Afghan opium poppy cultivation has exploded to a new record high this year, with the multibillion dollar trade fueled by Taliban militants and corrupt officials in President Hamid Karzai's government, a U.N. report said.

The country produces nearly all the world's opium, and Taliban insurgents are profiting. Militants tax farmers and protect convoys smuggling opium into neighboring countries, said Antonio Maria Costa, executive director of the United Nations Office of Drugs and Crime.

"It is clearly documented now that insurgents actively promote or allow and then take advantage of the cultivation, refining and the trafficking of opium," Costa said.

The UNODC report casts doubt on the effectiveness of efforts by the United States and other Western countries to fight the cultivation.

It also adds pressure on Karzai to consider new ways of curbing an expansion that threatens to turn Afghanistan into a "narco-state," where some warn that groups such as Al Qaeda could once again find sanctuary.

Karzai rejected U.S. offers to spray this year's crop after Afghans said herbicide could affect livestock, legal crops and water supplies.

Costa said the U.N. supports the Afghan government's position, but added that crop eradication was a key element of any strategy to combat the trade.

Afghanistan has doubled its opium production over the past two years and now accounts for 93 percent of the world's output, according to the annual UNODC survey. The southern province of Helmand alone has become the world's biggest source of illicit drugs.

The raw material for heroin grows on 477,000 acres of Afghan land, a 17 percent increase from last year's record 408,000 acres, the U.N. report said. The amount of Afghan land used for opium has surpassed the total used for coca cultivation in Colombia, Peru and Bolivia combined.

Costa said Afghanistan was on track to produce 9,000 tons of opium this year, up 34 percent from 2006.

"The situation is dramatic and getting worse by the day," Costa said in an interview in Kabul. said. "No other country in the world has ever had such a large amount of farmland used for illegal activity, beside China 100 years ago," when it was a major opium producer.

The farm value of Afghanistan's annual crop is about $1 billion, and street value of the heroin produced from it is many times higher, the U.N. report said.

While 13 northern provinces are now poppy free — up from six last year — production in the insurgency-wracked south has surged to unprecedented levels.

Helmand, with 253,944 acres under cultivation, now accounts for more than half of the national total.

"The government has lost control of this territory because of the presence of the insurgents," Costa said.

Some 3.3 million of Afghanistan's 25 million people are involved in opium production, according to the report.

Costa said there was a "tremendous amount of collusion" between traffickers and government officials.

"The government's benign tolerance of corruption is undermining the future: no country has ever built prosperity on crime," Costa said in a summary of the report.

Gen. Khodaidad, Afghanistan's acting counternarcotics minister, acknowledged the government's strategy has failed in the south and west. He blamed corrupt local officials, poor policing, failure in eradication and open borders with Iran to the west and Pakistan to the east.

Khodaidad, who like many Afghans goes by only one name, said the government needs to review its strategy at an upcoming national conference Wednesday. He said inefficient and corrupt officials should be threatened with dismissal and those who curbed production and trade should be rewarded.

While urging NATO to stay clear of eradication efforts, Costa said the alliance should support counternarcotics operations by destroying opium labs, targeting traffickers and closing opium markets.

"The opium economy of Afghanistan can be bankrupted by blocking the two-way flow of imported chemicals and exported drugs," Costa said. "In both instances materials are being moved across the southern border and nobody seems to take notice," he said. Refiners need chemicals to turn opium into heroin.

The report did not say how much of the opium gets made into heroin in Afghanistan before being smuggled out.

Costa also urged Afghanistan to submit the names of about a dozen known traffickers — whom he did not identify — to the U.N. Security Council for inclusion alongside Al Qaeda and Taliban members on a list of people who are barred from traveling, have their assets seized and face extradition.

"The Afghan opium situation looks grim, but it is not yet hopeless," Costa said. "It will take time, money and determination — worthwhile investments to spare Afghanistan and the rest of the world more tragedies."