For many New Yorkers who make their living from the city's harbor, the high-pitched, month-long debate over the so-called Arab takeover of the port was beyond baffling.

LINK

Dubai Ports World, a company owned by the United Arab Emirates, was going to operate only one facility in New York -- a port terminal that handles just cruise ships, not cargo. (It would also have shared control of another terminal in New Jersey.) But there are seven other port facilities in New York Harbor, and the company would have had nothing to do with them.

Faced with ever-increasing opposition in Congress fueled by public opinion, DPW announced that it was dropping the port deal, and would "transfer" the lease to an American company. But even if the deal had gone through, Dubai -- despite what politicians and columnists said over and over again -- would not have owned, controlled or taken over the ports. The port is owned by the taxpayers and controlled by state and local governments. The lease that DPW had purchased from a British company was simply to manage the facilities.

"It's not like foreigners are just coming in and doing their own thing," said Captain Timothy Ferrie, a ship pilot and president of the Maritime Society of New York City. "There's American involvement every step of the way."

Those who know the waterfront best also point out that foreign companies - even some with close ties to governments that the U.S. considers dangerous - have been operating on the waterways for years. A high-ranking official in the Communist Party in China is in charge of a company that for the past ten years has managed a facility on Staten Island that not only handles cargo ships, but also deploys military equipment for the U.S. Army.

Above all, some express bafflement -- or outrage -- that the nation's lawmakers seem only suddenly to have discovered the port.

"Where were these people for the last few decades?" Mayor Michael Bloomberg asked during his radio program. "Everybody's rushing to save our ports; it isn't like this hasn't been brewing for two decades."

Whether or not the fracas over port security will continue now that the Dubai deal has fallen through, it has brought back attention to a once-great waterfront that even most New Yorkers probably assumed had fallen into commercial disuse. The truth is that the ports of American cities -- and in particular the Port of New York and New Jersey -- are still vital, and growing more so. And if security in the ports is a major concern, it is far from the only issue threatening the future of New York Harbor.

THE BUSIEST PORT IN HISTORY

In 1648, Governor Peter Stuyvesant ordered construction of a wharf on a stretch of the west bank of the East River sheltered from harsh winds and ice. With that move, he launched New York as a prime port for the colonies and later for the newly independent nation.

The port grew rapidly with the introduction of steamships and especially with the completion in 1825 of the Erie Canal, which made New York the most important connection between Europe and the American heartland. By the mid 19th century, more passengers and products came through the port of New York than all other harbors in the country combined. In 1944, at the height of World War II, the New York port was the busiest in the world -- and in all of history.

The port's importance has faded in the decades since then. But it remains a powerful presence. The Port of New Jersey and New York is the third busiest in the nation, after Los Angeles and Long Beach, California. Last year more than 5,300 ships delivered goods here that went to 35 percent of the U.S. population.

In 2004, more than half a million people departed from Manhattan's only working ship terminal, the cruise ship terminal across from the Javits Convention Center on the Hudson River. While well behind Florida, this still accounted for five percent of the worldwide trade and helped the cruise industry generate more than 21,000 jobs in the city.

Overall, according to the Maritime Industry Museum at Fort Schuyler, the maritime industry in New York State generates $14 billion a year.

SLAVERY, STRIFE, CORRUPTION

While the port has brought jobs, money and an international flavor to New York City, it has also brought problems, many reflecting the concerns of the day.

While flour and furs came through the city's port in the 17th and 18th century, so did slaves. That trade helped make New York the largest slave holding state in the north, led to slave rebellions in the city and spawned an array of harsh laws.

Unrest would plague the waterfront in the 19th century. In 1836, stevedores seeking better wages walked off their jobs, shutting down the port. In response, Mayor Cornelius Lawrence called in the troops, marking the first time the military had ever been used to put down a strike in New York City. And waterfront workers participated in the draft riots of 1863.

