The most farcical moment since the start of the Iraq crisis came last weekend when Ahmed Chalabi, the Pentagon's choice to rule Iraq only last year, was accused of counterfeiting by Iraq's chief investigating judge. His nephew Salem Chalabi, whom the US put in charge of organising the trial of Saddam Hussein, is accused of murder and is refusing to return to Iraq.
The charges are the outcome of bureaucratic warfare in Washington. The Chalabis have long depended on their friends among the civilians running the Pentagon and neo-conservative officials elsewhere in the Bush administration. They have been hated for years by the CIA and the State Department. It is the latter, increasingly in the ascendant, who are now wreaking their revenge.
This internecine warfare between different branches of the US administration has been a recurring and damaging feature of the US occupation of Iraq. It was Donald Rumsfeld, the Secretary of Defence, who tore up the State Department's plans to run Iraq after the overthrow of Saddam Hussein and excluded any experts deemed hostile to the Chalabi family.
What are the merits of the charges? All the Iraqi exile groups that entered Baghdad in the wake of American tanks last year swiftly discredited themselves among ordinary Iraqis by their lawlessness and greed. Ahmed Chalabi's Iraqi National Congress, very much his personal political vehicle, established itself in the Hunting Club, once the haunt of the Iraqi elite. It became notorious among Iraqi businessmen that if you wanted to do business with the US occupation you had to give a cut to the INC or other Iraqi exile groups.
The INC was probably no worse than the others. The Iraqi National Accord of Iyad Allawi, the present Iraqi Prime Minister, also had its snout in the trough soon after it arrived in Baghdad. One returning exile, two of whose brothers had been killed by Saddam Hussein, told me in despair: "Saddam used to appoint real experts as well as relatives and cronies, but the political parties now hand out jobs to their relatives even if they have no idea of what they are doing."
The occupation regime was riddled with corruption from the moment it was established. The charges now made against Ahmed and Salem Chalabi sound shocking, but similar charges could be made against almost all the triumphant opposition who returned to Baghdad on the top of American tanks. Some INC members were accused of kidnapping; stolen cars, seized at gunpoint in great numbers in Baghdad, were routinely exported with no questions asked through territory controlled by Iraqi Kurdish leaders; US officials in the Coalition Provisional Authority were assumed by Iraqi businessmen to be on the take.
The accusations against Ahmed Chalabi, following the claim that he informed the Iranians that the US had broken their diplomatic code, probably means that he can never recover his old influence in Washington. But, as one Iraqi politician put it: "Until I see Ahmed lying in his grave with a stake through his heart I am not going to write his political obituary."
As his links with Washington weaken Mr Chalabi has been reinventing himself as a Shia leader, associating with Muqtada Sadr, the radical cleric. It will not be easy for Mr Chalabi to switch from being a symbol of the US occupation to being its opponent but it could be done, particularly if he has Iranian support.
The present situation in Iraq is deceptive. It looks as if Mr Allawi and his government are gaining in support. But Iraq is increasingly fragmented and is more like Afghanistan by the day. Mr Allawi may talk tough, but he is reliant on 138,000 US troops. Cities around Baghdad like Fallujah and Samarra are under the control of Islamic militants. In Ramadi, west of Baghdad, local police patrol this city of 400,000 people between 8am and 2pm. At all other times Ramadi is run by the insurgents.
The struggle for Iraq is in its early stages. The Shia and Sunni Arabs and the Kurds, the three great communities of Iraq, have not achieved their goals. The US would still like to be the predominant power in Iraq even if it has to exercise control through Iraqi frontmen. Syria and Iran fear the US will use Baghdad as a launching pad to destabilise their governments. In this mess an agile politician like Mr Chalabi should be able to make new allies.
In the months before the US presidential election in November, Washington is straining every nerve to showthat the situation in Iraq is improving. This is not true. Much of Iraq is outside the control of the central government. Mr Allawi is behaving like the old Baathist he once was by threatening to crush his enemies. He would be much better off trying to increase the number of his friends.
The charges against the Chalabis show the difficulty the US is having in producing a coherent policy in Iraq. If Salem Chalabi is arrested for murder then there is the ludicrous possibility that he will have to arrange the trial of Saddam Hussein from a cell neighbouring that of the Iraqi leader. The real lesson of the past year is that none of the old opposition leaders, such as Chalabi or Allawi, have enough support to establish a stable government.