Norman Bailey, a member of the National Security Council (NSC) whose specialty is monitoring terrorism by tracking finances, will later reveal that in the early 1980s the NSC learns that BCCI is not just a bank but is engaged in widespread criminal activity. “We were aware that BCCI was involved in drug-money transactions,” he will later say. “We were also aware that BCCI was involved with terrorists, technology transfers—including the unapproved transfer of US technology to the Soviet bloc—weapons dealing, the manipulation of financial markets, and other activities.” The main source for the NSC about this are reports from the CIA. From 1981 on, the NSC learns of BCCI’s role in illegal technology deals for Pakistan, Iraq, Libya, Iran, and other countries. A clear picture has emerged by the start of 1984. But neither the CIA nor the NSC take any action against the bank. [Beaty and Gwynne, 1993, pp. 291, 315]
1982-1989: US Turns Blind Eye to BCCI and Pakistani Government Involvement in Heroin Trade
CIA covert weapons shipments are sent by the Pakistani army and the ISI to rebel camps in the North West Frontier province near the Afghanistan border. The governor of the province is Lieutenant General Fazle Haq, who author Alfred McCoy calls Pakistani President Muhammad Zia ul-Haq’s “closest confidant and the de facto overlord of the mujaheddin guerrillas.” Haq allows hundreds of heroin refineries to set up in his province. Beginning around 1982, Pakistani army trucks carrying CIA weapons from Karachi often pick up heroin in Haq’s province and return loaded with heroin. They are protected from police search by ISI papers. [McCoy, 2003, pp. 477] By 1982, Haq is listed with Interpol as an international drug trafficker. But Haq also becomes known as a CIA asset. Despite his worsening reputation, visiting US politicians such as CIA Director William Casey and Vice President George H. W. Bush continue to meet with him when they visit Pakistan. Haq then moves his heroin money through the criminal Bank of Credit and Commerce International (BCCI). A highly placed US official will later say that Haq “was our man… everybody knew that Haq was also running the drug trade” and that “BCCI was completely involved.” [Scott, 2007, pp. 73-75] Both European and Pakistani police complain that investigations of heroin trafficking in the province are “aborted at the highest level.” [McCoy, 2003, pp. 477] In 1989, shortly after Benazir Bhutto takes over as the new ruler of Pakistan, Pakistani police arrest Haq and charge him with murder. He is considered a multi-billionaire by this time. But Haq will be gunned down and killed in 1991, apparently before he is tried. [McCoy, 2003, pp. 483] Even President Zia is implied in the drug trade. In 1985, a Norwegian government investigation will lead to the arrest of a Pakistani drug dealer who also is President Zia’s personal finance manager. When arrested, his briefcase contains Zia’s personal banking records. The manager will be sentenced to a long prison term. [McCoy, 2003, pp. 481-482]
February 11, 1982: CIA Is Given Green Light to Take Part in Illegal Drug Trade in Afghanistan
CIA Director William Casey gets a legal exemption sparing the CIA for a requirement that it report on drug smuggling by CIA officers, agents, or assets. Attorney General William French Smith grants the exemption in a secret memorandum. On March 2, Casey will thank Smith for the exemption, saying it will help protect intelligence sources and methods. [Cooley, 2002, pp. 110-111] There are allegations that in 1981 President Reagan approved a covert program to weaken Soviet soldiers fighting in Afghanistan by addicting them to illegal drugs (see February 1981 and After). A book co-written by two Time magazine reporters will even allege that “a few American intelligence operatives were deeply enmeshed in the drug trade” during the war. [Scott, 2007, pp. 124-125] President Clinton will rescind the exemption in 1995. [Cooley, 2002, pp. 111]
1983: Pakistani Government Allows Drug Traffickers to Deposit Profits in BCCI Bank
According to Alfred W. McCoy, author of The Politics of Heroin, in 1983 Pakistani President Muhammad Zia ul-Haq allows Pakistani drug traffickers to deposit their drug profits in the BCCI bank without getting punished. The criminal BCCI bank has close ties to the Pakistani government and the US funding of the Afghan war. It will be shut down in 1991. BCCI also plays a critical role in facilitating the movement of Pakistan’s heroin money. By 1989, Pakistan’s heroin trade will be valued at $4 billion a year, more than all of Pakistan’s legal exports. [McCoy, 2003, pp. 480]
1984: Bin Laden Develops Ties with Pakistani ISI and Afghan Warlord
Bin Laden moves to Peshawar, a Pakistani town bordering Afghanistan, and helps run a front organization for the mujaheddin known as Maktab al-Khidamat (MAK), which funnels money, arms, and fighters from the outside world into the Afghan war. [New Yorker, 1/24/2000] “MAK [is] nurtured by Pakistan’s state security services, the Inter-Services Intelligence agency, or ISI, the CIA’s primary conduit for conducting the covert war against Moscow’s occupation.” [MSNBC, 8/24/1998] Bin Laden becomes closely tied to the warlord Gulbuddin Hekmatyar, and greatly strengthens Hekmatyar’s opium smuggling operations. [Le Monde (Paris), 9/14/2001] Hekmatyar, who also has ties with bin Laden, the CIA, and drug running, has been called “an ISI stooge and creation.” [Asia Times, 11/15/2001] MAK is also known as Al-Kifah and its branch in New York is called the Al-Kifah Refugee Center. This branch will play a pivotal role in the 1993 WTC bombing and also has CIA ties (see January 24, 1994).
