Afghanistan was never supposed to be a simple mission, nor is it turning out to be one. Five years into the West's involvement and less than a year since Nato took over responsibility for running the volatile southern and eastern areas of the country, there are worrying signs of drift, with both the US and Nato voicing concern about the internal security situation. Britain has been forced to increase the size of its force in Helmand province by sending an additional 1400 troops, and commanders on the ground would prefer a larger deployment.

Poppy production is also causing problems. Last year the country's opium production increased by 50%, making it the source of 92% of total global production, and the profits are being channelled into the Taliban to fund their insurgency against president Hamid Karzai's administration. A leaked UN report shows that the opium trade is worth $3 billion to the local economy and that the market is dominated by sophisticated criminal dealers who enjoy the protection of Taliban warlords.

To complicate the issue, neighbouring Pakistan has become part of the equation, with continued claims that the country's security forces have been aiding and abetting the Taliban and failing to crack down on suspected al-Qaeda cells in Quetta and Peshawar.

"Despite the stationing of around 80,000 troops in the tribal areas along the border, Pakistan has neither been able to prevent the al-Qaeda and Taliban fighters crossing the porous borders into Afghanistan nor to prevent the radicalisation of its own tribal belt," claims Harsh V Pant of the department of defence studies at King's College London. "The Taliban have found a particularly hospitable environment in Waziristan and the border areas of neighbouring Baluchistan."

In Washington, the Bush administration has warned that Afghanistan risks becoming a failed state if the deteriorating internal security situation is not taken more seriously by Nato, and last week vice-president Dick Cheney warned president Pervez Musharraf of Pakistan that he had to do much more to stop the flow of Taliban fighters across the border.

There are fears that the Taliban are about to open a fresh offensive against Nato forces and that the insurgency will be difficult to contain as long as the Taliban receive unofficial strategic support from Pakistan. Quetta, the capital of Baluchistan province, has long been suspected of playing host to a Taliban headquarters, and that seemed to be confirmed on Friday when the Pakistani security forces arrested mullah Obaidullah Akhund, the highest ranking Taliban warlord to fall into their hands.

While the arrest has been hailed as a breakthrough, it will not remove the pressure on Musharraf, who stands accused of signing up to the war on terror but continuing to help the Taliban behind the scenes. A leaked British Defence Academy paper has already alleged that Pakistan's Inter-Services Intelligence (ISI) has been lending support to the Taliban, and a recent Pakistani truce agreement with pro-Taliban elements in North Waziristan was met with undisguised fury in Washington. As part of the agreement, Musharraf agreed to end military activity in the area, which is suspected of being a haven for Taliban fighters and other militants.

With elections due later this year or early next year, Musharraf does not have his troubles to seek. In the wake of 9/11 he was given the choice of supporting Washington or being punished as a supporter of terrorism. With little option but to choose the former, he signed up to Bush's war against terror, and from time to time his security forces have delivered important information about terrorist activity. However, the suspicion remains that Musharraf has not done enough, and that what has been done, such as last week's arrest, has been done only as a sop to Washington.

Part of the problem is that Musharraf is being undermined by his own military. Despite all the denials, it is clear that both the army and ISI retain their links with the Taliban, because they view them as the best means of retaining Pakistani influence in Afghanistan. For many years the Taliban were seen as the best bet to stave off Indian influence, which has grown during Karzai's period in office. At the same time there has been an upsurge in anti-US sentiment in Pakistan, matched by a rise in Islamic militancy.

"Yes, we're unhappy about the lack of progress in containing the Taliban, and yes we've got our suspicions about the involvement of the Pakistanis in fomenting trouble in Afghanistan," says a US diplomatic source. "But no, we're not going to push Musharraf too hard, as we know only too well that he has to make compromises to remain in power."

While the north of Afghanistan remains relatively calm, there has been widespread disenchantment with the slow pace of redevelopment in the volatile southern provinces and a growing cynicism about the validity of Karzai's government. The most recent assessment by the CIA paints a bleak picture of a country on the brink of failure, and unable to exist without external military and financial support. While there have been improvements, the rate of reform has been too slow and unfocused. This has led to resentment with the Karzai regime and a growing perception that the Taliban is a valid alternative, hence the increasing number and ferocity of attacks against US and Nato forces.

And, thanks to the profits made out of the drug trade, it is not a problem that attracts easy solutions. Cash from the sale of poppies for drug production means that Taliban warlords can easily recruit fighters who are paid $100 a month, a huge amount of money in Afghanistan. Small wonder that US and Nato forces have evolved an eradication programme, and it is hardly surprising that Taliban fighters are doing all they can to resist it.