From the Wall Street Journal (Thursday February 26, 2009

Pakistan's Leader Stirs Fresh Turmoi

By MATTHEW ROSENBERG and ZAHID HUSSAIN

ISLAMABAD -- When Asif Ali Zardari won the presidency last year, he vowed to unite this fractious country after nearly a decade of military rule. Instead, Mr. Zardari is emerging as a divisive figure at a time when Pakistan faces a rising Islamist insurgency and a stuttering economy.

The widower of slain former Prime Minister Benazir Bhutto is alienating both allies and foes. Even his personal style has turned off supporters of his wife -- some of whom serve in his government but are now reluctant to deal with him directly. At meetings in recent months, according to several witnesses, he lashed out at senior ministers, calling one a "witch" and another "impotent."

Protests in Pakistan

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Associated Press

Sharif's supporters protested in Rawalpindi Wednesday.

On Wednesday, Pakistan was plunged into fresh political turmoil when the Supreme Court barred from elected office former Prime Minister Nawaz Sharif, the country's leading opposition politician, citing a past criminal conviction. The court also barred Mr. Sharif's brother, Shahbaz Sharif, from office, effectively unseating him as chief minister of Punjab, Pakistan's largest and most powerful province. Following the decision, Mr. Zardari dismissed Punjab's state government and imposed executive rule in the province, sparking demonstrations in several cities

"It is a political decision given on the directives of Mr. Zardari," Nawaz Sharif, a former prime minister still popular across Pakistan, said at a news conference at his residence in Lahore. "It is a conspiracy to keep me out of politics."

Several government officials and Western diplomats say the friction caused by Mr. Zardari's rule is weakening the government and diminishing Pakistan's ability to solve the thicket of challenges it faces.

Wednesday's developments triggered a 5% drop in Pakistan's benchmark stock index in Karachi on the expectation of political tensions and possible street violence. The prospect of Mr. Sharif and his supporters leading a campaign against Mr. Zardari is likely to concern Washington. The Obama administration wants the president and his top officials focused on countering the threat posed by al Qaeda and the Taliban -- not contending with domestic political unrest.

Since taking over the presidency last September, Mr. Zardari has surrounded himself with a small cadre of advisers, many of them unelected, including family members and associates whom Mr. Zardari got to know in jail or in exile, leaving even government officials unsure of who runs what. Among the members of Mr. Zardari's inner circle: his former physician, Dr. Asim Hussain, who in addition to running a hospital in Karachi is the government's adviser on petroleum affairs and runs the oil ministry, despite having no background in the industry.

Pakistan's Problems

· Political Turmoil: Fresh tensions arose Wednesday after the Supreme Court banned a key opposition leader from contesting elections.

· Sputtering Economy: Pakistan was forced to seek a $7.6 billion rescue package from the IMF in November.

· Mumbai Fallout: November's attack on Mumbai, blamed on an Islamic militant group based in Pakistan, set back peace efforts with New Delhi.

· Taliban Troubles: In the Swat Valley, hours from Islamabad, authorities agreed to impose Islamic law, yielding to a key demand of a Taliban faction. The Taliban have stepped up attacks on convoys supplying U.S. troops in Afghanistan.

More

· Zardari Imposes Federal Rule in Punjab

· Taliban Extend Truce, Gain Sway

Mr. Zardari, 53 years old, declined to be interviewed for this story. A spokesman, Farhatullah Babar, said Mr. Zardari is seeking to bring the best people into Pakistan's government. He also said the president had never "used intemperate language" with colleagues.

"Far from endorsing infighting and general nastiness, President Zardari is seeking to melt away the bitterness of the past," Mr. Babar said in an email.

Concession to Taliban

In one recent controversial move, officials effectively yielded to a key Taliban demand and agreed to impose Islamic law in the Swat Valley. The region, located a few hours' drive northwest of the capital, until two years ago was best known as an alpine weekend getaway.

