Global Policy Forum

By Patrick Cockburn

King Abdullah of Jordan has agreed to pardon Ahmed Chalabi, the controversial Iraqi political leader, who was sentenced to 22 years in prison for fraud after his bank collapsed with $300m (£160m) in missing deposits in 1989. Jalal Talabani, the Iraqi President, asked the king to resolve the differences between Jordan and Mr Chalabi, now Deputy Prime Minister of Iraq, during a visit to Ammanthis week.

Latif Rashid, the Iraqi minister of water resources, said Mr Talabani confirmed to him that King Abdullah had promised, in effect, to quash the conviction. He expected there would first be a meeting between Jordanian officials and Mr Chalabi "who has some questions of his own." The expected pardon, is the latest twist in the extraordinary career of Mr Chalabi, now again in the ascendant as an important member of the Shia coalition and the new Iraqi government. Only a year ago US soldiers raided his house in Baghdad, put a gun to his head, arrested two of his supporters and seized papers. He was accused of passing intelligence information to Iran.

Previously an ally of the neoconservatives and of the civilians in the Pentagon whom he managed to convince of the need to topple Saddam Hussein, Mr Chalabi sought new friends. He cultivated Muqtada al-Sadr, the Shia clergyman whose militia the US Army was trying to destroy. He became a leader of one of the main factions in the United Iraqi Alliance, the Shia coalition which triumphed in the election on 30 January.

Again Mr Chalabi has escaped not only political annihilation, but has emerged from a crisis with his power enhanced. He was born into one of the wealthiest families in Iraq, adept under the monarchy at turning political influence into economic gain and vice versa. When the monarchy fell in 1958 the Chalabis moved to Lebanon where they married into important Shia families. Even as a child Mr Chalabi was ambitious. A cousin recalled that when he was at school he would throw a tantrum if he got nine marks in a test and someone else got 10.

In 1970, he graduated from Massachusetts Institute of Technology and collected a PhD in mathematics from the University of Chicago at the age of 22. In 1977, he moved to Jordan and set up the Petra Bank and in a decade made it the second biggest bank in the country. It was linked with family banks and investment companies in Beirut, Geneva and Washington.

In 1989, Petra was taken over by the Jordanian banking authorities after all Jordanian banks were told to deposit 30 per cent of their foreign exchange in the central bank. Petra could not come up with the money. Mr Chalabi hurriedly left the country - in the boot of a friend's car according to one report. In April 1992, he was sentenced in absentia by a military court to 22 years in prison. An audit by Arthur Andersen showed that Petra, far from having a net balance of $40m had a deficit of at least $215m. The military prosecutors said that $72m listed as assets were in fact fictitious accounts. Other sums had allegedly been diverted into private accounts or had disappeared in bad loans to other Chalabi companies.

Unbowed, Mr Chalabi switched to politics. He headed the CIA-funded Iraqi National Congress, an umbrella group for opponents of Saddam Hussein. He tried to foment a coup against Saddam from Kurdistan in 1995. When this failed, and after quarrelling with the CIA, he moved to Washington and courted the neo-conservatives and the Republican right to persuade them to seek the overthrow of Saddam. In the wake of 9/11 he got his wish.

How Chalabi rose, fell, and rose again

• 1977: Chalabi sets up second biggest bank in Jordan, Petra Bank.
• 1989: Petra collapses and Chalabi is accused of multimillion-pound fraud.
• 1992: Chalabi is convicted of embezzlement and sentenced in absentia to 22 years. He flees Jordan and sets up Iraqi National Congress (INC).
• 1995: INC offensive against Saddam Hussein's troops fails.
• 1996: Chalabi forced to flee Iraq after Saddam's army overruns INC base.
• 2003: Chalabi, backed by the Pentagon, returns to Iraq during invasion to consolidate political base.
• August 2004: An arrest warrant is issued on charges of counterfeiting.
• September 2004: Charges are dropped for lack of evidence.
• January 2005: Chalabi's party, the United Iraqi Alliance, sweeps to victory in Iraqi elections.
• April 2005: Chalabi is appointed the deputy prime minister of the Iraqi government.