Families and Friends for Drug Law Reform
committed to preventing tragedy that arises from illicit drug use
Australian heroin drought:
by W.M. Bush
Note: Footnotes not included in this version.
Full text with footnotes can be downloaded in PDF format.
The article disputes the claim by the Federal Government that Australian law enforcement financed by its Tough on Drugs Strategy was primarily responsible for the heroin drought and resulting fall in overdose deaths. Law enforcement agencies – notably the Australian Federal Police through its Commissioner – have revealed intelligence to the effect that Asian crime syndicates have assessed that there is a large and very profitable market in Australia for amphetamine-like drugs and that they have made a marketing decision to promote them rather than heroin.
The paper analyses carefully these and other contributing factors of the drought, including law enforcement, put forward by the Australian Federal Police. The evidence made available by enforcement agencies suggests strongly that the prime causes of the drought were a series of poor opium harvests in Burma and the marketing decision of crime syndicates. No other explanation fits the known facts including:
• the drought being confined to Australia;
• a big rise in availability of amphetamine-like drugs imported through the same channels as heroin;
• the known large rise in recent years in production in South East Asia of these artificial drugs; and
• the greater profit derivable from them than from heroin; and
• their lower vulnerability to law enforcement interdiction.
If Australian law enforcement had an effect it was probably only a subsidiary factor. The evidence is strong that there would have been no drought in the absence of the other factors. In that case the Government is taking credit for a decision of criminals.
The Australian heroin drought:
The case for an inquiry into its causes and the flood of methamphetamines
Finding the causes of the heroin drought that emerged at the beginning of 2001 is of the first importance for the determination of future drug policy. This paper reviews evidence on the causes of the drought disclosed by the Australian Federal Police and other law enforcement agencies and concludes that this evidence does not support the claim of the Federal Government that law enforcement was primarily responsible.
The falling price of heroin in the years up to 2001 demonstrated that heroin was becoming more freely available. The drought became evident in sudden price rises and reduction in purity and was borne out in the annual surveys of drug trends presented in November in Sydney. Dr Shane Darke, a senior researcher with the National Drug and Alcohol Research Centre of the University of NSW, told the gathering that in his long involvement in drug trend surveys he had never expected to see such a change.
The Federal Government claims credit for the drought and the resulting large decline in heroin overdose deaths. It states that the law enforcement effort funded by the Tough on Drugs Strategy has been responsible. The Prime Minister used this claim during the federal election campaign; the Minister for Justice and Customs, Mr Ellison, and, most recently, the new Health Minister, Senator Kay Patterson, have repeated it.
This claim is not supported by what law enforcement agencies have disclosed. The evidence points to the drought being caused primarily by external factors and that if Australian law enforcement has had an effect it was probably only minor. The evidence is strong that there would have been no drought in the absence of those other factors.
If this conclusion is correct the Government is seriously misleading the public.
Reasons put forward to explain the heroin drought
The following reasons have been put forward by police and other law enforcement specialists for the drought:
• general shortage of heroin arising from unfavourable weather conditions in the opium growing regions of Burma and increased demand on that supply;
• decisions by Asian crime syndicates to concentrate on marketing amphetamine-like drugs in Australia rather than heroin; and
• high seizures of heroin; and
• success in the arrest and conviction people involved at a high level in the importation and distribution of heroin in Australia.
We would be reassured that policy was on the right track if law enforcement was primarily responsible for the drought through high seizures and disruption of the distribution chain. But we would not be reassured if the Australian drought arose from a general commodity shortage caused by factors like weather unrelated to supply control. Even more we would be alarmed if the principal cause was a commercial decision of criminal suppliers.
Over the last few years there has been a decline in opium production in the Golden Triangle, the main source of Australia’s heroin. "Three years of drought was followed by abnormal flooding and frost in Burma" (Gordon (Sept. 2001), p. 20). The US Department of State has estimated that the potential yield for 2000 – effectively the same as that disclosed by the AFP – was only 46% of the estimate for 1997. In both absolute terms and as a proportion of world production less heroin has been coming from that region (Gordon (Sept. 2001) p. 20).
At the same time there has been substantial growth in the opium and heroin markets in countries which, like Australia, are supplied from the Golden Triangle. Indeed the AFP has noted that "in the region predominantly now supplied by the Golden Triangle – East and South East Asia [including China], Australia and Canada – opium and heroin addiction grew. According to official Chinese data, opium and heroin addiction in China rose by 870 per cent in the period from 1990-99."
This shortage of opiate production in an environment of increased demand could well lead to some reduction in availability. Police assessments seem to be mixed on this important point. In spite of the decline in production, the AFP reported in June that "there was plenty of heroin available in Asia.". In contrast, in October the Commissioner suggested that weather conditions had reduced availability. Whatever the case, it is likely that other influences were also operating to explain the drought. How is it that alone in the world, Australia is affected and so markedly? A conference of leading analysts on the Global Economy of Illicit Drugs held in London in June concluded that "the Australian drought was a unique phenomenon globally and therefore worthy of careful study" (Gordon (Dec. 2001)).