The government of the North West Frontier Province, where Swat is located, opted this month for a truce with the Taliban faction fighting in the valley, even though a similar deal collapsed after only a few weeks last year. Mr. Zardari initially opposed the deal, say officials. But with the army losing ground, he concluded he had "no other option but to go along with the decision of a beleaguered provincial government," one of his aides said.

The truce stunned officials in Washington, who are concerned that the war in Afghanistan will be undermined if the insurgents have a safe haven in Pakistan from which to launch cross-border attacks.

Mr. Zardari emerged as Pakistan's most powerful politician in the wake of Ms. Bhutto's December 2007 assassination. Previously, he was best known for his love of polo and for corruption allegations that made the nickname "Mr. Ten Percent" stick with the public. Mr. Zardari nonetheless led the PPP to victory in elections last February.

Pakistan's mounting problems not only worry the new administration of U.S. President Barack Obama. They also have contributed to a sharp decline in Mr. Zardari's own popularity. Recent opinion polls indicate the president's approval rating has sunk to a level near that of Pervez Musharraf, the widely reviled former general ousted from the presidency by Mr. Zardari and Mr. Sharif last summer.

Reuters

Pakistan President Asif Ali Zardari (pictured) has had a strained relationship with his hand-picked prime minister, Yousuf Raza Gilani (below).

Even Mr. Zardari's relationship with his handpicked prime minister, Yousuf Raza Gilani, has become strained of late, several government officials say. Associates of Mr. Gilani say the prime minister has grown frustrated at Mr. Zardari's failure to fulfill his promise to reduce the presidency to its traditional role as head of state, allowing the prime minister to take a bigger role in decision-making and appointments.

Mumbai Attack

Tensions came to a head in January. Mr. Gilani fired his national security adviser, Mahmood Ali Durrani, for acknowledging that the sole surviving gunman captured by India during November's terrorist attack on Mumbai was Pakistani. Mr. Durrani was a close ally of Mr. Zardari and was fired days ahead of a visit by Joseph Biden, then U.S. vice president-elect.

Within minutes of hearing the news, a furious Mr. Zardari phoned Mr. Gilani to demand the move be reversed, one of the president's top aides said. When Mr. Gilani refused, the president asked: "Can you wait at least till Joe Biden's visit to Islamabad is over?" according to the aide. The prime minister again refused.

Mr. Babar, the president's spokesman, said Mr. Zardari approved the national security adviser's firing. He dismissed talk of a split between the president and prime minister as the talk of "PPP haters who think that their best chance to destabilize the system is to spread rumors of a rift within."

Mr. Gilani, in an interview during last month's World Economic Forum in Davos, Switzerland, said his relationship with the president was "very good." As for Mr. Durrani's firing, Mr. Gilani said the president "has to approve it, and therefore that was approved."

But, he added, "I have to run the government. I'm the chief executive."

The infighting in the government contrasts with the tenor of government under Mr. Musharraf. He became a U.S. favorite by keeping a lid on intramural squabbles and making it clear he was the sole decision maker in Pakistan.

Bloomberg News

Yousuf Raza Gilani

Mr. Zardari's supporters say he remains determined to restore Pakistan to a stable civilian democracy after nine years of Mr. Musharraf's military-backed rule. He often cites as motivation the 11 years he spent in prison in Pakistan on corruption and murder allegations. He says these were politically motivated; most of the allegations were dropped under an amnesty deal with President Musharraf.

On a February visit to Peshawar, the capital of the North-West Frontier Province and a city beset by Taliban insurgents, he told a gathering of tribal and political leaders: "I am myself a tribesman and know what misery is. I have passed through all such traumas for 11 years in jail."

He added: "But I never compromised on principles and succumbed to a dictator."

Western officials say they view Mr. Zardari's record of government to date as mixed. They credit him with keeping the military focused on fighting the Taliban and al Qaeda and providing intelligence to aid missile strikes on the militants by U.S. drone aircraft. His position is a risky one because of the widespread outrage in Pakistan over the attacks.

