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Sunday, Nov 22, 2009
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.
