Karachi affair

The Karachi affair (affaire Karachi; آگسٹا آبدوز اسکینڈل), otherwise known as Agosta Submarine scandal, was a major military scandal that took place in the second term of the Prime Minister Benazir Bhutto, involving the presidencies of François Mitterrand and Jacques Chirac in 1992–97.

The scandal is commonly related to the massive commissions and kickbacks paid by France and Pakistan to the parties involved when it agreed to sell and transfer the technology of its emerging AIP-based Agosta 90B class submarines' propriety designs to Pakistan.

In 1992, the Benazir administration began its negotiation with French President François Mitterrand over the procurement of expensive and complex Agosta 90B submarine designs, eventually signing the contract in 1994 for a sum equivalent to €826 million (£684m, $996m). Negotiations and the decision for defence procurement with France was extremely controversial with the United Kingdom later intervening in the matter between two states, also offering its six Upholder/Victoria-class submarines, which already were serving in the Royal Navy.

When the United Kingdom intervened in the matter, the Navy NHQ wanted to procured the six British manufactured Upholder submarines, the diesel-electric submarine which were the readily available, for a lesser while the Agosta's were yet to be manufactured being prototypes and would have taken years to be delivered. Nonetheless, the Benazir administration selected the Agosta, taking the advantage over the lucrative and generous financial credits provided by France.

Commissions of 6.25% of the contract, approximately €50 million, were paid out. Some €50m were allegedly paid as "sweeteners" to various senior Pakistan Navy admirals and officers as well as the political leaders. In 1996–97, the Naval Intelligence led by its Director-General, Rear-Admiral Tanvir Ahmed, secretly launched its investigations into this matter and began collecting physical evidences that eventually led to the exposure of Chief of Naval Staff, Admiral Mansurul Haq, in receiving massive monetary commissions in 1997. Massive media coverage and news of dismissals of one and two-star admirals in the Navy tarnished the image of the Navy, as Adm. Fasih Bokhari, who took over the command of Navy from Adm. Haq, worked towards the damage control of the situation.

In 1990s, it was legal in France to award monetary commissions and kickbacks to the political lobbyists involved in the bilateral deals until France began partied and ratified the OECD Convention that led to the outlawing the practice of awarding monetary commissions in 2000.

Since its exposure in the news media of both France and Pakistan, the scandal has been involved in various investigative journalism and attracted sensations and conspiracy theories in both countries, including this scandal's allegement of financing the political campaign of then-Prime Minister Edouard Balladur in the presidential elections took place in 1995. Upon electing President Jacques Chirac cancelled the commissions and kickbacks, angering many officials in Pakistan and France. Other theories and subsequent investigative journalist reports alleged that the bus bombing on 8 May 2002 in Karachi that killed eleven French engineers in Karachi was in retaliation for the cancellation of these commissions. This theory was rejected by the Government of Pakistan when the FIA and the CID made potential discovery in linking the HuM and the al-Qaeda had carried out the terrorist attack in Karachi, mistaking the French nationals for the Americans.

Negotiations and Procurements
Plans to replace the aging diesel-electric submarines to nuclear submarine was aggressively pursued by then-Chairman joint chiefs Admiral I.A. Sirohey to counter the Indian Navy in 1990s.

In 1990, Pakistan entered in negotiation with Sweden, China, and France over the procurement and acquisition of the submarines with air-independent propulsion as a substitute to nuclear power submarine. The Sweden offered their Gotland with an AIP technology, while China offered the diesel-electric, Type 35, submarines at a price tag of $US 180 million, which was $US 83 million cheaper than the French submarines. The Chinese offer was rejected partly due to Navy exploring the idea of procuring and attempting to acquire the AIP technology, despite the fact that the Chinese submarines would have acquired in larger number. Due to the expensive procurement of the Gotland and outdated Type 035 , the Navy abandoned their talks with Swedish and Chinese governments, consequently having the government talk with France.

Eventually, Pakistan entered in negotiation with France over the procurement of the Agosta-90B submarines after the DCNS prepared and gave presentation of the prototypes of Agosta 90B in 1992. Personal initiatives and interests between Chief of Naval Staff Admiral S.M. Khan and British First Sea Lord Julian Oswald who helped him closed a deal with the British government, the Navy procured the entire fleet of Type 21 frigates to Pakistan.

Upon hearing the submarine procurement, the Royal Navy subsequently offered their six Upholder/Victoria-class diesel-electric submarine to Pakistan Navy, which was favored by Chief of Naval Staff Admiral S.M. Khan who began lobbying for the British submarines over the French submarines.

The United Kingdom formally entered in the competition with France in 1993–94, offering their six British manufactured Upholder class, the diesel-electric submarines which were the readily available, for a much lesser price. Although, Adm. S.M. Khan made efforts to procured the British submarines, his Vice Chief of Naval Staff Vice-Admiral A. U. Khan had provided strong lobbying in the government of procuring the technology and proprietary designs of Agosta submarines designs from France rather than procuring the readily available submarines. Besides vice naval chief, Vice-Admiral A.U. Khan, then-Rear-Admiral Fasih Bokhari, DCNS (Supply), had also favor the Agosta over the Upholder.

When the retirement of Adm. S.M. Khan was confirmed in 1994, Aftab Shaban Mirani, the Defence Minister in Bainazir government, had confided the later that the final decision had been reached for preference for the induction of the French technology over the British second-hand use submarines.

