WEDNESDAY, SEPTEMBER 1, 2010 THE WAR IN AFGHANISTAN


Afghan envoy leaving his post in U.S.


BY RAJIV CHANDRASEKARAN After serving as Afghanistan’s


top diplomat in Washington for seven years, Ambassador Said T. Jawad said Tuesday that his gov- ernment has ordered him to va- catehispost inSeptember. Jawad, a dapper and eloquent


advocate for his war-torn nation, has been the subject of what he called a “smear campaign” in Af- ghanistan during the past few weeks. Several Afghan Web sites published photographs that pur- ported to showpeople consuming alcohol and women dancing in sleeveless dresses at an embassy party tocelebrate theMuslimholy monthofRamadan. The images were subsequently


printed by a few Kabul newspa- pers. Their release promptly causedascandal inAfghanistan— wheremixed-sexdancingishighly unusual and where Muslims are forbidden to consume alcohol. Some members of parliament called on PresidentHamid Karzai to fire Jawad. Embassy officials insisted that


there was no Ramadan party and that Jawad was on a trip to South America when the bash is alleged to have occurred. They said the pictures appear to have been tak- enatanAfghanindependenceday party a year ago. In a statement, the embassy called the assertions that the photos were taken at a Ramadan party “slanderous and libelous false accusations.” Karzai’s government did not


immediately provide a reason for Jawad’s removal. A successor has not beennamed. In an interview, Jawad said the


party photos “had nothing to do with” the end of his ambassador- ship. “These things happen in Af-


ghanistan,”he said. “Everything has a beginning


and an end, and I look forward to continuing to serve my country,” he added. Jawad said he was asked to re-


turn to Kabul to work in the For- eign Ministry, but he said he has not decided what he will do. He said he and his family plan to stay intheWashingtonarea—whichis where they lived before the Tali- banwas toppled in 2001—as they work out transitionplans. Jawad had served as an adviser


toKarzaibefore theAfghanleader asked him to return to Washing- ton as ambassador in 2003. Al- though his dismissal was con- veyed by his superiors at the For- eign Ministry, such decisions are typically made with Karzai’s ap- proval. Karzai has made a series of


hasty firings in the past few months.Lastweek,hedismisseda deputy attorney general who had beeninvolvedincorruptioninves- tigations of government officials. In June, Karzai abruptly fired In- terior Minister Hanif Atmar and intelligence chiefAmrullahSaleh. In a farewell e-mail message


Tuesday, Jawad called his tenure as ambassador “amost rewarding experience.” “We secured the generous fi-


nancial and moral support of the private sector, civil society, foun- dations, and universities, to ad- dressournationalpriorities,build human capital and promote in- vestment in Afghanistan,” he wrote. “Our hopes are still high andIamcommittedtocontinuing to contribute to Afghanistan’s fu- ture inmyprivate capacity.” chandrasekaranr@washpost.com


Afghan officials take over big bank to avoid collapse afghan from A1


friends of powerful politicians, is unclear. Some Afghan businessmen


said they consider President Hamid Karzai’s decision to con- front Kabul Bank his first signifi- cant move in the fight against corruption in Afghanistan. U.S. officials have often prodded Karzai to crack down on graft in his government and have com- plained that the Afghan leader has not taken a firm enough stand, and has even intervened to protect suspects who are close to him. Kabul Bank’s chairman, Sherkhan Farnood, a world-class poker player, and its chief execu- tive, a former gem trader, were forced to resignMonday after be- ing threatened with arrest if they did not accept a management purgeorderedbyKarzai, saidpeo- ple familiar with the showdown. The bank — which is partly


owned by Karzai’s brother Mah- moud — has been placed in the hands of the Central Bank’s chief financial officer, who was in- stalled as chief executive. He will dig into the bank’s accounts in search of illegal, off-the-book loans totaling perhaps hundreds of millions of dollars and try to recover assets. Karzai chose to move on Kabul


