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Bill Young and the CIA in the Drug Industry

an excerpt from: 
       Drugs, the U.S., and Khun Sa 
       Francis W. Belanger 1989 
       Editions Duang Kamol 
       Siam Square,  Bangkok, Thailand 
       ISBN 974-210-4808 

       The mid-1960s marked the peak of the European heroin industry, and  shortly  thereafter it went into a sudden decline. In the early 1960s the Italian  government launched a crackdown on the Sicilian Mafia, and in 1967 the  Turkish government announced that it would begin phasing out cultivation  of  opium poppies on the Anatolian plateau in order to deprive Marseille’s  heroin  laboratories of their most important source of raw material. But,  unwilling  to abandon their lucrative narcotics racket the Corsican syndicates—and  the  American Mafia—shifted their sources of supply to Southeast Asia, where  surplus opium production and systematic government corruption created an  ideal climate for large scale heroin production. 
And once again American foreign policy played a role in creating these  favorable conditions. During the early 1950s the CIA had backed the  formation  of a Nationalist Chinese guerilla army in Burma, a group which still  controls  as much as half of  the world's opium supply, and in Laos the CIA  created a  M  eo mercenary army whose commander manufactured heroin for sale to, among  others, American GIs in South Vietnam. The State Department provided  unconditional support for corrupt governments known to be engaged in the  international drug traffic. In late 1969 new heroin laboratories sprang  up in  the tri-border and where Burma, Thailand, and Laos converge, and  unprecedented quantities of heroin started flooding into the United  States.  Nurtured by a seemingly limitless flow of heroin, America's total number  of  addicts skyrocketed. 
The bloody Saigon street fighting of April-May 1955 marked the end of  French  colonial rule and the beginning of direct American intervention in  Vietnam.  When the First Indochina war came to an end, the French government had  planned to withdraw its forces gradually over a two- or three-year  period in  order to protect its substantial political and economic interests in  southern  Vietnam. The armistice concluded at Geneva, Switzerland, in July 1954  called  for the French Expeditionary Corps to withdraw into the southern half of  Vietnam for two years, until an all-Vietnam referendum determined the  nation's political future. Convinced that Ho Chi Minh and the Communist  Viet  Minh were going to score an overwhelming electoral victory, the French  began  negotiating a diplomatic understanding with the government in Hanoi. 
But America's moralistic cold warriors were not quite so flexible.  Speaking  before the American Legion Convention several weeks after the signing of  the  Geneva Accords, New York's influential Catholic prelate, Cardinal  Spellman,  warned that:  "If Geneva and what was agreed upon there means anything at all, it  means ...  taps for the buried hopes of freedom in Southeast Asia! Taps for the  newly  betrayed millions of Indochinese who must now learn the awful facts of  slavery from their eager Communist masters!" 
Rather than surrendering southern Vietnam to the "Red rulers' godless  goons,"  the Eisenhower administration decided to create a new nation where none  had  existed before. Looking back on America's post-Geneva policies from the  vantage point of the mid 1960s, the Pentagon Papers concluded that South  Vietnam" was essentially the creation of the United States. 
The French had little enthusiasm for this emerging nation and its  premier,  and so the French had to go. Pressured by American military aid cutbacks  and  prodded by the Diem regime, the French stepped up their troop  withdrawal. By  April 1956 the once mighty French Expeditionary Corps had been reduced  to  less than 5,000 men, and American officers had taken over their jobs as  advisers to the Vietnamese army. The Americans criticized the French as  hopelessly "colonialist" in their attitudes, and the French officials  retorted that the Americans were naive. During this difficult transition  period one French official denounced "the meddling Americans who, in  their  incorrigible guilelessness believed that once the French Army leaves,  Vietnamese independence will burst forth for all to see." 
But America's fall from innocence was not long in coming. Only seven  years  later, the U.S. Embassy and the CIA engineered a coup that toppled Diem  and  left him murdered in the back of an armored personnel carrier. And by  1965  the United States found itself fighting a war that was almost a carbon  copy  of France’s colonial war. The U.S. Embassy was wearisomely trying, but  effectually unable, to manipulate the same clique of corrupt Saigon  politicos  that had confounded the French in their day.
The U.S. Army looked just  like  the French Expeditionary Corps to most Vietnamese, only instead of  Senegalese  and Moroccan colonial levies, the U.S. Army was assisted by Thai and  South  Korean troops. The CIA and the U.S. special forces (the "Green Berets")  were  assigned to train the very same hilltribe mercenaries that the French  MACG  (the "Red Berets") had recruited ten years earlier. 
