Dubai Co. to Give Up Stake in U.S. Ports Deal

WASHINGTON – A United Arab Emirates-owned company said Thursday it would give up its management stake in a controversial ports deal that has taken Washington by storm and has caused massive upheaval in the president's own party.

The Thursday announcement came just hours after Republican leaders warned President Bush that the House and Senate appeared ready to block Dubai Ports World from taking over some terminal operations at six U.S. ports.

"Because of the strong relationship between the United Arab Emirates and the United States and to preserve that relationship, DP World has decided to transfer fully the U.S. operation of P&O Operations North America to a United States entity," DP World's chief operating officer, Edward H. Bilkey, said in a statement, read on the Senate floor by Sen. John Warner, R-Va.

The company said its decision was "based on an understanding that DP World will have time to affect the transfer in an orderly fashion and that DP World will not suffer economic loss."

The announcement was somewhat of a blow for Democrats, who were pushing for a Senate vote on an amendment that would halt the deal. The Senate later voted 51-47 to ignore GOP requests to wait until a 45-day review of the deal is completed before they try to stop it. Republican leaders needed 67 votes to stop debate on the measure.

"This should make the whole issue go away," said Senate Majority Leader Bill Frist, holding up a copy of the DP World press release that announced the U.S. ports concession. "The [review] process is underway ... we should not have to interrupt it on the floor of the United States Senate."

A Warner spokesman told FOX News that based on conversation between his boss and DP World lawyers, "we understand this is a full divestment or sale of the U.S. operations of P&O." That would mean the Senate amendment would essentially be off the table.

Democrats were pushing that amendment to lobbying reform legislation to ensure that no UAE-related company has any control over U.S. port operations, particularly since so few details of the latest DP World plan is known. The amendment, sponsored by Sen. Charles Schumer, would not only block the Dubai deal, but also other U.S. ports deal with any company wholly owned or controlled by any foreign government that recognized the Taliban in Afghanistan from 1996-2001.

If they succeeded in forcing a vote on the amendment, Democrats could then claim a big election year win in the area of national security — an area Republicans generally have a stronger track record on.

"The bottom line is, security has to come first. We know that this deal would not bring security," Schumer, D-N.Y., told reporters Thursday. "We had to force this vote, it's unfortunate that we did but now the handwriting is on the wall and that is that the UAE will not operate ports in the United States of America, plain and simple."

The political firestorm erupted after the administration approved a plan to hand over some terminal currently operated by the British company, Peninsular & Oriental Steam navigation Co., to the UAE-owned DP World.

DP World finalized its $6.8 billion purchase earlier Thursday of P&O, which through a U.S. subsidiary runs important 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 deal in question, however, focused primarily on lucrative Asian markets. DP World valued its rival's American operations at less than 10 percent of the nearly $7 billion total purchase.

A senior Frist aide told FOX News that the Senate majority leader and his staff informed DP World and UAE government officials Wednesday night to pull the plug on the deal. When asked what prompted this action from Frist, the aide said the House action Wednesday night created a "destabilized coalition among House and Senate GOP."

Just one night before, GOP-led House Appropriations Committee passed a bill blocking the deal. Bush has vowed to veto any measure halting the deal.

By attaching it to a larger must-pass $91 billion spending bill funding wars in Iraq and Afghanistan, as well as hurricane recovery, lawmakers are challenging Bush: If he follows through on his veto threat, he would also be vetoing the entire package.

Earlier Thursday, the White House said Bush was open to compromise but expressed concern that the House GOP tactic could "slow down passage of vital funds and resources" and said Bush's veto threat still stood.

"It does provide a way forward and resolve the matter," White House spokesman Scott McClellan said later, after the DP World announcement. "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 administration has repeatedly argued that port security would not be outsourced as part of the deal and that the UAE is a strong ally in the War on Terror since the Sept. 11, 2001, attacks.

'The Devil's in the Details'

With the latest DP World news, many members of Congress who thus far have been critical of the deal may be much more positive toward it.

"It resolves all of the security issues involved," Rep. Peter King, chairman of the House Homeland Security Committee and a lead critic of the deal, told FOX News. "It's a very positive step and now we can go forward on overall legislation dealing with the ports."

