City of Gold: Dubai and the Dream of Capitalism (14 page)

The Middle East’s tallest building had little trouble finding tenants. Its thirty-nine stories housed offices for some of the biggest corporations of the day, including IBM, Union Carbide, United Technologies, and British Petroleum. The honeycomb skyscraper, engraved onto the 100-dirham note, also hosts the U.S. consulate and several others, as well as Dubai’s local stock market. On September 11, 1001, two of Rashid’s countrymen would ensure Dubai’s World Trade Centre would outlast New York’s.

The third project was the biggest. Sheikh Rashid told the world he would build another port in Dubai’s farthest scrap of empty beach, Jebel Ali, about twenty miles from the creek. There was no natural harbor at Jebel Ali, just a beach of broken coral where locals camped. Every square inch of the new port would have to be dug from the sandy shoreline, and a channel dredged through the coral beds offshore. The excavations were visible with the naked eye from outer space. Satellite pictures reveal a notch chiseled from the Gulf shore. Tiny Dubai would soon have more berthing capacity than San Francisco Bay.
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In 1980, the
Wall Street Journal
chided Sheikh Rashid in a frontpage article titled “Is Dry Dock in Dubai to Be High and Dry and Pie in the Sky?”

The article, written by
Journal
reporter Ray Vicker, went on to state that the only way to explain Dubai’s building boom was that Sheikh Rashid suffered “an edifice complex.” Nearly thirty years later, the same accusation gets leveled at Rashid’s son.

Vicker wasn’t the only skeptic. Dubaians themselves had reservations, especially about Jebel Ali port, so far from the city center.
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This time, Sheikh Rashid’s own sons broke ranks with him. As Sheikh Mohammed relates in his autobiography, Dubai merchants pleaded with him to talk sense to his father. Young Mohammed agreed, bluntly asking his father to stop the job before the city went bankrupt. The old sheikh puffed on his pipe and told his son: “I’m building this port now because there will come a time when you won’t be able to afford it.”
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The Jebel Ali port is the world’s largest man-made harbor, Dubai’s greatest financial asset, and the U.S. Navy’s number one overseas seaport. From the air, its mile-long container stacks resemble furrows of a vast cornfield. The fifty-two-square-mile tract of warehouses, factories, and container storage is some of the earth’s busiest real estate. To call it bustling is an understatement. The level of activity is relentless and disorienting. Cranes swing shipping containers overhead, trucks rumble past, forklifts dash around like houseflies, and tugboat teams nudge juggernaut ships to their berths.

Many believe that Sheikh Rashid’s steel-gut gambles on infrastructure were
the
pivotal decisions that make Dubai what it is today. Dubai’s massive investments set the tiny emirate apart from its oil-rich neighbors. Abu Dhabi, Saudi Arabia, and Kuwait used mineral wealth to subsidize cushy lifestyles and overpaid bureaucracies, or they parked it in overseas
stocks and bonds. Their investments earned maybe 10 cents on the dollar, while Dubai made $5 for each dollar invested in infrastructure, says Essa Kazim, who heads Dubai’s stock exchanges.

In hindsight, Sheikh Rashid’s ideas were the best use of Dubai’s small oil reserves. Dubai had one chance to get it right, and, instead of following its neighbors, it chose a new route. It invested to diversify its economy. The more Sheikh Rashid poured into ports, industry, and airports, the faster the economy grew. State spending triggered a larger torrent of private investment.

“Everything he did was visionary and everything he did was criticized at the time,” says Charley Kestenbaum, the retired U.S. diplomat. “The thirty-nine-story tower: ‘What do you need a thirty-nine-story tower for in the desert?’ The dry dock: ‘Oh my God, what a white elephant!’”

Why did Dubai’s mega-investments succeed when so many others in the Third World failed? Maybe the price of failure was too high: The cash was Dubai’s own, and not on loan from the World Bank. Maybe Sheikh Rashid’s sons made sure their father’s priorities were given maintenance and attention, not left to rot.

“Time and again the British advisers said, ‘This is risky. Don’t do it.’ Or ‘Don’t do it on such a large scale.’ Time and again the rulers in Dubai got it right,” says Davidson, the British academic.

Dubai today is the Middle East’s capital of commerce, one of its biggest recipients of foreign direct investment, its top financial center, biggest port and airport, and home of the largest number of foreign businesses. Sheikh Rashid’s investment gambles in the 1950s, 1960s, and 1970s are largely responsible.

THE ROAD TO DOMINANCE

IT’S 1971. BLACK
Sabbath is pounding out “Iron Man.” NASA’s fourth moon launch is under way. The Israelis are busy assimilating territory captured from Egypt, Jordan, and Syria. And the British Empire is disintegrating.

Three years earlier, Britain announced the jettisoning of its territories east of the Suez. The Trucial States would have to fend for themselves in a tough new world. No one thinks they can do it, not even their own leaders. The seven weak sheikhdoms have no experience with central rule. There is no government infrastructure, no tradition of private property, no currency, no roads stitching them together. There are few laws and fewer books. Most people are illiterate. Women cover their faces in metallic masks that resemble helmet visors of medieval knights. The territory’s only protection is a tiny band of paramilitaries called the Trucial Oman Scouts. Outside the main cities of Dubai, Abu Dhabi, and Sharjah, the country is as primitive as sub-Saharan Africa: Tribesmen raise families by lantern light in thatched huts or goat hair tents. Bedouin roam the desert in search of water and grazing.

