AFGHANISTAN: Paying Off the Warlords, Anatomy of an Afghan Culture of Corruption

Read the full article: Tomgram: Pratap Chatterjee, Afghanistan as a Patronage Machine

Every morning, dozens of trucks laden with diesel from Turkmenistan
lumber out of the northern Afghan border town of Hairaton on a two-day
trek across the Hindu Kush down to Afghanistan's capital, Kabul. Among
the dozens of businesses dispatching these trucks are two extremely
well connected companies -- Ghazanfar and Zahid Walid -- that helped to
swell the election coffers of President Hamid Karzai as well as the
family business of his running mate, the country's new vice president, warlord Mohammed Qasim Fahim.

Some of the trucks are on their way to two power stations in the
northern part of the capital: a recently refurbished, if inefficient,
plant that has served Kabul for a little more than a quarter of a
century, and a brand new facility scheduled for completion next year
and built with money from the U.S. Agency for International Development
(USAID).

Afghan political analysts observe that Ghazanfar and Zahid Walid are
striking examples of the multimillion-dollar business conglomerates,
financed by American as well as Afghan tax dollars and connected to
powerful political figures, that have, since the fall of the Taliban in
2001, emerged as part of a pervasive culture of corruption here.
Nasrullah Stanikzai, a professor of law and political science at Kabul
University, says of the companies in the pocket of the vice-president:
"Everybody knows who is Ghazanfar. Everybody knows who is Zahid Walid.
The [government elite] directly or indirectly have companies, licenses,
and sign contracts. But corruption is not confined just to the Afghans.
The international community bears a share of this blame."

Indeed, the tale of the "reconstruction" of Kabul's electricity
supply is a classic story of how foreign aid has often served to line
the pockets of both international contractors from the donor countries
and the local political elite. Unfortunately, these aid-financed
projects also generally fail -- as the Kabul diesel plants appear
destined to -- because of a lack of planning and the hard cash to keep
them operating.

The Rise of a Power Broker

Abdul Hasin and his brother, the vice-president, offer a perfect
exemplar of the new business elite. The two men are half-brothers, born
to the two wives of a well-respected religious cleric from the village
of Marz in the Panjshir valley north of Kabul.

In the early 1980s, Fahim, the older brother, joined the mujahedeen
forces of Ahmed Shah Massoud in the struggle against the Soviet
occupation of Afghanistan. In 1992, three years after the Soviet army
withdrew in defeat, Fahim was appointed head of intelligence in
Afghanistan by the new president Burhanuddin Rabbani in the midst of a
fierce and destructive civil war among the victors. When the Taliban
took control of the country a few years later, Fahim became the
intelligence chief for the Northern Alliance, also led by Massoud,
which controlled less than a third of the country. On September 9,
2001, two days before the World Trade Center was attacked, Massoud was
assassinated by al-Qaeda operatives and Fahim took control of the
Northern Alliance, which the U.S. would soon finance and support in its
"invasion" of Afghanistan.

A number of popular accounts of that invasion, such as Bob Woodward's book Bush at War,
suggest that the Central Intelligence Agency directly gave Northern
Alliance warlords like Fahim millions of dollars in cold, hard cash to
help fight the Taliban in the run-up to the U.S. invasion. "I can take
Kabul, I can take Kunduz if you break the [Taliban front] line for me.
My guys are ready," Woodward quotes Fahim telling a CIA agent named Gary after pocketing a million dollars in $100 bills.

Once the Taliban was defeated, Fahim was invited to become vice
president in the transitional government led by Hamid Karzai, a
position he held for two years. It was at this juncture that Fahim's
brothers, notably Abdul Hasin, started to build a business empire --
and not long after, good fortune began to rain down on the family in
the form of lucrative "reconstruction" contracts.

In January 2002, while Fahim took whirlwind tours of Washington and London, meeting General Tommy Franks, who had commanded U.S. forces during the invasion, and taking the salute
from the Coldstream Guards, his younger brother was putting together a
business plan. Soon thereafter, Zahid Walid, a company named after
Abdul Hasin's older sons, not so surprisingly won a series of lucrative
contracts to pour concrete for a NATO base as well as portions of the
U.S. embassy being rebuilt in Kabul and that city's airport, which was
in a state of disrepair.