Mid-1980s: Pakistani ISI and CIA Gain from Drug Production
The Pakistani ISI starts a special cell of agents who use profits from heroin production for covert actions “at the insistence of the CIA.”
“This cell promotes the cultivation of opium, the extraction of heroin in Pakistani and Afghan territories under mujaheddin control. The heroin is then smuggled into the Soviet controlled areas, in an attempt to turn the Soviet troops into heroin addicts. After the withdrawal of the Soviet troops, the ISI’s heroin cell started using its network of refineries and smugglers for smuggling heroin to the Western countries and using the money as a supplement to its legitimate economy. But for these heroin dollars, Pakistan’s legitimate economy must have collapsed many years ago.” [Financial Times, 8/10/2001] The ISI grows so powerful on this money, that “even by the shadowy standards of spy agencies, the ISI is notorious. It is commonly branded ‘a state within the state,’ or Pakistan’s ‘invisible government.’” [Time, 5/6/2002]
Mid-1980s: ISI Head Regularly Meets with Bin Laden
According to controversial author Gerald Posner, ex-CIA officials claim that General Akhtar Abdur Rahman, Pakistani ISI’s head from 1980 to 1987, regularly meets bin Laden in Peshawar, Pakistan. The ISI and bin Laden form a partnership that forces Afghan tribal warlords to pay a “tax” on the opium trade. By 1985, bin Laden and the ISI are splitting annual profits of up to $100 million a year. [Posner, 2003, pp. 29]
April 10, 1988: US Government Uninterested in Stopping Drug Trade in Afghanistan
The New York Times reports that “Afghanistan is one place where the drug issue has been subordinated to the [Reagan] administration’s policy of supporting anti-Communist insurgencies.” In interviews with The New York Times in 1986, dozens of Afghan rebel leaders admitted cultivating and selling opium poppies. US intelligence suspects that the same planes and trucks sending US aid to rebels in Afghanistan are returning to Pakistan with drugs. However, little is being done about this. One anonymous Reagan administration official tells the Times: “We’re not going to let a little thing like drugs get in the way of the political situation. And when the Soviets leave and there’s no money in the country, it’s not going to be a priority to disrupt the drug trade.” [New York Times, 4/10/1998]
February 1991: Pakistan Supposedly Considers Funding Covert Operations through Drug Money
Pakistan’s army chief and the head of the ISI, its intelligence agency, propose to sell heroin to pay for the country’s covert operations, according to Nawaz Sharif, Pakistan’s prime minister at the time. Sharif claims that shortly after becoming prime minister, army chief of staff Gen. Aslam Beg and ISI director Gen. Asad Durrani present him with a plan to sell heroin through third parties to pay for covert operations that are no longer funded by the CIA, now that the Afghan war is over. Sharif claims he does not approve the plan. Sharif will make these accusations in 1994, one year after he lost an election and became leader of the opposition. Durrani and Beg will deny the allegations. Both will have retired from these jobs by the time the allegations are made. The Washington Post will comment in 1994, “It has been rumored for years that Pakistan’s military has been involved in the drug trade. Pakistan’s army, and particularly its intelligence agency… is immensely powerful and is known for pursuing its own agenda.” The Post will further note that in 1992, “A consultant hired by the CIA warned that drug corruption had permeated virtually all segments of Pakistani society and that drug kingpins were closely connected to the country’s key institutions of power, including the president and military intelligence agencies.” [Washington Post, 9/12/1994]
July 1991: Bin Laden Loses Money in BCCI; Begins Profiting from Drug Trade
In early 2001, anonymous US officials will say that when the notorious Bank of Credit and Commerce International (BCCI) is shut down in July 1991 (see July 5, 1991), Osama bin Laden suffers a heavy blow because he has put much of his money in the bank and he loses everything he invested there. As a result, he begins to launder money from the drug trade to make up for the lost revenue. He cooperates with Afghan warlord Gulbuddin Hekmatyar, who is already diverting profits from the Afghan drug trade to help finance Islamic terrorist movements. Others claim bin Laden begins his involvement with the drug trade several years later. [United Press International, 3/1/2001] It also seems that bin Laden’s financial network eventually grows to at least partly replace the role of BCCI for Islamist militant financing (see After July 1991).
