Left Flank

I put this story about Dubai wanting to go nuclear (and then, retracting it) into deep freeze until I was reading Frantz and Collins on A.Q. Khan today about Dubai's role in the Pakistani pipeline.

Dubai is one of the seven principalities that form the United Arab Emirates: a sleepy port until a construction boom started in the 1960s, by the 1980s Dubai was a bustling free-trade zone without tariffs or taxes and little in the way of government regulation. Foreign businessmen had been drawn by the freewheeling, explosive economy. Among them was Mohammed Farooq, a stocky Indian who had set up a small import-export business in the Jebel Ali Free Zone. Like Lerch, Farooq was a veteran of the nuclear black market—he had met the engineer in South Africa years before, and they had also crossed paths over the years in their dealings with Khan. Lerch now contacted Farooq and found a willing local partner. Lerch also recruited another alumnus of the Pakistani network, Heinz Mebus. Mebus had worked at Siemens and spoke better English than Lerch, prompting later speculation that he had been the one to write the four-point proposal for Iran on some of his old stationery.

At some point, Lerch or Mebus ran the Iranian deal past Khan, who had access to the centrifuges and components that were a key part of the transaction. As a fellow Muslim who was well-known for his role in building the Islamic bomb. Khan's involvement also served to quell any worries the Iranians still had about a sting operation. Although the Pakistani scientist was willing to participate, he did not want to travel to Dubai for the meeting. Instead, he agreed to provide two centrifuges and some components. At the time, Kahuta was developing a more advanced centrifuge, known as the P-2, so all Khan had to do was dip into his stockpile of P-1s waiting to be melted down and ship them to Dubai. He still operated with complete immunity, without any real oversight, so the goods could be sent out of the country merely on his signature.

Later Khan would rationalize his participation in the transfer of nuclear technology to Iran in a variety of ways. Chiefly, he would argue that providing an atomic weapon to another Muslim country was a way to shift some of the West's scrutiny away from Pakistan. In private, he told friends that he had been encouraged to assist Iran by Pakistani military leaders who were interested in expanding ties with Tehran against the West and Israel. At the time of the first deal, President Zia did not trust the Americans despite the hundreds of millions of dollars in annual aid, any more than he trusted the Soviets occupying the country next door. The secure future that Zia envisioned for Pakistan rested on a new alliance stretching west to unite the west to unite the region's non-Arab Muslims in Afghanistan, Iran, and Turkey. This was, in Zia's mind, a formation capable of resisting outsiders and posing a formidable counterweight to India. He had ordered his plan put down in writing and called it the Strategic Regional Consensus.

Perhaps this is just sin by association or coincidence, but Khan went on to own a company (and a private apartment) in Dubai. Dubai became instrumental for Khan's efforts to help not only Iran, but also Iraq and Libya, get the bomb. Do we add Dubai to this list (if not directly, but like the younger apprentice following the master)?

R. Elgin and JD Link exchange some excellent points on David Eldon's remarks at a press conference yesterday on reforming ROK's FDI exposure and regulatory practices.

"When I was asked to work as Lee's adviser, I was a little bit puzzled over why Korea, an OECD country, has not reached the same level of other similar economies. Advanced countries with successful financial centers have a single and independent regulator in common. Korea has tremendous potential. Korean organizations should be more globalized and attractive."

JD Link has this comment to that R. Elgin post:

He's on the right track. You'll have noticed that the biz and economic news for the past couple of weeks has been full of grand ideas. Today's Joongang has many interesting stories. One shows 2MB promising to allow greater cross-shareholding by the chaebol, a couple days ago letting them own banks. Neither are good ideas.

But rather than oppose the individual policy decisions that have strong support among Korea's business leaders, Eldon knows that simply legislating greater transparency will, in time, reveal the weakness of these reforms, should they come to pass. If investors, whether foreign or Korean, could actually see and understand who owns what (and controls what) in Korea, and how the companies use the money, then the investors themselves will force the needed changes. This is a much more powerful and lasting force for change than government tinkering with regulations while the real workings of Korean business stay hidden from view.

Eldon is trying to halt a train accelerating to its wreck, and no amount of press conferences will disguise that. I hope he's earning good money for good services, at least.