VZCZCXRO8812
OO RUEHDE
DE RUEHDE #1010/01 0561327
ZNY CCCCC ZZH
O P 251327Z FEB 06
FM AMCONSUL DUBAI
TO RUEHC/SECSTATE WASHDC IMMEDIATE 8629
INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHAD/AMEMBASSY ABU DHABI PRIORITY 1307
RUEHDE/AMCONSUL DUBAI 1549

C O N F I D E N T I A L SECTION 01 OF 02 DUBAI 001010 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR NEA/ARPI, EB/IFD/OIA, EB/TPP/BTA 
STATE PASS USTR FOR DOUG BELL 
COMMERCE FOR BIS MARY O'BRIEN 
 
E.O. 12958: DECL:  2/25/2016 
TAGS: EINV ETRD PREL AE
SUBJECT: DUBAI PORTS WORLD CHAIRMAN: DUBAI CONTROL, BUT NOT PURCHASE, 
OF P&O'S U.S. OPERATIONS TO BE DELAYED 
 
REF: ABU DHABI 650 
 
CLASSIFIED BY: Jason L. Davis, Consul General, Dubai, UAE. 
REASON: 1.4 (b), (d) 
 
 
 
¶1. (C) Consul General contacted Dubai Ports World (DPW) 
Executive Chairman Sultan bin Sulayim (SBS) February 25 to seek 
clarification of DPW's February 24 announcement that it was 
willing to delay taking over P&O's U.S. operations. Did this 
mean that DPW's purchase of P&O would be delayed?  SBS stated 
emphatically that a delay in the purchase, or its "closing" 
date, currently scheduled for March 2, was not possible.  The 
U.S. portion of the P&O sale was "only 10 percent" of the 
overall deal; there were "people working for us all over the 
world who are in limbo," and who would be susceptible to 
recruitment efforts by DPW's competitors if the sale were put on 
ice for a month or more.  "We could end up owning a bunch of new 
ports but not have enough people to run them," SBS concluded, 
adding that delaying the entire sale of the U.K. company would 
be "not only unreasonable, but actually impossible." 
 
¶2. (C) Rather than delaying the actual sale, SBS said, DPW had 
decided to "segregate" P&O's U.S. operations.  This meant that 
DPW would "not exercise any management control" over P&O's U.S. 
operations "pending the outcome" of discussions with Congress 
and the administration, which would likely mean a delay of 30, 
or possibly even 45 days. In practical terms the decision meant 
that Michael Seymour, P&O's current "President of North American 
Operations," would be the top decision-maker for the affected 
ports. There would be no changes in procedures or personnel 
during this period.  SBS said there had been no request from the 
USG or the UAEG for DPW to delay its takeover of U.S. ports; 
rather, the decision had been taken "at our own initiative, as a 
gesture to make sure there was no confrontation" between DPW, 
Congress, and the administration. 
 
¶3. (C) CG asked SBS about the financing that would be involved 
in the purchase.  SBS reported that there was no funding coming 
from the Dubai Government or ruling family.  The bulk of the 
financing would come from commercial banks, and would be backed 
by income from Dubai Ports and Free Zone Corporation.  The banks 
had initially wanted Dubai government guarantees, but DPW had 
refused this, preferring to keep it an entirely commercial 
transaction.  The remainder of the funding -- an additional USD 
3.5 billion -- was being raised through the issuance of bonds 
("suquq"). 
 
Background on DPW History and Structure 
--------------------------------------- 
 
¶4. (U) Giving some background on DPW's role managing port 
operations domestically and internationally, SBS said that up 
until the creation of DPW last year, Dubai Ports Authority (DPA) 
had been responsible for domestic operations, and Dubai Ports 
International (DPI) had been responsible for overseas ports.  In 
September 2005 DPA and DPI had been merged into one new entity, 
DPW.  DPW's domestic operations were at Jebel Ali and Port 
Rashid in Dubai, and at the ports of Abu Dhabi and Fujeirah.  CG 
asked SBS whether DPW was responsible for port management 
operations at Dubai Creek.  SBS said it was not:  Dubai's Ports, 
Customs and Free Zone Corporation (PCFC)'s main presence at 
Dubai Creek was the large Dubai Customs operation there.  Even 
prior to the merger with DPI, DPA had not been involved in 
managing off-loading and on-loading of cargo onto the (mainly 
small wooden) dhows on the Dubai Creek. 
 
¶5. (U) SBS explained that while DPW itself played no role in 
Creek operations, a small legacy DPA unit there was responsible 
for ensuring adherence to port regulations.  Elaborating, he 
explained that DPA had originally included two elements:  (1) a 
large port management element related to handling of cargo and 
containers, and (2) a regulatory element responsible for 
ensuring adherence to government regulations and port 
ordinances.  After DPA's merger with DPI, it had been clear that 
the new entity, DPW, should not be in the "governmental" 
business of enforcing regulations and imposing fines on 
violators. DPW had thus recently signed an agreement with the 
Dubai Government according to which a new PCFC spin-off, to be 
known (logically but nonetheless somewhat confusingly) as the 
Dubai Ports Authority, would be responsible for regulatory 
enforcement at Dubai's ports.  Asked whether this new 
arrangement was already in place, SBS said "yes, it has been 
done." (Note: We understand from a contact at Dubai Customs that 
while the deal may be technically "done," in that it has been 
 
DUBAI 00001010  002 OF 002 
 
 
approved and signed, it is not scheduled to be announced until 
the first or second week of March.) 
DAVIS