"DP World's agreement is a positive outcome," added Rep. Pete Hoekstra, R-Mich., the chairman of the House Select Committee on Intelligence. "I hope that it will not impact our strong relationship with the United Arab Emirates, a valuable ally in prosecuting the War on Terror."

Added Sen. Wayne Allard, R-Colo." "Dubai's decision to withdraw, and turn over management of the ports to a U.S. company, certainly relieves those concerns. Congress still has a critical roll to play in decisions that affect ports security, and national security overall."

But many lawmakers, particularly Democrats, are still cautious, arguing that DP World has to let go of all control over any firm that may take over the port operations.

"The devil's in the details," Schumer said. "Those of us who feel strongly about this issue believe that the U.S. part of the British company should have no connection to the United Arab Emirates or DP World."

On the Senate floor Thursday, Sen. Frank Lautenberg, D-N.J., argued that with Dubai's record of failing to recognize Israel, among other things, it's "crazy" to do business of any great magnitude with a UAE-owned firm.

"We ought to play showdown here, to use the expression, and vote whether or not we want this deal to go through," Lautenberg said. "It's not political, just do it."

Senate GOP leaders had been hoping to prevent any votes until the conclusion of a 45-day review of the deal, being conducted by the U.S. Committee on Foreign Investment in the United States (CFIUS).

"The right thing to do right now is not to vote on this [Schumer] amendment," Sen. Tom Coburn, R-Okla., said Thursday on the Senate floor. "The amendment attempting to be offered is a political stunt, not based on knowledge of what is and isn't the facts. ... We can beat up on the president but the fact is, he's operating under the law. He has not broken law. Now maybe the law needs to be changed ... [but] we've got 45 days. And if true that this should not go through, then we'll stop it ... but it will be on the basis of fact, not politics."

Frist tried to argue that the lobbying reform bill should be dealt with before the ports issue; before Schumer's actions Wednesday, Senate Democrats had earlier said they would not try to attach ports bills to the lobbying measure. But Democrats were demanding that a specific time and date be set to debate and vote on the hot-button topic. Instead of giving them a date, Frist on Thursday ended debate on the lobby reform bill -- Democrats' self-proclaimed "signature issue" -- altogether and moved on to a budget bill.

"It is disappointing that the Senate is not completing action this week on lobbying reform legislation. This bipartisan legislation is critical to help restore the public's eroding confidence in the integrity of the government's decisions," said Governmental Affairs and Homeland Security Committee Chairwoman Susan Collins of Maine, who has been a leader on both issues. "I fear that this delay could jeopardize this important bill and that it could become a casualty of a crowded calendar."

An aide to Collins said that though Frist said he would attempt to bring back up lobby reform next week, "my boss thinks this will become victim to some must-pass bills."

On the House side, Democrats charge that the House Appropriations bill doesn't do enough and that the administration should be prevented not only from going through with this deal involving the UAE-owned company, but also from future deals allowing foreign-government owned companies from controlling U.S. assets.

"The Republican [House] proposal only stops President Bush's current backroom Dubai ports deal. It does not prohibit future ill-advised Bush administration agreements that will let other firms controlled by foreign governments operate in U.S. ports, nor does it address the lack of U.S. cargo security, which poses an even larger threat," said House Democratic Leader Nancy Pelosi of California.

But House Republicans feared that if they did not move to block the deal now, Democrats would beat them to it.

"There's no way that we should or will, leave the national security issue to the Democrats," Senate Banking Committee Chairman Richard Shelby, R-Ala., told FOX News on Thursday. "We could pay a price in the fall [elections] and we cannot afford not to do this."

Democrats said the Dubai deal is just a small part of the broader issue of port security that they say the Bush administration has not paid enough attention to.

"Dubai deal or no Dubai deal, it's clear that this is just the tip of the iceberg of the administration's failure on port security," said Sen. John Kerry, D-Mass. "A new report from the Department of Homeland Security shows that Target does a better job monitoring their stores than our government does monitoring our ports. Their failure to put together a basic program after all the warnings must be a wake-up call to finally get it right on homeland security."

FOX News' Major Garrett, Molly Hooper and Trish Turner and The Associated Press contributed to this story.