From Washington Post:

Port Deal To Have Broader Review
Dubai Firm Sought U.S. Security Probe

By Jonathan Weisman
Washington Post Staff Writer
Monday, February 27, 2006; A01

The Bush administration said yesterday that it has accepted a proposal from a Dubai maritime company to conduct a 45-day review of the national security implications of the company's plans to take control of significant operations at six U.S. ports.

The announcement by Dubai Ports World, brokered by the White House and Senate Majority Leader Bill Frist (R-Tenn.), appears to satisfy the demands of many members of Congress, who had threatened to force a security review if the administration would not conduct one. The deal also offered pledges to reassure the United States that the ports deal would not pose any threats to American safety and security.

The administration had approved DP World's $6.85 billion purchase of London-based Peninsular and Oriental Steam Navigation Co. (P&O) earlier this month without conducting a security review, after a broad interagency panel that looked at the transaction concluded the takeover of port operations in the United States would not affect the nation's safety.

But last week, members of both political parties erupted in furor, questioning the administration's judgment and promising to delay the deal, if not scuttle it. After President Bush vowed to veto any legislation that would thwart the Dubai company's plans, the most public clash between the Republican Congress and the Bush White House seemed in the offing. But yesterday's announcement may have headed off any showdown.

"We recognize that there are concerns regarding DP World's acquisition of P&O's U.S. terminal operations. Despite having already obtained approval by the federal government, we continue to take voluntary steps to assure people that the security of the U.S. will not be harmed as a result of this acquisition," said Edward H. "Ted" Bilkey, DP World's chief operating officer.

White House spokesman Scott McClellan said: "We are pleased that Dubai Ports reached a middle ground with Congress. The transaction was closely scrutinized by the appropriate national security and intelligence officials, and important safeguards are in place. We believe, however, the additional time and investigation at the request of the company will provide Congress with a better understanding of the facts, and that Congress will be comfortable with the transaction moving forward once it does."

Eric Ueland, Frist's chief of staff, said yesterday that the Senate majority leader would ask the relevant committees to continue oversight while the administration conducts its review, and he said the company will have to continue its efforts to reassure lawmakers.

But, he said, Frist and GOP leaders would not tamper with the secretive interagency administration panel, known as the Committee on Foreign Investment in the United States (CFIUS), during the review. The committee said yesterday in a statement that it welcomes the announcement and that it will "promptly initiate the review process and fulfill Dubai's request for a full investigation."

Sen. John W. Warner (R-Va.), who supports the deal, said on NBC's "Meet the Press" that the new agreement "spells out unequivocally the willingness of this company to give every means of support to help work this thing out."

Warner called the ports deal diplomatically and economically vital to the United States. "This is going to establish a precedent, and it's got to be done in a way not to choke off other opportunities," he said.

Lawmakers who had threatened to block or delay the deal welcomed a longer investigation. Rep. Peter T. King (R-N.Y.) said the new proposal probably would quell calls for emergency legislation in Congress this week. He said a deeper investigation is necessary of a United Arab Emirates-owned company operating U.S. ports.

"This was only 4 1/2 , five years ago that they were very close to bin Laden, they were supporting Taliban," King, who heads the House Homeland Security Committee, said on "Meet the Press." "And unless there's been a complete transformation, I have real concerns."

Sen. Charles E. Schumer (D-N.Y.), another critic of the deal, agreed that the delay would forestall immediate action in Congress but emphasized that transparency is vital in the new investigation. "If, after the 45-day investigation, it's kept secret, it's given to the president, who after all has come out for this deal already, I don't think that's going to assure the American people," he said on CBS's "Face the Nation."

Under the terms of the deal announced by DP World, the company would proceed with its takeover of P&O. That deal is to be completed Thursday.

But DP World said it would "guarantee" the independence of operations at the ports of New York, New Jersey, Philadelphia, Baltimore, Miami and New Orleans by establishing North American operations as a "completely separate" business unit. Management of the North American operations would be left in the hands of P&O's chief executive in London, who is British. The chief security officer of the North American unit would still be a U.S. citizen, unless the Coast Guard approves a change.

The rest of the current management of P&O in the United States also would remain in place, and DP World pledged not to interfere with operations, policies, procedures or security that was in place when P&O ran the U.S. terminals.

The statement concluded that all these pledges would remain in place until May 1 or the completion of the CFIUS review.

"We are confident the further review by CFIUS will confirm that DP World's acquisition of P&O's U.S. operations does not pose any threat to Americans' safety and security. We hope that voluntarily agreeing to further scrutiny demonstrates our commitment to our long-standing relationship with the United States," Bilkey said.

The deal was worked out over a series of meetings Friday among Frist, Bilkey, DP World lawyers, Cabinet secretaries and White House officials. Late Friday, Frist recommended to the government of the United Arab Emirates and to House Speaker J. Dennis Hastert (R-Ill.) that DP World request a security review and more clearly spell out how it intended to separate its U.S. operations from port management around the world.

DP World executives and their lawyers worked through the agreement all day Saturday, while GOP leaders in Congress and White House officials focused on the next political steps. Ueland said Frist is pleased with yesterday's company statement, indicating it comported with his expectations.

Staff writers Anne Hull and Jim VandeHei contributed to this report.

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