Given the striking similarities between the French and American war  machines,  it is hardly surprising that the broad outlines of "operation X"  (Although  the French colonial government initiated a program to eliminate opium  addiction, the French intelligence and paramilitary agencies took over  the  opium traffic in order to finance their covert operations during the  First  Indochina War of 1946-1954.) reemerged after U.S. intervention. As the  CIA  became involved in Laos in the early 1960s it became aware of the truth  of  Colonial Trinquier's axiom, "To have the Meo, one must buy their opium."  At a  time when there was no ground or air transport to and from the mountains  of  Laos except CIA aircraft, opium continued to flow out of the villages of  Laos  to transit points such as Long Tieng. There, government forces, this  time  Vietnamese and Lao instead of French, transportcd narcotics to Saigon,  where  parties associated with the Vietnamese political leaders were involved  in the  domestic distribution and arranged for export to Europe through Corsican  and  CIA syndicates. And just as the French high commissioner had found it  politically expedient to overlook the Binh Xuyen's involvement in  Saigon's  opium trade, the U.S. Embassy, as part of its unqualified support of the  Thieu Ky regime, looked the other way when presented with evidence that  members of the regime were involved in the GI heroin traffic. 
In Laos, CIA clandestine intervention produced changes and upheavals in  the  narcotics traffic. When political infighting among the Lao elite,  coupled  with the escalating war in Vietnam, forced the small charter airlines  owned  by the Corsican syndicates out of the opium business in 1965, the CIA's  airline, Air America, began flying Meo opium out of the hills to Long  Tieng  and Vientiane. CIA cross-border intelligence missions launched Into  China  from Laos reaped an unexpected dividend in 1962 when the Shan rebel  leader  who had organized the forays for the agency began financing the Shan  nationalist cause; he did so by selling Burmese opium to another CIA  protege,  Laotian General Phoumi Nosavan. The business alliance between General  Phoumi  and the Shans opened up a new trading pattern that diverted increasingly  significant quantities of Burmese opium from their normal marketplace in  Bangkok. By the late 1960s U.S Air Force bombing had further disrupted  opium  production in Laos by forcing the majority of the Meo opium farmers to  become  refugees. In response, flourishing Laotian heroin laboratories—which  were the  major suppliers for the GI users in Vietnam—simply increased their  imports of  Burmese opium through pre-existing trade relationships. 
The importance of these CIA clients in the subsequent growth of the  Golden  Triangle's heroin trade was revealed  inadvertently, by the Agency  itself  when it leaked a classified report on the Southeast Asian opium traffic  to  the New York Times. The CIA analysis identified twenty-one opium  refineries  in the tri-border area where Burma, Thailand, and Laos converge and  reported  that seven were capable of producing 90 to 99 percent pure No. 4 heroin.  Of  these seven heroin refineries, "The most important are located in the  areas  around Tachilek, Burma; Ban Houei Sai and Nam Keung in Laos; and Mae  Salong  in Thailand." 
Although the CIA did not see fit to mention it, many of those refineries  were  located in areas totally controlled by paramilitary groups closely  identified  with American military operations in the Golden Triangle. Mae Salong was  headquarters of the Nationalist Chinese Fifth Army, which had been  continuously involved in CIA intelligence and counterinsurgency  operations  since 1950. According to a former CIA operative who worked in the area  for a  number of years, the heroin laboratory at Na Kueng was protected by  Major  Chao La, commander of Yao mercenary troops for the CIA in northwestern  Laos.  One of the heroin laboratories near Ban Huay Sai reportedly belonged to  General Ouane Rattikone, former commander in chief of the Royal Laotian  Army—the only army in the world, except for the U.S. army itself, to be  entirely financed by the U.S. government. The heroin factories near  Tachilek  were operated by rebel units from Burma and Shan rebel armies who even  now  control a large
percentage of the narcotics traffic out of Burma.  Although  few of these Shan groups still have any relation with the CIA, one of  the  most important chapters in the history of the Shan States' opium trade  involves a Shan rebel army under Khun Sa, who is still receiving CIA  support,  either directly or indirectly. 
Other sources have revealed the existence of an important heroin  laboratory  that operated near Vientiane under the protection of General Ouane  Rattikone.  And finally, the U.S. Bureau of Narcotics had reports that General Vang  Pao,  commander of the CIA's 'secret army', had been operating a heroin  factory at  Long Tieng, headquarters for CIA sponsored operations in northern Laos. 
In the fertile minds of the geopolitical strategists in the CIA's  Special  Operations division, potential infiltration routes stretched from the  Shan  hills of north-eastern Burma, through the rugged Laotian mountains, and  then  southward into the Central Highlands of South Vietnam. According to one  retired CIA operative, Lt. Col. Lucien Conein, Agency personnel were  sent to  Laos in 1959 to supervise eight Green Beret teams who were then training  Meo  guerrillas on the Plain of Jars. In 1960 and 1961 the CIA recruited  elements  of Nationalist Chinese Paramilitary units based in northern Thailand to  inf[i]ltrate into China-Burma border areas; they also sent Green Berets  into  South Vietnam's Central Highlands to organize hilltribe commando units  for  intelligence and sabotage patrols along the Ho Chi Minh Trail. Finally,  in  1962 one CIA operative based in northwestern Laos began sending trained  Yao  and Lahu tribesmen into the heart of China's Yunnan Province to monitor  road  traffic and tap telephones. 
While the U.S. military required half a million troops to fight a  conventional war in South Vietnam, the mountain war had needed only a  handful  of Americans. American paramilitary personnel in Laos tended to serve  long  tours of duty, some for a decade or more, and had been given an enormous  amount of personal power. If the nature of the conventional war in South  Vietnam is best analyzed in terms of the faceless bureaucracies that  spewed  out jargonized policies, the secret war in Laos is most readily  understood  through the men who fought it. 
