NEWS: How Ahmed Chalabi conned the neocons
The hawks who launched the Iraq war believed the deal-making exile when he promised to build a secular democracy with close ties to Israel. Now the Israel deal is dead, he's cozying up to Iran -- and his patrons look like they're on the way out. A Salon exclusive.
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By John Dizard
salon.com
May 4, 2004 / When the definitive history of the current Iraq war is finally written, wealthy exile Ahmed Chalabi will be among those judged most responsible for the Bush administration's decision to invade Iraq and topple Saddam Hussein. More than a decade ago Chalabi teamed up with American neoconservatives to sell the war as the cornerstone of an energetic new policy to bring democracy to the Middle East -- and after 9/11, as the crucial antidote to global terrorism. It was Chalabi who provided crucial intelligence on Iraqi weaponry to justify the invasion, almost all of which turned out to be false, and laid out a rosy scenario about the country's readiness for an American strike against Saddam that led the nation's leaders to predict -- and apparently even believe -- that they would be greeted as liberators. Chalabi also promised his neoconservative patrons that as leader of Iraq he would make peace with Israel, an issue of vital importance to them. A year ago, Chalabi was riding high, after Saddam Hussein fell with even less trouble than expected.
Now his power is slipping away, and some of his old neoconservative allies -- whose own political survival is looking increasingly shaky as the U.S. occupation turns nightmarish -- are beginning to turn on him. The U.S. reversed its policy of excluding former Baathists from the Iraqi army -- a policy devised by Chalabi -- and Marine commanders even empowered former Republican Guard officers to run the pacification of Fallujah. Last week United Nations envoy Lakhdar Brahimi delivered a devastating blow to Chalabi's future leadership hopes, recommending that the Iraqi Governing Council, of which he is finance chair, be accorded no governance role after the June 30 transition to sovereignty. Meanwhile, administration neoconservatives, once united behind Chalabi and the Iraqi National Congress he founded, are now split, as new doubts about his long-stated commitment to a secular Iraqi democracy with ties to Israel, and fears that he is cozying up to his Shiite co-religionists in Iran, begin to emerge. At least one key Pentagon neocon is said to be on his way out, a casualty of the battle over Chalabi and the increasing chaos in Iraq, and others could follow.
"Ahmed Chalabi is a treacherous, spineless turncoat," says L. Marc Zell, a former law partner of Douglas Feith, now the undersecretary of defense for policy, and a former friend and supporter of Chalabi and his aspirations to lead Iraq. "He had one set of friends before he was in power, and now he's got another." While Zell's disaffection with Chalabi has been a long time in the making, his remarks to Salon represent his first public break with the would-be Iraqi leader, and are likely to ripple throughout Washington in the days to come.
Zell, a Jerusalem attorney, continues to be a partner in the firm that Feith left in 2001 to take the Pentagon job. He also helped Ahmed Chalabi's nephew Salem set up a new law office in Baghdad in late 2003. Chalabi met with Zell and other neoconservatives many times from the mid-1990s on in London, Turkey, and the U.S. Zell outlines what Chalabi was promising the neocons before the Iraq war: "He said he would end Iraq's boycott of trade with Israel, and would allow Israeli companies to do business there. He said [the new Iraqi government] would agree to rebuild the pipeline from Mosul [in the northern Iraqi oil fields] to Haifa [the Israeli port, and the location of a major refinery]." But Chalabi, Zell says, has delivered on none of them. The bitter ex-Chalabi backer believes his former friend's moves were a deliberate bait and switch designed to win support for his designs to return to Iraq and run the country.
Chalabi's ties to Iran -- Israel's most dangerous enemy -- have also alarmed both his allies and his enemies in the Bush administration. Those ties were highlighted on Monday, when Newsweek reported that "U.S. officials say that electronic intercepts of discussions between Iranian leaders indicate that Chalabi and his entourage told Iranian contacts about American political plans in Iraq." According to one government source, some of the information he gave Iran "could get people killed." A Chalabi aide denied the allegation. According to Newsweek, the State Department and the CIA -- Chalabi's longtime enemies -- were behind the leak: "the State Department and the CIA are using the intelligence about his Iran ties to persuade the president to cut him loose once and for all."
But the neocons have bigger problems than Chalabi. As the intellectual architects of an "easy" war gone bad, they stand to pay the price. The first to go may be Zell's old partner Douglas Feith. Military sources say Feith will resign his Defense Department post by mid-May. His removal was reportedly a precondition imposed by Ambassador to the U.N. John Negroponte when he agreed to take over from Paul Bremer as the top U.S. official in Iraq. "Feith is on the way out," Iraqi defense minister (and Chalabi nephew) Ali Allawi says confidently, and other sources confirm it. Feith's boss, Undersecretary of Defense Paul Wolfowitz, may follow. Bush political mastermind Karl Rove is said to be determined that Wolfowitz move on before the November election, even if he comes back in a second Bush term. Sources say one of the positions being suggested is the director of Central Intelligence.
