February 21, 2006

UAE and American Ports: a Modest Proposal

Hatched by Dafydd

A very curious conflict has arisen between the president and most shipping experts on one side, and virtually the entire political establishment, Republican and Democrat, on the other. A British company, Peninsular and Oriental Steam Navigation Co. (P&O), which had the management of cargo and other operations (not port security) at six American ports, including New York and New Orleans, was bought by Dubai Ports World -- a company wholly owned by the government of Dubai, one of the emirates within the United Arab Emirates.

The sale - expected to be finalized in early March - would put Dubai Ports in charge of major shipping operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. "If there was any chance that this transaction would jeopardize the security of the United States, it would not go forward," Bush said.

Bluntly put, there are very good reasons to go ahead with this deal -- but also some very real security concerns that must be dealt with. We at Big Lizards have a modest proposal for cutting this Gordian Knot (one that is meant seriously, not as satirist Jonathon Swift meant his own Modest Proposal!)

The Two-Headed Dragon

There are two problems with this proposal, one security-related and the other political; but there are also good reasons in favor of it. Bush apparently has completely ignored the problems (this is likely an illusion), while Republicans and Democrats high in the political heirarchy seemingly do not even notice any of the arguments in favor: the deal is bitterly opposed by such stalwarts on both sides, Republicans such as Senate Majority Leader Bill Frist of Tennessee, House Speaker Dennis Hastert of Illinois, and New York Gov. George Pataki, and Democrats including Sen. Charles Schumer, Sen. Hillary Clinton, and Rep. Edward Markey, all of New York... although Republican opposition is more in the form of wanting further study, while Democrats simply want the deal killed outright.

Head #1: National Security

The security related problem is easier to deal with. Dubai Ports would not, in fact, run any of the security operations at any of the ports; but they would deal with cargo issues, and they would have access to plans showing the layout and configuration of the cargo areas... plans which are, however, already publicly available to every company that does business in those ports (including Saudi Arabian, Turkish, and Indonesian companies).

The UAE has been America's most reliable Arab partner in the war against Islamist jihadi terrorism. Nobody is worried that the current Emir of Dubai will suddenly link up with al-Qaeda, just as we're not worried that General Pervez Musharraf of Pakistan will cut a deal with Osama bin Laden. But both countries have many Islamists and many supporters of terrorism and of al-Qaeda... and they cannot always ensure that their companies have not been infiltrated by sleeper agents. That is the danger of Dubai Ports having such access to American ports.

Lawmakers from both parties have noted that some of the Sept. 11 hijackers used the United Arab Emirates as an operational and financial base. In addition, critics contend the UAE was an important transfer point for shipments of smuggled nuclear components sent to Iran, North Korea and Libya by a Pakistani scientist.

[This cryptic phrase refers to A.Q. Khan, the "father" of the Pakistan nuclear program, who then sold the technology to dangerous regimes all over the world. He was subsequently fired and remains under surveillance... though his national popularity within Pakistan precludes him being imprisoned. -- the Mgt.]

[Lawmakers] say a port operator complicit in smuggling or terrorism could manipulate manifests and other records to frustrate Homeland Security's already limited scrutiny of shipping containers and slip contraband past U.S. Customs inspectors.

Head #2: the Political Dimension

The political problem, of course, is the appearance that the Bush administration is turning a blind eye to Arab infiltration of critical port operations. This tends to damage Bush's great political strength, his fight against terrorism.

There is another, subtler political danger: Democrats, who until now have appeared as nothing but weaklings and moral cowards on national security issues -- Rep. John Murtha, D-PA, demanding an immediate withdrawal of all U.S. forces from Iraq springs to mind -- have the chance to get to the "right" of the president on a national-security issue, as Schumer and Clinton are doing: as hard to credit as it may be that Sen. Clinton cares a fig for national security, she can nevertheless sound tough and still oppose the president... and that is a golden opportunity in an election year, and also for her expected presidential run in 2008.

On the Plus Side

But there are political perils on the anti-deal side, too... notably that America has allowed foreign companies, including those based in countries with unfriendly populations or even enemy governments (such as Red China), to operate other American ports, just as Dubai Ports wants to do:

The White House appeared stunned by the uprising, over a transaction that they considered routine — especially since China's biggest state-owned shipper runs major ports in the United States, as do a host of other foreign companies. Mr. Bush's aides defended their decision, saying the company, Dubai Ports World, which is owned by the United Arab Emirates, would have no control over security issues....

