded by levies it imposed on cocaine 
trafficking. As the SL waned in the late 1990s, so did its influence on 
the drug trade. But in 2001, the SL had a slight resurgence in areas 
like the Huallaga and Apurimac valleys where coca is cultivated and 
processed, indicating that the remnants of the group are probably 
financing operations with drug profits from security and taxation 
``services.''
Tri-Border Islamic Groups
    In Ciudad del Este, Paraguay, and along the loosely controlled 
region that it borders with Brazil and Argentina, members of radical 
Islamic groups are reported to be engaged in drug trafficking, money 
laundering, intellectual property rights piracy, alien smuggling and 
arms trafficking. One such individual is Said Hassan Ali Mohamed 
Mukhlis, a suspected member of the Egyptian Islamic Group with possible 
ties to Osama bin Laden. This group is linked to the murder of 58 
tourists in Luxor, Egypt, and Mukhilis himself was arrested in 1999 by 
Uruguayan authorities in connection with foiled plots to bomb the U.S. 
embassies in Paraguay and Uruguay.
                    South Asia & Former Soviet Union
    Throughout this region, proximity to cultivation and production, 
combined with the infrastructure provided by the traffickers, has 
encouraged mutually beneficial relationships between terrorist groups 
and drug trafficking organizations.
Al-Qaida
    Since it transferred its base of operations to Afghanistan, al-
Qaida has been sustained by a government that earned a substantial part 
of its revenue through taxes on opium production and trafficking. 
Afghanistan's opiate trafficking, which accounts for more than 70 
percent of the world's supply, was reportedly advocated by Osama bin 
Ladin as a way to weaken the West.
Kashmiri militant groups
    These groups likely take part in the drug trade to finance their 
activities given their proximity to major production and refining sites 
and trafficking routes.
Liberation Tigers of Tamil Eelam (Sri Lanka)
    Individual members and sympathizers worldwide traffic drugs--
principally heroin--to raise money for their cause, but there is no 
evidence of official LTTE involvement in the drug trade. The LTTE 
reportedly has close ties to drug trafficking networks in Burma, and 
Tamil expatriates may carry drugs in exchange for training from Burma, 
Pakistan and Afghanistan.
Islamic Movement of Uzbekistan (IMU)
    The IMU has reportedly profited from the drug trade out of 
Afghanistan and trafficking through Central Asia to Russia and Europe.
                              middle east
Hizballah
    The Lebanese ``Hizballah'' group smuggles cocaine from Latin 
America to Europe and the Middle East and has in the past smuggled 
opiates out of Lebanon's Bekaa valley, although poppy cultivation there 
has dwindled in recent years. Its involvement in drug trafficking and 
other illicit activity may expand as state sponsorship declines.
                                 europe
Kurdistan Workers' Party (PKK)
    The PKK ``taxes'' ethnic Kurdish drug traffickers and individual 
cells traffic heroin to support their operations.
Irish Terrorists
    Although there is some evidence linking the Real IRA to drug 
trafficking, the extent to which the Real IRA or other terrorist groups 
in Ireland engage in drug trafficking is unclear.
Basque Fatherland and Liberty (ETA)
    Reporting indicates the ETA or its members have been involved in a 
variety of crimes from drug trafficking to money laundering.
                             southeast asia
United Wa State Army (UWSA) (Burma)
    The UWSA controlled major drug producing areas in Burma and used 
the proceeds to carry out an insurgency against the Burmese government 
until a ceasefire agreement that granted the UWSA enough automony to 
continue drug trafficking for profit. The Wa have also engaged in 
large-scale production and trafficking of synthetic drugs.
    Thank you again, Madam Chairperson and Members of the Committee, 
for the opportunity to discuss these issues with you.

