INTELLIGENCE MEMORANDUM INTERNATIONAL NARCOTIC SERIES NO. 8 REDUCED PRODUCTION OF NO. 4 HEROIN IN THE GOLDEN TRIANGLE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700030034-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 22, 2016
• Document Release Date: May 20, 2010
• Sequence Number: 34
• Publication Date: March 1, 1972
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
International Narcotic Series No. 8
Reduced Production of No. 4 Heroin in the Golden Triangle
Secret
ER IM 72-34
March 1972
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP 1
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
March 1972
REDUCED PRODUCTION OF NO. 4 HEROIN
IN THE GOLDEN TRIANGLE
Conclusions
1. During 1970 and the first half of 1971, narcotics traffickers
moved unusually large quantities of raw opium into processing centers in
the Burma-Thailand-Laos border area -- the Gc!den Triangle. Production
of No. 4 heroin at existing refining centers expanded, and new refineries
were established for heroin production. This increase in production served
to meet a sharp increase in demand for heroin by US forces in South
Vietnam. The expansion of No. 4 heroin production was in addition to,
and did not affect, the ongoing production of prepared opium, morphine
base, and No. 3 smoking heroin in the Triangle for consumption in the
traditional markets in Southeast Asia.
2. Beginning in mid-1971, normal opium flows in the region were
disrupted; stocks of raw opium, morphine base, and No. 4 heroin rose
sharply; the refining of morphine base into No. 4 heroin was drastically
curtailed; and, in some cases, heroin refineries shut down opeations
completely. By year-end, wholesale prices for all narcotics had fallen sharply.
T;lis recession in the market almost certainly was the result of the
withdrawal of US forces from South Vietnam and the adoption in June
1971 of measures designed to inhibit the use of heroin by US forces
remaining in South Vietnam. Narcotics suppression actions by the
governments of Burma, Thailand, and Laos had only limited impact on
the overall narcotics market and apparently were not a factor in the
contraction of the GI market for No. 4 heroin in South Vietnam.
Note: This memorandum was prepared by the Office of Economic Research
and has been coordinated within the Central Intelligence Agency and with
the Bureau of Narcotics and Dangerous Drugs.
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3. Traffickers in the area are still adjusting to the loss of the US
troop market and to the ongoing suppression efforts by Burma, Thailand,
and Laos. At the same time, the basic capabilities of the Golden Triangle
for supplying large quantities of heroin remain unimpaired. Raw opium
supplies, equipment and processing skills for production of narcotics, and
established distribution networks are all amply available. A resumption of
No. 4 heroin production in the Triangle on the scale prevailing through
mid-1971 would likely signify that Southeast Asian traffickers have sizably
enlarged their presently limited access to the heroin market in the United
States.
Discussion
Background
4. The Burma-Laos-Thailand border area, known also as the Golden
Triangle, is one of the world's largest opium-producing regions (see the map).
This region normally accounts for about 700 metric tons of opium annually,
or about one-half of the world's total illicit output. A substantial proportion
traditionally is consumed within this region as opium. Until 1)69 the
remaining portion of the opium was shipped to refineries in the Golden
Triangle, process ;d into cooked opium, morphine base, and No. 3 smoking
heroin, and exported for consumption in, for the most part, urban S ,utheast
Asia. In such cities as Bangkok and Hong Kong, small quantities of morphine
base were converted to No. 4 white heroin for the international traffic.
5. Beginning in late 1969, and continuing through 1970 and 1971,
existing opium processing facilities in the Tachilek - Mae Salong segment
of the tri-border area began production of No. 4 heroin in addition to
their more traditional products. A number of new refineries exclusively
producing No. 4 heroin were also established in the area during this period.