But [the] firestorm of opposition to the deal drew a similarly intense expression of befuddlement by shipping industry and port experts.

The shipping business, they said, went global more than a decade ago and across the United States, foreign-based companies already control more than 30 percent of the port terminals.

That inventory includes APL Limited, which is controlled by the government of Singapore, and which operates terminals in Los Angeles, Oakland, Seattle, and Dutch Harbor, Alaska. Globally, 24 of the top 25 ship terminal operators are foreign-based, meaning most of the containers sent to the United States leave terminals around the world that are operated by foreign government or foreign-based companies.

"This kind of reaction is totally illogical," said Philip Damas, research director at Drewry Shipping Consultants of London. "The location of the headquarters of a company in the age of globalism is irrelevant."

Singapore, of course, is also a country with a large and radicalized Moslem population that is infiltrated -- inundated is the better word -- by international terrorist organizations like al-Qaeda and their affilliate, Jemaah Islamiah; yet no one is up in arms about APL operating American ports. What is the difference?

The danger to the shrillest voices opposing this deal (especially the Democrats) is that they never objected when other dicey foreign countries operated the ports... but when an Arab country, even a friendly one that has been a huge help to us in the war, wants to do the same thing, the Democrats become hysterical. It smacks of racism -- the idea that it doesn't matter what an Arab thinks or even how hard he has fought on our side in the war against jihadism... his ethnicity alone makes him suspect. After flinging such charges at Republicans for so many decades, Democrats are very edgy about such accusations sticking to them.

There are other, more tangible arguments in favor of the deal, mostly that the UAE has agreed to dramatically increase their already very high level of cooperation with the United States and our Western allies in the war effort. According to AP:

To assuage concerns, the administration disclosed some assurances it had negotiated with Dubai Ports. It required mandatory participation in U.S. security programs to stop smuggling and detect illegal shipments of nuclear materials; roughly 33 other port companies participate in these voluntarily. The Coast Guard also said Tuesday it was nearly finished inspecting Dubai Ports' facilities in the United States.

A senior Homeland Security official, Stewart Baker, said this was the first-ever sale involving U.S. port operations to a state-owned government. "In that sense this is a new layer of controls," he said. Baker added that U.S. intelligence agencies were consulted "very early on to actually look at vulnerabilities and threats...."

A senior executive from Dubai Ports World pledged the company would agree to whatever security precautions the U.S. government demanded to salvage the deal. Chief operating officer Edward "Ted" H. Bilkey promised Dubai Ports "will fully cooperate in putting into place whatever is necessary to protect the terminals...."

Bush, who has never vetoed a bill as president, said on the White House South Lawn: "This is a company that has played by the rules, has been cooperative with the United States, from a country that's an ally on the war on terror, and it would send a terrible signal to friends and allies not to let this transaction go through."

A Modest Proposal

Neither side has noticed that there is a fairly obvious compromise staring us in the face, which Big Lizards believes would resolve the very real security concerns without losing the equally real security benefits from this deal.

Both the actual national-security risk and also the political danger come, not from the ownership of the company, but rather from the day to day management -- the actual control of operations. The emirate wants the profits that accrue from ownership; rational Americans want to see control of the port, even the cargo areas, in friendly hands, preferably American.

This suggests a workable compromise: an American company should be chartered -- American owned and American managed -- that is a wholly owned but independently operated subsidiary of Dubai Ports... call it American Port Services, Inc., or somesuch name that makes clear the nationality; and then let all the actual management of the ports be handled by the American APS, not by Dubai Ports.

This will add a middle corporate layer, so Dubai Ports won't make quite as much of a profit as they would running the ports directly; but on the other hand, it's still better than no profit at all. And Americans can be assured that rather than shifting from British control to UAE control, we will in fact have shifted from British to American control of port operations.