In part, the White House political crew is reacting to pressure from the uniformed military, which is becoming a quiet but effective enemy of the neocons. The White House seems to be performing triage to save the political capital of Defense Secretary Donald Rumsfeld and Vice President Dick Cheney, Iraq hawks who have close ties to the neocons. "Rumsfeld and Cheney stay," says an Army officer. "Powell has his guy Negroponte in there. But the neocons are losing power day by day."
Why did the neocons put such enormous faith in Ahmed Chalabi, an exile with a shady past and no standing with Iraqis? One word: Israel. They saw the invasion of Iraq as the precondition for a reorganization of the Middle East that would solve Israel's strategic problems, without the need for an accommodation with either the Palestinians or the existing Arab states. Chalabi assured them that the Iraqi democracy he would build would develop diplomatic and trade ties with Israel, and eschew Arab nationalism.
Now some influential allies believe those assurances were part of an elaborate con, and that Chalabi has betrayed his promises on Israel while cozying up to Iranian Shia leaders. Whether because of intentional deception or a realistic calculation of what the Iraqi people will accept, it's clear that Chalabi won't be delivering on his bright promises to ally a democratic Iraq with Israel. Had the neocons not been deluded by gross ignorance of the Arab world and blinded by wishful thinking, they would have realized that the chances that Chalabi or any other Iraqi leader could deliver on such promises were always remote. In fact, they need have looked no further than the Israeli media: A long piece in Israel's Jerusalem Report magazine published nine days before the war began last year featured Israelis who dismissed Chalabi's promises about Israel as a political ploy, "a means by which to appeal to the Jewish lobby and, in turn, the administration."
"Chalabi has no use for Israel. He knew all along that this was a nonstarter," says Robert Baer, a former CIA field officer who led covert U.S. operations inside Iraq in the mid-1990s aimed at toppling Saddam. "Chalabi knows exactly what Israel stands for in Iraq and in Iran, with or without Saddam. The idea of building the pipeline to Haifa, or rapprochement with Iran ... I'm sure he told [the neocons] these things could happen, that he played to their prejudices and said, 'This is the new Middle East,' but he didn't believe any of it. That's the way Chalabi operates."
"He was willing to ally with anyone to get where he is now, whether it was the neocons, the Israelis or the Iranians," adds Baer. "He wanted back into Iraq and nothing was going to stop him."
It could have been predicted that Chalabi would want to deal with Israel's enemies in Iran. He and his relatives have made that clear. As Iraq's defense minister, Ali Allawi, says, "We have a lot of problems in common with Iran. If we could involve them in a regional security agreement with us, that would be very fruitful." Still, Chalabi's visit to Iran last December and his repeated assertions that peace in Iraq requires peace with Iran first alarmed, then embittered, his old friends.
Chalabi's neoconservative friends, however, seem to have looked away from evidence that the businessman has always allied himself with whomever can help him the most. In the 1980s, Chalabi's scandal-plagued Petra Bank funneled money to Amal, a Shia militia allied with Iran in Lebanon. And according to a former CIA case officer who worked in Iraq, Chalabi had close ties to the Iranian regime when he was in Kurdish Northern Iraq in the mid-1990s trying to foment resistance to Saddam. He even dealt with Saddam himself when the price was right, and initiated a method to finance the dictator's trade with Jordan in the 1980s through his Petra Bank.
Chalabi's Arab admirers say they knew he'd never make good on his promises to ally with Israel. "I was worried that he was going to do business with the Zionists," confesses Moh'd Asad, the managing director of the Amman, Jordan-based International Investment Arabian Group, an industrial and agricultural exporter, who is one of Chalabi's Palestinian friends and business partners. "He told me not to worry, that he just needed the Jews in order to get what he wanted from Washington, and that he would turn on them after that."
Ahmed Chalabi refused to speak to Salon. He has denounced U.N. envoy Brahimi as an "Arab nationalist" and compared the U.S. decision to bring back some former Iraqi soldiers to "allowing Nazis into the German government immediately after World War II." Douglas Feith, Chalabi's longtime ally and sponsor, also declined a request for an interview. Nevertheless, the outline of the new conflict between the Shiite former exile and his erstwhile sponsors is clear, based on interviews with Iraqi officials, U.S. military personnel and intelligence officers, and politically connected Israelis.
