Dubai Port Deal Was Illegal
NY Times
Bush Would Veto Any Bill Halting Dubai Port Deal
By DAVID E. SANGER and ERIC LIPTON
February 22, 2006
WASHINGTON, Feb. 21 — President Bush, trying to put down a rapidly
escalating rebellion among leaders of his own party, said Tuesday that he would
veto any legislation blocking a deal for a state-owned company in Dubai to take
over the management of port terminals in New York, Miami, Baltimore and other
major American cities.
Mr. Bush issued the threat after the Senate majority leader, Bill Frist, and
the House speaker, J. Dennis Hastert, publicly criticized the deal and said a
thorough review was necessary to ensure that terrorists could not exploit the
arrangement to slip weapons into American ports. Mr. Bush suggested that the
objections to the deal might be based on bias against a company from the Middle
East, one he said was an ally in fighting terrorism.
"If there was any chance that this transaction would jeopardize the security
of the United States, it would not go forward," Mr. Bush said, discussing a
government review of the deal that began in October and ended on Jan. 16
without producing any objections from officials in his administration.
The president added, "This is a company that has played by the rules, that
has been cooperative with the United States, a country that's an ally in the
war on terror, and it would send a terrible signal to friends and allies not to
let this transaction go through."
The White House was taken by surprise when Mr. Frist and Mr. Hastert joined
Democratic leaders in Congress and other prominent Republicans, including Mayor
Michael R. Bloomberg and Gov. George E. Pataki of New York, in calling for the
government to stop the deal from closing next week as scheduled.
"We have not received the necessary assurances regarding security concerns,"
Mr. Bloomberg wrote in a letter to the president on Tuesday evening. He said he
was joining New York's two Democratic senators, Hillary Rodham Clinton and
Charles E. Schumer, in calling for a 45-day investigation of the deal under a
federal law that governs the review of foreign investments.
Mr. Frist gave the White House only an hour's notice before breaking ranks
and saying that "the decision to finalize this deal should be put on hold." He
said that if a delay did not occur, he would "plan on introducing legislation
to ensure that the deal is placed on hold until this decision gets a more
thorough review."
The response from the White House set up a confrontation between Mr. Bush,
who has said his primary goal is protecting the American people, and the
leadership of his party in Congress, which is approaching midterm
elections.
Mr. Bush rarely makes veto threats, and he has not vetoed a single bill in
his more than five years in office. He issued his remarks after calling
reporters into his conference room aboard Air Force One while flying back to
Washington from Colorado, and then repeated them for television cameras after
stepping out of his helicopter on the South Lawn of the White House.
The White House appeared to have considered the deal routine, especially
because so many foreign firms — from Singapore, Denmark and Japan —
run major port terminals in the United States and have for years. But Senator
Schumer, in an interview, said: "I don't think China or Britain or many of the
others have the nexus with terrorism that Dubai has. What kind of controls do
they have to prevent infiltration?"
Mr. Bush's aides rejected that line of thought, saying the company in
question, Dubai Ports World, which is owned by the government of Dubai, would
have no control over security issues at the six terminal operations it is
seeking to buy, at New York, Newark, Philadelphia, Baltimore, Miami and New
Orleans. The company would not own the ports but would operate some of the
terminals in these cities.
They pointed out that a similar purchase involving the container-handling
division of the CSX Corporation, which was bought by Dubai Ports in December
2004, went through with no objections. In that case, none of the terminals
Dubai Ports assumed control of were in the United States.
But the central argument of the deal's proponents is that the United Arab
Emirates have aided the United States in pursuing terror groups.
"We have naval visits there and landing rights," said Senator John W.
Warner, Republican of Virginia and chairman of the Armed Services Committee,
which has set a briefing on the subject for Thursday. "We have to move
carefully in considering the implications of what we do."
But Dubai's record is hardly unblemished. Two of the hijackers in the Sept.
11 attacks came from the United Arab Emirates and laundered some of their money
through its banking system. It was also the main transshipment point for Abdul
Qadeer Khan, a Pakistani nuclear engineer who ran the world's largest nuclear
proliferation ring from warehouses near the port, met Iranian officials there,
and shipped centrifuge equipment, which can be used to enrich uranium, from
there to Libya.
