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Iraqi Port Weathers Danish Storm

by Lotte Folke Kaarsholm, Charlotte Aagaard and Osama Al-HabahbehSpecial to CorpWatch
January 31st, 2006

cartoon by Khalil Bendib

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.

By May 2003, obscured by the fog of war, Maersk had taken control of the port. 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.

Shipping Giant

Maersk, Denmark's largest company, had positioned itself well for that advantage. Starting in August 2002, Maersk's giant container ships had delivered a third of all U.S. military equipment to the region, in preparation for the invasion of Iraq.

The company had the connections, resources and experience to develop the port: it owns large parts of the Danish oil reservoirs in the North Sea, has very close ties with the government as well as the Danish royal family, and accounts for about 15 percent of the Danish gross national product. Its global projects, worth billions, include ports in China North Sea oil fields, giant ships, and it controls much of the world's container stock.

But Copenhagen remains Maersk's headquarters and Denmark's membership in the "partnership of the willing" has created close ties to Washington. On May 1, 2003, the same day President Bush declared an end to the Iraq war, Danish ambassador in Damascus, Ole Woehlers Olsen, was appointed as the governor and regional chief of the American-led administration of southern Iraq. Woehlers' appointment was widely seen as payback for Denmark's participation in the U.S. dominated coalition.

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

Spring 2003: Preperations, Then Chaos


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 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.""

Summer 2003: The Contract


That June, while Woehlers was packing his bags in Basra after an unusually short, three-month term as governor, Ambassador Trent and his deputy, Frank Willis, were arriving in Baghdad. For more than a year, as part of Coalition Provisional Authority (CPA), led by U.S. Ambassador Paul Bremer, Trent would run Iraq's transport authority first as the de facto transport minister in the U.S.-led administration, then as the senior advisor to the U.S.-appointed Transport Minister Benham Zayya Polis.

One of the first problems Trent encountered was a complaint from Iraqi port employees in Khor az-Zubayr. They charged that a Danish company, claiming CPA authorization, was keeping them out of their workplace.

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.

Before long, the contract turned into a running joke at CPA. "We would imagine the tall gentlemen from Maersk stopping some random guy in a uniform and having him sign the contract," Trent recalls. Willis describes rumors "that CPA's regional chief in Basra had given these guys a verbal authorization to sign. Others said that one of the employees of CPA-Basra was a former Maersk man and had secured the contract for them."

It turns out that this version of events might be close to the truth.

Allan Poul Rosenberg, a former employee of Maersk, offered to help Woehlers with the administration of southern Iraq in those early days of May 2003. Danish sources describe Rosenberg as Maersk's "problem crusher who speaks an entirely different and more direct language than that usually spoken in Maersk's corridors." Woehlers admitted that "certain organizations and corporations lent employees to me, among them ... Maersk. Allan Rosenberg arrived in mid-May when I had been in Basra for a couple of weeks," Woehlers said.

Initially Woehlers described Rosenberg as merely in charge of personnel and having nothing to do with port questions. When confronted with a document naming Rosenberg as responsible for ports in the CPA, Woehlers admitted that was the task for which he originally hired Rosenberg.

Winter 2003-4: Communication Breakdown


By late summer 2003, the irregular arrangement was causing consternation at the CPA. Frank Willis sent an official letter to Maersk noting that the CPA wanted to regularize the contract situation around the port. A meeting in Baghdad was set for October, according to Trent, but Maersk's management cancelled it at the last minute, and then ignored all communications from the transportation ministry.

Eventually, Trent's patience ran out. Toward the end of 2003 he borrowed a helicopter from the British forces and flew down to Khor az-Zubayr. By then conditions were so dangerous that the helicopter personnel refused to wait around the port while Trent and his delegation had lunch with Maersk representatives.

"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 while complaints about the corporation's behavior kept coming in.

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, including internally: The coalition authorities were accused of having spent far too much money and keeping too little track of the reconstruction process. (Both Willis and Trent put much of the blame on staff shortages.)

