So what's the story here? Dubai Ports World, a company wholly owned by the Dubai government, a member of the United Arab Emirates and famous waypoint and financial haven for the 9-11 terrorists, is rigging up to take over port management of six major U.S. cities.
Are we headed for a security disaster of the largest order? - or is this port deal actually an international business smack-down and a security scare that's much ado about nothing?
My gut reaction is to say yes, it's absolutely insane; there's no way a country that recognized the
Taliban should ever gain control of U.S. ports. I mean come on, we've all seen the Sum of All Fears, we just know there's a nuclear bomb in a vending machine somewhere waiting to get shipped to America. Granted, in the movie they were Nazi throwbacks, and not Arabs, and ultimately that bomb came from Israel, but if you've read the book you know the "religion of peace" does not escape unscathed.
Of course in real life we have stuff like
this and
this, and
this going on in the world, and we're kind of in the middle of a war against terrorists. So the fear is certainly not unfounded. It's more than prudent.
And this fear is exactly what's driving Senator Chuck Schumer, Senator Rick Santorum and Senator Hillary Clinton in their protests of this sale. Though of course I think Hillary called it the evil Republican "culture of fear" last week, and now suddenly she is embracing it. But her flopping around for electoral platforms aside, the really scary part is that I found myself agreeing with them. Hillary even
stepped up yesterday to say she'll co-sponser legislation to stop not just this port deal, but any further port deals.
Sens. Robert Menendez of New Jersey and Hillary Clinton of New York, both Democrats, said they would offer legislation to ban companies owned or controlled by foreign governments from acquiring U.S. port operations, targeting the $6.8 billion purchase of P&O by Dubai Ports World.
So how did it even come to this point where we're turning over the keys? Don't we have like, Customs, and a navy, or something, to stop them? Are we going to have a whole boatload of terrorists showing up, greeted only by our newly deputized frontline defenders, the longshoremen at the docks?
Well actually, as it turns out...no, we're not. And the more I research this, the more it's bothering me that a lot of media, and bloggers, are not explaining the whole story. I can understand the need to sound the siren, by all means do so. But honestly, after researching this deal I haven't made my mind up one way or the other on this issue yet. Here's why.
First, as you might know, this is not the sale of an American company to the government of Dubai. It is the sale of a British company, the
Peninsular and Oriental Steam Navigation Company, the fourth largest container-port company, to the
Dubai Ports World company, the seventh largest container-port company. Now P&O is one of those really old businesses, their history reads like a James Clavell novel (seriously, tell me it doesn't):
In 1822 Brodie McGhie Wilcox, a London ship broker, and Arthur Anderson, a Scottish sailor, went into partnership to operate a shipping line, primarily operating routes between England and Spain and Portugal. In 1835 a Dublin shipowner named Captain Richard Bourne joined the business and the three men started a regular steamer service between London and Spain and Portugal - the Iberian Peninsula - using the name Peninsular Steam Navigation Company, with services to Vigo, Oporto, Lisbon and Cadiz.
In 1837 the business won a contract from the British Admiralty to deliver mail to the Iberian Peninsula and in 1840 they acquired a contract to deliver mail to Alexandria in Egypt. The present company, the Peninsular and Oriental Steam Navigation Company was incorporated in that year by a Royal Charter, and its name therefore includes neither "Plc" nor "Limited".
And their
charter -
"is an antique scroll that hangs on the wall in P&O's corporate office on Pall Mall, a historic London street near Buckingham Palace."So yeah, they've been around the block. And this "surprise deal" that everyone keeps moaning about, has actually been in the public eye, that I could find, since
last November.
Peninsular & Oriental Steam Navigation Co. is close to an agreement to be bought by Dubai Ports World of the United Arab Emirates for more than £3 billion, or about $5.1 billion, creating a new global ports powerhouse and ending the storied history of one of Britain's oldest companies.
P&O, as the London firm is known, operates container ports in 30 cities around the world and is considered to have many of the premier sites across Asia, North America and Europe. With P&O's business, Dubai Ports World, which is controlled by the U.A.E., would become the world's third-largest port operator from seventh in terms of capacity.
