Dubai Ports, The Deal Is Dead

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A United Arab Emirates-based maritime company at the center of a furious controversy over port security bowed to pressure from Congress yesterday and announced that it will sell off its U.S. operations to an American owner.

The announcement, issued by Dubai Ports World Chief Operating Officer Edward H. Bilkey, came hours after House and Senate GOP leaders bluntly told President Bush that Congress would kill the U.S. portions of the company's $6.8 billion acquisition of London-based Peninsular and Oriental Steam Navigation Co. (P&O), which has operations at six major U.S. ports, including New York and Baltimore.

Well, let's hope someone has the $700 000 (the US asset represents roughly 10 %), stashed away in the closet, as Dubai ports is certainly not going to fire sell this asset. One potential private-equity buyer, namely Washington's Carlyle Group, said "the firm will probably not be interested in P&O's port operations, given the political scrutiny such a deal would invite." Speaking as an experienced negotiator, this provides a great scene setting for cutting a lucrative deal, and it looks as if though some are already starting to play hard to get.

House Republicans have openly defied the President, partly for obvious reasons, namely to prevent the danger to national security, and partly presumably to prevent Democrats from outflanking us on that very subject as the elections approach. Mostly however because he was downright wrong!

Tom Bevan @ Real Clear Politics: "Bush saves face and doesn't have to make good on a veto threat. A Republican-led Congrees looks good to its constituents (and feels good about itself) for flexing its muscle and derailing the deal. DPW loses, at least for the moment."

Michelle Malkin: "Nervous nellies will argue that the House Republican “hotheads” should have waited for the 45-day review of the deal. But to many knowledgeable observers of the CFIUS process, the panel is the root of the problem—not the solution. As I made clear in my first post on this subject on Feb. 18 and consistently throughout the debate, we simply cannot afford the business-as-usual attitude of the rubber-stampers at CFIUS. And if that means the UAE retaliates by pulling out of business deals with Boeing, as it is threatening to do now, so be it."

As I have said before, the President made a mistake, and should have been the one to rescind on the deal, instead of allowing the embarrassing humiliation of the Senate, and especially his own Republican Senators, doing it for him. Bush Administration and their arrogant, cavalier attitude toward this deal does not install confidence, and to have threatened with a veto had to be the biggest 'icing on the cake' blunder of all. Karl Rove, who seems to have the instincts of a turtle, finally switched the lights on:

Late Thursday that Karl Rove had decided to pull the plug. President Bush's political adviser was said to have conveyed to a top manager of Dubai Ports World in Washington that the White House couldn't hold out any longer against congressional pressure to kill the Arab company's plan to acquire freight terminals at six U.S. ports. The initial response of one Dubai executive was: "Who's Karl Rove?"

A very badly played hand indeed. The Anchoress as usual gets it right: "The president should not have been defensive and - for the first time in his presidency - threatening a veto. It was too hot-headed, too arrogant. The congress should not have been so eager to shoot down a deal because “the people writing letters and emails,” to whom they never listened before, suddenly mattered in this election year. No, GOP, I’m still not impressed with any of you. Not that you’d know that, or care, but still."

My friend @ Media Lies: "What other system is there in the world where the voice of the people is so quickly and obediently paid heed? For all the racuous, contentious, noisomeness of our political system, it does one thing very well. It pays attention to its citizens."

Ed Morrissey hands out demerits to all parties involved: "To the Treas. Dept., who "should have understood the political implications" and should have "prepared their superiors" for possible controversy; the media, who saw it as "boring bureaucratic transaction" until "radio blowhard Michael Savage grabbed onto the story" and "managed to fan the deal into a veritable blaze of hysteria -- and instead of informing the public of all the nuances of the story, the initial reporting followed Savage's lead"; the WH, "went into what can only be called Harriet Miers mode. They accused critics of being xenophobes and anti-Arab bigots, including a large number of conservatives upset at an apparent lack of focus on national security"; Congress, for "demonstrating an embarrassing level of ignorance of the ports deal" -- singling out Rep. Jerry Lewis (R-CA) in particular; and to the blogosphere: "Too many of us jumped to the conclusion we saw when the media first reported this deal, myself included."