Three men, perhaps more than any of the others, have left their personal  imprint on the conduct of the secret war: Edgar Buell, Anthony Poe, and  William Young. And each in his own way illustrates a different aspect of  America's conscious and unconscious complicity in the Laotian opium  traffic. 
William Young, perhaps one of the most effective agents ever, was born  in the  Burmese Shan States, where his grandfather had been a missionary to the  hill  tribes. A gifted linguist, Young spoke five of the local languages and  probably knew more about mountain minorities than any other American in  Laos;  the ClA rightly regarded him as its "tribal expert." Because of his deep  and  sophisticated understanding of the hill tribes, he viewed the opium  problem  from the perspective of a hilltribe farmer. He felt nothing should be  done to  obstruct the opium traffic. Young explained his views: "As long as there  is  opium in Burma, somebody will market it." 
Anthony Poe was indifferent to the problem. A marine in the Pacific  during  World War II, Poe joined the CIA's Special Operations division sometime  after  the war and quickly earned a reputation as one of its crack clandestine  warfare operatives in Asia, playing an important role in the CIA's  Tibetan  operations. Poe's first assignment in Indochina was with anti-Sihanouk  mercenaries along the Cambodian border in South Vietnam, and in 1963 he  was  sent to Laos as chief advisor to General Vang Pao. Several years later  he was  transferred to northwestern Laos to supervise Secret Army operations in  the  tri-border area and to work with Yao tribesmen. The Yao remember "Mr.  Tony"  as a drinker and as an authoritarian commander who bribed and threatened  to  reach his goals, as a mercurial leader who rewarded his soldiers 500 kip  (one  dollar) for an ear and 5,000 kip for a severed head—when accompanied by  a  Pathet Lao army cap. He was indifferent toward the opium traffic and  ignored  the
prospering heroin factories along the Mekong River, not once  stopping any  of Ouane Rattikone's officers from using U.S. supplied facilities to  administer the drug traffic. 
The most curious of this triumvirate is Edgar "Pop" Buell, originally a  farmer from Steuben County, Indiana. Buell first came to Laos in 1960 as  an  agricultural volunteer for International Voluntary Services (IVS), a  Bible  Belt counterpart of the Peace Corps. He was assigned to the Plain of  Jars,  where the CIA was building up its secret Meo army, and became involved  in the  Agency's activities largely through circumstance and his own God-given  anti-Communism. As CIA influence spread through the Meo villages ringing  the  Plain of Jars, Buell became a one-man supply corps, dispatching Air  America  planes to drop rice, meat, and other necessities the CIA had promised to  deliver. Buell feigned being the innocent country boy, claiming his work  was  humanitarian aid for Meo refugees. Nevertheless, his operations were  clearly  an integral part of the CIA program. In his efforts to bolster the Meo  economy and to increase the tribe' military effectiveness, Buell  utilized his  agricultural skills to improve Meo techniques for planting and  cultivating  opium. "If you're gonna grow it, grow it good," Buell told the Meo. 
Just as the work of French clandestine services in Indochina had enabled  the  opium trade to survive a government repression campaign, so some CIA  'actives' in Burma helped transform the poppy-growing Shan States from a  relatively backwater into the largest opium-growing center in the world.  The  precipitous collapse of the Nationalist Chinese or Kuomintang (KMT)  government in 1949 convinced the Truman administration that it had to  stem  "the southward flow of communism" into Southeast Asia. In 1950 the  Defense  Department proffered military aid to the remnants of the defeated  Kuomintang  army in the Burmese Shan States for a projected invasion of southern  China.  Although the KMT army was to fail in its military objectives, it did  succeed  in monopolizing and expanding the Shan States' opium trade. 
When the People's Liberation Army entered Yunnan in it December 1949, Lu  Han  armed the populace, who then drove Chiang's troops out of the cities.  Nationalist Chinese stragglers began crossing into Burma in late 1949,  and in  January of 1950 remnants of the Ninety-third Division, Twenty-sixth  Army, and  General Li Mi's Eighth Army arrived in Burma. Five thousand of General  Li  Mi's troops who had crossed into Laos instead of Burma were quickly  disarmed  by the French and interned on Phu Quoc Island in the Gulf of Thailand,  from  where they were repatriated to Taiwan in June 1953. 
The Burmese army was, however, less successful than the French in  dealing  with the KMT. By March 1950 some fifteen hundred of the displaced troops  had  crossed the border and were occupying territory between the city of  Kengtung  and Tachilek. In June, the Burmese army commander for Kengtung State  demanded  that the KMT either surrender or leave Burma immediately. When Li Mi  refused,  the Burmese launched an attack from Kengtung and captured Tachilek in a  matter of weeks.
