From Ally to Outcast in U.S. Eyes

The raid on Ahmad Chalabi’s Baghdad home offered proof Thursday of collapsing U.S. support for the former exile once viewed by Bush administration officials as their greatest hope to lead a new Iraq.

Over 15 years, the American-trained financier convinced Washington that he was a sophisticated Shiite Muslim who could Westernize a country in the heart of the Arab world and foster reform throughout the troubled region.

Yet in recent months, Chalabi’s support from the Bush administration tumbled as he increasingly challenged U.S. policy to improve his standing with Iraqis.

Though some U.S. officials denied that they were behind the raid, White House officials acknowledged privately that they had known such an action was coming, and they expressed dissatisfaction with their erstwhile ally.

“I don’t think anyone in the White House was taken by surprise,” one official said. “Chalabi, in terms of people’s esteem for him here, has been losing altitude for several months. His actions and past comments have raised serious questions as to what kind of associations we as a government wish to have with him.”

Although Chalabi, a member of the Iraqi Governing Council, may still find himself in an important role in Iraq, his split with U.S. authorities invalidated one of the administration’s assumptions about the war. They had bet on the wrong man.

Chalabi was one of the primary advocates for the war, and he was well positioned to argue the case as head of an umbrella exile group called the Iraqi National Congress, which he helped organize in the aftermath of the 1991 Persian Gulf War.

Chalabi, whose father once headed the Iraqi Senate, was educated at the Massachusetts Institute of Technology and fled to Jordan with his family after a coup in Baghdad in 1958.

As head of the INC during the 1990s, he cultivated the support of influential members of Congress and leading neoconservatives. The most dramatic sign of U.S. confidence in Chalabi came on April 6, 2003, when U.S. forces airlifted him and about 500 INC fighters from northern Iraq to the southern city of Nasiriya, to help stabilize the country as American forces prepared to seize Baghdad.

As recently as March, one U.S. official marveled at Chalabi’s skills in making the Americans think he was their most important contact with the Iraqis, and making the Iraqis think they needed him to get what they wanted from the Americans.

“I figure, he’s not going to end up with less than the No. 2 or No. 3 position in the new government,” the official said at the time.

Yet Chalabi has long been a controversial figure among U.S. government officials.

CIA officials supported him during the 1990s, when he tried to build a small army in northern Iraq. But they distanced themselves from him after he launched a coup against President Saddam Hussein in 1995 that failed catastrophically, leading to the arrest of 200 Iraqi military officers and the execution of 80.

State Department officials were suspicious of Chalabi’s handling of U.S. funds, which at one point were cut off. Some U.S. officials privately scorned the fine clothes that Chalabi wore and the life of luxury he led as an exile in London during the 1990s.

The INC has received $27 million from the U.S. government over the last four years, the group’s officials have said.

Chalabi was implicated in the failure of the Petra Bank of Jordan, which he headed until its bankruptcy in 1989. He was convicted in absentia of embezzling $70 million from the bank and sentenced to 22 years in prison. The financier, however, has argued that the conviction came about because of pressure on Jordan from Hussein.

Doubts about Chalabi increased after the war. Several defectors sent by Chalabi convinced Western intelligence agencies that they had evidence that Hussein was producing weapons of mass destruction. Since then, the defectors’ information has been found to be misleading, inaccurate or fabricated.

But that has been only one source of friction.

U.S. officials have been irritated at the adversarial role he has played within the U.S.-picked Iraqi Governing Council. He has openly clashed with L. Paul Bremer III, the U.S. administrator in Iraq, and pushed for the new Iraqi government to have more power, including over security forces and oil revenues.

He has been in the middle of an increasingly bitter fight with the U.S.-led Coalition Provisional Authority over the investigation of the United Nations’ “oil-for-food” program. U.S. officials are unhappy that he has been unwilling to turn over documents scooped up after the war that bear on the investigation.

Some U.S. officials complain that Chalabi has been parceling out the documents in small numbers each month to justify the $340,000 in U.S. aid to the INC. U.S. officials announced this week that the money was being halted because Iraq was about to regain its sovereignty.

Chalabi and U.S. officials have clashed over the coalition authority’s decision to ease up on a program, overseen by Chalabi, that has sought to keep members of Hussein’s Baath Party out of government.

Chalabi has said that allowing former Baathists into the government was “like allowing Nazis into the German government after World War II.”

His readiness to criticize the United States may stem in part, U.S. officials say, from a desire to separate himself from the occupying power, in hopes of building a base of popular support he has never had. Polls show that the INC has only single-digit support among Iraqis, and many have long been suspicious of him.

The U.S. official said the administration had lost patience with Chalabi over a combination of issues.

“Even though he was at the center of the decision-making on de-Baathification, he suddenly turned on us. So there’s a little bit of ‘whiplash’ when it comes to Mr. Chalabi,” a State Department official said.

One Western diplomat said he believed that the administration “has recognized that Chalabi has become much more part of the problem than he was a part of the solution.”

Even the Pentagon, the envoy said, “knew he had become tainted goods.”

Chalabi is not expected to be named as part of the new caretaker government in Iraq, because his selection probably would be opposed by the United Nations, many European allies and neighboring Arab countries.

Nevertheless, Iraqi and U.S. officials acknowledge that, even with fading U.S. support, Chalabi is well positioned to continue to be highly influential in Iraq.

He has wide commercial ties, influence over the country’s banking network, control over the de-Baathification program, and key allies and relatives in important places. One nephew is defense minister; another heads the Iraqi tribunal that will try Hussein and members of his former regime.

Even though Chalabi has lost support in many places, there were strong expressions of support and outrage Thursday after the raid on his home.

“This is a campaign of intimidation against people that the U.N. or the CPA or both think are interfering with their nicely laid plans,” said Danielle Pletka of the American Enterprise Institute, which has strongly supported Chalabi. “This is an act that’s more appropriate to Saddam’s Iraq than the new one.”

Patrick Clawson, deputy director of the Washington Institute for Near East Policy, said the raid was a blunder, coming at a time when the coalition authority should be seeking accommodation with people who disagree.

“You should try to court Iraqis who don’t agree with you, not humiliate them,” he said.

One Iraqi official close to the Governing Council suggested that Chalabi is so smart that he sometimes outsmarts himself playing “one hand he doesn’t have.”

Nevertheless, the official predicted that “Ahmad Chalabi will be around in 10 years’ time. He will not go away. And he has the ability to make trouble for the Americans.”

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Times staff writers Bob Drogin, Richard B. Schmitt and Doyle McManus contributed to this report.