February 27, 2006

Hurdles remain for ports deal

By Matt Spetalnick

WASHINGTON (Reuters) - U.S. lawmakers pressed ahead with
legislation on Monday to possibly block a state-owned Arab
company from taking over key U.S. port operations, despite the
White House agreeing to a broader security review of the
contested deal.

The review is a face-saving compromise that gives President
George W. Bush, who has backed the takeover, more time to quell
a bipartisan uproar. But at the end of the 45-day review
period, Bush will be in the politically sensitive position of
having to authorize or reject the deal.

The reprieve came after Dubai Ports World asked the U.S.
government on Sunday to conduct the additional investigation
into the takeover, as requested by lawmakers, to allay concerns
about handing over terminal management in six major ports to a
firm owned by the government of Dubai in the United Arab

"This is a reasonable middle ground that has been reached,"
White House spokesman Scott McClellan said after
behind-the-scenes negotiations.

Bush, who earlier said no additional review was necessary,
backs the acquisition and threatened last week to use his veto
power if members of Congress sought to derail it. Lawmakers
have expressed concerns that the takeover could make the United
States more vulnerable to attack because militant Islamists
could penetrate the Middle Eastern company and learn of U.S.
port security measures.

The ensuing furor has put Bush on the defensive over
national security, an issue seen as his strongest political
card as he tries to revive his sagging public approval ratings
at the start of a crucial midterm election year.

McClellan said on Monday the White House still wanted the
deal to go forward but did not repeat Bush's veto threat.

But, the spokesman added, "The president's position remains
the same."


Washington says the United Arab Emirates is a staunch ally
in the global war on terrorism and has worked to close the
loopholes that allowed al Qaeda operatives to use the Gulf Arab
state as a financial and logistical hub before the September 11

Several senators from both parties, including Democrat
Charles Schumer of New York and Republican Susan Collins of
Maine, said they planned to go ahead and introduce legislation
to ensure a thorough security review of the ports contract.

"I think we should proceed with the legislation," Collins
told CNBC. She said Dubai had a "very mixed record on
terrorism," particularly before the September 11 attacks.

The bill would suspend the Dubai Ports World takeover of
management of six U.S. ports immediately and require a report
to Congress at the end of the 45-day review. It also gives
Congress the authority to disapprove the sale affecting U.S.
ports within 30 days of receiving that report.

"We may not need to proceed to a vote on this bill, but I
think that the legislation sends a strong message that Congress
is concerned, that Congress was not briefed, that there are
serious national security and homeland security implications of
this sale, and a full investigation needs to be undertaken,"
Collins told CNBC.

"All of our concerns may be satisfied at the end of the
day. Right now we just don't know." she said.

Dubai Ports World said last week it would proceed with its
$6.85 billion takeover of Peninsular & Oriental Steam
Navigation, the British company that had been managing the
ports, on March 2 but would not immediately assume management
of the U.S. port terminals. The deal would make it the world's
third-largest port operator.

(Additional reporting by Susan Cornwell, Caroline Drees and
Steve Holland)