24 February 2006
White House Supports Delay in U.A.E. Firm's Control of U.S. Ports
Members of Congress promise examination of security concerns
By Elizabeth Kelleher
Washington File Staff Writer
Washington -- The White House welcomed the decision by a Dubai-based seaport-management company to delay taking over management of terminals in six U.S. seaports.
Members of Congress and some state government officials heatedly have criticized the deal on the grounds of national security, despite approval of the transaction by a Bush administration interagency group.
The Republican speaker of the House of Representatives, J. Dennis Hastert, issued a statement asking for “an immediate moratorium” on the deal.
The pending March 2 sale of current operator Peninsular & Oriental Steam Navigation Company of London (P&O) to Dubai Ports World (DP World) for $6.85 billion would put DP World, owned by the government of the United Arab Emirates (U.A.E.), in a position to operate port terminals in New York City; Newark, New Jersey; Philadelphia; Baltimore; New Orleans and Miami.
Even though the Bush administration approved the deal after what it described as a thorough examination, the approval has met with a flurry of criticism. The White House said it believes the delay will give it time to make its case to Congress and the U.S. public.
Specifically, the Dubai company said it would segregate P&O’s U.S. operations and “not exercise control over, or otherwise influence the management of P&O’s U.S. operations” pending the outcome of further discussions with the administration, congressional leaders and port authorities.
In the United States, ports are owned by state and local governments. The governors of some states where affected ports are located -- New York, Pennsylvania and Maryland -- have expressed concerns about the deal. The governor of New Jersey is suing to stop DP World from taking over any operations at Port Newark.
In its statement to the press, DP World said the U.S. assets represent less than 10 percent of the total sale portfolio, and thus the company would not delay the rest of the transaction.
The company did not say how long it would delay operating U.S. terminals, but the outcome might hinge on when or whether congressional concerns are satisfied abate and how patient the Bush administration will be in providing further information to lawmakers.
Several senators from both parties vowed that the delay would not stop them from introducing legislation demanding a 45-day investigation of the deal by the Bush administration – which the senators believe should have been done in the first place -- followed by a report to Congress and a 30-day period during which Congress could disapprove the deal.
But White House press secretary Scott McClellan gave no indication February 24 that the administration would conduct such an investigation. “We believe that once Congress has a better understanding … they will be more comfortable with the transaction moving forward, so [this] slight delay would be helpful," McClellan said.
Treasury Secretary John Snow welcomed the news and called the delay an “opportunity to better inform the Congress and the public.”
CONGRESSIONAL CONCERNS
Congress has been out of session, but hearings on the matter are being scheduled for when lawmakers return the week of February 27.
Senators expressed concern about the deal at an informal February 23 briefing for the Senate Armed Services Committee by administration officials. Senator John Warner, Republican chairman of the committee, requested that Deputy Treasury Secretary Robert Kimmitt provide the Senate with the Dubai company’s “letter of assurances” – in which DP World promises to provide information about its employees and security procedures “immediately, without subpoenas,” if asked.
Warner said he supports the deal but wants the administration to provide more information. He asked officials for legal clarification of why a 45-day investigation -- typically done by the Committee on Foreign Investment in the United States if a sale involves a state-owned company and could affect security -- was not done in the case of DP World.
Senator Hillary Clinton, a Democrat from New York, said bipartisan congressional sponsors would introduce “several pieces of legislation” to stop or delay the deal due to concerns stemming from the fact that DP World is a U.A.E. state-owned company. She said the country’s association with terrorist financing and support of the Taliban before the September 11, 2001, terrorist attacks were “red flags.”
President Bush has vowed to veto any legislation blocking the deal. But the president said February 23, “We’ll continue to talk to people in Congress and explain clearly why the decision was made.” He said his cabinet members were “bringing a sense of calm to this issue” and helping people to understand.
Robert Joseph, under secretary of state for arms control and international security, called the United Arab Emirates “a partner in the War on Terror.” He told Senators at the informal briefing the U.A.E. gives the United States access to its skies and hosts the largest number of U.S. Navy ships outside of U.S. ports. He said the U.A.E. supports humanitarian efforts in Afghanistan and Iraq and has helped to disrupt weapons proliferation by rogue states.
“Secretary Rice has made very clear that the U.A.E. is a stalwart ally of ours and this deal does serve our national interests,” he said.
Background information on the CFIUS and Dubai Ports World bid for U.S. port operations is available on the Treasury Web site.
(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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