From Iraqi oilfields to Tory HQ: how Nadhim Zahawi mixed business and politics
Last Update: 2023-01-25 00:00:00- Source: Iraq News
Nadhim Zahawi, chair of the UK Conservative party, is due to publish his memoirs later this year. The title, A Boy from Baghdad: My Journey from Waziriyah to Westminster, reflects a career that has taken him from the dusty oilfields of Iraqi Kurdistan to the upper echelons of British politics.
The final chapter, however, will need a major rewrite.
Zahawi is the focus of the first big scandal to engulf the young premiership of Rishi Sunak after revelations about a clash with the taxman that have left him struggling to hold on to his job.
At the weekend, a Zahawi ally admitted that he had paid a penalty to HM Revenue & Customs, as part of a total settlement of £5mn for unpaid taxes. Sunak, who enlisted Zahawi to prepare the Conservatives for an election next year, has instead ordered an ethics inquiry into his tax affairs and faces huge pressure to sack his party chief.
It is the latest chapter in a life story in which Zahawi has successfully straddled the worlds of business and politics, becoming hugely wealthy and occupying several senior positions in government. In the dying days of Boris Johnson’s government, he even held one of the great offices of state, serving as chancellor of the exchequer for two months.
Born in Baghdad, he has gone from working for disgraced peer Jeffrey Archer to acting as a fixer for oil companies in the notoriously murky world of post-Saddam Iraq. In 2000, he co-founded YouGov, the polling group, which would earn his family millions.
Many colleagues admire him for his pluck and backslapping bonhomie, for his competent handling, as vaccines minister, of Britain’s fight against Covid-19, and for undoubted prowess as a self-made businessman.
But throughout his career, he has faced criticism for blurring the lines between business and politics, between the public and the personal. Those criticisms have come to a head in the latest scandal. When Zahawi agreed a settlement over profits from his family’s YouGov stake, he was at the time chancellor, leading the department that oversees HMRC.
One former Tory minister described Zahawi as a popular MP and successful risk-taking entrepreneur. But now, he said, Zahawi may have finally “flown a little too close to the sun”.
Zahawi was born in 1967 into an influential Kurdish family. One grandfather had been governor of the central bank, his signature appearing on Iraq’s banknotes.
Aged nine, he watched his father Hareth flee Baghdad. An entrepreneur, Hareth had fallen foul of Saddam Hussein’s Ba’ath party for refusing to join its ranks. Tipped off to a raid on his house the night before, he boarded a one-way Swissair flight to London in 1978.
Nadhim, who did not speak English when the family arrived in the UK at the age of 11, soon found his feet.
He graduated in engineering then showed a flair for entrepreneurship, sourcing and distributing T-shirts and Teletubbies merchandise to retailers such as Marks and Spencer.
It was while campaigning for Kurdish victims of the Hussein regime that he met Archer, then a prominent Tory politician, who raved about the young man’s administrative skills.
“If you said ‘I need six taxis, three aeroplanes and a double-decker bus, all in 30 minutes’ he went and did it,” he told the BBC.
In 1999, Zahawi worked on the failed London mayoralty bid by Archer, who two years later was convicted of perjury charges and jailed for four years.
It was on that campaign he met Stephan Shakespeare, with whom he went on to found polling company YouGov in 2000, floating the business on the stock market five years later.
A 42.5 per cent founder’s stake in the group went to Balshore, a Gibraltar-registered entity controlled by his father. By 2018, that shareholding had been sold off by Balshore for £27mn, disposals that are thought to have led to Zahawi’s settlement with HMRC last summer.
Today, although he is worth less than Sunak, who is married to the daughter of a billionaire, Zahawi is rich beyond the dreams of most MPs.
He owns a property empire valued at more than £58mn, according to accounts filed at Companies House by his company Zahawi & Zahawi. It includes a lavish townhouse in Belgravia, London, purchased for £13.75mn in 2013, as well as a home and livery yard in Stratford-upon-Avon.
In 2013, Zahawi was criticised by his political foes when it emerged that he had claimed £5,822 in expenses for heating the stables with taxpayer money. This was an innocent error, he said at the time: “I am mortified by this mistake.”