Bad working conditions and corruption were hallmarks of the docks in much of the 20th century. One union leader - Joseph Patrick Ryan - managed to be responsible for both, repressing strikes, negotiating sweetheart contracts, and using convicts to make sure none of his members objected.

In the 1950s the mob controlled the waterfront. "The waterfront's tougher - like it ain't part of America. Anywhere else you got the law protectin' ya. Here ya just get knocked off and forgotten," says a galoot in the 1954 film, On the Waterfront.

More recently waterfront corruption has been featured in episodes of "The Sopranos." And, some prosecutors charge, the corruption is not merely fictional. Last year, the federal government filed suit in Brooklyn against the International Longshoremen's Association, whose members work on the New York port, accusing it of being a "vehicle for organized crime," with links to the Genovese and Gambino crime families.

Such corruption, some experts say, could help terrorists. "It is an invitation to smuggling of all kinds, whether it is heroin, or weapons, or human trafficking," Joseph King, a former Customs Service agent who teaches at John Jay College of Criminal Justice, told the Associated Press. "Instead of bringing in 50 kilograms of heroin, what would stop them from bringing in five kilograms of plutonium?"

THE DUBAI DEAL

Although port security has been a concern since 9/11, the issue came to the fore with the Dubai Ports World deal. The controversy began unobtrusively last month, when the company owned by one of the United Arab Emirates, moved to purchase the British corporation that ran facilities in six U.S. cities, including the passenger terminal in Manhattan and a cargo terminal in Newark. Many experts said little would change.

While politicians have focused on the Dubai Ports deal, the Global Marine Terminal in Staten Island is already owned by a Hong Kong based company with ties to the Communist Party in China.


"When all is said and done, it's going to be the same people running the [terminals] day by day, the same managers managing it," said Rob Quartel, a former member of the Federal Maritime Commission.

The federal government approved the arrangement in mid February without even running it by the White House or state and local officials, apparently considering the matter a routine financial transaction.

Whatever the merits of the deal, the matter quickly became anything but routine. While Dubai is a moderate Arab state and the Bush administration considers it an ally in the war on terror, it is an Arab state in the Middle East, undoubtedly a red flag to some who pounced on the deal.

Two of the 9/11 hijackers came from the United Arab Emirates, of which Dubai is a part, and the country served as a transfer point for nuclear parts being sent from Pakistan to Iran, Libya and North Korea.

That was all many Democrats needed to attack the deal -- including both of New York's Senators, Charles Schumer and Hillary Clinton, who became prominent critics. But Republicans also hammered Bush on the issue.

"Not since Watergate, when GOP congressional leaders told Richard Nixon they would vote him from office if he didn't resign, have Capitol Hill Republicans challenged their president like this," wrote Thomas DeFrank in the Daily News.

"It is my intention to lay the foundation to block the deal," Republican Representative Jerry Lewis of California, head of the House Appropriations Committee, declared March 7. And so he did. The next day, Lewis' committee voted 62 to 2 to block the transaction.

On March 9 - less than four weeks after the deal became public -- Dubai Ports International announced it would transfer the leases for the American facilities to a U.S. company that has not yet been named.

President George W. Bush expressed regret at the outcome. "I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East," Bush said. "In order to win the war on terror, we have got to strengthen our relationships and friendships with moderate Arab countries in the Middle East."

Despite their apparent victory, opponents of the deal -- particularly Democrats -- seemed reluctant to let the issue go. "We will not settle for any solution that doesn't completely eliminate the role of the United Arab Emirates in our ports," Schumer told reporters. And Clinton said she would still work to ban all foreign governments from running U.S. ports.

For better or worse, the Dubai Ports controversy reached a straightforward resolution. The other issues facing New York's port will be far harder to solve.

JOBS

The storied New York port has been fading since the 1960s as big container ships moved in. That is because the old New York docks were built when cargo was unloaded by dock workers one load at a time.

Now there are self-contained units already loaded with cargo -- huge containers that look like train cars or truck trailers, and indeed they can be plopped onto a truck or train without even touching the cargo inside of them. Port facilities in New Jersey can provide the docking and storage space that containers need. The New Jersey docks also provide better inland transportation for cargo than New York terminals.

