An alarming uptick in poppy production has Afghan and international officials worried about the impact the opium trade will have on the emerging democracy, but all sides agree that interdiction efforts must be led by the Afghans themselves.

While President Hamid Karzai was inaugurated Tuesday with great fanfare, a U.N. Office on Drugs and Crime (search) report released last month shows that poppy cultivation in Afghanistan (search) was up 64 percent from 2003 to 2004. The percent of agricultural land used for poppy cultivation has risen from 1.6 percent to 2.9 percent during that time, or 51,000 hectares to 131,000 hectares. While the price per kilogram has dropped 67 percent during that period, all 32 provinces in the country and a record number of farmers are involved in some form of opium cultivation.

"The situation is getting out of hand," said Mahmood Karzai, brother of the new president. Karzai lives in the United States and travels frequently to his home country as head of the Afghan-American Chamber of Commerce (search). "The United States wants to take care of the problem. I think it is a good thing to do, but it’s important that in taking care of the problem, part of the solution is resolving the Afghan economy as a whole."

Col. David Lamm, chief of staff for the U.S. military command in Afghanistan, agrees that production is expanding, and added that efforts to shut it down, including busting drug lords, closing laboratories and destroying the poppies — the main ingredient in heroin — must be led by the Afghans.

Any counter-narcotics plans won’t involve the U.S. military directly in law enforcement or crop destruction, he told FOXNews.com.

"We don’t want to upset what is an emerging democracy here," Lamm said. "We are very serious about addressing the problem but it is important not to get too precipitous."

Though the military is offering only backup support to the Afghans, the Drug Enforcement Administration announced in November that it is stepping up its efforts to fight drug production in the region and will put more agents and resources into the country as part of the Bush administration's counter-narcotics plan.

Afghanistan is the world’s leading producer of opium, responsible for about 87 percent of the world's supply, the U.N. drug office reported in its Afghanistan Opium Survey of 2004 (search). The drug trade there counts for nearly $2.8 billion a year — roughly 60 percent of Afghanistan’s gross domestic product, the U.N. says.

Despite a ban by the Taliban (search) on poppy crops in 2001, the fundamentalist government had enjoyed the fruits of the opium trade for years. The U.S. government reported in 2001 that much of the money earned by the Taliban in the drug trade funded Al Qaeda terrorists.

Today, members of the Taliban, while out of power, are still scraping by, offering safe passage to drug traffickers and contributing to instability in the country.

U.N. officials admit that no crop can earn the kind of cash that the poppy trade does. The average yearly income per capita in Afghanistan was $207 in 2000, while opium-growing families — 264,000 households in the nation of 24 million are believed to be involved — earned a per capita income of $600 that same year.

The drug money has also corrupted the rest of society, to the highest levels of government, say experts. In response, the Bush administration is seeking more than $700 million to expand the drug war there, providing more muscle to British forces that are now taking the lead in the counter-narcotics effort.

Some of the money will come from transferring funds from existing programs, for which congressional approval is needed. Staffers on Capitol Hill said last week that the rest of the cash will likely come in the form of a supplemental funding request.

Robert Charles, assistant secretary for international narcotics and law enforcement at the U.S State Department, which is leading the administration’s efforts, told FOXNews.com that the additional funds will assist the Afghan government in law enforcement, intelligence, setting up a legal system to prosecute drug warlords, crop eradication, public information and offering economic incentives like subsidies for farmers to grow alternative crops.

"The primary theme is the Afghan government has expressed a very strong desire to do this," Charles said, adding that the military will function in a supporting role to the Afghan government's efforts.

But some foreign policy experts have expressed doubts about U.S. efforts, and warn against launching an American-style drug war in a country still battle-weary and just beginning to trust the occupying western forces.

"We have really done damage to the Taliban and Al Qaeda and we would not want to see them rejuvenate simply because of clumsy U.S policy," said Ted Galen Carpenter, foreign policy expert at the Cato Institute (search). He argues that an aggressive drug interdiction effort, particularly against poor farmers, may undermine the primary mission.

"I would say it would be a tragedy," he added.

But others say that clearing the country of the nearly 506 square miles of poppy crops and putting a dent in the organized crime and corruption will help stabilize the country and put the squeeze on a valuable terrorist funding source.

"We recognize that the drug problem in Afghanistan is probably one of the major threats we will be dealing with for the next two to three years," said Col. Lamm. "Afghanistan really wants to be a successful state, not a narco-state."

Eradication Efforts Gone Awry

A suspected attempt to destroy some of the poppy crops has already drawn a barrier between Afghanistan and the United States and Britain. In November, Afghan President Karzai questioned British and American officials about a mysterious plane that allegedly sprayed poppy fields in the Nangarhar province with herbicides, and reportedly made some villagers sick.

U.S and British officials deny any involvement, and Lamm said he is "skeptical" such a plane even exists, adding that the military does not do crop eradication. Crop destruction, so far, has been conducted on the ground by local Afghans, officials added.

U.S. critics say that if the incident is true, it’s regrettable since such aggressive targeting of poor farmers might ultimately drive rural Afghans against coalition forces.

"If this is the proverbial trial balloon, it’s certainly emerging as a problem — doing crop eradication by spraying herbicides is likely to go spectacularly wrong," said David Isby, a Central Asian specialist with U.S. defense contractors SPARTA, Inc. (search)

Lamm said if the United States wants to help farmers move away from poppy production, it must help build roads, irrigation systems and other infrastructure.

"We have to ensure that farmers be given a chance for a better livelihood before we go in and eradicate," he said. "[Afghans] are pragmatic, hardworking folks and I think they will be more than happy to have an alternative and get rid of the drug lords."

Mahmood Karzai said Afghans are "reasonable people" who will respond to a carrot and stick approach.

"If the government says, okay, we will give you this particular price if you grow this (alternative crop), but if you grow poppies we will destroy you, they will listen," he said.