Ships of fools?

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To fully appreciate the complications and dangers America faces in the post Sept. 11, 2001, world, consider recent actions taken by the government of one of America's strategic allies.

Mongolia is the world's second-largest landlocked country. Its capital is situated on the edge of one of the world's great deserts. Despite this, the Mongolian government in recent years has encouraged the development of a fleet of ships. It now has a significant and a growing maritime presence.

Indeed, five years ago, during a period when his ex-communist party controlled all but four seats in parliament, then-Prime Minister Nambaryn Enkhbayar, who has since ascended to the country's presidency, set up the Mongolia Ship Registry. The stated mission was "to provide and promote excellence in registry and marine services."

These were tasks with which the landlocked Mongolians had, understandably, not a whit of experience, historical or otherwise. Yet today the government of Mongolia boasts of a merchant marine of no fewer than 73 ships, each with a capacity of at least 1,000 gross register tons. What's going on here?

It seems the Mongolians are flirting with a very risky and dangerous geopolitical game. The Mongolian People's Revolutionary Party believes it can make a quick buck by renting out Mongolia's national banner as a so-called "flag of convenience," made available to ship owners who, for whatever reason, don't want their vessels scrutinized too closely.

A study published last year by Strategic Insights, the bimonthly journal of the Naval Postgraduate School's Center for Contemporary Conflict, noted that: "Flags of convenience [FOC] for ship registration remain the equivalent in the maritime sphere of offshore financial centers and bank secrecy havens in the financial world, hiding beneficial ownership, minimizing transparency, and facilitating criminal and other malevolent activities. The FOC system and the layers of corporate ownership and front companies that accompany it, provide a veil of anonymity that allow criminals and terrorists alike to transport all sorts of illicit goods, including possibly an [improvised nuclear device]."

Mongolia's registry operation, sanctioned by the government, isn't even based in the country. It is run out of a 50-story office tower in Singapore and managed by Sovereign Ventures, a conglomerate owned by an interesting character named "Capt." Chong Koy Sen.

To get a sense of the kind of company with which Mongolia is working, Mr. Chong's firm formerly operated Cambodia's ship registry until 2002, when its franchise was revoked after two alarming incidents. In June of that year, French commandos boarded the Winner, a vessel at sail in the Atlantic, flagged with Cambodian colors by Mr. Chong's outfit. Amid gunfire from the crew, French marines seized more than a ton of cocaine with a street value of more than $235 million.

In another episode the same year, a North Korean-owned freighter, the So San, was likewise flagged with the Cambodian colors. This ship was headed for Yemen but was stopped by a Spanish frigate which had been alerted by U.S. intelligence. Boarding the vessel, Spanish troops found 15 Scud-type missiles and some 85 barrels of rocket fuel hidden under bags of cement. It was shortly after these disturbing maritime incidents under Cambodian flags of convenience that the landlocked Mongolians went out to sea.

According to Lloyd's List, the authoritative maritime trade publication, Mongolia's partner, Mr. Chong, is also the majority stockholder in Korasia Trading and Shipping, a firm which acts as a shipping agent for North Korea. Given the menacing and unstable nature of the North Korean regime, ships flying that Stalinist country's flag are subject to intense scrutiny. For example, the Japanese have established severe restrictions on North Korean ships in their territorial waters. But Japanese naval authorities noticed in recent years that while port calls by North Korean vessels began dropping precipitously, increasing numbers of — you guessed it — Mongolian-flagged vessels began frequenting Japanese ports. Other vessels sailing under the banner of the land of Genghis Khan include some whose true colors are actually those of Lebanon, Syria and Russia.

Of particular concern for American lawmakers is the fact Mongolia received an average of $12.8 million in U.S. assistance annually for the last five years in addition to being the beneficiary of a $285 million grant from the American taxpayer-funded Millennium Challenge Corp.

Despite receiving millions of dollars from America's public purse, Mongolia appears to have no problem renting out its flag to weapons proliferators, criminals and other shady figures who endanger the security of the United States and its allies.

In the middle of its struggle against terrorism, America needs to be assured that the ships sailing the world's oceans — waters kept open largely by the efforts of the U.S. Navy — are safe, high-quality vessels meeting commonsense security requirements. We need to know who owns operates and crews the ships — especially if they approach our shores or those of our allies.

It should be noted there has been some progress. Last year Mongolia agreed to allow the United States and its partners in the Proliferation Security Initiative (PSI) to board and inspect vessels flying its flag if they have a "basis for the suspicion" that something is amiss. But this only marginally lessens the risk.

The truth is, in assessing Mongolia's value as an ally in the global war on terrorism, the country's modest troop contributions to Iraq and Afghanistan have to be weighed against the threat to our national interests posed by the bargain-basement "flag of convenience" it now hawks. Secretary of State Condoleezza Rice should have her regional representative investigate Mongolia's maritime activities and aims — and the State Department's coordinator for counterterrorism should be asked to certify whether they represent a threat to Americans at home and abroad. In short, a country like Mongolia cannot be allowed to drift into these dangerous waters, least of all on America's dime.

J. Peter Pham is director of the Nelson Institute for International and Public Affairs at James Madison University and is a senior fellow at the Foundation for the Defense of Democracies.