Dubai firm opts out of ports control deal

WASHINGTON -- Attempting to quiet a political rebellion, a Dubai-owned company that was poised to take over operations at major American ports announced yesterday that it would sell those management rights to a US-based firm.

Just hours after House and Senate leaders told President Bush that Congress would almost certainly move to kill the deal, Dubai Ports World issued a statement saying that it would shed its stake in the ports to avoid jeopardizing close ties between the United Arab Emirates, which owns the company, and the United States.

''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 US operation of [the ports] to a United States entity," Edward H. Bilkey, DP World's chief operating officer, said in a statement. The statement was read on the Senate floor by Senator John W. Warner, Republican of Virginia and chairman of the Armed Services Committee.

DP World officials did not say which company would buy the operation rights, though they said they would seek to make sure DP World did not lose money on the sale.

Despite some lingering questions over the details of the deal, such as who would take over and the price of the sale, DP World's decision seemed likely to rid Bush and his fellow Republicans of a divisive issue that was threatening the party's standing on security issues in an election year.

''This should make the whole issue go away," said Senate majority leader Bill Frist, Republican of Tennessee.

The company's decision came a day after a key House committee voted to block the deal from going through, and as senators from both parties threatened to do the same, despite Bush's promise to veto any such bills. Lawmakers were pressing to kill the deal even though the Bush administration had agreed to launch a 45-day review.

The prospect of a Dubai company controlling American port operations exposed major fault lines within the Republican Party, with scores of GOP lawmakers joining Democrats in defying the White House on an issue closely connected to keeping the nation safe.

From the time the deal first gained wide notice last month, it sparked outrage from lawmakers in both parties and was opposed in public opinion polls by 3-to-1 ratios. Though Dubai is now considered a close US ally in fighting terrorism, many lawmakers pointed out that Al Qaeda funds were once routed through Emirates institutions, and that the Emirates government had recognized the Taliban regime in Afghanistan.

After yesterday's announcement, members of both parties said they would closely monitor the transaction to make sure that DP World would have no role in running the ports. Democrats and some Republicans said they would still press ahead with legislation to ban the Emirates from having any role in the operation of US ports, to eliminate any doubts.

''I got a press release from his highness telling me he has given me back port property in my country, I guess," said Representative Mark Foley, a Florida Republican who has vehemently opposed the Dubai deal. ''I think we have to make a statement that we're not simply going to change the nameplates on the car."

Democrats said questions remain about how quickly the company will sell off its management rights to the 21 American ports in such major cities as New York, Philadelphia, Baltimore, Miami, and New Orleans. DP World only yesterday closed its $6.8 billion deal to purchase the British firm that operated the ports, Peninsular and Oriental Steam Navigation Co.

''We will have to wait and see what is really going to happen," said Senate minority leader Harry Reid, Democrat of Nevada. ''The devil is in the details. We want a vote" to guarantee that Dubai will have no involvement at the ports.

Meanwhile, the six ports will continue to be run by the British company.

Warner said he did not know the details of the planned transactions, but said he was guaranteed by the company that DP World is ''not going to keep any tentacles" in the operation of the ports.

The announcement defused much of the anger generated by the deal, prompting sighs of relief from leading Republicans.

''I've never seen a clearer demonstration of the will of the American people," said Peter King, Republican of New York and the House Homeland Security chairman, a leading critic of the deal. ''This was definitely a result of the American people forcing the Congress to respond as we did."

The company's reversal reflected a calculation that opposition in Congress was too strong to overcome. Keeping up the fight in the face of public and congressional opposition could have forced the company into a lengthy and expensive legal battle.

Yesterday, House and Senate leaders told Bush at the White House that it would be ''impossible" to prevent Congress from killing the deal, raising the prospect that Bush would have had to wield the first veto of his presidency to allow the deal to go forward. The vote to block the deal was expected to be overwhelming, meaning it was possible that Bush's veto would be overridden.

David L. Mack, a US ambassador to the Emirates during the Reagan administration, said the forced divestment may make the Middle Eastern nation less cooperative on matters that are not in its direct interests. While Dubai will still do business with the United States, it may be less inclined to help out on matters such as increasing its oil capacity, he said.

The deal fell apart because of internal US politics, he added.

''Let's face it: You put three words together and you get a political firestorm in this town, and those three words are 'money, Arab, and Bush,' " said Mack, who is now with the Middle East Institute. ''This administration has been exploiting the terrorism issue to beat the Democrats over the head for five years, and they are eager to have payback."

Though the controversy over the ports now appears likely to fade, Democrats served notice that they will continue to use port security to criticize the Bush administration. Senator John F. Kerry, Democrat of Massachusetts, said in a statement that while the ''plug was mercifully pulled" on the deal, ''the question is, will anything change now?"

''It's been a case study in the administration's incompetence and inattention to the fundamental issue of port security," Kerry said.

Rick Klein can be reached at rklein@globe.com.