Creating New Soldiers in Mexico's Drug War

How U.S. drug policy is making Mexican cartels more deadly.

Barack Obama's drug czar, Gil Kerlikowske, once said that he wanted to retire the phrase "war on drugs." But on the U.S.-Mexico border, where the drug war is less metaphorical, the United States remains an enthusiastic ally -- and the Obama administration has gone to great lengths to show it. This year, the U.S. secretaries of defense, state, and homeland security, as well as the chairman of the Joint Chiefs of Staff, paid a high-profile group visit to Mexico to demonstrate U.S. solidarity in the fight against Mexico's drug traffickers. While the current U.S. administration, more than its predecessor, recognizes the need to reduce the demand for drugs at home, much of its efforts are still focused on the United States' southern neighbor: helping Mexico strengthen its military capacity and promote the rule of law.

Unfortunately, though, the United States has failed to come up with a working strategy to weaken the most powerful players in today's drug trade: the handful of Mexican cartels that control the shipment of drugs across the border. Worse, U.S. efforts to make moving drugs across the border more difficult might be having the opposite effect: consolidating the illicit drug business into fewer and fewer hands and making the surviving heavyweights more difficult to defeat. The United States is, in essence, arming the drug cartels as it fights the drug war.

Every year, the United States illegally imports more than 200 metric tons of cocaine, 1,500 metric tons of marijuana, 15 metric tons of heroin, and 20 metric tons of methamphetamines. The more than $50 billion it has spent on interdiction efforts over the past quarter-century have barely made a dent in this demand.

The efforts have, however, altered the structure of the drug trade. The production of marijuana and heroin in Mexico through the 1960s and 1970s was the province of small-time operators, many of them family-type organizations, which could move drugs across a laxly policed U.S.-Mexico border without much risk of capture. But the cocaine epidemic and the advent of the U.S.-led "war on drugs" changed the nature of the business.

As the United States stepped up its enforcement efforts at key transshipment points -- the Caribbean and the U.S.-Mexico border -- and paid its Latin American drug war allies to do the same elsewhere, moving product into the United States became more difficult. Traffickers today must outwit American soldiers, Drug Enforcement Administration agents, and Border Patrol officers. An estimated 30 percent of drugs en route to the United States are now seized before they reach the border. Getting the rest there involves evading navies and coast guards at sea and radar surveillance in the air, or navigating an array of land hazards in Central America and Mexico: police and military checkpoints where officers often charge bribes proportional to the price of the drugs, as well as rival traffickers and other criminal organizations. Another estimated 15 to 20 percent is seized at the U.S.-Mexico border, as well as 10 percent more en route to destinations within the United States -- losses that of course also come with potentially harsh criminal sentences for the smugglers.

None of this has slowed the drug trade -- demand, remember, has remained mostly constant. Instead, the cost of getting into the business has risen. To escape stringent enforcement, today's smugglers need deep pockets to run the sophisticated logistics needed to escape detection and seizure, pay the necessary bribes, and absorb substantial losses of their product when seizures do happen. These barriers to entry have winnowed the trafficking business down to a handful of major players: first Colombia's Medellín and Cali cartels in the 1980s and 1990s, and now the five key Mexican cartels. Smaller outfits, meanwhile, have found new, less daunting lines of work as suppliers and service providers for large syndicates.

As a result, a business that once enjoyed a certain degree of market competition is now an oligopoly. A diagram of the illegal drug industry today looks like an hourglass: At the production and the retail ends of the business there are hundreds of thousands of players -- farmers, processors, distributors, dealers. In between, at the shipment and smuggling level, there are only a handful. For that handful, the stakes are enormous. The traffickers who move drugs across the U.S.-Mexico border keep nearly a quarter of the retail price of each kilo of cocaine, which can be bought in Colombia for $1,700 and sold to a wholesaler in the United States for $25,000. Over the past 25 years, the total earnings of the drug trade in Mexico have probably increased tenfold, while the number of organizations reaping the profits has remained small -- as of 2006, six Mexican cartels controlled 90 percent of the United States' illicit drug imports.  

As the cartels have shrunk in number, the pressure on them -- from U.S. and Mexican authorities, and from their own competitors -- has increased apace, forcing the organizations to become better equipped and more violent. Today's Mexican cartels spend millions of dollars a year on assault rifles, explosives, armored high-end SUVs, and sophisticated intelligence operations, with the aim of avoiding interdiction and eliminating competitors.     

This is the grand paradox of drug enforcement. Unless enforcement agencies can intercept virtually all of the drugs crossing the border -- something that approaches impossibility -- their efforts are likely to simply produce more formidable opponents. The cartels' profits will increase, and with them the dangers they pose to Mexican authorities and the Mexican population.