Two hundred of Li Mi's troops fled into Laos where they  were  interned, but the remainder retreated to Mong Hsat, about forty miles  west of  Tachilek and fifteen miles from the Thai border. Because the Burmese  army had  been weakened by three years in central Burma battling four major  rebellions,  its Kengtung contingent was inadequate to pursue the KMT through the  mountains to Mong Hsat. But, at the time, it seemed only a matter of  months  until the Burmese troops would become available for the final assault on  the  weakened KMT forces. 
At this point the CIA entered the list of combatants on the side of the  KMT,  drastically altering the balance of power. The Truman administration,  ambivalent toward the conflict in Southeast Asia since taking office in  1945,  was shocked into action by the sudden collapse of Chiang Kai-shek's  Kuomintang regime. Government agencies scrambled to devise policies "to  block  further Communist expansion in Asia," and in April 1950 the Joint Chief  of  Staff (JCS) advised the Secretary of Defense to implement "a program of  special covert operations designed to interfere with Communist  activities in  Southeast Asia..."  The exact details of such "special covert  operations" plan  ned for Burma were not spelled out in the JCS memo or any of the other  Pentagon Papers because it was one of the most heavily classified  operations  ever undertaken by the CIA: the U.S. ambassador to Burma was not told;  top  ranking officials in the State Department were kept in the dark; and it  was  even hidden from the
CIA's own deputy director for intelligence. 
The first signs of direct CIA aid to the KMT appeared in early 1951,  when  Burmese intelligence agents reported that unmarked C46 and C-47  transport  aircraft were making at least five parachute drops a week to KMT forces  in  Mong Hsat. With its new supplies, the KMT underwent a period of vigorous  expansion and reorganization. Training bases were constructed near Mong  Hsat  and staffed with instructors flown in from Taiwan. 
KMT agents scoured the Kokang and Wa States along those Burma-China  border  for scattered KMT survivors, and General Li Mi's force burgeoned to four  thousand men. In April 1950, Li Mi led the bulk of this force up the  Salween  River to Mong Mao in the Wa States, where they established a base camp  near  the China border. As more stragglers were rounded up, a new base camp  was  opened at Mong Yang; soon unmarked C-47s were seen making air drops in  the  area. After Li Mi recruited three hundred troops from Kokang State under  the  command of the headman's younger sister, Olive Yang, more arms were  dropped  to the KMT camp. 
In April 1951, the attempted reconquest of Yunnan began when 2,000  soldiers  of the Yunnan Province Anti-Communist National Salvation Army based at  Mong  Mao crossed the border into China. Accompanied by CIA advisors and  supplied  by regular airdrops from unmarked C-47s, KMT troops moved northward in  two  columns, capturing Kengma without resistance. However, as they advanced  north  of Kengma, the People's Liberation Army (PLA) counterattacked. The KMT  suffered massive casualties, and several of their CIA advisors were  killed.  Li Mi and his Salvation Army fled back to Burma after less than a week  in  China. Undeterred by this crushing defeat, however, the General  dispatched  his two thousand-man contingent at Mong Yang into southern Yunnan; they  too  were quickly overwhelmed and driven back into Burma. 
Rather than abandoning this doomed adventure, the CIA redoubled its  efforts.  Late in 1951, the KMT reopened the old World War It landing strip at  Mong  Hsat so that it could handle the large two- and four-engine aircraft  flying  in directly from Taiwan or Bangkok. In November, Li Mi flew to Taiwan  for a  vacation and returned three months later, to be soon followed by a CAT  (Civil  Air Transport, later known as Air America) airlift, which flew seven  hundred  regular KMT soldiers from Taiwan to Mong Hsat. Burmese intelligence  reported  that the unmarked C-47s began a regular shuttle service with two flights  a  week direct from Taiwan. A mysterious Bangkok-based American company  named  Sea Supply Corporation began forwarding enormous quantities of U.S. arms  to  Mong Hsat. Burmese Military Intelligence observed that the KMT began  sporting  brand- new American M-1s, .50 caliber machine guns, bazookas, mortars,  and  anti-aircraft artillery. With these lavish supplies, the KMT  press-ganged  eight thousand soldiers from the hardy local hill tribes and soon  tripled  their forces to twelve thousand. 
After a year-long buildup, General Li Mi launched his final bid to  reconquer  Yuman Province. In August 1952, 2,100 KMT troops from Mong Yang invaded  China  and penetrated about sixty miles before the Chinese army drove them back  into  Burma. There would be no more invasions. Although General Li Mi and his  American advisors had not really expected to conquer the vast stretches  of  Yunnan Province with an army of twelve thousand men, they had been  confident  that once the KMT set foot in China, the "enslaved masses" would rise up  against Mao and flock to Chiang Kai-shek's banner. After the three  abortive  forrays had conspicuously failed to arouse the populace, General Li Mi  quietly abandoned the idea of conquering China and resigned himself to  holding the line in Burma. 
The KMT ceased concentrating their forces in a few bases on the China  border  and spread their troops out to control as much territory as possible.  Since  the Burmese army was still preoccupied with insurgency in other parts of  Burma, the KMT soon became the only effective government in all the Shan  States territories between the Salween River and the China border  (Kokang,  Wa, and Kengtung states). These territories were also Burma's major  opium-producing region, and the shift in KMT tactics allowed them to  increase  their control over the region's opium traffic. 
