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US Tax Dollars Aiding Establishment Of Pacific Ship Registry

June 20, 1988 GMT

WASHINGTON (AP) _ The U.S. Navy could be forced to provide worldwide protection for merchant ships flying the world’s newest flag-of-convenience, which is being established by the Marshall Islands with U.S. tax dollars.

The Pacific republic is challenging the lucrative ship registeries operated by countries such as Panama and Liberia with a fledgling registry that is a direct outgrowth of the 1986 compact under which the Marshalls attained independence with close ties to the United States.

The Marshalls registry, like those of other Third World countries, offers shipowners the advantages of less stringent inspection and operating rules - and lower costs - than nations like the United States and Japan.

Chief negotiator of the Marshall Islands compact was Fred Monroe Zeder II, a close friend of Vice President George Bush, a Bush campaign fundraiser and frequently reported to be in line for a top job in a Bush administration.

Zeder’s son, Howard Blood Zeder, is wearing two hats in the Marshalls registry, heading it as the republic’s maritime commissioner and serving as an officer and part-owner of the private company that is operating the registry.

Neither Howard Zeder nor Peter Watson, a Washington lawyer who speaks for the Marshalls about the registry, will disclose the arrangement’s financial details or even how much Zeder is being paid as maritime commissioner.

The arrangement would have been an illegal conflict of interest, had former Rep. John Seiberling, D-Ohio, Rep. Don Young, R-Alaska, and former Interior Department official Rick Montoya had their way.

They tried unsuccessfully to include a provision barring such arrangements, but the Reagan administration - with Fred Zeder as its point man - managed to scuttle the proposal in the House Interior Committee.

For a small nation, a ship registry is big business, akin to a motor vehicle registry - keeping computerized records, shuffling papers and having relatively low operating costs.

There are about 360 million tons of registered commercial shipping in the world, much of it flying the flags of Third World nations.

The going rate to register a ship initially is about $1 a ton, with an annual reregistration for about 40 cents a ton. Capturing 10 percent of the business means about $36 million in initial fees and $14.4 million in renewal fees.

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The Marshall Islands, a former U.S. trust territory with an annual budget of $76 million, is stressing its political stability and the compact with the United States in efforts to break into the ship registry business.

The 15-year compact requires the United States ″to defend the Marshall Islands ... and their peoples from attack or threats thereof as the United States and its citizens are defended.″

Watson says that in trying to get ship owners to switch to a Marshalls flag, the republic ″is making no representations to anyone it would be entitled to U.S. defense rights.″

However, he said it is providing copies of the compact to shipowners, allowing them to ″make their own interpretation.″

Howard Hills, a State Department lawyer who helped Fred Zeder steer the compact through Congress, says that ″Marshall Islands vessels fall within the class of vessels which, like U.S. vessels, are entitled to U.S. protection. ... We seek to protect U.S. vessels everywhere in the world.″

Hills said, however, that an attack on a Marshalls ship would not automatically bring a U.S. response. ″This is a strategic military policy decision,″ he said.

The Marshalls registry is being set up under a $1.2 million line of credit from the Marshall Island Development Authority. The money is part of $6 million the United States has provided for economic development.

Watson declined to reveal the terms of the development authority’s lending to the maritime authority, which is operating out of Honolulu - the home base of the Zeders - because the Marshall Islands lack 24-hour communications facilities.

Watson and Howard Zeder also declined to reveal the exact financial arrangements between the maritime authority headed by Howard Zeder and Maritime Registry Management Inc. (MRM), the private company that is operating the registry.

″Coca Cola doesn’t give its formula away,″ said Watson when asked whether MRM is being paid a consultant fee or would share in profits made by the registry. He said that ″substantially all (the profits) go to the Marshall Islands government.″

Howard Zeder said he is president and board chairman of MRM and has an ownership interest, which he declined to disclose. ″I’m sort of speaking with two hats,″ he said of his dual role. He said his father ″has no stock or operational role.″

When the compact was pending before Congress, the House Interior subcommittee on public lands approved tough conflict-of-interest rules for the implementing legislation.

The rules would have prohibited any U.S. official who participated in compact negotiations and implementation - and their immediate families - from benefiting even indirectly from U.S. dollars flowing to the Marshalls under the compact.

The prohibition was opposed by the administration and was dropped before the legislation went before the full Interior Committee. The administration’s point man was Fred Zeder, who was President Reagan’s personal representative to the Pacific trust territories like the Marshalls.

Seiberling, who headed the subcommittee before his retirement in 1987, said the language was aimed squarely at Fred Zeder.

″(Fred) Zeder was a wheeler and dealer and had interests in the Pacific,″ Seiberling said. ″We wanted to make sure he and the people around him didn’t profit from U.S. monies.″

Montoya, a Republican who formerly headed the Interior Department office supervising the trust territories, said he too favored the prohibition.

″I was specifically concerned with Fred Zeder,″ he said.

The conflict-of-interest language was offered in subcommittee by Young, the ranking Republican on the Interior Committee. He said ″a lot of those who were working (on the compact) could have had a conflict.″

Fred Zeder, however, said Seiberling ″went out of his way and misused his position as a congressman. ... Seiberling has never had any idea about business. I have never trusted him.″

He said Seiberling was angry because he once went to Ohio to raise money for a Republican challenger to the former representative and ″I’d do it again.″

He said that although ″the subject of the ship registry was never mentioned when I was the president’s representative ... I’ve encouraged the idea. ... It’s a wonderful thing. It will give them stature around the world and a good income.″

Fred Zeder said that while he’s introduced his son Howard ″to a lot of people out there (in the Pacific) over the years,″ he had nothing to do with establishing the registry.

He said the Marshalls government will get ″the lion’s share″ of revenue from the registry, with MRM getting ″a minor piece of the action.″