Intermediaries, commissions, and kickbacks
In 1993, the Bainazir government had been mulling towards acquiring and commissioning six diesel-electric Upholder-class submarines from the United Kingdom, which were made available after acquiring the Amazon-class frigates as Tariq class in the Pakistan Navy.

With CNS Admiral S.M. Khan lobbying for such submarines were available at much lesser price and were being acquired in greater numbers as opposed to French' offer, others, including Vice Chief of Naval Staff (VCNS) V.Adm. A.U. Khan and his DCNS (Supply) R.Adm. Fasih Bokhari who were the submariners by profession and trained in the French built Hangor submarines, were focusing and enjoying towards the idea of exploring the air-independent propulsion technology that French had been offering.

Nonetheless, the Navy NHQ recommended to the Finance ministry and the ministry of defence production to acquire the Upholder submarines which were the readily available, for a lesser while the Agosta's were yet to be manufactured being prototypes and would have taken years to be delivered.

Upon hearing the news of Great Britain entering in the competition and closing the defence deals in regards to the submarine procurement, the French government then offered extremely lucrative monetary offers and generous financial credits to the Pakistan government in its annual federal budgets over the Agosta submarine, which was taken as granted as the Bainazir government took the advantage of keeping the "under-employed KESW in Karachi" in employment and works.

Despite the strong political opposition by India over this deal in 1994, French President and Prime Minister Benazir Bhutto signed off a submarine procurement deal that was initially aimed at $520 million but the programme of technology transfer costed $950 million, for which France first provided loans that were paid in five to six years.

In 1990s, it was a common practice in France to pay commissions and kickbacks to foreign public officials which was aimted at intending to "convince" political leaders and military officials, but such practices were declared illegal in France until the signing of the OECD Convention against Corruption in 2000. The French government agency, Société française d’exportation de matériel militaire et aéronautique (SOFMA), channelled money to political and military officials through front companies in Pakistan and France. The names of the recipients are secret but the amounts are known and were reported to the French Ministry of Finance and Pakistan Ministry of Finance in 2000 as these commissions are 6.25% of the contract amount. The French Libération newspaper revealed that payments of SOFMA continued until 2001, when they were stopped by former French President Jacques Chirac.

Karachi attack on May 8, 2002
On May 8, 2002, a man driving an explosive-laden car stopped next to a bus in Karachi outside the Sheraton Hotel. A terrorist detonated the car, ripping the bus apart, and killing himself, eleven Frenchmen, and two Pakistanis. The eleven Frenchmen were engineers working with Pakistan to assemble Agosta 90B class submarine for the Pakistani Navy. About 40 others were wounded.

Al-Qaeda was blamed for the attack. On September 18, 2002, a man named Sharib Zubair, who was believed to have masterminded the attack, was arrested. In 2003, two men were sentenced to death for the bombing by Sindh High Court. The suspected bombmaker, Mufti Mohammad Sabir, was arrested in Karachi on September 8, 2005. There were several convictions in the case, though Pakistani courts had acquitted three defendants by 2009.

According to Libération newspaper, the links between the attack and the activities of the DCN were raised by it and by United States investigators in 2002. Claude Thévenet, the former senior official of Direction de la surveillance du territoire, was recruited by the DCN to investigate the circumstances of the attack. His report "Nautilus", dated 11 September 2002, concludes that it was related to the discontinuation of payment of commissions. This report, although intended as confidential, was seized by the judges in the spring of 2008, in connection with another case, and forwarded to Judge Marc Trévidic. Another paper, written by Gérard Philippe Menayas (former CFO of DCNI) gave the same version of events.

Mansurul Haq
Mansurul Haq is a former admiral and now disposed Chief of Naval Staff of Pakistan Navy. Mansurul Haq was retired in 1997 by the former Prime Minister of Pakistan Nawaz Sharif government. He was then arrested on charges of corruption related to Agosta submarine commissions in 2001, but later negotiated a plea bargain and was released. Mansurul Haq was found to have received €33 million while the arms dealer, Amir Lodhi, share was €2.9 million. Amir Lodhi, the brother of a former Pakistani ambassador Maliha Lodhi to the United States, is a close friend of Asif Ali Zardari, who became President of Pakistan in 2008 one year after the assassination of his wife, former Prime Minister of Pakistan Benazir Bhutto.

Edouard Balladur
Ziad Takieddine, a Lebanese and French citizen, received commission and then paid off officials in Pakistan and France. According to French judicial inquiry, part of the commission was used to finance presidential campaign of Edouard Balladur. On April 26, 1995 10,250,000 francs were donated to campaign account at the Crédit du Nord of former Prime Minister Edouard Balladur three days after the first round of presidential elections.

Former culture minister of France, Renaud Donnedieu de Vabres was detained for questioning about the kickbacks on Agosta 90B diesel attack submarines (SSKs) deal which may have funded the Edouard Balladur's failed 1995 presidential campaign.

Nicolas Sarkozy
Nicolas Sarkozy, then budget minister, was also Edouard Balladur's campaign spokesman. Both have denied any involvement in Karachi Affair. On 3 July 2012, French police raided Nicolas Sarkozy residence and office as part of their probe into claims that he was involved in illegal political campaign financing. The allegations are related to the Pakistan Agosta submarine commissions used in political campaigns.