© USIP 2014 • All rights reserved.

United States Institute of Peace • www.usip.org • Tel. 202.457.1700 • 

UNITED STATES INSTITUTE OF PEACE

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“Afghanistan’s comparative advantage is based 

largely on the illegality of 

opium and associated high 

prices. The country would 

not be competitive in a more 

liberalized and regulated 

global regime for opiates.”

September 2014

Licensing Afghan Opium for Medicinal Use

Why It Won’t Work

William A. Byrd and David Mansfield

E-mail: wbyrd@usip.org

 DavidMfld@aol.com

PEACEBRIEF179

The Problem and the Proposal

Afghan opium cultivation and production has increased sharply since 2012, with further increases 

expected in coming years. By far Afghanistan’s largest illicit economic activity, opium production 

and its processing into heroin brings many problems for the country, including adverse effects 

on governance and the rule of law, as well as a growing drug use problem among Afghans. These 

problems more than offset the short-term financial benefits for rural households cultivating opium 

poppy and the stimulus opium provides to demand in a weak economy.1

There is a risk that frustrated reactions in the international community to repeated increases in 

opium cultivation will give rise to a search for extreme solutions. But there are no silver bullets—

simplistic, one-dimensional remedies—for Afghanistan’s opium problem. Radical measures, such as 

massive eradication of opium poppy fields, either ground-based or through aerial chemical spraying, 

Summary

• With large increases in Afghan opium cultivation and production in 2013 and 2014, there is a risk 

that resulting frustration may give rise to a search for extreme but unproductive solutions.

• There are no easy solutions to the illegal narcotics problem. The proposal that Afghanistan could 

shift to licensed production of opium for pain medications will not work.

• Due to severe problems with governance, rule of law and security, opium licensing in Afghanistan would be subject to extremely high leakages. Afghanistan’s comparative advantage in 

supplying the illicit market means that it would likely expand cultivation to meet demand in 

both markets.

• Afghanistan is a high-cost producer of opium, and prices for licensed opium are much lower 

than on the illegal market, so profits might well be marginal or even negative.

• Existing producers of licensed opiates—Australia, Turkey, India, France and others—would 

strongly oppose any move to let Afghanistan become a competitor on the licensed market.

• Even if a more liberalized market for opiates is envisioned, technological advances and modern 

techniques in other countries mean that Afghanistan could not be a competitive producer.
© USIP 2014 • All rights reserved.

Licensing Afghan Opium for Medicinal Use

page 2 • PB 179 • September 2014

at one extreme or legalization of opium at the other, will not work, are likely to be counterproductive 

in the country’s fragile economic and political environment and could lead to worse outcomes than 

the problem they are meant to address. 

This paper explores a common proposal: to license Afghan opium for medicinal use. It is widely 

recognized that there may be considerable unmet demand for opioids—synthetics and opiates—for 

pain medication. Only 10 percent of the world’s population is estimated to consume as much as 90 

percent of pain relief medication, and many in the developing world do not have access to analgesics 

at all. Global demand for opioids more than tripled between 1993 and 2012 and is expected to 

continue to increase, even though the share of opiates in opioids is likely to decline due to faster 

expansion in the use of synthetics. Thus, it has been suggested that Afghanistan should shift from the 

illicit market to licensed opium production for pain medications, eliminating the serious problems 

associated with opium’s criminalization and responding to demand for pain medications.2

International Regulatory System for Medicinal Opiates

The International Narcotics Control Board (INCB) is charged to ensure a balance between global demand and supply of narcotics for legitimate medical needs. The Single Convention on Narcotic Drugs 

of 1961 requires that cultivation, production and trade in licit opiates occur under INCB supervision 

and guidance.3 Each producing country must establish a government agency responsible for a 

licensing system for licit opium poppy cultivation. This agency acts as the sole purchaser of the crop 

and maintains the exclusive rights for exporting, wholesale trading, and maintaining stocks of opium 

and its derivatives.

Australia (mainly on the island of Tasmania), France, India, Spain and Turkey are the five major 

exporters of licensed opiates, but India is the sole exporter of raw opium, which it produces using 

labor-intensive techniques similar to those in Afghanistan. The other countries all produce concentrate of poppy straw (CPS), which the Single Convention defines as “all parts (except the seeds) of 

the opium poppy, after mowing.” CPS comprises the bulk of the global supply of licensed opiates, 

95 percent of opiate raw material rich in morphine and 97 percent of opiate raw material rich in 

thebaine in 2013.4 Producing CPS is preferred because it is mechanized and offers considerable 

economies of scale, with much lower labor requirements than extracting raw opium. There are also 

much more limited opportunities for diversion into the illicit market, and the product has a higher 

value-to-weight ratio, reducing transport costs. Finally, CPS processing involves less residual waste 

than raw opium, facilitating safe disposal with fewer environmental hazards. 