As a result, as much as 80 percent of New York Harbor shipping goes to New Jersey, not New York City. Today, there are only two terminals in New York that accommodate container ships.

In Staten Island, the 187-acre Howland Hook Marine Terminal by the Goethals Bridge, can work three ships at a time and handle 425,000 containers a year. It also handles American military supplies heading to the wars in Iraq and Afghanistan.

The 80-acre South Brooklyn Marine Terminal in Red Hook currently handles container ships and deals with the contents of giant tankers filled with cooking oil, olive oil and orange juice. But in 2007, officials plan to convert it into a passenger ship terminal. That would throw into question whether there would be jobs for all of the more than 600 longshoremen who work there now.

Experts say that the shipping industry is a fragile enterprise that can change quickly. For example, during a dock strike on the West Coast in 2002, some shippers transferred their business to the East Coast. Some fear that if New York officials do not continue to plan for the future, companies will move their business elsewhere.

DREDGING

In order for New York and New Jersey to compete with other ports and to accommodate larger ships, its shallow channels must be dredged deeper.

Despite fervent opposition from environmentalists in the 1990s, channels up to 50 feet deep in Kill Van Kull and Newark Bay were planned to accommodate larger ships at the Port Newark and Elizabeth marine terminals. The Arthur Kill and Port Jersey channels would also be deepened. That would accommodate massive ships carrying 8,000 containers (much larger than the present capacity for ships that carry 3,000 containers). Those are called "post-Panamax" ships because they're too large for the Panama Canal.

However, a federal judge has blocked this deep dredging for the time being because much of the area is a Superfund site, contaminated by dioxin.

One of the biggest problems with dredging is what to do with the toxic mud that is dug up. In the past, solutions have included dumping it in the ocean, burying it, or trucking it out of state. All of these options have high costs and environmental consequences.

INFRASTRUCTURE

The Port Authority is busily bolstering the infrastructure of the port to make it more easily accessible to trade that has been expanding at higher-than-expected rates. Shipments increased nearly 12 percent last year when it was projected to increase at 4 percent.

Construction for rail lines in Staten Island will allow direct transfer of goods to rail cars instead of having to load everything on trucks as is done now. Rail and storage facilities are being expanded in Elizabeth, too. The biggest project is the merging of Maher and APM terminals in New Jersey to create one major 445-acre facility.

The frantic construction amidst the burgeoning business brings a scene to mind for Rick Larrabee, director of port commerce for the Port Authority of New York and New Jersey, he told Shipping Digest last October. "It's like having your family over for Sunday dinner when you just started renovating your kitchen on Friday."

SECURITY

A number of public and private agencies handle security for the ships traveling in and out of New York. And each level has its own challenges to ensuring the safety of New York Harbor.

1. International Security

The first level of security actually begins before a ship leaves the port in other countries.

The United States currently has agreements in 43 major foreign ports that allow U.S. Customs officials to inspect containers using X-ray and radiation detectors.

"Since Sept. 11, we do screening as much as possible outside the U.S.," said Stewart Baker, a Homeland Security Official told National Public Radio. "We don't want to discover a weapon of mass destruction inside a U.S. port."

Customs hopes by the end of the year to increase from 43 to 50 the number of foreign ports that allow U.S. agents to inspect containers. (The United Arab Emirates, ironically, is the only Middle Eastern country that currently allows the U.S. do so). But building diplomatic relations with individual countries can take years of effort.

When it comes to security of international cargo, the issues are so complex that even the U.S. Coast Guard said it was "impossible to assess" the threat posed by the Dubai deal.

2. Funding

Port security is under funded, many experts say. Since 9/11, the federal government has spent $25 billion on airport security, but only $800 million on port security. About $44 million of that was given to New York and New Jersey.

"Most of the federal government's attention has focused on aviation security because airports and airplanes affect the lives of so many people," said Port Authority Chair Anthony Coscia. "However our nation's ports are equally if not more vulnerable."