The deal is expected to be announced as soon as Tuesday, with Dubai Ports World paying about 440 pence a share, people familiar with the matter said. P&O's shares closed in London Monday at 435 pence. A spokeswoman for P&O declined to comment, and a spokesman at Dubai Ports World wasn't available.
It is expected that global port operators in Hong Kong, Singapore, Denmark and elsewhere may consider a rival bid for P&O, people close to the matter said.
And bid they did. This deal started turning into an international brawl, because the number two player, Singapore owned
PSA International,
jumped into the fray to make it's own bid.
Smelling a battle between a pair of rich bidders amid a boom in cargo volume, investors pushed shares of port operator Peninsular & Oriental Steam Navigation Co. of Britain up 6.3% Wednesday after PSA International Pte. Ltd. of Singapore said it might make a bid for it at as much as £3.54 billion ($6.25 billion).
PSA, a unit of Singapore's state-owned investment company Temasek Holdings Pte. Ltd., said after the London market closed Tuesday that it could pay as much as 470 pence a share for P&O, as the company is known. That would trump a bid of 443 pence a share, or £3.3 billion, that Dubai Ports World, of the United Arab Emirates, made in November and that P&O's board then recommended to its shareholders.
The original bid from DP World was 5.1 billion (American), then trumped by soaring stock and the PSA bid of 6.25 billion. The titans battled it out for a bit more, and then DP World delivered the knock-out punch of 6.79 billion on the table. A stunning fight, and a bit of amazing maneuvering by DP World. And it is interesting to note the corporate rankings again, because DP World has been on the rampage for a while now, increasing it's size through acquisitions like this, the most recent addition to it's portfolio being the international terminals business of
CSX Corporation. With P&O they now jump to the number three container-port company.
But why all the fuss over P&O? Why up the ante over 30% higher than the initial offering? Because according to analysts, P&O is the
ultimate prize.
...Fitch notes that though P&O occupies a slightly distant fourth position in the throughput league tables, its portfolio surpasses higher-ranked peers in terms of geographical diversification.
Meaning they have choice port spots across the entire world. And in the virtually closed market of port operation, this is an
historical coup.
What is at stake is much bigger than a £3.3 billion company. Port holdings have become crucial assets in global trade.
As the manufacturing of low-cost goods in Asia has boomed and China has emerged as an economic power, the race is on to control the ports that launch the goods made in Asia, and receive them in the U.S., Western Europe and elsewhere. As global industrialization continues, container shipping of nearly every variety of manufactured good is expected to expand strongly.
P&O's 29 ports around the world are among the last available for sale. The rest are state-owned or in the hands of big port operators with no interest in selling. Because there is so much infrastructure involved in container ports, not many new ones are built. And when they are, it takes many years.
"In big-picture terms, P&O ports would be very attractive to add in its entirety," says Neil Davidson, head of the ports practice at Drewry Shipping Consultants in London. He added that P&O's operations in Asia and North America and a new U.K. port are key assets.
"You buy P&O and you get a big chunk of the Indian port market," he said, adding that a buyer would also get the "potential to build in the U.K., which is a pretty rare thing to have."
This is global, not just about six U.S. ports. And as most of the port operators are non-U.S. companies anyway, chances are somebody foreign would be taking over where P&O left off.
Of course now we come to it - terrorism, and the threat to America.
Are we signing our own death warrants by allowing this sale to go through? The
evidence against the UAE, in spite of the confidence of the
Bush administration and their help in the war on terror, is substantial. (via
Captain's Quarters)
...In fact, the 9/11 Commission notes UAE involvement in Islamist terrorism in several spots.
Page 138: "Even after Bin Ladin's departure from the area, CIA officers hoped he might return, seeing the camp as a magnet that could draw him for as long as it was still set up.The military maintained readiness for another strike opportunity.160 On March 7, 1999, [Richard] Clarke called a UAE official to express his concerns about possible associations between Emirati officials and Bin Ladin.Clarke later wrote in a memorandum of this conversation that the call had been approved at an interagency meeting and cleared with the CIA." [This involved Clarke blowing a cover on a covert operation.]
