Dubai Company Gives Up On Ports Deal

Move Comes As GOP Leaders Warn Bush That Congress Will Block Takeover

(CBS/AP) 
Retried Coast Guard Cmdr. Stephen Flynn told CBS News that while port security was a great national security concern, who operated the ports was a low priority.

"This commercial transaction is always something you want to look at closely," Flynn said. "But it ranks near the bottom of my security concerns because the other gaps are so huge."

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 (video).

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."

Sen. Charles Schumer, D-N.Y., a chief critic of the deal, reacted cautiously.

"This is obviously a promising development, but the devil's in the details," he said. "Those of us who feel strongly about this issue believe that the U.S. part of the British company should have no connection to the United Arab Emirates or DP World."