This resolves both the security and the political problems:

  • Americans will be running day to day operations, quieting the very real fears of terrorist infiltration;
  • Republican senators, representatives, and governors can truthfully say that they negotiated a much better deal with the president, so their protest to the initial version was successful;
  • President Bush can deliver on his promise to a friend and ally in the war on jihadi terrorism, thus gaining even more cooperation from the UAE on anti-terrorist measures -- and making America more secure;
  • The White House and Republicans in Congress and the state houses can again unite on matters of national security, as before;
  • The only losers will be the hysterical Democrats: unlike the Republicans, who insisted only upon more "scrutiny" of the deal, Democrats have simply been howling for the whole thing to be killed... and they'll be left out in the cold by a solid, secure "new deal" that incorporates all the benefits while avoiding the dangerous pitfalls.

Once again, the Democrats have overreacted, demanding death to the deal, when in fact we can address the real and sincere threats without having to pull the beard of a long-time ally in the war effort. As Dubai Ports has already agreed to "whatever security precautions the U.S. government demanded to salvage the deal," they should be willing to sign off on being a holding company, rather than the actual operator, which will be "American Port Services," or whatever they decide to call it.

All sides will be satisfied, and we can then proceed with the deal.

Hatched by Dafydd on this day, February 21, 2006, at the time of 8:36 PM

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The following hissed in response by: blueguitarbob

Now, this is the first sober article I've read regarding this issue. Thanks for not jumping headlong onto the xenophobia bandwagon.

However, the proposal still makes the same silly, unsupported assertion that -- simply because DP World is based in Dubai, UAE -- the company is somehow more at risk of being "infiltrated by sleeper agents." Substantive argument, please? Or are we to believe that every Arab secretly hates us, and they all conspiring against us?

Please. A terrorist organization can infiltrate DP World, P&O, Kraft Foods, General Motors, Exxon-Mobil, Raytheon, Boeing, or any other multinational corporation with equal ease if they really want to. The key is properly funding our law enforcement agencies, so that they can detect and limit terrorist actions. Forcing the corporate mailing address to have a US Zip code may give an illusion of enhanced security, but that's all.

By the way, have a visit to the DP World website: http://www.dpiterminals.com/dpworld_main.asp and look at the management team. How many Arab names? I count one, along with Ted, George, Matt, and Vijay among others. Filled to the gunnels with raving Jihadis, yep.

As for the proposal? Meh. Politics is the art of compromise, or so I am told ad nauseum. I'm sure some compromise like this will happen. Its not a shining moment of high principle, that's for sure.

The above hissed in response by: blueguitarbob [TypeKey Profile Page] at February 21, 2006 11:16 PM

The following hissed in response by: Bill Faith

I linked from Bush Defends UAE Port Takeover Despite Mounting OppositionI think you have an excellent idea.

The above hissed in response by: Bill Faith [TypeKey Profile Page] at February 21, 2006 11:16 PM

The following hissed in response by: Mr. Michael

For the most part I'm going to punt on the Second Head, that of the Political Dimension, and leave it to others to dissect. But on the First Head, that of the National Security angle, let me hold forth:

Wrong target, people.

If you are upset that an Arab Nation is going to be responsible for the Security of our Ports, rest assured that this will not be. As Dafyyd notes, APL manages the ocean shipping port in Seattle, but security is provided through Coast Guard, FBI, Port of Seattle (a local govenment layer separate from [and larger than!] the City of Seattle) as well as the thousands of people who work on site.

DP World operates ports in China, Hong Kong, and Australia...
all ports which ship things TO the United States. This being the case, they already have in their posession all information/ability to send terrorist related activity our way, and when the Bush administration says that they are a valuable partner in the GWOT, it's because DP World is already heavily cooperating with the U.S. to protect our ports by screening cargo before it ever gets to us. Keep this in mind: We are already dealing with this company, and they have already proven themselves as VERY helpful allies doing in foreign ports exactly what they would be doing in local ports.

So look at the Worst Case Scenario: Terrorists infiltrate the UAE and DP World to the point that they actually work proactively to destroy America. What could they do as property managers in New York that they could not already do as property managers in Hong Kong? Nothing directly... perhaps they could be a source for information gathering, but they already have access to that information today as operators of these other ports. They know our layouts, they know our proceedures, and they know our schedules... just like the operators of all the ports and all the shipping companies worldwide. In order to comply with our security, they have to be told what our security demands, after all.

I love the idea of Congressional Investigation on this issue! Let the facts come out in Congressional Session, not just on the cable TV talk shows and America will learn that there ARE Arabian nations who work with us to make America safe... and that there are already lots of controls in place to avoid ANY corporation from using their access to our ports to do us harm.

