Ports and politics

Mar 21, 2006


A company owned by a UAE royal family gains control over major ports in the United States, kicking up a controversy in the country

ON February 14, Valentine's Day, the international business press ran a report about a routine event. The previous day, the shareholders of P&O (Peninsular and Oriental Steam Navigation Company) met at London's Wembley Exhibition and Conference Centre. They agreed to sell the 169-year-old company to the United Arab Emirates' Dubai Ports World (D.P. World) for £3.92 billion. Talks over the sale of the British firm had been ongoing since late September 2005, when P&O began negotiations with Thunder Free Zone Enterprise (a subsidiary of D.P. World). Singapore's PSA International entered the fray to start a bidding war. The price went up, PSA withdrew, and D.P. World closed the deal. It was an ordinary event: another merger created another giant firm (this would be the third largest port operator in the world).

P&O was the conduit of the British empire. It carted civilians and officials from Europe to the colonies. With the growth of air travel, P&O's passenger business declined. The company diversified into luxury liners and cargo transport (oil tankers and container ships). Opportunities for P&O opened up with the wave of port privatisations that began in 1981 when the British government sold off 21 ports to a joint stock company, Associated British Ports Holdings. P&O now also operates ports, roughly 85 in over 20 countries. Dubai Ports, formed in 1999, had until now concentrated on the UAE's two major harbours at Port Rashid and Jebel Ali Port, as well as on its operations in Africa and Asia (including three ports in India). The annexation of P&O is a major gain for Dubai Ports, which will finance the deal with monies made available through Barclay's Bank and Deutsche Bank.

In the United States, news of this merger created a political firestorm. Both Democrats and Republicans in Congress fumed over the deal. Senators from New York (Charles Schumer and Hillary Clinton) and New Jersey (Robert Menendez), all Democrats, and one New York Congressman, Peter King (Republican), led the charge. "Our port security is too important to place in the hands of foreign governments," said Hillary Clinton, who also intimated that she, along with Menendez, would introduce legislation to block such sales. About 10 per cent of the new D.P.-P&O port operations are in the U.S., where this firm owned by a UAE royal family will operate its major ports (New York, Philadelphia, Baltimore and more). President George Bush, surprised by this challenge, spoke out in favour of the deal and threatened to veto any legislation that impinged upon it.

"Security is a low priority for [the elites]," said Professor Noam Chomsky, who pointed out that the Bush administration had not complied with the 9/11 Commission recommendations on national security. "It is quite common for states to rank objectives of power, domination, profit for dominant elites far above security for society, which is not their business." For the intransigent Right, the traditional base of Bush's support, the issue is simple. How can an Arab company, a wholly owned subsidiary of an Arab royal family, control U.S. ports? The UAE's own sordid past makes it harder to defend against the overt racism of the political class. The UAE is a haven for arms dealers (the "merchant of death" Victor Bout lives in Dubai, as do most of Mumbai's gangster bosses). The royal family had an intimate relationship with the Taliban and Osama bin Laden (until recently the family would travel regularly to the region around Kandahar to hunt the endangered houbara bustard with Taliban officials and associates of bin Laden). This history, along with suspicions of money laundering, makes it hard to discredit Congressman King, who from his perch on the Homeland Security Committee threatens that this deal allows "infiltration by Al Qaeda or someone else".

The Democrats did not challenge this casual association between the UAE and Al Qaeda. On economic issues, the mainstream of the party's agenda is identical to that of the Republicans. They both promote "free market" policies engineered to benefit U.S.-based corporations. Since 9/11, the Democratic Party has been afraid of being marked as "soft" on national security. Trying to be as hawkish and macho as possible, Democratic presidential nominee John Kerry ran on his military record as well as on port security. In each of his debates with Bush, Kerry underscored that "95 per cent of containers coming into America go un inspected".

Hillary Clinton, who has presidential ambitions of her own, warned about a lack of resolve by the Bush administration to shore up the ports. She was joined by the American Association of Port Authorities, which pointed out that 8 million of the post-9/11 allotment towards maritime security had not been disbursed.

In search of a strategy for the mid-term elections of 2006, the Democrats seem to have adopted the most effective, if immoral, one: xenophobia. When Kerry talked about port security during the debates, he did not raise the issue of "foreign governments" though P&O was a British concern. Hillary Clinton picked up Kerry's tune after the election, and she too did not say anything about the British firm that controlled the ports. For this reason, the American Arab Anti-Discrimination Committee's Laila Al-Qatami pointed out that the politicians "are engaging in racial profiling on the corporate level".

U.S. trade unions, which should have seen the wood for the trees, joined in the xenophobia. The International Longshore and Warehouse Union carped about "companies owned and operated by foreign governments where serious concerns exist regarding terrorist activities and funding".