A factor particular to Australia that would explain the phenomenon is that the syndicates supplying Australia artificially induced the drought. In June Mr Keelty, the AFP Commissioner, said there had been: "a business decision by Asian organised crime gangs to switch from heroin production as their major source of income to the making of methamphetamine, or speed, tablets." "[T]heir market research …. tells them that these days people are more prepared to pop a pill than inject themselves."
Assessing the relative influence of law enforcement
The important question in explaining the drought is the relative importance of, on the one hand, this business decision by criminal suppliers and, on the other, Australian law enforcement effort. The AFP suggests that the following successful law enforcement activity may have been responsible:
• development since 1998 of a capacity to work off-shore with other law enforcement agencies;
• heroin seizures;
• the discovery of many of the importation methods used by Asian drug syndicates; and
• "dismantling of a major syndicate in mid-2000 by an Australian-led international task force."
The likely contribution to the drought of each of these law enforcement factors deserves closer scrutiny.
It is clear from reports of the AFP and the National Crime Authority that Australian law enforcement has an increasing international focus. According to the AFP annual report published in September 2001: "Globalisation has significantly expanded the opportunities for sophisticated illegal activity and facilitated closer interaction between organised criminal groups from different locations and cultures." However, while there was a big expansion of AFP overseas presence after 1998, the AFP has long had an overseas presence, co-operated closely on drugs with law enforcement agencies including those of the United States and been engaged in international operations. The $36.062 million disclosed in the latest AFP annual report that was applied to its"International Services" performance outcome is dwarfed by the annual turnover of what the Prime Minister has described as "an international, multi-billion dollar enterprise with its undisclosed and untaxed profits rivalled by few industries." The annual turnover of the Australian illicit drug industry was estimated by Access Economics in 1997 to be $7 billion.
One can also be sceptical about attributing the drought to drug seizures. Indeed high seizure rates are likely to reflect high availability. The AFP itself warns that "While seizure rates do not necessarily correspond with production, they can be a good indicator of production trends." Big seizures in the past including the huge one of 400kg in October 1998 have not led to a heroin shortage. The then AFP Commissioner, Mr Palmer, noted that "the indications are we haven't made much dent on the market." In contrast, the drought became evident around Christmas 2000 after a large off shore seizure of heroin bound for Australia in October.
Was there a causal relationship? Even these historically high seizures are only a small proportion of the amount consumed. The National Crime Authority made a fair estimate of the size of the Australian market by multiplying the average daily usage of 0.5 grams of a purity rate of 50% by the number of dependent heroin users estimated at 74,000. This means that about 6.7 tonnes a year (say 6 tonnes) was used in Australia before the drought. The high amount seized in 1999-2000 (734 kg) was a mere 12% of that 6 tonnes. On this basis it would be surprising if the seizures had a big impact on heroin supply.
Similarly, there is reason to be sceptical of an AFP claim that the discovery of importation methods for one drug (heroin) has led to a shortage of supply of that when there is no shortage of supply of other drugs (amphetamines) from the same source. The two sorts of drug are similar enough for similar concealment techniques to be used for each as indeed they are.
Past experience teaches caution against claiming too much from arresting even those high up on the distribution chain. If a head is cut off, hydra-like a replacement grows. The AFP itself is aware of the example of the elimination of the large Cali Cartel in Colombia only to be replaced by a multiplicity of traffickers. Many law enforcement successes are said to be the result of a tip-off by one criminal group to secure the elimination of competition. Indeed, the important conviction of a syndicate head secured by law enforcement agencies apparent arose from a tip-off. The AFP itself has admitted the need for caution saying only that "it is possible" that the dismantling of a major syndicate in mid-2000 "may have been ‘the straw that broke the camels’s back’ of the heroin market’."
There were thus no extraordinary law enforcement successes leading up to the drought. The improvements of capability and successes fall within a continuum of change to keep pace with the growth in law enforcement challenges rather than being an increased effort acting on a static level of crime.
Evidence particular to the drought that show other factors have been more influential than law enforcement
These considerations do not rule out law enforcement being the principal cause of the heroin shortage even though that explanation is, on past experience, unlikely. It is other evidence particular to the drought that leaves little doubt that other explanations were much more influential.
• The AFP Commissioner himself gave most weight to the decision of Asian crime syndicates to switch from heroin to amphetamine-like drugs. In June 2001 he said it was "a major" reason for the heroin shortage which "was more a result of the business strategy by crime czars than a shortage of the drug."
• The big rise in availability of amphetamine-like drugs is consistent with the same police intelligence reports disclosed in June. The accuracy of this prediction is confirmed by the recent national drug trends conference, increasing seizures and the assessment of the police. For example, Mr Keelty predicted in June the arrival of the amphetamine-like yaa baa pills. He commented after a big seizure a month later that: "It appears that has now happened" (Moor (19/07/2001)).
