Don't Tell Congress -- the Enemy Is Already Here

[Tigermike 3,051]

Don't Tell Congress -- the Enemy Is Already Here:

Caroline Baum

March 20 (Bloomberg) -- When Congress effectively torpedoed the Dubai ports deal, the members had no idea how out of touch they were.

Not with public opinion, which was overwhelmingly on their side. Opposition to DP World's $6.8 billion acquisition of Britain's Peninsular & Oriental Steam Navigation Co., which would have given Dubai control over terminal operations at six U.S. ports, was so intense the company bowed out before the deal could be subjected to a 45-day review.

The out-of-touch I'm talking about is the failure to realize that the enemy, at least as Congress sees it, is already in our midst.

Last year, the Dubai royal family's investment group made a splash in the New York City real estate market with its $440 million purchase of the Essex House, the art-deco hotel on Central Park South. The name was changed to ``Jumeirah Essex House,'' after the United Arab Emirates hospitality company was hired to manage it, making it clear to guests they're not in Kansas anymore.

The Dubai royal family also paid $705 million for 230 Park Ave., a tower than stands astride Park Avenue just north of Grand Central Terminal.

``They bought and sold $1 billion of apartments in Texas'' as well, says Robert White, president of Real Capital Analytics, a New York real estate research firm.

Contracting Out

While none of these properties qualifies as vital infrastructure, they do present potential opportunities for terrorists. If members of Congress are afraid that Dubai ownership of a port-management company leaves the U.S. vulnerable to infiltration, by all rights they should decline invitations to dine at the opulent Alain Ducasse, the three-star Michelin restaurant in the Jumeirah Essex House. (I almost forgot, Congress is clamping down on that sort of thing.)

More in line with the Dubai Ports deal is a maritime acquisition that, by all rights, should raise the same kinds of security concerns in Congress. Time Magazine reports that one of the Dubai government's investment vehicles, Istithmar (Istithmar was used to purchase 230 Park Ave.), in January bought Inchcape Shipping Service, a British company that provides a variety of shipping and logistics services to the maritime industry, including the British Navy.

Now Inchcape has a $50 million, five-year contract with the U.S. Navy to provide ``ship husbanding services'' -- everything from food to fuel to maintenance to security -- in ports around the globe, according to Time.

Docking Rights

That means Dubai would have access to sensitive information such as shipping schedules -- the same information that was at the root of the hysteria over the Dubai ports acquisition and ultimately scuttled the deal.

``More ships dock at the Port of Dubai than at any other port outside the U.S.,'' says Dan Griswold, director of the Center for Trade Policy Studies at the libertarian Cato Institute in Washington.

And Dubai now has access to all of them!

What about air access? Emirates SkyCargo, the airfreight division of Emirates Airline, is one of a handful of U.A.E. companies operating in the U.S., according to Uniworld Business Publications Inc., a database publishing firm in Millis, Massachusetts.

Unfriendly Skies

Emirates SkyCargo flies to 75 destinations worldwide, including New York's John F. Kennedy International Airport. It complements its air network with ``an extensive system of scheduled truck links to regional, off-line points,'' according to the Web site.

Everyone agrees that U.S. seaports are vulnerable -- an issue for the U.S. Coast Guard and Customs Authority regardless of ownership. Why should it be any more difficult for Osama bin Laden, who is known for meticulous planning, to infiltrate SkyCargo's airport operations? A crate containing nuclear weapons material might somehow find its way around the screening process when it departs the Middle East or Africa en route to the U.S. Only a portion of air cargo is screened on arrival in the U.S.

``All cargo moved into the U.S. is handled by foreigners,'' says David Hoppin, a managing director at MergeGlobal Inc., a consulting firm specializing in transport economics and security based in Arlington, Virginia. ``If you're concerned about ownership of port terminals by the U.A.E., consider that foreigners own and operate a majority of ocean terminals in the U.S. and have a substantial presence in air-cargo handling.''

And where was Congress when we were presumably subcontracting national security to foreigners?

Show Them the Exit

For the record, foreign direct investment by the U.A.E. in the U.S. to date is an infinitesimal share of the total. Through the end of 2004, the Emirates had invested a cumulative $1.8 billion, or .001 percent of total FDI, according to the Bureau of Economic Analysis. That figure captures the ultimate beneficial owner of an investment.

Direct transactions are much smaller: $24 million through 2004. The difference suggests that ``much investment by the U.A.E. is made through third countries,'' says Jeffrey Lowe, an economist at the BEA.

That's a rock Congress has yet to overturn. If lawmakers don't want foreigners owning U.S. assets, they should have closed the doors a long time ago.

To contact the writer of this column:

Caroline Baum in New York at  cabaum@bloomberg.net

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[quietfan 233]

Well, if the other shipping and airfreight operations increase the opportunites for terrorsts to smuggle weapons or people into the country, then they should have been examined in the same light as the ports deal. [i'm not sure legally what could be done after the fact, once a legally binding contract has been signed and executed, however.]

Last year, the Dubai royal family's investment group made a splash in the New York City real estate market with its $440 million purchase of the Essex House, the art-deco hotel ...

The Dubai royal family also paid $705 million for 230 Park Ave., a tower than stands astride Park Avenue just north of Grand Central Terminal.

``They bought and sold $1 billion of apartments in Texas'' ...

I wouldn't think mere real estate holding involve the same security risks, though, since presumably any dangerous contraband shoud be seized at Customs BEFORE it can be "checked in" to the hotel.