Russia and China are two such silos and the US under Donald Trump was fast becoming a third, perhaps Biden can change course. The declining EU is an island of law. The UK has been swimming towards impunity as fast as it can. It is in danger of drowning in its own irrelevance. Pakistan is vulnerable in this new world order and Pakistanis in the world need to be cautious. One small case study of the extent to which we live in an age of sovereign impunity is the story of Arif Naqvi: what happened to him can happen to you.
Naqvi founded the Abraaj Group in Dubai in 2002. By 2016, it had become the largest private equity firm investing in the fastest growing economies in the world on the front line of the trade war between the United States and China.
Naqvi’s mantra of making money and while doing good was based on the use of private capital in health, education and clean energy, styled “impact investments.” He became the Pakistani poster boy of the Davos set. The boy from Karachi bought Karachi electric in 2008.
Naqvi had been cultivated as a western asset. An East-West institute role play in 2011 projected Naqvi as prime minister of a reforming Pakistan. Bill Gates invited him to join the Giving Pledge. Secretary Clinton was briefed on him just before the Arab Spring. When he made the investment into Karachi Electric, the US embassy in Islamabad was delighted. Having turned KE around, facing down the unions, reducing outages and theft, Abraaj was ready to make its exit. Naqvi had built his company in the Gulf with capital from that region. After 2012, he pursued US investors to increase the scale of his funds. In 2016, he turned to China. His plan was to launch a single global fund, APEF VI, which achieved a successful close first of 3 billion, around $1 billion of which was Chinese investment. He was also contemplating selling a piece of Abraaj to Chinese investors.
In October 2016, he announced the sale of KE to Shanghai Electric for $1.7 billion – Abraaj was overexposed and needed the $550 million it would net from that sale. A few weeks later, Trump won the US Presidential election with record donations from US private equity.
Naqvi’s Chinese play placed him in direct opposition to the Trump administration and the pro-US elements in the Pakistani establishment. US private equity firms estimated it would cost them $500 million to establish Abraaj’s presence in emerging markets so they were looking for an opportunity to gain that access cheaply.
The US launched a classic economic hitman operation. The best way of destroying a private equity firm is to destroy its reputation, this was achieved in stages. The US lobby in Pakistan was pressured to try to block the completion of the agreed sale of Karachi Electric to the Chinese. This created a cash flow crisis in Abraaj. This might not have mattered if the APEF VI had closed at its targeted $6 billion. To stop Abraaj, the fundraising for APEF VI had to be stopped and to ensure that Naqvi did not close the Karachi Electric sale, he had to be stopped.
Naqvi’s Chinese play placed him in direct opposition to the Trump administration and the pro-US elements in the Pakistani establishment
An anonymous untraceable email was sent to key investors. The email told the investors to look at the way in which Abraaj was commingling funds from different sources and its use of these funds to cover running costs. The existence of the email was later leaked to the press who began intense coverage of the story.
A small group of investors asked for an audit, even though there had already been audits by KPMG and Deloitte and an opinion from Abraaj’s lawyers Freshfields that the use of funds had been appropriate.
A firm close to the DOJ and SEC carried out the audit but never submitted it to Abraaj. Naqvi continued to try and close the Karachi Electric deal but because he wanted to continue working with the US investors, he returned all their funds with interest by the end of 2017. As the sale of KE and the fund raising for APEF VI had not been stopped by the initial stories, the Abraaj email server was either hacked by an outside agency or someone senior inside the company leaked selections from it.
In February 2018, this material went to the Department of Justice, an investigation was launched which the Abraaj executives did not know about until arrests were made in April 2019.
Imran Khan was planning on making Naqvi finance minister before the crisis hit and Naqvi was still advising the his government on IMF talks. To finally stop him, he was arrested at Heathrow Airport on April 10, 2019 under an indictment form the Southern District of New York. The IMF deal was concluded on IMF terms. Karachi Electric has not been sold to the Chinese. Naqvi remains under house arrest, fighting extradition to the US where he faces 291 years in prison if found guilty.
In his study of economic hitmen (EHM), John Perkins wrote that: “activities that would have been viewed as immoral, unacceptable, and illegal in the United States in my EHM days are now standard practice… Corruption at the top has become legitimate because corporate EHMs draft the laws and finance the politicians who pass them.”
Imran Khan was planning on making Naqvi finance minister before the crisis hit and Naqvi was still advising the his government on IMF talks
Naqvi and his Abraaj Group were a piece of collateral damage in the trade war that will define the world in the decades after the pandemic. The destruction of Abraaj was carried out with impunity supported by judicial overreach. Abraaj was based in Dubai. Naqvi and his team had drunk the Kool-Aid of globlisation and that is what killed them. They did not have a nation state to protect them and in the age of sovereign impunity that meant they were powerless. The reality of world today is that a drone can come out of the sky and kill you in an instant or an indictment can destroy your life. The state that fired the drone and issues the indictment faces no consequences. It acts with impunity.