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The DP World controversy began in February 2006 and rose to prominence as a national security debate in the United States. At issue was the sale of port management businesses in six major U.S. seaports to a company based in the United Arab Emirates (UAE), and whether such a sale would compromise port security.

The controversy pertained to management contracts of six major United States ports. The purchaser was DP World (DPW), a state-owned company in the UAE. The contracts had already been foreign-owned, by Peninsular and Oriental Steam Navigation Company (P&O), a British firm taken over by DPW (completed in March 2006). Though the sale was approved by the executive branch of the United States Government, various United States political figures argued that the takeover would compromise U.S. port security.

U.S. President George W. Bush argued vigorously for the approval of the deal, claiming that the delay sends the wrong message to U.S. allies. Legislation was introduced to the United States Congress to delay the sale.

Background

DP World is a company owned by the government of Dubai in the United Arab Emirates, via a holding company. This holding company is under the direct control of the ruler of Dubai, Sheikh Mohammed bin Rashid Al Maktoum, who is also the prime minister of the UAE.

Chronology

In mid-October 2005, DP World approached the Committee on Foreign Investment in the United States (CFIUS) to clear regulatory hurdles for a possible acquisition of the British firm P&O. The CFIUS is the multi-agency federal panel that passes judgment on deals with foreign corporations that raise antitrust or national security questions, Soon after, DPW began negotiating the terms of the takeover with P&O. They were advised by former President Bill Clinton to submit to a 45-day review of the acquisition. *

In February 2006, the stockholders of the Peninsular and Oriental Steam Navigation Company (P&O), a British firm, agreed to a sale of that company to DPW over a bid by PSA International of Singapore. As part of the sale, DPW would assume the leases of P&O to manage major U.S. port facilities in New York, New Jersey, Philadelphia, Baltimore, New Orleans, and Miami, as well as operations in 16 other ports.

After P&O stockholders approved the deal, the arrangement was reviewed by the CFIUS headed by the U.S. Treasury Department. The transfer of leases was approved.

Once the deal appeared in the business press, it was noticed by Eller & Company, a Florida firm. Eller has two joint ventures with P&O and it feared becoming an "involuntary partner of DP World". According to the company's lawyer, Michael Kreitzer, Eller hired semi-retired lobbyist Joe Muldoon as a last ditch effort to persuade Congress to block the deal. Soon Muldoon and Kreitzer got the attention of Democratic New York Senator Chuck Schumer and an Associated Press reporter. Within days, Schumer held a press conference calling for a review and the AP ran the story nationally. *

Congressional politicians were quick to respond after Schumer's press conference and the AP story put the Dubai Ports deal in the national spotlight. Both Democratic and Republican members of Congress started to question the approval. Republican leaders Dennis Hastert and Bill Frist, who usually work closely with the office of the President, publicly questioned the deal. Frist said "If the administration cannot delay the process, I plan on introducing legislation to ensure that the deal is placed on hold until this decision gets a more thorough review." *

On February 22, 2006, President Bush threatened to veto any legislation passed by Congress to block the deal, a veto that would be his first. In a statement to reporters, Bush claimed, "It would send a terrible signal to friends and allies not to let this transaction go through." DP Worlds Chief Operating Officer, Ted Bilkey engaged a number of high profile lobbying firms to garner congressional support for the deal. *

The controversy has created a public and unusually high-profile dispute within the Republican Party, and between the Republican-controlled Congress and the Republican-controlled White House.

On February 23, 2006, DPW volunteered to postpone its takeover of significant operations at the ports to give the White House more time to convince lawmakers that the deal poses no increased risks from terrorism.

On February 24, 2006, it was reported* that there are 22 U.S. ports in the deal, not just the six major ports mentioned in initial news stories and reports. According to the website of P&O Ports, the port-operations subsidiary of P&O, DPW would take over stevedore services at 12 East Coast ports including Portland, Maine; Boston, Massachusetts; Davisville, Rhode Island; New York City; Newark, New Jersey; Philadelphia, Pennsylvania; Camden, New Jersey; Wilmington, Delaware; Baltimore, Maryland; and Virginia locations at Newport News, Norfolk, and Portsmouth.

