Kurdistan’s Covert Back-Channels
News: How an ex-Mossad chief, a German uberspy, and a gaggle of
top-dollar GOP lobbyists helped Kurdistan snag 15 tons of $100
bills.
By Laura Rozen
04/12/07 "Mother
Jones" -- -- In June 2004, journalist Seymour
Hersh reported in the New Yorker that Israelis operating in
northern Iraq under the guise of businessmen were in fact
cultivating Kurdish proxies to gather intelligence in
preparation for possible future action against Iran. About the
same time, I too was hearing about Israelis operating in Kurdish
northern Iraq. First, from a former senior American diplomat who
was invited by an Israeli American businessman to advise the
Kurds on how to get billions of dollars they believed they were
owed from the Saddam Hussein-era United Nations Oil-for-Food
program. The diplomat gave me the Israeli’s name—Shlomi
Michaels—and phone numbers for Michaels in Beverly Hills,
Turkey, and Israel. The diplomat had walked away from the
project, put off by Michaels’ temper, and also, he said, by
doubts about what Michaels was really up to, and who he might
really be working for.
So I was intrigued when, last summer, I read in the Israeli
newspaper Haaretz that Shlomi Michaels had become the subject of
an Israeli government investigation for allegedly operating in
Iraq without the required authorization from the Israeli
authorities. Not only had I known about Michaels for two years,
I had spent about as long trying to understand if the Bush
administration would embrace the regime-change policy of its
Iran hawks, who believe that the solution to Iran’s nuclear
ambitions is to promote mass uprisings of ethnic minority and
dissident groups such as the Kurds.
For much of the past year, I have been digging into the story of
Shlomi Michaels’ operations in Kurdistan, and his connections in
Israel, the United States, and around the world. My
investigation took me to Israel early last fall, shortly after
the Israeli war with Hezbollah, to talk with Israeli officials
investigating Michaels, as well as one of Michaels’ long-time
American associates, and Michaels’ business partner, the former
Mossad chief Danny Yatom.
What I found was not the story I had expected. Instead of
Michaels being part of a covert operation to set up anti-Iranian
proxies in Kurdish Iraq, I discovered that Michaels and his
associates were part of an effort by the Kurds and their allies
to lobby the West for greater power in Iraq, and greater clout
in Washington, and at the same time, by a group of Israeli ex
security officials to rekindle good relations with their
historical allies the Kurds through joint infrastructure,
economic development, and security projects. It was, in other
words, a story about influence-building, buying, and profit,
albeit with subplots that were equal parts John le Carre and
Keystone Kops, and a cast of characters ranging from ex-Mossad
head Yatom to a former German superspy, with Israeli
counterterrorism commandos, Kurdish political dynasties,
powerful American lobbyists, Turkish business tycoons thrown
in—not to mention millions of dollars stashed in Swiss bank
accounts.
Yatom met me in the lobby of the Tel Aviv Sheraton at 7:30am on
a Sunday, the beginning of Israel’s work week. The ex-Mossad
chief turned Labor Party member of parliament was on his way to
his office at the Knesset after a stop at the gym, dressed
casually in a white button down shirt and black jeans. He spoke
openly about his business relationship with Shlomi Michaels and
the Kurdish venture they’d developed together, noting that he
was no longer involved in its operations; after being elected to
the Knesset in 2003, he’d put his business interests in a blind
trust, as required by Israeli law.
Yatom said he and Michaels were introduced to key Iraqi Kurdish
players by a European intelligence official whom he wouldn’t
name; interviews with his associates revealed that it was Bernd
Schmidbauer, West Germany’s intelligence chief in the 1990s.
Dubbed “008” for his intelligence adventures during the waning
days of the Cold War, Schmidbauer—now a member of the German
parliament—did not respond to numerous messages left with his
offices in Berlin and in Heidelberg.