Bankafterhereceived evidence of the bank’s illicit dealings from Abdul Qadir Fitrat, the Central Bank governor, at a meeting about a month ago.Gen.David H. Petraeus, the topU.S.commander in Afghanistan, attended the meeting, according to Kabul Bank insiders, who spoke on the condition of anonymity and said thatPetraeus urgedKarzai to take action. Two bank shareholders said


Farnood had helped force the hand of Afghan authorities by providing the U.S. Embassy in Kabul with details of irregular lending. This information, they added, prompted Petraeus to press Karzai to clean house. Far- nood denied this. Karzai initially hesitated to act


and, people close to the matter said, ordered a full-scale purge only on Sunday, after a stormy and inconclusive meeting be- tween bank managers and the Central Bank that day. Speaking Tuesday night at his seafront villa in Dubai — which


Central Bank’s intervention


Afghanistan’s Central Bank has purged the senior management of Kabul Bank, the country’s largest private financial institution. It wants to untangle aweb of illegal loans and recover real estate purchased in Dubai with bank money, including lavish villas bought for Afghans connected to President Hamid Karzai.


RESIGNED


Hold property in Dubai funded by


Kabul Bank and/or companies owned by the bank’sfounder


BUSINESS


CONNECTIONS TO KABUL BANK


Percentageof Kabul Bank


ownership held: PERSONAL


CONNECTIONS TO PRESIDENT KARZAI


Sherkhan Farnood


Kabul Bank founder/chairman RESIGNED


Khalilullah Fruzi


Kabul Bank chief executive


His brother controls Kabul Bank’s security force


28%


Helped finance reelection campaign


Replaced by:


Kabul Bank and/or


companies


owned by the bank’sfounder


Central Bank official


Masood Ghazi


Acting chief executive


Mahmoud Karzai


Heads Afghan cement company that bank helped finance


Former financial adviser to reelection campaign


7% Brother


Haseen Fahim


Owns gas and construction companies that received loans from bank


28%3%


Brother of First Vice President Mohammed Fahim


Former first vice president


Ahmad Zia Massoud


KLMNO


EZ SU


A9


ANDREW HIGGINS AND CRISTINA RIVERO/WASHINGTON POST


was paid for by Kabul Bank — Mahmoud Karzai, who owns 7 percent of Kabul Bank, said: “Mybrotherdidaverygoodthing. Now the bank can play by the rules.” He said he will vacate his villa soon and rent accommoda- tions elsewhere. Kabul Bank, he said, should “invest in Afghani- stan, not outside.” Kabul Bank previously had


been shielded by the political clout of its shareholders who, in addition toMahmoud Karzai, in- clude Haseen Fahim, the brother of Vice PresidentMohammed Fa- him. Kabul Bank also contributed to President Karzai’s reelection campaign last year. TheCentralBankhasnot taken ownership of Kabul Bank, but control of its management. The new acting chief executive, Cen- tralBankofficialMasoodGhazi, is expected to be in place for three months until the Central Bank can recruit independent manage- ment. He replaced Khalilullah Fruzi, a onetime gem merchant whose brother controls Kabul


afghan.AAA Topic: foreign


RunDate: 9/1/2010 Size: 47p6 x5.25” Artist: rivero


Bank’s heavily armed security force.


Kabul Bank was once hailed as


a banking pioneer in Afghani- stan, where it introduced ATMs, produced glossy brochures and drummed up business by holding prize drawingsfor depositors.But it then expanded into the airline business, took in politically con- nected figures as shareholders and became an emblem of the cowboy crony capitalism that has helpeddisfigurethecountrysince the U.S.-led rout of the Taliban in late 2001. Murky transactions by Kabul


