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Arab Firm Gives Up Ports Deal

The company, battered by bipartisan criticism, will sell off its stake in the American facilities to a U.S. `entity.' The decision pulls a thorn from Bush's side.

March 10, 2006|Richard Simon and Mary Curtius | Times Staff Writers

WASHINGTON — Amid unyielding congressional opposition, an Arab company Thursday retreated from taking over operations at several U.S. ports, rescuing President Bush from a politically embarrassing showdown with fellow Republicans over a national security dispute.

Dubai Ports World said in a statement that it would "transfer fully" its stake in the U.S. facilities to a "United States entity."

It was not clear how soon that would happen or what American firm would assume the port management. And some lawmakers said they wanted further assurances that the company, a state-owned entity of the United Arab Emirates, would completely divest itself of any financial link to the U.S. port operations.

But many of the deal's GOP opponents declared victory.

"It's over," said Rep. Peter T. King (R-N.Y.).

As chairman of the House Committee on Homeland Security, King had helped lead a Republican attack on the ports deal that showed no signs of diminishing.

Despite White House efforts to defuse the controversy and defend the United Arab Emirates as an important ally in the war on terrorism, the Bush administration seemed relieved by the company's decision.

"It does provide a way forward and resolve the matter," said Scott McClellan, the president's spokesman.

The company's statement came hours after GOP congressional leaders told Bush at a White House meeting that lawmakers appeared determined to pass legislation blocking the deal. The legislators have been concerned that port security could be compromised.

Bush had threatened to issue the first veto of his presidency if he was sent such a bill. Although he apparently will be spared that step, the furor still may have cost him.

Emboldened congressional Republicans -- many up for reelection in November -- could be more willing to challenge the administration on national security, federal spending and other issues.

At the least, GOP leaders are hoping the episode spurs White House officials to improve communications with Capitol Hill allies.

"They're going to have to be a little more sensitive" to the opinions of Republican House and Senate members on crucial issues, said Rep. Thomas M. Davis III (R-Va.), referring to the White House.

The president "has not handled the port issue well," said Sen. Rick Santorum (R-Pa.), who is facing reelection. "I think we've been pretty clear about that" on Capitol Hill.

Broader debates also lay ahead.

Lawmakers from both parties pledged to press ahead with legislation that would restrict foreign management of facilities viewed as crucial to national security. That measure would affect the Los Angeles-Long Beach port complex, where many terminals are operated by foreign companies.

Other measures would tighten security at U.S. ports, a matter some say was shortchanged by the focus on protecting airliners from hijackers after the Sept. 11 terrorist attacks.

"If there is any silver lining to this issue, it is that it has highlighted the vulnerability of our ports and the need for a greater emphasis on security," said Sen. Susan Collins (R-Maine), chairwoman of the Senate Committee on Homeland Security and Governmental Affairs.

Also likely to remain in the spotlight is the process the administration follows in determining whether to allow foreign companies to purchase or invest in U.S. operations.

The ports deal was approved in January by an inter-agency panel that includes representatives of the departments of Defense, Treasury and Homeland Security. In an initial effort by Dubai Ports World to calm criticism of the deal, it agreed to an additional review by the group.

But many lawmakers want the panel to revise its overall procedures, charging that it focuses on financial issues at the expense of potential security concerns.

The planned takeover of managing cargo terminals at U.S. ports in New Orleans, Miami, Baltimore, Philadelphia, New York and Newark, N.J., was part of the United Arab Emirates company's $6.8-billion purchase of Peninsular & Oriental Steam Navigation Co., a private British firm. The transaction had been in the works since last year and was completed Thursday.

Little attention had been paid to the acquisition until late February. But within days, criticism of the deal came to dominate discussions on Capitol Hill.

The flak from an array of Republicans underscored the issue's political volatility. Try as the White House might to build support for the deal, GOP lawmakers who in the past had been Bush loyalists showed no qualms about continuing to challenge it.

Bush suggested that an anti-Arab bias was at the heart of the disagreement and warned that the congressional bid to derail the deal could harm his efforts to improve U.S. relations with Arab countries.

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