Trading with the enemy: Halliburton and Dubai

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" Zepp " <zepp

Wed, 22 Feb 2006 07:02:49 -0800

[Zepps_News] Trading with the enemy: Halliburton and Dubai

 

 

 

 

 

This FORBES 2004 article sheds new light since UAE now is Bush's

choice to manage US ports.

 

UAE Is a GREAT way to hide US corporations trading with America's

enemies, just like Haliburton did/does with Iran.

 

===========================

 

 

http://www.forbes.com/forbes/2004/0412/086_print.html

 

Forbes 2000

Trading With the Enemy

Matthew Swibel, 04.12.04

 

*If you want to get around export controls, just sell the product to a

front company in Dubai. The middlemen will take it from there.*

 

On paper the shipment was harmless enough. Sixty-six American-made spark

gaps--high-speed electrical switches used in medical devices to break

up kidney stones--traveled from the manufacturer in Salem, Mass. late

last summer to a buyer in Secaucus, N.J. From there, according to the

export

declaration, they were to be shipped to their ultimate destination in

Cape Town, South Africa. But these spark gaps can also be used to

detonate nuclear bombs--and it turned out that the goods were aimed at

an end user in Pakistan, with a stopover in Dubai. The commercial

capital of the United Arab Emirates, where trading activity accounts

for the biggest single chunk (16.5%) of a $20 billion economy, has

become a

favorite diversion point on the Persian Gulf for shady cargo. With no

export controls and hardly any bureaucracy at ports, airports and free

zones, this entrepôt provides stellar cover for smugglers hoping to

bypass U.S. embargoes.

 

On Oct. 3 U.S. investigators got a tip from a South African source. The

shipment was headed for Islamabad via a DHL freight-forwarding service

on Emirates Airlines--Dubai's government carrier. Hours after the

Emirates Airbus jet landed at Dubai International Airport on Oct. 20, a

U.S. special agent there tracked down the spark gaps to the airline's

cargo shed, contacted its director of security and demanded to inspect

the box. The response? Not a chance, according to the U.A.E.'s

director of customs. The next day the goods, valued at $30,000,

arrived in Pakistan aboard another Emirates flight.

 

The alleged shipper, an Israeli national named Asher Karni, was arrested

in December at Denver International Airport. He awaits trial in the U.S.

for conspiring to export goods without a license, a crime that could

result in a ten-year sentence and $250,000 fine per count. Neither

Emirates Airlines nor the U.A.E. has been criticized publicly--let

alone blacklisted--by U.S. officials.

 

That is particularly odd in light of the recent revelations of the

region's pivotal role in the spread of weapons of mass destruction. A

Dubai-based computer firm arranged for Malaysian- and European-made gas

centrifuge components, used to enrich uranium, to be sent on to Libya.

The firm was part of a vast network devised by Abdul Qadeer Khan,

Pakistan's own Edward Teller.

 

Hardly a revelation to the U.S. government. " Dubai, as a major shipping

hub with a large free-trade zone, is in close proximity to countries

of concern, and that poses some challenges, " says Kenneth Juster, an

undersecretary at the Department of Commerce. Among the world's top

five sea-air hubs, Dubai can accept cargo and send it off in less than

four hours. It's only 100 miles to the southern Iranian port of Bandar

Abbas.

 

No matter how hard the U.S. tries to keep dual-use commodities like

gas monitors, software and nuclear triggers out of transshipment hubs

like Dubai, stuff gets through. The lure is quick profits. Traders

easily pocket 40% markups just by flipping goods, illicit and otherwise.

" Businesspeople [here] are like cats, " says Abbas Bolurfrushan,

chairman of the Dubai-based Iranian Business Council. " They find their

way out of any dilemma. "

 

The open secret is that Dubai buys far more than it keeps. More than a

quarter of its $23 billion in annual nonoil imports are reexported, and

Iran gets the biggest share. Interviews with private businesspeople and

U.S. officials, along with court documents, reveal a simple scheme.

Companies located around the world sell goods--from cigarettes to

medical devices and PCs--to buyers in the U.A.E. Dubai traders

repackage the items and send them along by air or ship to agents in,

say, Tehran, Pyongyang, Damascus or Islamabad.

 

Smoking out the offenders is tough. Outside of free zones foreigners are

not permitted to own a majority of a business in Dubai, and local

partners aren't subject to export-control laws. These realities leave

bureaucrats in Washington pessimistic. " Whenever there are third-party

transactions, there is only so much you can do to follow the path of

the transaction, " admits a U.S. Treasury official.

 

Smuggling isn't exactly new to the Persian Gulf. But the system really

took off around 1987, when the U.S. imposed its first trade embargo on

Iranian goods and services in response to Tehran's sponsoring of

terrorism in the Middle East. By the time the 1995 oil sanctions took

effect, it was a well-greased mechanism. Virtually all trade and

investment with Iran was prohibited in 1997, though the ban on caviar,

nuts, dried fruits and carpets was lifted in 2000. The penalties--fines

of up to $250,000 for individuals and ten years in the slammer--should

have deterred violators.

