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Dubai Firm to Give Up Stake in U.S. Ports

DAVID ESPO and ANDREW TAYLOR / AP | March 10 2006

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, a decision that one senator said had been approved personally by the prime minister of the United Arab Emirates.

"The devil is in the details," said Senate Democratic Leader Harry Reid of Nevada, reflecting a sentiment expressed by numerous critics of the deal.

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. The White House expressed satisfaction with the outcome.

"It does provide a way forward and resolve the matter," presidential spokesman Scott McClellan said.

"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.

"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.

After weeks of controversy - and White House veto threats that spokesman Scott 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.

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.

But that portion of the deal set off a political chain of events unlike any other in Bush's five years in office. Republicans denounced the deal, saying they were worried about the effects it would have on efforts to make ports safer from terrorist threats. Democrats did likewise, and capitalized on the issue as well as a way to narrow the polling gap with the GOP on issues of national security.

Bush defended the deal, calling the United Arab Emirates a strong ally in the war on terror and pledging to cast a veto if Congress voted to interfere.

Senate Republicans initially sought to fend off a vote to block the deal, and the administration agreed to a 45-day review of the transaction. That strategy collapsed on Wednesday with the vote in the House Appropriations Committee.

Warner, R-Va., provided the first public word of the firm's switch, when he went to the Senate floor and read aloud from its statement.

Warner said that Sheikh Mohammed Al Maktoum, prime minister of the United Arab Emirates, "advised the company ... that this action is the appropriate course to take."

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