Dubai and the sheikhdoms that would form the UAE had languished in isolation for centuries. The idea that they could catch up with the
developed world appeared preposterous. Independence was a problem, not an opportunity. Sheikh Zayed of Abu Dhabi and Sheikh Rashid of Dubai pleaded with London to extend British protection. They’d pay all expenses.

The Gulf beyond Britain’s embrace was a cutthroat neighborhood in 1971. Saudi Arabia’s royals were looking to expand their undefined borders. And Iran, across the narrow sea, had its long-running claims to bits of the Arab side, including Shiite-majority Bahrain.
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When the Trucial sheikhdoms came together as the United Arab Emirates, they stood little chance of fending off these powers. American and British diplomats expected the untested UAE, including Dubai, to be subsumed into a new regional empire. Joseph Sisco, the U.S. undersecretary for political affairs, told Congress he had grave doubts the UAE would remain in one piece.
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The British decision to pull out was final. Recovery from World War II had overstretched the British economy, and the public wanted the government to pare down its expensive colonial empire. So the preparations moved toward UAE independence day, December 2, 1971.

And then, electrifying everyone’s fears, Iran swooped in. The day before independence, Iran captured three islands governed by the Trucial States. Two of the islands, the Tunbs, were held by Ras Al-Khaimah. The third, Abu Musa, was governed by Sharjah. It wasn’t a good omen.

The Iranians planned a clever takeover. The shah sent a flotilla on maneuvers in the lower Gulf under the cover of Navy Day celebrations. Hours before the British mandate expired, on November 30, 1971, an Iranian destroyer group broke from the maneuvers and sailed to the Tunbs. Iranian marines landed in hovercraft and jogged toward the police barracks. Instead of surrendering, the Arab police opened fire with machine guns, mowing down the invaders. The burst killed three Iranians and wounded a fourth. The Iranians responded by assaulting the post, killing five and wounding a sixth. The invaders soon captured the remaining Arab defenders, who were allowed to join civilians fleeing to Ras Al-Khaimah.

A pair of British warships idling nearby did nothing to intervene. A British government spokesman said the Royal Navy couldn’t be expected to exercise her treaty responsibilities toward the Arab sheikhdoms on the final day the treaties remained in force.
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The UAE’s diminished standing in the regional power structure was all too clear.

The Iranians also sent a destroyer group to seize Abu Musa. There, however, the wheels had been greased. The Sharjah ruler, Sheikh Khalid bin Mohammed al-Qassimi, perhaps understanding that Iran would invade anyway, leased the island to the Iranian navy for $3 million a year.
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The Iranian force staged a similar amphibious landing on Abu Musa, but instead of being greeted by bullets, the Sharjah ruler’s brother met the Iranian officers with handshakes. Tehran quickly exceeded its mandate, building a port, setting up a customs post, and incorporating Abu Musa into Iran. Abu Musa and the Tunbs have been held by Iran ever since.

Sheikh Khalid’s family never forgave him for the traitorous selling off of Qawasim land. In January 1972, Khalid’s brother Saqr launched a coup and murdered the Sharjah leader. But a new way of governing was already afoot. The UAE’s month-old federal government intervened and sent Saqr into exile. Khalid’s brother Sultan took over as Sharjah’s ruler.

The Iranian aggression wasn’t the only event spawning doubt about the UAE’s longevity. Saudi Arabia still claimed broad swaths of Abu Dhabi and decided to withhold diplomatic recognition. Across the border in Oman, a full-blown communist insurgency was under way, with leftist rebels fighting to overturn the royal family and British warplanes bombing insurgent bases. It was a mess.

A decade earlier, Omani rebels mounted several attacks inside the Trucial States, bombing British troop carriers. In 1961, the rebels planted bombs on a passenger ship, the
Dara
, carrying 800 people between Basra and Bombay. As the ship approached Dubai, two blasts tore through it, killing 236 passengers and crew. The
Dara
sank two days later.
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That bombing stands as the worst terrorist attack in Dubai history. The Omani insurgency grew stronger in the following years and many worried the war would destabilize the neighboring UAE. The rebels weren’t defeated until 1976.

Competing internal interests also endangered the union. Sheikh Rashid himself was lukewarm on joining a federation that would be dominated by Abu Dhabi, with 88 percent of the land and 90 percent of the oil. Dubai was clearly the most advanced of the seven sheikhdoms, but the energetic Sheikh Zayed was proposing to fund the partnership. Dubai’s chief aim was to preserve its autonomy. A compromise constitution bowed to these interests, allowing each sheikhdom—known henceforth as emirates—to control its own oil resources and politics.

On December 2, 1971, the leaders of six of the seven sheikhdoms—Dubai, Abu Dhabi, Sharjah, Ajman, Umm Al-Quwain, and Fujairah–met in Dubai’s Union House, overlooking Jumeirah Beach, and signed the proclamation declaring themselves part of a new country called the United Arab Emirates. Ras Al-Khaimah joined the following year. A towering flagpole mounted with a colossal flag marks the spot. Sheikh Zayed became president and Abu Dhabi city was named temporary capital. Sheikh Rashid assumed the roles of vice president and prime minister. The United Arab Emirates became a tribal confederation, its ruling sheikhs the owners of all land and mineral wealth. For the few outsiders who took notice, independence was a nonevent. People described it as the federation that was born to die.