Karachi Affair

Karachi Affair (Urdu: ماجرہ کراچی ‎) refers to the commissions and kickbacks paid by France when it sold Agosta submarines to Pakistan and the May 8, 2002 terrorist attack in Karachi, Sindh, Pakistan. In 1994, France negotiated a deal to sell three Agosta-class submarines to Pakistan for a sum equivalent to €826 million (£684m, $996m). Commissions of 6.25% of the contract, approximately €50 million, were paid out. Some 50m Euros were paid as 'sweeteners' to various senior Pakistani military and political leaders. At the time, this was legal, because France signed an OECD convention outlawing commissions only in 2000.

These contracts are alleged to have financed the campaign of the then Prime Minister Edouard Balladur in the French presidential election, 1995. When his rival Jacques Chirac was elected, he cancelled the commissions and kickbacks, angering many officials in Pakistan. Some intelligence reports allege that the May 8, 2002 terrorist attack that killed eleven French engineers in Karachi was in retaliation for the cancellation of these commissions. Some intelligence reports allege that Pakistan Army's ISI intelligence used part of these commission to finance Kashmiri millitants in Indian-administered Kashmir. Other reports allege that Harkat-ul Mujahideen al-Alami, an ally of al-Qaeda, carried out the terrorist attack.

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