Additionally, DPW will take over P&O stevedoring operations at nine ports along the Gulf of Mexico including the Texas ports of Beaumont, Port Arthur, Galveston, Houston, Freeport, and Corpus Christi, plus the Louisiana ports of Lake Charles and New Orleans.

On March 8, 2006 the House Panel voted 62–2 to block the deal, and senator Charles Schumer added amendments to a senate bill to block the deal, causing an uproar in the senate.*

On March 9, 2006, Dubai Ports World released a statement saying they would turn over operation of U.S. ports to a U.S. "Entity".Later that same day, American Enterprise Institute scholar Norm Ornstein reported on PBS's "News Hour" that DP World was considering selling its U.S. operations to Halliburton.[http://www.pbs.org/newshour/bb/transportation/jan-june06/hls-ports_3-9.html

General opinion and comment

According to Bill Gertz, author of How America's Intelligence Failures Led to September 11:

"Intelligence and security officials opposed to the deal with Dubai Ports World said ports are vulnerable to the entry of terrorists or illicit weapons because of the large number of containers that enter U.S. territory, regardless of who manages them." *

Frank Gaffney, president of the Center for Security Policy wrote:

At the very least, the company will have to be read-in on these ports' security plans as it will have some role in their implementation. *

Susan Collins, Republican Senator from Maine (and Homeland Security Committee chairman) wrote:

"careful review of the 'assurances letter' reveals that DP World is not, in fact, bound to provide the U.S. government with the information it would need to close the intelligence gaps the Coast Guard identified...The language is weak... Indeed, the assurances appear to amount to little more than a restatement of what the FBI or other law enforcement agenc*

After the company announced its decision to transfer the US port operations to a US entity, the BBC quoted Daniel T. Griswold, director of the Cato Institute's Center for Trade Policy Studies, as saying that the affair would "send a chilling signal": "It is just assuming that if a company is from the Middle East it is de facto disqualified from investing in the United States, and I think that is a terrible message to send." *

Opposition to the deal

The objections to approving the sale centered on arguments about who controls US ports, especially after the September 11, 2001 attacks. Some opposed to the sale have argued that no foreign government should be permitted to own such strategic assets while others argue that port security should remain in the hands of American firms under American control at the very least. Few had offered similar objections to the P&O's ownership, until the proposed DPW takeover brought attention to the situation. Over 80 percent of the terminals in the USA are already controlled by foreign owners. While the UAE's past actions regarding funding terrorist organizations (notably Hamas) and DPW's state-ownership increased discomfort across major party lines in the United States few thought to reflect that significantly more holders of British passports are in Guantanamo Bay than Emirati. There are no UAE nationals in Guatanamo.

Those who expressed opposition to the deal included: The New York Times, Michael Savage, Lindsey Graham, The New Republic, The John Birch Society, Sean Hannity Even Sean Hannity Agrees UAE Port Deal Is A Bad Idea, by Ellen, News Hounds, February 23, 2006, retrieved March 11, 2006, Lou Dobbs Lou Dobbs told to Shut up, Crooks and Liars, February 27, 2006, retrieved March 11, 2006, Laura Ingraham; Bill Frist and Hillary Clinton Hillary Clinton 'unaware' of Bill's Dubai ties, by Stephanie Kirchgaessner, MSNBC, March 4, 2006, retrieved March 11, 2006, prominent politicians from two different parties; Robert Menendez, John Gibson John Gibson: U.S. Ports Should Be Off Limits to Foreign Companies, by John Gibson, FOXnews.com, February 24, 2006, retrieved March 11, 2006, Jon Corzine, and Peter KingPeter King: Dubai Ports Company in 'al-Qaida Heartland', NewsMax.com, February 20, 2006, retrieved March 23, 2006.

The objections commonly raised in public discourse differ from those lodged by Eller & Company, the Florida firm responsible for bringing national attention to the deal. Eller has two joint ventures with P&O and it feared becoming an "involuntary partner of DP World". For them, business rather than security or concerns over the approval process were the overriding factors driving their lobbying efforts to sink the deal. In fact, Eller & Company has a disreputable history and several exposes have been written about them by prominent print media.