This expansion of production of No. 4 heroin was intended to meet the
growing demand for the commodity by US forces in South Vietnam.*
6. Demand for heroin by US forces in Vietnam was suddenly and
severely depressed in June 1971 by the strengthening of US military
enforcement action against the traffic on US bases, by implementation of
a program of testing troops for drug use, and by the continuing withdrawal
of troops. This decline in demand, described by some observers as a
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Kachin KUnlongf
Slate ) Yunnan;i
Loshlo' Northern
Shan
S u r m a lti ?KFn6Yu p
Tachilek
Maw * am Kuoung
1 / 1, f Laos
~Ch(
ang Mnt
i
?Lampang
Southeast Asia
Opium Growing Areas
= Opium growing area
A Major processing center
t 0 400 Mile
0 100 20 0-1-
iMI, AHM1 11011 NI]A 11Y !1 Ii.O i.NtAT1oN
A ~ 111 Nl OLIIOAl11I.Y ~U1i 110HIt A*IV!'
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"collapse" of the market for No. 4 heroin, created severe problems in
the narcotics market during the last half of 1971. As indicated below,
virtually all elements of that market - raw opium shipments, narcotics
st^^ks, refinery operations, and prices paid for narcotics -- were affected.
Opium Shipments
7. During 1971 the major producers of narcotics in the tri-border
area imported an unusually large quantity of raw opium from northeast
Burma for conversion into morphine base and No. 4 heroin. A total of
375 tons of raw opium was imported during 1971, with almost 300 tons
arriving during the first half of the year. 25X1
quantities shipped in past years indicates that, although as much as 300
tons may move in a given year, 150 tons is a more normal fig-,e. A
minimum of 120 tons is known to have been shipped during 1970.
8. Although increased planting of 25X1
poppy during the year, the 1971 opium harvest in Burma does not appear
to have been unusually large, nor was there evidence of an extraordinary
effort to collect opium from growers. On the other hand, there is some
evidence that prices paid to growers during the 1971 opium harvest were
much higher than in 1970. The unusually large 1971 shipments probably
resulted from larger than usual sales of raw opium in response to the increase
in purchase prices. A drawing down of growers' and distributors' opium
stocks was probably a major source of supply. At least 60 tons of the
total delivered in the first six months of 1971 are known to have criginated
from 1970 carry-over stocks.
Narcotic Stocks
9. The normal patterns of opium flows were disrupted in 1971 and
caused severe imbalances in stocks held in processing areas throughout the
tri-border region. The heavy demand for raw opiurr. during the first half
of 1971 apparently depleted carry-over stocks from 1970 in growing areas.
Declining prices and a depressed narcotics market in the tri-border region
beginning about mid-1971 resulted in a drastic reduction in opium shipments
to the processing centers during the latter half of 1971. For the most part,
traffickers became wary about shipping additional opium until a more
favorable market situation developed. The traffic in traditional opium
products was also temporarily affected by the heroin market depression.
As a result, some 60 tons of raw opium stocks accumulated in the northern
Shan State of Burma by the end of November 1977 1. Unsold stocks of
morphine base and No. 4 heroin also accumulated in the processing areas
during this period. In the Tachilek - Mae Sai area alone, stocks of No. 4
heroin totaled about 600 kilograms. Even larger supplies were believed to
be languishing in Vientiane, Bangkok, and Saigon.
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10. A temporary shortage of raw opium to meet the demands of
domestic Asian markets was reported in November. This situation was
exacerbated by the imposition of limitations by the Burmese government
on opium shipments from the northern Shan State, which temporarily
prevented the replenishment of processing stocks. However, the resumption
of large opium shipments in December 1971 and January 1972 - more
than 100 tons - flooded the market and apparently resulted in a
considerable buildup of stocks in the processing areas for carryover into
1972.
Refinery Operations
11. Since June 1971, many opium conversion facilities have
reportedly closed down because of disruptions created in the traffic and
transportation systems in Thailand and Laos by enforcement measures
imposed by the governments of those countries. Even the Burmese
authorities have periodically ordered closure of heroin refineries in the
Tachilek area, a major opium conversion center. In addition, some of the
marginal heroin producers - who went into operation in 1969 to meet
the needs of the greatly increased US forces in South Vietnam -- closed
because of shortages of opium conversion chemicals. These shortages were
in part the result of the Laotian government's seizure of a sizable amount
of acetic anhydride in November 1971.
