When the Good Guys are the Bad Guys

Mohammed Waeli was furious. The powerful governor of Basra had heard that Iraqi Army soldiers were looking to use city bulldozers to clean up the streets of his unruly metropolis. If anyone was going to get credit for improving life in Basra, he was. In a late-night phone call last month, he tore into the top Army commander in Basra, Gen. Mohammed Huweidi. "We want to use [the bulldozers] to serve the city," the general protested. "We're not asking any money for this service." Waeli wasn't mollified. Huweidi's men were interfering and should back off, he warned. "Let me explain," Huweidi said, as the governor continued to berate him. Finally Huweidi relented. "Yes, you're the governor," he said. "I will ask them to pull back."

As tough as the fight against jihadists and outlaw militias has been in Iraq, the government's next foe may be equally challenging: itself. Waeli, the general said after hanging up, felt threatened by the Army: "We work seriously here, and this is not always welcome." Their clash is likely to be repeated elsewhere. As the Iraqi Army grows more capable and the central government expands its influence across the country, they're sure to antagonize local players like Waeli who have carved out profitable fiefdoms for themselves. The Basra governor—described as a "mafia don" by one Baghdad official, who asked for anonymity in order to speak more freely—is not the only example. In late June a bomb killed four Americans and six Iraqi officials at a district council meeting in Baghdad's Sadr City. The attack was blamed on the head of the local council, who feared the Americans were maneuvering to have him replaced.

Prime Minister Nuri al-Maliki sent some 30,000 troops to Basra in March in a bid to tame the Shiite militias that were running rampant in the city. But some Baghdad officials believe he was also hoping to oust Waeli himself. The governor took power in 2005, on the same day that religious zealots severely beat dozens of university students having a picnic in a Basra park. The assault marked a sea change in the port city, which had been known as relatively liberal (at least by regional standards). Soon dozens of academics, doctors and other secular professionals were also targeted. One militia, Tharallah, which translates as God's Vengeance, is suspected of killing dozens of women in the city. Public music performances, even by traditional musicians playing drums on the corniche, stopped. In one downtown roundabout, the nipples of a female statue were scratched off.

Waeli, a chubby man with a trim mustache and penchant for sharp tailored suits, seems to be less a zealot than an opportunist. According to a handful of Iraqi and U.S. officials familiar with southern Iraq, the governor ran a successful import-export business under Saddam. The enterprise attracted the attention of the secret police, and Waeli is suspected of cutting deals with the regime to keep his business going. After the U.S. invasion in 2003, he underwent a makeover. "He was secular and used to drink," says Wael Abdul Latif, a former governor of Basra and Waeli's second cousin. "But overnight he became religious and started carrying dark prayer beads as a sign of his devotion." He joined the Fadhila Party, an offshoot of the political movement loyal to cleric Moqtada al-Sadr, and deftly outmaneuvered his political rivals in the 2005 elections.

The governor is known as the "oil prince" because of his suspected ties to smuggling networks in oil-rich southern Iraq. The road that leads south from Basra to the port of Abu Fulus, for instance, winds through dozens of date farms. Iraqi officials say smugglers have buried underground tanks here for storing petroleum. Every few kilometers, small creeks and canals cut through the farms; from these, boats chug out to the open sea and link up with tankers that carry the oil a short distance across the Persian Gulf to the deepwater port of Al Fujayrah in the United Arab Emirates. The racket is estimated to bring in millions of dollars a year.

Before March, many of the guards posted at the Basra oilfields and ports—known as the Facilities Protection Service, or FPS—were loyal to Fadhila and, according to both Iraqi and American officials, collected kickbacks on the party's behalf. Waeli's brother Ismail is suspected of taking care of the details. Hadi al-Ameri, the head of the Iraqi Parliament's security committee and one of Waeli's political rivals, says the government suspects Ismail of involvement in a string of assassinations but doesn't have sufficient evidence to push for an arrest yet. For now, Ismail, who denied any involvement in smuggling in an interview with the Al-Watan newspaper in April, is keeping a low profile in Kuwait. (He did not address Ameri's charges, and NEWSWEEK was not able to reach him independently for comment.)