    Chairperson Feinstein. Thanks very much, General Taylor.
    Let me quickly begin with you, Mr. Newcomb. I want to thank 
you for your remarks because I think you pointed out how the 
1995 law and then Coverdell-Feinstein is really working to 
produce some very real dividends.
    Do you believe that there is any additional legislation 
that would be necessary, that would be helpful, now that we 
have established the nexus between what is happening in the 
world today vis-a-vis terror and its supply sources, its 
funding from drugs either through hawalas or through other 
transfer agencies? Do you need anything else to get at that, to 
confiscate assets to shut them down?
    Mr. Newcomb. We, as you know, are in the very early stages 
of still implementing the Coverdell-Feinstein legislation, and 
it has been a very effective way of identifying who the 
narcotics kingpins are worldwide and then moving in on those 
individuals and entities that are owned or controlled.
    It is very broad legislation. It deals with narcotics 
trafficking affecting the United States; that is very broadly 
defined as well. And for at least this period of time, that, in 
conjunction with the executive order signed by President Bush 
on September 24 dealing with, first, the Al Qaeda organization 
and Osama bin Laden and bringing within its ambit all other 27 
identified foreign terrorist organizations--it would be my 
opinion at this time that there is sufficient legislation to 
move forward.
    But I think this is a question that we should continue to 
discuss over the years as we proceed to implement because as we 
move forward, these organizations and groups seek more 
surreptitious ways of dealing with their activity. So up to 
this time, we have done well, but we need to continue talking.
    Chairperson Feinstein. Thanks very much. I appreciate that.
    Recent reports indicate that Afghan growers have replanted 
the 45,000 to 65,000 hectares of poppy fields which, if 
harvested, as I pointed out, would yield 2 to 3,000 metric tons 
of opium. As I understand it, this harvest is going to occur in 
a couple of weeks. Needless to say, this is very troubling. It 
is going to go on the world market. It is going to provide 
funds for the Afghan warlords, it is going to provide funds for 
former Taliban in the area, it is going to provide funds for 
the Al Qaeda insurgents. Is there anything the United States or 
other nations are planning to do to interrupt this harvest?
    I strongly believe that it is better to pay the farmers and 
confiscate the crop, that there is more, to use a 
colloquialism, bang for the buck in doing that than there is to 
see it grow to this $35 billion street market value.
    Do you want to tackle that, Mr. Hutchinson?
    Mr. Hutchinson. I have said before that I think this is a 
historical opportunity and responsibility to intervene in a 
country, as you pointed out, that provides 70 percent of the 
world's supply of heroin. It is very difficult to be able to 
get everything done in time to intercede with the next crop. We 
have worked with the State Department, and I know that Mr. 
Beers will have something to say in regard to that.
    From the standpoint of the DEA, our short-term strategy has 
been to put personnel over there on a TDY basis. They are 
physically there. We are working our informants. We are gaining 
intelligence on the conversion laboratory locations, also in 
reference to the warehouses, and passing that on to have those 
addressed and destroyed. So that has been successful, working 
with our counterparts in other agencies, as well as the 
military.
    On a long-term basis, our responsibility is to develop our 
law enforcement connections there, the infrastructure to help 
build that so that we can prosecute and interdict the heroin 
coming out of there. What you are addressing is the crop. That 
does not specifically fall within the province of the DEA, but 
we are urging as quick an action as we can to develop a 
strategy for eradicating and destroying that crop.
    Chairperson Feinstein. Well, let me press that question 
with Mr. Beers because it seems to me that we have an 
opportunity today to really change the farm processes in 
Afghanistan. If we can't do it today when our people are there, 
are never going to be able to do it anywhere, and I believe 
that very strongly. I mean, these farmers don't want to grow 
poppy. That is all they can make money from, and they make a 
considerable amount, but it is de minimis in terms of what it 
means to terror and what it means on the world market.
    Would you like to say something?
    Mr. Beers. Yes, ma'am. Thank you very much. We as a 
Government, together with our allies, have been discussing this 
critical issue for several months now. We are in the final 
stages, I think, of putting together the very strategy that you 
have just described. However, I want to talk a little bit about 
some of the practical issues that are associated with it so 
that everyone understands that we will do as much as we can, 
but there may be some real tactical limits.
    We have had some conversations, we the United States and we 
the international community, with Chairman Karzai over the last 
several months, and I think the clearest manifestation of those 
conversations was his January 17 announcement that he was 
banning poppy within Afghanistan, both the cultivation, the 
processing and the trafficking--an ironic continuation, 
actually, of the Taliban ban.
    That represented the basis for operation within Afghanistan 
in order to be able to have the interim authority and clearly 
stating to both the people of Afghanistan and the international 
community that they recognized the problem and were prepared to 
do something about that.
    Since then, we and others have had several other 
conversations with Chairman Karzai and members of his cabinet 
on this very issue, and he in turn has begun talking both 
within the government and to the governors of the provinces 
within Afghanistan because quite frankly Kabul is a very small 
place and they don't grow much poppy there. Unless we can get 
out to the governors and down to the local authorities, the 
ability to actually effect some kind of change is going to be 
limited.
    He has just talked to those governors. He has made clear to 
them that they are going to have to take action in association 
with this, and now we have the second step, if you will, of a 
legal basis in order to go further into the field in order to 
deal with that.
    We have also talked with the international community, 
including a meeting which I just came back from in Vienna, and 
I think we have general agreement that this short-term strategy 
is something that we are going to have to focus on right away 
and we are going to have to begin to effect that.
    Having said that, the problem which remains is the actual 
security situation in the areas in which the opium poppy is 
being grown. The five major provinces in Afghanistan in which 
opium poppy is grown are Helmand, Nangarhar, Kandahar, Uruzgan 
and Badakhshan. Of those five provinces, the only one which is 
clearly secure today is Badakhshan, which was a northern 
Alliance stronghold, and that is the least significant area of 
cultivation. The greatest area of cultivation is Helmand, 50 
percent of the overall crop, and that is the least secure 
province in Afghanistan today. So that gives you the range of 
the kind of issue we face.
    Now, you are absolutely right to say we have an opportunity 
here because we have security forces there who can help us in 
some way to do that, and that is what we are, in fact, trying 
to do right now, both with our own forces there and with the 
international security assistance force, to look at ways in 
which the security umbrella that they provide will allow us to 
actually do something.
    But there are two stages to that. The first stage is the 
voluntary eradication by the farmers in return for some kind of 
remuneration or other kinds of assistance. We have worked out 
some ideas in that regard. We have some money that is available 
either in the United States or in other donor pockets that we 
are looking to make available.
    Where we are falling short at this point in time is what 
can we do after that, because the amount of money that can be 
paid on the first instance is relatively limited, and as soon 
as we begin to do that we are going to be competing with an 
ever rising price for that product within Afghanistan.
    So the second half of that is to be able to follow that up 
with some significant development kinds of assistance, whether 
it is work programs to build roads or schools or clinics, or 
whether it is extended agricultural assistance to put crops in 
the ground that can actually grow and return money to those 
farmers for that production. So I think that gives you the 
sense.
    The international community is committed to following this 
kind of a strategy, but all of us have to also say this is only 
going to be the beginning. As you well know from your 
experience in this area, this is not going to happen overnight 
and it is not going to be a 100-percent successful effort with 
the current crop that is in the ground.
    But we are going to do it; we are going to make some 
progress in this area and I hope by the end of May to be able 
to come back and tell you all exactly what kind of progress we 
have actually made in this area. We are very much seized with 
this issue.
    Chairperson Feinstein. I am very heartened by your 
comments.
    My time has expired. Since there are just a few of us, I am 
going to turn off the light so that you have a chance to ask 
your questions.
    Senator Kyl?
    Senator Kyl. Thank you very much, Senator Feinstein.
    In the opening statement that I wanted to include in the 
record, I had information that in 2000 opium production in 
Afghanistan was about 3,000 metric tons of opium to be turned 
into heroin, which would account for 7 to 10 times as much 
heroin as humans would consume annually.
    If that is true, then it suggest that not only do we have a 
problem with the crops growing, but the storage of it, and that 
would be another opportunity for us to eradicate concentrated 
portions of this crop after it is harvested. If we can get the 
intelligence to find out where it is, we can destroy it there.
    Either Asa Hutchinson or Secretary Beers, would you like to 
comment on that?
    Mr. Hutchinson. Well, I would like to, and I think you, in 
combination with Mr. Beers, really struck the right chord that 
Chairman Karzai can put out a decree not to grow poppy, but it 
takes a law enforcement component to enforce that decree. 
Unless there is a significant eradication program--and I am 
delighted to hear that there is going to be a remuneration 
program for the farmers that are engaged in the cultivation. 
That is a critical part of it.
    I am engaged in law enforcement, but we cannot have a 
successful operation in Afghanistan to reduce the warehouses, 
the supply, and the transportation of this heroin without 
building a good law enforcement component in Afghanistan and 
without the DEA being physically present there.
    There are security concerns. This is an enormously 
dangerous neck of the woods, as we say in Arkansas, but we have 
DEA agents who are ready, willing and anxious to be there 
because this is so important to our Nation and to our efforts.
    I can put individuals there on a TDY basis temporarily, but 
until we get all the hoops through in terms of having our 
personnel physically located, having our office in the embassy, 
having the sensitive investigative units trained, we are 
handicapped. So that is what we are really trying to move 
forward with very quickly.
    I have met with the person who will be the new justice 
minister in Afghanistan. I am aware of the historic problems 
that we have, but we are ready to go there and I think that 
operationally we can do a great deal there in cooperation with 
our international partners. A great deal of the responsibility 
falls on Europe.
    Like Mr. Beers, we have met with our international 
partners. They are committed. We have a resource committee, 
because Germany has a presence there and the Brits have a 
presence there and we want to make sure we are not duplicating. 
So we are coordinating with them in our enforcement efforts and 
in our sharing of intelligence, and I am optimistic we can make 
a difference there.
    Senator Kyl. Mr. Beers, anything further?
    Mr. Beers. Yes, sir. The Administrator is absolutely 
correct. The first critical element from the U.S. side 
specifically is to get some DEA presence that be located there 
permanently in order to work this issue, but I would also add 
that an area where we are making some progress today is, in 
fact, in the police training area.
    The Germans have sent several officers out there to conduct 
an assessment of what is needed for the overall police force 
for Afghanistan. We are having a meeting in Berlin at the end 
of this week to talk about the results of that and a 
preliminary survey which we have done. One of the key elements 
of that and one of the key topics that will occur is what does 
the counternarcotics subset of the overall police force look 
like within Afghanistan. The Administrator is correct. What we 
are looking at is a special investigative unit of some form 
that will be devoted specifically to the counternarcotics area 
that can do something about this.
    I would add, sir, that not all of the stockpiles that 
necessarily have been accumulated in the past are today in 
Afghanistan. So there is a second critical area that we have 
been working on for some time, and DEA has been one of the key 
participants in that, and that is related to what DEA calls 
Operation Containment and what we also call a regional action 
plan, which is to look at the countries that surround 
Afghanistan and see what they can do in terms of acting as an 
interdicting entity around Afghanistan.
    The countries have all met on a number of occasions. We are 
working in some of them individually; others are working in 
others of them individually. It is no secret that Iran 
obviously represents a particular issue for us, but others are 
working with the Iranians as well. I think we have got the 
basis of a serious effort here that can form sort of concentric 
rings around the Afghan problem on the enforcement side to go 
after the flow out of Afghanistan. It won't be perfect; it has 
never been, but we have got the building blocks in place.
    Senator Kyl. Let me just make a suggestion, and that is 
Senator Feinstein and I were both in Colombia as well and we 
found there that through various means we were able to learn 
through good intelligence where the production facilities were 
and that it was much more economical to strike those production 
facilities than to try to spray crops.
    Likewise, it seems to me that good intelligence in this 
part of the world to locate where the centers of production are 
and then deal with those appropriately--and I am not sure that 
police trained forces are necessarily the most efficient way to 
deal with this. I mean, a little cash and good intelligence can 
go a long way in that part of the world.
    Part of what we are trying to do here is to eliminate the 
underbrush and to figure out what we need to do to help you 
eliminate that. Senator Feinstein whispered to me a moment ago 
``what is holding them up?'' We say we need DEA agents on the 
ground and that is the question: what is holding it up and what 
can we do to advance that process?
    Mr. Hutchinson. May I respond?
    Senator Kyl. Sure.
    Mr. Hutchinson. We are ready to go. The steps that are 
necessary to accomplish this are that Operation Containment, 
which is the DEA plan of action in Afghanistan and the 
surrounding region, has been submitted as part of the 
President's budget that has to be submitted as a separate 
reprogramming. So the funds are there that have been not spent 
in previous years. They are already appropriated funds, but 
they have to be reprogrammed by Congress.
    So we need your assistance in signing off and encouraging 
the appropriators to sign off on that reprogramming. Once that 
is done, then we can put people there, but we really can't 
legally start that process until that reprogramming is signed 
off on. That is what we need help on.
    Chairperson Feinstein. All three of us would like to help 
you. If you would just tell us exactly where they are, we will 
go to work.
    Senator Kyl. You have got a chief appropriator right here, 
so she is ready to go.
    Mr. Hutchinson. Thank you.
    Senator Kyl. Could I just ask one more question, then?
    Chairperson Feinstein. Yes.
    Senator Kyl. This is intended to be the slow curve that 
gets hit way out of the park, but there is a purpose for my 
asking the question. There are some who say, of course, that if 
you try to eradicate the crop of coca in Colombia, they will 
just raise it in Peru or Ecuador. Or if you try to eradicate 
the poppies in Afghanistan, they will be raised in Burma or 
wherever. Therefore, it is a useless exercise and there is no 
point in it.
    I mean, some go off and say, therefore, let's just legalize 
drugs. Others say let's forget this part of the drug war. 
Others don't seem to have much of a positive suggestion as to 
what to do, but they do know what they think doesn't work, and 
this doesn't work and therefore let's just give up on the 
effort.
    What is your view?
    Mr. Hutchinson. Well, I usually miss slow curves, but I 
will take a swing at it. My experience is that obviously 
traffickers will try to move to another region where they can 
produce coca when we suppress it in one area, but that is 
exactly why you have to work in a broad context across the 
globe.
    They are fairly limited in where they can go. Historically, 
Colombia, Peru, Bolivia is where the coca-producing regions 
have been. Bolivia has reduced coca production by over 70 
percent--an extraordinary success story in Bolivia. In Peru, 
they have had a very successful operation there that has forced 
more of the activity into Colombia, and now we are working in 
Colombia.
    I have the belief, and I think it is proven by history, 
that you can control that commodity market. We are not there 
yet, but both in terms of heroin and in terms of cocaine it is 
in some ways not any different than corn. It all goes into the 
market basket and whenever you can reduce the production, it 
affects the price and purity here in the United States, which 
is our goal. We have had success in Peru and Bolivia. We want 
to bring that success to Colombia, and I think whenever we can 
engage in that we are limiting the places where the coca 
producers can go.
    Chairperson Feinstein. Thank you, Senator Kyl.
    Mr. Beers. Could I second what the Administrator just said?
    Chairperson Feinstein. Please.
    Mr. Beers. I couldn't agree more with what he just said. I 
think that that analysis that you just referred to, which we 
hear a lot, is just, one, wrong-headed, and, two, 10 to 20 
years out of date.
    I think that people could have said that 20 years ago 
because we were fighting in the macro sense a battle between 
the world being divided between those who produce drugs and 
those who use drugs, and it was a fight between us--it is your 
problem, it is your problem--and then nothing or not enough was 
getting done.
    I think the world is significantly different today. I think 
that most nations recognize that this is an issue of shared 
responsibility, that we can't divide ourselves between 
producers and consumers. In the first place, every nation in 
the world has consumption, so it is ridiculous to say that some 
consume more than others and that is a division. We have also 
taken some steps internationally in terms of bringing about 
that cooperation, and I think that the levels of cooperation 
and the levels of action have just increased enormously over 
the last several years.
    Senator Feinstein used to berate me regularly on Mexico, 
among other countries, and I think the Administrator would be 
among the first to say there is a different today, and the 
events of the last week are a clear indication of that in terms 
of going after traffickers.
    On the issue of, well, they will just displace it somewhere 
else, of course that is a possibility and the traffickers are 
not going to sit back and simply accept our efforts to strangle 
them in the locations that they are currently operating out of. 
That is why I think it is essential that we approach each of 
these problems on a regional basis.
    The Andean regional initiative that the Bush administration 
has submitted is a recognition of that. It builds on Plan 
Colombia. The security belt or the Operation Containment 
concepts that we are looking at in Afghanistan recognize that 
this is not just an Afghan problem or an Afghan issue. It is 
something that we have got to approach on a regional basis.
    We are going to have to do roughly the same thing with 
respect to Southeast Asia because, yes, that is a potential 
area where production could increase if we are successful in 
other locations, and we will have to work with Burma's 
neighbors there in order to effect the same kind of approach. 
But I see it as something that we should be optimistic, not 
pessimistic about. I think this is a real time of opportunity 
to deal with this problem.
    Senator Kyl. Two homeruns.
    Chairperson Feinstein. Exactly, and I hope that you work 
with Treasury in terms of seeing that the Kingpin Act gets 
enforced. There has got to be a price for doing business with 
drug kingpins.
    Mr. Beers. It is a critical element absolutely, and I think 
the opening statement by Ambassador Taylor is absolutely 
representative of that. This merger of the Lyon group and the 
Roma group in the G8 context was a recognition that the folks 
who dealt with terrorism and the folks who dealt with crime 
ought to sit down together because the expertise that both had 
was contained and it ought to be merged. Money laundering is 
the absolutely clearest indication of an area where we can put 
our heads together and two plus two equals more than four.
    Chairperson Feinstein. Senator Sessions, welcome.
    Senator Sessions. Thank you.
    Chairperson Feinstein. If you would like to make a 
statement or ask questions, it is your time.
    Senator Sessions. Thank you. I will just start off with Mr. 
Beers. He has been at this so long. We have exchanged ideas and 
frustrations over the years.
    Mr. Beers, isn't it basically true, first, that we expect 
nations to control their own borders and their own drug 
problem, and that we are not able to enter those countries 
routinely and enforce our laws in their sovereign territory? 
And is it a coincidence that with regard to Afghanistan and 
Colombia, both of those countries have large areas that are 
really not effectively under law enforcement?
    Mr. Beers. It is true that in the first instance we would 
like and hope that countries will control that which happens 
within their own borders. But to simply take the second part of 
the question, it is not always the case that every country is, 
in fact, able to do that, and that is why we have, together 
with other nations, tried to talk about this concept of shared 
responsibility and seek in what we could, with what funds we 
had, help countries who are prepared to take those actions but 
whose resource base is limited to expand their capabilities and 
to use the political will that they have to actually go ahead 
and do things like that.
    I think Colombia is an area where the government was 
willing and the resources and capacity were limited. We had had 
a long-developed relationship with the police and we continued 
that, but it wasn't sufficient in terms of dealing with the 
problem. Afghanistan is another area. This is a very new area 
for us. We have got an enormous set of tasks there, but we are 
heading into that.
    Senator Sessions. It strikes me that the greatest thing 
that could happen to us in being able to crack down on drug 
production in these two countries is that the governments of 
those countries could gain control of their territory and start 
effectively enforcing their own laws. I guess that is not in 
dispute. I mean, you would agree with that.
    Mr. Beers. Absolutely.
    Senator Sessions. We would normally expect Colombia, for 
example, to stop drug trafficking, but here they have given an 
area the size of Rhode Island to communist drug-dealing, 
kidnapping terrorists, and they are using that territory there. 
Now, they have taken it away, I hope, and will be able to fight 
back. But we apparently accepted that action over the years, 
and now I believe if we want to see Colombia cease to be the 
major production center for cocaine, we have got to help them 
reestablish control of their territory.
    What do you say about that? Do you agree with that?
    Mr. Beers. I agree with you completely.
    Senator Sessions. I will just add it is time for this 
administration--and I raised this with the previous 
administration--it is time for this administration to recognize 
that we need to quit couching all our help to Colombia solely 
on the matter that we are here to fight drugs and only drugs, 
and we really don't care who wins this war that is going on in 
the country.
    Ambassador Pickering testified several years ago and he 
said that our sole goal--and I pressed him on it and he 
repeated it--is to fight narcotics there. Well, if they can't 
reestablish control over the country, the United States 
Government is not going to be able to go in and stop narcotics 
production.
    I am a sucker for a slow curve and my batting average has 
never been very good, but the problem with eradicating drugs 
from around the world is--and there was an op ed in the 
Washington Post a year or so ago on this by some professor. He 
calculated that the coca leaf producers paid $.10 to produce 
sufficient cocaine to sell for $100 in the United States.
    So the price being what it is in Colombia, South America, 
and those kinds of places, the farmers are paid a little bit 
for their coca leaf and we come along and we say, well, we want 
you to plant coffee or some other crop and you can make just as 
much. But that doesn't recognize the fact that there is 
tremendous potential elasticity in that price. It could go to 
$1.00, ten times easily, and it would not affect the price of 
cocaine in the United States.
    Isn't this the problem that we have economically around the 
world in expecting that we can solve our drug problem--I know 
you don't believe this, but there are some people who believe 
we can solve our drug problem by just stopping production 
around the world, and it is an exceedingly difficult thing 
because of the potential for a rise in price.
    I guess, Mr. Beers, I would start with you since you have 
been at this so many years. My first question is, isn't that a 
big problem?
    Mr. Beers. Yes, sir, it is, but let me start with the 
first--
    Senator Sessions. Now, you are going to go off on some 
other discussion.
    Mr. Beers. I am not, sir. We have had this discussion over 
a number of years and I want to answer your first question 
first.
    Senator Sessions. Okay.
    Mr. Beers. You won, okay? Yesterday, the Secretary of State 
said in a hearing before the C-J-S Subcommittee that the 
administration was going to be seeking additional authorities 
from the Congress in order to try to deal with the terrorism-
drug nexus. He was talking specifically about Colombia in that 
particular instance.
    The final forum of that authority has not been determined 
yet. It is still being discussed within the administration, but 
he was attempting to signal, as reported correctly I think in 
the Washington Post today, that we were going to look beyond 
the counternarcotics justification for our activities in 
Colombia in response to President Pastrana's cessation of the 
DSPA and his clear intent to go much more actively and strongly 
after the terrorists who have inflicted the damage that they 
have on Colombia.
    Senator Sessions. That is good news.
    Mr. Beers. So you and I and you and others have had this 
discussion before and I just wanted to make clear to you that 
that is the current view in this administration that we intend 
to move forward on that. And we will be coming up shortly with 
precisely what the actual intent of that expanded authority 
might look like.
    Secondly, with respect to the issue of trying simply to 
curtail production, your points about price are absolutely 
right. There is a lot of flexibility there on the part of the 
trafficker to pay a whole lot more for any of the drugs that 
are produced or cultivated anywhere in the world and still have 
an enormous profit margin, and that represents one of the 
challenges.
    Our own overall strategy over the years has always been 
that no single action, no single effort is going to by itself 
deal with this problem. This starts in the fields or where the 
precursor chemicals are produced that make amphetamine-type 
substances and goes through the whole enforcement spectrum, and 
every one of those parts is absolutely critical to this effort.
    Likewise, on the demand reduction side, all of us need to 
do what we can in terms of trying to get the people who use 
drugs to stop using drugs, to seek treatment where that is an 
appropriate response, or to simply say no where that is an 
appropriate response. All of that has got to be part of this 
effort and no one particular part represents a solution. We 
sometimes talk about one part more than we talk about another, 
but I certainly hold the view that we have got to do all of 
these things.
    Chairperson Feinstein. Gentlemen, I would like to move this 
on. It is my desire to conclude the hearing at 12:00. We have a 
vote at 11:50. So are there other questions, or can we move to 
the second panel?
    Then why don't we move to the second panel, and let me say 
thank you very much. It was excellent testimony and I think at 
least we are on a track that might produce some results. Thank 
you very much.
    I will begin by introducing the second panel. The first 
person is Curtis Kamman. Curtis Kamman is the former United 
States Ambassador to Colombia. His career in foreign service 
spans 40 years, most recently serving as United States 
Ambassador to Colombia from 1997 to 2000. He previously served 
as Ambassador to Bolivia and Chile, and has served in numerous 
diplomatic positions around the world, from Mexico to Hong 
Kong.
    I will introduce all of our witnesses at one time.
    The next person will be Michael Shifter. Professor Shifter 
has been a Senior Fellow and Program Director at the Inter-
American Dialogue since April of 1994. He has taught Latin 
American politics at Georgetown's School of Foreign Service 
since 1993 and has written and spoken widely on United States-
Latin American relations and hemispheric affairs. He is also a 
member of the Council on Foreign Relations and the Latin 
American Studies Association.
    R. Grant Smith is a former Ambassador to Tajikistan. He is 
an expert on Tajikistan society and politics, as well as 
regional affairs in Central Asia, including relations with 
Afghanistan. He is currently a Senior Fellow at Johns Hopkins 
University's Central Asia Caucasus Institute.
    Martha Brill Olcott is with the Carnegie Endowment for 
International Peace. She is a senior associate at the Carnegie 
Endowment, where she specializes in the problems of transition 
and security challenges in Central Asia and the Caucasus. She 
has spent over 25 years following inter-ethnic relations in 
Russia and the states of the former Soviet Union, and is also a 
professor of political science at Colgate, as well as an 
adjunct professor at Georgetown.
    We will begin with you, Ambassador Kamman. Welcome.

