Economic jihad and U.S. ports?

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Thanks to our congressmen who lined up against trusting the management and leases of U.S. ports to the sheikdom of Dubai, Dubai Ports World announced on March 9 that it will transfer its U.S. operations to an American entity. However, it is not clear that they gave up the ownership.

Our elected officials knew all along that this deal would have been a grave mistake. But even they did not realize this deal's full implications. DP World's acquisition of the British Peninsular and Oriental Steam Navigation (P&O), is not merely a financial transaction. Rather, it signals a major advance in the economic jihad waged by the Islamic world against the West.

According to a fatwa issued on July 10, 2002 by Hussein Shihata, Professor of Islamic Economy at Cairo's al-Azhar University, economic jihad's "primary aim is to weaken the economy of the Zionists, the Crusaders and their allies, while at the same time, it strengthens the Arab and Islamic economy in a way that make it a self-dependent economy."

The Dubai government's recent acquisitions have serious global strategic and security implications, since it puts the Islamic city-state of Dubai, one of the United Arab Emirates (UAE), in control of major ports worldwide. On Feb. 26, while the uproar about the sale of the leases and management of 22 U.S. ports to Dubai was raging, a sister emirate, Abu Dhabi, demonstrated the real attitude toward the U.S. by confiscating a text book, 'World Cultures,' used at the American school there.

The Ministry of Education banned the book "for allegedly presenting Islam and the Muslim countries including Gulf States in a negative light while glorifying Israel on the other hand." And despite repeated statements that the UAE joined the U.S. war on terrorism, after September 11, on December 4, 2002, Abu Dhabi Islamic Bank, controlled by members of the ruling family transferred $26,616.6 to Hamas' Tulkarem Zakat and Sadaqat Committee. Another transfer on April 7, 2003 of $11,416 to the same Hamas organization, was also documented by the Intelligence and Terrorism Information Center at the Center for Special Studies. Yet the UAE is praised by members of the Bush administration as "an important ally against terrorism," and "a good ally."

Gaining possession of P&O's worldwide operation followed Dubai Ports World's $1.15 billion 2004 purchase of the Florida-based CSX World Terminals, "a leading international container terminal developer and operator with operations in Asia, Europe, Australia and Latin America."

The P&O operations included "29 container terminals and logistics operations in over 100 ports, from China and India, to Argentina, Canada, the U.S., Russia, the Middle East and Africa. It also managed "freight and tourist passengers between the UK and Belgium, France, Holland, Ireland and Spain." In addition, P&O held property in the U.K., Europe and the United States. Now, most of these are controlled and operated by the Dubai government-owned DP World.

In Australia, for example, P&O established "Defense Maritime Services, " focusing "on the Government sector (with Defense, Science and Security) and the specialized bulk (port and ship) services sector." From there, P&O's "primary operational regions were South East Asia, Australia, the Antarctic and Southern Oceans." These, too, are now the possessions of the UAE through DP World. On March 9, 2006, DP World declared its purchase of P&O complete. According to the announcement, "The deal makes DP World a top three global port operation, with 51 terminals in 30 countries across 5 continents."

To help finance the purchase of P&O, DP World has issued "the world's biggest-ever Islamic bond issue," a $3.5 billion Sukukbond -- together with Dubai's Ports Customs and Free Zone Corp. (PCFC). The Sukuk is the Islamic version of an asset-backed zero coupon bond, which pays yield and principle at maturity. This Sukuk was underwritten by the PCFC and Dubai Islamic Bank, and 30 percent of each bond is convertible into PCFC shares when the company goes public in 2007.

The Sukuk issue has attracted non-Muslim investors, including banks, asset management companies, and high-net-worth individual from across Europe and Asia. Since Islamic law governs the Sukuk, all these non-Muslim investors will subscribe to Islamic laws along with their bond purchases. This extremely attractive variable yield of 7.25 percent to 8.25 percent is some 250 to 350 basis points more than that offered on a two-year dollar Libor swap. In the current fixed-income market, where two-year U.S. Treasuries yield 4.66 percent, it is virtually impossible to find an investment-grade two-year bond with such a high interest rate anywhere else.

With such tempting returns, it is not surprising that Western investors have been lured into supporting the growing influence of the sharia-controlled Islamic financial system. This is one way in which the West weakens its financial underpinnings while strengthening "the Arab and Islamic economy in a way that make it a self-dependent economy," as advocated by Hussein Shihata's fatwa.

How long will it take for Islamic companies running Western ports and the banking institutions funding them to demand that all products shipped through these ports meet Islamic laws? How long before pork and alcohol are banned from ships going through ports controlled by Islamic companies and laws?

The purchase of P&O promises Islamic interests a head start on gaining control over the majority of global shipping facilities, and marks an important step in the growing Islamic financial network.

Rachel Ehrenfeld is the director of American Center for Democracy and a member of the Committee on the Present Danger. Alyssa A. Lappen is a senior fellow at the American Center for Democracy.