Washington: The death of Oruzgan's feared police chief and warlord Matiullah Khan creates a frightening power vacuum in the Afghan province that the Australian Defence Force could not tame.

The Taliban and others had tried many times to take him down. But the millionaire Matiullah moved in a security bubble that, remarkably, had not been penetrated until Wednesday evening as the police chief stepped out of the hotel where he had been staying while doing business in the Afghan capital Kabul.

The Taliban claimed responsibility for a burqa-clad suicide bomber who detonated a vest bomb as he approached Matiullah. Reports from Kabul said that he had suffered shrapnel wounds to his chest, bring to an abrupt halt the rise and rise of an illiterate former cabbie and field labourer who came to command a seat at Afghanistan's top table.

Matiullah was a new age warlord whose demise is likely to ignite a massive power struggle in Oruzgan, where his tribal enemies will go after each other for control of his turf and wealth. Matiullah's great good luck was to arrive on the threshold of power as Australian and US forces invaded his country, bringing with them billions of dollars.

I was a guest of Matiullah for 10 days in 2013. When I arrived at Tarin Kowt with Fairfax photographer Kate Geraghty, Australian troops detained us and were planning to put us on the next flight back to Kabul when Matiullah intervened – if the Australians didn't want us, he would have us.

In his own ruthless way, he was charming. With a well-established record for brutality and - by Afghan standards - a rare capacity to take the fight to the Taliban, it was not necessary for him to continue being brutal; people knew they should fear him and his forces.

That was why, when he seized control of the highway from Kandahar to Tarin Kowt, the Australians and Americans agreed to his terms. His human rights record was appalling, he was into drug dealing and he had his own militia – but all that would have been small beer had both Canberra and Washington not anointed him.

MK, as he was called, could beguile the smartest generals in the ADF and run rings around Washington's finest. He scooped tens of millions from their taxpayer-funded budgets and they would pat him on the back, sanitising his atrocious record by refusing to acknowledge it and embracing him as a much-needed "security provider" who would protect their supply convoys – which you would have thought was the sort of work that armies invading from across the world would be able to do for themselves.

It was an incredible stunt. Matiullah had been a lowly commander in the Afghan highway patrol, which was disbanded holus-bolus because it was riddled with corruption. Undaunted, the warlord in Matiullah emerged and he simply assumed control of one of the most lucrative highways in the country.

Unlike many of his contemporaries, he evolved at a rate that stunned those who were in the business of watching him. "Seriously, in 2003 this guy had the mind of a child," one human rights professional told me. "He was a typical greedy warlord, fighting for resources. Now, he doesn't go after every penny. He consults the elders, instead of dismissing them. He shows respect for the ones that he needs to respect and he has developed this incredible understanding of how to play politics."

Even before then president Hamid Karzai, a fellow Popolzai tribesman, appointed him as provincial police chief, Matiullah would co-opt local officials or use his millions to drive around those foolish enough to stand in his way. The police title was cover, a painstakingly crafted web of power and patronage that dovetailed neatly with that of the president and his cronies at a time when Karzai was positioning his associates  to hold on to their massive, ill-gotten gains as he approached the mandated end of his term as national leader in 2014.

Matiullah Khan was a crony – but he also was his own man. Explaining how the unelected police chief eclipsed other warlords and tribal heavyweights, one foreign observer  said: "Politically, MK is a very important non-government commander - he collaborates with the Australians and the Kabul government. But he relies on a weak central government to be able to do his own thing."

He had effectively established his own shadow government, elevating himself above the Kabul-appointed provincial governor. He would unilaterally embark on his pick of the jobs that needed to be done across the province, spending massively from his own stash as he mocked the more cumbersome planning approach of the provincial and national bureaucracy and even of his Australian backers, who would not dare to move "outside the wire" without drowning in a sea of planning considerations.

He complained that the Australians sat in their bunkers "doing nothing, while I was clearing the Baluchi Valley [between Tarin Kowt and Chora in Oruzgan]". And he sniped at the Australian-led Provincial Reconstruction Team: "I do things; they talk about doing them."

He had his own radio station to shape local news and his desk clutter was a window into his world – it included plaques of appreciation from the Australian Federal Police and a boxed boomerang – a gift from Air Chief Marshal Angus Houston.