The CIA was active in China and Thailand starting on February 7, 1951, CIA planes began to shuttle arms and supplies from Bangkok to Li Mi’s forces in north Burma, at first in the form of air drops five times a week and then with landings at Mong Hsat, an airfield constructed by the CIA fifteen miles from the Thai border. For the return journey the CIA planes were often reloaded with raw opium, which was flown back to Bangkok or Chiang Mai in northern Thailand and sold to General Phao Siyanan, head of the Thai police. General Phao had been made director of Thailand’s national police after the CIA-backed coup in 1948 led by Major General Phin Choohannan. Phao’s 40,000-member police force, the Police Knights, immediately engaged in a campaign of assassinations of Phin and Phao’s political enemies. These troops also assumed control of Thailand’s lucrative opium trade. In Phao’s able hands the supply of cheap opium from the Shan States made Bangkok the hub of the Southeast Asia opium trade, according to the British Customs Office. Phao’s control of the opium trade was directly abetted by the CIA, which had funnelled him $35 million in aid. Thailand would thereafter become the CIA’s main base of operations in the region.
In the 1950s the CIA backed General Phao in a struggle with another Thai general for monopoly of control of Thailand’s opium and heroin trade. Using artillery and aircraft supplied by the CIA’s Overseas Supply Company, based in Bangkok, Phao easily outgunned his rival and duly imposed near total control over the government of Thailand and the country’s criminal enterprises. Backed by squads of CIA advisers, Phao set about the task of turning Thailand into a police state. The country’s leading dissidents and academics were jailed and CIA-trained police reconnaissance units patrolled the countryside, among other activities levying a protection fee on the opium caravans. In addition to controlling the opium and heroin trade, Phao also cornered the country’s gold market, played a leading role on the top twenty corporate boards in the country, charged leading executives and businessmen protection fees and ran prostitution houses and gambling dens. Phao became great friends with Bill Donovan, at that time US ambassador to Thailand. Donovan was so enamored of Phao that he put him up for a Legion of Merit award. This for a man described by one Thai diplomat as “the worst man in the whole history of modern Thailand.”
The military aspect of the venture was less efficiently executed. Li Mi’s troops managed three forays into China. The first, in June 1951, lasted only a week. The next, in July, ended in disaster within a month, with 900 dead, including several CIA advisers. The final bid came in August 1952 and went equally badly.
The weapons going to the KMT were supplied by a CIA front company called Overseas Supply, run by a CIA lawyer called Paul Helliwell, an old Asia hand who had worked in China and Burma with the OSS. Helliwell later bragged about paying his Asian informants with “sticky brown bars of opium.”
One of the CIA’s strategic objectives had been to provoke an attack by China across the Burmese border in retaliation for forays by the KMT. This plan misfired, however. In 1961 the Chinese did indeed launch a drive into the Shan States, but at the request of the Burmese government to deal, once and for all, with the KMT. The People’s Liberation Army drove the KMT remnant into Thailand, where it settled outside Chiang Mai. After this operation, the Burmese army discovered a fresh cache of weapons and supplies at the former KMT base, still in boxes with US markings, and containing more than five tons of ammunition and hundreds of rifles and machine guns. They also discovered more than a dozen opium-processing labs.
The CIA’s liaison to the KMT at its new quarters in Thailand was William Young, the son of a Baptist missionary. Young had joined the CIA in 1958 and quickly proved himself to be one of the Agency’s most capable hands, and one of the few CIA men respected by the tribal leaders. Young had been born in the Shan States and used his intimate knowledge of the culture and his fluency in the difficult languages of the hill country to recruit the local tribesmen as surrogate warriors in the CIA’s operations across Southeast Asia. Young was more than willing to indulge his hill tribe mercenaries in the opium trade with the excuse that “[a]s long as there is opium in Burma somebody will market it.”
In 1963 Young recruited KMT soldiers into a raiding force that led attacks on villages in northern Laos believed to be sympathetic to the Communist Pathet Lao. From 1962 to 1971 Young’s mercenaries carried out more than fifty cross-border ventures into China, where they monitored truck traffic and tapped phone lines. These expeditions were propelled by the CIA’s fear that China might intervene in Laos and Vietnam. His recruits were trained by the Thai secret police, taken to Mong Hkan, a CIA base near the Burma–China border, then from Mong Hkan into China using the Shan opium caravans as cover. The mules that carried bags of opium also packed radios and surveillance equipment.