STATEMENT OF CURTIS W. KAMMAN, FORMER UNITED STATES AMBASSADOR 
       TO COLOMBIA, DEPARTMENT OF STATE, WASHINGTON, D.C.

    Mr. Kamman. Thank you, Madam Chairwoman. Since our time is 
limited, I will just make a few remarks and I have submitted a 
statement for the record.
    I would like to make one point that it does identify me on 
your witness list as former ambassador. That is correct. It 
says below that ``U.S. Department of State.'' I retired a year-
and-a-half ago and I am speaking, therefore, as a private 
citizen.
    Chairperson Feinstein. Thank you.
    Mr. Kamman. But I am also quite delighted that a statement 
I wrote last week has now been made into administration policy 
by Secretary Powell, and you have just heard that from Randy 
Beers. In other words, the thrust of my statement pertaining to 
Colombia is that we have had a constraint on what we can do in 
that country for several years.
    All of our aid has gone for counternarcotics exclusively 
and I think that it is time to take some of those constraints 
off without, however, still allowing ourselves to become 
directly involved. I don't think we have to go in with our own 
troops to fight, as we had to do in Afghanistan. This is not 
another Vietnam, but this is a place where we can do more to 
help that country bring the narcotics problem under control.
    With that I will conclude, and I hope we will have a little 
time for questions. Thank you, Madam Chairwoman.
    [The prepared statement of Mr. Kamman follows:]

Statement of Curtis W. Kamman, Former U.S. Ambassador to Colombia, U.S. 
                          Department of State

                                Summary
    Colombia is a prime example of the symbiotic relationship between 
narcotics trafficking and politically motivated violence perpetrated by 
three illicit groups on the State Department's international terrorist 
list. While the terrorist groups claim to act in pursuit of social 
justice and democracy, their viability depends on the money they 
receive for protecting the production and transportation of drugs 
destined for the overseas market.
    The threat to U.S. interests from these groups is twofold. First, 
they make it possible for common criminals seeking illicit profits to 
produce and sell drugs that damage our society, especially our young 
people. Second, the vast profits of this illegal trade sustain a level 
of violence that undermines the legitimate government of Colombia, 
thereby risking the erosion of law and order throughout the country. 
Unlike the Islamist extremists in other parts of the world, the 
terrorists who operate in Colombia have not explicitly declared the 
United States to be their target. But their political and economic 
objectives are incompatible with our values, and they could ultimately 
represent a force for evil no less troublesome than Al Qaeda or 
irresponsible forces possessing weapons of mass destruction.
    Responsibility for combating terrorist groups in Colombia obviously 
belongs to the people and government of that country. But the recent 
termination of a political dialogue between the government and the 
largest leftist terrorist group poses a challenge to the United States. 
Should we continue to limit our assistance to Colombia to operations 
against narco-traffickers, or should we attempt to strengthen the 
Colombian capability to defeat guerrillas and paramilitary groups that 
work hand in hand with the drug criminals? I believe we can unshackle 
our existing assistance to the police and armed forces of Colombia and 
increase our material aid in ways that do not draw us into a combat 
role. We don't want to repeat the experience of Vietnam. But neither do 
we want to commit the error of neglect that allowed the Taliban to rise 
in Afghanistan.
                               Discussion
                       criminals and terrorists.
    What is the fundamental distinction between narco-traffickers and 
terrorists? The drug merchant is a common criminal attracted by huge 
illicit profits, caring little for the damage to individual lives and 
whole societies as a result of drug addiction and peddling. The 
terrorist has a political or religious motive and deliberately targets 
innocent civilians as well as legitimate authority in order to advance 
his cause. In Colombia, the two kinds of antisocial elements have 
formed an alliance, a marriage of convenience, while retaining their 
separate basic goals. And neither group is especially reticent about 
its links with the other. FARC commanders have frequently acknowledged 
that they work with growers of coca, which they justify on grounds of 
providing economic support to the peasantry. They acknowledge when 
pressed that half or more of their income is derived from fees charged 
to narco-traffickers (the other major source is kidnapping). So-called 
self-defense groups, commonly referred to as paramilitaries, openly 
admit that they get a major share of income from protection money paid 
by narco-traffickers, along with money extorted from legitimate 
businesses.
                            focus on drugs.
    For years, the United States has devoted funds and effort to 
fighting Colombian narco-traffickers, but has maintained a hands-off 
attitude towards leftist guerrilla groups and illegal rightist 
paramilitary forces. We have defined the problem largely in terms of 
criminal conspiracy, and our partnership with the Colombian Government 
has occurred within the framework of international narcotics treaties 
or bilateral law enforcement cooperation. To be sure, such joint 
successes as dismantling the Medellin and Cali cartels, extraditing 
kingpin traffickers and eradicating thousands of hectares of coca have 
placed significant obstacles in the way of drug dealers. But so long as 
the traffickers enjoy the protection of the FARC and ELN guerrillas and 
the AUC paramilitaries, they will not be forced to abandon their 
lucrative business.
                       focus on terrorist groups.
    The corrosive effect of narcotics money on Colombian society has 
distorted the economy, weakened the democratic political process and 
eroded confidence in the country's stability. But nowhere is this 
effect more damaging than in its continued fueling of violence by a 
tiny minority of radical insurgents, who in turn have stimulated the 
growth of right-wing groups organized as death squads. What began 40 
years ago as protest movements against elite domination of political 
institutions, kept alive by ideological support from Moscow and Havana 
during the Cold War, have now evolved into organized armed units bent 
on controlling territory through intimidation of the civilian populace.
    The Government of Colombia has attempted for the past three years 
to curtail the resources flowing into guerrilla and paramilitary groups 
by waging an all-out campaign against the drug trade, beginning with 
the eradication of industrial-scale cultivation of coca and extending 
to interdiction of the raw material and finished product at every stage 
of production and shipping. At the same time, it sought to reach a 
political settlement with the largest guerrilla group, the FARC, based 
on a common understanding of reforms consistent with the FARC's stated 
objectives. That effort came to an end last month with the FARC's 
kidnapping of two Senators, one of them a courageous woman whose 
candidacy for the Presidency was based on her long record as an 
opponent of corruption. A third Senator, also a woman, was murdered by 
the FARC.
                       threat to u.s. interests.
    Does the outcome of Colombia's struggle against internal terrorist 
groups matter to the United States? Strictly in the context of 
narcotics control objectives, it is important to us. But we should also 
consider the broader impact on our humanitarian, economic and political 
objectives. We should ultimately examine how the fate of democratic 
stable government in Colombia could affect our own security. The end of 
the Cold War may have lulled us into a complacency about insurgent 
movements abroad that we now recognize as dangerous.
    The people of Colombia in recent years have lived with a murder 
rate seven times that of the United States, a kidnapping occurring on 
the average once every three hours, and a total of well over a million 
people displaced from their homes by guerrilla or paramilitary 
violence. The methods used by the terrorist groups are brutal--summary 
execution of men in front of their families, attacks with home-made 
mortars made from cooking gas cylinders filled with nails, and 
massacres of whole villages by paramilitary groups as ``punishment'' 
for alleged collaboration with guerrillas.
    Quite apart from these outrages to our humanitarian values, the 
FARC, ELN and AUC terrorist organizations have already done direct harm 
to U.S. interests. About 100 U.S. citizens have been kidnapped in the 
past decade in Colombia. Some are held for months, while others, like 
three activists working with Colombia's indigenous peoples in 1999, 
have been deliberately murdered by the FARC. Even kidnappings by non-
political criminals often result in the hostages being held by 
guerrilla groups, who take custody of the victims and negotiate a high 
ransom. FARC and ELN guerrilla units continue to inflict great damage 
on pipelines and exploration activities of multinational oil companies, 
seriously affecting U.S. economic interests. And AUC or guerrilla 
extortion demands raise economic costs to U.S. investors, even if the 
response is only to increase security measures.
    Terrorist groups in Colombia have so far not chosen deliberately to 
target the United States, in part because they have a healthy fear of 
retaliation that was heightened by our missile attacks on Afghanistan 
and Sudan in 1998 and certainly by the current campaign against the 
Taliban and Al Qaeda. Nevertheless, the enormous financial resources 
derived from the narcotics trade have enabled guerrillas to smuggle in 
high potency weapons in large quantities, such as a shipment in 2000 
that was brokered by the sinister Peruvian official Vladimiro 
Montesinos. The FARC hosted three men from the outlawed Irish 
Republican Army (IRA) for five weeks last year, demonstrating how the 
power of money reaches across international borders.
                              u.s. policy.
    We are thus faced with a witches' brew in Colombia that bodes ill 
for our counter-narcotics goals and eventually could result in an even 
more powerful sanctuary for terrorist groups whose political objectives 
are contrary to our own. The overwhelming majority of the Colombian 
people reject both the illicit drug trade and the violence begotten by 
terrorist groups. It has proved difficult to win the fight against 
narco-trafficking by concentrating only on the producers and smugglers. 
The armed groups on which they rely are equally inimical to our 
interests. The situation has not become so alarming that we must 
contemplate direct U.S. military action, as we have had to do in 
Afghanistan. But we should broaden the objectives of our assistance to 
law enforcement and military forces in Colombia. In order to break the 
link between drug traffickers and illicit armed groups, we should relax 
restrictions on our material and training assistance, while continuing 
to avoid any direct combat role in Colombia's internal struggle.
                         colombia a precedent?
    Narcotics entrepreneurs are no strangers to organized crime. And 
terrorist groups often resort to criminal activity to fund their 
operations. But the unique combination of organized armed groups 
pursuing political power, funded by proceeds of the illicit drug trade, 
has reached a stage in Colombia that does not exist in the other Andean 
countries, nor for that matter in Central and South Asia. If the 
terrorist link to narco-trafficking can be broken in Colombia, it will 
be less tempting to terrorist groups elsewhere in the world to go the 
same route as the FARC, ELN and AUC.

    Chairperson Feinstein. Thank you.
    Professor Shifter?

  STATEMENT OF MICHAEL SHIFTER, ADJUNCT PROFESSOR AND PROGRAM 
 DIRECTOR, INTER-AMERICAN DIALOGUE, CENTER FOR LATIN AMERICAN 
  STUDIES, SCHOOL OF FOREIGN SERVICE, GEORGETOWN UNIVERSITY, 
                        WASHINGTON, D.C.