Page 167: "In early 2000,Atta, Jarrah, and Binalshibh returned to Hamburg. Jarrah arrived first, on January 31, 2000.97 According to Binalshibh, he and Atta left Kandahar together and proceeded first to Karachi, where they met KSM and were instructed by him on security and on living in the United States. Shehhi apparently had already met with KSM before returning to the UAE.Atta returned to Hamburg in late February, and Binalshibh arrived shortly thereafter. Shehhi's travels took him to the UAE (where he acquired a new passport and a U.S. visa), Saudi Arabia, Bahrain, and one or more other destinations."
Page 171: "Bin Ladin relied on the established hawala networks operating in Pakistan, in Dubai, and throughout the Middle East to transfer funds efficiently."
Page 216: "On June 20, Hanjour returned home to Saudi Arabia. He obtained a U.S. student visa on September 25 and told his family he was returning to his job in the UAE. Hanjour did go to the UAE, but to meet facilitator Ali Abdul Aziz Ali.62"
Page 224: "The Hamburg operatives paid for their flight training primarily with funds wired from Dubai by KSM's nephew,Ali Abdul Aziz Ali. Between June 29 and September 17, 2000,Ali sent Shehhi and Atta a total of $114,500 in five transfers ranging from $5,000 to $70,000."
Page 236: "After training in Afghanistan, the operatives went to a safehouse maintained by KSM in Karachi and stayed there temporarily before being deployed to the United States via the UAE. ... Ali apparently assisted nine future hijackers between April and June 2001 as they came through Dubai. He helped them with plane tickets, traveler's checks, and hotel reservations; he also taught them about everyday aspects of life in the West, such as purchasing clothes and ordering food. Dubai, a modern city with easy access to a major airport, travel agencies, hotels, and Western commercial establishments,was an ideal transit point."
In fact, many of the 9/11 hijackers transited through the UAE, and a significant amount of al-Qaeda cash came through UAE-based accounts. If they run their own country's borders so poorly, why would we trust them to run ours? The White House needs to deep-six this deal, or cancel the contracts and re-bid them. Putting our ports in the hands of Arab authoritarians isn't just putting the fox in charge of the henhouse, it's tantamount to cooking him eggs for breakfast every morning and bringing him KFC for supper every night.
And it's a point well taken. But it is worthy to note that one of the reasons the hijackers used the UAE is because it is so connected to the West. Note from the report -
"Dubai, a modern city with easy access to a major airport, travel agencies, hotels, and Western commercial establishments,was an ideal transit point." That speaks to the Westernized nature of the UAE. And it is true that the
UAE has been helpful in the war on terror, as the Bush administration contends.
"We have worked very closely with the United States on a number of issues relating to the combat of terrorism, prior to and post Sept. 11," Al Nahyan said in answer to questions submitted through the Information Ministry.
"We have recently concluded joint task force agreements with the United States on drying up the funding for terrorist groups and also on nonproliferation," Al Nahyan added, without giving specifics on the agreements.
"It is no secret now that we have handed over in recent years a number of suspects linked to terrorism, either wanted in their home countries or in the United States," he said.
One of the suspects that the U.A.E. caught and handed to the U.S. was wanted for the 2000 bombing of the destroyer USS Cole in Yemen, Al Nayhan said.
The United Arab Emirates, where Dubai is one of seven emirates, is a major U.S. ally in the Arab world. It has allowed the U.S. Air Force to operate from several bases in the country, including flying U-2 spy planes and unmanned craft with intelligence-gathering sensors.
And that's a big deal. It's not perfect, by any means, but do we now return the favor by saying "sorry, you're Arab, and some of the terrorists came from your country, so no ports for you"? I'm asking, seriously, because I haven't made up my mind either. Remember, we've also recently sold the UAE F-16 fighters and related equipment. This is a real U.S. partner, not Iran.