Military's Role

For now, there appears little prospect that the powerful military, which has ruled Pakistan for much of its 62 years as an independent nation, will intervene. It saw its morale and reputation battered in the final days of Mr. Musharraf's rule. Gen. Ashaq Kayani, the army chief and a veteran soldier, is determined to focus on fighting the militants and staying out of public life, say senior civilian and military officials and Western diplomats who often deal with him.

"I think there's a lot of patience in the services right now to let the civilian government take its course," said an officer at Inter-Services Intelligence, Pakistan's premier spy agency. "The patience won't last forever but it will last for a long time."

Mr. Zardari has proved willing to back down on policy changes that Gen. Kayani opposes. In November, Mr. Zardari announced that Pakistan was adopting a "no first strike" policy for its nuclear arsenal. It was a drastic change from the military's long stance of refusing to rule out a nuclear first strike, a strategy designed to keep larger rival India off balance. Pakistan's top military brass was livid.

Gen. Kayani immediately called Mr. Zardari to say Pakistan's nuclear doctrine was "irreversible." The policy of vagueness was restored.

Fuel Subsidies

Early in his tenure, Mr. Zardari had won praise for making the tough call to eliminate national fuel subsidies that were bankrupting Pakistan. When that didn't stanch the flow of hard currency out of the country, he successfully negotiated with the International Monetary Fund for $7.6 billion in loans that staved off financial collapse.

"When I met the president in the spring, before he was president, I came away thinking this is the man we need," said Munir Ladha, a former board member of the Karachi Stock Exchange and the chairman of Eastern Capital Ltd, a securities firm.

Mr. Ladha says he has since grown deeply disillusioned, pointing to the government's failure to make good on a commitment to aid the collapsing Karachi Stock Exchange. At the end of July, with shares plummeting, the government pledged to create a $635 million fund that would buoy the market by buying back stocks in seven government-owned companies.

Ultimately, the fund took months to materialize. By then the Pakistani stock market had fallen sharply. The benchmark KSE-100 index is now hovering above 5,000 points, its all-time high of more than 15,000 points reached in April 2008.

The IMF said in a statement Wednesday that Pakistan is on track to comply with the economic program agreed under the $7.6 billion credit facility granted in November. But it added that the deterioration in the global economy required Pakistan's government to "recalibrate" its fiscal and monetary policies.

In the Red Zone

Today, Mr. Zardari rarely ventures outside the presidential palace, deep in Islamabad's heavily secured "Red Zone," down roads blocked off from regular traffic by police checkpoints and cement barricades. Traditions such as visiting a local mosque during major holidays have been discarded. Mr. Zardari and top officials instead held this year's prayers for Eid al-Adha, a major Muslim holiday, inside the palace.

Presidential aides say security concerns keep him inside the Red Zone and he does his best to regularly meet with ordinary Pakistanis and local politicians inside the palace. "Never before has the presidency been opened to all cross sections of the diverse public," said Mr. Babar.

Some of those who visit him there, however, say they are frequently subjected to boorish behavior.

At a meeting in mid-January, Mr. Zardari taunted Sen. Raza Rabbani, Pakistan's provincial coordination minister, calling him "impotent" after the two disagreed on how to approach allied political parties about running certain candidates in upcoming Senate elections. "You always say no, and that is a reason why you don't have children," the president told the 55-year-old senator, according to multiple witnesses.

In previous meetings, Mr. Zardari has called a senior cabinet minister a "witch" on many occasions. He has told others to "shut up" or mocked their personal foibles, divorces, affairs. "This is what you come to expect at the presidency. You go there and you are insulted," said another senator who was at the mid-January meeting. .

Officials say his behavior is putting off people to the point where they actively try to avoid working with him. That is keeping the government from getting things done, they say, citing everything from shaping economic policy to deciding the future of the tribal areas, which are ruled by the federal government.

Mr. Babar said such criticisms were motivated by opposition to the president's reform agenda. He described Mr. Zardari's approach to leadership as, "Forgive but do not forget the past, arrange for the present and face the future."

—Marc Champion contributed to this article.

Write to Matthew Rosenberg at [log in to unmask]

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