By Hugh Bronstein

ITAGUI, Colombia, Aug 14 (Reuters) - Colombia's cocaine trade is much bigger than the government says and will continue to grow on stronger European and Asian demand unless a coherent anti-drugs plan is adopted, a jailed warlord said.

Salvatore Mancuso, once feared throughout northern Colombia for his cocaine-financed paramilitary war against leftist rebels, says Colombia is not serious about cracking down on the drug trade that fuels the four-decade-old insurgency.

Vested interests -- from politicians and military officers who collude with drug smugglers, to contractors connected to a multibillion-dollar U.S. anti-narcotics program, to companies that sell chemicals used to process cocaine -- don't want the war to end, he said.

"As long as there is a conflict in Colombia, all this will flourish," Mancuso told Reuters on Monday at a maximum security prison in the mountains outside Medellin. "We have to cut off the guerrillas' oxygen supply and that oxygen supply is cocaine."

The ex-leader of the 2,500-member Northern Bloc militia said he ordered a study that shows Colombia produces 960 tonnes of cocaine a year, more than 50 percent above official estimates, and the trade will remain strong as the U.S. cocaine market holds steady and demand grows fast in Europe and China.

A cattleman who took up arms against guerrillas after they started kidnapping his neighbors in Cordoba province, Mancuso is himself wanted in the United States on drugs charges.

He tearfully turned over his gun in a 2004 demobilization ceremony that was part of a government deal offering him benefits, including reduced jail time.

But that deal has been thrown into question by the Supreme Court, which is insisting on a harder line against paramilitary leaders who, as Mancuso admits, killed innocent people in the name of fighting the guerrillas.

Mancuso said he is trying to persuade the U.S. government to listen to his plan for ending the drug trade in this Andean country, but has had little luck so far.

He said the U.S.-backed program of fumigating coca plants used to make cocaine is haphazard and that sprayed areas are often retaken by the rebels and replanted.

"First we need all-out coca eradication. Second a coherent plan for security and a state presence in these rural areas," Mancuso said. "Then there has to be social and economic development for each community."

This would include construction of roads allowing farmers get their legal crops to market.

Mancuso, stylishly dressed in Lacoste moccasins despite his stark prison surroundings, opened up his laptop to show data he has gathered about all aspects of the cocaine trade and the peasant communities that participate in it.

"I am the only one who has done detailed studies from inside the cocaine business. I could give the best advice in the world," he said.

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