The Bush administration argued that the U.S. Coast Guard would maintain port security as per the 2002 Maritime Transportation Security Act and the 2004 International Ship and Port Facility Security Codes. Furthermore, the government's Committee on Foreign Investments in the U.S. (CFIUS) reviewed the deal at its earliest inception in November 2005.

"After careful review by our government," Bush said, "I believe the transaction ought to go forward." D.P.'s head, Sultan Ahmed bin Sulayem, told the Dubai media: "We are very encouraged by what Mr. Bush has said. We are happy that he takes this view." Nevertheless, D.P. has offered to hold off on the deal pending further review.

The D.P. fiasco is the second commercial deal to be treated as a national security problem. In 2005, the U.S. Congress intervened to bar the Chinese oil firm CNOOC from purchasing California-based UNOCAL. If protectionism cannot be secured by recourse to economic arguments, it is justified on national security lines. But, as Meizhu Lui of the Boston-based United for a Fair Economy said, the episode "reveals an uncomfortable truth: the continuing U.S. decline as a player in the global marketplace". Domestic U.S. firms used to manage ports and be able to manufacture goods, but this is no longer the case. "The emperor has no clothes," she points out, "and the empire is also a mirage in the Saudi desert."

David Ignatius, who writes a popular column for The Washington Post, concurs: "The real absurdity here is that Congress doesn't seem to realise that an Arab-owned company's management of America's ports is just a taste of what is coming. Greater foreign ownership of U.S. assets is an inevitable consequence of the reckless tax-cutting, deficit-ballooning fiscal policies that Congress and the White House have pursued."

The U.S. deficit in 2006 will climb to 0 billion. The deficit is currently buoyed by the Chinese and Saudi purchase of Treasury Bills. In time creditor firms and banks will turn from t-bills to purchase U.S. capital stocks.

The U.S. does enjoy one comparative advantage. It has an unmatched military force. Secretary of State Condoleezza Rice, who arrived in Abu Dhabi during the crisis, provided a clue as to other reasons for Bush's obduracy. "We have a really strong ally in the UAE," she said. "Our naval activity with the UAE is probably more active and more intensive than any place else in the world."

Journalist Pratap Chatterjee, who has covered the Gulf extensively and is executive director of CorpWatch, points out that "the government of the UAE is providing a de facto base for the U.S. military and private contractors in Dubai".
The Dubai base is central to the Iraq occupation. It would be unwise for the Bush team to provoke hostility when it is already isolated on the international stage.

For U.S. primacy in West Asia, the military option is not the only one. A strategy shared between the Republicans and the Democrats is the use of the free trade instrument to secure the fealty of global elites. In May 2003, Bush pledged to create a Middle East Free Trade Area (MEFTA) by 2013. To attain this end, the U.S. government has signed bilateral Trade and Investment Framework Agreements with Algeria, Bahrain, Egypt, Iraq, Israel, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, the UAE and Yemen.

Step by step the U.S. has moved towards the realisation of MEFTA. This, according to U.S. Trade Representative Robert Zoellick, "puts free trade on the offensive". The point of MEFTA was not only to liberalise the various economies, Zoellick noted, but also to "deepen their economic relationship with the United States". Countries that "behaved" would be given access to the U.S. market and other such laurels (after Kuwait allowed itself to be the launch pad for the U.S. invasion of Iraq, it attained "major non-NATO ally" status from the U.S. government).

The close ties cultivated between the U.S. government and its corporate allies in the Gulf (who are the main boosters of the MEFTA plan) are well illustrated by the nomination of David Sanborn (a senior executive at D.P. World) to become Maritime Administrator in the U.S. Department of Transportation. The UAE is a crucial leg for MEFTA: it is the third largest trading partner for the U.S. in West Asia (after Israel and Saudi Arabia), and its royal family plays an influential role in the region. With the military occupation of Iraq in a shambles, the Bush administration is loath to allow the MEFTA strategy to unravel.

Meanwhile, in Basra, Iraq, port workers and oil workers joined together in 2004 and again in 2005 to eject the U.S.-based Stevedoring Services of America and KBR as well as the Danish shipping firm Maersk from the ports of Umm Qasr and Zubair. After militant action by the workers and by the General Union of Oil Employees, these firms retreated. The Iraqi Port Authority, a public concern, has taken control of the ports again.

Nathan Radi, head of the Umm Qasr branch of the Union, told U.S. journalist David Bacon: "We are very proud that we have been able to regain our ports for the Iraqi people." The union flew a banner in central Basra with the message that they wished "to revive the public sector and build an Iraq free of privatisation". Iraqi workers forcibly secured their rights to their ports, even while they are under occupation. They remind us of other ways forward, outside the tired rhetoric of xenophobia and privatisation.

This article was first published in FRONTLINE – India’s national magazine, and is reproduced here with permission - http://www.hinduonnet.com/fline/


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