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Thursday, February 23, 2006 - Page updated at 09:10 AM


White House says Bush learned of ports deal after backlash began

WASHINGTON — President Bush didn't know about the deal to allow a state-owned United Arab Emirates company to manage terminals at six major U.S. ports until after his administration had approved it, White House officials said Wednesday.

The White House also acknowledged that it made a mistake in not briefing Congress about the pending transaction, igniting a bipartisan firestorm on Capitol Hill and among governors of some affected states.

In an attempt to defuse the controversy, Bush has instructed aides to brief members of Congress on Dubai Ports World, its operations and the intelligence community's findings that the firm poses no risk to national security. The briefings began Wednesday.

Senate Majority Leader Bill Frist, R-Tenn., and House Speaker Dennis Hastert, R-Ill., called Tuesday for Bush to freeze the deal until it's reviewed thoroughly, and Frist promised legislation to achieve that if the president won't. Bush threatened to veto such legislation, and the White House reaffirmed his threat Wednesday.

The deal is a planned $6.8 billion acquisition by Dubai Ports World, the UAE firm, of Peninsular and Oriental Steam Navigation, a British firm that has been managing terminals at the ports of Miami; Philadelphia; New York; Newark, N.J.; Baltimore and New Orleans.

Opponents say they fear the deal could compromise security, noting that two of the Sept. 11, 2001, hijackers had used the UAE as a base and al-Qaida laundered money through the country's banking system.

The U.S. government reviews business transactions with national-security implications and decided after a 23-day review by midlevel officials that Dubai Ports World posed no threat. White House Press Secretary Scott McClellan said Bush learned about the sale in recent days, after it had been widely reported.

In seeking to assuage critics, administration officials noted that the local or state ports authorities and the U.S. Coast Guard would be responsible for security at the six ports, not Dubai Ports World, which would be responsible for running terminal facilities and loading and unloading ships and storing the containers they transport.

Bush maintains that the UAE is a staunch ally in the war on terrorism, that Dubai Ports World has followed all the rules and that to block it would send a message that the United States welcomes British investment but not Arab investment.

While defending the deal, McClellan acknowledged the president didn't know his administration's interagency task force had approved it until the media began reporting the growing political reaction to it last week. Bush wasn't informed earlier because the interagency review found nothing to raise it to the presidential level, McClellan said.

The Committee on Foreign Investment in the United States is a 12-agency panel that includes the CIA and departments of State, Defense and Homeland Security, among others, and is chaired by the Treasury Department.

It's charged with reviewing foreign purchases of U.S.-based assets that might compromise national security. For the Dubai Ports World transaction, two additional agencies — the Department of Transportation and the Energy Department — joined the panel.

"They also look at the intelligence; they ask for intelligence advice from the intelligence services about is there a threat from this transaction, are there vulnerabilities of this transaction," Clay Lowery, the Treasury Department's assistant secretary for International Affairs, said Tuesday.

Administration officials did not consider the sale of port-terminal management to a Middle Eastern company dangerous or potentially controversial, White House aides said.

Foreign-owned companies, including a Chinese operation, have controlled terminals at various U.S. ports for years — and lawmakers have rarely complained. The White House said intelligence officials reviewed the sale and raised no concerns.

In a private briefing for House aides late Wednesday, administration officials from the departments of State, Defense, Treasury and Homeland Security said that the committee met once during a 23-day review of the sale and that the few objections raised were quickly addressed.

A Homeland Security official, for instance, argued successfully that the UAE company should be required to open its books without the threat of subpoena, participants said. Dubai Ports World agreed.

Administration officials said they were trying to get a copy of that agreement to provide to lawmakers.

In September, the Government Accountability Office, a nonpartisan watchdog agency of Congress, faulted the committee as judging too hastily. It also questioned whether the panel should expand its definition of national security.

Republican lawmakers have been flooded with phone calls and letters from constituents encouraging them to fight Bush over the ports deal, even at the expense of GOP unity on combating terrorism, viewed as the party's best political issue.

As a result, Bush and Republicans are divided over a national-security issue as never before and bracing for a possible showdown that could either force Bush to delay the sale or veto a Republican bill against it, congressional and White House officials said.

With the president's approval ratings mired at about 40 percent, some Republican lawmakers who face tough re-election bids in November have been looking for ways to distance themselves from Bush without appearing soft on terrorism.

The president, who once enjoyed near-unanimous support from GOP allies on Capitol Hill, has seen a steady rise in Republican criticism over Iraq, Iran, warrantless domestic spying and now the ports deal.

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