Monday, February 27, 2006

Dubai Ports Follow-Up

(cross-posted on Daily Kos)

Just wanted to follow up on my Diary of last Friday, Dubai Deal-Making Timeline, which lists developments in the Sheik of Dubai's recent decision to "go global" in ports management as documented by sources in the shipping industry and corporate/investment press.

Today the AP reported that the Coast Guard - the US government agency in charge of American port security - Expressed Concerns About Intelligence Gaps to the bush administration weeks ago. These gaps mean that the Coast Guard could not determine if Dubai Ports World might support terrorist operations.

Administration officials said in a Senate Homeland Security Committee hearing today [Monday] that those concerns had been addressed prior to CFIUS approval of the P&O takeover by DPW on January 17, but both the Congress and the American public are not convinced. I am not convinced either, for reasons that don't have a lot to do with the Bush administrations secret dealings with Dubai's royal house for strategic support within shooting distance of Iran...

First and foremost, it's important in the politics of sorting all this out that we understand the fact that the US government cannot yea or nay the sale of a British corporation to any other corporation they want. All CFIUS can do is yea or nay the buyer's takeover of P&O leases of American port facilities. We all know that CFIUS said 'yea' on January 27, but they forgot to tell the Congress or the port authorities in the states where the 21 ports are located... oops.

The states should pursue (by suit if necessary) their right to review all the information CIFUS considered, along with their duty to make the final determination about terminal leases in their ports. If DPW has to spin off yet another front company (through Carlyle) to handle operations in the US through a US-controlled subsidiary that's okay with me. Or P&O can decide to sell to one of the other bidders - AP Moller-Mearsk, for instance, which just purchased P&O's line division (ships and containers) in December. Or PSA's Temasek offer, though that would put the facilities in the hands of the Singapore government.

The container industry was a great idea in 1956 (when Sea-Land invented it). Allows door-to-door service, easily handled by truck/train in the interior, etc. The deep-water Port of Dubai, built by a Sheik-owned CSX spin-off in 1978, apparently handles trans-shipment of most of the containers in the world right now, so it's obviously a well-run operation. But in a world where terrorists with WMDs are a serious issue, the return of empties on the same ships with sealed containers presents a pretty darned tempting opportunity.

Check ILA [Longshoremen's Union] comments filed as part of the DOT/Coast Guard revamping of maritime security after 9-11:

"In addition, one of the most overlooked of potential security risks to terminals, ships and port infrastructures is the proper handling of empty containers. On any given day as much as forty percent of cargo delivered into any facility is comprised of empty containers.  Containers marked as empty provide easier opportunity to house destructive devices and, therefore, present increased security risks warranting their inspection at port facilities.

In many ports throughout the world, the inspection of empty containers is a requirement for many of the reasons outlined above.  For years, inspections of empty containers was regularly done in America's largest seaports; however this procedure was abandoned some years ago. Once again, if we truly are serious about creating safe and secure seaports, then the return to these inspections is a must."

A Tale of Docks and Mobsters is quite a fun read, with revelations like this...

"In a series of indictments, a reputed Genovese mob captain from New Jersey and three top ILA officials are charged with conspiracy to commit extortion and fraud. Prosecutors say the scheme was aimed at taking control of the 35,000-member dockworkers union — which represents 4,000 workers in the metropolitan area alone — while steering lucrative union-benefits contracts to companies that paid kickbacks to the mob."

Worse, the American mob isn't the only player. One can hope our mob wouldn't knowingly abet terrorists, but who can guarantee such a thing? We wouldn't put our national security in the hands of the Russian mafia or Chinese Triads. Americans are not being unreasonable or "racist" for not automatically trusting a Middle Eastern Emirate that has been notorious for smuggling people, drugs, arms and other contraband in the Middle East for 200 years.

But ultimately, my problem with this sneaky deal is that Dubai's international terminal operation is less than a year old (purchase of CSX WT in March of 2005) - the company we've been introduced to as DPW is just 5 months old. It was created solely so it could enter the bidding for P&O's terminals division and its operations in North America.

There's precisely ZERO history on which to base a rational decision about security threats to the US from this company or from a country with well-documented ties to the 9-11 terrorists.

Trading With the Enemy [Forbes, April 12, 2004] -

"If you want to get around export controls, just sell the product to a front company in Dubai. The middlemen will take it from there."


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