US Alarmed as Some Exports Veer Off Course

U.S. Alarmed as Some Exports Veer Off Course
Tamara Abdul Hadi for The New York Times

Port Rashid terminal in Dubai, United Arab Emirates. Dubai is the host for more Navy ships than any port outside America.

By ERIC LIPTON
Published: April 2, 2008

WASHINGTON — Roadside bombings of American troops in Iraq were occurring with unnerving regularity when military investigators made a disturbing discovery: American-made computer circuits sold to a trading company in the United Arab Emirates had turned up in the bomb detonators.

That finding set off a clash with Washington last year when the Bush administration cited the diversion of the computer circuits to Iran, and eventually Iraq, as proof that the United Arab Emirates were failing to prevent American technology from slipping into the wrong hands. Administration officials said aircraft parts, specialized metals and gas detectors that have a potential military use had also moved through Dubai, one of the emirates, to Iran, Syria or Pakistan.

The diplomatic face-off, which drew little public attention, prompted the United States to threaten tough new controls on exports to the United Arab Emirates, an ally. The nation had invested billions to become a global trading hub and had begun a campaign to burnish its image in the United States after the uproar in 2006 over a proposal to allow a Dubai company manage some American port terminals.

The administration backed down only after the emirates promised to pass their own export control law. But it is unclear that much has changed nearly a year after the confrontation.

Yousef al-Otaiba, an adviser to the crown prince of the United Arab Emirates, said his country was more closely monitoring goods that it re-exported while blocking items that might help Iran build weapons systems. But trade experts and Iranian traders in Dubai said there was little evidence that the new export control law was being broadly enforced.

“It has virtually had no effect, to be honest,” said Nasser Hashempour, deputy president of the Iranian Business Council in Dubai. “If someone wants to move something — get it to Iran — it is easy to be done.”

Relations with the United Arab Emirates have long been delicate for the United States. Dubai, for example, is the host for more Navy ships than any port outside the United States and is an important listening post for American intelligence personnel. Emirates officials have complied with a Bush administration request to inspect American-bound ship containers for nuclear threats as they move through Dubai.

But the country, which is made up of the emirates Abu Dhabi, Dubai, Sharjah, Ajman, Al Fujayrah, Umm al Qaywayn and Ras al Khaymah, has deep economic and cultural ties with Iran, which is only about 70 miles across the Persian Gulf from Dubai. As many as 400,000 Iranians live in the emirates, many of them traders who track down goods in the sprawling consumer bazaar of Dubai and then re-export them to Iran, at times ignoring United Nations trade sanctions related to Iran’s nuclear program and a broader United States embargo.

Emirates Blame U.S.

Nearly $12 billion worth of American goods flowed into the emirates in 2007. Officials in the emirates say the United States — which prohibits American companies from directly selling most goods to Iran and bars foreign companies from reselling dual-use products there — has complicated efforts to follow the rules.

The officials, with trade experts, blame America for overstating the potential dangers of certain goods or passing on tips about illicit shipments that are inaccurate or too vague to act.

“They like to exaggerate, or at least try to point to some strategic significance of the item, like saying, ‘This software program could be used to design nuclear power plants,’ even if someone is just buying it to draw puppies and flowers,” said Clif Burns, an export control lawyer at Powell Goldstein in Washington.

American officials have been increasingly alarmed about trade in the United Arab Emirates since 2002, when the Commerce Department sent an inspector, Mary O’Brien, there. From her spot checks of factories, freight forwarders and other companies that had ordered American products subject to export controls, Commerce officials say, it was clear that dual-use goods, including computer equipment, were being diverted on a grander scale than imagined.

An entity said to be a woodworking shop, for example, had ordered a sophisticated American machine for making metal parts. The device, Ms. O’Brien knew, could also shape components for a missile system. The supposed factory contained almost no sawdust, and the few employees could not explain how they intended to use the machine.

“This is not right,” Ms. O’Brien said she had said to herself, convinced that she had turned up her first “briefcase business”— open for inspection, but closed for good as soon as she walked out.

She pressed a Dubai pistachio wholesaler on why he had bought an American infrared camera, which can detect living objects in the dark, and where it had gone. Later she found he had arranged its return from Iran, where it had apparently been diverted, while stalling a follow-up inspection.

In nearly 40 percent of her inspections in four years, she found that regulated items were missing or that the recipient would not cooperate. Many of those companies were placed on a list, warning American exporters to be careful when selling to them.

