February 24, 2006
Dubai Company Delays New Role at Six U.S. Ports
By DAVID S. CLOUD and DAVID E. SANGER
WASHINGTON, Feb. 23 — The Dubai company at the center of a political furor
over its plans to take over some terminal operations at six American ports
said Thursday night that it planned to close the deal next week, but that it
would "not exercise control" over its new operations in the United States
while the Bush administration tried to calm opposition in Congress.
The statement may provide a little time and political breathing room for
President Bush, who has appeared stunned at the opposition from Republicans
and Democrats alike over the deal involving one of the country's few close
Arab allies. But it was not clear how long the company was willing to
suspend control over its new American properties, or whether its offer would
assuage the members of Congress, governors and mayors who have vowed to
block the deal.
In a statement, the company, Dubai Ports World, said that its $6.85 billion
purchase of the Peninsular & Oriental Steam Navigation Company of Britain
spanned 30 terminals in 18 countries.
"The reaction in the United States has occurred in no other country in the
world," said Ted Bilkey, the chief operating officer for Dubai Ports, which
is controlled by the government of the United Arab Emirates. "We need to
understand the concerns of the people in the U.S. who are worried about this
transaction and make sure that they are addressed to the benefit of all
parties. Security is everyone's business."
The action came after the Bush administration and leading members of
Congress, including Senator John W. Warner, Republican of Virginia and the
chairman of the Senate Armed Services Committee, quietly told the company
that more time was needed to derail Congressional action to block the deal.
Earlier in the day, administration officials and Senate Democrats clashed in
a public hearing on Capitol Hill about whether allowing Dubai Ports to
assume management of terminals at American ports would represent any kind of
national security risk.
In an effort to calm Congress, the administration released a confidential
letter sent on Jan. 6 in which the company committed itself to continuing
its participation in a range of American-led initiatives to close gaping
security holes in ports around the world. This included an agreement with
the Department of Energy a year ago to use new equipment in Dubai's own
seaports intended to sniff out radioactive shipments.
Among the ports in the United States where the company hopes to take over
terminals, only one, in Newark, is similarly equipped with nuclear
detectors. On Thursday afternoon, hours before the company's announcement,
the Port Authority of New York and New Jersey, which owns the Newark
container port, said it would terminate the lease of P &O Ports, the current
manager of the terminal, in an effort to stop what it termed an illegal
transfer to the Dubai company.
White House officials had said that because the deal was formally approved
by the Committee on Foreign Investment in the United States in mid-January,
the administration had no legal channel to reopen its review of the
acquisition, a step being pressed by Congress, unless it determines that the
company misled the federal government.
But with members of Congress threatening to enact legislation to block the
deal, the White House strongly signaled that it would welcome an agreement
by Dubai Ports to delay final closing of the deal, which is scheduled next
In its statement Thursday night, the company said, "It is not only
unreasonable but also impractical to suggest that the closing of this entire
global transaction should be delayed."
So instead, the company's lawyers came up with a plan under which Dubai
Ports would essentially become a silent partner, owning the management
contracts for the six facilities but recusing itself from managing them.
"DP world will segregate P & O's U.S. operations while it engages in further
consultation with the Bush administration and, as appropriate, Congressional
leadership," the statement said.
The company appeared to be facing the political reality that unless it
blinked, its entire deal could be scuttled.
The White House, while defending the deal, had sent some less-than-subtle
hints. Karl Rove, the deputy White House chief of staff and President Bush's
chief political adviser, said in an interview with Fox News that while the
acquisition by Dubai Ports World would pass its final regulatory hurdles
next week, "there's no requirement that it close, you know, immediately
Mr. Rove added: "Our interest is in making certain the members of Congress
have full information about it, and that, we're convinced, will give them a
level of comfort with this."
A senior White House official said, however, that Mr. Bush was still firm
that he would veto any effort by Congress to overturn the deal.
"He's completely adamant about this," another aide to Mr. Bush said. If a
Dubai company is treated as less trustworthy than a British one, the aide
said, "he thinks that the signal in the Mideast would be disastrous."
Critics of the deal said earlier in the day that a delay was insufficient.
"A simple 30-day cooling off period without the full 45-day review that
should have been done from the beginning is not adequate," said Senator
Charles E. Schumer, Democrat of New York. "If the president were to
voluntarily institute the review and delay the contract, that would obviate
the need for our legislation, but a simple cooling off period will not allay
Senator Warner said at the public hearing that the White House needed to
"recognize the very strong sentiment in Congress" for requiring further
review of the acquisition. Mr. Warner said he hoped the political uproar
would "work itself out" without Congress intervening.
His statement appeared to be aimed at persuading the White House and Dubai
Ports World to accept political reality and submit the deal to further
Mr. Warner convened the hearing at which a group of administration officials
conceded little ground in a nearly three-hour briefing on the details of the
deal. The group, led by the deputy Treasury secretary, Robert M. Kimmitt,
said that the administration's interagency review of the transaction had
taken three months, and that the Dubai company had been willing to address
concerns raised by the Department of Homeland Security.
In the Jan. 6 letter to the department, the company agreed to operate the
terminals "to the extent possible with the current U.S. management
structure" and to maintain existing security policies. But most of its
assurances centered on compliance with existing United States law.
Democratic lawmakers asserted that acquisition fell under a provision of the
law requiring a far more extensive, 45-day government review of transactions
that have potential national security implications or involve, as this
transaction does, a state-owned company.
"Is there not one agency in this government that believes this takeover
could affect the national security of the United States?" asked Senator Carl
Levin of Michigan, the senior Democrat on the Armed Services Committee.
But Mr. Kimmitt said "all of those concerns were addressed" in the
administration's initial, three-month examination of the deal. When the
interagency panel charged with reviewing foreign acquisitions met in
mid-January — its only formal meeting on the Dubai Ports World acquisition —
no agency raised further national concerns, Mr. Kimmitt said. That made an
additional 45-day review unnecessary, he said.
Democrats disagreed, and even Mr. Warner conceded that the language of the
statute could be read to require the additional investigation. Senator
Hillary Rodham Clinton, Democrat of New York, said that the administration's
review "appears to be cursory at best" and that "port security is too
important to be treated this cavalierly."
When Congress returns from recess next week, House and Senate lawmakers from
both parties are expected to introduce legislation to require further
examination of the acquisition's national's security implications, an idea
that the Republicans leadership in both chambers have supported.
Mr. Schumer and Representative Peter T. King, Republican of New York, have
said they will propose companion bills to block the Dubai Ports World
acquisition until after the 45-day review is completed.