WORLD

A cloud of suspicion

Did BCCI bankroll an Islamic Bomb?

MARCI McDONALD August 19 1991
WORLD

A cloud of suspicion

Did BCCI bankroll an Islamic Bomb?

MARCI McDONALD August 19 1991

A cloud of suspicion

WORLD

PAKISTAN

Did BCCI bankroll an Islamic Bomb?

At an immigration control booth in Frankfurt’s bustling airport, an officer was running a routine check on the passport that a Pakistani businessman had just handed him when its number triggered a warning alert. And after months of intelligence tracking around the world, the German Border Patrol moved in swiftly to end a four-year international manhunt. With the arrest of 62year-old retired brigadier-general Inam ul-Haq on July 11, Washington’s justice department promptly launched extradition proceedings against a figure whom Philadelphia prosecutor Amy Kurland called a “driving force” behind Pakistan’s attempts to procure embargoed American materials for its clandestine efforts to build an atomic bomb. Not only may his trial shed crucial light on the shadowy global networks by which a growing list of Third World countries have secretly acquired nuclear weapons, but an updated indictment against him in a Philadelphia Federal Court last week has also raised new questions about whether the collapsed Bank of Credit and Commerce International (BCCI), charged with a massive $23-billion fraud in New York City last month, played a key role in funding a so-called Islamic Bomb.

According to court documents obtained by Maclean ’s and NBC News, the Canadian head office of BCCI at the comer of Toronto’s King

and Yonge streets issued a $447,450 letter of credit to a suburban Willowdale businessman, Pakistani-born Arshad Pervez, who was convicted in December, 1987, by a Philadelphia court of conspiring with Inam to export restricted metals to Karachi for nuclear use. Last week, Ohio Senator John Glenn asked justice officials to investigate whether the bank and its Persian Gulf shareholders may have helped finance Pakistan’s atomic arms race. Said Glenn: “For years, there has been speculation that the Pakistani program was being bankrolled by persons in the Middle East.”

Inam’s arrest comes amid renewed fears about the perils of A-bomb technology landing in the hands of possible Third World nuclear outlaws. Only a month ago, President George Bush threatened to launch another U.S. bombing strike against Iraq for its repeated attempts to conceal technology for uranium enrichment, required for nuclear weapons, from United Nations inspectors. Said Jacqueline Smith, assistant director of the Nuclear Non-Proliferation Project at Washington’s Carnegie Endowment: “Iraq showed people what an important issue this was—and how scary.”

The case also highlights recent intelligence reports that Pakistan has stepped up its nuclear program in the wake of a sharp cutback in U.S. aid last October—a cutback that was paradoxi-

cally triggered by signs of renewed bombbuilding activity. At the time, Bush failed to respond to a congressional amendment that required that, before Pakistan received its aid package, the President would have to certify that the country was not creating nuclear weapons. For most of the past decade, Bush’s predecessor, Ronald Reagan, had overridden that congressional requirement in order to pacify a nation through which the CIA was funnelling assistance to rebels fighting Soviet troops in Afghanistan. But since the Soviet withdrawal in 1989, Pakistanis have been stunned to discover that the Americans no longer consider them key strategic allies.

Pakistan began its quest for an Islamic Bomb after its Hindu archenemy, India, exploded a so-called peaceful nuclear device in 1974. At the time, then-Prime Minister Zulfikar Ali Bhutto vowed that his poverty-ridden citizens would “eat grass,” if necessary, in order to acquire their own atomic threat.

Since then, intelligence reports chronicle how a vast network of Pakistani expatriates has worked around the world, filling a shopping list of raw materials and arcane technology that, piece by piece, has enabled the country to produce weapons-grade uranium at a heavily guarded plant at Kahuta, near Islamabad. Presiding over Kahuta is a reclusive Pakistani metallurgist named Abdul Qadeer Khan, who has been hailed as a national folk hero. In a 1984 issue of the country’s Defense Journal, he confirmed his success in enriching uranium with ultra-high-speed gas centrifuges, musing that “such an achievement by our team in a country where ... we cannot make a good bicycle, or even a grinding machine, speaks [for] itself.”

Khan was a close associate of then-President Mohammed Zia ul-Haq, who repeatedly denied that his country had a nuclear arms pro-

gram. But although intelligence sources have gathered incontrovertible evidence of the project, its financing has remained a mystery. In 1981, in a book entitled The Islamic Bomb, authors Steve Weissman and Herbert Krosney claimed that much of the funding had come from Libyan leader Col. Moammar Gadhafi and Saudi Arabian sources, both of which were determined to build a Moslem weapon to counter Israel’s nuclear arms program. A congressional aide, on condition of anonymity, told Maclean’s that those claims are consistent with new links indicating the involvement of BCCI, whose founder and chairman, Pakistani Agha Hasan Abedi, was also a close friend of Zia’s. One of the bank’s original shareholders was Abu Dhabi’s ruler, Sheik Zayed bin Sultan al-Nahayan, who is a business partner of Gadhafi’s in the Bahrain-based Arab Banking Corp. Another is Kamal Adham, the former head of Saudi intelligence.

Last month, the British daily newspaper The Guardian added a new twist in an article accusing BCCI of running a covert worldwide network to “fund a joint effort by Argentina, Libya and Pakistan to acquire nuclear Afghan rebels

weapons.” According to -

those undocumented charges, “BCCI also arranged airfreight, shipping and insurance for the components and provided operating funds for agents of the secret consortium.” The article followed a report by Islamabad’s daily, The Muslim, that when Inam was arrested in

Frankfurt, he was carrying documents linking him to the bank.

A grand jury in Philadelphia originally indicted Inam along with Pervez in 1987 for conspiring to evade U.S. commerce department controls and export special high-strength maraging-350 steel—used in centrifuges to enrich uranium—from a company in Pennsyl-

vania to Karachi. Inam narrowly escaped arrest, but Pervez was caught in a nine-month U.S. customs undercover investigation as part of an operation code-named Exodus. During his trial, Pervez testified that he was working at Inam’s direction, although he claimed that

he believed the steel was for turbines.

Convicted in December, 1987, he served three years of a five-year sentence. He was released last year after a Philadelphia lawyer succeeded in negotiating a plea-bargain arrangement. The original conviction was set aside, and Pervez was convicted of lesser charges. At the time of his arrest, an RCMP raid on his Willowdale home produced a series of Telexes between him and Inam. Among other documents was confirmation of the BCCI letter of credit, transmitted from the bank’s main British branch on London’s Leadenhall Street to its Toronto office at 1 King St., using as an intermediary a branch of a Pakistani bank, Habib Bank Ltd., based on the Isle of Man.

Pervez’s arrest provoked an outcry and a series of Capitol Hill hearings, which threatened to cut off all aid to Pakistan. And now, the capture of the man alleged to be his boss promises to renew that debate at a time when the Pakistani government has accused India of harboring a il team of Israeli commandos in g the troubled border region of z Kashmir to attack the Kahuta ° plant. Last week, that tension Pakistan took on more sinister reso-

nance as the world quietly

marked the day 46 years ago when the first horrifying demonstration of nuclear vengeance took shape in a mushroom cloud over Hiroshima.

MARCI McDONALD in Washington