Myanmar remains engulfed in a brutal civil war that has claimed countless lives and left the military junta controlling only a fraction of the country. Estimates vary, but the regime’s grip on power has steadily eroded as ethnic armed organizations and resistance forces expand their influence across large swaths of territory.

Yet while the state continues to fragment, not everyone is losing. In many of Myanmar’s borderlands, armed groups are becoming increasingly powerful, asserting forms of quasi-sovereignty financed through criminal enterprises. Organizations such as the Wa United State Army have long been associated with drug trafficking and illicit commerce, benefiting from conflict, access to Chinese weapons, and complex networks of regional patronage.

Although the current war has accelerated the growth of this system of narco-governance, its foundations were laid decades ago. The model now visible across much of Myanmar’s periphery owes a great deal to a figure who is often overlooked in discussions of the country’s contemporary conflict. Long before today’s militias turned criminal economies into instruments of governance, Khun Sa perfected the formula.

In 1996, Khun Sa retired under the protection of Myanmar’s military rulers despite repeated calls from the U.S. Drug Enforcement Administration for his arrest. For years, he had been one of the most notorious drug traffickers in the world. As Los Angeles Times journalist Scott Kraft observed at the time, “For three decades, the elusive Khun Sa was the opium king. With a private militia of 20,000, he supplied nearly a third of the heroin on U.S. streets and, at the same time, waged a war for independence for his Shan state.”

Yet by December 1996, Khun Sa announced his retirement from the drug trade. American authorities were deeply frustrated by the arrangement that allowed him to walk away. “With this deal, everyone is being allowed to go on with their lives,” a disappointed DEA official remarked at the time. “That means Khun Sa won’t have to worry about fighting off the government anymore, and it will make it that much easier to grow poppies.”

The obvious question is why Khun Sa succeeded where so many other drug lords failed. Figures such as Pablo Escobar met violent ends, hunted relentlessly by states determined to destroy them. Khun Sa survived because he transformed himself into something far more valuable: a useful political asset.

He struck an accommodation with Myanmar’s military government, agreeing to deploy his militia against Communist insurgents who threatened the junta. In return, he and other allied militias were granted remarkable freedom to cultivate, transport, and profit from opium production. Rather than merely operating a criminal enterprise, Khun Sa built what amounted to a state within a state.

His wealth did not come solely from producing and trafficking narcotics. Equally important was his control of the routes through which narcotics moved. Other traffickers could move their products across territory under his influence, provided they paid for the privilege. Those revenues funded roads, schools, hospitals, and local infrastructure. To many residents, Khun Sa appeared not simply as a warlord but as a provider of public services that the central government either could not or would not deliver.

He also understood the political value of nationalism. By wrapping his enterprise in the language of Shan self-determination, he cultivated legitimacy among communities that felt neglected or oppressed by the Burmese state. By 1996, drug production in Myanmar was largely dominated by two ethnic groups: the Shan and the Wa. Both had histories of armed resistance against the central government, and both discovered that narcotics revenues could finance political ambitions far more effectively than ideology alone.

Khun Sa died of natural causes in 2007. His political system, however, survived him.

Indeed, it flourished.

Groups such as the Wa United State Army expanded into portions of the territory once associated with Khun Sa’s operations. Meanwhile, the economics of the region evolved. By 2022, after the Taliban’s ban on opium cultivation in Afghanistan disrupted global supply chains, Myanmar regained its position as the world’s leading producer of opium. Yet narcotics became only one component of a much broader illicit economy.

Modern armed groups have diversified. Alongside drug trafficking, they increasingly profit from money laundering, cyber-scam compounds, human trafficking networks, casinos, and other transnational criminal enterprises. Together, these activities form a sprawling shadow economy that generates enormous revenues while further weakening the authority of the central state.

In many respects, the similarities to Khun Sa’s model are striking. Armed groups continue to control territory, collect taxes, regulate commerce, and provide varying degrees of local governance. What has changed is the scale and sophistication of the criminal economy supporting them.

