Washington Report on Middle East Affairs, May/June 2006, pages 26-27

Special Report

The Dubai Ports World Deal: Manna to Publicity Hound Sen. Charles Schumer (D-NY)

By Richard H. Curtiss

At New Jersey’s Port Newark Container Terminal, Sen. Charles Schumer (D-NY) speaks at a Feb. 27 rally of longshore workers protesting the takeover of six U.S. port operations by Dubai Ports World (AFP Photo/Stan Honda).

FORMER presidential candidate Bob Dole once quipped that “the most dangerous place in Washington is between Charles Schumer and a television camera.” Indeed, the Democratic New York senator frequently schedules media appearances on Sundays, a slow news day, in hopes of getting wider television coverage.

On Feb. 13 the tireless Schumer trekked with some TV reporters to the New York harbor to discuss a pending port deal. Schumer hit a bonanza of publicity when he discussed his concerns that the Arab-owned Dubai Ports World (DPW) had purchased the British firm Peninsular and Oriental Steam Navigation Company (P&O). Schumer called the sale a “grave security risk.”

The U.S. government already had vetted the United Arab Emirates (UAE)-owned company, and had said that the U.S. Coast Guard had found nothing to be alarmed about—it would remain responsible for port security. “We made sure there were assurances in place to satisfy us that the deal is appropriate from a national security standpoint,” Homeland Security Secretary Michael Chertoff told ABC television. “The reality is the major terminal operators are all foreign-owned,” Robert C. Bonner, a former top U.S. customs official, pointed out.

But Schumer and New York Republican Rep. Peter King thought otherwise, and demanded further assurances. Suddenly Schumer was off and running, moving from talk shows and back-to-back interviews—exactly what the senator from New York loves best.

Almost lost in the hue and cry was the original arrangement with tiny Dubai, an Arab emirate with an indigenous population of considerably less than 100,000 people. Nevertheless, on March 9, 2006 DPW withdrew its application to purchase the P&O shipping firm, which had agreed to the $6.8 billion takeover.

Stunned by the negative reaction, the P&O owners—primarily London investors—are looking for a new company to assume ownership of the line, even if it means a financial loss.

As a result of this fracas, Saudi Arabia has quietly begun divesting from American securities in favor of euros—a reorientationwhich, if it continues, could have a major impact on the world economy to the detriment of dollar-denominated credits. In the long run this could have grave financial implications far beyond the current crisis.

A Focused Rise to the Top

According to his authorized biography, publicity-hungry “Chuck” Schumer, 56, has a remarkably focused background. The class valedictorian at his high school graduation, he then went to Harvard University. He passed the state bar exam in 1975, but never practiced law. Instead, that same year he ran for and was elected to the New York State Assembly, becoming at age 23 probably the youngest member of the New York legislature since Theodore Roosevelt.

He served three terms in Albany and, in the years since, has never lost an election. He and his wife, Iris Weinshall, New York City commissioner of transportation, have two daughters, Jessica and Alison.

In 1980 Congresswoman Elizabeth Holtzman won the Democratic nomination for the Senate seat of Republican Jacob Javits. In that election Schumer ran for her vacated House seat, and won. While in the House of Representatives he co-authored the federal assault weapons ban in 1994, along with California Sen. Dianne Feinstein. He has been given much credit for the Brady Handgun Violence Prevention Act as well.

In 1998, after winning the Democratic senatorial primary against Mark Green and Geraldine Ferraro, Schumer went on to defeat three-term incumbent Republican Sen. Alphonse D’Amato.

Schumer currently is chairman of the 2006 Democratic Senatorial Campaign Committee, which raises funds and recruits candidates. Controversy arose last year when two of Schumer’s staff employees, Katie Barge and Lauren Weiner, illegally obtained a copy of the credit report of Maryland Lt. Gov. Michael Steele, an African-American Republican senatorial candidate, using Steele’s social security number. The two employees were suspended but remained on the payroll during the investigation, a subject that may cause more embarrassment to Schumer before the investigation is completed.

Ironically, Schumer co-authored the Schumer-Nelson ID Theft Prevention Bill to discourage the kind of actions that Barge and Weiner took. Thus far the senator has not been implicated in the matter, saying his “only involvement was to report the matter to the authorities immediately after first learning about it.” Given that federal statutes make the acquisition, distribution, acceptance, and even reading of this data illegal without written permission, Schumer’s employees committed a federal crime.

As writer Edward Morrissey pointed out in The Daily Standard: “Keeping two staffers on paid leave of absence after breaking federal laws on privacy—especially when data privacy happens to be a specialty of Schumer—does indicate a casual approach to practicing what Schumer preaches.”