Several additional arguments have circulated among critics of the deal, including:

  • Review and approval of the acquisition by CFIUS was not sufficiently transparent and thorough, and never reached the proper level within the administration. In fact DP World received a unanimous approval and followed the letter of the law exactly.
  • Personal ties between the Bush administration and DP World, such as the appointment of David C. Sanborn to the Transportation Department's Maritime Administration portray a conflict of interest. In fact Mr. Sanborn was personally selected by the Secretary of Transportation and vetted by his predecesor in office. He is also uniquely qualified for the role with a degree from King's Point and several overseas assignments for prestigious American companys.
  • Joining the debate, the Anti-Defamation League has protested the deal, stating that "The UAE's boycott of Israel alone should torpedo this deal"* In fact, the largest Israeli shipping company, Zim Israel, supported the deal. (see below)

The contracts under consideration are for the management of numerous American ports. Critics of the deal claim that this is tantamount to “outsourcing” national security, given the vulnerability of ports for terror attacks or as an entry point for Al-Qaeda operatives. In fact the labor would still be 100% American and part of the Longshore Union. The Union went on record as supporting the deal. This outsourcing argument comes in several forms, including:

  • “America would not be in control of her own security” In fact, nothing changes under the deal.
  • “Foreign states, especially those related to terrorism in the past, cannot be trusted with strategic American assets” Why then is it acceptable for the U.K. to be involved?
  • “Foreign countries should not have managerial responsibilities over ports due to divided loyalties and concerns over national independence"

Support for the deal

Editorial support for the deal came from publications including the Financial Times, the Wall Street Journal, the Los Angeles Times, the Washington Post, The Economist and commentators including Tony Snow Tony Snow: It's time for cooler heads to prevail, by Tony Snow, townhall.com, February 24, 2006, retrieved March 11, 2006, Thomas Friedman Port controversy could widen racial chasm - Thomas L. Friedman, New York Times, February 25, 2006, Rush Limbaugh Limbaugh, O'Reilly favor deal, while Savage, Hannity oppose, WorldNetDaily, February 24, 2006, Jimmy Carter Jimmy Carter backs Dubai Ports World deal, NewsMax.com, February 21, 2006, retrieved March 11, 2006, John Warner Dubai Firm Sought U.S. Security Probe, by Jonathan Weisman, washingtonpost.com, February 27, 2006, retrieved March 11, 2006 and Bill O'Reilly.

Former President Bill Clinton has not been clear on whether he supports the deal. He has accepted large amounts of money from Dubai and has a close relationship advising the UAE government. (subscription required) This has created some confusion as his wife is publicly opposed to the deal.

The Bush administration and other supporters of the deal make the following arguments:

Israel's largest shipping firm, Zim Integrated Shipping Services, came out in support of the deal.

"During our long association with DP World, we have not experienced a single security issue in these ports or in any of the terminals operated by DP World... We are proud to be associated with DP World and look forward to working with them into the future." Zim Integrated Shipping Services CEO, Idan Ofer, February 22 2006.

The controversy comes shortly after the World Trade Organisation's Doha Round of global trade talks. Many member states had called for the U.S. to open up its ports to international competition, in the same way that the world's richer countries have pushed poorer countries into opening up their service sectors (e.g. water, telecoms, etc.). http://news.moneycentral.msn.com/provider/providerarticle.asp?feed=FT&Date=20060305&ID=5556275

The DP World controversy has reinforced fears in the Middle East that investments in the United States have become politically risky for Arabs and Muslims. Some commentators, have expressed concern that the controversy is being driven by racist hysteria, notably James Zogby of the Arab American Institute. This view is also shared by business leaders active in US-Arab trade such as David Hamod, president of the National US-Arab Chamber of Commerce.

References

See also

External links

George W. Bush administration controversies

 

This article is licensed under the GNU Free Documentation License. It uses material from the "Dubai Ports World controversy".

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