Shlomi Michaels was similarly elusive, despite messages left at
several of his far-flung residences. Fifty-two years old, six
feet tall, and built, according to an acquaintance, “like a
brick shithouse,” with the commando’s trademark shaved head and
a black belt in karate, Michaels splits his time between Israel
and the United States, with detours to Switzerland, Turkey, and
Kurdistan. The elite counterterror officer turned entrepreneur
and multimillionaire is well networked in Tel Aviv, Washington,
and New York, where he taught a counterterrorism course at
Columbia University in 2003. For a time, according to one
source, he even ran a security consulting business in Los
Angeles.
When the United States was preparing to invade Iraq, Michaels
evidently saw an opportunity: According to his business
associates, as well as public records and Israeli media reports,
he reached out to contacts in Washington, seeking high powered
lobbying help to get the Kurds a greater share of United Nations
Oil-for-Food Program money, a fund set up by the UN in 1995 to
use Iraq’s oil revenues to provide Iraqis humanitarian supplies
during international economic sanctions against Iraq. During
Saddam Hussein’s rein, the Oil-for-Food “revenue was spent in
Arab parts of Iraq but not in Kurdistan,” according to the Los
Angeles Times. “Kurdistan’s share of the fund was set at 13%. At
least $4 billion accrued in Kurdistan’s name, Kurdish officials
say, and some contend that the amount could be as much as $5.5
billion.” The paper reported that in late June 2004, just five
days before he turned Iraq back over to domestic rule and flew
out of Iraq, then-top US official in Iraq Paul Bremer ordered
the transfer by three U.S. military helicopters of $1.4 billion
in 100 dollar bills to Kurdistan—his calculation of the Kurds’
share of Oil-for-Food funds; but the Kurds and their advocates
believe they are owed a few billion more. It was so much cash—15
tons’ worth—the paper further reported, that no bank could be
found in which to deposit it.
Even as he helped connect the Kurds to those who lobbied for
them to receive more money, Michaels positioned himself to be in
line for some of the cash. A year before the invasion of Iraq,
Yatom and Michaels had formed an investment and security
consulting company called the Interop Group (short for
international operations group) that has since done millions of
dollars of business in Kurdish Iraq. Michaels’ main business in
Iraq is a joint venture called the Kurdish Development
Organization, or KUDO. One American source describes Kudo as a
joint venture between Michaels’ company and the Barzani part of
a Kurdish governmental entity. According to a second American
source (who has at times offered differing accounts), KUDO is a
venture between Michaels, Schmidbauer, Yatom, and members of the
powerful Barzani Iraqi Kurdish political family. According to
this source, KUDO serves as a general service contractual
liaison between the Kurdish Regional Government and the
contractors for the massive $300 million project to build a new
international airport in the Kurdish city of Irbil. The main
contractor on the airport project is a Turkish company called
Mak-yol. A third Michaels’ company, Coloseum Consulting, is
registered in Switzerland as an affiliated company of Interop,
according to Swiss federal corporate registration papers.
More covertly, the Israeli newspapers Yedioth Ahronoth and
Haaretz have reported, Michaels has also brought in former
Israeli military officers to provide counterterrorism training
to Kurdish security forces at a secret “camp Z” in Iraq. Sources
say the contract was mere “bupkas”—a few million dollars—and
Michaels undertook the work out of friendship with then-Kurdish
Minister of Interior and security chief Karim Sinjari, and also
because the Kurds faced a threat from al Qaeda.
Whatever the reasoning, the execution of the “Camp Z” project
was problematic. In 2004, according to Israeli media reports,
Michaels’ team brought in dozens of Israeli combat veterans
through the Turkish-Iraqi Kurdish border, traveling on Israeli
passports whose details were duly noted by Ankara. Soon the
Turkish government grew alarmed that Israeli military types were
moving into northern Iraq, claiming to be agriculture advisers
and the like. The story made it to Israel, whose nationals are
prohibited from doing business in Iraq without explicit
government permission. “There is a legal state of war between
Israel and Iraq,” Israeli Foreign Ministry spokesman Mark Regev
told me. “It is therefore illegal for Israeli nationals to visit
Iraq. Hopefully that will change one day.” But since it has not
yet, the news about Michaels’ operation caused a stir; making
matters worse were Michaels’ alleged feuds with his business
partners over money. One disgruntled former Israeli employee
went to the Israeli press in the fall of 2005, revealing with
documents and photographs the extent of Michaels’ involvement in
Kurdistan.