Spring 2004: Iraqis refuse Maersk Demands


In January 2004, when Maersk announced that it had received a five-year contract to manage the port in Khor az-Zubayr, the company's share value rose by over four percent. The overall Danish KFX share index rose 5.5 percent that day, which several analysts attributed to the new contracts.

Meanwhile, Ambassador Trent wondered why he was still unable to get in touch with Maersk, but dropped the matter when he returned to the U.S. in the summer of 2004.

If the Americans were content to ignore the port's legal ambiguity and Maersk's profitable status, many Iraqis weren't. Only four months after Maersk's official January announcement, investors were surprised when Mahmoud Salih Abdul-Nabi, the director of Iraq's port authorities, made his own announcement: Maersk did not have a monopoly on Khor az-Zubayr. The Iraqis planned to invite bids for the ports of Khor az-Zubayr and Umm Qasr as soon as they took over the running of their country again.

A solicitation for new bids was announced on June 28, 2004, 13 days after Richard Nalwasky, a CPA official, signed a four-month payment authorizing Maersk to keep the port running until the Iraqis could decide on who would win operating rights.

This team of reporters has obtained a copy of this short-term agreement. In it the CPA agreed to pay Maersk $1.87 million for the four months ending August 31, 2004. The document, which is numbered DABV01-04-M-0101 and dated April 25, 2004, was signed on June 15, 2004 by CPA's officer Richard M. Nalwasky and Maersk's Middle East manager in Dubai, Hans Peter Glipman.

Maersk's comments to the press took on a new, urbane, tone saying the company hoped to bid on the contract.

Maersk was well aware that the Americans' access to the rebuilding funds from Iraq's oil exports would be cut off when they turned the country over to the Iraqis on June 30th, 2004. From then on the Iraqis themselves would control of the money as well as Khor az-Zubayr's future.

The transition from U.S. to Iraqi control created problems for Maersk. Iraq's vice transport minister Nabil Atta, began negotiations soon after he was appointed in April 2004 and continued them after Paul Bremer's administration left.

"I told Maersk that we were prepared to give them the port as a long-term investment but that these fees were unacceptable. If they would equip and modernize the port we would give them the rights to run it for 10-15 years," Atta explains. But Glipman continued Maersk's demand for 93 percent of all port fees as well as a daily payment of $15,000 and Atta sensed growing resistance to the project itself.

"They were beginning to look for an excuse to get out of Iraq," he says and explains that the local chief of the port was "a very nervous kind of guy who kept telling the headquarters that things were dangerous in 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.

The unionists were not the only people getting angry with Maersk. Nationalist and religious leaders were demanding an end to the occupation and the exit of the multinational corporations from Iraq.

Several local newspapers accused Maersk of smuggling oil and misusing the port among other things. Part of the campaign targeted Maersk security chief Jacob Bentsen, who called it a smear campaign. A former Danish police sergeant deputy, Bentsen came to Iraq to help train the officers preparing to become the core of the future Iraqi police force. Instead, he hired on as Maersk's head of security in the new port.

Toward the end of February 205, three of the port's Iraqi employees were taken as hostages by an unknown group. According to Al-Manarah, a Basra newspaper, the hostage-takers were mostly interested in information on Bentsen. After a short while the three were released.

Today Bentsen says he doesn't know what to make of the incident and finds it is strange that none of the port's employees were kidnapped before, seeing that it was impossible to protect people once they were outside the port area.

March 2005: Last Person out, Turn off the Lights

A couple of days after the kidnapping, on March 1, the situation between Maersk and local Iraqis grew critical. Outside the port several hundred Iraqis gathered to protest. Some were unionists denouncing Maersk's treatment of former port workers and with the fact that they were not allowed to organize present employees. Others were nationalist Iraqis who wanted multinational companies out of the country.

But among the protesters was the head of the Iranian-supported Islamic organisation Tha'r Allah (Revenge of Allah). Yusif al-Musawi is suspected of masterminding the murder of several former members of Saddam Hussein's Baath party, and on that day in March, he had appeared along with his security guards to make Maersk give up the port. The religious leader requested a talk with Bentsen.