On a plot of land in downtown Kabul reportedly "seized" for a song
by Fahim, Abdul Hasin also financed the construction of a high-rise
building dubbed "Goldpoint," which now houses dozens of jewelry shops.
Soon, the company was importing Russian gas, and not long after that,
Abdul Hasin set up the Gas Group, a company which ran a plant in the
industrial suburb of Tarakhil that marketed bottled gas to households
and small businesses.

In the winter of 2006, Zahid Walid won a $12 million dollar contract
from the Afghan ministry of energy and water to supply fuel to the old
diesel plant in northwest Kabul, according to data published on the website
of the government's central procurement agency, Afghanistan
Reconstruction and Development Services. In the summer of 2007, the
company won another $40 million diesel-supply contract, and last winter
it took on a third contract worth $22 million.

On October 19th, I visited Zahid Walid's heavily guarded
headquarters in the wealthy Kabul neighborhood of Wazir Akbar Khan, not
far from the even more heavily fortified U.S. embassy. There, Ramin
Seddiqui, the managing director of the company's diesel-import
business, filled me in on another exclusive contract the company had
secured from the Afghan government only days before for an additional
$17 million. Zahid Walid is now to supply diesel fuel to the new 100
megawatt diesel power plant being built by Black & Veatch, a Kansas
construction company, with money from USAID.

Most senior Afghan government officials and political figures are
loath to discuss how Zahid Walid has won all these contracts -- at
least publicly. On a recent visit to the Ministry of Commerce, I asked
Noor Mohammed Wafa, the general director of oil products and liquid
gas, about them. He promptly claimed that he had never even heard of
the company. He then shot a glance at my Afghan assistant and said in
Dari: "That's Marshal Fahim's company, isn't it?" When I asked whether
the rules were different for powerful political figures -- as everyone
in Kabul knows is the case -- Wafa politely denied any suggestion of
favoritism in the awarding of import licenses.

In fact, dozens of people assured me in private on my most recent visit
to Kabul that favoritism and corruption are the essence of the Karzai
government the U.S. has helped "reconstruct" over the last eight years.

A White Elephant Power Plant in Kabul

While Zahid Walid has won close to $100 million in diesel contracts
from the Afghan government in these years, there is hard evidence that
the money for this once-needed fuel is now essentially being
squandered. Earlier this year, KEC, an Indian company, completed the
first of two high voltage power lines from neighboring Central Asian
countries that will bring cheap and reliable electricity into the
capital.

The initial 220 kilovolt power line from Uzbekistan -- a $35 million
project -- follows the same path as Zahid Walid's diesel trucks over
the Hindu Kush. The comparison, however, ends there. True, the Indian
engineers who constructed it had to survive the brutal snows in the
Salang pass, but they are now done. On the other hand, the truckers
continue to take the treacherous daily drive through the tunnel that
connects northern Afghanistan to the south, bringing Turkmen diesel to
Kabul at 22 cents a kilowatt hour. Meanwhile, the Uzbek electricity,
traveling effortlessly through KEC's transmission lines, costs the
Afghan taxpayer a mere six cents a kilowatt hour.

To add insult to injury, much of the diesel is meant for the USAID power plant at Tarakhil that has become a symbol of the sort of massive and widespread
reconstruction waste and abuse that has gone on in this country for
years. The plant, built by Black & Veatch, is now projected to cost
$300 million, three times the price of similar plants in neighboring
Pakistan. In addition, it will only be capable of supplying one-third
of the power the Uzbek power line can deliver far less expensively. Nor
will the Uzbek line be the only source of cheap electricity. KEC's
engineers have broken ground on a second power line -- this one from
Tajikistan -- that will supply 300 megawatts of electricity to Kabul,
three times what the Tarakhil plant will produce at a bargain basement
construction cost of $28 million.

"At full capacity, we burn 600,000 liters a day," Jack Currie, the
Scottish manager of the Tarakhil plant told me as I toured it in late
October. "And just how much will that cost the Afghan taxpayer?" I
asked. "Well," replied Currie, "you can assume a dollar a liter of
diesel." I quickly calculated and arrived at an annual total of $219
million per year, not including the plant's maintenance costs
(estimated at another $60 million a year). Currie looked astonished
when I mentioned the figure.

