Dubai company moves to end storm over US ports deal

WASHINGTON, Mar 10 (Reuters) The state-owned Arab company Dubai Ports World pledged to transfer operation of six US port terminals to a US entity, a move the White House said should settle a political firestorm surrounding the deal. But the US Congress was skeptical.

Many lawmakers have demanded that the Dubai company be stopped from running the ports because of potential security risks, rebelling against President George W Bush, whose administration approved the company's involvement in January.

''It does provide a way forward and resolve the matter ...,'' White House spokesman Scott McClellan said of the company's announcement.

The statement by Dubai Ports World's chief operating officer, Edward Bilkey, said that the company had decided to ''transfer fully ... to a US entity'' the operation of North American ports terminals it had acquired from British-based P&O.

It was read out on the Senate floor by Virginia Republican John Warner. But Capitol Hill critics in both parties said they wanted to see the fine print before backing away from legislation to unwind the contract, noting the company had not said to whom it was selling, or when.

''To simply say that the US entity will be separate isn't enough. How will it be separate? How thick is the wall?'' demanded New York Democratic Sen Charles Schumer.

The company announcement is not clear enough, said Florida Republican Rep Ileana Ros-Lehtinen, chairwoman of the Middle East subcommittee of the House International Relations panel.

''Is the ports deal dead? Will the US entity be a mere shell company?'' she asked. ''Current congressional plans are to move forward with the appropriations language next week which kills the transaction. Just to make sure.'' One House Republican leadership aide said yesterday that because of the company's announcement, there could be a motion to strike the language reversing the deal in the House next week -- but noted that this would still require a vote.

In Dubai, sources close to the deal said the United Arab Emirates government had intervened to defuse the crisis that exploded in Washington last month after the deal became known.

''It is a political decision to ask Dubai Ports to defuse the situation. We have to help our friends. Our close ties with the United States are important,'' a UAE official told Reuters in Dubai on condition of anonymity.

The ports dispute, which played into American concerns about security since the September 11 attacks, proved a political hot potato for Bush's Republicans seven months before elections in which Democrats hope to regain control of Congress.

The Bush administration says the United Arab Emirates is an ally in its war on terrorism and has worked to close loopholes that allowed al Qaeda members to use the Gulf Arab state as a financial and logistical hub before the September 11 attacks.

US lawmakers opposed to the takeover have noted that two of the September 11 hijackers came from the UAE, that al Qaeda funding passed through UAE banks, and that a United Nations agency said disgraced Pakistani scientist Abdul Qadeer Khan used Dubai as the headquarters for his nuclear black market.

The administration had earlier sought to quell the outcry against the company by ordering a new review of the ports deal.

That review is still in place, the Treasury said on Thursday.

But the political protests continued.

Even after the company announcement yesterday, Senate Republican leaders pulled legislation from the floor rather than face a possible vote on halting the ports deal.

Democrats were not ready to let go of potential political gain from the ports deal.

''Today the plug was mercifully pulled on the ownership of US port operations by Dubai Ports World,'' said Sen John Kerry, a Massachusetts Democrat. ''It's been a case study in the Administration's incompetence and inattention to the fundamental issue of port security,'' he said.

US port management is highly fractionalized. While some private companies operating terminals are US corporations, many are non-US businesses that operate terminals worldwide or are affiliated with foreign flag steamship lines that carry cargo, the American Association of Port Authorities says.

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