Australia, France and Spain have demonstrated their comparative advantage in the licit opiate 

industry, using improved seeds and well-resourced agricultural extension. The development of new 

genetic varieties has provided increased alkaloid content, particularly in thebaine-rich varieties, for 

which demand has been increasing, especially in the United States. Cultivation occurs on sizable 

farms; Australian fields reportedly averaged thirty-six hectares in 2012–13.5 The economic potential 

of the opiate industry in Australia and its competitive advantage in the international market has 

prompted the country to approve extension of licensing into the state of Victoria and possibly the 

northern territories.6 

India and Turkey continue to cultivate opiates on smaller farms. While Turkey produces CPS, India’s 

raw opium extraction is considered to have a significant problem with leakages into the illicit market, 

making it quite possibly the fourth-largest global producer of illegal opiates. The United Nations 

recognizes both countries as traditional supplier countries, and they have preferential access to the 

large U.S. market under the so-called 80/20 rule.7 
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Licensing Afghan Opium for Medicinal Use

page 3 • PB 179 • September 2014

Information on production costs is considered commercially sensitive, but 1999 figures indicate 

that Australia produced morphine equivalent for US$56 per kg, around one-third the cost in India 

($160) and less than one-fourth the cost in Turkey ($250) at that time. Production figures for 2013 

suggest that Australia has far higher yields, producing 16 kg of morphine equivalent per hectare 

compared to 5.7 kg in India.8

In 2013 INCB estimated global demand for opiate raw materials at 480 tons of morphine-rich 

opiates and 287 tons of thebaine-rich opiates. In the same year, INCB anticipated that 593 tons of 

the former and 348 tons of the latter would be produced, exceeding supply in both categories. Thus, 

worldwide opium stocks for licit medicinal use are growing.9 

Why Opium Licensing Won’t Work for Afghanistan

Opium licensing in Afghanistan is a proposal that unfortunately does not survive several reality 

checks. Of most immediate relevance, the institutional setup, good governance and security are not 

in place in Afghanistan to prevent and minimize leakages from licit production into the illegal market. 

Because of weak security, lack of rule of law, significant corruption and existing trafficking networks, 

Afghanistan has a strong comparative advantage in supplying the illicit heroin market, and incentives 

to continue to produce for this market remain very strong. Afghanistan uses a very small proportion of 

its agricultural land to produce opium. So if licit licensing were introduced, there is no reason why total 

cultivation would not increase sharply to cater to both licensed and illicit markets. Prices for licensed 

opium are much lower than those on the illegal market, skewing incentives in favor of the latter. 

If the problem of leakages and the risk of continuing large-scale illicit opium poppy cultivation 

somehow could be mitigated, the next problem is that there would be no international demand 

on the licit market for the raw opium that Afghanistan produces. Supply from India already exceeds 

global demand. Pharmaceutical companies prefer CPS. Moreover, it seems doubtful that Afghanistan 

would be able to obtain status as a traditional producer of opium, even though it is certainly true 

from a historical perspective; existing licit producers would strongly oppose it.

Even if Afghanistan could gain access to the licit market, the country’s tiny farm sizes, highly laborintensive technology and poor infrastructure mean that costs would be very high. On well-irrigated 

land in the central canal command area of Helmand Province, an estimated 4.7 kg of morphine 

equivalent per hectare was produced in 2013 (based on a yield of 33 kg per hectare of opium and 

a conversion ratio of 7 kg of opium to 1 kg of morphine equivalent). The estimated production cost 

was US$3,100 per hectare, or $660 per kg of morphine equivalent—much higher than costs in licit 

opium-producing countries, probably ten times higher than in Australia. The relatively low prices of 

licensed opiates would mean at most limited benefits for Afghanistan. 

