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Bush concerned about deal collapse

| Saturday, March 11, 2006

WASHINGTON -- President Bush said Friday he was troubled by the political storm that forced the reversal of a deal allowing a company in Dubai to take over operations of six American ports, saying it sent a bad message to U.S. allies in the Middle East.

Bush said the United States needs moderate allies in the Arab world, like the United Arab Emirates, to win the global war on terrorism.

The president said he had been satisfied that security would be sound at the ports if the Dubai deal had taken effect. "Nevertheless, Congress was still very much opposed to it," Bush said. He made his remarks to a conference of the National Newspaper Association, which represents owners, publishers and editors of community newspapers.

"I'm concerned about a broader message this issue could send to our friends and allies around the world, particularly in the Middle East," the president said. "In order to win the war on terror we have got to strengthen our friendships and relationships with moderate Arab countries in the Middle East."

"UAE is a committed ally in the war on terror," Bush added. "They are a key partner for our military in a critical region, and outside of our own country, Dubai services more of our military, military ships, than any country in the world.

"They're sharing intelligence so we can hunt down the terrorists," Bush added. "They helped us shut down a worldwide proliferation network run by A.Q. Khan" -- the Pakistani scientist who sold nuclear technology to Iran, North Korea and Libya, he said.

"UAE is a valued and strategic partner," he said. "I'm committed to strengthening our relationship with the UAE."

After a storm of protest in the Republican-controlled Congress, DP World announced Thursday that it would transfer six U.S. port operations to a U.S. entity. The move spared Bush from a veto showdown with GOP lawmakers. Yet the larger issue highlighted by the DP world controversy -- U.S. port security -- shows no signs of going away.

Shortly after Bush's appearance, the administration announced a postponement in the next round of negotiations aimed at reaching a free trade agreement with the UAE, but wouldn't say whether it was related to the fallen ports deal.

The office of U.S. Trade Representative Rob Portman said merely that the next round of talks was put off to allow both sides more time to prepare.

Sen. Lindsey Graham, R-S.C., said of the controversy: "The problem of the political moment has passed, but the problem of adequate port security still looms large."

Republicans and Democrats alike welcomed DP World's decision to give up its aspirations to manage significant operations at the six ports, but they warned that the move doesn't negate the urgent need for broad legislation aimed at protecting America's ports.

"I'm sure that the decision by DP World was a difficult decision to hand over port operations that they had purchased from another company," Bush said.

"There are gaping holes in cargo and port security that need to be plugged," said Sen. Patty Murray, D-Wash.

Legislation on the issue has piled up in both the House and the Senate in the weeks since the flap over DP World erupted and divided Bush from the GOP-led Congress.

Before the United Arab Emirates-based company's announcement, the House and Senate appeared all but certain to block DP World's U.S. plan despite Bush's veto threats -- a message that GOP congressional leaders delivered personally to the White House.

Facing a disapproving public in an election year, a House committee overwhelmingly voted against the plan Wednesday. And House Speaker Dennis Hastert, R-Ill., and Senate Majority Leader Bill Frist, R-Tenn., warned the president in a private meeting Thursday that the Senate inevitably would follow suit.

Within hours, Sen. John Warner, R-Va., one of the few members of Congress to back the administration's position on the issue, went to the Senate floor to read a statement from the company.

"DP World will transfer fully the U.S. operations ... to a United States entity," H. Edward Bilkey, the company's top executive, said in the statement. It was unclear which American business might get the port operations.

The White House expressed satisfaction with the company's decision.

"It does provide a way forward and resolve the matter," said Scott McClellan, the White House press secretary. "We have a strong relationship with the UAE and a good partnership in the global war on terrorism, and I think their decision reflects the importance of our broader relationship."

The company's decision gives the president an out. He now doesn't have to back down from his staunch support of the company or further divide his party on a terrorism-related issue with a veto.

It was unclear how the company would manage its planned divestiture, and Bilkey's statement said its announcement was "based on an understanding that DP World will not suffer economic loss."

"This should make the issue go away," Frist said.

Even critics of the deal expressed cautious optimism that DP World's move would quell the controversy surrounding that company's plan to take over some U.S. terminal leases held by the London-based company it was purchasing.

"The devil is in the details," said Senate Minority Leader Harry Reid, D-Nev., echoing sentiments expressed by other lawmakers.

DP World on Thursday finalized its $6.8 billion purchase of Peninsular & Oriental Steam Navigation Co., the British company that through a U.S. subsidiary runs important port operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. It also plays a lesser role in dockside activities at 16 other American ports.

The plan was disclosed last month, setting off a political firestorm in the United States even though the company's U.S. operations were only a small part of the global transaction.

Republicans were furious that they learned of it from news reports instead of from the Bush administration. They cited concerns over a company run by a foreign government overseeing operations at U.S. ports already deemed vulnerable to terrorist attacks.

Democrats also pledged to halt the takeover and clamored for a vote in the Senate. They sought political advantage from the issue by trying to narrow a polling gap with the GOP on issues of national security.

Senate Republicans initially tried to fend off a vote, and the administration agreed to a 45-day review of the transaction. That strategy collapsed Wednesday with the 62-2 vote in the House Appropriations Committee to thwart the sale.

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