But of course this speaks to the larger issue of exactly who our allies really are in the Middle East, and why. Pakistan, a nuclear power, who aided in the rule of the Taliban, is now a major ally. Why? Because al Qaeda wants Musharaff dead, and has attempted to kill him numerous times. The Saudis are a major ally, helped us stage for Iraq, let us use their bases, attempted to (along with Kuwait) stabilize the price of oil by dumping millions more barrals a day onto the market, and they are also under threat from al Qaeda; yet they also foment oppressive society and some sheiks held a telethon for suicide bomber families. So where do we draw the line for friend or foe? Obviously our ally today could be our foe tomorrow - or visa versa. But unfortunately all I've heard from our politicians on this matter is a lot of rhetoric.
The UAE is an interesting place, because they've been making strides towards modernity (despite their abysmal record in the sex trade, second only to the United Nations I think - though
John Bolton is going to start knocking heads over there soon enough), moreso than other Middle Eastern nations. It's actually a premier tourist spot on the Persian Gulf. And their oil won't last forever. Many analysts see this port move as a means to secure other industries for the future. Sort of like how Phillip Morris diversified into things like Kraft foods and such.
But about that terrorism... Are our ports in danger? Absolutely, they always were. Is the transfer of management to DP World going to increase that danger? Possibly...but many people in the business are saying
no.
...some maritime and security experts said the DP World deal posed no particular risks and called the pushback political.
''We've worked with Dubai Ports, and their management company is committed to improved security at all of their acquired ports,'' said Kim Petersen, president of Fort Lauderdale-based SeaSecure, a consultant. "The vast majority of their managers are ex-pats. It's not like you will find Dubai nationals running security or even managing the operation at an American port.''
P&O Ports owns 50 percent of the Port of Miami Terminal Operating Co., which handles about half the cargo containers at the Port of Miami-Dade. There are two other terminals at the port.
''It's a nonissue,'' said Harlan Ullman, a senior advisor on national security at the Center for Strategic and International Studies in Washington. "If someone is going to infiltrate, you can infiltrate an American company as well as anyone else.''
They noted DP World will have an American board of directors for its American operations and must comply with new, tougher worldwide security standards promoted by the U.S. Coast Guard.
....
To protect the country against weapons of mass destruction being imported in a cargo container, U.S. Customs and Border Protection established programs to flag suspect containers for inspection and has sent teams of inspectors to dozens of ports worldwide to review manifests before ships leave.
But it's estimated only 3-to-5 percent of containers entering the country are scanned, prompting criticism of gaping security holes. [And this is a problem outside the scope of DP World or P&O --ZP]
....
It's believed that most of P&O's employees will remain with DP World, and that little will change at the American ports, said Rick Eyerdam, editor of The Florida Shipper.
Port of Miami-Dade executives aren't concerned.
"They are not buying the Port of Miami," said Deputy Port Director Khalid Salahuddin. "They are buying part of one of the operators at the port."
And this move to globalization is part of the
Bush administration's own initiative for pushing freer trade and capitalism in the Arab world.
The Bush administration has proposed a Middle East Free Trade Area (MEFTA), which would link 22 Arab nations, Israel and the United States by 2013.
A free trade agreement between the U.S. and Morocco went into effect on Jan. 1, and a similar agreement with Bahrain was approved by Congress in December and is expected to take force this March. Other trade agreements now exist between the United States and Israel and Jordan.
I am greatly concerned about our port security, but honestly I don't know if stopping the sale is the answer - or even if we could stop the sale. At the most I think the government could cancel the port contracts, or maybe the city governments would have to find DP World deficient in the lease somehow. That might kill the deal. But as the
Miami Herald notes:
...the tiny emirate has become one of the few places in the Middle East where freewheeling capitalism has taken root and been successful.
Do we want to kill this as well? This is a lot bigger deal than it's made out to be. And so I think because of security concerns we need an investigation, we need to look at this very carefully. But our strategy for winning the war on terror is both military action and societal change. We need to find the balance, and ditch the rhetoric.
Let's hope that in this situation we can do that, whatever the outcome.
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