12. In addition to the Tachilek area, refinery operations have also
been curtailed in Laos, and those operating in Thailand are believed to
be restricted to the facilities owned by the Chinese Irregular Forces (CIF)
in the Mae Sai, Mae Salong, and Tham Ngop areas.
13. These remaining facilities have drastically reduced `heir
production of No. 4 heroin, and many have reverted to the production
of refined opium and No. 3 smoking heroin for traditional Asian markets.
The most striking evidence of reduced No. 4 heroin production activity
lies in reports of the layoff of known heroin "chemists."
14. The reversion of many of the former No. 4 heroin producing
refineries to the production of refined opium and No. 3 heroin in recent
months has also been accompanied by a flurry of relocation activity within
the tri-border area. As indicated in Figures 1, 2, and 3, the equipment
in these refineries is suited to primitive surroundings and is simple to move.
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Figure 1.
Working Area in a Golden Triangle Refinery
Figure 2. Portable Electric Generator. This 4- 7-kilowatt generator probably puts out
220-volt current and is diesel-driven. Power from this generator appears to have been
used as a heat source and to run equipment such as the air compressor shown in Figure 3.
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Figure 3. Portable Air Compressor. This water-cooled compressor probably takes 220
volts to run a 1- 2-horsepower motor. Use of such a compressor can shorten opium
processing time through use of vacuum filtration.
general, the operation of refineries in the Tachilek area appears to depend
on the relationship between the owners of these facilities (predominantly
members of the Burmese-Self Defence Force - KKY) and the Burmese
government. In return for KKY assistance in counter-insurgency actions,
the Burmese government has on occasion acquiesced in KKY operation of
refineries.
15. Wholesale prices for all narcotics in the area began to decline
about mid-June 1971 (see the table). Traffickers attributed this depressed
market to many causes, including such things as a collapse of the credit
purchase system, raw opium shortages, chemical shortages, and suppression
actions by the governments of Burma, Thailand, and Laos. With the
exception of government suppression measures, most of these factors appear
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Wholesale Prices of Narcotics
in the Tachilek - Mae Sai Area
US $ per Kilogram
Date
No. 4
Heroin
No. 3
Heroin
Morphine
Base Op
ium
1962 a/
675
Aug
Sep
1,240
Apr
1,780
May
1,570
495
Jun
1,500
389
Jul
1,230
157
378 35
.62
Aug
b/ 1
,06
2 to 1,097
96 to 101
370 33.12
to 36.25
Sep
926
91
359 33
.12
Oct
b/
82
3 to 891
89
317 32
.50
Nov
686
123
154 39
.60
Dec
b/
617
123
190 27.00
to 31.50
a. Average.
b. When a range is given, the Zower figure represents the
cash price, the higher figure the credit price.
to have been results rather than causes of the market decline. To judge
from the reporting received, most traffickers appear to have had only an
imperfect knowledge of the factors affecting the No. 4 heroin market in
South Vietnam. In particular, traffickers either were unaware of or chose
to ignore the ongoing withdrawal of US forces from Vietnam and the
imposition of stricter US military controls on troop drug consumption. As
a result there was a significant overproduction of No. 4 heroin.
16. The narcotics market recession affected all commodities and
persisted through the end of 1971. The price of No. 4 heroin continued
its eight-month decline during December, probably reflecting the unsold
accumulation of large stocks of this commodity throughout the tri-border
area and in major cities of Southeast Asia. The decline in morphine base
prices appears to have halted in December with the price stabilizing at a
level above November but still well below earlier levels. Except for a
short-lived upturn in November 1971, the price of raw opium also continued
to decline through the end of the year.
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17. ' No. 4 heroin continued to be available in abundant supply
throughout' South Vietnam, and retail prices remained steady during the
last quarter of 1971. However, the wholesale price in Saigon began declining
after June 1971, when it had peaked at $10,000 per kilogram, to a
November 1971 price of $5,000 per kilogram.
wholesale prices for No. 4 declined even further in January ,:;id February
.