The story kicked up controversy—Israeli operations are a source
of paranoid fascination in the region—and led to two separate
Israeli government investigations. Exposure has also led to the
necessary departure of almost all of the Israelis working for
Michaels from northern Iraq. (Speculation was further fanned by
Seymour Hersh’s 2004 New Yorker report that Israel is forging a
“plan B” for Iraq that includes training Kurdish commandos and
use them to infiltrate Iran and Syria.) One of those probes—by
the Israeli ministry of defense, which wanted to know why it had
never been approached for export licenses for the Israeli
defense and secure communications equipment sold in northern
Iraq—has since been referred to the Israeli police and “will
continue as long as necessary,” police spokesman Micky Rosenfeld
told me in an email last fall.
Skeptics dismiss the probe as a PR gesture aimed at the Turks,
whose goodwill is critical to Israel and who resent any moves to
arm the Kurds on their border In fact, notes one former senior
U.S. diplomat, “Michaels said to me… he had the explicit
approval of the Israeli government” for his private business
activities in Kurdish Iraq. “What they were trying to do is
develop influence in the Kurdish area.”
None of this activity has geopolitical implications, insists the
Kurdish government’s polished young representative in
Washington, Qubad Talabani, who happens to be the son of Iraq’s
president, and whose family has been the historic rival of
Michaels’ partners in the Barzani clan. In an interview in his
offices on I Street, Talabani told me any Israeli business
development activities in Kurdistan were “purely private sector
activities,” and that “Kurdistan is open for business.”
As Talabani walked me out after my interview, we passed a poster
advertising a new bi-weekly direct Austrian Airlines route from
Vienna to Irbil, site of Michaels’ airport project—a town of
990,000 people until recently served only by regional air
carriers and charter flights. “We will become the gateway to
Iraq,” Talabani told me.
Plenty of non-Kurds would like to help—and make a little profit
along the way. According to lobbying records, the high powered,
White House-connected lobbying firm, Barbour Griffith & Rogers,
LLC has earned $800,000 promoting the Kurdistan Regional
Government’s interests since 2004; before hiring the firm, two
U.S. sources say, Michaels had approached Jack Abramoff about
representing the Kurds, but the discussions never went beyond
the initial stages.
Russell Wilson, a former senior professional staffer for the
House international relations committee who helped advise the
Kurds on Washington representation and who was formerly listed
as a non equity officer in Interop, notes that Kurdistan has
many of the things the rest of Iraq lacks: “It’s safe, secure,
it’s geographically rich”—features include plenty of unexplored
potential oil and natural gas reserves—”and the people are
extremely nice.” Wilson says it was he who recommended in the
spring of 2004 that the Kurds hire Ed Rogers, a former political
director in the Bush I White House, of Barbour Griffith & Rogers
as their Washington lobbyist.
In the end, Yatom and Michaels’ business activities may well be
evidence, as much as any covert U.S. interests, of the Kurds’
superb gamesmanship, pragmatism, and sense of
opportunity—instincts honed to a fine art by a people that,
lacking durable proximate allies, has learned how to cultivate
the enemies of its enemies. The Mossad’s former Irbil station
chief, Eliezer Geizi Tsafrir, told me that like the Israelis,
the Kurds regard themselves as an historically stateless people
surrounded by hostile nations. Back when Tsafrir served in
Irbil, he even helped set up a Kurdish intelligence service, in
cooperation with the Barzani patriarch, Mustafa Barzani. “They
[the Kurds] approached us, saying they had nobody to help them
in the world, and our people had suffered too,” he said. “We
supplied them with cannons, guns, anti-air equipment, all sorts
of equipment, and even lobbying. The contacts between us, and
the sympathy, will last for generations to come.”
Reporting for this project was supported by the Nation
Institute.
© 2007 The Foundation for National ProgressClick here
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