By Maria Abi-Habib
KABUL—The U.S. military has blacklisted Afghanistan's largest private airline, alleging it is smuggling "bulk" quantities of opium on civilian flights to Tajikistan, a corridor through which the drugs reach the rest of the world.
Kam Air was barred this month from receiving U.S. military contracts by U.S. Central Command chief Marine Gen. James Mattis, according to U.S. military officials.
"The U.S. will not do business with those who fund and support illicit activities," U.S. Army Maj.-Gen. Richard Longo, the commander of Task Force 2010, a coalition anticorruption unit, said in an interview. "Kam Air is too large of a company not to know what has been going on within its organization."
Kam Air, which denied the charges, is the first major Afghan company to be penalized by the U.S. military over drug allegations. It wasn't clear how much U.S. military business the company stands to lose.
The move underscores growing concerns among Western officials that the drug trade in Afghanistan is not only resurgent, but is also taking an increasingly open role in the country's economy. In the past month, Kam Air has engaged in talks to merge with Afghanistan's state-owned flag carrier, Ariana Afghan Airlines, both sides have said. The deal could see the Afghan carrier absorb Kam Air's debts, say people familiar with it.
Gen. Longo confirmed that his task force had conducted an investigation into Kam Air but said details were classified. Other U.S. officials said the decision to bar the airline from U.S. contracts was made because of evidence of Kam Air's widespread involvement in the drug trade.
"I totally deny the allegations," the airline's president and founder, Zamari Kamgar, said after being told of the U.S. decision. It would be impossible to fly drugs out of the country as the airline is subject to thorough security checks at Afghan airports, he said, adding that the allegations were likely a conspiracy perpetrated by his competitors.
Mr. Kamgar said he expects the Kam Air-Ariana deal to go through and that his management team would take over the combined entity, which he said would plan to open direct routes to U.S. and European airports. A spokesman for Afghanistan's Transportation Ministry, which runs Ariana, said he was "not aware of the smuggling of drugs by Kam Air" and wasn't aware of the U.S. investigation.
The U.S. action underlines how deeply the drug trade is entrenched in Afghanistan, which the United Nations has said provides more than 90% of the world's illicit opiates. While the U.S. and allies from the North Atlantic Treaty Organization have fiercely engaged the Taliban over the past 11 years, the coalition has failed to cut away at the opium trade that helps finance the insurgency.
Opium cultivation spread in recent years to provinces once considered "poppy free." While blight and poor weather in recent years have cut into Afghanistan's opium and heroin exports, poppy cultivation rose 18% in 2012 from the previous year, according to the U.N.'s Office on Drugs and Crime.
"Export earnings from Afghan opiates may be worth $2.4 billion—equivalent to 15%" of gross domestic product, the UNODC said in a report last year.
As the U.S. and allies prepare to withdraw military forces in 2014, officials of coalition countries have expressed concerns that Afghanistan will become a narco-state where legal business activities and government institutions are intertwined with the drug trade. Some Western officials fear that the narco-trade and associated corruption will pose a greater threat to stability after 2014 than the Taliban, who also derive a large portion of their revenues from narcotics.
"The corruption, crime and impunity the narcotic problem causes on the society, governance and more specifically, families and individuals, is not only devastating for Afghanistan but equally to many of the surrounding countries," said Jean-Luc Lemahieu, the Afghanistan representative of the UNODC.
The U.N. estimates that Afghan opiates kill 10,000 people a year in the U.S. and other NATO countries, compared with some 400 coalition soldiers killed last year by the Taliban.
The latest move follows two separate U.S. investigations, reported last year by The Wall Street Journal, into allegations that the U.S.-funded Afghan Air Force was smuggling drugs and weapons around the country. Kabul denied those allegations.
The investigations, led by the U.S. Drug Enforcement Administration and the military coalition, have stalled because of lack of cooperation from Afghan authorities, according to U.S. officials.
The Afghan government says the Afghan Air Force is clean and that it would cooperate with any U.S. narcotics investigation into the force if presented with sufficient evidence.
The investigation by Task Force 2010 was likely spurred last fall, Gen. Longo said, after Kam Air bid on a contract tendered by the international military coalition in Kabul.
"An organization such as Kam Air exposes itself when it bids on a U.S. contract," said Gen. Longo. "They are subject to scrutiny."
Kam Air operates a fleet of some 16 planes, including Boeing 767 and 747 aircraft and Antonov cargo planes. The task force believes that domestic passenger routes have been used to ferry opium around the country, according to a U.S. official in Kabul. But the investigation is focused on Central Asia, the official said. "Kam Air is flying out bulk quantities of opium," the official said.
Kam Air flies cargo to many destinations. But its only scheduled Central Asian passenger route is between Kabul and Dushanbe, the capital of Tajikistan.
The poorest former Soviet republic, Tajikistan suffers from political instability and porous borders. High-level government protection for drug smugglers has made the country a trafficking route for Afghan opium to reach the world, Western law-enforcement officials have said.
A spokesman for Tajikistan's National Security Committee declined to comment, as did the Foreign Ministry in Dushanbe.
Kam Air's Mr. Kamgar said the company has provided logistic services to the U.S.-led coalition in Afghanistan but said he couldn't immediately characterize the scope of the business. U.S. military officials were unable to provide details of any contracts given to Kam Air.
The U.S. Embassy in Afghanistan currently has no contracts with the airline, though it has been on its list of authorized cargo carriers, an official said.
Following Gen. Mattis's designation, all U.S. Department of Defense entities are forbidden from working with the airline. The decision doesn't directly affect civilian U.S. agencies. Coalition partners in Afghanistan have tended to follow the U.S. lead in blackballing companies, including trucking firms, seen to be corrupt.
—Ziaulhaq Sultani contributed to this article.