I don't hear cheers from the other side of the Blogosphere, only whimpering complaints. But as Michael van der Galien, the talented liberal blogger said, you cannot seem to please the liberals nowadays, no matter what. Indeed. Defeatist attitudes do not make victories, neither does the insistence upon an up or down vote after the deal has been killed, but a strong leadership and a strong message does.

Junkyard Blog "Hard to say, but it’s not exactly a stretch:"

Members of Dubai’s royal family were said to be furious on Thursday over U.S. plans to reject their bid to operate terminals at U.S. ports - and they’re threatening to cancel American business deals and perhaps even boot U.S. military forces from strategic bases in the UAE.
“They’re saying, ‘All we’ve done for you guys, all our purchases, we’ll stop it, we’ll just yank it,’” a deal insider told the Hill newspaper.

The source said that Dubai’s royals were “furious” at both Republicans and Democrats over the rebuff. At stake are two major U.S. bases in the UAE. The port of Jebel Ali docked over 500 Navy warships last year, and played host over 70,000 American troops.

As for this part:

Even before the deal fell through, Arab media had been portraying U.S. opposition as an anti-Arab slur, contrasting that resistance to the acceptance generally accorded in the United States to investments from Asian and European entities.

"This can only make the already-damaged image worse," said Youssef M. Ibrahim, managing director of Dubai-based Strategic Energy Investment Group. "The problem is, for four or five years, we haven't found a way to repair that damaged image."

Tell it to someone who cares. We have been freeing people in the Muslim world for over a decade, and the thanks we get is that we are called The Great Satan. In Afghanistan, against the USSR, in Bosnia, in Kosovo, and again in Iraq. As I said, tell it to someone who cares, like the families whose loved ones sacrificed their lives fighting for the freedom in the Muslim world.

Here are some links from both sides: Memeorandum features my post here.

Mary Katherine Ham @ Hugh Hewitt, Kim Priestap @ Wizbang, Instapundit, Daniel Drezner, Wonkette, Ace of Spades HQ, Outside The Beltway, MSNBC, Protein Wisdom, Protein Wisdom (2), The Heretik, PoliBlog, The Political Pit Bull, Below the Beltway, A Blog For All, Decision '08, BrothersJudd Blog Crooks and Liars, QandO, Gina Cobb, Daily Kos, The Sundries Shack, GOP Bloggers, Fraters Libertas, RedState, Media Blog on National, The Huffington Post, The Moderate Voice, The Strata-Sphere, The Washington Monthly, Sister Toldjah, Blogs for Bush, Wonkette, PunditGuy, Gringoman, Small Town Veteran, Tel-Chai Nation, Environmental Republican, The Glittering Eye, Unpartisan, Right Winged, Elephants in Academia, Peaktalk, Andrew Sullivan, Associated Press,  The Indepundit, Flopping Aces, The Jawa Report,  The RCP Blog, MSNBC, Right Wing News, Iowa Voice, Shakespeare's Sister, The Carpetbagger Report, PunditGuy, New Donkey, Middle Earth Journal, Secular Blasphemy, Fraters Libertas, Crazy Politico's Rantings 

Comments

[David Foster]

Alexandra,

You don't need $6.8 billion; all that is needed is about $700 million, since the value of the US part of the deal has been placed at about 10% of the value of the entire P&O acquisition. It will be interesting to see who bids..the Blackstone private equity group has been mentioned as one possibility. I wouldn't be surprised if the gov't has to kick in some portion of the price, since it seems the bidding wasn't exactly flooded with US companies last time around.

Michael...I don't think anything like 100% inspection of containers is possible, given the scale of operations at these ports. There needs to be improved guarantee of container integrity, via physical and/or electronic seals, combined with selection and authentication of trusted shippers. I do think the terminal operator matters from a security standpoint, since that entity has physical control of the containers: the security authorities are not going to be able to watch everything that goes on in the facility.