Last week in his radio address, Mayor Michael Bloomberg criticized politicians for trying to kill the deal with Dubai Ports, but doing little to fund the U.S. Coast Guard and local police departments who are responsible for protecting the harbor.

"They need to have money every year," said Bloomberg. "They need to have modern equipment. They need to know that the government and the people are behind them."

3. Screening Cargo

The U.S. Customs and Border Protection is responsible for screening and inspecting cargo. Containers are put through radiation detectors and suspicious cargo is then put through X-ray and gamma ray machines. Some are inspected by hand.

However, only one in 20 containers coming into the U.S. is inspected - and even the ones that are inspected pose problems.

Of the 5,000 containers that are processed each day at the Port Newark facility, the radiation detector machines register 200 false alarms.

"Radiation monitors at ports and borders cannot differentiate between radiation emitted by a nuclear bomb and naturally occurring radiation from everyday material like cat litter or ceramic tile," noted the New York Times last year.

4. Screening of Port Employees

On the docks, the 6,800 people who load and unload the containers are screened by the Waterfront Commission of New York, a bi-state agency, originally created in the 1950s to clean the mob out of the ports.

Even foreign companies must have their employees screened.

"The longshore register is a closed register, and the Waterfront Commission is the gatekeeper," one commission official told the Asbury Park Press in February. "If Dubai wanted to bring in, say, 100 new workers, they'd have to petition us."

Still, there are loopholes. ABC News recently reported that the Department of Homeland Security found that nearly half of the 9,000 truckers who transport goods across the country had criminal records and more than 500 had fake driver's licenses.

5.Security After Dubai

While many politicians and Americans have already shifted their attention elsewhere now that the Dubai deal has collapsed, security concerns still plague the nation's ports and New York Harbor.

A few days after the deal fell through, the Associated Press reported on a Department of Homeland Security investigation -- which took 3 years, cost $75 million, and is still ongoing -- that found security lapses at port facilities across the U.S., including the Newark cargo terminal that Dubai would have operated under the agreement. Cargo containers, the investigation concludes, can be secretly opened during shipment without alerting security officials.

As the report states: "No silver bullet has emerged to render terrorists incapable of introducing weapons of mass destruction into containers."

Under Pressure, Dubai Company Drops Port Deal
By DAVID E. SANGER, NY TIMES

LINK

WASHINGTON, March 9 The state-owned Dubai company seeking to manage some terminal operations at six American ports dropped out of the deal on Thursday, bowing to an unrelenting bipartisan attack in Congress that swept aside President Bush's efforts.

The company, DP World, said that at the direction of Dubai's ruler it would "transfer" to a still-unnamed American company the leases to manage some of the busiest terminals in the United States, including some in New York, Newark, Baltimore and Miami.

Under questioning, the company declined to say whether it planned to sell the American operations or had some other transaction in mind.

The action averted a showdown with Congress that Mr. Bush was all but certain to lose, as signaled on Wednesday by a 62-to-2 vote of the House Appropriations Committee to reject the transfer, because it allowed the sale of some terminal operations to an Arab state company.

Senator John W. Warner, Republican of Virginia, announced the change on the Senate floor two hours before the Senate had been scheduled to vote on a motion that could have paved the way for a Democratic proposal to scuttle the deal.

Mr. Warner made his announcement amid indications that the White House was looking for a way out of the confrontation. A delegation of Republican Congressional leaders told Mr. Bush on Thursday morning that his threat to veto Congressional action against transferring control of the terminals would not stop Congress from blocking the deal.

The outcome did nothing to solve the underlying issue exposed by an uproar that has consumed the capital for weeks. A vast majority of containers that flow daily into the United States remain uninspected and vulnerable to security gaps at many points.

Some experts suggested that DP World's quick surrender might take pressure off the administration, Congress and nations around the world to solve that problem.

DP World announced its decision after the White House appeared to signal that Mr. Bush wanted a face-saving way out of the shift by declining to repeat his veto threat.

