The US counter-narcotics strategy in Afghanistan is to undergo a U-turn with money previously spent on controversial opium poppy eradication shifting to agricultural development, Richard Holbrooke, US special envoy to Afghanistan and Pakistan, told an international conference on Saturday.

Franco Frattini, Italy’s foreign minister who chaired the conference in the port city of Trieste, quoted Mr Holbrooke as saying the US would spend “several hundred million dollars” in promoting production of legal crops and cut back funding for eradication.

Mr Frattini called it a very significant move, part of what he described as an United Nations-backed “Green Marshall Plan” for Afghanistan.

The former Bush administration’s emphasis on destroying opium poppy fields, sometimes with pesticides sold by US companies, was hugely controversial, with opponents arguing it drove poor communities into the arms of Taliban insurgents.

In testimony to Congress this week, Mr Holbrooke said the eradication policy, which cost hundreds of millions of dollars, had been “totally ineffectual” and served a useful recruitment tool for the Taliban.

”In my experience, this is the least effective program ever,” he said.

Afghanistan produces some 90 per cent of the world’s opiates that go into making heroin. Production areas are shrinking, however, and are concentrated in five southern provinces in areas controlled by insurgents, Antonio Maria Costa, head of the UN Office on Drugs and Crime told the conference.

Opium poppy cultivation declined by nearly 20 per cent last year and a further decrease was expected this year, Mr Costa said. Drug prices were falling and wheat prices were rising.

“Recent news is welcome, though vulnerable to relapse,” Mr Costa said, noting that Afghan opium would still kill 100,000 people in Europe, Russia and West Asia this year.

The most powerful instrument to counter poppy growing, Mr Costa said, was development in the form of more and better assistance to farmers. He urged the 27 countries and international organisations around the table in Trieste – above all the World Bank – “to display in Afghanistan an economic power as forceful as Nato’s military fire-power.”

He also acknowledged the effectiveness of strikes by Nato and Afghan government forces against drug markets, heroin laboratories and convoys.

Mr Frattini regretted that Iran had turned down an invitation to attend the conference, organised on the sidelines of Group of Eight foreign ministers meeting ahead of next month’s summit in Italy.

“It was a lost occasion for Iran,” he said, noting its common interest in stabilising the region and combating the flow of drugs into and across its territory. Mr Frattini said 6 per cent of Iran’s population were opium addicts, the highest rate in the world.

The final conference statement welcomed exchanges of intelligence between countries in the region on narcotics and pointed to possible sharing of such intelligence between Iran and G8 countries.

Mr Frattini said Italian army commanders based in Afghanistan’s northwest region of Herat cooperated with the Iranian military on the border but their intelligence sharing was not structured or organised on a higher level as Italy wished.

Mr Frattini suggested one alternative to growing opium poppies might be resumption of production of an ”excellent Riesling” white wine that had been made there many years before from Afghan vines.