At the same time as the YouGov polling business was taking off, Zahawi was also looking for commercial opportunities back in Iraq after the US-led invasion in 2003.
His father’s company — then called the Al-Zahawi Group, but now known as Iraq Projects Business Development (IPBD) — quickly procured a contract to provide cleaning, logistics and support services to the new US-led interim government, based at Hussein’s Republican Palace.
In the early days after the invasion, Zahawi worked out of a small, dusty office in the same wing of the palace as Paul Bremer, head of the occupying authority.
It was then that he first met his friend Boris Johnson who, as editor of The Spectator, had commissioned a YouGov poll of Baghdad residents about the US invasion.
Zahawi, who became MP for Stratford in 2010, once said of his life in parliament: “My first priority, before anything else, is my constituency work and I would never, or have never, let anything get in the way of this.”
Yet his extracurricular business activities occupied a large chunk of his early years as an MP.
Within weeks of election he became the vice-chair of the All-Party Parliamentary Group (APPG) on Kurdistan, taking five free trips to the autonomous region of Northern Iraq between 2011 and 2015 funded by the region’s government.
At around the same time, he also set up his Zahawi & Zahawi Ltd consultancy, which he would use for the next seven years to advise oil companies operating in the energy-rich region, netting him more than £1mn in fees.
For a handful of oil companies in a crisis, he soon became a man to turn to: a go-to fixer who could help smooth relations or make introductions between oil executives and Kurdish officials, industry sources said.
“With rumours of 45bn barrels of reserves, everybody wanted a piece of the cake, and companies were fighting hard,” said Alan Mohtadi, who heads T&S Consulting Energy and Security, which advises companies in the Kurdish oil and gas sector.
At the time, the industry was largely run on personal, rather than institutional, relationships, Mohtadi said, which meant that corruption was rife.
Oil companies relied on consultants with close ties to regional government officials, including the influential minister for natural resources, Ashti Hawrami, who is largely credited with building the industry from scratch.
Although Zahawi was an “opportunist”, in the words of one oil consultant, there is no suggestion that he acted improperly in Iraq, an oil-rich country blighted by endemic corruption, including in its energy sector.
People who know him say that Zahawi’s political ambitions in the UK made him very cautious about any wrongdoing. “He was very careful about his ties there and how they could be perceived,” one person said.
After Zahawi entered parliament, he began building closer ties with the Barzanis, one of the two ruling families who dominate the Kurdistan region’s dynastic politics. They saw him as a potential conduit to both the British government and to Hawrami, the oil minister, according to industry sources and people who know his family.
According to parliamentary records, Zahawi & Zahawi’s clients included London-listed oil producer Afren. The Texas-based company was later investigated for bribery by the Serious Fraud Office in 2015, and two Afren executives were jailed for fraud and money laundering. Zahawi had already dropped the troubled company, and there is no suggestion that he was involved in any wrongdoing.
By July 2015, he had landed a lucrative role as chief strategy officer at Gulf Keystone, which operated the Shaikan oilfield, one of the Kurdistan region’s largest.
Gulf Keystone was paying Zahawi £29,643 a month by the time he stepped back from the role in 2017. In total, including a £285,000 leaving bonus, he earned at least £1.3mn.
At that time, oil companies were struggling to secure regular payments from the Kurdistan Regional Government in return for their exports, while also grappling with low crude prices.
Gulf Keystone was in freefall, having publicly clashed with the Kurdistan Regional Government over unpaid bills. But soon after Zahawi was appointed, it began receiving its payments on time and in full, unlike most other oil companies, Kurdish oil sources said.
“Zahawi’s influence managed to push them to the head of the queue,” said one consultant working on similar projects at the same time. “[Some] rival oil companies felt the Kurdistan Regional Government was playing favourites.”
The Tory MP also accompanied senior members of the KRG to meetings with British officials, including Johnson when he was mayor of London and then prime minister.
In 2013, he also became a large shareholder in Anglo-Turkish exploration company Genel Energy, which operated a field in Kurdistan. On a four-day trip by MPs to Erbil paid for by the Kurdistan government in 2013, the parliamentarians visited an oilfield run by Genel.