The KMT occupation centralized the marketing structure by using hundreds  of  petty opium traders to comb the Shan highlands. The KMT also required  that  every hilltribe farmer pay an annual tax in the form of opium. One  American  missionary to the Lahu tribesmen of Kengtung State, the Reverend Paul  Lewis,  recalls that the KMT tax stimulated a dramatic rise in the amount of  opium  grown in the highland villages he visited. Tribes had very little choice  in  the matter, and Lewis can still remember the agony of the Lahu who were  tortured by the KMT for failing to comply with their demands. 
Many Chinese soldiers inevitably married Lahu tribeswomen, and such  marriages  reinforced KMT control over the highlands and made it easier for them to  secure opium and recruits. Given their personal contacts in mountain  villages, their powerful army, and their control over the opium-growing  regions, the KMT were in an ideal position to force an expansion of the  Shan  States' opium production when Yunnan's illicit production began to  disappear  in the early 1950s.  Soon after their arrival in Burma, the KMT had formed a mountain  transport  unit, recruiting local mule drivers and their animals.
Almost all the  KMT  opium was sent south to Thailand, either by mule train or aircraft.  Since  most of their munitions and supplies were carried overland from  Thailand, the  KMT mule caravans found it convenient to haul opium on the outgoing trip  from  Mong Hsat and soon developed a regular caravan trade across the Thai  border.  Burmese military sources claimed that much of the KMT opium was flown  from  Mong Hsat in unmarked C-47s flying to Thailand and Taiwan. However it  was  carried, once the KMT opium left Mong Hsat it was usually shipped to  Chiang  Mai, where a KMT colonel maintained a liaison office with the  Nationalist  Chinese consulate and with local Thai authorities. Posing as ordinary  Chinese  merchants, the colonel and his staff used raw opium to pay for the  munitions,  food, and clothing that arrived from Bangkok at the Chiang Mai railhead. 
Once  the material was paid for, it was the colonel's responsibility to to  forward  it to Mong Hsat. Usually the KMT dealt with the commander of the Thai  police,  General Phao, who shipped the opium from Chiang Mai to Bangkok for local  consumption and export.  While the three CIA-sponsored invasions of Yunnan, however feebly  conceived  they may have been, at least represented a bona fide anti-Communist  policy,  the next move defied all logic. With what appeared to be CIA support,  the KMT  began a full-scale invasion of eastern Burma. In late 1952, thousands of  KMT  mercenaries forded the Salween River and began a well-orchestrated  advance.  The Burmese government claimed that this was the beginning of an attempt  to  conquer the entire country. But in March 1953, the Burmese fielded three  crack brigades and quickly drove the KMT back across the Salween River.  Intriguingly, after a skirmish with the KMT at Wan Hsa La ferry, Burmese  soldiers discovered the bodies of three caucasians who bore no  identification  other than some personal letters Washington and New York addresses.) 
By now the issue had become such a source of international  embarrassment  for the United States that Washington used its influence to convene, in  May  of 1953, a Four-Nation Militiary Commission (the United States, Burma,  Taiwan, and Thailand) to deal with the problem. At the meeting (which  was  held in Bangkok), Only after Burma took the, issue to the United Nations  in  September did the Taiwan negotiators in Bangkok stop quibbling and agree  to  the withdrawal of two thousand KMT troops; the evacuees would march to  the  Burma-Thailand border, be trucked back to Chiang Rai, Thailand, and  flown to  Taiwan General Chennault's CAT. 
The Burmese, however, were suspicious of the arrangements from the very  beginning, and when representatives of the Four-Nation Military  Commission  arrived in northern Thailand to observe the withdrawal, Thai police  commander  Phao, refused to allow the Burmese delegation to accompany the others to  the  staging areas. On the ninth of November, the U.S. ambassador to Taiwan,  Charlie L. Rankin, stated that if the the[sic] United States did not  ease its  pressure, Chiang threatened to make public the CIA support of the KMT in  Burma. The American ambassador to Thailand, General William Donovan,  cabled  back that the "Chicoms" and Soviets already knew about the CIA  operations and  so he kept pressuring for withdrawl. 
Although the continuing struggle faded from American headlines, in June  1955  the Rangoon Nation reported that six hundred KMT troops had been  smuggled  into the Shan States from Taiwan. A new KMT commander was appointed, and  a  headquarters complex was established at Mong Pa Liao near the Mekong  River.  The KMT continued to rule the hilltribes with an iron hand. In 1957, an  American missionary reported:  "For many years there have been large numbers of Chinese Nationalist  troops  in the area demanding food and money from the people. The areas in which  these troops operate are getting poorer and poorer and some villages are  finding it necessary to flee." 
