Port Security & Dubai - *Ernest Nounou

Overheard: "If anyone says they are doing it for your own good, don't believe them."

And so it is at the nexus where business intersects politics, with the Dubai government's intended purchase of the British company presently managing six US ports. Regrettably the indignation expressed by both those for and against the transaction is more about politics than port security. This is not to favor the Administration, which clearly failed to do its due diligence. But Congressional protests from both parties are largely self-serving, with the November elections in mind.

The US already suffers from port insecurity, with minimal safeguards and inspection of incoming traffic - and very little is being done to address it. Foreign companies manage every major US port; so it boils down to the nature of the Dubai government. Last year the US discouraged purchase of Unocal by CNOOC, a company controlled by the Chinese government. That Unocal had few resources in the US, and insignificant oil reserves offshore did not stop the posturing and killing the deal. Where else will the line be drawn? In a globalized world in which the US relies on access to foreign economies, and with the flood of US dollars in foreign hands, more purchases of US assets are inevitable. Heaven help all of us if the US takes to protectionism.

Would port security really improve in the hands of a US company? Substitute ExxonMobil for Dubai, and recall retired Chairman Lee Raymond's testimony before the Congressional committee exploring price gouging last fall. He pointed out that 80% of ExxonMobil's operations are outside the US; so just how "American" is it? Sony has over 30% of its business in the US, and it too is listed on the NY stock exchange; is it a "US company" in the traditional sense? Few are.

Does ExxonMobil's having its headquarters in Texas provide comfort? In the first oil shock of 1973 Exxon and Mobil were separate companies headquartered in New York. Prices increased fourfold overnight, with the Arab oil states imposing an oil embargo on the US and Europe. When pressed to consider US interest and ignore the embargo, Mobil's Chairman Raleigh Warner asserted there was little he could do, as Mobil had to respect the instructions of its Arab bosses, the owners of the oil. Recall also that the aircraft hijacked by the 9/11 terrorists belonged to US companies. So much for taking comfort from American company ownership!

The reality is whether safeguarding nuclear reactors, our food and water supply, transportation or infrastructure to name a few, the private sector doesn't do security well; nor is it a realistic to expect otherwise. Consider their lousy job safeguarding their own technology and intellectual property; often selling it for shortsighted advantage and profit. Real security can only come from intelligent government leadership, partnering with the private sector and general population.

A historical irony is that the 1973 embargo was defeated because Iran, Venezuela and Mexico refused to go along. Fast forward to the present. A number of countries, not particularly friendly to the US, have or will inevitably have nuclear weapons know-how. If they are suicidal and determined to hit the US, they will try and risk annihilation by the inevitable response. Even France, who opposed going to war over WMD, has already declared it will hold responsible and retaliate against any country giving nuclear technology to terrorists using it to attack France!

Iran gets the message, and while they may or may not develop nuclear weaponry, they have a far more realistic weapon at their disposal. Given the high oil prices and incredible wealth transfer to oil producing countries, they don't have to sell as much oil to finance their own needs. What if Iran, Venezuela, and Arab states pressured by radical Islam, proposed a present day embargo of the US and Europe? Or what if they simply allocated bigger quotas to China and India, with smaller quotas to the US and Europe? Who will stop them, ExxonMobil, Chevron, or NATO and the US military? Not an attractive prospect, and surely a compelling incentive to move full-speed with a sane energy policy!

Meanwhile, a conservative investment to consider for your portfolio is the shares of ExxonMobil, selling for about $60.00 with a PE of 10 and yielding 2%. Future prospects look good too.

*A graduate of Wharton, Ernie is a Founding Partner of Catalytic Group, Inc., a Technology consulting and execution firm. A former banker he enjoys writing on business topics and can be reached at ernie@catalyticgroup.com.