The crux of the conflict is Iran, and whether the U.S. should try to make a deal with the Islamic Republic to enlist its support for peace in Iraq. Before and immediately after the war, the neoconservative position was that U.S. empowerment of the long-disenfranchised Shia community would make possible an Iraqi government that would make a "warm peace" with Israel. This in turn would pressure the rest of the Arab world to make a similar peace, without the need to concede land to the Palestinians.
This was, of course, a pipe dream: The Shia community in Iraq, like the Sunni community, is overwhelmingly anti-Israel, and the entire range of its leadership has close ties with Iran. Belatedly realizing that Chalabi's promise to build a secular, pro-Israel Shiite government is not going to come true, in the past couple of months the neocons in the Defense Department have tried to come up with a new plan. Feith, Wolfowitz and others are backing away from the Shia, due to their ties to Iran as well as Chalabi's deceptions. They are trying to cobble together a coalition of rehabilitated Sunni Muslim Iraqi Army officers and Kurdish leaders backed by their militias that would have Shia participation, but in a reduced role. For proponents of this strategy, the front-runner to be prime minister of the next version of the transitional government is Kurdish leader Jalal Talabani, the founder and leader of the Patriotic Union of Kurdistan.
This policy has very little support. It's opposed by those neocons who still back Ahmed Chalabi and his Shia allies -- including influential former Defense Policy Board chair Richard Perle, along with neocon intellectuals Michael Ledeen, Bernard Lewis and Barbara Lerner. Although they like Talabani, they oppose the tilt toward the Sunnis, and some are still adamant that Chalabi play a role. "He's effective in bringing groups of Iraqis together, something he's done for many years," Perle said on CNN on March 28. "He believes in democracy. I have complete confidence in him, and I hope the people of Iraq are wise enough to see his benefits."
The shift in strategy toward Talabani is also being dismissed, for different reasons, by National Security Advisor Condoleezza Rice, Secretary of State Colin Powell, John Negroponte, the new ambassador to Iraq, and the uniformed military. They look at the Iraqi population statistics, which show a Shia majority; a map of the country, which shows a long, hard-to-defend border with Iran; and the U.S. military order of battle, which shows overstretched armed forces, and conclude there cannot be a stable Iraqi government that isn't led by the majority Shia.
Even the Kurds have their doubts about the new rise in their standing with the neocons. Richard Galustian, a British security contractor in Iraq who works closely with the Kurdish authorities, says, "The political elevation of the Kurds within Iraq will be very unpopular with other Iraqis, and will be treated with caution by the Kurdish leaders themselves. Many will be skeptical of the ability of the U.S. administration to sustain and remain consistent in any new relationships." If the Americans can turn on the Shia, the reasoning goes, why couldn't they later turn on the Kurds?
President Bush's ability to impose order on this mess is not obvious, and he doesn't have more than a couple of weeks to figure out a solution. With photographs of U.S. troops torturing and abusing Iraqi prisoners inflaming the Arab world, U.S. casualties soaring, the June 30 date to turn over sovereignty looming and no exit strategy in sight, Bush's Iraq adventure has turned into a deadly mess that seems certain to make the U.S. more at risk from terrorism, not less. Bush brought this trouble on himself by buying into the neocons' interpretation of the dynamics of the Middle East, and into Ahmed Chalabi's plans for Iraq -- maybe most disastrously by buying Chalabi's assurances that a secular government dominated by Israel-friendly Shia was possible. If Bush and the neocons wanted to know about Chalabi's real deal-making nature, the signs were there for them to read. But they didn't want to know.
Chalabi appears to have recognized that the neocons, while ruthless, realistic and effective in bureaucratic politics, were remarkably ignorant about the situation in Iraq, and willing to buy a fantasy of how the country's politics worked. So he sold it to them.
Ahmed Chalabi's family, Shia Muslims from Kut in southern Iraq, has a tradition of working with occupation governments, starting with the regime of the Ottoman Turks in 1638. Chalabi's father, Abdul Haydi Chalabi, was a member of the council of ministers of King Faisal II, whose short-lived Hashemite dynasty was installed by the British in 1921. He was also president of the Iraqi Senate created by the Hashemites.
The Hashemites are Sunni Muslim nobility, originally from a region in today's Saudi Arabia. While they lost their leading position in the Arabian peninsula to the Al Sa'ud family, they were successfully installed as monarchs in both Jordan and Iraq with British support. The Jordanian Hashemites found a base of support in the local Bedouin tribes, and retain power to this day. The Iraqi Hashemite branch, though, was strongly opposed by the local Shia Muslim ayatollahs from the beginning. So in 1922 the Iraqi Shia religious leaders in Najaf issued a fatwa, or decree, forbidding observant Shia from supporting the Hashemites. The Chalabi family wasn't deterred, though. They were among the few Shia to defy the fatwa and support the British-imposed dynasty. They were rewarded with royal patronage, and wound up controlling the flour milling industry in Baghdad and Basra. The fatwa was finally lifted in 1937, and by then the Chalabis had made a fortune.
