MQM chief Altaf Hussain was accused of raising anti-Pakistan slogans at a protest rally.
After 24 years running Pakistan's largest city from exile in a quiet suburban house in north London, Altaf Hussain may be finally losing his grip on power.
In August, the corpulent, bespectacled 63-year-old leader of the Muttahida Qaumi Movement, the party that has run Karachi since the late 1980s, addressed a gathering of hundreds of followers in the city by phone, his voice relayed via loudspeakers.
"The state is failing us, down with the state," Hussain said, according to Nadeem Nusrat, MQM convener and Hussain's London-based aide.
Security forces controlled by the military and central government were quick to respond after Hussain's supporters were accused of storming media offices, killing one person and injuring others. The MQM's most senior member in Pakistan, Farooq Sattar, renounced Hussain's leadership, the first time the party's Pakistan lawmakers openly split from the group in London.
It was the latest in decades of accusations and counter accusations by the party, police and military of extra-judicial killings, kidnappings, extortion and murder that have hampered development of Pakistan's commercial heart, home to the nation's central bank, stock exchange and biggest port.
A transit point for everything from Afghan opium and arms to cotton and rice, Karachi's estimated 20 million people pay more than 65 percent of Pakistan's tax, yet the city's economy is worth about $68 billion, a quarter the size of Mumbai, India's leading commercial center, and smaller than Dubai, which has a fraction of the population.
Hussain's increasingly erratic hold on power threatens to ignite a power struggle that would pit leaders of the city's Urdu-speaking Mohajir majority against each other and against the military and police who they claim have been suppressing the MQM in a bloody three-year clampdown.
Chinese InvestmentThat could jeopardize efforts to attract investors to one of the world's fastest-growing cities, which has been trying to shake off its lawless image and gain billions of dollars in funding from Chinese and other foreign companies.
"The MQM is facing multiple pressures both external and internal," said Huma Yusuf, senior Pakistan analyst at consultancy Control Risks in London. "A split that divided the party into London and Karachi camps would lead to an intra-party tussle over members, voters and control of resources that could lead to instability, including violence."
The August protest in Karachi was the spark. The national government led by Prime Minister Nawaz Sharif branded Hussain's remarks "anti-Pakistan," and claimed he incited MQM members to violence. Paramilitary forces arrested the party's leaders and closed its offices nationwide.
Hussain later apologized for his remarks, but the damage was done. When he called for all MQM lawmakers to resign this month, they ignored him. Hussain didn't respond to written requests for an interview delivered to the party's London office.
A splintering of the MQM could be a powder keg for the city's inhabitants, most of whom are Mohajir -- Muslims who fled India during the subcontinent's partition after the end of British rule in 1947. For a quarter of a century, they have stuck together under Hussain.
Karachi CrackdownNow that's changing. Sharif, an old adversary of Hussain's, was elected in 2013 with a majority in parliament in Pakistan's first transfer of power between civilian governments. He embarked on a crackdown against violence, especially in Karachi, which is ranked among the 10 least livable cities in the world by the Economist Intelligence Unit.
The MQM, the nation's fourth-largest political party, which holds 17 of Karachi's 20 seats in the National Assembly, became a target. Portraits of army chief Raheel Sharif, no relation to the prime minister, replaced those of Hussain across the city. The national government says its actions were to restore order and were not political.
In the ensuing battle for control of Karachi's streets, thousands died, were imprisoned or went underground.
As of 2009, the MQM controlled an armed wing of about 10,000 active members and 25,000 reserves known as the "Good Friends," that detractors said were responsible for extortion, assassination of political rivals and murder of people from other ethnic communities, then-U.S. Consul General Stephen Fakan wrote in a classified cable released by WikiLeaks.
Miftah Ismail, an aide to Nawaz Sharif and chairman of the government's Board of Investment, said the prime minister faced complaints from angry business owners at a meeting in Karachi shortly after the 2013 election.
"They were talking about law and order issues they were facing -- kidnapping, extortion, target killing," said Ismail, who attended the meeting. "Now if you talk to businessmen, they will talk about garbage in the street."
Uber Technologies Inc. started operations in the city in August, while Shanghai Electric Power Co. is bidding for the city's power utility. A $46 billion package of investment across Pakistan, announced last year by China, is dependent on improved security.
Financier Arif Habib says improved security has helped fuel a property boom, with prices at his 1,300-acre property development at the northern tip of the city doubling since 2012.
Still, safety is relative. Police say average daily killings in Karachi dropped to two as of last month, from six in September 2013. Bomb attacks dropped 80 percent last year after peaking in 2013, according to the South Asia Terrorism Portal.
And Hussain remains an idol for many of Karachi's Mohajirs. Waseem Akhtar, an MQM member who was arrested in July on charges of sedition and terrorism, ran for mayor of the city from prison and was elected in August, leaving jail briefly to be sworn in. He has denied the charges.
In 1992, Hussain fled Pakistan after threats against his life, later falling out with Sharif, then in his first stint running the country. Since 2010, Hussain has become reclusive and rarely leaves his home, said Nusrat. The exiled leader, who holds a U.K. passport, has diabetes and heart problems, he said.
Nusrat denies the MQM rules by violence and fear, saying the party only acts in self-defense against extremists. "It's called realpolitik," he said. "People have every right to defend themselves if the state is failing."
Since August 2013, nearly 10,000 MQM affiliated properties have been raided throughout southern Sindh province and more than 1,000 party members are in prison or detention, Nusrat said. At least 62 have been killed without trial and about 150 are missing, he said.
Murdered WifeA former Pakistani police officer who fled to the U.K. in late 2008 and was granted asylum, says the MQM is a militant group that uses weapons and force and threats. In a dilapidated apartment in Scotland, the ex-officer, who asked not to be identified for fear of reprisal, said he left Karachi because his brother and pregnant wife were gunned down by unknown assailants. Their murders followed death threats chalked on his house after he arrested three alleged MQM gunmen nine years ago.
The military campaign has reduced the ability of the MQM's militia to shut down the city "because most of them have been arrested or have gone underground," said Zia Ur Rehman, author of ''Karachi in Turmoil."
Hussein's erratic behavior is driving away younger voters, said Raza Haroon, 51, a former MQM lawmaker who spent 14 years in London with Hussain. "My nieces, my nephews don't follow the MQM," said Haroon, who has joined a splinter group called Pak Sarzameen Party.
Many are afraid to leave the MQM because "in the past, anyone who split from the party has been the target of assassination," said Omar Hamid, a police officer and writer in Karachi, whose father was allegedly murdered on the orders of Hussain in 1997, an accusation the party denies.
For the government and the citizens of Karachi, the concern is that when Hussain goes, the ensuing power struggle could throw the city back into bloody chaos.
"It's only being held together by the fear of Altaf," said Hamid. Without Hussain, factional groups will come out further "and the party will splinter."
© 2016 Bloomberg L.P.