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Port deal dies in a storm

Dubai backs out of controversial plan in a rare bipartisan defeat for the Bush administration

BY GLENN THRUSH | NEWSDAY WASHINGTON BUREAU

March 10, 2006

WASHINGTON - In a bid to end the Dubai ports fracas, a United Arab Emirates-owned company yesterday agreed to transfer operations at six U.S. ports to an American "entity" - hours after GOP leaders pronounced the deal dead on Capitol Hill.

Details of DP World's offer were sketchy, but senior White House officials say the company is "selling completely" its contract to run terminals in U.S. ports, according to House Homeland Security Chairman Peter King (R-Seaford), who visited the White House yesterday.

"From what we know, the Dubai Ports deal is over," said King, who, along with Sen. Charles Schumer (D-N.Y.), has spearheaded efforts to spike the deal. "But we haven't seen any details yet."

The decision by DP World followed a morning briefing at the White House in which House Speaker Dennis Hastert (R-Ill.) and Senate Majority Leader Bill Frist (R-Tenn.) told Bush their members wouldn't stand for any version of the deal. On Wednesday, the GOP-dominated House Appropriations Committee voted 62-2 to scuttle the agreement, and a similar Senate measure cleared a key procedural hurdle yesterday.

In a vaguely worded statement read on the Senate floor by Armed Services Committee chairman John Warner (R-Va.), the company's chief operating officer, Ted Bilkey, said, "DP World will transfer fully the operations ... to a United States entity."

Bilkey didn't offer a timetable for the transfer, saying only that it would occur in "an orderly fashion" and would ensure the company doesn't "suffer economic loss."

Bush spokesman Scott McClellan said DP World's offer "does provide a way forward [to] resolve the matter," but leading Democrats, including Schumer, were skeptical that the transfer might involve creation of a U.S.-based company that still had ties to Dubai.

"We now smell the scent of victory ... but the devil is in the details," said Schumer. "We need to make sure that all U.S. operations are totally removed from the United Arab Emirates and Dubai Ports World control."

DP World officials told Warner, who had been trying to negotiate a last-minute compromise to save the deal, they were pulling out late yesterday morning, according to Warner.

The decision came directly from UAE Prime Minister Sheikh Mohammed Al Maktoum, who realized the depth of opposition after yesterday's White House meeting, according to Senate sources.

DP World doesn't have a U.S. buyer in mind and may issue a request for proposals, a company source told Newsday.

"The funny thing is that Halliburton may be the one American company with the capacity to do this," said one congressional Republican, speaking earlier this week on condition of anonymity. "Problem is that the Democrats would probably complain that the Dubai deal was a big ruse to get Halliburton the contract." Vice President Dick Cheney used to run Halliburton.

The company's decision came as the Senate moved a step closer to passing its own anti-DP World bill. The Senate defeated, 51-47, a Republican attempt to kill a Schumer-sponsored amendment to vote on the deal; Frist has no plans to allow Schumer's measure to come for a vote anytime soon.

Still, some GOP senators seemed as eager as their Democratic counterparts to go on the record in opposition to the Dubai deal. Two 9/11 hijackers came from the UAE and the country's banks have been implicated in al-Qaida money-laundering schemes.

"I'd like the chance to vote against this," said Jim Talent (R-Mo.), who faces a tough re-election campaign against a well-financed Democratic challenger.

The Bush White House hopes DP World's move will quell a GOP insurrection that seemed to be growing by the hour.

Congressional Republicans have governed in virtual lock-step with the White House for more than five years. But Bush's threat to veto any bill that would challenge the port deal - at a time when polls were showing more than 70 percent disapproval - was just too much for many on Capitol Hill.

House and Senate Republicans, faced with a serious Democratic effort to take back both houses in this year's midterm elections, were furious with Bush for handing their enemies a prime issue to attack the GOP on an issue that had been a Republican winner - national security.

"We cannot afford to have the Democrats outflank us on national and homeland security," said King.

Others, including an aide to a Republican senator who asked not to be named, were more blunt: "This is us telling the president that we're tired of being ignored, that we're tired of them doing whatever the hell they want without consulting us."

Sen. John McCain (R-Ariz.), one of the few senators to vocally back DP World, said the company's forced pullout could compromise future relations with Dubai, whose port is a major base of operations for the U.S. military in the Mideast.

"I've already been told that, of course, they're offended," said McCain. "I'm concerned not just because of their having to make the sale but the way they were treated and the rhetoric that was used around here."

Last week DP World completed a $6.8-billion buyout of Peninsular & Oriental Steam Navigation Co., the British firm that operates terminals in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia.

Craig Gordon and J. Jioni Palmer of the Washington Bureau contributed to this story.