Zahawi became UK junior education minister in January 2018. However, his rise to the ministerial ranks was almost derailed just days later when it emerged that he had attended a Presidents Club charity dinner exposed by the Financial Times as the scene of sexual harassment.
He was given a “dressing down” by Theresa May, then prime minister. But he said he had left early and had not witnessed “the horrific events”, which he condemned “unequivocally”.
Months later he became a junior minister in the business department (BEIS), where he was working when Covid hit.
At the start of the pandemic he intervened to help facilitate a new business opportunity for Greensill Capital.
Greensill provided £400mn of credit to entities linked to GFG Alliance, the conglomerate owned by steel tycoon Sanjeev Gupta, after the loans were backed by the government as part of its Covid support measures for the economy.
David Cameron, the former prime minister who earned millions of pounds as a boardroom adviser to the controversial financing firm, told Zahawi via text in 2020 that he had been “v helpful” with Greensill’s successful bid to offer taxpayer-backed Covid loans.
Gupta, whose businesses are now under criminal investigation for fraud, went even further in a letter to Zahawi a few months later, describing the government minister as “personally instrumental” in getting Greensill approved on the scheme.
Yet when journalists investigating the Gupta scandal tried to obtain the government minister’s correspondence with the two men, they hit a brick wall: Zahawi’s messages had been deleted.
While a Freedom of Information request from the Financial Times eventually revealed that “a text exchange or phone call between Sanjeev Gupta and Nadhim Zahawi took place at an unknown date” in relation to “Covid assistance”, the business department disclosed that there “was no longer an electronic record of the communication stored on the device used by Nadhim Zahawi, which was his personal mobile phone”.
By the time the FT exposed Gupta’s lavish praise of Zahawi, the major government inquiries into the collapse of Greensill Capital had come and gone.
Allies of Zahawi say he took steps to help a struggling industry, of totemic political importance, as minister responsible for the steel jobs.
Under the premiership of his old friend Johnson, Zahawi’s political career took off with the sensitive job of vaccines minister during the pandemic, followed by education secretary and then, after the resignation of Sunak in July 2022, the chancellorship.
After Johnson announced his resignation, Zahawi stayed on as chancellor for two months and mounted an abortive attempt to win the party leadership.
His campaign struggled to gain momentum, not least with the first revelation that he was in a dispute with HMRC about his tax affairs. At the time he suggested that the claims were a media “smear”.
Zahawi’s position had always been that Balshore, his father’s company, owned the 42.5 per cent stake in YouGov, and that neither he nor his wife or children were beneficiaries.
But last summer experts pointed out that YouGov had described Balshore as “the family trust of Nadhim Zahawi” in its reports. Likewise, Zahawi received a payment from Balshore of £99,000 in 2005.
On July 9 last year, he told The Times: “All of my business interests were properly dealt with and declared from 2000.” On August 24, his lawyers wrote to Dan Neidle, the tax expert who raised questions about Zahawi’s tax affairs, saying: “Our client’s taxes are fully declared and paid in the UK.”
Some colleagues are baffled as to why Zahawi did not admit that he was in talks with HMRC officials about his own tax settlement while running the Treasury, and instead tried to silence Neidle and journalists with legal threats.
One former cabinet minister said there was a “case for the defence” that Zahawi may have been disputing the Inland Revenue officials just as he became chancellor. “Sometimes the Inland Revenue makes an enormous mess of their investigations and you’re entitled to challenge them.”
But, this month, Zahawi’s attempts to avoid scrutiny crumbled when The Guardian revealed that the payment he made to HMRC was close to £5mn, made up of £3.7mn of unpaid taxes, a £1.1mn fine and some interest.
At first a spokesperson refused to comment on the report but, by last Saturday, Zahawi had issued a statement disclosing that he had reached a settlement with HMRC after what he called a “careless and not deliberate error” in relation to the tax treatment of shares in YouGov.
Even then he refused to say how much he had paid or whether there was a penalty. Only on Sunday evening did one ally confirm that the settlement included a penalty.
Zahawi did not respond to a request for comment on Tuesday.
Sunak, promising to lead a government of “integrity, professionalism and accountability” has launched an ethics inquiry “to get to the bottom of everything”.
“Nadhim’s finished,” said one senior Tory MP. “He’s toast.”