    Mr. Shifter. Thank you very much, Madam Chairwoman, for 
this opportunity. I also would like to submit my testimony for 
the record.
    If I could just make maybe a few opening comments about the 
importance of the Colombia policy challenge for the United 
States, there is, I think, a risk of spreading criminality not 
only in Colombia but throughout the Andean region, in South 
America. We do have a problem with terrorist acts that are 
fueled by the drug trade and other criminal activity.
    The core problem, I think, is that the Colombian state 
cannot protect its citizens and does not have authority and 
control over its own territory. Our objective of U.S. policy 
should be to defend that democracy. It is the oldest democracy 
in South America. That should be the overriding goal, I think, 
of U.S. policy.
    The narcotics problem and the terrorism problem exist in 
Colombia because of a weak state and weak governance. So our 
efforts should be aimed, in my view, to try to help that 
government reassert its authority and its control so it can 
protect its citizens.
    I will just go very briefly into perhaps four ways that 
concretely we might be able to make progress in this area. The 
first, I think, is to work with the Colombian government--and 
there will be a new government coming in in Colombia on August 
7--to try to come up with a strategy and an end game to try to 
end that country's tragic conflict which has had enormous human 
costs and economic costs for that country.
    There needs to be a comprehensive plan, approach, that the 
United States, with the new government, should try to outline 
to try to reach a politically-negotiated settlement to that 
conflict. A military solution, in my judgment, given the scale 
and the nature of that conflict, is not a viable one.
    Second is to undertake a systematic plan of military 
assistance to the military and to the police to professionalize 
them, to enable them to exercise their legitimate function to 
protect citizens more effectively than they have up until now, 
which is also consistent with human rights standards and human 
rights norms. There is no contradiction between making them 
more effective and building their capacity and adhering to 
human rights guarantees. All of this, though, should be a 
function of the larger political objective which was the first 
element of our strategy.
    We should also bear in mind as the third element that there 
is an importance to focus on the long-term social and 
institutional reform of Colombia. Colombia is a country where 
there are serious problems of social justice, and the 
Colombians have to demonstrate--and this should be the deal we 
should try to reach with the Colombians--their commitment to do 
their part in terms of generating the resources, paying taxes 
and all the rest, so that we can work together to try to turn 
around this downward spiral.
    Finally, the drug issue, which is a critical issue, is not 
just a Colombian problem. This, as we know, is a global problem 
and we need to focus greater cooperation within the region to 
try to reduce production and trafficking. I think the Andean 
Trade Preference Act should be seen as a piece of legislation 
that is important to try to strengthen the legal economy in 
Colombia and the Andean countries. I think one should give 
serious attention to the mechanism that is being developed in 
the Organization of American States to try to move toward a 
multilateral approach in dealing with the drug problem.
    But Colombian can only be a good partner with the United 
States on all of these issues if it has effective governance 
and control over its territory. Otherwise, it is hard to see 
that.
    Finally, if I can, I just want to say that Colombia, in my 
judgment, is not in a civil war, as is often described. 
Colombians are not divided. Colombians are united in their 
desire for peace, and what has happened is there are 30,000 or 
35,000 violent actors that are well-funded and well-armed and 
it is making it very difficult, if not impossible, for the 
Colombian citizens to fulfill that desire. We should really do 
what we can to try to help them.
    Thank you.
    [The prepared statement of Mr. Shifter follows:]

Statment of Michael Shifter, Vice President for Policy, Inter-American 
Dialogue, Center for Latin American Studies, School of Foreign Service, 
                Georgetown University, Washington, D.C.

    I very much appreciate your invitation to appear before the 
Subcommittee today to talk about the connection between drugs and 
terrorism. I will focus my remarks on Colombia and what the United 
States should be doing in addressing the situation there. This is 
precisely the right moment to ask hard questions, and engage in an 
open, public debate about where US policy is heading, and ought to be 
heading, on these issues. Our interests and goals in Latin America's 
third largest country deserve serious discussion. That is why this 
hearing is so important.
    Let me start with the question of what purpose we want to achieve 
in Colombia. The objective should be clear: we need to do all we can to 
defend Colombia's democracy by strengthening the government's capacity 
and authority to protect its citizens throughout its territory. Our 
efforts should go towards helping the government reach a political 
solution to the country's deep, internal conflict. Given the scale and 
nature of the conflict, a military solution is not a viable option. 
Colombia will only be able to deal effectively with its narcotics and 
terrorism problems if it moves in this direction.
    By now, there is widespread agreement about the diagnosis of 
Colombia's crisis. The country is experiencing unprecedented 
lawlessness perpetrated by a host of violent actors. The problem is 
that violence and armed conflict exist because of the weakness and even 
absence of governance and effective authority in wide swaths of 
territory. There are three groups that appear on the State Department's 
list of terrorist organizations, all of which deserve the designation. 
These are the Revolutionary Armed Forces of Colombia (FARC), the 
National Liberation Army (ELN), and the United Self-Defense Forces of 
Colombia (AUC). The first and third groups, in conflict with one 
another, should particularly concern us. They are formidable forces 
that have expanded most dramatically in recent years and, together, 
have an estimated 30,000 combatants.
    The Colombian conflict has old, historic roots, but is so virulent 
now because the insurgent groups have developed a system of financing 
themselves through kidnapping, extortion, and taxing the drug trade. 
Narcotics is not the cause of terrorist criminal activity, but it does 
fuel it. Although the FARC and AUC are no doubt strengthened from the 
drug trade, these groups would continue to pose a threat to Colombia 
even if the drug problem were somehow resolved. Drugs, coca and heroin 
production, is an important element or dimension of a much more 
profound and complex problem. Drugs and terrorism--though intimately 
related and mutually reinforcing--are distinct phenomena and should be 
treated as much.
    For the United States, it is understandable why there is such a 
great temptation to fit Colombia under the framework of the war against 
drugs and, since September 11, the global campaign against terrorism. 
Drugs and terrorism are no doubt serious problems, and both affect US 
interests. But in the Colombia case, both of these problems derive from 
a lack of state authority, control and capacity. That is what needs 
most urgent attention to turn around the country's dramatic 
deterioration. That should be the focus and guiding purpose of US 
policy. A Colombian state threatened by collapse--a democracy at 
serious risk--cannot be a very good partner in tackling the drug and 
terrorism problems.
    In concrete terms, what does this mean? First, the United States 
should engage actively and in a sustained way with the Colombian 
government to formulate a comprehensive joint strategy and end game. 
High-level political attention should seek to support efforts aimed at 
forcing a negotiated political settlement. Until now, Colombia policy 
has been in the hands of operational policymakers. Peace talks have now 
broken down, and conditions are not ripe to move towards a settlement. 
But, perhaps unlike the goals in the war against terrorism in other 
parts of the world, the political objective in Colombia must be 
paramount.
    Second, to help shape the conditions that will make an eventual 
negotiation with all three of Colombia's terrorist groups more 
realistic and feasible, it is crucial for the United States to 
undertake a long-term effort aimed at professionalizing Colombia's 
security forces. Our objective should be to help Colombia develop a 
professional, modern military, and police capacity to maintain public 
order. At present, the security forces cannot effectively protect 
Colombia's citizens. The US security aid provided to Colombia until now 
has been focused on equipment and training for eradication and 
interdiction of drugs. That the administration and Congress are now 
looking to go beyond this narrow emphasis is welcome news. But a plan 
of military assistance needs to be explicit about the importance of 
Colombia's security forces targeting all groups operating outside of 
the law, concerns and conditions related to human rights, and a clear 
eye on the ultimate political objective outlined above. This would mean 
a significant departure from what is now in place.
    Third, although the security question in Colombia is most urgent, 
the United States government should make it clear that it is prepared 
to support the Colombian government over the longer-term on a wide 
range of badly needed reform efforts. Judicial and social reform 
particularly stand out. These may not be part of an eventual 
negotiation, but should be integral to an assistance package aimed at 
strengthening Colombia's key institutions. Such a commitment should be 
contingent on the Colombian government and business leaders 
demonstrating accountability and doing their share in contributing to 
such a rebuilding effort. Tax reform and greater enforcement, for 
example, should be part of such a deal.
    Finally, the United States should intensify and improve current 
efforts to tackle the serious drug problem, not only in working with 
Colombia, but with our other partners in the region. This is a global 
problem, and the United States should seek to promote greater 
cooperation among the relevant countries in this hemisphere in an 
effort to reduce production and trafficking. The US government should 
give highest priority to supporting the region's legal economy; it can 
best do so by expanding the Andean Trade Preference Act (ATPA). A 
multilateral mechanism being developed in the Organization of American 
States is promising and deserves political support. To make an overall 
drug policy more effective, the US government needs to give greater 
attention to efforts aimed at reducing demand and consumption in the 
United States, as well as more vigorous law enforcement in this 
country.
    Colombia will only be a good partner with the United States on 
these critical issues if its state is able to assert greater authority 
and better control its territory. That is the urgent priority that 
should frame US policy on questions related to drugs and terrorism.
    The United States has an enormous stake in what happens in 
Colombia. This is not only because of the relentless, drug-fueled 
terrorist acts that are putting South America's oldest democracy at 
serious risk. It is also because of the potential for an even deeper 
crisis that affects the wider region. With the recent escalation of 
violence in Colombia, Peruvian, Venezuelan, Ecuadorian and Brazilian 
troops have been put on alert on their borders. Last week there was a 
confrontation between the FARC and Brazilian soldiers. There is 
tremendous political tension and uncertainty in Venezuela, and 
troubling institutional fragility in Ecuador. This is a region that is 
nervous and on edge. At least some of the trends are ominous. I believe 
US engagement in the ways outlined here is critical precisely to avert 
a deteriorating situation that would, down the road, be even more 
difficult to control.
    Finally, it's important to remember that Colombia has important 
assets and advantages to work with. It has a long, democratic 
tradition, and prizes elections. In the last century, it had only four 
years of military rule. Contrary to what is often said, the country is 
not experiencing a civil war, but rather a war against society. It is 
not politically divided. On the contrary, it is politically united 
around the common desire to lead normal lives, in peace. Unfortunately, 
some of the country's actors, who commit barbarous, terrorist acts, are 
making it virtually impossible for the overwhelming majority of law-
abiding Colombian citizens to fulfill that common desire. The US 
government should help them do so.
    Thank you very much for this opportunity. I would be happy to 
clarify or expand on any of these points, or answer any questions you 
might have.

    Chairperson Feinstein. Thanks, Professor Shifter.
    I would like to indicate that the hearing record will 
remain open for written comments, and I would like to submit 
the statement of Senator DeWine for the record.
    Ambassador Smith?

STATEMENT OF R. GRANT SMITH, FORMER UNITED STATES AMBASSADOR TO 
       TAJIKISTAN, DEPARTMENT OF STATE, WASHINGTON, D.C.

    Mr. Grant. Thank you, Madam Chairwoman. I understand that 
my colleague, Dr. Olcott, will be focusing on Afghanistan and I 
am going to talk more about the link between terrorism and 
narcotrafficking in the former Soviet Union, specifically the 
link with the Islamic Movement of Uzbekistan.
    I don't want to overplay that link. The Islamic Movement of 
Uzbekistan is not the main drug trafficking organization to the 
area and narcotics were not its sole source of income. However, 
there was a link and even a small percentage of narcotics 
trafficking through Tajikistan would produce a profit in the 
millions of dollars for the Islamic Movement of Uzbekistan.
    Remnants of that group will, if they have not already, 
return to Tajikistan and are likely to go back to terrorism and 
narcotrafficking. They have the potential and there is a threat 
there. They have the means and knowledge to traffic, and they 
have the will to conduct terrorist operations with the means 
that would be provided by trafficking of narcotics.
    While the reduced state of the Islamic Movement of 
Uzbekistan will make it easier to deal with it, the resumption 
of poppy growing in Afghanistan is going to ensure a continuing 
supply. I doubt that the trafficking networks thus far have 
really been damaged.
    A full-spectrum program is necessary to attack this 
problem. Randy Beers has already spoken about the proposals for 
dealing with the problem in Afghanistan. I would add to that 
that one part or one aspect of dealing with the problem in 
Afghanistan is to stop the inflow of chemical precursors 
necessary for the processing of heroin, and that is an area 
where the Central Asian states can play an important role.
    Another aspect of dealing with the problem is obviously 
going to be enforcement measures against both trafficking and 
terrorist groups, and finally doing something about the 
consumption, the demand, in developing countries. Of course, in 
the case of Afghanistan, most of the consumption of the heroin 
produced in Afghanistan is in Europe and the former Soviet 
Union.
    On the interdiction side, enforcement side, in Central Asia 
there is a very real need for better cooperation among the 
countries of the area, both in fighting terrorism and in 
fighting narcotics trafficking. There really has not been very 
effective cooperation among the countries. They are very 
suspicious of each other. It is going to take a lot of outside 
pressure and support to get them to do this.
    I would also mention very specifically that there is an 
example of the drug interdiction unit in Tajikistan which has 
been quite successful and has been cited by the United Nations 
as being successful. It has been supported by the United 
Nations, but that support is supposed to end and if it doesn't 
continue, I don't think that program is going to continue.
    Finally, I think that there is another aspect here that is 
relevant in central Asia. When we talk about dealing with the 
problem of growing, we always talk about a combination of 
interdiction and crop substitution programs, or alternate 
employment programs might be a better term.
    I think when you talk of dealing with trafficking, at least 
in the Central Asia area, the same concept is useful because 
the people who are doing the trafficking, the couriers, are in 
it not because they want to be in it, but because they do not 
have any money. The collapse of the economic system of the 
Soviet Union has driven them into this.
    I am convinced that if you had a strong interdiction 
program, a lot of publicity--that is an important part of it--
plus a program to reinvigorate those economies, particularly 
the rural economies, you would reduce the trafficking, and I 
think that this is something that the international community 
should be looking at.
    I would note that it would also have the effect of reducing 
the number of recruits for the main terrorist organization in 
the area, the Islamic Movement of Uzbekistan. So here is a 
program which serves both purposes.
    Thank you.
    [The prepared statement of Mr. Smith follows:]

   Statement of R. Grant Smith, Senior Fellow, Central Asia Caucasus 
  Institute, School of Advanced International Studies, Johns Hopkins 
                      University, Washington, D.C.