[Michael Galien]

Alexandra,

Great post as usual. You are entirely right; the White House (not for the first time in my opinion) acted way too arrogant on this one. Even the fiercest among Bush supporters in Congress couldn't let them get away with this.

About the company itself: I do not think it would really be such a big problem. As I understand it, they are also responsible for Ports in, among others, Germany. Besides that the USA would be responsible for the security themselves. In other words: would it really matter? I do not know.
Besides that it seems only 2% of all containers are being 'checked' in the US ports. 2%??. That is the real problem here IMO. If one wants to secure oneself in an accurate and efficient manner, 2% is not enough.

That is the first thing that needs to be dealt with.

[Michael Andreyakovich]

Wish to report what I have seen today.

Standing in line at bank. CNN on TVs.

Announce that subject of tonight's Lou Dobbs is "DUBAI PORTS DEAL DEAD: BUSH PRESIDENCY SHIPWRECKED??????"

Should have known they would do this to us.

Suspicion of bias reinforced by commercial for forthcoming DVD edition of GOOD NIGHT AND GOOD LUCK.

[Washington]

The WH made the type of mistake a city councilman would not make; they put their own feelings ahead of what was "perceived" by the public.

I don't want to beat a dead horse because I addressed it in two of my own posts but this deal was politically hopeless. Not economically-but politically. In order to have people in office who support investment they have to be ELECTED and thus, like it or not, politics enters into the fray.

The WH was trumped and now looks impotent. Meanwhile, as predicted, the deal was changed. Apologists for Mr. Bush will cry foul, the left will limp along as usual, the economy first people will cringe while objective people will state: This is how I though it would play out.

[DavidByron]

Well it's not the first time this christonasti-bornagaini president has threatened a veto. I heard he does it all the time but he's all hat. I do recall he threatened the veto over the law banning torture.

But then I guess he "realised" he can just issue a signing statement that reinterprets the law and then ignore even his interpretation under some pseudo-constitutional war powers argument.

This whole deal is full of irony. As far as I can see Bush is right, although probably the only way the decision was made correctly is that he didn't know anything about the deal until afterwards.

Then of course Bush can never admit a "mistake" to save his life (or approval ratings in this case) so he digs his heals in over a decision he had zero investment in. Just because. And bizarrely the Democrats actually make an issue of it - despite the obvious racism.

So Bush gets burned for the first right decision he ever made. Even Republicans are lining up against him.

Meanwhile in the other corner ... I hate to bother y'all ... looks like your system of checks and balances just got flushed down the toilet.

As for the idea that the state shouldn't let foreign companies run the ports. Fine by me. I think the state should run everything. What's next? Can we nationalise all the airlines now? Just think! We have ARAB companies sending WMDs (aka airplanes) into US airspace every day. let's nationalise it all. It's not like any private company is going to be able to pick up on this deal.

I'm just a little surprised to see Republicans backing socialism, but I guess I'll take it.

[RL]

Our federal govt. has no business doing business with islamonazi wahabi terrorists, who are officially at war with the only truly democratic nation in the Middle East. Let this be an important lesson to the islamonazi wahabi terrorists; as long as you continue to be at war with and aggressively boycott the Jewish state, the American govt. will not conduct business with you. islamonazi-wahabi "ideas" have terrible, terrible consequences.

There would be no islamonazi-wahabi terrorism without adequate funding; the uae has been, and continues to be one of the primary financial-sponsors of international islamonazi-wahabi terrorism. Maybe this explains why so many islamic Iranian ayatollahs and mullahs have such vast sums of money ($ billions) in their (uae) banks.

[Huan]

The mistake was to give into the fear mongering of the MSM and the political exploitations of the Democrats. The deal should have been allowed to go through. Instead, Republicans jumped the shark.

Pitiful political play for short term appearance gains.