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Dubai ports takeover prompts backlash

>By Stephanie Kirchgaessner and Edward Alden in Washington
>Published: February 16 2006 23:00 |
>>

Washington lawmakers on Thursday expressed deep reservations about Dubai Ports World’s £3.9bn acquisition of P&O, the UK-based port operator, on the grounds that the deal represented a potential national security threat, and demanded that the White House re-open a regulatory review of the deal.

In a letter to Treasury secretary John Snow, Senator Richard Shelby, an influential Alabama Republican, stopped short of calling for the deal to be blocked, but said the transaction merited further scrutiny, potentially raising complications for DP World’s bid. Mr Shelby is expected to call for a hearing to discuss the issue in coming weeks.

In a separate letter to Mr Snow, New York senator Chuck Schumer and others said US ports were “the most vulnerable targets for terrorist attack”. They questioned whether DP World, which is owned and controlled by Dubai, should be allowed to take over P&O, charging that Dubai was a “key transfer point” for shipments of nuclear components bound for Iran, North Korea and Libya.

The deal, which has already been given regulatory clearance by the White House, gives DP World container terminals at six ports on the east coast of the US, including New York and New Jersey.

Although the Department of Homeland Security is ultimately charged with cargo- screening functions, the legislators said the port facility itself was responsible for securing cargo coming in and out of the port and the hiring of security personnel.

“After the 9/11 attacks, your department complained of a lack of co-operation by the UAE and other Arab countries as the US was trying to track down Osama bin Laden’s bank accounts,” the letter stipulated.

The growing congressional backlash against the deal is likely to reignite a debate in Washington on the effectiveness of the committee on foreign investments in the US, or Cfius, an inter-agency panel that vets foreign takeovers of US assets on national security grounds.

Cfius, which is chaired by the Treasury Department, approved Dubai’s bid for P&O after reviewing it for a standard 30-day-period, although the committee could have called for the deal to be examined more thoroughly over an additional 45 days.

Stewart Baker, assistant secretary for policy in the Department of Homeland Security, said that Cfius had completed its review after it was notified last year of the pending takeover, and had concluded there was no national security basis for blocking the transaction.

He said the US government had worked cooperatively with DP World in the past as part of the global container security initiative launched by the US after the September 11 attacks.

People familiar with the deal said administration officials were yesterday briefing lawmakers on the deal to assuage their concerns.

A spokesperson for the Treasury Department said the administration would not re-open its review unless evidence emerged that DP World had given the committee false information.

Cfius came under harsh scrutiny by lawmakers last year following a failed attempt by CNOOC, the Chinese oil company, to takeover California-based Unocal. Although the deal was quashed before Cfius reviewed the transaction, the widespread opposition to the deal in Congress prompted the Treasury Department and other agencies to promise to increase transparency at Cfius by communicating more with Congress and to be more willing to conduct full investigations of deals.

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