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The World Heroin MarketCan Supply Be Cut?$

Letizia Paoli, Victoria A. Greenfield, and Peter Reuter

Print publication date: 2009

Print ISBN-13: 9780195322996

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780195322996.001.0001

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(p.259) Appendix A Legal Production of Opium

(p.259) Appendix A Legal Production of Opium

The World Heroin Market
Oxford University Press

The focus of this book is the illegal market for opium and its refined products. A legal market, which services the pharmaceutical industry, exists alongside the illegal market. Except for India, which we examine in chapter 7, there is little evidence of leakage from legal to illegal markets in producing countries.1 Nonetheless, because there are occasional proposals that current illegal producers be allowed into the legal market as a method for reducing the supply to illegal markets (e.g., Senlis Council, 2005), it is useful to provide a brief account of that market.

The International Narcotics Control Board (INCB), a UN organization established in 1968 in accordance with the 1961 Single Convention, strictly regulates legal production. The INCB allocates to individual countries the right to produce specific quantities of opium and many other psychoactive substances. The set of countries allowed to produce opium has changed over time. The 1953 Opium Protocol allowed seven countries to produce for the export market: Bulgaria, Greece, India, Iran, Turkey, the USSR, and Yugoslavia (McAllister, 2000:179–184). The list now is very different. Of the original seven, only India and Turkey are still licensed producers. The other nations with quotas are Australia, France, Spain, and Hungary (INCB, 2008a:78–81). A few other nations, including China and Japan, produce small amounts for their own medical use. India is the only country that permits the legal extraction and export of opium gum; all other large-scale producers, including Turkey, have adopted the concentrate of poppy straw (CPS) processing method, which is.much less prone to diversion.2 For this reason, the opiates now licitly produced are formally called opiate (INCB, 2008a) or narcotics raw materials (p.260) (NRM) (DEA, 2006). In 2006 total production of opiates for the international licit market consisted of a total of 490 tons of morphine equivalent (39 tons in morphine equivalent of opium production plus 451 tons in morphine equivalent of morphine-rich poppy straw) and of 72 tons in thebaine equivalent of thebaine-rich poppy straw (INCB, 2008a: 79–81). Thebaine is, like morphine, an alkaloid of opium; unlike morphine, it is not used therapeutically but is converted industrially into a variety of compounds, including the painkiller oxycodone.

The INCB attempts to balance supply and demand by obtaining regular estimates from each country on their consumption of various kinds of opiates. The allocation among producer nations is a purely political process. There is no claim, for example, that these are the lowest cost producers or that this configuration helps minimize illicit production. India is a high-cost producer but bases its claim for a higher allocation on the risk of diversion. Australia is a low-cost producer with minimal diversion risk. Efforts to gain substantial quotas for illicit producers (e.g., Burma in 1964 and Afghanistan in 2005) as a way of reducing black market supplies have been unsuccessful.

Since 1979, the UN Economic and Social Council has repeatedly called on importing countries to support traditional suppliers of NRM and to limit imports from non-traditional suppliers. In response to such a resolution, in 1981 the U.S. DEA (2006) published a final rule specifying certain source countries of opiates; the rule is frequently referred to as the 80/20 rule. Under that rule, opiates can be imported from one of only seven countries. Traditional suppliers, India and Turkey, must be the source of at least 80% of the U.S. requirement for opiates. Five countries—France, Poland, Hungary, Australia, and, in the past, Yugoslavia as well3—may be the source of not more than 20% (DEA, 2006). The 80/20 rule has had a profound impact on the licit opiate market, because the United States is by far the largest importer.

Up until the late 1990s, India’s market-leading position was further reinforced by the fact that thebaine could be extracted only from opium gum, which India alone produced. Because thebaine is not naturally present in CPS, the CPS producing countries were effectively excluded from the thebaine market. However, since the late 1990s, technological progress has threatened India’s dominance. Since that time, in fact, Australia and France have begun producing CPS with high thebaine content and, as a consequence, many countries, including the United States, have been importing an increasing fraction of their legal opiates from Australia and France instead of India, as opium rich in thebaine is not included in the 80/20 rule (see chapter 7). According to interviews with foreign liaison officers in Delhi, U.S. pharmaceutical companies have also been lobbying the U.S. government to revise the 80/20 rule. So far, their lobbying efforts have not been successful, given that the 80/20 rule was confirmed anew in 2006 (DEA, 2006). Despite this, India’s opium exports have followed a downward trend since the 1990s and its overall market share has considerably declined (INCB, 2008a:78–79; see chapter 7).


(1.) There is a great deal of diversion further down the chain. In the United States, such drugs as oxycodone (sold under the trade name of Oxycontin) and hydrocodone, have entered the black market through diversion from regular distribution channels.

(2.) In the CPS process, poppy pods are dried on the stalk in the fields and then crushed to remove the seeds. The seeds are used for a food product and the crushed pods are processed in a factory to extract the alkaloids. In India, however, farmers lance poppy pods in the fields to remove opium. Farmers then turn in the collected opium gum to the government (INCB, 2008a:78–80).

(3.) In late 2006, the DEA (2006) proposed to replace Yugoslavia with Spain.