Bank, first detailed by TheWash- ington Post this year, include large property purchases in Dubai with bank money. The properties include at least 16 mul- timillion-dollar villas on Palm Jumeirah, a luxury development in the Persian Gulf, and two tow- ers under construction. All were registered in thenameofFarnood and his wife. Farnood, the bank’s founder and ousted chairman, initially


balked at stepping down. But, at the meeting at the Central Bank on Monday, he did so after being warned that police would be called, according to people famil- iar with thematter.He agreed to a request from the Central Bank that he transfer the titles to all of his and his wife’s properties in Dubai to Kabul Bank. Several of the Palm Jumeirah


waterfront villas, each with a swimming pool, are occupied by prominent Afghans, including Mahmoud Karzai, who used to runanAfghanrestaurant in Balti- more. The Central Bank had sought


to keep secret its plans for Kabul Bank, fearing that public specula- tion about its solvency could spark a run on the bank, which has branches across the country. “Wedon'twanttomake a panic in the market, so we are handling it very carefully,” said one Central Bank official who spoke on the condition of anonymity. The bank’s future will depend in part on the Dubai property


market, where the price of real estate purchased with cash from the bank has plummeted and cre- ated big losses, at least on paper. Another major source of concern, bankers and officials said, is a hidden web of large loans, many of them to Kabul Bank’s own shareholders. Afghan regulators did not uncover the insider loans, which exceeded legal limits, de- spite extensive assistance from theUnited States. Kabul Bank’s biggest creditor,


bank insiders said, is Haseen Fa- him, a minority shareholder, who borrowed tens of millions of dol- lars to fund various business ven- tures, which in turn won con- tracts at U.S. bases and sites in Afghanistan operated by the CIA. Fahim,whois inGermany with


his ailing brother, the vice presi- dent, said in a telephone inter- view that he took loans totaling $92 million from Kabul Bank.He recently paid back $26.5 million and said his assets, including a Kabul gold market, are worth far more than his bank debts. Fahim described the Central


Bankaction as hastyandsaid that authorities should have allowed shareholders time to return the overseas money. His home in Dubai, he said, is registered in his name and was bought with per- sonal money. “Naturally, this will affect the


market,” he said. Kabul Bank's two biggest shareholders are Farnood, the ex- chairman, and Fruzi, the former chief executive. The two men, both Russian speakers who spent years in Russia and the former Soviet bloc, have in recent weeks been locked in a tumultuous struggle for control of the bank. “As both sides were going at


each other, and then going to external entities, that made the president nervous, that made American investigators nervous and that made the Central Bank nervous,” said a person familiar with the clash. “And that led to this decision.” A senior Afghan official said


OLEG POPOV/REUTERS


AU.S. soldier runs to the scene of a roadside bomb explosion in Kandahar province. One goal of the intervention by Afghanistan’s Central Bank is strengthening a key pillar of the battle against the Taliban. Kabul Bank handles salary payments for Afghan soldiers.


that the Central Bank’s interven- tion took care of the problems at Kabul Bank. “There is nothing to worry about,” he added. partlowj@washpost.com


higginsandrew@washpost.com China pushes six-party talks with North Korea, but others remain skeptical BY CHICO HARLAN


tokyo—China is in the midst of a sales pitch. It is pushing for the resumption of six-party talks, the process concocted seven years ago to end a North Korean nucle- ar program that has not yet end- ed.


This time, Beijing says North


Korean leader Kim Jong Il is onboard. And in recent days, Chi- na has sent its nuclear envoy to South Korea and Japan, touting the six-party idea toWashington’s closest Asian allies. On Wednes- day, he will visitWashington for a meeting at the State Department. According to officials inWash-


ington, Seoul and Tokyo, China has emerged as the driving force pushing to restart the talks, which Beijing sees as the bestway to maintain security and status quo on the Korean Peninsula. China has proposed a three-


step process that calls first for bilateral talks betweenNorth Ko- rea and the United States, per- haps in Beijing, Pyongyang or New York. That would be fol-


lowed by a meeting of nuclear delegation leaders representing the six participating nations: Russia, Japan, South Korea, the United States, China and North Korea. Last, barring provocations from Pyongyang, the six coun- tries would resume full-fledged talks for the first time since 2008. But even as the Obama admin-


