Drug Policy – Integration of the Security Dimension

Prague, 9th of June, 2025

1. Introduction

The security dimension of the drug problem is often pushed into the background in both Czech and international discourse, in favour of health, social, or moral considerations. Public and political debate usually focuses on prevention, treatment, repression, or legalisation from the perspective of individual behaviour, but not from the viewpoint of broader systemic consequences. Yet it is precisely the security aspects, violence, the destabilisation of public institutions, links to organised crime, and losses in tax revenues, that rank among the most significant, long-term, and at the same time difficult-to-address consequences of drug markets.

The purpose of this commentary is to highlight some of the key security consequences of the illicit trade in drugs and related substances. This concerns not only so-called illegal drugs (such as heroin, cocaine, or methamphetamine), but also legal substances, most notably alcohol and tobacco, that frequently enter illicit markets. In both cases, illegal trade plays a crucial role in generating violence, undermining the rule of law, and financing criminal structures. The security risks extend beyond direct consequences such as armed violence, encompassing wider impacts on the tax system, the state budget, corruption, and public trust in the rule of law.

This text therefore divides the security dimension into three interconnected areas: (1) violence and state destabilisation as a consequence of the prohibition framework and the illicit market, (2) the links between drugs, organised crime, and terrorism, and (3) a separate section devoted to the illicit market in alcohol and tobacco, which is often underestimated despite generating risks in many regions comparable to those of the illegal drug trade.

2. Violence and destabilisation as a consequence of the prohibition framework

One of the most serious security consequences of the prohibitionist approach to drugs is the escalation of violence within illicit markets. The drug trade is a typical example of an “extra-legal market,” where legal instruments cannot be used to enforce contracts, protect property, or resolve disputes. Instead, these functions are assumed by the market actors themselves—often through intimidation, corruption, or armed violence. Research has repeatedly confirmed that intensifying repressive interventions against drug markets tends to increase rather than reduce violence among illicit market actors, particularly where the market is unstable or fragmented [Werb et al., 2011]

A systematic review of more than 15 studies shows that harsh enforcement of drug laws often increases the likelihood of violent clashes between competing groups, as it disrupts existing balances and redistributes market shares that must then be “reclaimed” by force [Werb et al.]. A typical example is the situation in Mexico after 2006, when military interventions against the cartels led to a dramatic surge in inter-cartel violence. A similar development was observed in Colombia during the collapse of the Medellín cartel, as well as in parts of Afghanistan where the fight against drugs disrupted local balances between insurgent and criminal groups [Felbab-Brown, 2009].

Alongside violence, another consequence is the destabilisation of state institutions. Within illicit markets, it is common for criminal structures to seek influence over, or infiltration of, public administration, the police, and the judiciary. Research from Latin America, post-Soviet states, and Southeast Asia has repeatedly shown that the illicit drug trade undermines the integrity of public administration and legitimises alternative power structures [Shelley, 2014]. Where the state fails to provide legitimate and effective alternatives, criminal organisations can become de facto governors of territory, not only in terms of drug distribution, but also through the collection of “taxes” (extortion), the provision of “security,” and even the resolution of disputes.

From a security policy perspective, it is important to recognise that drug-related violence is not the result of the mere existence of drugs, but of their illegal status and the way this prohibition is enforced. In legalised or regulated systems (for example, cannabis in Canada or certain U.S. states), violence in distribution has virtually disappeared, whereas in places with a repressive strategy still persists [UNODC, 2023; Werb et al., 2011].

3. Drugs, terrorism and organised crime

The illicit drug trade is one of the most significant sources of financing for organised crime and, in certain regions, terrorist groups. Estimates suggest that profits from the global drug market amount to hundreds of billions of dollars annually, with much of this revenue flowing into structures that systematically undermine public security, state stability, and the rule of law [UNODC, 2023].