I'm very suspicious that this whole thing is blowing up something like three months after the business decision was made. I know there are valid fears about Arab Nations and companies involved in our Nations' security... valid because it is Arabs who publicly threaten our security and promise to hide amongst the regular population to do so. But I have to wonder who benefits from this storm of fearmongering at this late date in the process.

Dafyyd, you want an American company to run the operations on this end? How about we ask the guys running CAIR to do it? No? Why not... they are Americans. Bunch of 'em are Citizens. How about we get a French corporation to do it? No? The problem isn't the Nationality, it's the trustability. If you don't trust any foreign based corporations, and it makes you feel better, go ahead and add a layer of management. But remember you have to do it for ALL of our ports operated by companies based offshore, not just the UAE. But I submit to you that the DP World as a company directly owned by the political leaders of the UAE would be more responsive to our security demands than some publicly traded company run by brits of the mold of George Galloway.

Mr. Michael

The above hissed in response by: Mr. Michael [TypeKey Profile Page] at February 21, 2006 11:44 PM

The following hissed in response by: stackja1945

Will UAE move the ports to the Gulf? I assume no. Then what is the problem?

The above hissed in response by: stackja1945 [TypeKey Profile Page] at February 21, 2006 11:55 PM

The following hissed in response by: Cowgirl

Dafydd, I like your analysis of the problem and proposed solution.

I, like most everyone else, was shocked when I first heard about this deal.

Just for starters, I was unaware that the ports were operated by foreign companies.

If this deal was negotiated 3 months ago, where has the wonderful, competent MSM been during that time? What have they been reporting on? Certainly not this.

I am willing to trust the President if he says this is what should be done. What scares me more than anything else, is that Jimmy Carter thinks it is a good deal.....and he is always wrong! Scary stuff for sure.

The above hissed in response by: Cowgirl [TypeKey Profile Page] at February 22, 2006 5:19 AM

The following hissed in response by: reliapundit - the astute blogger

I HAVE A SIMPLE SOLUTION: Let's get P&O - the current British owner - or Ports World (the impending Dubai owner) - to sell the USA port operations to MAERSK - a DANISH shipping company.

They're one of the LARGEST shipping container companies in the world, and already manage dozens and dozens of major ports; in fact, Maersk's APM TERMINALS division is the THIRD LARGEST port operator in the world.

I think most Americans trust the Danes - and would LOVE to see the Danes get this business, especially NOW!


The above hissed in response by: reliapundit - the astute blogger [TypeKey Profile Page] at February 22, 2006 7:24 AM

The following hissed in response by: RBMN

Re: reliapundit - the astute blogger [TypeKey Profile Page] at February 22, 2006 07:24 AM

> I HAVE A SIMPLE SOLUTION: Let's get P&O - the
> current British owner - or Ports World (the
> impending Dubai owner) - to sell the USA port
> operations to MAERSK - a DANISH shipping company.

Yeah, that'll make us much safer. You wouldn't want to reward countries that have been helping us track terrorists and track their money, like UAE has, with any profits from a LEASE. UAE is in a variety of businesses and friendly to the West, because unlike their neighbors, they only get 7% of their income from oil.

The above hissed in response by: RBMN [TypeKey Profile Page] at February 22, 2006 8:01 AM

The following hissed in response by: The Hedgehog

I am glad to see a credible blog actually looking into the issue carefully and even-handedly. I fear you will be in the minority, however, as the Laura Ingrahams, Sean Hannitys, and NRO Corners of the world unite in a chorus of shrieking about the port deal before the considerations you rasie can even see much of the light of day.

I'm a conservative and I listen to and read those folks all the time, but I'm often struck by their "hair trigger" approach to issues like this one.

The above hissed in response by: The Hedgehog [TypeKey Profile Page] at February 22, 2006 8:29 AM

The following hissed in response by: antimedia

Well, I'd certainly feel safer if Americans ran the ports. After all, what's the chances of an American blowing up a building? Or trying to blow a plane out of the sky? Or fighting for Al Qaeda?

Oh wait.....nevermind.....

