Bad Business
Dubai, again.


Just weeks after United Arab Emirates-owned Dubai Ports World abandoned its bid to assume management of nearly a score of U.S. port facilities in the face of intense public and congressional scrutiny about the potential threat to homeland security inherent in the deal, it appears another U.A.E.-controlled company is poised to acquire yet another company critical to American security.

Largely obscured by the DP World flap, the government entity whose secretive, unaccountable deliberations contributed greatly to its intensity–the Committee on Foreign Investment in the United States (CFIUS)–opened an investigation in early March into the potential security implications of Dubai International Capital’s $1.2 billion acquisition of Doncasters Group. Doncasters’ U.S. subsidiaries produce precision components used in, among other things, engines for military aircraft and tanks.

While the controversy over DP World prompted many in Congress to promise to reform CFIUS to make it more transparent and accountable, the committee continues to operate in a thoroughly secretive manner. Consequently, it cannot be determined with certainty at this point whether it actually recommended that Dubai be allowed to become a U.S. defense contractor.

Given that, out of more than 1,500 cases of foreign acquisitions reviewed since 1988, CFIUS has only formally rejected one, however, it seems certain that the classified report the committee sent to the president for review and decision a fortnight ago recommended approval of the takeover. Accordingly, the president is expected today to accept CFIUS’ recommendation–either by direct approval or simply by allowing the 15-day period during which he may veto the deal to expire.

Such an action would be not just an unwise political step for the administration– still trying to undo the damage caused by the aborted DP World deal to public confidence in the President’s judgment on national security matters. It would potentially be highly detrimental to U.S. security.

Doncasters, which is headquartered in Melbourne, England but has plants in Georgia, Connecticut, and several other states across the country, provides critical services to the U.S. armed forces. For example, it is the sole provider of specialized turbine-engine parts for the Abrams tank. Furthermore, it has other customers that play a key role in the defense of America, including Boeing, General Electric, and Pratt and Whitney.

Too little attention has been paid for far too long to the growing dependence of the U.S. military on foreign suppliers for key components of weapon systems and support equipment. Particularly troubling is the prospect that such dependency could cause us to rely upon a foreign state with a checkered record of support for terrorism.

Just as was true of our ports, an investment in this country that affords such a state the opportunity to put personnel into positions where they can do us harm–perhaps by interfering with the manufacturing processes or quality control at a critical moment–is not likely to be passed up by terrorists who have operated from the UAE in the past.

The 1988 Exon-Florio Amendment gave the Committee on Foreign Investment in the United States a charter to evaluate foreign direct investment for, among other things, “the potential effects of the transaction on the sales of military goods, equipment, or technology to a country that supports terrorism” and “the control of domestic industries and commercial activity by foreign citizens as it affects the capability and capacity of the U.S. to meet the requirements of national security.” It would seem that a rejection of the Doncasters acquisition by Dubai should have been triggered on one or both of these grounds.

The Doncasters sale provides further evidence of dysfunctionality of an interagency committee supposed to evaluate national-security concerns that is nonetheless chaired by the Treasury Department, the agency of the U.S. government charged with promoting foreign investment in the United States. Absent congressional action, it is clear that CFIUS will continue as it has in the past: Using secretive deliberations that amount to going through the motions of a security review to achieve a foreordained, positive outcome–with little real regard for the long-term impact on the nation’s security.

Describing his inability to get answers from or register concerns with CFIUS, Democratic Congressman John Barrow of Georgia, who represents a district which has a Doncasters plant that makes tank engines, said, “We can’t find out things….We have no reason to believe they are doing anything other than sleepwalking through the review process.”

If the president will not interpose an objection to the Doncasters sale to the United Arab Emirates, Congress must ensure that the Defense Department does not become reliant upon Dubai as a supplier of key military hardware. More importantly, the fact that such an ill-advised transaction could possibly get this far is proof positive of the urgent need for a new, more transparent, accountable and rigorous mechanism for evaluating foreign investments like this one that can adversely affect the security of the United States.

Frank J. Gaffney Jr., is president of the Center for Security Policy and a contributor to NRO.


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