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Journalists examine D.C. power networks
But first a story, one that shows some of the changes that have transformed Washington, and some of the forces that have created gridlock on America’s Main Street.
This story unfolded in February 2006, with a furor like that of one of those summer thunderstorms that periodically sweep across the nation’s capital, seeming to arise out of nowhere, building rapidly to a loud and frightening climax, and then moving out again, leaving Washingtonians to wonder what had hit them. The episode became known simply as “the Dubai Ports deal.”
The story began quietly enough: A company few in Washington had heard of, with headquarters in a country most Americans never thought about, agreed to a corporate transaction that once might have passed unnoticed. The deal involved the purchase of terminal operations at a handful of American seaports. In the modern global economy, overlaid by new national-security fears and today’s instant and shrill political jousting, this particular transaction lit a fire of rebellion and disunity.
A firm called Dubai Ports World–DP World for short–had emerged as the winner in a bidding contest to take over a British firm, Peninsular & Oriental Steam Navigation Company, for $6.85 billion. Both companies were in the business of operating the giant oceanside ports that increasingly send and receive the massive shipments of goods that keep the new global economy running.
P&O, a firm with a long and illustrious history in shipping, had long-run shipping terminals at ports around the globe. DP World, in turn, was a company created and owned by the government of Dubai, a tiny Persian Gulf emirate, to do the same thing. Dubai had used some of its billions of dollars in oil money to build a world-class port of its own, and then created DP World to buy and manage other port operations. DP World was run largely by Westerners on the emirate’s payroll.
What P&O owned, and what DP World coveted, were terminals at some key ports around the globe. Most important, P&O owned port operations in booming China. The fact that DP World would gain access to terminals at six American ports also run by P&O was seen largely as a fortunate by-product.
It was hardly a secret that P&O was selling out; that had been noted in The Wall Street Journal and other newspapers, though in routine stories on inside pages.1 More important, the company approached the U.S. government in mid-October 2005 to inform it that a sale affecting American port operations might be coming.
That, too, was a routine move. Foreign firms attempting a takeover or merger that might affect national security must get a stamp of approval from a little-known group called the Committee on Foreign Investments in the United States, a panel of representatives from across the government run by the Treasury Department from its grand building on Pennsylvania Avenue, next to the White House. CFIUS, as the group is known, has representatives from twelve different Cabinet departments and White House offices. Under its procedures, lower-level career officials in the departments study proposed foreign investments to see whether they pose any security threats. If those officials agree among themselves, a deal is approved. If there are disagreements, a proposed investment deal is kicked upstairs, where higher-level officials, normally political appointees, can take forty-five days for a second investigation, and the decision is ultimately put on the president’s desk.
As it happened, CFIUS had been racked by dissension in the previous year or so. Officials from the Defense Department and other security agencies, who tend to be more sensitive to foreign threats than are their counterparts at the government’s financial agencies, felt that their views weren’t being heard enough in the process. They wanted more scrutiny of deals. Their counterparts at the Treasury and elsewhere, in turn, felt they were under pressure from the White House to decide on deals without pushing them up the line where they would bother higher-level officials and land on the president’s desk. In the months before the DP World deal arrived, the officials running CFIUS had been busy changing their procedures to better ensure that security agencies would have their views heard.
In the case of the ports deal, the question was whether foreigners operating American ports could be counted on to make sure the ports weren’t being used by terrorists or rogue states to sneak into the United States either people or materials for terrorist attacks. So, when the ports deal arrived, CFIUS went into action. The Department of Homeland Security was chosen to take the lead in vetting the deal, because it was in charge of port security. P&O and DP World twice briefed officials from all the agencies and departments in CFIUS on the proposed deal. The Central Intelligence Agency and its sister intelligence services were asked to provide written assessments of whether the deal posed problems. Meetings were held, memos exchanged; the system did its job.
By mid-December, when P&O and DP World formally filed their request for government approval, the American government already had been considering the deal for two months. Questions had been asked and answered, security guarantees sought and delivered. In early January 2006, DP World sent a dense three-page, single-spaced letter to the Department of Homeland Security promising to abide by all the U.S. government’s port-security programs already in place. More than that, the company agreed to keep its American port operations under management by American citizens “to the extent possible,” to open up its files on the “design, maintenance of the ompanies’ U.S. facilities, equipment or services,” and to give the government “any relevant records” it might seek regarding directions the port managers received from abroad.2 Security officials felt that, if anything, they would end up having a tighter security arrangement with DP World than with any other port manager in the country. By mid-January, a poll had been taken of all the government agencies involved in CFIUS, and the decision was unanimous: The deal should be allowed to go forward.
It’s not hard to understand why the bureaucrats saw no threat to American national security, given the way they viewed the deal. DP World was seen in the shipping business as a smart and well-run company— and one that actually had been very cooperative with Home- land Security in setting up a program to monitor shipping containers that are sent from abroad to U.S. shores. The tiny sheikhdom of Dubai, just a few years earlier known as a place that looked the other way as extremists transferred money through its banks and Iran shipped weapons parts through its ports, had transformed itself into the Gulf state most openly cooperating in the war on terror. Among other things, it publicly allowed the U.S. Navy and Air Force to use its ports and airfields. As such, Dubai actually was a favorite of the folks at the Pentagon who might normally be the most keen to suspect national-security threats in a foreign takeover.
Moreover, given the recent turmoil among the officials who ran CFIUS, if objections weren’t registered by the Defense and Homeland Security officials, who had been so annoyed that their concerns weren’t being heard on other deals, why should anyone else stand in the way of this one? At that point, perhaps 250 officials, at the second and third tiers of government, had reviewed the deal, and their consensus was that it didn’t pose a problem. The substantive, logical, and bureaucratic considerations all ignored one thing: the chance that the politics of the deal, inflamed by a polarized electoral system and media culture, could explode in controversy.
Whether DP World was a safe partner or not, how would it look to Congress and the American public, in the midst of a war against terrorism emanating from the Middle East, to sell operations at some of America’s most important ports to an Arab country? Worse, how would it look to sell those operations at a time when the administration was being criticized specifically for not doing enough to be sure terrorists weren’t smuggling bombs, or even people, into America through the nation’s ports?
This separation of political passions and bureaucratic decisionmaking wouldn’t last. And it was a sign of the times that those passions exploded in the face of a man who had seen, in his life and career, the erosion of the sensible center, and the emergence of gridlock on Pennsylvania Avenue.
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