Not only did the KMT continue to demand opium from the tribes, but they  increased their activities in the narcotics trade as well. When the  Burmese  army captured the KMT camp at Wanton in 1959, they discovered three  refineries of morphine base operating near a usable airstrip.  Although forgotten by the international press, the KMT guerrilla  operations  continued to create problems for both the Burmese and Chinese  governments.  When delegations from the Union of Burma and People's Republic of China  met  to resolve a border dispute in the summer of 1960, they also concluded a  secret agreement for combined operations against the KMT at Mong Pa  Liao.  This base, with a runway capable of handling even the largest transport  aircraft, was defended by some ten thousand  KMT troops entrenched in an  elaborate fortified complex. After weeks of heavy fighting, five  thousand  Burmese troops and three full People's Liberation Army divisions  (totaling  20,000 men), finally overwhelmed the fortress on January 26, 1961. While  many  of their hilltribe recruits fled into the nearby mountains, the crack  KMT  retreated across the Mekong River into northwestern Laos. Burmese  officers  were outraged to discover American weapons of recent manufacture and  five  tons of ammunition bearing distinctive American labels. In Rangoon,  10,000  angry demonstrators marched in front of the U.S. Embassy, and Burma sent  a  note of protest to the United Nations saying that "large quantities of  modem  military equipment, mainly of Americans origin, have been captured by  Burmese  forces." 
The KMT shipped bountiful harvests to northern Thailand, where they were  sold  to a CIA client, General Phao Sriyanonda of the Thai police. The CIA  promoted  the Phao-KMT partnership in order to provide a secure rear area for the  KMT,  but this strategic alliance soon became a pivotal factor in the growth  of  Southeast Asia's narcotics traffic.  With CIA support, the KMT remained in Burma until 1961, when the Burmese  army  drove them into Laos and Thailand. Bythis time the Kuomintang had  already  used their control over the  tribal populations to expand Shan State  opium  production nearly tenfold—from less than 40 tons at the end of World War  II  to estimated three hundred to four hundred tons by 1962. From bases in  northern Thailand, the KMT continues to this very day to dispatch mule  caravans into the Shan States to carry out the opium harvest. Today,  nearly  thirty years after the CIA began supporting the KMT in the Golden  Triangle  region, KMT 'soldiers' control almost half of the world's total illicit  opium  supply and share about half of Southeast Asia's thriving heroin  business. 
At first glance the history of the KMT's involvement in the Burmese  opium  trade seems to be just another case of a CIA client unilaterally taking  advantage of the agency's political protection to enrich itself from the  narcotics trade. But upon closer examination, the CIA appears to be much  more  seriously compromised in the affair. The CIA fostered the growth of the  Yunnan Province Anti-Communist National Salvation Army in the  borderlands of  northeastern Burma—a potentially rich opium-growing region. There can be  no  question of CIA ignorance or naivete since as early as 1952 The New York  Times and other major American newspapers published detailed accounts of  the  KMT's role in the narcotics trade. But most disturbing of all is the  coincidence that the KMT's Bangkok connection was the commander of the  Thai  Police—and General Phao was the CIA's man in Thailand. 
Government corruption is not just a problem in Thailand, it is a way of  life.  Like every bureaucracy, the Thai government has elaborate organizational  charts marking out neatly delineated areas of authority. To the  uninformed  observer it seems to function much like any other meritocracy, with  university graduates occupying government posts, careers advancing step  by  step, and proposals moving up and down the hierarchy in a more or less  orderly fashion. But all of these these charts and procedures were (and  are)  a facade, behind which operate powerful military cliques whose driving  ambition is to expropriate enough money, power, and patronage to become  a  government within the government. These cliques are not ideological  factions,  coteries of plotters united by greed and ambition. 
A clique usually has its beginning in some branch of the  military  service,  where a hardcore of friends and relatives begin to recruit supporters  from  the ranks of their brother officers. Since official salaries have always  been  notoriously inadequate for the basic needs—not to mention the dreams—of  many  officers, each rising faction must find itself a source of supplementary  income. While graft within the military itself provides a certain amount  of  money, all cliques are eventually forced to extend their tentacles into  the  civilian sector. A clique usually concentrates on taking over a single  government ministry or monopolizing a certain realm of business, such as  the  rice trade or the lumber industry. By the time a clique matures it has a  highly disciplined pyramid of corruption. At the bottom, minor  functionaries  engage in extortion or graft, passing the money up the ladder, where  leaders  skim off vast sums for themselves divide the remainder among their loyal  followers. Clique members may steal from the official government, but  they  usually do not dare steal from the clique itself; and the amount of  money  they receive from the clique is rigidly controlled. 
When such a clique grows strong enough to make a bid for  national  power, it  is inevitably forced to confront another in military faction. Such  confrontations account for nearly all the coups and counter-coups that  have  determined the course of Thai politics ever since senior civil servants  and  army officers ended the absolute monarchy in 1932.  From 1947 to 1957, Thai politics was dominated by an intense rivalry  between  two powerful cliques: one led by General Phao Sriyanonda and the other  by  Marshal Sarit Thanarat. Both men were catapulted upward by the November  1947  coup which restored to power Thailand's wartime leader, Marshal Phibun  Songkhram. Too weak to execute the coup himself, Marshal Phibun had  recruited  these two powerful army cliques. The clique led by Sarit was composed  mainly  of ambitious young army officers; the other was led by the commander in  chief  of the army, General Phin, and sparked by his aggressive son-in-law,  Colonel  Phao
Soon after the triumvirate took power, the two army cliques began to  squabble  over the division of the spoils. Military power was divided without too  much  rancor when Phao became deputy director-general of the National Police.  (When  Phao took over in 1951, his forty thousand police officers were an  adequate  counterbalance to Sarit's forty-five thousand-man army.) And many of the  bureaucratic and commercial spoils were divided with equal harmony. An  exceptionally bitter struggle developed, however, over control of the  opium  traffic. 
