DUBAI, March 10 (Reuters) Gulf Arabs reacted bitterly on Friday to Dubai's decision to relinquish control of six US ports, saying the political storm that forced the emirate's hand could provoke a backlash among regional investors.
State-owned Dubai Ports yesterday announced that it would transfer the ports to a US entity at the behest of Dubai's ruler to allay concerns in the United States that the deal posed a threat to American national security.
''Do you think we are happy this morning? The mood is black, very, very black,'' said a senior official who was involved in the Dubai Ports deal.
Since the September. 11 attacks, investors from the world's biggest oil-exporting region have feared their assets in the United States might be targeted for security reasons.
While the Dubai Ports row reinforced those fears among the Gulf's wealthy private investors, most analysts had said it would barely affect state-controlled petrodollar flows that are increasingly important to the US economy.
They, like the region's business community, had believed the Gulf's close diplomatic and military ties with Washington would prevail when push came to shove.
But that faith was shattered by the forced capitulation of a government-controlled company in the United Arab Emirates, a frequent port of call for American warships and a country described by President George W Bush as a staunch ally.
''It doesn't matter whether it is a private investor or a public investor. This will affect investment,'' said Robert Springborg, director of the London Middle East Institute of the School of Oriental and African Studies.
US critics of the deal note that two of the September. 11 hijackers came from the UAE and that the country once recognised the Taliban government in Afghanistan.
Those arguments have done nothing to address concerns in the region that Dubai Ports, which had gained control of U.S. ports by taking over British firm P&O, was singled out simply because it was an Arab company.
''They preach about a capitalist economy where everyone's free to do as they wish, but now they're just trying to come up with any excuse...to paint the country with terrorism,'' said Ahmed el-Leithy, a construction engineer in Dubai. ''Dubai is the most pro-Western place in the Arab region. It is just ridiculous to assume the UAE is of any kind of security concern to the United States,'' he added.
''I have always argued that this was not an anti-Arab issue but rather a matter of domestic (US) politics,'' said Ali Sadek, a former director of the Arab Monetary Fund.
''But the perception, whether on the street or the corridors of power, is going to be that it is.'' The sheer volume of cash at stake makes that perception a matter of critical economic importance.
Record oil prices are driving up the amount of Gulf money available for investment in foreign assets by about 130 billion dollars a year -- about 16 percent of the external funding needed to cover the US current account deficit.
The UAE economy minister warned last week that the Dubai Ports row could prompt other countries to divert funds away from the United States.
A lot of that money is channelled through bodies linked to Gulf governments, which have been diversifying their holdings across geographies and asset classes since the oil boom began.
US securities still account for the bulk of the identifiable investment from OPEC oil cartel states, but their share of investable OPEC funds has fallen compared to the last oil boom in the 1970s, according the Bank for International Settlements.
The Dubai ports row has given Gulf investors another reason to keep diversifying their holdings away from the United States, the destination of choice during the 1970s oil boom, analysts said.
''There already has been a drift away from US assets by Arab investors. You may well have a further drift,'' said Angus Blair of Dubai-based Mena Financial.
Springborg said the immediate impact would be felt in the mergers and acquisitions business, which drew more than 30 billion dollars of Gulf cash last year. Only about 6 per cent of that went to the United States, according to a Credit Suisse report.