The drug trade as a source of income for armed and terrorist groups

In a number of conflicts in recent decades, drugs have played a key role as a source of financing for insurgent movements, terrorist organisations, and paramilitary militias. In Afghanistan, opium production was one of the main sources of income for the Taliban, both before and during Western military presence. In Colombia, the leftist FARC guerrilla movement financed much of its armed operations through the cocaine trade, as did right-wing paramilitary groups [Felbab-Brown, 2009]. In Turkey and Iraq, drug (and cigarette) trafficking was exploited by Kurdish armed groups, including the PKK (Kurdistan Workers’ Party) [Shelley, 2014].

These connections extend beyond production areas to transit and consumer countries. In some European cases, the drug trade has served as a source of funding for Islamist cells, for example, within the network known as the “Arab-Pakistani Connection,” which operated between North Africa, the Balkans, and Western Europe [Shelley, 2014; UNODC, 2023].

4. Financial flows, corruption and the erosion of state integrity

While direct violence is primarily associated with illicit drugs, the illegal trade in addictive substances, including alcohol and tobacco, also poses a major challenge in terms of undermining legitimate governance and the fiscal integrity of the state. Illicit markets generate enormous sums of untaxed money, much of which is used to finance not only crime but also authoritarian regimes, oligarchic structures, and clientelist networks.

Money laundering and parallel economies

Proceeds from illicit trade are typically laundered through offshore accounts, shell companies, cryptocurrencies, or real estate investments. This process not only complicates the detection of crime but also erodes confidence in tax fairness and the transparency of the economy. Research by Reuter and Truman (2004) shows that most flows from the illicit drug trade never leave the system: they are reinvested, often through legal channels, which makes their detection all the more difficult.

Corruption as a structural consequence of illegal markets

Where significant illicit markets exist, crime and public administration become systematically intertwined. Bribes, favours, threats, and infiltration of decision-making structures are among the common tools of influence. Louise Shelley (2014) highlights how the drug trade becomes a powerful factor that weakens the rule of law and fosters “state capture”, a phenomenon observed most notably in Latin America, Eastern Europe, and Asia.

Financing of authoritarian regimes

According to Shelley and UNODC reports, there are concrete examples where revenues from illicit markets help sustain repressive regimes, either through connections with corrupt security forces or by directly supporting the apparatus of repression. 

Afghanistan, Syria, eastern Ukraine, Belarus, the North Caucasus, and Venezuela are cited as cases where links between state institutions and criminal structures are bolstered precisely through illicit trade, often involving cigarettes or alcohol [Schayegh, 2011; Shelley, 2014; Koehler et al., 2022; UNODC, 2023; Azizi, 2024; Burman & Blanga, 2025].

These dynamics are not limited to the developing world. Studies on tobacco smuggling in the EU show that tax and regulatory discrepancies among Member States enable the growth of extensive smuggling networks, which exploit both weak customs capacities and, in some cases, the deliberate complicity of local actors [Boboc & Ciobanu, 2021].

5. The illicit alcohol market and its security implications

Although alcohol is legal and widely available in most countries, its illicit production and distribution represent a significant security risk. This phenomenon is often overlooked in comparison with illicit drugs, even though it generates comparable consequences in terms of public health, security, and institutional stability.

According to Euromonitor International, illicit alcohol accounted for as much as 25.8% of global alcohol consumption in 2018, with spirits making up the largest share (81% of the illicit market) [Euromonitor, 2018]. The WHO projects that by 2025 the share of so-called unrecorded alcohol will rise to 27.7% of total consumption [WHO, 2018].

Health risks and direct threats to life

Illicit alcohol often contains toxic substances such as methanol and is sold either as counterfeit branded products or as cheap alternatives. In recent years, mass methanol poisonings have occurred in the Dominican Republic (330+ deaths), India, Pakistan, and South Africa [Witt & Nagy, 202]. The Czech Republic also experienced a severe methanol crisis in 2012, when consumption of adulterated alcohol caused 50 deaths and left dozens of people with permanent health damage. Consumers frequently do not realise that they are buying illicit or counterfeit products, especially when bottles and labels are reused.

