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TRIESTE, Italy - The United States has announced a new drug policy for opium-rich Afghanistan, saying it was phasing out funding for eradication programs while significantly increasing its funding for alternate crop and drug interdiction efforts.

The U.S. envoy for Afghanistan, Richard Holbrooke, told The Associated Press on Saturday that eradication programs weren't working and were only driving farmers into the hands of the Taliban.

"Eradication is a waste of money," Holbrooke said on the sidelines of a Group of Eight foreign ministers' meeting on Afghanistan, during which he briefed regional representatives on the new policy.

The G-8 ministers "strongly appreciated" the shift, which also includes an increase in annual U.S. funding for agricultural development from a few million dollars to a few hundred million dollars, said Foreign Minister Franco Frattini of Italy, the current G-8 president.

Officials at Afghanistan's Interior Ministry and Counternarcotics Ministry could not immediately be reached for comment.

Afghanistan is the world's leading source of opium, cultivating 93 per cent of the world's heroin-producing crop. The United Nations has estimated the Taliban and other Afghan militants made $50 million to $70 million of last year's opium and heroin trade.

The UN drug office said in a report this week that opium cultivation dropped 19 per cent last year, but was still concentrated in southern provinces where the Taliban insurgency is strongest.

The head of the UN drug office, Antonio Maria Costa, told the G-8 meeting that the dip in cultivation was welcome "though vulnerable to relapse" without concerted international efforts to assist farmers abandon poppy cultivation to harvest other crops. In addition, law enforcement operations must be increased to disrupt drug markets, production labs and convoys, he said.

Holbrooke said the U.S. planned to do just that with its new policy shift.

"We're essentially phasing out our support for crop eradication and using the money to work on interdiction, rule of law, alternate crops," he told the AP. At the same time, Washington is upgrading its support for agriculture programs.

"That's the big change in our policies," he said. "This was widely accepted as the right thing to do."

Costa said the United Nations had determined that eradication programs were inefficient since too few hectares (acres) were being cleared at too high a cost.

The U.S. strategy of phasing out eradication in favour of agricultural development and drug interdiction "seems to be the winning strategy, and I'm glad that all of this has received support from the G-8 ministers," Costa told the AP.

Holbrooke said the previous U.S. policy to combat Afghan poppy, which focused on eradication programs, hadn't reduced "by one dollar" the amount of money the Taliban earned off cultivation and production.

"It might destroy some acreage," Holbrooke said. "But it just helped the Taliban."

Agriculture was among the issues taken up at the G-8 meeting on Saturday, with participants saying in their final statement that agricultural development was "key to the future of Afghanistan and Pakistan, as well as other countries in the region."

"Moreover, food insecurity and chronic poverty are root causes of civil instability and forced migration," it said in calling for expanded international co-operation in agriculture to boost employment and incomes and provide farmers with alternatives to poppy production.

Holbrooke said the international community wasn't trying to target Afghan farmers in its policies, just the Taliban militants who buy their crops.

"The farmers are not our enemy, they're just growing a crop to make a living," he said. "It's the drug system. So the U.S. policy was driving people into the hands of the Taliban."

Costa urged the international community to put the same amount of economic emphasis on boosting the agricultural sector that it puts on combatting the Taliban insurgency militarily.

"If this can be done, I believe that -- and I'm optimistic -- that the Afghan opium situation will improve dramatically," he said.

The shift in U.S. policy follows a steady decrease in the number of hectares (acres) destroyed by eradication programs.

According to the UN report, opium poppy eradication reached a high in 2003, after the Taliban were ousted from power, with over 21,000 hectares eradicated. In 2008, only 5,480 hectares were cut down compared with 19,047 hectares in 2007.

Costa said Afghan opium would kill 100,000 people this year in the parts of world where demand for heroin is highest: Europe, Russia and West Asia.

To fight it, he said major powers had to expand their counter-drug efforts to neighbouring Pakistan as well as Iran, where half the 7,000 tons of exported Afghan opium transits, "causing the highest addiction rate in the world."

"Facing a grave health epidemic, Iran should be given the chance to engage in common efforts to combat illicit trafficking," he said.

Iran had been invited to attend the G-8 meeting on Afghanistan, because anti-drug efforts in Afghanistan have been identified as a key area where the United States and Iran can work together -- part of President Barack Obama's outreach effort.

But Italy withdrew the invitation after Iran failed to respond and after its bloody postelection crackdown on protesters, which has sparked international condemnation.