Friday, February 24, 2006

Danes Operate a Port in Iraq

Khor az-Zubayr

Here’s a story from January, before the UAE hysteria, about what a Danish company did in Iraq, at the port of Khor az-Zubayr, in southern Iraq:

Khor az-Zubayr, a port in southern Iraq, did not seem like a war prize when the Saddam Hussein's regime was ousted in April 2003. Its waters were clogged with ships wrecked in the Iran-Iraq war; it was much smaller than the nearby port Umm Qasr; and much of it was too shallow for ocean-going ships to navigate.

But Danish port operator and shipping giant A.P.Moeller Maersk saw beyond the flaws. Maersk knew that Khor az-Zubayr was one of just two outlets on Iraq's short Gulf coastline that opens the country to world trade. Across the wetlands that backed the port town was a gigantic oil refinery with pipelines leading straight to Khor az-Zubayr.

It took a month or so for Maersk to gain permission and control of the port, but by May they were in business. But, as these things often are, the transactions were rather murky:

... There is no evidence on whether this was legal [or not] but many have speculated that the take-over was rigged to reward Denmark and Maersk for their support of the United States invasion of Iraq. What is known is that a senior Maersk employee was also working for the government authority that was in charge of the port at the time.

"Maersk had found themselves a jewel, if they could get that port up and running," U.S. Ambassador Darrell Trent told our reporting team in November 2005. Trent, who had served under Presidents Nixon and Reagan, was in charge of Iraq's transport ministry until the summer of 2004.

"Lots of people were trying to make use of the chaotic situation to get themselves lucrative contracts," said Trent. "But Maersk were the most blatant of them all and openly took advantage of the situation. (They) presented us with a contract that had been signed by a low-ranking officer of the U.S. military who had no authorization to make such a deal."

He called the terms of the contract so favorable to Maersk that it was "almost ridiculous." Maersk got 93 percent of all port fees plus almost $15,000 a day.

Not bad for a small country, eh? Especially a small country with a huge company that cleverly positioned itself for this coup. Its container ships , beginning in August, 2002, had begun delivering U.S. equipment to the region in preparation of the invasion of Iraq. Denmark’s partnership in the “coalition of the willing” helped its ties with Washington. Coincidentally, on the same day — May 1, 2003 — that President Bush declared the Iraq war at an end, the then-ambassador from Denmark to Syria was appointed as the governor and regional chief of the American-led administration of southern Iraq. Guess what happened then?

Maersk's claim on the port of Khor az-Zubayr soon followed.

[…]

Just when, how, or even if, Maersk took over the port of Khor az-Zubayr is subject to much dispute. But there is not much doubt that the giant shipping company started jockeying for lucrative reconstruction contracts well before Saddam Hussein's fall.

[…]

Maersk's Executive Vice President Knud Pontoppidan told our [Corp Watch] reporting team that Maersk began managing the port as early as May 2003. But Governor Ole Woehlers Olsen, who was in charge of the area, said he was "surprised" to hear Maersk's claim. "I myself did not have the authority to sign such a contract but I passed on the offer to Baghdad with my recommendations," says Woehlers. When I left Iraq again on July 18, Maersk's offer on the management of the port had not yet made its way through the bureaucracy in Baghdad."

Oh, well. Small matter. Maersk had possession of the port, and no one seems to know how the company finessed their way into the deal.

In June, Ambassador Trent and his deputy. Frank Willis arrived in Baghdad to run Iraq’s transport authority. One of the first problems he encountered was complaints from Iraqi port employees. Some Danish company was keeping them out of their workplace and was claiming CPA authorization. So Willis was sent to investigate:

Frank Willis said he couldn't believe his eyes when he saw the Maersk contract. "The first thing that surprised me was that it had not been signed by the CPA. It was signed by a couple of low-ranking officers that no one had heard of. It was very strange. They certainly had no mandate to sign a contract like that. It simply was not valid, and we made that clear to Maersk soon after," said Willis, who took the document to the CPA's lawyers.

But if the Americans were surprised by the contract, they were aghast at its terms. "The contract gave Maersk something like a monopoly in the port, and it was binding for at least five years. We at the CPA would never have signed an agreement like that. We were responsible for the future of the Iraqi people, and we would never have tied the country down for so long or on such onerous terms even if we had had the right to do so," Willis says.

By late summer, the CPA was fed up with the run-around they were getting from Maersk. The Authority called a meeting for October. Maersk agreed and then cancelled. Eventually, Trent ran out of patience and ordered a helicopter to fly him to the port. However, conditions there were so dangerous that the military personnel refused to wait around while the meeting was held and took off. Trent stayed and met with company officials anyway:

"The Maersk people told us at the time that they had spent millions of dollars on the renovation of the port," he says. Maersk assured Trent that it was interested in getting things in order regarding the contract, and a system for future communications was set up.

That, however, was the last time the ambassador heard from Maersk. The management in Khor az-Zubayr systematically ignored all approaches by the CPA in Baghdad...

One reason might have been that the company was overwhelmed by the size of the project. Maersk's port director, Tony Maynard, says that Khor az-Zubayr was larger than any other Maersk port and had the potential to handle a million containers at a time.

Yet Trent says this still does not make sense. "I just don't understand that a corporation with a good reputation like theirs would behave like that with the consent of their top management," he explains, stressing his interest in signing a legal contract. "We gave them every chance to regularize the agreement in good faith but they ignored everything."

