The assassination of 11 French engineers in a bomb blast in Karachi in 2002 may not be the work of Islamist terrorists, as alleged these past years, but an act of retaliation carried out by Pakistan's army and Inter-Services Intelligence in response to the French State's failure to pay Pakistani officials $33 million in promised kickbacks for a €1.8-billion contract for the purchase of Agosta submarines in 1994.

In documents published on Monday the left wing daily Liberation alleges that intermediaries close to then French Prime Minister Edouard Balladur (1994) received “retro commissions” or reverse kickbacks for the contract and that 10 million French Francs (€1.5 million) of that money found their way into Mr. Balladur's campaign fund for his presidential bid of 1995. The paper has obtained a copy of the 197-page armaments contract between France and Pakistan, a document which the French state has stubbornly refused to give the investigating magistrates looking into the Karachi bomb blast.

Liberation revealed that in the final phase of the negotiations, Mr. Balladur imposed two Lebanese businessmen as intermediaries on the Pakistani negotiators. The deal which was then struck, the daily alleges, was that Pakistani officials would receive 338 million French Francs as commission for signing on the dotted line, while another 216 million would be added to the price of the contract and returned to the French as reverse kickbacks.

Liberation gives details of how a web of offshore companies was created to channel the alleged commission payments. It also quotes from a confidential report written by a former French intelligence officer about the case. The secret memo says Pakistani officials kept asking for the unpaid bribes for several years.

Mr. Balladur lost the election to his arch rival Jacques Chirac who then decided to stop the payment of commissions to the Pakistani officials. The Pakistanis sent several messages to the French warning of dire consequences if the “debt” remained unpaid.

In June 2009, The Hindu, on the basis of discussions with lawyers close to the enquiry reported that investigating magistrates, Marc Trevidic and Yves Jannier had obtained a top secret internal memo containing the above allegations in October 2008 from the state-owned military shipbuilder DCN which supplied the submarines.

For the past seven years, French investigators have suspected that Islamist terrorists of being behind the Karachi attack. Now an entirely different and hugely compromising scenario is emerging. “There was a terrorist act in which French citizens were killed,” said Morice, a lawyer acting on behalf of the victims' families. “The motive, however, was not Islamic terrorism at all but revenge for the fact that France did not pay commissions it had pledged to pay.”

Today, Mr. Morice said President Sarkozy, who was then Minister for the Budget and in that capacity gave the deal the green light, bore a heavy burden of responsibility. “Mr. Sarkozy is at the heart of this corruption scandal that has cost the lives of several Frenchmen,” said Mr. Morice in a radio interview.

Mr. Balladur said he had no knowledge of these retro commissions and that his campaign accounts had been validated by the central audit office.

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