"Musawi wanted to talk to me. 'You are a Jewish spy who should have been killed a long time ago,' he said. 'But we will let you live because we want you to be our messenger,'" Bentsen recalls. "The situation was very tense. Our security guards had their guns pointed at Musawi's people and vice versa, while we were talking through an interpreter." To avoid a direct confrontation, Bentsen pulled his people back to a safe area in the port.

"Maersk's management were in Kuwait at that point so we called them and told them what was going on. At night there were shootings in the port area between different Iraqi groups and the Iraqi guards disappeared one by one. I told them to. In the end I myself was left in the central part of the port along with two people from my staff. There was heavy shooting between the various Iraqi groups, and looting took place," he says.

By March 4, 2005, Maersk's 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.

Epilogue

Maersk's Executive Vice President Knud Pontoppidan has refused to comment on Rosenberg, and declined requests to be interviewed, name the signatories, or make any of the contracts public. He referred our reporting team to an August 2005 statement issued by Maersk's Copenhagen communications department.

In it Pontoppidan's defends Maersk's financial arrangement as necessary "because of the wish of the port authorities to keep port fees at a minimum, which could not cover expenses." But while confirming the favorable terms, the letter carefully avoids any claim that Maersk actually had a valid contract in 2003.

Rather, it simply asserts that the company began managing the port "at the wish of the American administration in Iraq." The word "contract" is introduced only when referring to a later document: "Maersk Iraq Limited signed a contract last year [2004] with the American administration in Iraq for the continued management of the port."

Former Iraqi deputy minister of transportation Nabil Atta says: "Maersk ruined everything for themselves. We were ready to give them a long-term contract for the port but the Maersk people ... kept making demands that were completely unreasonable."

Atta's opinion is shared by a number of the union leaders. "Maersk behaved in an inhumane and threatening manner towards workers who were dissatisfied with their working conditions. Their morals were beneath contempt," says Faraj Rabat Mizbhan from GUOE, the Iraqi oil workers' union.

Former U.S. ambassador Darrell Trent's remains bewildered. Why, he continues to wonder, would Maersk never cooperate?

"Lots of people were trying to get their hands on lucrative contracts in Iraq but Maersk was the company that tried the most blatantly to take advantage of the situation," says Trent.

Frank Willis agrees: "Maersk were their own worst enemy. They were brazen, greedy, untruthful and aggressive. Maersk is a company with a very good reputation but they behaved like a colonial power and tried to make use of the situation for their own benefit," he says.

Allan Rosenberg and Hans Peter Glipman are back at work for Maersk in Dubai. After his tenure as Danish ambassador to Syria, Ole Woehlers Olsen took a job at the Danish Institute for International Studies.

When the information on the mysterious contracts was published in the Danish newspaper Information in December 2005, opposition parliamentarians posed a series of questions to Danish ministers, including Foreign Minister Per Stig Moeller, but no responses have been forthcoming so far on the role of Woehlers and other Danish authorities in giving Maersk access to Khor az-Zubayr.

Maersk has since published a statement calling the article "misleading" and claiming that Maersk always "seeks to follow the rules." The company, however, has refused to present documentation on its contracts at the port. The company also refused to translate its statements into English for this article, saying that the statements were made for Danish readers only.

In January 2006, the Danish parliament renewed the mandate for the Danish military presence in Iraq for another six months

Iraqis now run the port of Khor az-Zubayr. The Iraqi government lawsuit against Maersk was settled in December 2005 with both sides agreeing not to pursue each other. Maersk's Dubai office says the outgoing Iraqi government signed a new agreement in late 2005 for the company to return to the port, but that the company wants to wait until a new government takes over, and proper security and international insurance can be arranged.

Meanwhile Maersk had a record year in 2005, investing $10 billion in companies, ships, and oil. It capped off the year in December with a contract on Shanghai's future megaport Yangshan which the world's largest port.. Also in late December, Maersk became Qatar's largest foreign oil producer when it signed a $5 billion oil exploration contract.

Kaarsholm and Aagaard write for Information, the newspaper that printed the Danish version of this article. Al-Habahbeh is Al Jazeera's correspondent in Denmark.