    I appreciate the opportunity to appear today to discuss a subject 
which I followed closely both when I was Ambassador to Tajikistan and 
subsequently. I understand that others will cover Afghanistan, so I 
will focus on former Soviet Central Asia, particularly Tajikistan and 
the Islamic Movement of Uzbekistan.
    The connection between terrorism and narcotrafficking has several 
aspects. As we have seen in Colombia and Afghanistan, terrorist groups 
may profit directly or indirectly from the growing, processing and 
trafficking of narcotics. They may engage themselves in those 
activities, or provide protection for or tax the activities, without 
themselves engaging in the production or transport. In addition, 
terrorist groups can use existing narcotrafficking systems for their 
own benefit. For example, established drug smuggling routes can be 
adapted to move arms, explosives or even people, and narcotraffickers' 
money laundering channels can move terrorists' funds just as easily.
    Former Soviet Central Asia has seen both aspects of the interaction 
between the two groups. Narcotics trafficking through the area began in 
earnest after the breakup of the Soviet Union and expanded dramatically 
with the steep rise in production in Afghanistan at the end of the 
1990's. Whereas at the beginning of the decade, most of the opium 
production in Afghanistan exited to the south or west, by the end of 
the period an estimated half or more of what was not consumed in 
Afghanistan moved north, primarily through Turkmenistan and Tajikistan. 
As late as the mid-1990's, most of what transited Tajikistan was in the 
form of opium, representing the limited production of the Badakhshan 
province of Afghanistan, which has traditionally been only a few 
percent of the total production of Afghanistan. That opium moved 
through the eastern part of the country to the city of Osh, in 
Kyrgyzstan, and thence on to Russia, where there was a market for 
opium. In 1997 Tajikistan authorities seized their first heroin 
transiting the country. By 2000, the total for opiates transiting 
Tajikistan had risen to 300-500 tons of opium equivalent per year (30-
50 tons of heroin), according to UN estimates quoted in the Department 
of State's International Narcotics Control Strategy Report. Of that 80 
per cent went through the western portion of the country, largely in 
the form of heroin and largely originating in Taliban-controlled areas 
of Afghanistan.
    During this same period, the Islamic Movement of Uzbekistan, or 
IMU, began to move out from its bases in Tajikistan to conduct 
operations in Kyrgyzstan and Uzbekistan. Its military leader, Juma 
Namangani, had fled the Ferghana Valley portion of Uzbekistan during 
the Tajikistan civil war. An experienced fighter from his days with the 
Soviet Army in Afghanistan, Namangani fell in with the United Tajik 
Opposition (UTO). He rose to the level of deputy to the UTO chief of 
staff, Mirzo Ziyoev, operating out of Tavildara in eastern Tajikistan 
with a force of Uzbeks. He reportedly opposed the 1997 peace agreements 
that ended the fighting between the Government of Tajikistan and the 
UTO. With his men, he settled in the town of Hoit in the Karategin 
Valley of eastern Tajikistan, not far from the Ferghana Valley by way 
of mountain paths. The Government of Uzbekistan charged Muslim 
extremists with responsibility for attacks on security personnel in 
Ferghana in late 1997 and, later, for the assassination attempt against 
President Karimov in early 1999. With Uzbekistan pressing Tajikistan to 
act against Namangani, he led his men over the mountains into the 
Kyrgyzstan portion of the Ferghana Valley in August 1999 for what ended 
up as a series of kidnappings for ransom. They withdrew to Tajikistan 
in the fall. Finally, at the urging of their erstwhile allies of the 
UTO, who were then in the Government of Tajikistan, they moved on to 
Afghanistan, where they were warmly received by the Taliban. In 2000 
they mounted more widespread attacks within Uzbekistan and Kyrgyzstan, 
some using the route of the previous year and some by other routes. The 
United States declared the IMU a terrorist organization in September 
2000. By then, estimates put the strength of the IMU at up to 2-3000 
fighters, most of whom were based at Mazar-i-Sharif in Afghanistan, but 
with contingents also supporting the Taliban in Qunduz and Taloqan. 
These contingents fought with the Taliban in 2001, with Namangani 
himself reportedly killed.
    A portion of the income which enabled the IMU to operate into 
Kyrgyzstan and Uzbekistan came from moving heroin from Afghanistan 
across Tajikistan into those countries for onward shipment to Russia. 
The trafficking reportedly began before their hostage-taking forays but 
used the same route from their bases in Tajikistan into the Ferghana 
Valley portion of those two countries. While difficult and impassable 
by vehicles or by anyone in the winter, it had the advantage of 
avoiding the heavily monitored roads into Kyrgyzstan. The IMU 
experience in fighting with the UTO in eastern Tajikistan during the 
civil war there provided it with the bases, knowledge of the border 
crossings into Tajikistan from Afghanistan and contacts with the local 
field commanders necessary for such an operation.
    How important were these narcotrafficking profits for the IMU? One 
observer, quoted in Ahmed Rashid's new book, Jihad, estimated that the 
IMU controlled 70 percent of the narcotics trafficking Tajikistan. This 
would appear unlikely, since there were established routes, controlled 
by major warlords in Tajikistan, both to the east and west of the IMU 
area. However, even a small share of the Tajikistan transit market 
would have produced significant returns for the IMU. Assuming a profit 
of $500 for carrying one kilo of opium or opium-equivalent across 
Tajikistan, which was the figure when I was there, even a share of two 
per cent of the Tajikistan transit trade would produce a profit of $3-5 
million a year. When added to the IMU's reported income from other 
sources--gifts from Osama bin Laden and ransoms from hostage taking--it 
gave the organization the capability to outfit its fighters well and to 
pay for the food and other items it got from local populations.
    While the IMU leadership may be destroyed and its fighters mostly 
killed or taken prisoner in Afghanistan, some remnants have probably 
found their way to the IMU bases in Tajikistan, where they joined cadre 
that remained there during the fighting in Afghanistan. They presumably 
still wish to achieve the IMU objectives and will have the ability to 
pursue those objectives through money obtained from narcotrafficking.
    Preventing the resurgence of such an organization requires a multi-
pronged approach not unlike that which the international community has 
pursued in trying to end the growing of opium and coca. A strong 
enforcement effort, targeting both the narcotraffickers and the 
terrorist organizations, needs to be a major component. This will 
require a degree of cooperation among the Central Asian states that 
they have avoided to date. However, there also needs to be a 
``carrot.'' The lack of other sources of income in the post-Soviet era 
has driven individual Tajiks to smuggle opium or heroin across the 
country and was a key factor aiding IMU recruitment in the Ferghana 
Valley. In rural areas, the old agricultural economy no longer works--
particularly the cotton-growing collective farms--leading to large-
scale unemployment and underemployment. While some reform has occurred 
in Tajikistan, it has not revived the rural economy. In Uzbekistan, 
reform has not begun. Such reform will require commitment from both 
governments plus substantial international support. Only with such an 
effort, combined with a persistent, tough and well-financed program to 
eliminate poppy growing and terrorist groups in Afghanistan, can the 
international community hope to eliminate these twin scourges.
    Thank you.

    Chairperson Feinstein. Thank you very much, Ambassador 
Smith.
    Dr. Olcott, welcome.

 STATEMENT OF MARTHA BRILL OLCOTT, SENIOR ASSOCIATE, CARNEGIE 
      ENDOWMENT FOR INTERNATIONAL PEACE, WASHINGTON, D.C.

    Ms. Olcott. Thank you so much, and thank you for the 
opportunity to testify. I will read just a small portion of my 
previously submitted testimony.
    I would argue that until we tackle Afghanistan's drug 
problem head on, we can't claim a victory in the war against 
terrorism. While it is true that the provisional government of 
Hamid Karzai has formally extended the ban on the cultivation 
of poppies, there is no Afghan security force that can be 
relied on to enforce his edicts, and no international security 
force in place whose mandate spans all of Afghanistan.
    The effectiveness of the current ban depends on the 
willingness of local warlords to destroy the crop and 
discipline those who grow the poppies, but these are the very 
men who have no incentive to do so and currently tax the crop 
or its transit across their territory.
    We should stand by and simply acquiesce to this restoration 
of Afghanistan's drug trade which we have heard about this 
morning. Allowing or tolerating Afghanistan's cultivation of 
poppies simply turns the tragedy of that country's poverty into 
one of regional security.
    Afghanistan's narco mafia is committed to being a lasting 
force. They have already provided what I term ``opium 
futures,'' not only providing seed for the crop that is in the 
ground, but having already pre-purchased it, which is going to 
make the problem of destroying the crop that much more 
difficult. By contrast, USAID projects that are designed to 
create seed banks necessary for crop substitution are still in 
their very earliest pilot stages. So the drug mafia is way 
ahead of us on the ground in Afghanistan.
    I would like to suggest some things we could do to cut back 
on drug production in Afghanistan. One should not minimize the 
difficulty of this problem. The network of drug dealers is 
formally and fully intertwined with many parts of Afghanistan, 
including parts of Central Asia, and crop substitution programs 
alone will not eliminate drugs from this region. Economic 
incentives will only work if the country's leaders are forced 
to cease collecting tribute.
    Pressing Hamid Karzai's government to punish Afghanistan's 
drug dealers will certainly cost it and us some friends, as, 
too, would a policy of the U.S. refusing the services of 
warlords who are known to profit from the trade or production 
of drugs. But this is precisely what we and they should do.
    The effects of Afghanistan on the trajectories of 
development in many of the Central Asian states has been 
profound over the past decade. Tajikistan and Turkmenistan 
already meet some of the definitions of narco states. Parts of 
the governments in both places have been accused, and I believe 
do sift profits from the drug trade. Kyrgyzstan, too, is at 
risk of becoming a narco state, as the low salaries paid both 
local government and security officials make them ripe for 
being suborned.
    Most troublesome is what Ambassador Smith talked about, the 
potential fate of the 200-odd men who serve as officers in 
Tajikistan's National Drug Control Board whose salaries are way 
larger than scale in the region and has been a very effective 
force. But their salaries will run out at the end of 2002 when 
the UN program comes to a halt.
    Current U.S. programs have been increasing the amount of 
money that is available to help facilitate interdiction in the 
Central Asian states, but even the increased money still meets 
a fraction of these countries' training needs and does not 
provide the salary support, or has not to date provided salary 
support for law enforcement officials.
    As Afghanistan's drug trade increases, there is a real 
prospect that Central Asia's security forces could be fully 
overwhelmed. This demands what I would call a carrot-and-a-
stock approach in Afghanistan. The most effective strategy 
would be for the U.S. to seek and destroy the current stores of 
opium and close down the heroin factories throughout the 
country. Obviously, we have the intelligence and military 
capacity necessary to help facilitate this should we make this 
a priority.
    Independent of this, the U.S. could take more aggressive 
steps to halt the resumption of poppy cultivation in 
Afghanistan through a multi-faceted approach of incentives and 
disincentives. Afghan farmers should be offered cash subsidies 
for destroying the current harvest in the field or for turning 
it over for destruction, and those who refuse should really 
lose all priority for receiving future international 
development aid, while those who qualified should be put at the 
top of any trial programs or pilot programs.
    Since I am just about out of time, let me go to the 
conclusion.
    In drawing lessons from the tragedies of September 11, U.S. 
policymakers should not confuse the temporary amelioration of 
security challenges with rooting out their deep underpinnings. 
Our timetable for rebuilding Afghanistan must reflect the 
realities of how the risks in Afghanistan are generated and not 
simply those of our annual budget or work cycle.
    The administration should request an increase in 
supplemental funds to fight against the return of drug 
cultivation in Afghanistan and the trafficking of narcotics 
across the states of Central Asia. More pressure must also be 
placed on the Russians to do a better job. Finally, we must 
make it clear to our new friends in Kabul that the government 
of Afghanistan must do more than simply reaffirm the goal of 
ending drug production, that the U.S. will expect them to 
introduce and implement a wide range of programs designed to 
deal with drug interdiction, crop substitution, and creating a 
reliable network of intelligence to aid the international 
groups in their efforts.
    Thank you.
    [The prepared statement of Ms. Olcott follows:]

Statement of Martha Brill Olcott, Senior Associate, Carnegie Endowment 
               for International Peace, Washington, D.C.