The company said the decision had been made by the prime minister of the United Arab Emirates, who is also the ruler of Dubai, Sheikh Mohammed bin Rashid al Maktoum.

"This was clearly not a business decision made by DP World," a senior administration official said. "It was a strategic decision made by the U.A.E. to avoid further damage."

In Dubai, a senior political official with intimate knowledge of the deliberations, said: "A political decision was taken to ask DP World to try and defuse the situation. We have to help our friends."

The official sought anonymity because he was not authorized to speak for the record. He was referring to Mr. Bush, who backed the initial deal, and several Republican senators who did as well.

The company's decision drew sighs of relief from officials in New York and other cities where the imminent transfer had stirred cries of alarm. But the announcement left those officials wondering which American companies might want to buy the American terminal operations. The company that DP World outbid to buy the current operator, Peninsular & Oriental Steam Navigation, a British company, for $6.8 billion, is Singaporean.

"If it's a U.S. company, it should alleviate some of the concerns about security which have been talked about over the last few weeks," Charles A. Gargano, vice chairman of the Port Authority of New York and New Jersey, said. "I don't know how successful they'll be."

The Port Authority owns terminals in the New York metropolitan region.

Foreign companies have long dominated the business of loading and unloading cargo ships, and few American operators remain. "This is a case where we were arguing about the wrong part of the problem," said Stephen Flynn, a former Coast Guard officer and port security expert who has argued that the nationality of the port operations manager has little to do with the gaping holes in security. "Americans were shocked to learn that the vast majority of port operations in this country are handled by foreign firms. But transportation is a global network, and we're not going to own all of it."

Private equity firms, including the Blackstone Group in New York and KKR, have been named as potential buyers of the American terminal operations, which are a small and not particularly lucrative slice of the $6.85 billion Dubaian purchase.

The collapse of the deal is the second time in less than a year in which a foreign acquisition raised protests about the economic security of the United States. Cnooc, a Chinese government-owned oil company, dropped a bid to buy Unocal in July, after it was clear that opposition would run high. Chevron took over the company instead, for $18 billion.

What appeared to set off Democrats and Republicans this time, against the backdrop of concern about possible terrorist attacks, was that the buyer was a state-owned Arab company. Mr. Bush and his aides issued a strong defense, suggesting that racial bias lay at the core of the objections and warning that an undercurrent of isolationism would ultimately harm American efforts to enlist other nations in antiterrorism campaigns.

Those objections were washed away in a tidal wave of opposition in which Republicans and Democrats competed to position themselves as greater protectors of American security.

Democrats like Senator Charles E. Schumer of New York warned that the port operations could be "infiltrated" by terrorists exploiting the ownership in Dubai, an emirate known for its open trade. Dubai had been the transfer point starting in the late 90's for nuclear components shipped by the largest illicit nuclear technology network in the world.

The chairman of the House Armed Services Committee, Representative Duncan Hunter, Republican of California, introduced a bill that would require American ports and other strategic assets to be returned to American hands.

"Our longer-term goal is to identify long-range foreign investment in our critical infrastructure, reform the process for approving foreign investment in the United States and ensure 100 percent cargo inspection," Mr. Hunter said on Thursday.

From the start of the controversy, the White House appeared to have been caught flat-footed. Mr. Bush and his top advisers said they learned about the transfer late last month, one month after the Committee on Foreign Investments in the United States, an interagency committee that passes judgment on foreign acquisitions, approved the shift, after resolving minimal objections raised by the Coast Guard, part of the Homeland Security Department. The uproar over the deal, fanned in part by talk radio, led the White House and DP World into concessions. Ten days ago, DP World agreed to a more thorough investigation by the interagency group and said it would hold the American operations separate from the rest of the company until the review was completed.

By Thursday morning, Mr. Bush's press secretary, Scott McClellan, appeared to signal that the White House was backing away from its position, by refusing to repeat the veto threat.