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The State Department Can’t Be Trusted with Iran Sanctions

The U.S. Treasury is far more willing and equipped to make sanctions truly biting.

The U.S. Congress is very close to sending President Barack Obama a bill designed to sanction Iran's energy industry -- and potentially stop Iranian President Mahmoud Ahmadinejad and his coterie from getting a nuclear bomb. The Iran Refined Petroleum Sanctions Act is taking its final steps toward congressional reconciliation. If passed, the new law will hammer Iran's lucrative energy sector, making it even harder for cash-strapped Tehran to finance its illicit nuclear program.

The act as it stands is an important step. But there's one more thing Congress should do to make sure the law's provisions actually work: hand over responsibility for enforcing sanctions to the Treasury Department instead of Foggy Bottom. This is not an issue of inside-the-Beltway turf wars -- it's about effectiveness. Over the past three decades, the Treasury Department has shown that it's far more capable and willing to enforce sanctions than the State Department is -- and the sanctions in the new law are just too important to risk implementing halfway.

As it stands now, the Treasury Department mostly handles the sanctions portfolio stemming from presidential executive orders. In the case of Iran, it has placed targeted financial sanctions (freezing assets and banning transactions) on several Iranian terrorist groups, following from Executive Order 13224. It has, for example, cut off funds from the Iranian Quds Force, an elite unit within the country's Islamic Revolutionary Guard Corps (IRGC), which was designated as a terrorist entity in 2007.

The broader IGRC was placed on the terrorist list the same year, but it had already been under "smart sanctions" since Executive Order 13382 of 2001. Notorious for cracking down on protesters after last June's sham election, the IRGC is also a dominant player in the Iranian energy industry. In 2006, for example, the IRGC's engineering and construction arm, "Ghorb," received more than $7 billion in energy-related contracts from the regime. And this is where the Treasury sanctions proved especially useful.

Over the last four years, the Treasury Department has sought to financially isolate Ghorb, its leadership, its affiliates, and more than four dozen Iranian entities (including seven large Iranian banks) that play a role in the regime's nuclear, terrorist, and even fiscal activities.

Then there's the behind-the-scenes work of Treasury Undersecretary Stuart Levey. Doggedly determined to thwart Iran's nuclear ambitions, Levey has traveled the world in recent years to convince foreign financial institutions to cut ties with Iran. More than 80 financial institutions have done so. And though Levey alone cannot halt the Iranian nuclear drive, his example makes clear how useful the Treasury Department's work can be.

Contrast this with the State Department, which mostly manages the portfolio of sanctions imposed by congressional legislation. That responsibility traces back to the State Department's management of the annual list of state sponsors of terrorism, created by the 1979 Export Administration Act.

In retrospect, Congress probably should not have given the State Department this portfolio. The department's mission is maintaining and repairing relations with foreign countries, not antagonizing them by targeting foreign companies that do business with rogue regimes.

So it should not be surprising that the State Department has failed to enforce meaningful sanctions against Iran. In recent years, the department was responsible for enforcing the Iran and Libya Sanctions Act signed into law by President Bill Clinton in 1996 as well as its successor, the 2006 Iran Sanctions Act. The legislation requires the president to impose at least two out of seven specific sanctions on foreign companies that invest more than $20 million in a given year in Iran's energy sector. How many violators has the State Department pursued? None. Sadly, the department's apparent unwillingness to punish offenders ensured that Iran never paid the price for supporting terrorism worldwide. Nor, as we now know, did Iran's ruling mullahs pay a price for developing a nuclear program.

So, as members of the House and Senate gather to discuss the ways that Iran energy sanctions should be administered and enforced within the U.S. government, these conferees should think twice about bestowing the State Department with this important portfolio -- one that could potentially affect efforts to stop the Iranian bomb. The Treasury Department is much better equipped (and far more eager) to pursue hard-hitting, targeted sanctions against the IRGC and the front companies that play a dominant role in Tehran's energy sector.

And if Congress wanted to ensure the Treasury Department's success, it could empower the Energy Information Administration, an arm of the Energy Department, to begin publicly listing the companies doing business with Iran's energy sector. It used to do exactly that but stopped after reportedly losing a turf battle with the State Department over the matter. Renewing this flow of information will be critical to the effort to accurately identify sanctions targets under the new legislation.

In short, Congress should reward good work with more work. It should give the Treasury Department increased authority to target the Iranian energy sector and give sanctions every opportunity to stop Iran's drive to build a nuclear bomb.

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