istration seeks palatable alterna- tives to its pressure-and-punish- ment stance towardNorthKorea, the six-party process seems, at best, months away. On Wednesday, China’s nucle-


ar representative,Wu Dawei, will discuss the possibility of talks with deputy secretary of state James Steinberg, assistant secre- tary Kurt Campbell, North Korea envoy Stephen Bosworth and six- party talks ambassador Sung Kim. Analysts foresee a scenario where Bosworth soon travels to Beijing, Seoul or Tokyo to push the process farther along. “We want to see North Korea


take irreversible steps to fulfill its denuclearization commitments,” State Department spokesman P.J.


Crowley said. “If we see evidence that North Korea is prepared to move in that direction, then we are open to further engagement.” Although there is no agree-


ment in Washington about the best way to proceed, analysts and experts onU.S. policy describe an overall cynicism about the useful- ness of six-party talks, calling them a playground for Kim to make promises that he subse- quently ignores. With the United States having


announced new sanctions against North Korea on Monday, many analysts and officials now envision a period of strategic pa- tience, in which theUnited States consults closely with SouthKorea and possibly explores a new framework for dealing with the North—an alternative to six-par- ty talks. China attempted to build mo- mentum for talks this week, as Kim traveled by armored train through its northeastern coun- tryside. Analysts and North Ko- rea watchers say Kim’s trip had several purposes, both pragmatic


and symbolic.He sought econom- ic aid from China, his country’s chief benefactor. He wanted to build support for an upcoming power transfer to his son. Just as important, in visiting two Chi- nese landmarks associated with his father, he wanted to reinforce the Kim family narrative, the sacrosanct underpinning of his reclusive nation. But after Kim’s return to


Pyongyang, China emphasized North Korea’s readiness for six- party talks. The official Xinhua News Agency said that Kim, who met with Chinese President Hu Jintao, sought an “early resump- tion” of the talks as a way to ease tensions. He also said, according to New China, that North Korea’s stance toward denuclearization remained unchanged. Notable to U.S. officials, how-


ever, was the rhetoric coming from North Korea: The state-run Korean Central News Agency made note of Kim’s trip but did not mention six-party talks or disarmament. “It’s just stretching incredulity


to think that six-party talks are some panacea where the region’s problems disappear,” said Patrick Cronin, senior director at the Asia-Pacific Security Program at the Center for a New American Security. “This is the same Kim JongIlwhosaid,monthsago, that six-party talks are dead. And now what are we to believe? That Kim Jong Il is very serious this time?” Among North Korean experts,


South Korea is viewed as the six-party nation most reluctant about reengagement. In recent weeks, however, Seoul has sig- naled a modest shift. After an investigation that blamed Pyong- yang for theMarch torpedoing of its Cheonan navy ship, South Korea cut off almost all trade and aid to the North. It also said that an apology for the Cheonan sink- ing was a prerequisite for reen- gagement. SouthKorea’s foreign minister,


Yu Myung-hwan, said last week that theNorth needs to disable its nuclear facilities and permit in- ternational inspections before any engagement. According to


the Yonhap News Agency, citing an unidentified ForeignMinistry official, South Korea has backed away from its demand that an apology is also necessary. And Tuesday, South Korea’s Red Cross pledged $8.4 million worth of aid to the North Korea to help it recover from recent flooding. Japan could also be a hard sell.


On Tuesday, China’sWu met with Japan’s foreign minister, Katsuya Okada in Tokyo. But Okada, ac- cording to Japanese media re- ports, told Wu that talks should not begin until North Korea abandons its nuclear program. In Washington, according to numerous sources familiar with internal discussions,many senior U.S. officials see growing reason for some form of engagement withNorth Korea. “I think the administration’s


feeling right now is, they’re not comfortable with having zero contact with the regime,” said Michael Green, a former Asia specialist at theNational Security Council.


harlanc@washpost.com


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