Any old iron will do as smugglers hit hard times

Drugs and guns replaced by scrap as the trafficking trade hits hard times

"Look at these beautiful new villas up on the hillside," said our guide, a hardened northern Albanian peasant called Toma. "Not so long ago we made a good living around here."

The living in question was sanctions-busting, the illegal transport of petrol over the border to Montenegro during the wars in the former Yugoslavia. Not to mention a little gun-running to Kosovo, drugs trans-shipment to Europe and any number of rackets in stolen consumer goods from western Europe.

With the country in a state of protracted chaos following this spring's anti-government uprisings, smuggling in Albania has become a more uncertain, less democratic, business. The major rackets in drugs and arms are continuing, but without the mass involvement of ordinary Albanians. The Shkoder region - an impoverished area largely populated by agricultural smallholders - depends on illegal traffic for a living. But these days the mega-bucks of oil smuggling have given way to the pathetic trade in scrap metal. Every day, up to 150 lorries - weighed down with rusting pieces of old cars and obsolete industrial machinery - trundle their way to an officially non-existent border crossing between the sea and Lake Shkoder and make the tortuous six-hour journey to the Montenegrin state-owned foundry in Niksic.

It's a thankless, if efficiently organised, business. One Montenegrin middleman monitors the border, handing out "certificates" guaranteeing the lorries safe passage. In Niksic, another middleman takes delivery of the scrap, weighing it and promising payment within seven days or so.

Everyone is paid off, from the Albanian policemen monitoring the bridge across the Buna river leading to the border crossing, to the Montenegrin officials involved at every step of the process. The foundry pays a private import-export company for the scrap in Yugoslav dinars, and the company then passes on the proceeds in German marks - minus a considerable cut for itself - to the truck drivers.

In theory, it is a traffic that makes everyone happy: the Montenegrins because they can buy scrap at a fraction of the market price, and the truck drivers because they can feed their families. In reality, though, it is not much of a trade at all, since the truck drivers earn no more than pounds 100 per consignment (a fraction of what was earned at the height of the oil bonanza) and the Montenegrins are forever playing games by witholding payment or creating problems at the border. A unit of the Yugoslav army special forces stationed a few hundred yards away from the crossing is forever preventing the truck drivers from returning home, occasionally arresting individuals and - according to Montenegrin police sources - beating them up.

In the past couple of weeks the Albanian authorities, no doubt made nervous by the presence of international troops monitoring their activities, have imposed obstacles of their own, turning back trucks coming up to the border from central or southern Albania. Smuggled scrap metal nevertheless remains the main source of export revenue for Albania, according to the prosecutor's office in the capital, Tirana, and offers a telling insight into the sheer misery into which the Albanian economy has been plunged.

Not only has the productive economy ground to a halt, but government revenues have dried up because the state no longer controls key customs points and is unable to collect taxes. Inflation is galloping towards 100 per cent a year, and the lek is plummeting in value against the dollar. All consumer goods are effectively smuggled into the country, particularly in the southern port of Saranda, where the rebels who took over the lower half of Albania in February and March are in complete control.

The rebels have also developed sophisticated racketeering operations, notably in the high-quality marijuana grown in the flatlands of the south. Italian prosecutors say their police are seizing several hundred kilos of the drug every day - a fraction of the true amount believed to be flooding Italy and the rest of western Europe.

Until the multinational force arrived, most of the marijuana was going out from the port of Vlora, but regular patrols by Italian navy corvettes have encouraged the smugglers to divert the traffic elsewhere. In Lexha, halfway between Tirana and Shkoder, one petrol station attendant said business was booming like never before, because the town was now being used as a transit point for marijuana and the beneficiaries had all bought themselves gas-guzzling Mercedes.

Hard drugs, particularly heroin, are still passing through Albania from Turkey and the eastern Balkans, but are now being transported over land rather than by sea, according to Italy's chief anti-Mafia prosecutor, Pier Luigi Vigna. All of Albania's neighbours are afraid of an influx of arms, now that Albanian households are brimming with Kalashnikovs and submachine guns. But so far there seems to be no organised weapons smuggling operation.

Among ordinary Albanians, impoverished by the collapse of so-called pyramid investment schemes, a kind of smuggling frenzy appears to have set in, with all attempts to earn a living being attempted, no matter how absurd. At a deserted army base on the road to Shkoder, a group of smugglers were recently seen pulling an abandoned tank to pieces and loading the metal pieces on to a truck for sale across the border. In various seaside towns in the south, owners of fast powerboats play nightly games of cat and mouse with the Italian coastguard, knowing that their vessels travel faster.

The most wondrous story, however, comes from the border with Macedonia, where a group of Albanians determined to make a fast buck decided to bypass normal frontier controls by driving a stolen Mercedes along a mountain track and then physically carrying it over a pass for sale on the other side. After much grunting and heaving, they were finally caught, dazed and exhausted, by an incredulous Macedonian police patrol. The fate of the Mercedes was not recorded in the official report.