Criminal structures and organisation of the illegal market

The production and distribution of illicit alcohol are often controlled by well-organised criminal networks that exploit customs corruption, weak enforcement mechanisms, and gaps in the regulation of technical ethanol. These networks operate on a transnational scale, taking advantage of free trade zones, porous borders, and tax differentials. The illicit alcohol market often overlaps with drug and cigarette smuggling routes and logistics [Witt & Nagy, 2021; Shelley, 2014].

Examples: consequences of ad hoc tax changes and crisis bans

• The Dominican Republic, following a sharp increase in excise taxes in 2013, recorded a sudden rise in illegal alcohol production, pushing the illicit market share above 30%, leading to hundreds of methanol deaths and a budget loss of over USD 260 million annually [Euromonitor, 2020].
• Colombia faces a complex problem with counterfeit alcohol and “recycled” technical ethanol, with over half of the illicit market consisting of altered or hazardous alcohol [Witt & Nagy, 2021].
• South Africa, During pandemic-related alcohol bans, home production (“pineapple beer”) grew by 900%, fuelling rapid expansion of the illicit market, increased crime, and a rise in methanol-related fatalities [Euromonitor Consulting, 2021].

Impact on public finances and law enforcement

Estimates indicate that states lose billions of dollars annually linked to illicit alcohol markets. These losses are not only fiscal but also undermine the integrity of the rule of law. The illicit alcohol trade distorts competition, reinforces clientelist ties, and fosters corruption in licensing, ethanol import controls, and judicial rulings  [Witt & Nagy, 2021].

6. The illicit tobacco market and its security implications

The illicit trade in tobacco products, especially cigarettes, is one of the most widespread illegal markets in the world. According to WHO and other sources, illicit cigarettes account for around 11–12% of global consumption, corresponding to hundreds of billions of cigarettes annually [Paraje et al., 2022]. In Europe the situation is similar, with higher shares in the eastern and southern regions than in the west.

Security risks and the role of organised crime

The illicit cigarette market is largely controlled by organised criminal groups that exploit tax disparities, regulatory loopholes, and weaknesses in customs enforcement. These groups operate internationally, engaging in smuggling, counterfeiting, illegal production, and the distribution of “illicit whites”, cigarettes manufactured legally for export but intended from the outset for the black market [Boboc & Ciobanu, 2021].

Research confirms that in some regions (e.g. the eastern Balkans, the Baltic states, and the Maghreb), “illicit whites” make up as much as 60–80% of the illicit tobacco market. These products are often manufactured in legal factories in jurisdictions with weak regulation (e.g. Belarus, the UAE, Paraguay) and distributed through complex networks into high-price cigarette markets [Paraje et al., 2022; Shelley, 2014].

Losses to public budgets and tax revenues

Globally, illicit cigarette trade deprives governments of tens of billions of U.S. dollars each year. Within the European Union, the European Commission and OLAF estimate annual losses of approximately €10 billion in unpaid taxes due to illicit tobacco trade, resources that could otherwise support public services, healthcare, or prevention [EC, 2018; EC, 2023].

Corruption, loss of trust, and infiltration of the state apparatus

Illicit tobacco is not only a tax problem, it fosters systematic corruption and abuse of public institutions. Studies show that tax revenue losses often coincide with:

• weak tax administration,
• the presence of smuggling networks within the state structures,
• unwillingness or inability to prosecute transnational suppliers [Boboc & Ciobanu, 2021].

In some Balkan countries for example, customs officials have been found to have close ties with illicit tobacco distributors. In South Africa, the illicit market grew rapidly during a period when the tax authority was deliberately weakened, a case of “state capture”. [Paraje et al., 2022].

The tobacco industry and information warfare

Tobacco companies themselves play an ambivalent role. While they publicly position themselves against illicit trade, independent studies show that some are responsible for a substantial share of it, particularly when they oversupply risky markets with volumes destined for diversion [Gilmore et al., 2018].