Wholes-.,e price declines were also observed in Bangkok and Vientiane over
the same period.
Current Situation
18. At present the production of No. 4 heroin in the tri-border area
has been curtailed drastically. The depression in the narcotics market has
also led to lesser cutbacks in production of morphine base and No. 3 heroin
for the traditional markets in Southeast Asia. So far as is known, neither
the cutbacks in production of narcotics for traditional markets nor the
disruptions in the traffic in the tri-border area have affected consumption
in such places as Hong Kong and Singapore. In the meantime the resumption
of large raw opium shipments from northeast Burma during December 1971
and January 1972 has further depressed the market for opium. Three factors
may account for these increased shipments. First, the traffickers may be
building up large stocks of opium in expectation of a future resumption
in demand for No. 4 heroin. Second, the traffickers, fearing further
interdiction efforts, particularly by the Burmese government, may be trying
to move as much opium as possible from growing areas to processing points
beyond Burmese control. Third, it may now be necessary to clear out
remaining opium stocks in the producing areas to allow space for new stocks
from the current harvest in January-March 1972.
Factors Affecting the Current Situation
The US Market in South Vietnam
19. The declining demand for No. 4 heroin by American forces in
South Vietnam is almost certainly the major cause of the curtailment of
heroin production in the Golden Triangle. The number of US military
personnel in South Vietnam reached a peak level of more than 543,000
men in April 1969. Thereafter, withdrawals caused a steady decline in US
troop strength to levels of 475,000 in December 1969, 415,000 in June
1970, 335,000 in December 1970, and 239,000 in June 1971. Incidence
of No. 4 heroin use by GIs was reportedly low in 1969 and through the
first five months of 1970. From June 1970 through June 1971, however,
the use of heroin burgeoned. this
increase in drug use was particularly marked after the Cambodian campaign
of May 1970, when US forces were withdrawn from offensive operations
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and committed to perimeter defense and other passive defense tasks in South
Vietnam. The expansion of No. 4 heroin processing capacity in the Golden
Triangle area roughly coincided with this increased demand for heroin by
US forces in South Vietnam.
20. In June 1971 the US Government took a number of actions aimed
at attacking the narcotics problem in Southeast Asia in general and among
US troops in South Vietnam in particular. Governments in the area were
urged to strengthen their capabilities for suppression of the traffic, and,
in many cases, the United States offered material assistance. In South
Vietnam, US military enforcement actions against the traffic were
strengthened, sizable troop education programs dealing with drug abuse were
mounted, and a system of testing troops for narcotics use was implemented.
Troop withdrawals from South Vietnam also continued during 1971, and
by year-end, troop strength was down to a level of 157,000 men. All of
these actions appear to have contributed to the declining use of No. 4
heroin by US forces in South Vietnam during the last half of I'M and
early 1972.
Narcotics Suppression Actions in th!' Region
21. Narcotic suppression actions by the governments of Burma,
Thailand, and Laos have not been the major factor in the recent reduction
of No. 4 heroin production in the area. Nevertheless, such actions have
contributed to the general disarray that has marked all narcotics traffic
in the region since mid-1971. These government actions and the initial
adjustments of the market to such actions are reviewed below.
Burmese Actions
22. In previous years the Burmese government had shown a great
reluctance to cooperate in any bilateral or regional program for narcotics
control. Initially the government refused to acknowledge any Burmese
involvement in the opium traffic, placing the blame on alien groups such
as the CIF and various insurgency forces operating in the northern Shan
State. Nevertheless, since the beginning of 1971 the Burmese government
has initiated actiors designed to reduce or eliminate the production and
traffic in narcotics in areas under its control. In April 1971 the authorities
ordered all refineries in the Tachilek area to suspend operations. However,
many of these facilities simply moved to new locations and continued
operating. Later, the operators of these facilities were observed resuming
production again in the Tachilek area. In July, and again in November,
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the government ordered the closing of these refineries, particularly those
producing No. 4 heroin.