The illicit opium trade had only recently emerged as one of the  country's  richest economic assets. Its sudden, massive economic
significance may  have  served to upset the delicate balance of power between the Phao and Sarit  cliques. Although the official government Opium Monopoly had thrived for  almost a hundred years, by the time of the 1947 coup the high cost of  imported opium and the reasonably strict government controls made it an  unexceptional source of graft. However, the rapid decline in imports of  foreign opium and the growth of local production in the late 1940s and  the  1950s suddenly made the opium trade worth fighting over. 
At the first United Nations narcotics conference in 1946. Thailand was  criticized for being the only country in Southeast Asia still operating  a  legal government monopoly. Far more, threatening than the criticism,  however,  was the general agreement that all non-medical opium exports should be  ended  as soon as possible. Iran had already imposed a temporary ban on opium  production in April 1946, and smuggled supplies from China were  trickling to  an end as the People's Republic initiated its successful opium  eradication  campaign. Although the Thai monopoly was still able to import sufficient  quantities, the future of foreign imports was not too promising. To meet  their projected needs for raw opium, in in[sic] 1947 the Thai government  authorized poppy cultivation in the northern hills for the first time.  The  edict attracted an increasing number of Meo tribespeople into Thailand  opium-growing regions, stimulating a dramatic increase in opium  production. 
But these gains in local production were soon dwarfed by the even more  substantial increases in the Burmese Shan States. As Iranian and Chinese  opium gradually disappeared in the early 1950s, the KMT filled the void  by  forcing an expansion of production in the Shan States, which they  occupied.  The KMTwere at war with the Burmese and since their U.S. supplies were  sent  through Thailand, Bangkok became a natural entrepot for KMT opium. By  1949  most of the Thai monopoly's opium was from Southeast Asia, and in 1954  British customs in Singapore stated that Bangkok had become the major  center  for international opium trafficking in the region. The traffic had  become so  lucrative that Thailand quietly abandoned the anti-opium campaign  announced  in 1948 (all opium smoking was to have ended by 1953). 
 The 'opium war' between Phao and Sarit was a hidden one, with almost all  the  battles concealed by a clock of official secrecy. The most comical  exception  occurred in 1950 as one of General Sarit's army convoys approached the  railhead at Lampang in northern Thailand with a shipment of opium.  Phao's  police surrounded the convoy and demanded that the soldiers surrender  the  opium since anti-narcotics work was the exclusive responsibility of the  police. When the army men, threatening to shoot its way through to the  railway, the police brought up heavy machine guns and dug in for a  fire-fight. A nervous standoff continued for two days until Phao and  Sarit  themselves arrived in Lampang, took possession of the opium, and jointly  escorted it to Bangkok, where it quietly disappeared. 
In the underground struggle for the opium trade, General Phao slowly  gained  the upper hand. While the clandestine nature of this 'opium war' makes  it  difficult to reconstruct the precise ingredients in Phao's victory, the  critical importance of CIA support cannot be underestimated. In 1951, a  CIA  front organization, the Sea Supply Corporation, began delivering lavish  quantities of naval vessels, arms, armored vehicles, and aircraft to  General  Phao's police force. With this materiel, Phao was able to establish a  police  air force, a maritime police, a police armored division, and a police  paratroop unit. General Sarit's American military advisors repeatedly  refused  to grant to his army the large amounts of modem equipment that Sea  Supply  Corporation gave Phao's police. 
Since Sea Supply shipments to KMT troops in Burma were protected by the  Thai  police, Phao's alliance with the CIA also gave him extensive KMT  contacts,  through which he was able to build a virtual monopoly on Burmese opium  exports. Phao's new financial and military power quickly tipped the  balance  of political power in his favor and in a December 1951 cabinet reshuffle  his  clique captured five cabinet slots, while Sarit's fraction got only one.  Within a year, Sarit's rival had taken control of the, government and  Phao  was widely recognized as the most powerful man in Thailand. 
Phao used his new political power to further strengthen his financial  base.  He took over the vice rackets, expropriated the profitable Bangkok  slaughterhouse, rigged the gold exchange, collected protection money  from  Bangkok's wealthiest Chinese businessmen, and forced them to appoint him  to  the boards of over twenty corporations.  The man who C. L. Sulzberger of the The New York Times called a  "superlative  crook" (and whom a respected Thai diplomat hailed as the "worst man in  the  whole history of Thailand') became the CIA's most important Thai client.  Phao  became Thailand's most ardent anti-Communist, and it appears that his,  major  obligation was to further KMT political aims in Thailand and to support  its  guerrilla units in Burma. Phao protected supply, shipments to the KMT,  marketed their opium, and performed such miscellaneous services as  preventing  Burmese observers from going to the staging areas during the  November-December, 1953 airlifts of supposed KMT soldiers to Taiwan. 