I took these numbers to Mohammed Khan, a member of the Afghan
parliament and chair of its energy committee. "Will you approve the
funds for this diesel power plant?" I asked. The soft-spoken Khan, a
trained electrical engineer who worked for many years in the Kabul
Electricity Department, answered simply: "No. Not unless we have an
emergency."

So why build a power plant that, in terms of kilowatt hours made
available, costs 26 times as much as the Indian-built power line?
Anwar-ul-Haq Ahadi, Afghan's former finance minister, recalls the
process. The idea, he says, originally came from then-U.S. Ambassador
to Afghanistan Ronald Neumann, who dreamed it up in April 2007 shortly
before he left the country. He apparently envisioned it as a strategic
alternative to the Uzbek power line. After all, at that time the
repressive Uzbek regime had denied Washington the use of what was seen
as a key military base in Central Asia, Karshi-Khanabad, and so
functionally kicked U.S. troops out of the country. Naturally, then, it
was also seen as an unreliable political partner for the U.S.-backed
regime of Hamid Karzai.

Following
up, USAID officials told the Karzai government that they could build a
diesel plant in Kabul in just over two years for $120 million. It
would, the ambassador indicated, be functional just in time for the
2009 elections, allowing Karzai to claim that he had provided power to
the electricity-starved capital. The Afghan president readily agreed to
the plan, instructing anxious officials at the ministry of finance to
approve the scheme in early 2007. He even agreed to put $20 million of
Afghan funds into the project -- after being assured that the U.S.
would pay for the rest.

Over the next two years, while Indian engineers raced the Americans to provide power to Kabul (ultimately winning handily),
the ministry of energy and water was having a hard time keeping the
lights on during Kabul's harsh winters. And while the city waited for
these promised sources of power to come on line, the new
political-business elite, with its specially set up companies like
Zahid Walid, was winning government-issued contracts to supply diesel
to the old Kabul power plant -- and making money hand over fist.

Zahid Walid was hardly the only politically well-connected business
to clean up: Ghazanfar, a company from Mazar-i-Sharif, also won $17
million in diesel-supply contracts in the winter of 2006-2007, and then
an astonishing $78 million in new contracts for 2008-early 2009. Not
surprisingly, Ghazanfar turns out to be run by a family that is very
close to President Karzai. (One sister, Hosn Banu Ghazanfar, is the
women's minister and a brother is a member of parliament.)

In March 2009, the Ghazanfars opened a new bank
in the capital, plastering the city with giant billboard advertisements
featuring a cascade of gold coins. Less than six months later, the bank
wrote out a two million dollar interest-free loan to Karzai for his
election campaign, paying back the favors his government had done for
them over the previous three years.

Afghanistan as a Patronage Machine

This week, Mohammed Qasim Fahim will be sworn in as the next
vice-president of the new government of Afghanistan. Under an agreement
with USAID, this new government is required to spend Afghan money to
buy yet more diesel for the Tarakhil power plant, which in turn will
put money exclusively and directly into the vice president's brother's
pocket.

Hamid Jalil, the aid coordinator for the Ministry of Finance, points
out that wasting money on unnecessary projects like Tarakhil has helped
to hobble Afghanistan's progress in the last eight years. "The donor
projects undermine the legitimacy of the government and do not allow us
to build capacity," he says, adding in the weary tone you often hear in
Kabul today, "corruption is everywhere in post-conflict countries like
ours."

Former Afghan finance minister Ashraf Ghani summed up the whole
profitably corrupt system that has run Afghanistan into a cul-de-sac
this way. "It's not crazy, it's absurd," he says. "Crazy is when you
don't know what you're doing. Absurd is when you don't provide a sense
of ownership and a sense of sustainability."

Pratap Chatterjee is an investigative journalist and senior editor at CorpWatch. He is the author of Halliburton's Army: How A Well-Connected Texas Oil Company Revolutionized the Way America Makes War (Nation Books, 2009) and Iraq, Inc. (Seven Stories Press, 2004).

Dr Ali Safi contributed research and reporting for this article. A
video story by Chatterjee related to this one can be seen at Britain's Channel 4 News

[Note: The cartoon illustration in this piece, which can be
enlarged with the click of a mouse, comes from Josh Brown's ongoing
weekly series "Life During Wartime."]

• 21 Reconstruction
• 106 Money & Politics
• 116 Human Rights
• 187 Privatization