Where Schumer differs from many other Democrats is his strong support for the Iraq war, a characteristic of the neoconservatives. He is also an ardent booster of all Israeli arguments in favor of weakening Arab states.

According to a March 20 front page article in the New York Observer, some critics suggested Schumer’s opposition to the Dubai Ports World deal was driven by xenophobia or anti-Arab racism. Schumer heatedly disputed that view, saying, “Let’s say skinheads had bought a company to take over our port,” he said. “I think the outcry would have been the same.”

As others jumped on the anti-Arab bandwagon, the U.S. government pointed out that the UAE is a key ally in the war on terror. As Secretary of State Condoleezza Rice said, “We have to get out and make sure that people understand that this is an ally that we fully respect and that the U.S. values its moderate friends in the Middle East which stood with us. It means that we’re going to have to work and double our efforts to send a strong message that we value our allies.”

The Arab Reaction

This writer was in four Gulf countries at the height of the port controversy. Saudi Arabia, the UAE and, of course, the emirate of Dubai are deeply concerned about the Arab-bashing manifested by what they thought were friendly countries. The U.S. and UAE postponed free-trade talks that were due to start in March, and gave no new fixed date.

While the governor of the UAE central bank, Sultan Nasser al-Suweidi, made no specific reference to Arab investment, his subsequent remarks underscored growing concern among Gulf Arab investors regarding the anti-Arab backlash. Governments in the world’s largest oil-exporting region are now diversifying away from U.S. assets, as record oil prices drive up cash available for foreign investment by some $180 billion a year—about 16 percent of the external funding needed to cover the U.S. current account deficit. The U.S. must attract more than $10 billion in new capital each week to compensate for its inability to save enough to finance domestic investment and spending.

According to al-Suweidi, the central bank was looking to convert up to 10 percent of its foreign exchange reserves from dollars into euros—double the target the bank had previously set. The DPW furor will color foreign investors’ perceptions of the United States and affect future investment decisions, the United Arab Emirates’ Central Bank governor said.

Cautioned Treasury Secretary John Snow, “We need to keep our doors open or risk having the doors of the world closed to us. Clearly, the American people stand to lose a great deal if investment stops flowing into the U.S. from willing investors.”

“If foreign direct investment is driven away because of political hostility,” said the International Monetary Fund’s chief economist, Raghuram Rajan, “the U.S. will have to offer higher interest rates to attract additional, compensating portfolio investment.” The uproar over the ports is likely to give some potential foreign investors, particularly from developing countries, second thoughts.

“On the pure merits of the case,” wrote New York Times columnist Thomas Friedman on Feb. 24, “the president is right. The port deal should go ahead. The security argument is bogus and, I would add, borderline racist. Many U.S. ports are run today by foreign companies, but the U.S. Coast Guard still controls all aspects of port security entry and exits.”

DPW chairman Sultan Ahmed bin Sulayem was quoted by Washington Post columnist David Ignatius as saying, “We don’t understand politics, it is a surprise to us. We have been cooperating with the U.S. We are their best friends.”

Many of the UAE’s political leaders, including Crown Prince Mohammed bin Zayed, had grown increasingly convinced that the wisest course would be to pull out. In Ignatius’ opinion, “President Bush tried to do the right thing on the Dubai port deal, but he got rolled by a runaway Congress which responded to the Dubai deal with a frenzy of Muslim-bashing, disguised as concern about terrorism.”

As for the furor this issue raised over the security of U.S. ports, Homeland Security Secretary Michael Chertoff said, “U.S. ports would have been safer with an Arab company running the terminals than they will be now that a political uproar killed the deal.”

Chertoff had dismissed the security concerns raised by opponents of the deal all along, and he went a step further in a March 24 speech to the Council on Foreign Relations in New York. “The irony of this is that, had the deal gone forward, we would have had greater ability to impose a security regime worldwide on the company than we have now,” he said. Saying that he regretted the political opposition, Chertoff predicted that similar events in the future would jeopardize the U.S. economy, not security.

Said David Brooks of The New York Times: “Let’s be clear: the opposition to the acquisition by Dubai Ports World is completely bogus. Regardless of who operates the ports, the Coast Guard still controls their physical security. The Customs Service still controls container security.”

He continued, “The oil-rich nations of the Middle East have plenty of places to invest their money and don’t need to do favors for nations that kick them in the teeth.”

In retrospect, on his busy day in the limelight, Schumer succeeded in stampeding enough Republicans and Democrats, including fellow New York Sen. Hillary Clinton, into doing something that, in truth, makes little sense. 

Richard H. Curtiss is executive editor of the Washington Report on Middle East Affairs.

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