    The US is scoring a major victory against global terrorism by 
defeating the al-Qaida network in Afghanistan, but until we tackle 
Afghanistan's drug problem head on we cannot consider the victory to be 
a permanent one.
    Too long the international community has ignored or downplayed the 
security risks inherent in the drug trade, which derives from 
Afghanistan's poppy-crop. For most of the past decade, Afghanistan was 
the world's largest single producer of opium, and with every passing 
year it turned more and more of its opium into heroin. The drug traffic 
emanating from Afghanistan's poppy harvest, and the opium and heroin 
manufactured from it, have undermined the security of all the states of 
the region.
    But prior to September 11, it was difficult to convince US 
policymakers that Afghanistan's drug industry was a US problem, and 
even now we have no concrete strategy to deal with renewed drug 
cultivation in Afghanistan.
    Afghanistan is the source of less that 10 percent of all heroin 
consumed in the US. By contrast, about 80 percent of Europe's heroin 
traces its origin to Afghanistan, leading a series of US 
administrations to conclude that it was the Europeans' responsibility 
to take the lead in organizing and funding projects aimed at 
eliminating Afghanistan's narcotics industry.
    Even though this was not always admitted publicly, a quick look at 
the pattern of US spending on international drug control measures 
quickly reinforces this conclusion. The US priority has been on 
eradicating production and interdicting drugs originating in the Andean 
states, in Central America, and the Caribbean, and not on those half a 
world away, in a seemingly ungovernable part of the world. Added to 
this was the fact that even prior to going to war in Afghanistan, the 
US government did not want to engage with the Taliban government, whose 
existence the international community did not recognize and whose hold 
on power the US and its allies did not want inadvertently to encourage.
    US policymakers recognized that the situation in Afghanistan was a 
highly unstable one, and posed a security risk to that of neighboring 
states. But September 11, US security was not seen as at risk. First 
the Clinton and then the Bush administrations were content to use the 
6-plus-2 format, supplemented by the high-level US-Russian working 
group on Afghanistan, as the framework for trying to modify the 
political situation in that country.
    The existing status-quo, though, was one which left many of the 
leaders of neighboring countries very disturbed, and firmly convinced 
that their own national security was thoroughly compromised. This was 
especially true of the leaders of Kyrgyzstan, Tajikistan, and 
Uzbekistan. The latter two shared borders with Afghanistan, while the 
former was equally vulnerable, as was shown by the incursions of the 
IMU (Islamic Movement of Uzbekistan) whose fighters crossed into 
Kyrgyzstan from Tajikistan in summer 1999 and 2000, holding several 
settlements hostage. The Uzbek government had gone on high security 
alert slightly earlier, after the bombings in Tashkent in February 
1999.
    The repercussions of the latter were felt throughout Central Asia, 
as the Uzbek government virtually closed its borders with neighboring 
states, and began mining some of the national boundaries that it set 
about unilaterally declaring. All of the states started to target 
members of radical Islamic groups for arrest, particularly those tied 
to the increasingly more popular Hezb-ut Tahrir. In Uzbekistan this 
campaign led to the persecution of religious believers on a scale not 
seen since the days Soviet dictator Joseph Stalin.
    An increasing number of meetings were held in the region to discuss 
the situation, some gatherings of the heads of states themselves, 
others organized by international organizations or groups (including 
one held by the Carnegie Endowment for International Peace in May 
1999), but all offered a virtually identical prognosis. Unless the 
growing opium and heroin trade through Central Asia were curbed, anti-
state groups would have a continual and ready source of funding. Russia 
and Kazakhstan, both major transit points in the drug trade, shared the 
Central Asian leaders preoccupation with drugs and with what the 
leaders of the region termed ``Islamic extremism.'' Given their 
escalating engagement in Chechnya, whose armed forces they saw as 
partially supported through the sale of drugs, Russia's interest was 
particularly keen. But many observers also saw the Russians as a part 
of the problem, complaining that Russian troops based in Tajikistan 
helped organize and facilitate the shipment of heroin out of the 
region.
    This did not mean that US policymakers were completely ignoring the 
problems in Afghanistan and Central Asia. The US encouraged 
international efforts to monitor poppy cultivation in Afghanistan, and 
provided some support for improving the capacity for the neighboring 
Central Asian states to interdict the crop. However, until September 
11, the eradication of drug cultivation in Afghanistan remained of 
secondary concern to US policymakers.
                 The Drug Trade Returns to Afghanistan
    Now everyone recognizes that it would be an oversimplification to 
cite Afghanistan's drug trade was only one source of financing for the 
al-Qaida network. Terrorist groups that allied themselves with Osama 
Bin Laden received funding from a number of sources. Some of the money 
transfers they received came from legal income of their donors, but 
there was a highly beneficial symbiosis between Afghanistan's drug 
trade and those who preyed on the country's atmosphere of lawlessness 
to prepare ``cadres'' for their ``global battle''.
    Ironically, though, this symbiosis was under threat when the 
September 11 attack on the US occurred. Before the 2001 harvest the 
Taliban banned the cultivation of poppies, and the rigor with which 
they enforced the new restrictions resulted in a poppy crop that was 
only about five percent the size that of the previous year. The Taliban 
did not seize the country's considerable drug stores or destroy the 
small factories which produced the country's heroin. The stores of 
drugs in Afghanistan were so great that the actions of the Taliban 
government did little to staunch the flow of drugs through the country. 
It did, though, contribute to a rise in the price of heroin, which had 
been artificially lowered, it seemed, in order to raise the number of 
new addicts.
    Cynics have argued that the Taliban would have allowed the 2002 
crop to be planted, but obviously there is no way to know whether their 
ban on poppy cultivation would have continued to have been enforced. To 
speculate on this is to engage in the practice of writing alternative 
history, something which is of no real utility.
    What is true, and of far more significance, is that the provision 
government of Hamid Kharzai is unable to enforce the ban on the 
cultivation of poppies which he called for shortly after being brought 
to power. Nor does he have an Afghan security force which can be relied 
on to enforce his edicts. The effectiveness of the current ban depends 
upon the willingness of local warlords, those in control of the 
country's irregular militia forces to destroy the crop and discipline 
those who grow the poppies. But these men have absolutely no incentive 
to do so, as they are able to tax the crop or its transit, depending 
upon what part of the country they are living in.
    The US continues to regard the issue of Afghanistan's narcotics 
trade as of secondary importance, and has been pursuing a policy on not 
being distracted by secondary concerns until the Taliban and the al-
Qaida network are defeated throughout the country.
    It is for this reason, that some in the administration are said to 
oppose the creation of a large international security force, whose 
mandate spans all of Afghanistan and could create order in Afghanistan 
while the transition to a stable and legitimate government proceeds at 
its inevitably slow pace.
    The transition in Afghanistan must inevitably be a slow one, but 
while it occurs we should not sit by and acquiesce to the restoration 
of Afghanistan's drug trade. That Afghanistan's heroin does not 
dominate the US market should not make it of secondary concern to US 
policymakers. Heroin is a global commodity; thus, a harvest which meets 
the need in one part of the world frees up supply for all other 
regions.
    Moreover we have already seen how the atmosphere of lawlessness in 
Afghanistan, which the drug trade helped facilitate, was a direct 
threat to US security. Allowing or tolerating the Afghans cultivation 
of poppies once again simply transforms the tragedy of Afghanistan's 
poverty into a problem of regional security.
    Some even argue that we should close our eyes to the restoration of 
poppy cultivation in Afghanistan. Afghans have traditionally grown 
poppies and used opiates, they remind us, as have all Central Asian 
nationals. Moreover, growing poppies is easy and profitable, regardless 
of the relatively small percentage of profit that remains with the 
growers. After all, it is not like the Afghans have lots of choices 
today.
            This line of argument though is quite dangerous
    One cannot minimize the economic disruption that the Afghans have 
faced in the past two decades, when, among other things, there has been 
virtually no investment in agriculture. But this doesn't justify the 
return to the cultivation of opium poppies.
    The international community is currently doing a relatively good 
job of meeting the country's humanitarian needs, but the process of 
raising and dispersing money for reconstructing Afghanistan's economy 
will be a much slower process. Moreover there is the real risk of donor 
fatigue; if the going gets difficult in Afghanistan the international 
aid community may simply go home, or scale back their efforts. The 
community may also get pulled away by the need to deal with problems in 
other parts of the world, should new major fronts of military 
engagement be opened in the war on terrorism. Should this occur it 
would leave Afghanistan's drug lords in firm control.
    Afghanistan's drug dealers are committed to being a lasting force. 
So as USAID is spending some $15 million on a pilot program to create a 
seed bank, to reintroduce into cultivation strains of crops that were 
once indigenous to Afghanistan, Afghanistan's drug dealers are already 
out there paying for opium futures. They distributed seed or the money 
to purchase it in the fall, and are now primed to buy up the country's 
crop when it is harvested in March.
    For all of the Taliban's ban on opium cultivation, Afghanistan's 
drug dealers were not short on cash when the Taliban government 
collapsed. Moreover, although some of them may have died as the result 
of US bombing raids, Afghanistan's narco-mafia has undoubtedly survived 
the months of fighting relatively unscathed. While many of them worked 
with the Taliban, and accepted being tithed by the clerics, Taliban 
rulers never took over the drug trade, they simply sought to profit by 
it. Moreover, even when the Taliban banned poppy cultivation, it 
continued in the territory controlled by the Northern Alliance.
    One should not minimize how difficult it would be to sharply cut 
back drug protection in Afghanistan. The network of drug dealers is 
fully intertwined with the traditional local elite in many parts of 
Afghanistan, as it is in parts of Central Asia. Moreover, they are not 
short on cash, as US bombing raids have yet to target Afghanistan's 
drug stores or heroin producing facilities.
    Crop substitution programs alone will not eliminate drugs from 
Afghanistan. Economic incentives will work for the farmers, only if the 
country's elite is forced to cease collecting from this highly 
lucrative trade. As in all civilized countries, Afghanistan's drug 
dealers must be subject to arrest and lengthy incarceration, and a 
serious effort should be made to find them. Pressing Hamid Karzai's 
government to punish Afghanistan's drug dealers will certainly cost it 
and us some friends, as too would a policy of refusing the law-
enforcement services of warlords who are known to trade or profit from 
the trade in drugs. But this is precisely what we and they should do.
    Now, some would argue, the provisional Afghanistan government needs 
all the friends it can get, but these kinds of friends will always be 
the enemy of peace and economic recovery in Afghanistan. No cash crop 
will produce the same income that a farmer earns from opium 
cultivation, nor allow a rapacious elite the same easy riches.
    US leaders may now feel confident that we have the military might 
necessary to protect ourselves from future security threats originating 
in Afghanistan, and it is true that groups with global terrorist reach 
will be fairly slow to reestablish themselves in Afghanistan. But a US 
policy of responding with surgical strikes to cauterize festering 
points around the globe does not address ways in which Afghanistan's 
drug trade will undermine that country's economic recovery and the 
economies of Afghanistan's weakest neighbors, putting these states at 
greater risk.
               Afghanistan's Drugs are a Regional Problem
    In recent years, more than half of Afghanistan's drugs have exited 
through Central Asia, and the amount of drugs flowing through Central 
Asia has increased dramatically over the past decade. Interdiction has 
improved, but Tajikistan's chief narcotics control official estimates 
that only about one tenth of the drug traffic across his country is 
successfully interdicted. Moreover, the blend of drugs traversing 
Central Asia has changed in recent years, as the amount of heroin being 
produced in Afghanistan increased exponentially.
    Heroin interdiction is even more challenging than stopping the 
opium trade. During a January 2002 to Tajikistan, I had the opportunity 
to tour the vault of the National Narcotics Control Commission, where I 
was able to gain a greater appreciation of the magnitude of the task 
that Tajikistan's law enforcement officials face, as the vault was 
filled with small or otherwise cleverly disguised parcels all of which 
were filled with heroin. The skill displayed by Afghanistan's drug 
dealers in disguising their valuable packages was considerable. Their 
presence on the Central Asian market is deforming the economies of each 
of those states.
    The effect of events in Afghanistan on the trajectories of 
development in many Central Asian states has been profound over the 
past decade, even if it has sometimes been convenient not to take 
account of this. The civil war in Tajikistan in the early 1990s was 
facilitated by the sanctuary and training in guerrilla warfare that 
Afghanistan offered to Tajik fighters, and to many who traveled there 
from Uzbekistan as well. In turn Tajikistan's civil war provided 
fertile field for drug traffickers, arms dealers and Islamic 
revolutionary thinkers to thrive. Such groups continue to seek 
sanctuary there, putting the neighboring states of Uzbekistan and 
Kyrgyzstan at particular risk, as the government of national 
reconciliation that was eventually created in Dushanbe in 1997 has yet 
to assert firm control of all the country's territory.
    If eyewitness reports are at all credible, then Tajikistan and 
Turkmenistan already meet some of the definitions of ``narco-states'' 
as the governments in both places have credibly been accused of sifting 
profits directly from the drug trade. The Turkmen profited from drugs 
transiting Taliban-held territories. The Tajiks worked through the 
Northern Alliance, and their main drug routes went across Kyrgyzstan 
and then into Kazakhstan and Russia. Kyrgyzstan too is at risk of 
becoming a narco-state, as the low salaries paid to local government 
and security officials in the southern part of the country make them 
ripe for being suborned. Of greatest concern is the future of the 
approximately two hundred men who serve as officers for Tajikistan's 
National Drug Control board, and whose salary, quite generous by 
regional standards, is paid through funds provided by the UN Drug 
Control Program. Since this program went into effect, interdiction of 
heroin increased sharply in Tajikistan, but the funding for the project 
will run out in 2002. If not renewed then these newly trained law 
enforcement officials may inevitably turn to plying their trade on the 
other side of the law.
    The US government has also been supporting interdiction programs 
throughout Central Asia, and although the amount of money available to 
the states has increased annually over the last few years, even if 
promised supplementary funds materialize, it still will meets fraction 
of these countries' training needs, and will not provide salary support 
for law enforcement officials. Moreover, if Afghanistan's drug trade 
increases, and it is likely that this will occur in the political 
vacuum of the transition period, then Central Asia's security forces 
could rapidly be overwhelmed.
    Unless we move quickly to help the Central Asian states better 
protect themselves from the dangers emanating from Afghanistan--both 
directly through massively increased assistance to these countries drug 
interdiction efforts, and indirectly through efforts to end the 
cultivation of opium poppies in Afghanistan--then these countries could 
become the breeding grounds for future terrorist networks of global 
reach in much the same way Afghanistan did. Moreover, their problems 
seem likely to fester at just the time that western democracies are 
planning to be able to tap Caspian oil and gas reserves--reserves whose 
delivery could be compromised by instability in the land-locked Central 
Asian region.
               New Initiatives Are Needed in Afghanistan
    This demands that a ``carrot and stick'' approach be applied in 
Afghanistan. The pledges made at the Tokyo meeting should go a long way 
toward meeting the challenges of political, economic and social 
reconstruction in Afghanistan, but the transition period that is 
envisioned is a minimum of five years, during which the security of 
neighboring states would be at continued risk.
    Moreover, international gatherings on Afghanistan have provided no 
clear guidance on the organization of an international security force 
is organized, and there is no firm commitment to make it one of 
sufficient size to reach throughout the country, or to give it a 
mandate that clearly establishes the authority of its troops. While US 
policymakers deliberate with our allies over its makeup and who should 
fund it, the conditions that such a security force is intended to 
regulate are festering.
    Nowhere is this clearer than in the area of narcotics control, as 
these forces will have to deal with new and more dangerous realities on 
the ground. Having returned to the cultivation of opium, Afghan farmers 
and traders alike have much greater incentive to reject international 
interference with their livelihoods. Given that most Afghans are armed, 
their opposition to international drug control efforts could lead to 
further bloodshed.
    Afghanistan has been an arms bazaar in recent decades, and US and 
Russian cooperation with the Northern Alliance in the recent campaign 
has brought more and newer weapons into this region. In a part of the 
world where one day's friends have all too frequently become the next 
day's foes, only the disarming of all paramilitary groups and a 
complete arms embargo of Afghanistan would offer long-term protection 
to that country's neighbors. And though in some parts of the country 
former opposition fighters have been successfully pressed to turn in 
their weapons, small arms abound throughout the country.
    The presence of large stores of arms and markets for them in 
Afghanistan render the region's burgeoning drug trade even more deadly. 
This in itself should be sufficient incentive for the US to seek out 
and destroy current stores of opium and locate and then close down the 
heroin factories throughout the country, regardless of where they are 
found. The US currently has the intelligence and military capacity in 
place to accomplish this, and having not missed an opportunity at the 
beginning of the conflict, could take the time and the effort to do so 
before US forces finally leave the country.
    The US should also take aggressive steps toward halting the 
resumption of poppy cultivation in Afghanistan, through a multi-faceted 
approach of incentives and disincentives. Afghan farmers should be 
offered cash subsidies for destroying the current harvest in the field, 
or for turning it over to authorities charged with its destruction. 
Those who comply should qualify for trial or target programs of 
agricultural reform, while those who refuse should lose all priority 
for receiving future international development assistance.
    Anything less means that the opium and heroin trade through 
Afghanistan will quickly recover, as all the traders along these well 
established routes seek to maintain their profit levels. The drug trade 
feeds on the poverty of this region, and allows radical Islamic groups 
to become self-financing. Drug dealers and arms traders propagate each 
other, and have long been cooperating in this part of the world.
    This is bad news for the Central Asian states. The point of 
contagion for them remains Afghanistan. As one senior government 
official in Kyrgyzstan recently described the situation, the 
flourishing drug trade insures that anyone can buy his or her way into 
Central Asia at a price. Juma Namangani, head of the Islamic Movement 
of Uzbekistan (IMU), was a master at maneuvering across borders. Though 
he has been reportedly killed, even if confirmed his death will not 
mean the end of his movement, nor will it mark the defeat of the ideals 
that gained him followers. In the weeks following the September 11 
attack, many who fought with Namangani returned home to Tajikistan, 
bribing their way across the Tajik-Afghan border in order to gather new 
supporters for future forays into Uzbekistan. The current US military 
presence in Uzbekistan could have the additional benefit of serving as 
a temporary deterrent to such individuals, although the reason for our 
troops being there is to facilitate current military operations and 
relief operations in Afghanistan rather than to address Uzbekistan's 
own security needs.
    The reestablishment of Afghanistan's drug trade through Central 
Asia is good news for those interested in the perpetuation of militant 
Islamic groups. The current religious ferment in the region is nothing 
new. It has persevered in much the same fashion for over a hundred 
years. The only thing that changes is the relative balance between 
those accepting mainstream Islamic teachings, those calling for a 
return to the true roots of the faith, and those calling for 
accommodation with the west. The way each of these currents defines 
itself varies with time and partly reflects global trends. Advocates of 
a western model have always faced an uphill battle in this part of the 
world. Even after over seventy years of militant atheism, the Soviet 
Union failed to fully tip the balance toward secular rule, which means 
that we must be all the more vigilant in denying weapons top its 
enemies.
    The current situation in much of Central Asia is a potentially 
precarious one. Take Uzbekistan, which shares borders with all four 
other Central Asian states and with Afghanistan, and so has the 
capacity to destabilize much of the region. The government in Tashkent 
faces the challenge of educating, integrating and employing a new 
generation of Uzbeks--over half of the country is under 21--and given 
how little economic reform has occurred in the country it really still 
is the government's challenge, as there is only a tiny private sector 
to draw on for assistance. Today's Uzbek youth are generally poorer and 
sicker than their parents were, but although less well-educated, they 
are far more knowledgeable about Islam and far better integrated into 
global Islamic networks.
    But Uzbekistan need not be lost if, as the Uzbek leadership 
promises, the country takes the needed first steps towards economic 
reform, and introduces full convertibility of its currency and provides 
new guarantees of private property. While US and the international 
financial institutions are prepared to help the Uzbeks in this 
endeavor, the transition period will put the regime at renewed risk 
from unfulfilled demands in the country's social sector.
    The resumption of the drug trade simply adds new pressures. In 
Uzbekistan, as elsewhere, the social sector is under severe strain. 
Narcotics addiction is growing throughout the region, in all five 
Central Asian states and in Iran, and HIV/AIDS is on the rise as well. 
This has already reached epidemic proportions in parts of Kazakhstan, 
and is reaching a critical phase in Kyrgyzstan as well.
    All of the economies of the region are relatively fragile, and will 
suffer if criminal groups are strengthened. We have already seen how 
narcotics trade has served to undermine the governments of some of the 
Andean region states, funding terrorist groups. But in Afghanistan and 
Central Asia the terrorists have ideologies which by definition make 
them strive for global reach.
    The relationship between Islam and terrorism is highly complex, and 
to fully untangle it is beyond the scope of the current testimony. 
Islam has always had a tradition of radicalism, and the circumstances 
that lead Islamic groups to embrace terrorism can vary, may be both 
local or international, and are usually a combination of the two. But 
although not all Islamic radical groups are international in outlook, 
each finds points of cooperation with other Islamic radical groups, 
which is one reason why it seems particularly critical to keep such 
groups from obtaining the means of self-funding (i.e., money to pay 
salaries to unemployed youths who leaflet, organize etc.).
    Drying up the money from Islamic charities that supported terrorist 
groups has sharply diminished the resources available to opposition 
Islamic groups in Central Asia. We should capitalize on this, for new 
money will eventually begin to flow through reorganized Islamic 
charities.
               Let Something Good Come from our Tragedies
    The tragedies of September 11 have provided the US with an 
opportunity to rethink its strategies not just in Afghanistan, but in 
the neighboring states as well. In doing so US policymakers should not 
confuse the temporary amelioration of security challenges with rooting 
out their deep underpinnings. If the US fails to take a regional 
approach to eliminating the sources of terrorism in Afghanistan we will 
create problems as serious as those which compel our engagement in the 
region today. Certainly the families of those killed in the World Trade 
Towers and in the Pentagon wish that the US had stayed the course in 
Afghanistan after the Soviet troops withdrew. Let us not repeat our 
earlier mistakes. Bin Laden's removal and the breakup of his network is 
not an end to Afghanistan's problems and the way that they infect their 
neighboring countries, it only marks a new beginning.
    As part and parcel of destroying the al Quaida network US 
policymakers must be prepared to engage in a serious way to sharply 
reduce--if not eliminate--the cultivation of opium poppies in 
Afghanistan. The administration should propose concrete projects 
designed to do this as well as to stop the trafficking in narcotics 
across the states of Central Asia, and Congress should signal its 
willingness to supply the necessary supplementary funding. While US 
poliyc-makers should pressure our European allies to actively engage in 
this effort with us, including to help pay the cost of increased 
interdiction and crop substitution programs, we must be prepared to act 
even if the US is forced to bear a disproportionate share of the 
burden.
    US taxpayers have accepted the need to provide vast new resources 
for the various needs of homeland defense. But vigilance at home is 
only part of the solution. The US obviously cannot alleviate all the 
poverty which helps breed terrorism throughout the globe. But we can 
recognize places of particular vulnerability, as Afghanistan and its 
neighborhood is certain to be. Afghanistan continues to have all the 
elements of a terrorist breeding ground--poverty, drugs, conventional 
weapons and a population that is used to being permanently at war.
    Our timetable for rebuilding Afghanistan has to coincide with the 
timetable of how risks are generated and not that of our own annual 
budget cycle. The US must help organize and fund an international 
security force capable of meeting Afghanistan's current security 
challenges, and must pressure other members of the coalition against 
terror to provide men and funds to support it as well.
    The administration should request a dramatic increase in 
supplemental funds to fight the against the return of drug cultivation 
in Afghanistan, and the trafficking in narcotics across the states of 
Central Asia. More pressure must also be placed on the Russians to do a 
better job of combating the trafficking of narcotics across Russia as 
well.
    But most importantly, we have to make it clear to our new friends 
in Kabul, that the government of Afghanistan must do more than simply 
reaffirm the goal of ending drug production, that we expect them with 
international assistance, to implement a wide range of programs to deal 
with drug interdiction, as an integral part of developing a new 
national police force and civil service. Part of the latter's task must 
be to work with the local communities on projects designed to lead to 
crop substitution, and to develop programs which offer financial 
incentives for turning in criminal groups that seek to encourage the 
perpetuation of the drug trade.
    This raises the question of who will fund these activities. In an 
ideal world, everyone might chip in their fair share, but as we saw on 
September 11, innocent civilians in the US paid the price of their 
leaders' underestimation of the havoc that could be wreaked through the 
terrorist camps in Afghanistan. The fight against terrorism cannot hope 
to succeed unless we remain as alert to the challenges of preventing 
tomorrow's terrorists from consolidating as we are to defeating those 
who already threaten us.

