Friday, August 31, 2007

Bush Administration Concerned about Dubai?

President Bush and his staff spoke to an issue recently tackled on this blog, trade with the United Arab Emirates through its shining city by the sea, Dubai. The administration has deep concerns about products smuggled through Dubai to our enemies in Iran and Afghanistan. Yet, 30 days ago two U.S. aircraft service companies, Landmark Aviation and Standard Aero, were sold by The Carlyle Group to Dubai Aerospace with the full approval of CIFUS, a committee of the U.S. Treasury Department.

This morning the news reported:

The Bush administration is pressuring the United Arab Emirates to crack down on foreign companies the White House believes are smuggling equipment to nearby Iran to build explosive devices killing American soldiers in Iraq and Afghanistan."

The UAE is among the world's largest shipping hubs for international commerce, and is located just across the narrow Strait of Hormuz from Iran. The countries have been trading partners for centuries. Much of Iran's trade flows through Dubai, which also ranked as the top export destination in the Middle East last year for American companies with $12 billion worth of goods.

U.S. intelligence agencies have collected evidence that at least 11 individuals and companies operating in the United Arab Emirates are smuggling electronic components and devices - sometimes through Iran - to build explosive devices used to ambush American soldiers in Iraq and Afghanistan.

"The regulation of re-exports should be established by the UAE without the threat from the U.S.," the director general of the Dubai Chamber of Commerce and Industry, Hamad Buamim, wrote in a letter to the Bush administration obtained by the AP. "Only the UAE is able to judge the balance of concerns for re-export relative to national security against the risk of the trade moving to another re-export location."

The dispute highlights the conflicted relationship between the United States and the UAE. The administration considers the emirates a close ally, especially on military matters in the Middle East. But Dubai was forced last year to abandon plans for Dubai-based DP World to take over significant operations at six major U.S. seaports amid intense national criticism. (Yet, there was no public discourse on the sale of operations at some fifty U.S. airports. CIFUS analysis of the deal is not yet available on the Treasury Department website.)

"They have been getting a lot of pressure from the U.S. government," said Arthur Shulman of the Washington-based Wisconsin Project on Nuclear Arms Control, a nonprofit group that supports limiting shipments that could be used for nuclear weapons or missiles. "The UAE clearly have their own interests, and one of those interests is promoting trade and transshipments with few restrictions."

So CIFUS approved the sale of two aircraft operations companies in America to Dubai Aerospace whose interest is "promoting trade and transshipments with few restrictions"? I feel a Michael Brown moment approaching. Or should we call that a Lord John Browne moment?

Update 8-28-13:  In a Carlyle-like move Dubai Aerospace is ready to flip Standard Aero for a double.

Update 12-9-18:   Carlyle looks to buy Standard Aero yet again, this time from Veritas Capital.