There is another important difference as well.

Khun Sa depended heavily on the cooperation of Thai officials and networks that allowed his opium to reach international markets. Today, both Myanmar’s military rulers and many of the country’s powerful militias operate within a geopolitical environment increasingly shaped by China.

The junta itself remains heavily influenced by Beijing, even as it seeks to broaden its diplomatic relationships. President Min Aung Hlaing’s outreach to India reflects this balancing act. As one Straits Times analysis noted, the relationship offers an opportunity for both Myanmar and India to dilute China’s outsized influence. India, much like China, sees Myanmar as strategically important and rich in resources. The junta, meanwhile, is eager to diversify its partnerships, particularly after discovering that Beijing is willing to work with armed groups on both sides of the conflict.

As the civil war deepens and borderland authorities become more entrenched, Myanmar’s rulers have learned that reliance on China comes with risks. That lesson became unmistakable in October 2023 when Beijing appeared to give tacit approval to a major offensive by anti-junta forces in Shan State.

Known as Operation 1027, the campaign brought together three powerful armed organizations in a coordinated assault on military positions. The offensive highlighted the complicated relationship linking Myanmar’s state institutions, illicit economies, ethnic militias, and external patrons.

As Yun Sun of the Brookings Institution noted, “The offensive captured significant territory bordering China.” Beijing had become increasingly frustrated by cyber-scam operations operating along the China–Myanmar border, many of which targeted Chinese citizens and trapped thousands of victims in forced labor schemes. According to local accounts, many of these criminal enterprises were linked to border militias and actors connected to the junta, which benefited financially from their activities.

The impact of these scam compounds on Chinese nationals appears to have been a crucial factor in Beijing’s willingness to tolerate, and perhaps quietly support, the offensive launched by the Three Brotherhood Alliance. Composed of the Arakan Army, the Myanmar National Democratic Alliance Army, and the Ta’ang National Liberation Army, the alliance promised to dismantle many of the scam centers that had become a major source of tension between Beijing and the junta.

Like many armed groups in Myanmar, the alliance has its own connections to illicit economic activities. Yet its commitment to addressing the cyber-scam problem aligned neatly with Chinese interests, creating a temporary convergence of objectives.

As of 2026, China has not abandoned Myanmar’s military government. But Beijing’s relationship with the junta increasingly resembles its relationship with the country’s militias: pragmatic, transactional, and guided by self-interest rather than loyalty.

China’s overriding objective is stability. It wants secure borders, protected investments, and an end to criminal activities that threaten Chinese citizens. The junta has struggled to provide any of those outcomes. At the same time, Beijing remains wary of revolutionary upheaval and has periodically facilitated ceasefires that help prevent the complete collapse of military authority.

This ambiguity has fueled accusations from all sides. Some observers argue that China is interfering in Myanmar’s revolution. Others contend that Beijing is merely hedging its bets in an unpredictable conflict. The reality may be simpler. China is neither unequivocally pro-junta nor genuinely pro-revolution. It prefers a stable Myanmar and is willing to negotiate with whichever actors can help preserve that stability.

Khun Sa spent decades mastering the politics of Myanmar’s borderlands. He learned how to balance criminal enterprise, ethnic nationalism, and strategic alliances to preserve his power. The militias that dominate many of Myanmar’s frontier regions today have expanded upon that blueprint, adapting it to a new era of cybercrime, human trafficking, and transnational finance.

Yet there is an irony in this evolution. Khun Sa became famous for his ability to manipulate competing powers in order to survive. Three decades later, it is China that appears to have mastered the same game. In the shifting landscape of Myanmar’s civil war, Beijing has become the ultimate broker, bargaining with armed groups, the junta, and regional stakeholders alike.

If Khun Sa were alive today, he would probably recognize the system immediately. He might even admire it.