    Chairperson Feinstein. Thank you very much, all of you.
    Let me begin with this question: I am just wondering 
whether--and I asked this question of Mr. Newcomb and I want to 
ask it of you--in these areas where there are new terrorist 
groups uprising, Uzbekistan, Tajikistan, and controlling drug 
trafficking, whether it would make any sense to have a key 
terrorist list of these individuals and groups and perhaps 
strive to work in concert with our allies in freezing these 
assets. They may be too removed from that, but I would like 
your comment on it.
    Ambassador Smith?
    Mr. Smith. I think that in the case of the Islamic Movement 
of Uzbekistan, which I should say in the year 2000 was put on 
the State Department's list of terrorist organizations, I doubt 
that it has much in the way of assets that are attachable, 
concrete, identifiable, in contrast perhaps to groups 
elsewhere.
    Chairperson Feinstein. Colombia, Mexico, even Afghanistan. 
I appreciate that very much.
    I am going to turn to Senator Kyl. If you have some 
questions, go ahead.
    Senator Kyl. Yes. One of the things that I was struck by in 
both the previous panel and also what several of you said--I 
think, Dr. Olcott, one of the points you made was that we 
shouldn't be caught up in our own budget cycles or 
parliamentary restraints or constraints.
    This is a war on terrorism and we have established already 
that the drug trade helps to fund that war. In a war, you try 
to cut through red tape. You don't be bound by it, and it just 
seems to me that so many of you made points that relate to 
this. The fact that we have been hampered in Colombia by an 
overly restrictive policy that Senator Sessions pointed out 
really makes no sense.
    It is a catch-22. You have to have control of an area if 
you are going to eradicate the crop, but you can't give the 
military there the ability to control the area because then you 
might be helping the government in its war against the 
terrorists, which is a catch-22. So it seems to me that we have 
to look at little more clear-eyed at what this is all about.
    When it was just a war on drugs, we might have had the 
luxury of this sloppy thinking and sloppy action, but now that 
we know that, in addition to that, it helps to fund the 
terrorists who we are in a war with, we don't have that luxury 
anymore. And I think that to be bound by reprogramming problems 
and restrictions as we had in Colombia and some of the things 
that were referred to here is no longer acceptable to us. I 
hope that through hearings like this and suggestions that you 
all can give us, we can help to cut through a lot of that and 
begin to effectively deal with this problem.
    I know that each of you has so much more to add here. In 
view of the time, let me terminate here, unless any of you 
would like to comment on what I said, and give Senator Sessions 
a chance as well.
    Does anybody want to comment?
    Thanks.
    Chairperson Feinstein. Senator Sessions?
    Senator Sessions. Thank you.
    Ambassador Kamman, where do you see Colombia now from your 
vantage point? It strikes me that this is a nation of 40 
million people, the oldest democracy in South America, a good 
trading partner of the United States, an educated populace, but 
losing a lot of the educated people because of terrorism and 
brain drain, I guess, on the Colombian government. Is this a 
critical time in their history, and can we provide some 
assistance to put them over the hump?
    I know Professor Shifter noted, and I think it is correct, 
that it is only about 35,000 guerillas, but they are violent, 
tough people out there. They probably are going to have to kill 
a lot of them to gain control of the country. Are they ready to 
do that and can we help?
    Mr. Kamman. Well, Senator Sessions, I think it is a 
critical time. The problem is that the critical time began 
maybe 30 or 40 years ago and has gotten more and more critical, 
but now we do have an opportunity.
    I think you have made the point that this area which was 
given over to control of the insurgents, the FARC, is no longer 
under their control. I think the government of Colombia waited 
too long to do that, but now they have at least done that. They 
have sent the military and the police back to the area that 
they had evacuated.
    There is an election in Colombia this year. It is, I think, 
a pretty clear bet that the winner of that election is going to 
take a harder line. The effort to negotiate with the guerrillas 
has not worked. They have proved to be much too stubborn and 
politically insensitive, not to mention vicious and venal, and 
yet they have the money they get from the narcotraffickers. So 
we have an interest here in stopping the flow of narcotics. We 
also have an interest in trying to help a government, friendly 
and democratic, to stop a force that has bedeviled them now 
for, as I say, 30 years or better.
    I think the other thing is that when this election is over 
and done with, there will be a major military effort. I don't 
think it requires U.S. military presence, but it does require 
training. It does require perhaps some additional budget for 
more equipment to go to the Colombian military and police, and 
it will require removing some of the restrictions on the use of 
that equipment.
    But we will also find, I think, a controversy in the United 
States about whether this is necessary. I believe the 
government of President Pastrana has tried in good faith for 
three years to find a negotiated settlement that would be non-
violent and it just has not worked. And so I think we need to 
gird ourselves psychologically for seeing very likely an 
upsurge in the violence, which I will certainly be sorry to 
see, but I think it is the only way that the government of 
Colombia can get control of their own territory.
    Chairperson Feinstein. Dr. Olcott?
    Mr. Olcott. Can I say something about your terrorist list? 
I think that that is a very good idea, except I would point out 
one potential limitation, which is that the narcotics trade 
plays a critical role in allowing radical groups to make the 
transition to terrorist groups and the list itself would not 
really cope with that problem.
    In a sense, the biggest argument for getting rid of the 
drug trade is to keep groups from making that transition, to 
make it difficult for potential terrorist groups to get their 
earliest financing and not just cut off the financing of groups 
that are already in place.
    Thank you.
    Chairperson Feinstein. I agree with you a hundred percent. 
The question is how really to do that, and particularly in 
Afghanistan and the countries to the north. I think it is very 
difficult. I mean, I can see with the warlords now beginning to 
restore their dominance in Afghanistan, being fueled off of the 
drug traffic, that you create another scenario that makes the 
establishment of a legitimate government extraordinarily 
difficult and could push Afghanistan the way of Colombia.
    Ms. Olcott. Absolutely, I agree fully, and that is why even 
more money for interdiction efforts than we are talking about 
is just absolutely critical because we have to attempt to 
combat the drug problem both at the level of cultivation and at 
the point where it leaves Afghanistan and enters Central Asia. 
Otherwise, we risk not just a narco state in Afghanistan 
reestablishing itself, but the fragility of the Central Asian 
states really comes into question as well and we could have 
``greater Afghanistan'' in the worst sense of the term in 
another 5 to 10 years if we are not careful now.
    Chairperson Feinstein. My main concern about Afghanistan is 
around here everybody wants the mission defined and then get 
out quickly. If we get out quickly, we leave it to chaos, and 
chaos will be funded through the drug trade and I am very 
concerned about that.
    Does anybody have any other comments they would like to 
make? Ambassador Smith?
    Mr. Smith. On the question of dealing with the warlords in 
Afghanistan, my personal view is that in the short term there 
is not going to be the will or the military force to take them 
on and they are going to have to be dealt with in other ways.
    The experience in Tajikistan was that the warlords could be 
given positions and allowed to do things which kept them in the 
fold. The additional factor that we have been discussing today, 
though, is combined with that has to be a prohibition on 
trafficking, which makes it doubly difficult.
    There are other things that warlords can do in Afghanistan. 
They can smuggle things to Pakistan, and according to at least 
one academic analysis that was more profitable in the past than 
drugs. So there are other avenues for them. Perhaps they could 
be encouraged to go into legitimate business. That is the kind 
of approach that in the short term is necessary. I don't think 
it is going to be possible to confront them militarily, 
certainly not the largest ones.
    Chairperson Feinstein. Professor Shifter?
    Mr. Shifter. Yes, thank you. I just want to add that in the 
case of Colombia we really have a special problem and a special 
challenge, which is that we have two groups that are in 
conflict with one another that are on the terrorist list that 
are very formidable--the FARC guerrillas and the AUC, which was 
put on that list on September 10, and I think rightly so. The 
AUC is also a time bomb.
    So the challenge, I think, for the United States is really 
to apply pressure to the Colombian government, to the 
legitimate authority of the Colombian government to deal with 
these violent threats that are in conflict with one another. It 
is very complicated. I am not sure whether that situation 
exists in other parts of the world, and both of them derive a 
lot of their income from the drug trade as well and they 
represent a serious threat to Colombian society.
    Senator Kyl. Might I just ask you on that point, Professor 
Shifter, wouldn't it be most useful for the United States to 
strongly support the military of Colombia to enhance its 
capabilities and get the political people to make the decisions 
necessary to use that against the guerrillas there as a means 
of undercutting the AUC's authority?
    In other words, isn't its authority primarily a result of 
the ineffectiveness of the government? Granted, it uses many of 
the same tactics as FARC, for example.
    Mr. Shifter. My concern, Senator, is that they have become 
so autonomous and so strong that it is sort of a frankenstein. 
And I think to assume that if we just deal with the FARC and 
contain them that that is going to take care of the 
paramilitary problem, I am afraid that may not happen.
    Senator Kyl. No, and I was not suggesting that either. What 
I was suggesting is that by making the government and the 
military of Colombia stronger, it can deal with the FARC. It 
can also deal with AUC or the other affiliated kinds of 
rightist organizations, but to some extent it will be less 
necessary to do so because the populace that has generally 
supported those groups is going to see that there is an 
alternative, namely the Colombian government.
    Mr. Shifter. Absolutely. I think the focus should be on 
strengthening the Colombian government. I agree.
    Chairperson Feinstein. And also on the training of the 
military, because the allegations of human rights abuses by the 
military are legion and that is what really deters, I think, 
the strong support for a democratic government with an 
effective military. You can't have an effective military if 
they engage in gross human rights violations, and I think that 
has been one of the problems.
    Mr. Shifter. I think you are right, Senator, and I think 
the concept of professionalization, including human rights 
guarantees, and also more effectiveness, is what has to be 
promoted in Colombia. The government of Pastrana has made some 
progress in that area, but I think not nearly enough and a lot 
more has to be done.
    Chairperson Feinstein. Ambassador Kamman, would you like to 
have a closing comment?
    Mr. Kamman. Well, to agree with Michael, you do have a 
unique situation in that you have paramilitaries, right-wing 
people, who sprang up in a reaction to the left-wing 
guerrillas. And they are both on the terrorist list and they 
are both violent and they both get money from the narcos, which 
buys the narcos protection and they can therefore conduct their 
business.
    But I think you have put your finger on the key thing, 
Senator Feinstein, to put our effort into training the 
military, make them more professional, including the human 
rights issues. Quite a bit has been done by our own U.S. 
military in the last few years, and I think going a little 
further on that would allow us to overcome the attraction of 
the paramilitaries to the population. I agree with Senator Kyl. 
So we have to continue and probably step up our effort, 
training and some equipment for the Colombian military, as well 
as the police, which we traditionally have offered.
    Thank you.
    Chairperson Feinstein. Thank you very much. Let me thank 
you all. I have read your written statements. I think they are 
excellent, and let me thank you for your verbal statements 
here.
    The record will remain open for further comments from 
Senators, and the hearing is adjourned. Thank you very much.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]
    [A submission for the record follows.]