Although, given the diversity of players in the tobacco market, practices vary across the industry, companies often exaggerate the threat of illicit trade in order to undermine tax or regulatory proposals (such as plain packaging or menthol bans). This strategy has been disproven in countries such as Canada and Australia, where no significant increase in illicit trade followed the introduction of stricter regulations [Paraje et al., 2022].

7. Recommendations

The security aspects of the illegal market with drugs, tobacco, and alcohol are often overlooked or reduced to questions of public order. This commentary demonstrates that illicit markets represent complex and systemic security threats that undermine state structures, drain public finances, and destabilise geopolitics. Addressing them requires an integrated, consistently international, and realistic approach that combines market control, strengthened transparency, and targeted prevention..

Based on the analysis, we recommend the following strategic steps:

1. Strengthen international and cross-sectoral cooperation

• Support the implementation and expansion of instruments such as the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products and mechanisms developed by Interpol and the World Customs Organisation for alcohol and drugs.
• - Develop regional agreements for data exchange on goods, trademarks, flows, and actors, particularly within the EU, the Balkans, and the Eastern Partnership.

2. Improve tax and regulatory policy

• Avoid sudden tax changes (“tax shocks”), which often drive consumption toward the illicit market.
• Ensure the availability of lower-risk legal products.
• Use dynamic tax indexation (e.g. linked to GDP or CPI) instead of ad hoc interventions.

3. Introduce modern tracking and traceability technologies

• Expand track-and-trace systems to tobacco, alcohol, and key inputs (e.g. ethanol, filters, packaging materials).
• Safeguard the independence and integrity of these systems by excluding regulated companies from their operation.
• Enable the public to verify product origins (via mobile apps, QR codes) and incentivise retailers to cooperate.

4. Strengthen enforcement and anti-corruption mechanisms

• Invest in the equipment and training of customs and tax authorities, with a focus on high-risk goods and zones.
• Impose strict sanctions on public officials and companies involved in the illicit trade—including asset seizures.
• Guarantee protection for whistleblowers and journalists who expose links between illicit markets and public institutions.

5. Regulate the market with psychoactive substances as a security policy tool

• The current prohibition framework creates conditions for illicit markets to thrive, violence to escalate, and public finances to lose billions. Experiences from countries such as Canada, Uruguay, and the United States show that regulated legal markets can reduce crime, stabilise conditions, and better protect consumers.
• Regulation allows the state to control production, distribution, and pricing; restrict youth access; monitor product quality and potency; and weaken the economic power of organised crime.
• Control should be shifted from criminal law to tax, health, and administrative frameworks, similar to alcohol and tobacco. This involves licensing, taxation, inspection, and public education.
• Without market regulation, corruption, the financing of violent groups, and public health risks cannot be effectively addressed. Regulation is not a “soft approach” but a strategic, evidence-based security measure.

8. Conclusion

Despite increasingly sophisticated tools of surveillance, coordination, and regulation, the illicit trade in drugs, tobacco, and alcohol remains a major security threat to states, institutions, and public health. This analysis has shown that black markets not only fuel violence and corruption but also serve as a source of financing for hybrid actors and authoritarian regimes that deliberately undermine democratic structures. This is not merely a health or social issue but a structural disruption of the rule of law, tax justice, and public trust in institutions.

Looking ahead, it is essential to analyse whether, and how, revenues from the trade in psychoactive substances are used to finance hybrid operations, including disinformation campaigns, political infiltration, or cyberattacks. Both state and non-state actors may exploit illicit economic flows as instruments of influence and destabilisation, particularly in environments marked by weak oversight, corruption, or geopolitical vulnerability. Greater attention must also be devoted to illicit gambling, which often shares infrastructure and actors with drug and tobacco markets and may generate parallel streams of untaxed revenue with similar security implications..

Without a broader understanding of the links between illicit markets and geopolitics, it will be impossible to develop an effective, preventive, and strategic security policy. Both Czech and European security strategies should treat these dynamics as integral to the defence of democratic states. This is not only about law enforcement, it is about protecting the very foundations of social cohesion and state legitimacy..

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