At the time, Mr. Bush was meeting with the Senate majority leader, Bill Frist, and Speaker J. Dennis Hastert, both of whom had vocally split with Mr. Bush on the deal.

"It was a tactical discussion by that point," a participant said. "Look, the president didn't fall off a turnip truck. He understood the political reality."

Another participant, the House majority leader, Representative John A. Boehner, Republican of Ohio, was unapologetic about the uprising.

"House Republicans," Mr. Boehner said, "were obligated to take action to respond to the concerns Americans have expressed about the proposed deal."

It was unclear who a buyer might be for the assets now on the block. Experts said ports businesses threw off a predictable amount of cash, a quality often attractive to private equity buyers.

Because DP World is desperate to sell, some experts said, the terminal leases could be dumped at a bargain price.

"There are a lot of private equity firms that focus on logistics businesses, and operating a port might be a logical extension of that," said Andrew Sommer, a partner with Debevoise & Plimpton in New York who often works with private equity firms.

Three private equity firms named as potential suitors, Blackstone, KKR and the Texas Pacific Group, had no comment.

DP World issued its decision hours after its side won a round in a legal dispute with the Port Authority. The authority had asked a New Jersey state court in Newark to allow it to break quickly its 30-year lease on the Port Newark Container Terminal, half operated by P&O Ports North America.

Judge Patricia K. Costello of Superior Court in Essex County ruled that she did not know enough about the transaction to make an immediate decision about whether the transfer was a transaction that required the consent of the Port Authority. Judge Costello ordered an expedited review of the complaint because of the "high level of public interest" in the "security and workings of the port."

Reporting for this article was contributed by Hassan Fattah from Dubai, David D. Kirkpatrick from Washington, Patrick McGeehan from New York and Heather Timmons from London.

US to investigate security issue of ports takeover
By Demetri Sevastopulo and Stephanie Kirchgaessner in Washington
Thursday, March 02, 2006
Posted: 07:15 PM EST (00:15 London)

LINK

The Bush administration said on Thursday it was investigating the national security implications of Dubai International Capital's £700m ($1.227bn) takeover of Doncasters Group, the UK engineering company, following an uproar in Congress over the acquisition of five container terminals and other port operations by a sister company, Dubai Ports World.

Robert Kimmitt, the deputy US Treasury secretary, told a Senate committee that Cfius, the agency that reviews foreign takeovers of US assets, was conducting a 45-day review of the deal because security concerns had not been resolved in a preliminary probe. Doncasters is a leading supplier to makers of aircraft and jet engines that operates US plants.

The White House faces a barrage of congressional criticism over its handling of its review of DP World's takeover of P&O, the UK ports operator. It also underscores fears by some business groups that foreign companies could face longer regulatory reviews because of the ports controversy. Check Point Software, an Israeli software group, is also facing a 45-day investigation of its acquisition of Sourcefire, a software security firm.

A new Los Angeles Times/Bloomberg poll released on Thursday found that 58 per cent of Americans oppose the DP World deal.

Curt Weldon, the number two Republican on the committee, also questioned whether US intelligence agencies had examined a 2002 letter purportedly from al-Qaeda to the UAE government, in which the group claims that it had "infiltrated your [the UAE's] security, censorship, and monetary agencies along with other agencies that should not be mentioned".

A US government official familiar with the letter, which was included in a report on al-Qaeda by retired General Wayne Downing, said it was "an attempt to intimidate and influence" the UAE government, and did not reflect the reality of the situation.

One former senior intelligence official said Congress should consider the implications for US intelligence co-operation with Arab governments, suggesting the congressional opposition could reduce co-operation on the war on terror.

John McLaughlin, the former acting director of the CIA, said the US had had a very good intelligence relationship with the UAE since the 2001 attacks on the US. But another former senior intelligence official said the intelligence links were almost non-existent. He said the UAE did not even have an external intelligence service, such as the CIA or MI-6 in the UK.

"They are inconsequential, they are not a player [in providing intelligence]," the former official said.