The story about the sale of P&O’s port assets to Dubai Ports World (DPW) and the CFIUS approval of the deal has become a political firestorm in the past week. (Here’s the original AP story that got the ball rolling). In the middle of last week, members of Congress started attacking the deal; seven members of Congress from both political parties sent a letter to Sec. John Snow asking for additional investigation. In response, the Administration vigorously defended the CFIUS approval on Thursday and Friday. Sec. Chertoff defended it during his appearances on the Sunday morning talk shows this weekend, but Senators continued to lambaste the deal. Meanwhile, the blogosphere quickly turned up the knob to “outrage” about the deal. For example, see here and here. Although there have been other calmer voices; for example, see this post and this one.
I’ve been trying to educate myself on this story since it hit the media. I’ve restrained myself from writing about it until I had a better sense of it. It’s a complex story, in large measure because of the complexity of port operations today, with so many different participants across the supply chain: port authorities, terminal operators, shipping agents, freight forwarders, stevedores, etc. DPW would take over P&O’s position as terminal operator at a number of key U.S. ports via a management lease, but they would not “own the port.” And it’s worth noting that the terminal operations industry is already nearly entirely non-American: the large players Hutchison, Maersk, Temasek, and P&O are from Hong Kong, Denmark, Singapore, and the UK respectively.
Looking at the deal, I think we need to ask the following questions: Does this transaction pose a risk to port security today? And could it create new risks in the future?
In answer to the first question, I don’t see any significant security risks from this deal today. I know about the connections between the UAE and terrorism, some of which are concerning (e.g. UAE recognition of the Taliban) and some of which are spurious and/or guilt-by-association (e.g. 9/11 hijacker Marwan al-Shehhi’s UAE citizenship, even though he was clearly radicalized in Hamburg, Germany). But I’ve seen nothing yet to indicate a connection between DPW and its key financial backers and terrorism. If real ties were to be found, then that would be reason to block the deal. But if not, then I think it’s unfair to claim that there is a security risk today from this transaction.
Of greater concern to me are some of the security implications of this deal in the longer term. The DPW purchase of P&O could create a strong incentive for al-Qaeda and related groups to cultivate insiders at DPW to learn about security operations at ports. It’s not difficult to imagine scenarios where a well-positioned insider could learn sensitive tactical information such as the conditions used to select containers for additional screening (perhaps via retrospective analysis of selectees) or the daily cycle of security operations at key ports, which could assist with attacks and/or smuggling activities. Of course, there is known terrorist activity in the countries where all of the other major port operators are headquartered, so any of them could be similarly infiltrated today. The question is whether the insider threat would be greater with DPW.
A second longer-term implication is what impact that this would have on US intelligence, both in terms of preventing an attack and conducting a post-incident investigation. Would this impair the information flow related to critical counterterror and counterproliferation activities in the maritime domain? And if there were an attack involving an American port, would DPW open up its corporate records in Dubai and allow its non-US-based employees to be questioned by the FBI in the same way that a British-owned company would? On this last point, I’m initially skeptical.
Overall, I’m still undecided about the deal. I think it makes sense for the government to extend its CFIUS investigation, and do another round of checks. I wouldn’t be surprised to see Congressional hearings in the next few weeks to take a closer look at this issue. And now that the media and blogosphere are fired up, I expect that any facts of concern will emerge in the coming days and weeks. If nothing new emerges, I think the rational outcome would be to let the deal go through, perhaps with conditions that make it easier for local port authorities to recompete their terminal leases in a way that is fair to DPW.
That brings me to my final point: I wish that everyone who is expressing outrage about this deal would channel their anger into the issue of the government’s underinvestment in port security over the past 4 1/2 years. That’s the real issue. The potential vulnerabilities created by this deal are nothing in comparison with the real vulnerabilities that exist in our port system today due to the failure to make adequate security investments in port and supply chain security. The Maritime Transportation Security Act (MTSA) of 2002 provided a solid framework for improving port security, but Congress has not supplied the resources to effectively implement MTSA, which the Coast Guard had estimated would require a total of $7.3 billion over the 2003-2012 period. Congress has provided only a fraction of that: $175m for port security grants in current fiscal year, which itself was a significant improvement on the administration’s request. There have been many solid steps taken for port security, such as C-TPAT and the investments in radiation portal monitors at ports, but not the same system-wide commitment that we see today in the federal government to commercial aviation security.
Hopefully the political fracas that this story has generated will open peoples’ eyes to the need to renew our commitment to the important issue of port security.