Dubai to give up control of U.S. ports

updated 7:32 p.m. ET March 9, 2006

WASHINGTON - Bowing to ferocious opposition in Congress, a Dubai-owned company signaled surrender Thursday in its quest to take over operations at U.S. ports.

“DP World will transfer fully the U.S. operations ... to a United States entity,” the firm’s top executive, H. Edward Bilkey, said in an announcement that capped weeks of controversy.

Relieved Republicans in Congress said the firm had pledged full divestiture.

The announcement appeared to indicate an end to a politically tinged controversy that brought President Bush and Republicans in Congress to the brink of an election-year veto battle on a terrorism-related issue.

“It does provide a way forward and resolve the matter so we can continue working on other important priorities,” said White House spokesman Scott McClellan.

'Strong relationship'
“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,” he said.

A leading congressional critic of the ports deal, Rep. Peter King, applauded the decision but said he and others would wait to see the details. “It would have to be an American company with no links to DP World, and that would be a tremendous victory and very gratifying,” said the New York Republican, chairman of the House Homeland Security Committee.

It was Sen. John Warner, chairman of the Armed Services Committee and a member of the Senate committee on Homeland Security and Governmental Affairs, who took the Senate floor to read to colleagues a press release from Dubai Ports World disclosing its new stance.

“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,” he read from a statement by Bilkey, DP World’s chief operating officer. The announcement did not specify which American company would be involved.

Warner said that Sheik Mohammed Al Maktoum, prime minister of the United Arab Emirates, “advised the company ... that this action is the appropriate course to take.” Dubai is in the Emirates.

“This should make the issue go away,” said Senate Majority Leader Bill Frist. The Tennessee Republican was one of several GOP leaders to tell President Bush earlier in the day that Congress was ready to ignore his veto threat and scuttle the deal.

Several Republican officials, speaking on condition of anonymity, said Frist and Sen. John Warner, R-Va., chairman of the Armed Services Committee, had been privately urging the firm to give up its plans.

Sudden turnaround
After weeks of controversy — and White House veto threats that McClellan renewed at midmorning Thursday — the end came unexpectedly.

The House Appropriations Committee voted 62-2 on Wednesday to block the deal, and GOP congressional leaders privately informed the president Thursday morning that the Senate would inevitably follow suit. Senate Democrats clamored for a vote, increasing pressure on Senate Republicans to abandon the president.

“Our goal is to make sure that the security of our ports is in America’s hands and I look forward to learning more about this recent development,” House Appropriations Chairman Rep. Jerry Lewis, R-Calif., told NBC News.

NBC VIDEO Blow to Bush? March 9: NBC Washington Bureau Chief Tim Russert analyzes the Dubai ports controversy and what it means to President Bush. With anchor Brian Williams. Nightly News

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

The firm finalized its $6.8 billion purchase Thursday of Peninsular & Oriental Steam Navigation Co., the British firm 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.

Despite the furor, the company’s U.S. operations were never the most prized part of the global transaction. DP World valued its rival’s American operations at less than 10 percent of the nearly $7 billion total purchase.

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