The opposition to the deal brought expressions of befuddlement from shipping
industry and port experts. The shipping business, they said, went global more
than a decade ago, and foreign-based firms already control more than 30 percent
of the port terminals in the United States. They include APL Limited, which is
controlled by the government of Singapore and operates terminals in Los
Angeles; Oakland, Calif.; Dutch Harbor, Alaska; and Seattle.
Globally, 24 of the top 25 ship terminal operators are foreign-based,
meaning most of the containers sent to the United States leave terminals around
the world that are operated by foreign governments or foreign-based
companies.
"This kind of reaction is totally illogical," said Philip Damas, research
director at Drewry Shipping Consultants of London. "The location of the
headquarters of a company in the age of globalism is irrelevant."
The administration's review of the deal was conducted by the Committee on
Foreign Investment in the United States, a body that was created in 1975 to
review foreign investments in the country that could affect national security.
Under that review, officials from the Defense, State, Commerce and
Transportation Departments, along with the National Security Council and other
agencies, were charged with raising questions and passing judgment. They found
no problems to warrant the next stage of review, a 45-day investigation with
results reported to the president for a final decision.
However, a 1993 amendment to the law stipulates that such an investigation
is mandatory when the acquiring company is controlled by or acting on behalf of
a foreign government. Administration officials said they conducted additional
inquires because of the ties to the United Arab Emirates, but they could not
say why a 45-day investigation did not occur.
Administration officials acknowledged on Tuesday that they had, at least in
some ways, mishandled the matter by not briefing members of Congress early
enough to avoid the outburst that resulted when the news of the deal was made
public.
"We probably should have gotten up there further in advance than we did,"
said Clay Lowery, assistant secretary for international affairs at the Treasury
Department.
But officials insisted that they made the right choice, conducting a
comprehensive evaluation of the management structure at Dubai Ports World, its
operations abroad, and its security plans.
"The review said there was no derogatory information against this company,
and this company did not raise undue concerns about national security," Mr.
Lowery said.
The company, the officials noted, volunteered early last year to allow goods
headed to the United States to be screened before they left a port it operates
at its home base in Dubai.
The company agreed to continue this effort at its terminals and take other
security steps, including giving American officials access to information on
its United States-based employees and certifying that it had conducted
background checks on them, Department of Homeland Security officials said.
Thomas H. Gilmour, an assistant commandant at the United States Coast Guard,
which is in charge of port security, said that to ensure the promises were
honored, his agency was already conducting inspections at each of the terminals
Dubai Ports World intends to take over.
Officials in Dubai and representatives for Dubai Ports World said the
reaction to the deal was being driven by politics, not security concerns.
They pointed out that in 2002 security authorities in the United Arab
Emirates captured a Qaeda leader, Abd al-Rahim al-Nashiri, described at the
time as Al Qaeda's chief of naval operations.
In 2004, the United Arab Emirates also arrested Qari Saifullah Akhtar, a
leader of the radical Islamic group Harkat-ul-Jihad-e-Islami, and turned him
over to the Pakistani authorities.
"Our track record speaks for itself," said one United Arab Emirates
official, who asked not to be named because of the confidential nature of the
security matters. "We have handed over a number of high-value Al Qaeda suspects
either to their home countries or to the U.S."
Dubai Ports World has been inching toward the United States market, most
notably in 2004 when it bought the international port terminal businesses from
CSX, the American-based railroad and transportation company, which included
sites in the Dominican Republic and Europe. In this latest deal, worth $6.8
billion, it would buy the 29 global port terminals operated by Peninsular &
Oriental Steam Navigation of Britain.
George Dalton, general counsel for Dubai Ports World, said the company was
committed to maintaining or improving security operations at all of its
terminals. The uproar over the deal, he said, is entirely political.
"I think it borders on the absurd," he said. "They are sending exactly the
wrong message to the Arab world."
Hassan M. Fattah contributed reporting from Yemen for this article, and
Heather Timmons from London.
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