U.S. to Conduct New Review of Ports Deal

Published February 27, 2006

| FoxNews.com

The U.S. Committee on Foreign Investment in the United States will begin a new review of a deal involving a United Arab Emirates-based company seeking to purchase a London stevedoring firm that runs commercial operations at six U.S. ports.

"We think this is a good middle ground that has been found," White House press secretary Scott McClellan said Monday.

The Treasury Department issued a statement Sunday saying it will re-review the $6.8 billion purchase by Dubai Ports World of Peninsular & Oriental Steam Navigation Co., as soon as the request is filed. The same government panel that earlier investigated the deal but found no reason for national security concerns will reconsider it.

"DPW has asked for a CFIUS review, including the 45-day investigation under the Exon-Florio amendment, based on a restructured transaction that the company intends to file with the Committee. Upon receipt of the new notification, CFIUS will promptly initiate the review process and fulfill DPW's request for a full investigation," said a Treasury Department statement. The Exon-Florio amendment requires a full 45-day review when national security interests are at stake.

DP World sought a new review of security risks in an attempt to put U.S. lawmakers at ease over the deal. Beyond the length of the review, which will include significant congressional oversight, DP World has also promised to create a U.S. subsidiary that would operate independently of executives in Dubai until May 1 or when the deal is done, whichever comes sooner.

"We hope that voluntarily agreeing to further scrutiny demonstrates our commitment to our long-standing relationship with the United States," Edward H. Bilkey, the company's chief operating officer, said Sunday.

During the expanded review DP World would appoint Robert Woods, a British citizen operating out of London with authority over the U.S. ports during the review. Woods is the chief executive of P&O, which DP World purchased, pending approval of the U.S. government since P&O runs commercial operations at ports in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia. P&O North America's Web site shows operations in 15 other U.S. ports as well.

An American citizen would serve as the chief security officer during this period, the company said.

The company's offer is aimed at quelling opposition in Congress. Lawmakers have threatened to introduce legislation this week that would force a new investigation of security issues relating to the deal.

Senate Majority Leader Bill Frist had presented such a proposal to the company and the administration late Friday. All parties, including House Speaker Dennis Hastert's office, have held talks since then.

In a statement Sunday, Frist, R-Tenn., said he will recommend that the Senate wait for results of the broader review before acting on legislation to delay or block the deal. Frist said he anticipates oversight hearings to continue to examine the agreement and its implications on maritime security.

Rep. Peter King, R-N.Y. chairman of the House Homeland Security Committee, said the proposal appears to offer the more intensive investigation that many lawmakers had sought and could be enough to put off an immediate vote in Congress that might have blocked the ports deal.

"If it is what it appears to be, to me there's no need at this time to go forward" with emergency legislation, King said before the White House accepted the plan. "Obviously we have to hold it in reserve and see what happens."

Earlier in the day, Frances Fragos Townsend, the White House homeland security adviser, told "FOX News Sunday" that the administration was inclined to accept the deal.

"We believe that anything that permits there to be additional time so that more people can learn the facts as we learned them is to the better, because once people understand that security is never going to be outsourced, it will continue to be handled by the men and women of the Coast Guard and customs and border patrol, and that this is really a commercial deal where the security concerns have been addressed. That's a good thing, and people will be more comfortable with it," Townsend said.

The issue of the ports deal is still clouded in controversy, however. Republican and Democratic lawmakers alike want to know why the Bush administration would allow an Arab company to operate six major U.S. ports.

It "would have to be shown that there is nobody in the UAE [who] has ties to the Taliban or to Al Qaeda, no one within this company has ties to Al Qaeda or to the Taliban," said King on "Meet the Press."

"Remember this was only 4 1/2 years ago that they were very close to bin Laden, they were supporting the Taliban and unless there has been a complete transformation, I have real concerns," he added.

Critics of the deal have cited the UAE's history as an operational and financial base for the hijackers who attacked New York and Washington on Sept. 11, 2001. Furthermore, the United States raised concerns with the UAE several years ago about possible ties between officials and Usama bin Laden, according to the report by the independent commission that investigated the attacks.

Also, the UAE was one of only three countries that recognized the Taliban government in Afghanistan before its 2001 overthrow by U.S.-led forces.

"It reflects the fact that the 9/11 commission has given this administration failing grades on port security, failing grades on homeland security, and that's what you're seeing underneath all this," Sen. Joe Biden, D-Del., told "FOX News Sunday."

The White House says misconceptions persist about Dubai. Releasing a fact sheet Saturday to bolster its case, the White House says it's a myth the UAE is a "haven for terrorists," and calls the Arab nation a friend and ally.

"The UAE has worked with us to stop terrorist financing and money laundering, including by freezing accounts; enacting aggressive anti-money-laundering and counter-terrorist-financing laws and regulations; and exchanging information on people and entities suspected of being involved in these activities," the fact sheet argues.

"We have more U.S. Navy ships in UAE ports than in any other port outside the United States. The UAE services our ships while in port, refueling them, providing them with food and water and doing small repairs, among other services," it says.

Sen. Charles Schumer, D-N.Y., a leading critic of the deal, said DP World's willingness to submit to a lengthier review was "certainly a significant step forward, but the devil is in the details."

"If the report is completed and kept secret and only given to the president, who has already come out for the deal, it will not reassure Americans," Schumer said.

He said if lawmakers are allowed to examine security concerns and give their approval, then "I don't see any need for legislation or further conflict."

If the deal is stopped as a result of the fuller investigation, DP World would retain its right to sue, said one person familiar with the proposal. Asked whether the company faces liability from shareholders, Sen. John Warner, R-Va., a supporter of the deal, said: "I don't want to go all the way down that road."

Before the announcement of DP World's offer, Bush's national security adviser said the White House supported efforts to delay the ports takeover as long as it did not derail the deal.

"What the Congress and the companies are able to work out, we'll support and cooperate with so long as it does not involve a summary decision by the Congress that blocks this transaction," Stephen Hadley told a cable news network.

FOX News' Kelly Wright and The Associated Press contributed to this report.

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