Dubai Inc.

The company's ambitions are global, which is why it did not see the American backlash coming. Acquisitions are key to DP World's expansion strategy, but it got its new U.S. holdings almost by accident, as part of the deal when it purchased P&O of Britain last year. The P&O-controlled terminals in the United States would require major investment to bring them up to the cutting-edge standard of DP World facilities at home in Dubai. "Believe me, they didn't set out to acquire six small properties in the U.S.," says Stephen Flynn, a transport expert at the Council of Foreign Relations in New York. "What really interests them are the P&O holdings in India and China."

Yet neither is DP World quite as Western as the mainly European faces who are now representing the company in the United States. DP World executives have said they enjoy managerial autonomy from the royal family, but the Maktoums remain 100 percent shareholders. The chairman and vice chairman of DP World are Emiratis. Four members of the 11-man managerial board are also Emirati nationals, which includes three Americans. The same goes for most Dubai companies, analysts say: while Westerners may run day-to-day operations, final strategic decisions remain firmly in Emirati hands.

The problem is that outsiders' faith in Dubai rests heavily on the reputation of its ruler. With a population of 860,000 and annual GDP of $36 billion, Dubai is small enough to be run by one man; Sheik Mohammed is effectively the CEO of every project in Dubai. He is seen as a visionary, and if he often shows up on building sites, it is typically not to micromanage. Robert Crick, who runs the Dubai campus of Britain's Middlesex University, describes Dubai as the "most solid piece of secure capitalism you've ever seen." He says: "Sheik Mohammed is, in historical terms, something like an enlightened despot of the 18th century."

But any monarchy is only as good as the current ruler. Businessmen who work in Dubai are full of tales about how fast the sheik can get things done, like launching Emirates airlines. "His track record is awfully good," says former U.S. ambassador to the U.A.E. David Mack. "But it all comes down to one man. There is no transparency. There is no accountability."

The same is true of the sheik's bona fides as an ally in the war on terror. Mack, who was ambassador from 1986 to 1989, says during his time there he was still "uncertain" about how far Dubai had distanced itself "from what you might call the Arab outlook," but that has "changed dramatically," particularly since 9/11. At the time of the attacks, Dubai was still a wide-open place, more Hong Kong than Singapore; since then it has by all accounts tightened controls on the movement of people and money. At one point, says Mack, when the United States told Dubai it was concerned about money transfers through ATMs, the Dubai authorities offered to shut down and overhaul their entire ATM network. "Treasury was aghast--that could [have] set off a worldwide panic," says Mack. Dubai did tighten controls, without taking the network down. That kind of personalized service may be reassuring--but would be more so if it were less personal.

With Rana Foroohar and Emily Vencat Flynn in London

© 2006