Karzai's brother 'on CIA payroll'

US engagement under question after deal with suspected drug dealer

US involvement in Afghanistan has come into new question with the claim that President Hamid Karzai's brother has for years been on the payroll of the CIA – even though he is suspected of being a major figure in the illicit opium trade that Washington and its allies are pledged to do everything to stamp out.

The allegations against Ahmed Wali Karzai, set out yesterday in The New York Times and attributed to current and former US officials, paint a picture of a shadowy potentate and powerbroker with a finger in every pie, whose fief is the south of the country, heartland of the Taliban insurgency.

They could not have emerged at a more awkward time for the Obama administration, as it approaches a critical decision on American troop strength in the country. That decision in turn will be heavily influenced by the outcome of the run-off between Hamid Karzai and Abdullah Abdullah, the former foreign minister, scheduled for 7 November.

After the uproar over the fraud-ridden original election that purported to return Hamid Karzai with an absolute majority of the vote, Washington is counting on the run-off to produce a government that commands trust across the country. That, many policymakers here argue, is an essential precondition if Barack Obama is to authorise the major troop increase sought by General Stanley McChrystal, the US commander in Afghanistan. The signs are that Mr Obama is leaning towards a strategy that would focus on protecting major population centres. This would require more troops than the 68,000 currently in Afghanistan, but not as many as the 40,000 extra or more requested by General McChrystal. But the calculations will inevitably now be even more delicate, amid the controversy over Ahmed Wali Karzai.

Yesterday, he described as "ridiculous" the claims he was being paid by the CIA. "I work with the Americans, the Canadians. The British, anyone who asks for my help," he said. "I've no idea where they [the CIA] get their recruits. It's absolutely ridiculous." The Agency refused to comment, as did Robert Gibbs, the White House spokesman. But the affair has already caused divisions within the administration – between "realists" who argue the US has no choice but to work with powerful individuals, however distasteful they may be, and those who insist that the links with Ahmed Wali Karzai made a mockery of America's avowed efforts to promote a clean, trustworthy government.

It has also added to tensions between Washington and Hamid Karzai. According to the newspaper, US officials have pressed the Afghan leader to move his brother out of southern Afghanistan, where he is said to have grown rich by charging large transit fees for the drug traffickers whose activities finance the Taliban and feed corruption in the Kabul government. But President Karzai has refused, in effect protecting his brother from investigation.

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