"All we could do was tell people that it was not true when Maersk claimed they had the rights to the port. We had our own disasters and emergencies to deal with everywhere we looked. Maersk simply took advantage of the chaos of war, and if they had been less greedy about it they would have gotten away with it, too," says Frank Willis. Violence in Iraq was on the rise, and CPA had trouble in all corners…

Then, in 2004, Trent returned to America.

Meanwhile, the Iraqis grew increasingly dissatisfied with Maersk’s greedy contract and the lock-out of Iraqi employees. When Iraq announced that they would be inviting bids for the ports, CorpWatch thinks that Maersk began to look for ways to get out of Iraq:

In early 2005 the excuse arrived. Iraq's new unions for oil and port workers had been pressuring Maersk for a long time. Among other things they wanted jobs for the many workers laid off at Maersk's arrival. The unions and the port authorities, just like the Americans, tried to pressure Maersk into presenting a valid contract, says Haidar Abdul Zahra, who is the financial manager in UPW, the port workers' union.

"Maersk kept telling us that they had a valid contract till the end of March 2005 but they refused to produce it even though they were demanding thousands of dollars from the port authorities for the operation and securing of the port. They also refused to let me and the port chief into our offices to work, and they prohibited all union activities in the port," Zahra says.

Tensions escalated. There were demonstrations, fights between Iraqi factions, even a kidnapping. Jacob Bentsen, a former Danish police sergeant deputy, had originally arrived in Iraq to train police officers. Instead, he became chief of security for Maersk at the port.

The situation continued to deteriorate, with more violence expected among Iraqi factions and against Maersk.

By March 4, 2005, Maersk's excellent Iraqi adventure was over. "I was the last person to leave the port. I turned off the lights and closed it off," says Bentsen who is now back in Denmark as a high ranking official in the police force.

Like the Iraqi unionists, deputy transport minister Atta interprets Maersk's departure in a different way: "It was a peaceful demonstration. Maersk had been looking for an excuse to run off and they jumped at it."

All that was left was an empty port, a pending lawsuit, and anger on all sides.

In the end, Iraq regained control of the port of Iraqis now run the port of Khor az-Zubayr. The Iraqi government lawsuit against Maersk was settled in December; both sides have agreed to drop the matter.

Maersk claims that the outgoing Iraqi government signed a new agreement in 2005 for the company to return, but there are no plans to do so until they can get proper security and arrange insurance.

Strange story, isn’t it? There must be thousands more like it in Iraq. This is just one of them, and it happens to be about the Danes.

7 comments:

heather said...

Glad you added that last paragraph. Greed knows no national boundaries--it's everywhere.

Does CorpWatch have an agenda? Do you know anything about them? A very interesting site to visit. Thanks for the link.

hank_F_M said...

When I was in school in Europe one thing I learned was that European corporations were on average more hardheaded and monopoly oriented than US corporations. They also were more exploitative that US corporations. Since most European counties only have the market for one large corporation per market there was a lot closer connection between government policy and corporate success than in the US. This was true even when the corporation was not nationalized (i.e. an arm the government.) While the corporation may have had its hands clean a role of the countries intelligence agency was reported to be to improve sales.

I would not be surprised if this is more of the same. Possibly Maersk had a prewar contact and operated the port, perhaps thourgh a dummy, and was trying to maintain their position knowing that a pre-war contract would not be honored.

Dymphna said...

Heather--

I think CorpWatch may be leftist and anti-corporation. Otherwise why the "Watch"? But the news is probably solid...
_____

Hank --

I think Corp Watch would've said if there were a pre-war contract. What they emphasized was the tight tie with America, obviously a no-no. Their description of the port post-Saddam was pretty awful, too.

Wish I could remember where I got this link. And I'm curious about CW. However, as far as corruption goes in Iraq, I think the Danes were pretty far down the list; this was just business. Maybe not *quite* pure but not unlawful...what made it amusing was the fact that they found two low-level American officers to sign off on their "contract" and that seemed to flummox everyone.

linearthinker said...

I'd love to see a merger of Halliburton with Maersk. The Danes clearly have initiative and ability. What they seem to lack is any experience with open-ended, "indefinite quantity, indefinite delivery" contracts. They (those infamous contracts) are a brilliant innovation for managers, ie, DOD in a war zone, that want to get the job done with a minimum of obstruction from bean counters. Their use is not without risk, but honest parties to the contract can accomplish great things in short order.

Appears to me some managers' hubris (and simple greed) cost Maersk a valuable asset. Seems like a positive outcome all around was possible. Too Bad.

Evanston said...

Linearthinker, I gotta totally agree with you. Your contracting and logistics knowledge is showing. Were you in OIF or any other contingencies? Where others see greed, we both know how IDIQ contacts are often the only realistic option and that a good vendor is a real national asset. Too bad Maersk overreached. I thought they'd be smarter than that. Given how the Cartoon Crisis evolved, it all worked out for the best, anyway.

linearthinker said...

I wish could say I was the junior officer who signed off on the Maersk contract. The short answer is too many years in the federal government. Good point about the Danes being gone before the cartoon flap erupted.

MaoBi said...

Let's see....

1) A port so dangerous that american troops flying an official in for a meeting will not hang around

2) A port where it was not working (notice that wrecks don't make for good naval passage)

3) A port that most likely needed to be dredged.

They also refused to let me and the port chief into our offices to work, and they prohibited all union activities in the port," Zahra says.

Let me say that I don't know this story personally but it seems that there was a broken port where people didn't even care to get to work anymore (its hard to lock people out overnight, usually its a gradual process).

Then the Danes came in and cleaned it up. Now that things are "good" again everyone wants a slice of pie. Screw that.