Ahmed Chalabi was born in 1944. His family reached the peak of its wealth and influence during his childhood. In 1958, though, the Hashemite royals were slaughtered during a military coup d'état, and the Chalabis fled, first to Jordan, then to Britain. Chalabi reportedly still has a British passport.
The highly intelligent Chalabi enrolled at MIT at 16, where he earned a degree in mathematics. He then took a Ph.D. in math at the University of Chicago in 1969. (His thesis was "On the Jacobson Radical of a Group Algebra.") Despite these serious power-geek credentials, Chalabi has always been known as charming, worldly, and a skilled networker. While at Chicago, Chalabi met Albert Wohlstetter, an applied mathematician and one of the founders of the neoconservative movement. Wohlstetter introduced Chalabi to future movement leaders like Richard Perle and Paul Wolfowitz.
After earning his doctorate, Chalabi returned to the Middle East and became a math professor in Beirut. At the time Beirut was the peaceful financial center of the region, and in 1963 Chalabi's family had, along with some local partners, started Mebco, or the Middle East Banking Corp. It was run by Chalabi's brother Jawad. They had also established a Swiss financial company, Socofi, in 1954, as well as a Swiss subsidiary of MEBCO.
As Ahmed Chalabi has told the story, the Jordanian Hashemite crown prince, Hassan bin Talal, persuaded him to start the Petra Bank in Jordan in 1977. Chalabi's associates say the family had given the Jordanian Hashemites some of the assassinated Iraqi Hashemites' overseas assets after the 1958 coup, which no doubt helped smooth the way. The Chalabi family's other banking and financial companies provided further support.
Just after the overthrow of the Shah of Iran, Chalabi seems to have first established his ties with the Iranian Shia theocracy. The new Islamic Republic turned on the shah's former allies in Israel with a vengeance. The Iranian regime set up a substantial intelligence and political apparatus in Lebanon, among the oppressed local Shia.
One of the key Shia institutions in Lebanon was MEBCO in Beirut, which by the 1980s had become a banker for the Shia Amal militia. Amal and Hezbollah were the principal private armies in Lebanon tied to the regime in Iran. Chalabi was placing Petra depositors' money with MEBCO in those years; by the time Petra collapsed in 1989, bank auditors found, the equivalent of $41 million in transactions with MEBCO were on the books. "All the Lebanese banks were divided between political parties and factions," says Hassan Abdul Aziz, a former director at Petra Bank. "MEBCO bank was no different. All the Shia were close to Iran emotionally or otherwise." A former CIA case officer in Lebanon has a less sympathetic view. "This was basically funding a civil war, which meant murders, assassinations, and blowing up Israelis. MEBCO was putting their chips on every square." Iran and the Shite militias were not the only violent elements destabilizing Lebanon in the '70s and '80s, of course. The bloody Israeli invasions of Lebanon, along with later punitive expeditions, inflamed the Shia and other Lebanese.
But Lebanon was not the only venue for the Chalabi family's flexible and innovative approach to international finance. This may come as a surprise to some of Ahmed Chalabi's newer friends, but he helped finance Saddam Hussein's trade with Jordan during the 1980s. Specifically, Chalabi helped organize a special trading account for Iraq at the Jordanian central bank. Due to the problems created by the war with Iran, Saddam Hussein was unable to obtain credit on normal terms. The special account with the Jordanians allowed him to swap oil for necessary imports -- at least Saddam thought they were necessary -- without going through the international credit system. As Hassan Abdul Aziz explains, "Petra was the first to give letters of credit to Iraq, which they did for 23 months before Banco del Lavoro did in 1984. (The Banco del Lavoro scandal involved the provision of U.S. government commodities loans to buy arms for Saddam Hussein.) By 1986 Jordan had $1 billion in annual trade with Iraq this way, and Petra Bank had 50% of the market." It makes the neocons' insistence that Saddam was behind Petra's fall -- and Chalabi's conviction for embezzling and fraud -- even less credible.
After Petra was seized by the Jordanian authorities in August 1989, Chalabi fled Jordan in the trunk of Crown Prince Hassan's car. Chalabi and his family were still wealthy, despite the collapse of their banking empire, but his career in Middle East banking was over. He was now a double exile, from Jordan as well as Iraq, comfortably ensconced in London. Just a year after his fall, though, Saddam Hussein invaded Kuwait. When the subsequent Gulf War weakened but did not topple Saddam, a new possibility beckoned: the return of the Chalabi family to power in Iraq.
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