MOREH (Reuters) - As dusk falls on a lonely police station in the eastern tip of India, a young policeman nervously keeps an eye on the Arakan hills above him, dotted with poppy fields.
Just 22 bumpy miles from the capital of Manipur, he and his colleagues are outnumbered by gunmen from a faction of the National Socialist Council of Nagaland, one of half a dozen insurgent groups operating near India's border with Myanmar.
Last year, six policemen were killed a few miles away in an ambush authorities blamed on them.
Small groups of men with machetes on their belts can be seen in the winter twilight, openly climbing steep paths through the poppy fields, where valuable seed heads will later be harvested and taken to Myanmar for processing into heroin.
"There are many poppy fields in the hills here," the policeman said in a hushed voice, refusing to give his name to Reuters for fear of reprisals from the men he said were armed rebels patrolling the fields above his office. Growers will either sell the seed heads to agents or openly in the local market , he said.
Opium and insurgency can make for a profitable if exotic business model, but it is not what India had in mind when it launched its "Look East" policy 20 years ago to link its markets to those of booming Southeast Asia.
Now as resource-rich Myanmar emerges from decades of isolation under military rule, India should be a natural partner, with ties stretching back to 3rd Century BC Buddhist emperor Ashoka and, more recently, a shared experience of British colonialism and World War Two.
Map of border area: link.reuters.com/zux66s
BRIDGE TO SOUTHEAST ASIA
"Myanmar is India's only bridge to Southeast Asia," Myo Myint, Myanmar's deputy foreign minister, told Reuters last week at a meeting of Southeast Asian diplomats in New Delhi to look at ways to speed up road, rail and telecoms connections with India. "India needs to come forward with assistance."
Myanmar sits at Asia's crossroads, sharing a western border with India, and a northern one with China. Thailand is its neighbour to the east and the Malacca Strait is on its southern flank.
The country of nearly 60 million people has emerged from a half-century of military rule and is courting the West while trying to wean itself from dependency on China for trade and investment. But despite a recent flurry of high-level visits between the two countries, India appears ill-placed on the ground to exploit Myanmar's opening.
Reuters journalists on a recent trip to the Myanmar-India border in Manipur found a region where rebel groups deeply influence politics and business. Opium poppies are grown openly. Cross-border gun-running remains big business.
Manipur and the three other Indian states sharing the 1,640- km (1,020-mile) border with Myanmar were supposed to be India's "Gateway to the East". Instead, the area has become India's Wild East.
Legal trade on the border has dwindled in the last five years to just 0.15 percent of total commerce between Myanmar and India. Checkpoints by security forces and rebel group supporters make the 120 km (75 mile) journey along rutted Highway 102 through the hills from Manipur's capital Imphal to Moreh on the border a painstakingly slow -- and expensive, too, from the "taxes" they impose on traffic.
NO CRIME HERE
The sleepy border town of Moreh had dreams of being a major international trading centre, a key station on the ambitious Trans-Asia Railway that will enable containers from East and Southeast Asia to travel overland across India to Europe.
But work on the $900 million, 125 km (77 mile) stretch of the railway is already two years behind schedule and has only progressed a short distance. Costs are soaring.
At first glance, Moreh seems to be a quiet bazaar of traditional wooden stilt houses, frontier hotels and stores where Myanmarese Buddhist monks and tribespeople in traditional dress and sandal-paste painted faces mingle with traders from across India.
The town of 15,000 people has one bank.
"There is no crime here," acting police chief Akbar Hussein said, chewing on a lump of betel nut at his outdoor desk. "There was only one case registered this month, and that was a road accident."
Opened in 1995 to great fanfare, the Moreh crossing was supposed to be a major trading post by now. Only some small-scale merchants conduct legal trade. Much of that is on a barter system, exchanging flour and soy products for betel, a mild stimulant popular in India.
Despite the police chief's boast, Moreh is a major smuggling centre where outlaws move around freely. Heroin from the Golden Triangle, guns and gem stones go westward; raw opium, tiger bones and rhino horn move east.
"Since 1995, nothing substantial has taken place. The border area is like a 17th-century tribal village," said N. Mohindro, an expert on trade in the state. "It's all about drugs and guns. People can make money so easily."