 

Yet it didn't take long for U.S. products to seep through the cracks. As

long as a decade ago, more than a quarter of the roughly $1 billion in

American goods exported to Dubai ended up in Iran, estimates the

Wisconsin Project on Nuclear Arms Control, a nonproliferation advocacy

group in Washington, D.C. Last year U.S. companies sold $3.4 billion

worth of goods to the U.A.E.; export licenses have jumped 47% over the

last five years. " When you blow off the dust, the Dubai region

sometimes means Iran and Libya, " says Paul DeBenedictis, chairman of

the American Business Council of the Gulf Countries.

 

Today American companies are downright brazen about dodging the

sanctions. And why not? On the list of Specially Designated Nationals

and Blocked Persons maintained by the Office of Foreign Asset Control at

the U.S. Department of Treasury only 1% of 3,032 separate entries are

Dubai-based individuals and entities designated under the Iraq, Libya

and Iran terrorism sanctions programs. On the Commerce Department's

current list of 55 foreign end users specifically involved in

proliferation activities, there is not one U.A.E. entity; the agency

dispatched its first attaché to Dubai only 15 months ago. Since 1999 the

government has turned down just 2% of applications to export to the

U.A.E.--sometimes snaring unsuspecting entrepreneurs/ (see// box

<http://www.forbes.com/forbes/2004/0412/086sidebar.html>)/. Officials

do point out that 114 end-use checks were conducted in the region

between 2000 and 2003, up from 63 checks from 1996 to 1999.

 

Still, " companies are playing fast and loose, " says Adam Pener of

Conflict Securities Advisory Group, a D.C.-based consultancy to

multinational businesses. Halliburton, for example, manages to do

business with Iran obliquely. Its Dubai-based affiliate, Halliburton

Products & Services Ltd., allegedly has no Americans on staff; the

Houston oil services company claims it has no direct ownership of the

operation. Nevertheless, FORBES has obtained documents showing how Kala

Ltd., the British arm of the National Iranian Oil Co., solicited at

least 17 separate bids from the affiliate during 1997 and 1998 (when

Vice President Cheney was Halliburton's chief executive). A few bids

include handwritten notes that say " FOB [free on board] Dubai Airport "

or " FOB Dubai port " --meaning that the U.A.E. was just a way station

between Halliburton and Tehran. Halliburton would not comment on the

bids. In any event, earlier this year the Treasury Department reopened a

2001 inquiry into Halliburton's Iran operations and its Dubai-based

partner.

 

Halliburton is far from the only brand that shows up in Tehran.

Hewlett-Packard, Dell and Microsoft, among many other U.S. companies,

keep Dubai offices and are favorites these days among Iranian traders

in Dubai. Reason? Strong demand for " anything high-tech for military

or oil services, " says Bolurfrushan of the Iranian Business Council.

" In compliance with U.S. trade laws, it is Microsoft's policy to not

sell products to Iran from any of its offices, " says a spokeswoman for

the software colossus. (Dell says it follows export controls, too.) To

curtail the proliferations, the Department of Commerce is

strengthening its regulation that punishes U.S. companies that send

goods and know/--/or have reason to know/--/those goods could

contribute to weapons of mass destruction. " U.S. companies cannot

disregard facts showing that a violation will occur, " says Commerce's

Juster. Good luck proving that one.

 

Dubai, for its part, is happy to wink and look the other way. Last

month the emirate's de facto ruler, Sheikh Mohammed bin Rashid Al

Maktoum, met with Juster about the possibility of putting export

controls on the books. The process would take at least five years and

" would require drafting laws and regulations, establishing a licensing

and enforcement process and training personnel, " says Juster.

 

Baloney. The U.A.E. has acted swiftly in the past--when it has been in

the state's interest to do so. After a Georgian-flagged ship sank off

Dubai's coast in 2001, spilling smuggled Iraqi oil and forcing the

closure of several water desalination plants, the U.A.E. foreign

minister swiftly announced it would punish the shipowners and Dubai

companies caught transporting illegal oil. Dubai authorities have

squelched counterfeiting, another common practice in free zones, says

Timothy Trainer, president of the International AntiCounterfeiting

Coalition in Washington. One of its members, cigarette maker Philip

Morris, worked on a three-month-long investigation with the Dubai police

and in January 2002 seized 120 million knock-off cigarettes, worth $7.5

million. (None of the smugglers, however, faced jail time. Only one paid

a fine, and that was negligible, Trainer says.)

 

So what's Uncle Sam's excuse when it comes to cracking down on nuclear

proliferation? Can't we persuade the United Arab Emirates to police

their middlemen? Apparently much of it comes down to docking

privileges for U.S. forces and American arms sales ($8.1 billion from

1995 to 2002) to the U.A.E. Forcing the issue " would be incredibly

stupid, " says a source at the U.S. Embassy in the U.A.E. " This is the

one friend we have in the Gulf, except Kuwait. "

 

/Additional reporting by Robert Reigle./

 

--

" Now, by the way, any time you hear the United States government

talking about wiretap, it requires -- a wiretap requires a court

order. Nothing haschanged, by the way. When we're talking about

chasing down terrorists, we're talking about getting a court order

before we do so "

-George W. Bush, April 20, 2004

 

Not dead, in jail, or a slave? Thank a liberal!

Pay your taxes so the rich don't have to.

 

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