“This was a huge sieve,” said Lisa A. Prager, a former top Commerce export control official. “Almost nothing that said it was going to U.A.E. was staying in U.A.E.”

Ms. O’Brien’s efforts helped jump-start criminal investigations into the diversion of American-made goods to Iran. As of last year, 58 inquiries, nearly half of the total, involved the United Arab Emirates. A number of companies were fined or charged criminally, including Mine Safety Appliances of Pittsburgh, which admitted last year that its shipments of gas masks and other goods had been rerouted by its agent in Abu Dhabi to Iran and Syria. (In this case, the company turned itself in.)

The Bush administration turned up the diplomatic heat, sending top-level officials, including Frances F. Townsend, then the White House homeland security and counterterrorism adviser — to push emirates’ officials to confront the problem.

From Polite to Nasty

In 2005, the discovery of a American-made computer circuit in an unexploded roadside bomb in Iraq transformed what had been a polite diplomatic exchange into a nasty dispute.

By reading a serial number on the chip and studying shipping records, American investigators determined that it had moved from the manufacturer, AMD of Sunnyvale, Calif., to Mayrow General Trading in Dubai. It went to Iran, then turned up in Iraq in “limited numbers” of roadside bombs, a federal official involved in the inquiry said. No known deaths have been linked to the bombs, said the official, who spoke on condition of anonymity.

Officials at the Commerce and Defense Departments would not discuss how they had connected Mayrow to the unexploded bomb. But Michael D. Turner, who until last year was director of the Commerce Department’s enforcement office, said investigators uncovered evidence definitively connecting the two. A spokesman for AMD said the company cooperated with the inquiry, adding that its customers are bound by agreements not to re-export its products to Iran.

American officials had no authority to act against Mayrow, a foreign company, and the Commerce Department had not required AMD to get an export license restricting resale of the chip because it was not considered particularly powerful. But American officials were angry that their United Arab Emirates counterparts had not immediately moved to close Mayrow.

“The Mayrow case is just one example of an alarming lack of export oversight by the government of the U.A.E.,” Christopher A. Padilla, a senior Commerce Department official, said in a December 2006 speech in Washington. “We continue to discuss this issue with U.A.E. authorities, but time for action is running short.”

To back up that threat, the Commerce Department proposed a new export controls for “governments unwilling or unable to cooperate with the U.S. in interdiction efforts.” The rules would mandate special reviews before certain dual-use American products could be exported to those nations. Emirati diplomats and lobbyists appealed to officials in the State Department and White House, and promised the Commerce Department that the emirates would adopt their own export control law, a commitment they carried out by August.

Mr. Otaiba, the international affairs director for the crown prince, said that the emirates’ officials now had a clearer legal ground to intercept dual-use goods being exported to Iran or elsewhere — and that they had already started to do so.

Late last year, his government shut down more than 12 companies suspected of exporting goods illegally or money laundering. It recently arrested a Jordanian businessman who was trying to import a metal used in nuclear reactors, with the intention of selling it to another country.

Progress and Prospects

At the Commerce and State Departments, officials said they were encouraged by actions the Emirates had taken in some recent cases — the details of which are classified — that relied on their new authority under the export law. But they said an export licensing system must still be introduced and other enforcement steps taken.

“The UAE has made progress,” said Mario Mancuso, the Commerce under secretary for export administration. “But more needs to be done.”

The Commerce Department, however, declined requests by The New York Times and Congressional investigators in recent months to publicly release any updated figures on how frequently inspections by American authorities turned up problems.

Mr. Turner, who still works in export control, said he still was awaiting evidence that the new law was being enforced. “I still don’t see any real change in what the U.A.E. is doing,” he said.

Nasir Khan, the Commerce Department investigator who has the job once held by Ms. O’Brien, said in a brief interview about the new export law, “Things are still very nascent,” he said.

Executives at several of the companies suspected of violating American export controls, said they had faced no increased scrutiny in Dubai.

S. M. Mir Ebrhimi, chief executive of Reza Nezam Trading, which operates mostly out of Iran, said he continued sending products with American-made components as usual. Mohammad Kazem, supervisor at Al Musafer Tourism and Cargo, said he had not even known his business was on the warning list. He said that the company followed the law, disputing any suggestion by American authorities that he had shipped prohibited items to Iran. He also said that he had seen no more inspections or spot checks by Emirati authorities.

“There is no problem in Dubai,” he said.

Nada El Sawy contributed reporting from Dubai, United Arab Emirates.