A mule train, led by Burmese militia, carrying 16 tons of opium crossed into Laos to Ban Khwan, where they were attacked by rival drug smugglers from the Chinese Nationalists' Third and Fifth Armies.
The intended recipient of the shipment, Royal Lao Army General Ouane Rattikone, bombed both sides while moving in troops to sweep the battlefield.
With this supply of raw opium base, plus his greater grasp on the drug trade, Ouane's refineries began to ship their heroin worldwide.
On 23 December 1950, the United States signed the Pentalateral Treaty with France, Cambodia, Laos, and Vietnam binding them to financially support the French effort.
Beginning as early as 6 May 1953, the U.S. Central Intelligence Agency (CIA) used its proprietary airline, Civil Air Transport, for combat supply drops in support of the French Army in Laos.
One of its agents, William Young, was a missionary's son recruited for his cultural understanding of hill tribes in northwestern Laos.
Although Young recruited some of the Nationalist Chinese soldiers into the Royal Lao Army's 101st Special Battalion (French: Bataillon Especiale 101 – BE 101), many others became involved in the opium trade.
[5] In February 1967, Shan Burmese warlord Khun Sa declared he was entitled to a "transit tax" from KMT opium shipments moving through the Wa State of Burma; the KMT had already claimed the prerogative of similarly extorting a fee of nine dollars per kilo for opium to cross the Burmese border into Thailand or Laos.
He had his agents buy and gather 16 tons of opium from Wa and Kokang states for his mule train to transport from Ving Ngun, Burma into nearby northwestern Laos.
As this was occurring, the local school principal had carried word of the invasion to the nearest RLA post at Ton Peung.
As this occurred, the AT-28s from Luang Prabang struck four or five times daily for two days running, bombing both sides indiscriminately, men and mules alike.
A fortnight's impasse ensued, during which additional Lao troops flown in from Vientiane helped encircle the outnumbered KMT.
Either way, essentially the Lao general gained an enormous amount of free opium when his paratroopers gathered it from the battlefield and shipped it to Ban Houei Sai.
[6][7] The resultant embarrassing bad publicity from the opium war brought on a Thai crackdown on all the Kuomintang remaining on their northern border.
[6] Prior to the 1967 Opium War, the Thais and KMT had preserved a fiction that the Chinese were civilian refugees seeking asylum.
After the Chinese exposure caused by the battle at Ban Khwan, the Royal Thai Army began strictly supervising the Kuomintang units, insisting that their commanders be accountable for their troops.
[8] The KMT's revenue from the opium trade was much diminished; their 15-year control of the smuggling routes, collecting their "transit tax", had ended with the fighting at Ban Khwan.
At the time of the 1967 Opium War, they were turning out morphine base; some of that was further refined into crude but smokeable Number 3 Globe heroin.