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"Caldeum was once the proudest city in all of Kehjistan, the trade capital of the entire world. Caldeum was never seen as the heart of the empire, even though it rivaled Viz-Jun, and later Kurast, in size, and those who called Caldeum their home liked it that way. Even when the Mage Clan Wars erupted, the battles were never tolerated to affect trade in Caldeum, for while politics and magic may be important, trifling with trade is a serious matter."— Abd al-Hazir(src)
Caldeum, The Jewel of the East, is the greatest city in the entire Kehjistan empire, and even maybe the grandest city in Sanctuary. After the former imperial capital of Kurast fell to the influence of Mephisto, Caldeum has become the new capital of Kehjistan. The current ruler of Caldeum is Emperor Hakan II, who is merely a child. Caldeum is the trading center for all of the caravans in the Empire. Yshari Sanctum and Great Library are also located in Caldeum.
Following the corruption of the Kurast jungles by Mephisto, the nobles from Kurast migrated to Caldeum to seek sanctuary. Soon, they started demanding their 'rightful' place in the city's trading council and the city underwent a civil war-like state. But, due to the intervention of the charismatic Emperor of the Eastern Kingdoms, Hakan I, the citizens of Caldeum prospered for some time.
The famous author Abd al-Hazir may be native to Caldeum because he frequently refers to it as our fair city.
Only two leaders have been confirmed to have ruled Caldeum, but only one has brought the city glory. The city also has a ruling Trade Consortium Council that advises the ruler (and in fact ruled largely independent before the Imperial court moved to Caldeum). Belial corrupts the entire royal suitors in the events of Diablo III, and takes over the city for his own.
Emperor Hakan I seemed to be one of the greatest rulers in Caldeum's history. He worked with the Iron Wolves to root out evil and corruption wherever it may be found, with the close eye of the Zakarum priests. He had a son, Hakan II, who would many years later take his place. However, this became rushed as Hakan fell ill, and his son took power at around the age of 10.
Emperor Hakan II is the youngest regent ever to take power in Caldeum. He took the throne at a very young age, after his father fell ill and died. His mother's whereabouts are unknown. Many think Hakan as weak and unfit for power, and should be replaced with someone more fitting. Hakan II led the entire Empire into ruin, and many of his council members grew corrupt. He also let his own city become poor and ragged, with the buildings falling and throwing the city into poverty. The emperor also let Belial take over his city and kill many of his citizens. Hakan worked with Asheara afterward to restore the city back to its former glory.
In Diablo III, Caldeum is the central city of the second Act. It is under siege by Belial, the Lord of Lies and his Dark Coven in hopes of taking control of the city. However, before the nephalem hero can help the city, Belial wrests control of Emperor Hakan II and his royal court. His Coven also destroys Alcarnus and uses it has his frontal assault base. After the hero kills Maghda and revives Zoltun Kulle with his Black Soulstone, it is revealed that the Emperor was possessed before he could tell the nephalem who Belial's identity was. The hero kills Belial, and Asheara helps Hakan rebuild the city and create peace and order.
In Reaper of Souls Caldeum is mentioned by Tyrael to be one of the many cities to have fallen under attack from the Reapers. With nearly every city fighting its own battle and unable to aid each other, Tyrael and the Nephelam hold faith that the Iron Wolves will be able to defend the city from the angels as they did Belial.
Caldeum might be inspired from the city of Istanbul, Constantinople. Since both Caldeum and Istanbul connect the west & the east and were once capital trade centers. Architectural similarities do also support this claim as the Caldeum structures strongly resemble the Ottoman era architecture.
As well as being a popular Turkish name, "Hakan" is a Turkish title for a sovereign or military ruler. The title is derived from the old Turko-Mongol title for sovereign ruler, Khan.