Some of this business is in the hands of Indian insurgents who run their operations from the Myanmar side of the border. Several of Myanmar's own rebel groups are also based in the area.
A U.S. diplomatic cable from 2006 released by Wikileaks described local politicians either in league with the rebels or supporting them for financial reasons.
Local residents say security forces are also deeply involved in trafficking but a senior officer of the police intelligence branch in Imphal denies that.
"The dense forest cover in this open border region is a nightmare for us," the officer said of an unfenced 63 mile stretch running from Moreh, adding that "the easy availability of weapons inside Myanmar has worsened the situation".
It wasn't always this way. Until the early 1990s, Myanmarese flocked across the border to buy Indian-made consumer goods. But as China's workshops cranked up and offered cheaper, more durable products, the market shifted to the other side of the fence.
Now, traders from Imphal endure the serpentine journey along bumpy Highway 102 and its checkpoint shakedowns to visit the Namphalong bazaar on the Myanmar side of the Moreh border gate.
Their pick-up trucks are piled high with Chinese mattresses, refrigerators and TVs to sell back in India, returning along the same road that brought Japanese troops in World War Two through then Burma in an attempt to invade India. The trip from the border to Imphal carrying such contraband can involve payoffs along the way amounting to several hundred dollars.
Highway 102 was supposed to be part of a road network linking up with Mandalay, Myanmar's main city in the North, and on into Thailand. But the only notable improvement on the Indian side is a short patch running through the Manipur chief minister's home town.
"People had plans to open eateries, motels and shops along the Asian highway. Now, the trans-national road is imaginary. It does not exist here," said Lunminthang Haokip, a senior state government official for Moreh's Chandel district. "The Look East policy is no more than power-point presentations in Delhi."
The complaint is voiced often here by residents in Manipur who have suffered decades of rights abuses under draconian emergency powers including "shoot-to-kill" orders aimed at curtailing the insurgencies. Residents say New Delhi acts like a colonial power, with much of its mistrust of the region stemming from its relative proximity to China.
"The overwhelming presence of military, paramilitary and police officers contributed to the impression that Imphal was under military occupation," the U.S. embassy cable said. "The Indian civil servants were also clearly frustrated with their inability to stem the growing violence and anarchy in the state, feeling their efforts to effectively control the insurgencies was hamstrung by local politicians either in league with or at least through corruption, helping to finance the insurgents."
India, which fought a border war in 1962 with China, has watched with mounting concern as Beijing steadily increases its influence around the rim of the Indian Ocean.
"You can't leave the whole region under an iron curtain just because they look Chinese," said rights activist Babloo Loitongbam, in a restaurant left dark by one of the chronic power cuts in Imphal. "You have to constantly prove you are not anti-national."
Ten years ago India's foreign minister proposed reopening a World War Two highway to the north of Manipur called the Stilwell Road, which connects India's far eastern region, known as the Northeast, with Myanmar and China.
Worried that the road risked strengthening China's influence and the flow of militants and arms to the region, India dragged its feet and Myanmar turned to China's Yunnan Construction Engineering Group instead. India also missed out on the natural gas from two fields in Myanmar it has a stake in, when the government chose to pipe it to China.
During long years of self-imposed isolation, Myanmar's only major economic partner was China. India realised in the 1990s that Chinese investment in Myanmar's military and infrastructure was giving Beijing a strategic advantage in a nation that borders five countries, straddles busy Bay of Bengal shipping lanes and has large oil and gas reserves.
New Delhi quietly dropped its backing for the opposition party of Nobel peace laureate Aung San Suu Kyi, who went to school and university in India.
Ties have strengthened since then, with President Thein Sein just the latest of Myanmar's leaders to call on New Delhi on a visit to India last year.
Rajiv Bhatia, who was India's ambassador to Myanmar until 2005, says India is still more concerned with its South Asian neighbours, including Bangladesh and Pakistan, and could miss the moment.
"In pure geopolitical terms, Myanmar is hugely important to India. We are now getting a historic opportunity to recover our relationship," he said. " But it is still not a priority for our politicians."
(Editing by John Chalmers and Bill Tarrant)
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