From SHARON CHURCHER and ANNETTE WITHERIDGE, Mail on Sunday

Last updated at 18:05 20 March 2005

The appointment of George Bush's leading hawk as head of the World Bank was heading for a crisis over his relationship with a senior British employee.

Influential members of staff at the international organisation have complained to its board that Paul Wolfowitz, a married father of three, is so besotted with Oxford-educated Shaha Riza he cannot be impartial.

Extraordinarily, they claim she played a key role in pushing the 61-year-old Pentagon official into the Iraq War. And the row comes amid claims that Wolfowitz's wife Clare once warned George Bush of the threat to national security any infidelity by her husband could cause.

A British citizen - at 51, eight years younger than Wolfowitz's wife - Ms Riza grew up in Saudi Arabia and was passionately committed to democratising the Middle East when she allegedly began to date Wolfowitz.

She studied at the London School of Economics in the Seventies before taking a master's degree at St Anthony's College, Oxford, where she met her future husband, Turkish Cypriot Bulent Ali Riza, from whom she is now divorced.

After they moved to America, Shaha worked for the Iraq Foundation, set up by expatriates to overthrow Saddam Hussein after the first Gulf War. She subsequently joined the National Endowment for Democracy, created by President Ronald Reagan to promote American ideals.

Bulent Riza said Shaha started to "talk to Paul" about reforming the Middle East. And New Yorker magazine's respected commentator Paul Boyer observed that a senior World Bank official "named Shaha Ali Riza" was an "influence".

Downing Street 'furious' at nomination

Wolfowitz became known around the world as one of the fiercest proponents of invasion of Iraq. The Mail on Sunday has learned that Downing Street is "furious" about his nomination, fearing his hardline attitude could alienate large sections of the international community.

But it is his tangled private life that could stop him taking up the World Bank post.

Critics say it would be impossible for Wolfie - as he is nicknamed by Bush - to make independent decisions when his lover, who works on Middle Eastern and North African issues, is so committed to overthrowing Middle Eastern regimes.

"His womanising has come home to roost," a Washington insider said. "Paul was a foreign policy hawk long before he met Shaha but it doesn't look good to be accused of being under the thumb of your mistress."

One of his opponents at the bank said: "Unless Riza gives up her job, this will be an impossible conflict of interest."

National security risk

Wolfowitz married Clare Selgin in 1968. But they have lived separately since 2001, after allegations of an affair with an employee at the School of Advanced International Studies where he was dean for seven years.

According to one Republican Administration insider, Clare was so upset by rumours about the affair that she wrote to then President Elect Bush, saying if the story were true it could pose a national security risk.

Yesterday, she refused to comment on whether her husband had been unfaithful before their separation, saying: "I really do not want to share this with you."

She also refused to confirm her marital status - reports of his appointment repeatedly describe Wolfowitz as divorced but The Mail on Sunday has been unable to find any records. Asked if she is separated or divorced, Clare replied: "That's my business."

On the claim that she wrote a letter to Bush, she said: "That's very interesting but not something I can tell you about."

A friend of Wolfowitz insisted last night that he had not been unfaithful: "Paul and Clare have been separated since 2001. It is my understanding they are now legally separated."

By tradition, the United States picks the bank's president, but the decision must be approved by its board. The US has a 16 per cent vote, but Europe collectively has about 30 per cent.

The bank's staff association has told executives it has been swamped with complaints from employees about Wolfowitz.

However, Wolfowitz's only comment on the complaints has been a terse statement issued through a Pentagon spokesman. He said: "If a personal relationship presents a potential conflict of interest, I will comply with bank policies to resolve the issue."