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Dubai Port Deal Was Illegal
NY Times
Bush Would Veto Any Bill Halting Dubai Port Deal
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.