• Additional intelligence reports revealed in October (2001) have disclosed a further decision by Asian crime syndicates to manipulate the Australian illicit drug market in passing off amphetamine-like drugs as party drugs. "Asian organised crime gangs have made a business decision to swamp the nation with pills deliberately made to look like ecstasy, but which contain no MDMA, ecstasy's main ingredient." If crime syndicates have the capacity to implement this strategy, it is likely that they had the capacity to bring about a heroin drought.
• It makes good business sense for Asian crime syndicates to promote amphetamine-like drugs rather than heroin. The AFP Commissioner has himself identified seven reasons why Asian producers have decided to make the switch. These are:
- the vulnerability of opium crops to location by satellite and other means of surveillance;
- that opium growing is subject to the vagaries of the weather whereas artificial drugs like amphetamines are not;
- the ready availability in Asia of precursor chemicals needed for artificial drugs;
- a shorter and less labour intensive production and distribution chain for synthetic drugs and hence reduced vulnerability to interdiction and less sharing of profits;
- much higher profit margins for the synthetic drugs. The production cost of amphetamine-like drugs is very low compared its wholesale price. "While heroin may be a more valuable product per kilogram at both retail and wholesale levels, from the producers' point of view, the mark-up can be considerably greater for methamphetamine";
- an impending world shortage of heroin contributed to by the Taliban ban on opium production in Afghanistan; and
- a much higher potential Australian market for pills than for an injected drug like heroin.
• Amphetamine-like drugs found in or bound for Australia in plentiful quantities are originating in the same region and are being imported via the same channels as heroin. In these circumstances if Australian law enforcement had been responsible for the heroin shortage one would have expected that there would have been a parallel decline in availability of these other drugs. This consideration undermines an argument that the AFP public relations has recently put forward that law enforcement has had a substantial effect because it has created "a difficult and dangerous environment for importing heroin to Australia" in contrast to "a lucrative and relatively easy one for exporting ATS [amphetamine type stimulants] around the region" Gordon (Dec. 2001). The environment is substantially the same for the importation of both.
• Diversification of Asian drug syndicates into amphetamine-like drugs is consistent with the convergence in trafficking of different types of drugs and indeed of a range of criminal activities. "Global drug markets are now closely interconnected, both in terms of markets for the same drug type and markets between drug types" (Gordon (Sept. 2001) p. 22).
Conclusions drawn from the available evidence
This litany of factors strongly suggests that the Australian law enforcement here and in collaboration with agencies overseas has had only a subsidiary impact on the illicit drug supply to Australia. The AFP itself has been much more cautious than the Federal Government in claiming success for law enforcement. According to Mr Keelty law enforcement was only one of "several factors" responsible for the heroin shortage and that the business decision by Asian organised crime gangs to switch largely to amphetamine-like drugs was "a major one". At most he credits law enforcement with having prompted this decision by the large seizures and discovery of importation methods. If Australia managed to reduce the supply of heroin so drastically why has there not been a similar shortage of heroin in other countries where law enforcement effort has been as efficient as Australia? In terms of the rate of drug seizures Australia is among the top countries of the European Union and North America yet the AFP annual report reveals that the Netherlands and the United Kingdom where no heroin shortage is yet evident, consistently outperformed the AFP over the benchmark period. The NSW Police Commissioner, Mr Ryan, has bluntly denied that the heroin drought represents a win for law enforcement.
On the information that is available, the big decline in opium production in Burma from a string of poor harvests when there was a the lack of any compensating supply from Afghanistan thanks to the effective Taliban ban on production in 2000 has meant that Asian drug syndicates have had difficulty in supplying all their traditional heroin markets and their new expanding one in China. In this context and as the AFP claims, Australian law enforcement could well have influenced them to reserve most of their limited supplies of opiates for markets where law enforcement was less intrusive. Their market research showed a bright future for amphetamine-like drugs in Australia. In contrast to heroin, supply production is not so limited, profit margins are more attractive and the loss of 10% or so to seizures is less a deterrent. Based on what law enforcement agencies have revealed there would have been no heroin drought without these other factors.
It is a travesty of the evidence disclosed for the Government to claim that Australian law enforcement action has been responsible for the heroin drought and the resulting fall in drug overdose deaths. Apparently, a market plan devised by criminals is being played out in Australia. That an Australian Government is prepared to claim the benefits of this but not admit any responsibility for the fearful health and social effects of the flood of substitute drugs is deeply worrying.
It is of the first importance to examine closely big changes in the illicit drug market like the heroin drought because they throw light on the underpinnings of drug policy. Such changes rarely happen. Law enforcement agencies themselves have disclosed intelligence and other information that disclose a number of possible causes. If the Government’s interpretation is right, drug policy is on track. If the more plausible interpretation is correct, Australia is dancing to the tune of criminals and the nation’s security is threatened. There must be a thorough, open and independent inquiry with full access to all relevant sources of information to get to the bottom of what is happening.
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