                       SUBMISSION FOR THE RECORD

  Statement of Hon. Mike DeWine, a U.S. Senator from the State of Ohio

    Good morning. I appreciate you all taking the time to come here and 
discuss the undeniable link that exists between acts of terror and 
illegal drugs. While most of us have long recognized this close 
connection, recent events have made this link more relevant in the 
daily lives of all Americans. In the past six months, more and more 
people have come to the same simple conclusion: Terrorists and drug 
traffickers are linked in a mutually-beneficial relationship by money, 
tactics, geography and politics.
    I believe it is somewhat ironic that this issue has come into focus 
largely due to the relationship between the Taliban reg9ime, which 
provided safe haven to Osama bin Laden and his Al Qaeda network, and 
the opium and heroin trade in Central Asia. According to some 
estimates, the Taliban made as much as $50 million a year in revenue 
from the drug trade, and we know that Afghanistan supplies more then 70 
percent of the world's heroin.
    However, many (if not most) people in the United States paid 
relatively little attention to Afghan heroin because it only 
constitutes about 5 percent of the U.S. supply. Little notice was given 
to the fact that opium cultivation increased dramatically when the 
Taliban came to power, rising from 52 percent of the world's total in 
1996 to a high of 79 percent in 1999--4,581 metric tons, according to 
the United Nations. The fact of the matter is that the Taliban was 
extremely dependent on opium sales. Tragically, it took the events of 
September 11th to focus large scale international attention 
on the nexus between drugs and terrorism.
    And so, we must do everything possible to prevent illegal drug 
income from being used to finance regional instability or international 
terrorism. This is true whether we are talking about the Taliban in 
Afghanistan or the FARC in Colombia. If we fail to sever the ties 
between the drug money and terrorism, then we risk losing fragile 
democracies and around the world--and right here in our own backyard in 
countries like Haiti and Colombia.
    The reality is that democracy is being threatened in the Andean 
Region, in large measure, because money generated by narcotics 
production and trafficking funds well-armed terrorist groups. Nearly 90 
percent of the cocaine and the majority of the heroin arriving in the 
United States comes from Colombia, mostly originating in southern 
Colombia where government control is weakest. The Revolutionary Armed 
Forces of Colombia (FARC) receives about $300 million a year from drug 
sales (six times the annual amount reaped by the Taliban). The right-
wing paramilitary United Self Defense Forces of Colombia (AUC) relies 
on the illegal drug trade for 40 to 70 percent of its income. And, 
Peru's Shining Path is more dependent on drug money than ever before.
    In October, the State Department designated 28 organizations in the 
world as Foreign Terrorist Organizations. Twelve of those 28 listed 
organizations have been identified as having links with drug 
trafficking, and four of these twelve reside in the Andean Region.
    These groups routinely carry out political assassinations, murder 
innocent civilians, trade drugs for weapons, and torture and murder 
judges and law enforcement officials.
    In recent months, the FARC also has increased attacks in urban 
areas and against electricity towers, water supplies, and other 
critical infrastructure. There groups present a clear threat to 
regional security and, in fact, threaten our own national security. 
They rely on drug profits to do so. Whether they actively cultivate and 
traffic the drugs or ``tax'' those who do, the financial windfall that 
the narcotics industry guarantees is an adequate alternative to state 
sponsorship. Yet, ironically enough, the fact that these groups wear 
two hats--the insurgent hat and the drug hat--Actually affords them and 
some degree of protection under out current policy. We need to revisit 
this policy and ask ourselves if it really makes sense.
    The blurring of the lines between the international drug trade, 
terrorism, and organized crime poses new challenges to the United 
States. Organized crime groups often run the trafficking organizations, 
while the terrorists and insurgent groups often control the territory 
where the drugs trade to finance their organizations and operations.
    The magnitude of these profits almost guarantees financial 
independence from a state sponsor and allows these groups to operate 
with impunity. Any restraint that could, have been imposed by a state 
sponsor is non-existent, and ``traditional'' diplomatic and military 
measures are inapplicable in the absence of a state sponsor.
    This is more than just a drug problem, a health problem, or a law 
enforcement problem. It is a national security issue. And so, our 
response needs to go beyond drug eradication to include intelligence 
collection, diplomatic efforts, law enforcement activities, and 
military action. For example, while I continue to support Plan Colombia 
and the Andean Regional Initiative, we must go beyond eradication and 
increase our efforts to pursue the people and organizations who enable 
the narco-traffickers to operate.
    Thank you, and I look forward to hearing what you all have to say6 
this morning.

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