The Dubai Deal You Don't Know About

By Daren Fonda

Dubai Ports World backed out of the deal to run U.S. ports after Congress threatened to nix it, but another Dubai-owned firm shows no signs of cutting its U.S. ties. Inchcape Shipping Services (ISS), a British firm bought in January by a Dubai government investment vehicle, has a $50 million contract with the U.S. Navy and provides maritime services at more than a dozen U.S. ports. ISS also arranges everything from fuel to fresh vegetables for naval vessels at Middle Eastern ports, and is believed to get Navy docking schedules in advance--data that could be invaluable to terrorists. Yet ISS has largely escaped public scrutiny.

The U.S. Treasury Department, which signed off on the Dubai Ports deal, would not tell TIME whether ISS's sale to Dubai was even reviewed. U.S. Customs and Border Protection says the deal presents "no immediate implications" for cargo security. But a Homeland Security official told TIME there is a "big, gaping hole" in vetting workers--at ISS and other firms--for access to ports.

Why is the Navy doing business with a Dubai company? The Navy has long understood that it would be nearly impossible to rely solely on Western companies for critical services. ISS said in a statement that it has "undergone rigorous external security checks" and has "comprehensive internal policies on security."

Security aside, a big risk of the Ports affair is that Middle Eastern firms will invest their petrodollars elsewhere. One worrying sign: trade talks that were supposed to start this week between the U.S. and the United Arab Emirates were delayed. Both sides, it seems, need time to cool off.

With reporting by Sally B. Donnelly, Brian Bennett, J.F.O. McAllister