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Opening Statement of Senator Charles E. Grassley
Senate Caucus on International Narcotics Control Hearing on
U.S. Counternarcotics Strategy in Afghanistan

Wednesday, October 21, 2009

Thank you for joining us today to talk about the complex issue of drug trafficking in Afghanistan and the programs our government are using to get a handle on it. I am interested in hearing from our witnesses about how opium poppy and heroin continue to help fund extremist organizations, including the Taliban that we removed from power in 2001. I also look forward to hearing what programs they believe are working and not working in our current efforts to combat the drug trafficking, and to get their opinions on the changes in our counternarcotics strategy that are being made by the Obama Administration.

Although the drug trade in Afghanistan does not get the same media attention as military operations or extremist bombings, it is probably the single most destabilizing factor affecting the economic and political stability in the country today. Poppy cultivation makes up an estimated 25 to30 percent or more of Afghanistan’s Gross Domestic Product. Last year, Afghanistan alone produced 90 percent of the world’s opium valued at an estimated value of over 3 billion dollars.

Currently, 20 of 34 provinces are considered poppy free, but one province, Helmand Province, which is located in Southern Afghanistan, is still by itself the second largest producer of heroin in the world. This makes Helmand and the other poppy growing areas extremely financially important for extremist organizations.

Many factors such as high opium price, government corruption and the lack of security have forced many farmers into poppy production. But now with opium prices falling due to overproduction and with wheat prices high, we may have a window of opportunity.

Earlier this year, Obama Administration provided a general outline of their counter-narcotics strategy for Afghanistan. Their Strategy includes a focus on interdiction, alternative development and following the money. Eradication efforts will no longer be pursued, but I believe that when eradication is properly implemented in conjunction with alternative development and other programs, it has been effective in getting farmers to stop planting poppy.

We can’t just cure this problem through one simple solution; rather we must use a comprehensive approach that incorporates interdiction, alternative development and even eradication. We must also tackle corruption and security. Not only is the Taliban targeting our military forces with deadly violence, they are also targeting government employees working to establish alternative development and judicial reform programs. The lack of security makes it difficult for many to travel outside Kabul, let along set up programs in high-risk or unsecured areas.

Another major problem related to the illicit Afghan drug trade is the illicit proceeds derived from the sale of opium. In Afghanistan, nearly 90 percent of the Afghan economy functions outside of formal financial institutions that we use here in the United States every day. International trade is used to disguise money laundering and terrorism financing activities. Afghan officials have stated that drug traffickers smuggle heroin out of the country only to return with weapons and bombs.

Much of the Afghan economy uses cash, trade and an elaborate system of hawalas [ha-WA-laz] to move value. These often unregistered money service businesses can also be used to finance terrorism. They trade debts and move payments through an informal network of brokers without the need to access the traditional banking system which makes them extremely difficult to locate and shut down.

Terrorist organizations are experts at switching from one method to another when the need arises, but we are simply not prepared right now to keep up with them and put them out of business once and for all. We need to take the battle over terrorist funding to wherever the money flees. We need to understand how the terrorists adapt and go after their new methods with the same urgency and purpose that we had in the weeks and months after 9/11. The Treasury Department ought to be at the forefront of analyzing, evaluating, and countering these new trends.

I believe a solution to the growing influence of the narcotics trade in Afghanistan is to cut off the flow of illicit funds that result from the drug trade. I’ve been an outspoken advocate for reforming our Nation’s anti-money laundering laws. I introduced comprehensive legislation in previous Congresses that would help hit terrorists, criminal, and drug traffickers where it hurts the most, their pocketbooks. I am currently finalizing an updated version of this legislation and hope to introduce it in the near future. I’ve heard from a number of law enforcement officials that we urgently need to update our laws to combat evolving trends.

We need our laws to be up to date and flexible so that the source of money fueling this conflict is cutoff before it can be used to fund violence. Only once we cut off the flow of these illicit funds can we truly make a dent in the illicit activity of terrorists and drug traffickers. I hope my colleagues on the Drug Caucus and the Judiciary Committee will join me in supporting my efforts to reform our anti-money laundering laws.

I look forward to hearing the testimony from the witnesses and questioning them about ways we can strengthen our efforts to attack this multi-faceted problem plaguing Afghanistan. I thank the witnesses in advance for their testimony.