Finally, if the global market for opiates were decriminalized and subject to a regulated system, it 

seems extremely doubtful that Afghanistan could remain a significant producer of opium in a competitive international market. Australia, the low-cost producer, would defend and expand its market 

share. Other producers, such as Turkey, France and Spain, would do the same. Still other countries 

with modern mechanized agricultural sectors might well enter the market. These competitors would 

have ample capacity to take over the market for heroin and morphine-based medicines by producing 

morphine-rich CPS. If Afghanistan were to try to compete in CPS production, it would generate very 

little employment. In Australia only around 0.04 persons are employed per hectare cultivated, compared to an estimated 1.8 persons in Afghanistan—a difference of some forty-five times.

In sum, shifting to licensed opium production for medicinal use is not a realistic option for 

Afghanistan in the short or long run. Afghanistan’s comparative advantage is based largely on 

the illegality of opium and associated high prices. The country would not be competitive in a 
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Licensing Afghan Opium for Medicinal Use

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more liberalized and regulated global regime for opiates and most likely would cease to be a 

significant producer. Such an outcome would remove the serious adverse effects of illicit opium 

on Afghanistan, but the idea that the country could engage in licensed production of opiates and 

reap associated economic benefits is a nonstarter. 

Notes

1. See the body of fieldwork produced by the Afghan Research and Evaluation Unit on the opium 

economy between 2005 and 2014, available at www.areu.org.af (accessed September 11, 2014).

2. A prominent early example is the detailed proposal by the Senlis Council, subsequently renamed 

as The International Council on Security and Development, in 2005. See David Spivak, lead editor, Feasibility Study on Opium Licensing in Afghanistan (London: Senlis Council, 2006), available at 

www.icosgroup.net/static/reports/Feasibility_Study.pdf (accessed September 14, 2014).

3. Text of the convention available at https://www.unodc.org/pdf/convention_1961_en.pdf (accessed September 11, 2014).

4. The former is used to produce morphine and morphine-based medications, such as codeine, 

whereas the latter is used for other opiate medications such as oxycodone. The former could be 

processed into heroin but not the latter. 

5. See Parliament of Victoria State, Australia, “Drugs, Poisons and Controlled Substances (Poppy 

Cultivation and Processing) Amendment Bill 2013,” available at www.parliament.vic.gov.au/publications/research-papers/8902-drugs-poisons-and-controlled-substances-poppy-cultivationand-processing-amendment-bill-2013#_ftn44 (accessed September 11, 2014).

6. For background on the licensed opiate industry in Australia, see Keith Bradsher, “Shake-Up on 

Opium Island: Tasmania, Big Supplier to Drug Companies, Faces Changes,” New York Times, July 

19, 2014.

7. Dating back to 1981, this rule stipulates that “at least 80 percent of licit opium imported into the 

United States must have as its original source India and Turkey; not more than 20 percent can 

have as its original source Australia, Hungary, Poland, France, and the former Yugoslavia.” See U.S. 

General Accounting Office, “Drug Control: U.S. Heroin Control Efforts in Southwest Asia and the 

Former Soviet Union,” Washington, DC, May 1997, GAO/NSIAD-97-148BR, 45, available at www.

gao.gov/archive/1997/ns97148b.pdf (accessed September 11, 2014).

8. INCB reported that Australia harvested 11,484 hectares of morphine-rich opium poppy in 2013 

and produced 184 tons of morphine equivalent. India harvested 5,619 hectares but produced 

only 32 tons of morphine-equivalent in 2013. See International Narcotics Control Board, 

Estimated World Requirements for 2014—Statistics for 2012 (New York: United Nations, 2014), 

Part Three, available at www.incb.org/documents/Narcotic-Drugs/Technical-Publications/2012/

NDR_2012_Part3_Supply_E.pdf (accessed September 11, 2014). 

9. 2011 stocks of morphine-rich opiate raw materials for licit medicinal purposes could cover 

expected global demand for fourteen months, anticipated to increase to fifteen months in 2014. 

The inventory of thebaine-rich raw materials in 2012 was enough to meet global demand for 

eight months, with stocks expected to grow further. See INCB, Estimated World Requirements.

About This Brief

William A. Byrd, a senior expert 

at the U.S. Institute of Peace, is a 

development economist and has 

published extensively on Afghanistan’s economy and other topics. 

David Mansfield is an independent 

researcher who has conducted 

in-depth field research in rural 

Afghanistan for seventeen consecutive years and has produced numerous publications on the opium 

economy and related topics. This 

Peace Brief reflects both authors’ 

concern that a search for simplistic, 

one-dimensional solutions to 

Afghanistan’s opium problem would 

backfire. The views expressed do 

not necessarily reflect those of the 

U.S. Institute of Peace.