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23. Burmese government relationships with these KKY leaders are
delicate ones. The KKY forces act as a buffer force in the northern Shan
State in defending major population centers from the various insurgent
forces operating in the area. The Burmese government provides very little
material assistance to the KKY who depend on opium trade to support
their troops. It was therefore surprising that, in addition to the closing
of refineries, the government directed Burmese army forces to intercept
opium caravans and to limit the movement of opium by traders and KKY
leaders to two shipments per year between Keng Tung in the northern Shan
State and Tachilek. The delicate nature of the situation in this part of
Burma is reflected by the fact that the Burmese government subsequently
had to relent on this regulation.
by late January
Burmese authorities were again putting pressure on refinery owners at
Tachilek.
Laotian Actions
24. The first Royal Laotian Government anti-narcotics law went into
effect on 15 November 1971. Before this enactment the government had
undertaken various other suppressive actions against the traffic. In June
it ordered the curtailment of all refinery operations in the country. At
least two refineries were subsequently destroyed by government forces.
/Directives controlling acetic
anhydride imports have also been implemented. All customs declarations
pertaining to acetic anhydride are to be scrutinized, and tht owners of
such stocks are being required to justify their need for the chemical.
Prospective importers now have to obtain prior authorization from the
government before ordering.
Thai Actions
25. The government of Thailand has cooperated with US %arcotics
and customs agents in strengthening its enforcement efforts in the tri-border
area. The increased seizures of opium and heroin by Thai authorities during
1971 are testimony to this effort. As a result, traffickers shipping No. 4
heroin from Mae Sai and Tachilek to Bangkok have found it necessary to
break their shipments into smaller units to minimize losses in the event
of a seizure.
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Adjustments in the Market
26. The narcotics market in the tri-border area is still adjusting to
the events of the past year, and the full scope of the changes is not yet
clear. Refining facilities continue to be relocated to avoid governmental
attempts to shut them down, and shipments of finished products continue
to be broken down into smaller lots to avoid seizure. In addition, traffickers
who normally market their products through the traditional smuggling
routes from the Shan State of Burma to Laos and Thailand are actively
seeking alternative markets and routes. Some traders are also attempting
to expand the local Burmese market for heroin and other narcotics in major
population centers such as Mandalay and Rangoon. At the same time, they
are also attempting to develop Rangoon as a new transshipment point for
the smuggling of narcotics to their traditional markets in Asia and overseas.
These markets could also be serviced by opium conversion facilities in the
northern Shan State. Although there are now no known heroin producing
refineries in this area, the four ;acilities reportedly in operation in the
northern Shan State have a capability for producing morphine base. These
refineries are owned by various KKY leaders, who are also exp' rienced in
the production of heroin. Thus these refineries remain potential sources
of No. 4 heroin.
Outlook
27. The continued withdrawal of US forces from South Vietnam and
the maintenance of strong constraints against heroin use by the remaining
troops should continue to limit the market for No. 4 heroin produced in
the Golden Triangle. Suppression efforts by local governments in the area
are having few direct effects on this market and have so far had only limited
success in disrupting the overall traffic in opium and derivatives. The full
dimensions of the current adjustment of the narcotics market to these
suppression efforts is not yet clear. What seems clear is that the basic
capabilities of the Golden Triangle for supplying large quantities of heroin
and other opium derivatives remain unimpaired:
Raw opium is produced in amounts well in excess of local
levels of consumption.
The equipment and processing skills required for
production of narcotics are readily available.
9 Sizable stocks of narcotics apparently have been built up.
9 A functioning distributing network to the major cities and
ports of Southeast Asia exists.
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29. Small amounts of Southeast Asian No. 4 heroin continue to enter
the United States. As of early 1972, however, traffickers in Southeast Asia
evidently still had not been able to establish the connections required to
move large amounts of heroin into the United States.* As efforts to halt
the flow of heroin to the United States from other parts of the world
go forward, the Southeast Asian traffickers will be increasingly attracted
to the lucrative US market. A resumption of No. 4 heroin production in
the Golden Triangle on the scale prevailing up through mid-1971 is likely
to signify that these traffickers have enlarged their access to the US market.
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