The above hissed in response by: antimedia [TypeKey Profile Page] at February 22, 2006 10:47 AM

The following hissed in response by: Steven Den Beste

The one question I haven't heard anyone answer, or even talk about, is Israel. The UAE, like all Arab nations, participates in an economic boycott of Israeli products. If the UAE takes control of certain ports in the US, will they forbid any shipments from/to Israel passing through those ports?

If so, then irrespective of any other aspects of this deal, it's unacceptable as far as I'm concerned.

The above hissed in response by: Steven Den Beste [TypeKey Profile Page] at February 22, 2006 2:50 PM

The following hissed in response by: BigLeeH

In an odd way there is a security benefit to be had from having a UAE-owned company run the ports. The members of congress seem to be very confused about who, exactly, is responsible for security at the ports and, while the commercial operations of the ports where being managed by the Brits it was all-too-easy to assume, vaguely, that somebody was probably lookling after it. But with the Dubai Ports running the ports it is much more likely that security measures would be observed more formally.

There are compelling geopolitical reasons why we must show the UAE, as a relatively moderate and pro-western Arab country, that we trust them enough to do business with them. But it will not be insulting to remember Reagan's advice: "trust... and verify."

The above hissed in response by: BigLeeH [TypeKey Profile Page] at February 22, 2006 3:15 PM

The following hissed in response by: photoncourier.blogspot.com

"The location of the headquarters of a company in the age of globalism is irrelevant." I think this is wrong, particularly in this case. First, we're talking about a company that is *government owned*. Would the consultant assert that ownership is irrelevant to control? Surely, this would be a strange theory of corporate governance.

Even absent government ownership, the location in which a company is based is certainly relevant, because the government of that country has high leverage over the company's operations.

The above hissed in response by: photoncourier.blogspot.com [TypeKey Profile Page] at February 22, 2006 5:06 PM

The following hissed in response by: Dafydd ab Hugh


And of course, they recruit workers from the UAE, as Hugh Hewitt has pointed out.

That is why I'd like to see an American "buffer company" sitting in between.


The above hissed in response by: Dafydd ab Hugh [TypeKey Profile Page] at February 22, 2006 5:27 PM

The following hissed in response by: photoncourier.blogspot.com

The buffer company idea is interesting, but what would 'independently operated' actually mean? Specifically, who hires and fires the executives? If it isn't the parent company, then what does their "ownership" actually mean? And if it *is* the parent company, then those executives will most likely follow the direction they get from their owner.

The above hissed in response by: photoncourier.blogspot.com [TypeKey Profile Page] at February 22, 2006 5:31 PM

The following hissed in response by: Dafydd ab Hugh


I'm thinking like Haliburton owns KB&R, or like Japanese keiretsu: DP World would be a holding company, which normally doesn't have control over the day to day management of the subsidiary, but can hire and fire the top executives (they own a controlling share of the stock).

We could certainly include a clause in the contract that if DP World replaces senior executives in the American subsidiary, under some circumstances, the administration could cancel the contract: this would force consultation by DP before doing anything significant... which would prevent them from firing the CEO and putting Zarqawi in charge.

The point is somebody has to run the ports... and alas, there is no American company big enough to do so on the scale that is needed (I believe all our big ports have non-American companies running port ops.) We need the resources of a gigantic multinational like DP World. I don't think even Haliburton could do it.

At some point, you must trust somebody... or else you just shut all your ports and spiral down into catastrophic economic collapse. Sure, it's possible terrorists could find American executives to collaborate for enough money; but they can bribe British execs just as easily, so keeping the port ops in the hands of P&O is no perfect solution either.

But at least with an American based company operating exclusively in the United States, and the corporate officers being American, there is no legal ambiguity who has legal jurisdiction: the American buffer company would be much harder to infiltrate than an Arab company -- which is currently recruiting UAE nationals to come here to America and work at the ports as executives.


The above hissed in response by: Dafydd ab Hugh [TypeKey Profile Page] at February 22, 2006 7:47 PM

The following hissed in response by: Mr. Michael

Congratulations, Dafyyd... DP World has taken your advice, and are implementing your plan:

The only difference I see is that they are putting a Brit in charge of this branch of the Company and an American in charge of Security. Oh, and they are volunteering for the Corporate equivalant of a Cavity Search...

The above hissed in response by: Mr. Michael [TypeKey Profile Page] at February 26, 2006 7:51 PM

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