The Karachi Connection: A scandal too far for Sarkozy?
Murky arms deals, betrayal, kickbacks and a deadly bomb attack: France's latest scandal has all the makings of a high stakes political drama, but will Nicolas Sarkozy be cast as leading man?
The president has furiously denied any implication in a web of deals linking a contract to sell submarines to Pakistan, a former prime minister's failed presidential bid and the eventual murder of 11 French engineers.
French voters are wearily accustomed to their leaders being scrutinised for alleged financial shenanigans, but the "Karachi Scandal" has reignited bitter in-fighting on the French right and could yet inflict real political hurt.
Having faced down months of pension protests, reshuffled his cabinet and taken on the presidency of the G20 group of leading economies, Sarkozy hoped to launch his 2012 presidential re-election bid from a position of strength.
But his most bitter enemy in his own right-wing camp, former prime minister Dominique de Villepin, had other ideas. He swept back onto centre stage on Friday to testify to investigating judges and revive the slow-burning scandal.
"I want as much light shone on this as possible so that the judiciary can work with all independence and transparency," Villepin said after his hearing, at which he outlined suspicions of kick-backs on the submarine deal.
The roots of the scandal go back to 1994, when France sold submarines to Pakistan and frigates to Saudi Arabia.
The right was divided over who should run for president in 1995. Sarkozy, then budget minister, backed Prime Minister Edouard Balladur and became his campaign spokesman. Villepin sided with Paris mayor Jacques Chirac.
Chirac eventually won, but he never forgave Balladur for his betrayal, and Sarkozy and Villepin have over the succeeding years built up one of the most poisonous rivalries in French politics.
Following the election, experts at France's top judicial body, the Constitutional Council, recommended Balladur's campaign accounts be rejected for including too many suspicious, untraceable cash donations.
But the council itself, a committee of the eminent political appointees, voted to sign off on the defeated candidate's books. Last year, Balladur denied any wrongdoing, but suspicions persist.
Once in office, Chirac re-examined the contracts for the sale of the submarines, and ordered that commissions paid to middlemen be cancelled.
France did not outlaw payments to fixers in arms deals until 2000, but in this case officials suspected the foreign-based businessmen who took a cut on the contracts were paying "retro-commissions" to French politicians.
Sarkozy, who as budget minister reportedly had a role in signing off on the original contracts between Pakistan and the French state-owned shipyard that supplied the subs, has firmly denied any knowledge of wrongdoing.
If the Karachi scandal had remained limited to suspect commissions and Balladur's electoral defeat, it might have ended there, another footnote in France's long history of murky electoral finances.
But in 2002, a bus carrying French engineers working on the submarine contract was hit by a suicide bomber in Karachi. At least 15 people were killed, 11 of them French, in an attack first blamed on Al-Qaeda.
French judges investigating the attack are now following a different lead, however. Could the attack have been carried out by Islamists manipulated by Pakistani agents, in revenge for having lost out on cancelled kickbacks?
The families of the French victims take this idea seriously, their involvement putting a human face on the alleged scandal and making it harder for the politicians at the heart of the drama to brush the claims aside.
Villepin -- who plans to stand against Sarkozy in 2012 in a replay of the 1995 clash between their older mentors Balladur and Chirac -- appears to have revived the scandal in order to hurt the current president.
But he does not want Chirac to share the blame for the deaths, and now says that he does not think the cancellation of the commissions led to the bombing.
Chirac, he argues, cancelled contracts he thought could have led to retro-commissions in order to "moralise international public life".
French press reports have put a more cynical spin on the decision, citing earlier Villepin statements that the former president cancelled the deals as revenge against Balladur, striking his suspected source of funding.
© 2010 AFP