Bush unaware of Dubai ports deal before approval

President George W. Bush did not know about a deal to hand over operations at six major U.S. ports to an Arab company until after his administration had approved it, the White House said on Wednesday.

Surprised by a backlash from Bush's own Republican Party, the White House said it was a mistake not to explain to Congress the administration's approval of the sale decried by lawmakers as a risk to national security.

U.S. Treasury Secretary John Snow also told reporters he did not know of the decision even though he chairs the committee that approved the sale of British-based P&O to Dubai Ports World based in the United Arab Emirates.

White House spokesman Scott McClellan said Bush learned of the deal in the media and there were no objections during the review process that would have warranted it being brought to the president's attention.

When Bush found out about it, he confirmed that Cabinet secretaries stood by the decision to allow state-controlled Dubai Ports World to manage the ports, McClellan said.

U.S. officials say the UAE is a staunch ally in the war against terrorism and has worked hard to close the loopholes that allowed September 11 conspirators to use the Gulf state as an important logistics hub and conduit for funds.

The Dubai firm's planned takeover of operations in New York, New Jersey, Baltimore, Philadelphia, New Orleans and Miami has sparked a political firestorm as Bush struggles to boost his sagging public approval ratings.

Bush held a rare news conference aboard Air Force One on Tuesday to say the deal should go forward despite lawmakers' concerns. He threatened to veto any legislation to stop it.

FOREIGN POLICY IMPLICATIONS

Secretary of State Condoleezza Rice, who visits the United Arab Emirates on Thursday as part of a Middle East tour, said the country origin of a company should not matter in contracts as long as the firm passes U.S. vetting.

"The UAE is a good partner in the war on terrorism. It has been a stalwart partner and we believe that this is a port deal that serves the interests of the United States," she said in Saudi Arabia.

Shipping analysts and experts said U.S. security was not at risk from the deal, citing Dubai Ports World's strong track record and international treaties that set stringent requirements.

"We're a commercial enterprise of the government of Dubai. The government of Dubai has nothing to do with us," Edward Bilkey, chief operating officer of DP World told CNN.

"There's a complete misconception about security. Security comes under the demands of the Coast Guard, Homeland Security, customs, the local police forces. And we implement their instructions. We follow them to the letter," he said.

Shipping industry sources say it would not be the first time a foreign government-controlled company managed port terminals in the United States, pointing to APL subsidiary Eagle Marine Services on the West Coast. Its parent company is majority owned by Singapore's government.

The political tug-of-war spread to the White House nomination of David Sanborn, one of several Americans on Dubai Ports World's senior management team, to head the U.S. Maritime Administration.

In his new job Sanborn would have oversight of his former employer, a possible conflict of interest, said Florida Democratic Sen. Bill Nelson (news, bio, voting record), who plans to block Sanborn's nomination until more hearings are held.

Treasury Secretary Snow said he had no knowledge that the company he once headed, CSX Corp., had sold its global port assets to Dubai Ports World for $1.15 billion in 2004 -- the year after Snow left to join the administration.

Sen. Edward Kennedy (news, bio, voting record), a Massachusetts Democrat, urged Bush to work with Congress rather than threaten it with a veto of any legislation to block the deal.

The panel headed by Senate Armed Services Committee Chairman John Warner, a Virginia Republican, planned to hear testimony on Thursday from officials involved in the decision to approve the deal.

The Senate Banking Committee and Senate Commerce Committee planned to hold separate hearings next week on the ports deal.

The United States is in the process of negotiating a free trade agreement with the UAE -- its third largest trading partner in the Middle East after Israel and Saudi Arabia.

(Additional reporting by Caroline Drees, Steve Holland, Susan Cornwell, Glenn Somerville, and Saul Hudson)