White House Asked Dubai Ports to Pull Out

March 10, 2006 — -- The White House asked Dubai Ports World, a company owned by the United Arab Emirates, to give up its management stake in U.S. ports, to save President Bush from the politically difficult position of vetoing a key piece of legislation to protect America's ports, ABC News has learned.

When the company announced Thursday that it would sell its management stake in six U.S. ports, it was a stunning defeat for Bush, who had put his political capital on the line to back the deal, ABC News chief Washington correspondent George Stephanopoulos said.

"Certainly, it's the most significant break with the Republican leadership in the Congress this term," he said.

The Democrats -- suddenly feeling united -- insist the scuttled ports deal is proof that the White House is weakened and divided against its own party.

"They couldn't hold their forces on the other side," said Sen. Frank Lautenberg, D-N.J., "and this is a retreat under fire, make no mistake."

"[Capitol] Hill was leading the charge," Stephanopoulos said. "They've been telling the White House for three weeks, 'This deal is dead. We're going to override you.'"

With victory in hand, leading Republicans insist there are no hard feelings.

"In all fairness, I'm not going to be a Monday-morning quarterback," said Rep. Peter King, R-N.Y., chairman of the Homeland Security Committee. "It's all over now."

Sen. John Warner, R-Va., agreed.

"I think this incident is behind us, and we will go forward," he said.

A Complex Relationship

The defeat does lead one to question how much control the increasingly unpopular White House will have over Republicans in Congress during this election year. Stephanopoulos said he had been struck by how many Republican members of Congress had said they were holding the White House in contempt.

"They're saying they're arrogant, and they don't trust their competence anymore," he said.

The complex relationship between the president and the Republican members of Congress affects how effective they will be.

"The more they abandon the president, the more they weaken the president," Stephanopoulos said. "But, it also hurts their prospects in the midterm elections. They have debates coming up on immigration, the budget, Iraq."

"I think they want to be together with the president," he added, "but not at their own expense."

Political Storm

On Thursday, Dubai Ports World closed its $6.8 billion purchase of Peninsular & Oriental Steam Navigation Co., the British firm that runs important port operations in New York, New Jersey, Baltimore, New Orleans, Miami and Philadelphia through a U.S. subsidiary. It also plays a lesser role in dockside activities at 16 other American ports.

The takeover plan was disclosed last month, setting off a political firestorm in the United States even though the company's U.S. operations were only a small part of the global transaction. Dubai Ports valued its rival's American operations at less than 10 percent of the nearly $7 billion total purchase.

Republicans denounced the plan, furious that they had learned about it from news reports and not the White House. They cited concerns over a company run by a foreign government overseeing operations at U.S. ports already vulnerable to terrorist attacks.

Democrats also pledged to halt the takeover and clamored for a vote in the Senate. They sought to gain political advantage from the controversy by trying to narrow a polling gap with the GOP on issues of national security.

After the company's announcement Thursday, the Senate indefinitely postponed a vote on a Democratic move to block the deal.

Bush had defended the deal, calling the United Arab Emirates a strong ally in the war on terror and pledging to cast the first veto of his presidency if Congress voted to interfere.

Senate Republicans initially tried to fend off a vote, and the administration agreed to a 45-day review of the transaction. That strategy collapsed Wednesday with the 62-2 vote in the House Appropriations Committee to stop the sale. Republican leaders of Congress privately told the president the Senate would inevitably do the same, despite his threats to veto any legislation killing the deal.

The Associated Press contributed to this report.