Saturday, February 18, 2006

Democrats plan bill to block Dubai port deal

Democrats plan bill to block Dubai port deal
By Jeremy Pelofsky and Caroline Drees

WASHINGTON (Reuters) - Two U.S. senators, citing national security concerns, said on Friday they would try to block a company backed by the United Arab Emirates government from acquiring a British firm that runs several U.S. ports.

Sens. Robert Menendez of New Jersey and Hillary Clinton of New York, both Democrats, said they would offer legislation to ban companies owned or controlled by foreign governments from acquiring U.S. port operations, targeting the $6.8 billion purchase of P&O by Dubai Ports World.

"We wouldn't turn the border patrol or the customs service over to a foreign government, and we can't afford to turn our ports over to one either," Menendez said in a statement. The Senate Banking Committee also plans to hold a hearing on the issue later this month.

P&O is already owned by a foreign company, but is not state-owned, and the concern is that the purchaser is owned by the Dubai government, which is part of the UAE. The Bush administration considers Dubai and the UAE a solid ally in its campaign against terrorism.

The UAE company would control management of major ports in New York and New Jersey, Baltimore, Philadelphia, New Orleans and Miami.

U.S. seaports handle 2 billion tons of freight each year. Only about 5 percent of containers are examined on arrival.

It was unclear whether there was broad support for the new legislation. But objections in Congress to the deal could complicate ties between the United States and the UAE.

Secretary of State Condoleezza Rice said she supported the U.S. government decision to approve the deal and that the administration may need to better explain its reasons to Congress.

"There was a thorough review. It was decided that this could be done and done safely," she said in an interview with Middle East-based media.

Rice plans to meet with some Gulf foreign ministers next week in Abu Dhabi, where the subject could come up.

"I understand the debate in the U.S. on the issue of P&O and Dubai Ports but we would like to emphasize that we have been a strong ally of the U.S. in combating terrorism and will remain so," UAE Foreign Minister Sheikh Abdullah bin Zayed al-Nahayan told Reuters.

A Dubai Ports World spokesman said ports the company managed met international security standards and that it had received all the U.S. regulatory approvals for the deal.

"All Dubai Ports World ports are ISPS (International Ship and Port Facility Security) certified as are the P&O ports in the U.S.," the spokesman told Reuters in Dubai.

The Committee on Foreign Investment in the United States (CFIUS), a U.S. inter-agency panel that reviews security implications of foreign takeovers of strategic assets, reviewed the transaction and did not object.

But both Republicans and Democrats in Congress urged the administration to conduct a more rigorous review. Some expressed fears that the UAE was used as a conduit for parts used for nuclear proliferation and that the local banking system had been abused by financiers with possible links to terrorist organizations.

The Senate Banking Committee plans to hold a hearing the week of February 27 to examine concerns about the P&O sale and the U.S. government review process, a panel spokesman said.

"This does not create a train wreck," said Jon Alterman, head of the Middle East program at the Center for Strategic and International Studies in Washington. "But it's not helpful for a huge number of things we do with the UAE, everything from cooperation on money laundering and trafficking to counterterrorism to defense issues and on and on."

U.S. officials have praised the UAE for steps to protect its booming financial sector against abuse by terrorism financiers. Money for the September 11 attacks was wired through the UAE's banking system, according to U.S. officials. Two of the September 11 hijackers were UAE citizens.

(Additional reporting by Saul Hudson in Washington, Dayan Candappa and Firouz Sedarat in Dubai)