By 1955, Phao's National Police Force had become the largest  opium-trafficking syndicate in Thailand and was ultimately involved in  every  phase of the narcotics traffic; the level' of corruption was remarkable  even  by Thai standards. If the smuggled opium was destined for export, police  border guards escorted the KMT caravans from the Thailand-Burma border  to  police warehouses in Chiang Mai. From there police guards brought it to  Bangkok by train or police aircraft. It was then loaded onto civilian  coastal  vessels and straightforwardly escorted by maritime police to a mid-ocean  rendezvous with freighters bound for Singapore or Hong Kong.  
However, if the opium was needed for the government Opium Monopoly,  political  considerations necessitated bizarre theatrics, with police border guards  staging elaborate shoot-outs with the KMT smugglers near the Thai-Burma  frontier. Invariably, the KMT guerrillas would drop the opium and flee,  while  the police heroes brought the 'captured' opium to Bangkok and collected  a  reward worth one-eighth of the retail value. The opium would  subsequently  disappear. Phao himself delighted in posing as the leader in the crusade  against opium smuggling, and he often made hurried, dramatic departures  to  the northern frontier, where he personally led his men in these  desperate gun  battles with the ruthless smugglers of slow death. 
There can be little doubt that CIA support was an invaluable asset to  General  Phao in managing the opium traffic. The agency supplied the aircraft,  motor  vehicles, and naval vessels that gave Phao the logistic capability to  move  opium from the poppy fields to the sea lanes. And his role in protecting  Sea  Supply's shipments to the KMT no doubt gave Phao a considerable  advantage in  establishing himself as the exclusive exporter of KMT opium. 
Given its even greater involvement in the KMT's Shan States opium  commerce,  how do we evaluate the CIA's role in the evolution of large-scale opium  trafficking in the Burma-Thailand region? Under the Kennedy  administration,  Presidential adviser Walt W. Rostow popularized a doctrine of economic  development which preached that a stagnant, underdeveloped economy could  be  jolted into a period of rapid growth, an economic "takeoff," by a  massive  injection of foreign aid and capital, capital which could subsequently  be  withdrawn as the economy coasted into a period of self-sustaining  growth. CIA  support for Phao and the KMT seems to have sparked such a "takeoff' in  the  Burma-Thailand opium trade during the 1950s: modem aircraft replaced  mules,  naval vessels replaced sampans, and well-trained military organizations  expropriated the traffic from bands of illiterate mountain traders. 
Never before had the Shan States encountered smugglers with the  discipline,  technology, and ruthlessness of the KMT. Under General Phao's  leadership,  Thailand had changed from an opium-consuming nation to emerge as the  world's  most important opium distribution center. The Golden Triangle's opium  output  approached its present level; Burma's total harvest had increased from  less  than forty tons just before World War II to reach three hundred to four  hundred tons in 1962—and then to nearly 2,000 tons today. Thailand's  growth  was even more remarkable, from seven tons to over 100 tons. 
But was this increase in opium production the result of a conscious  decision  by the CIA to support its allies, Phao and the KMT, through the  narcotics  traffic? Of one thing there can be no doubt: the CIA knew its allies  were  heavily involved in the traffic. Headlines made it known to the whole  world.  Phao, clearly a protege of the CIA, was obviously responsible for the  censure  that Thailand received from the United Nations Commission on Narcotic  Drugs.  And certainly the CIA did nothing to halt the trade or to prevent its  aid  from being abused. But whether the CIA actively organized the traffic is  something that only the Agency itself can answer. In any case, by the  early  1960s the Golden Triangle had become the largest single opium-growing  region  in the world—a vast reservoir able to supply America's lucrative  markets.  Today, the Golden Triangle has surplus opium; it still has  well-protected,  disciplined syndicates; and it has become America's major heroin  supplier. 
In Thailand, a hundred years of foreign advisers and twenty-five years  of  American advisers have given the government a certain veneer of  technical  sophistication but have also inhibited the growth of any internal  revolutions  that might have broken with the traditional patterns of corrupted,  autocratic  government. 
At the base of Thailand's contemporary pyramids of corruption, legions  of  functionaries systematically plunder the nation and pass money up the  chain  of command to the top, where authoritarian leaders enjoy an opulent  lifestyle  reminiscent of the old god-kings. Marshal Sarit, for example, had over a  hundred mistresses, arbitrarily executed criminals at public spectacles,  and  died with an estate of over $150 million. Such potentates, able to  control  every corrupt functionary in the most remote province, are rarely  betrayed  during struggles with other factions. As a result, a single political  faction  has usually been able to centralize and monopolize all of Thailand's  narcotics traffic. In contrast, the opium trade in Laos and the Shan  States  of Burma reflects a more fragmented and feudal political tradition: each  regional warlord controls the traffic in his own territory. 
pps. 70-95  --[cont]-- 

Copyright 1991 The Akha Heritage Foundation