Dubai backlash ‘will deter foreign investors’

A rejection by lawmakers of Dubai Ports World’s agreed acquisition of US container terminals would send a signal that foreign investments “from certain parts of the world aren’t welcome”, John Snow, the Treasury secretary, said on Wednesday.

The remarks underscored the tensions that erupted this week between the White House and congressional lawmakers across the political spectrum who have condemned on the grounds of national security the Bush administration’s decision to approve Dubai-owned DP World’s $6.8bn (€5.7bn, £3.9bn) takeover of P&O, the UK ports operator.

Washington insiders were left to guess on Wednesday whether the White House or some of the most prominent lawmakers in Congress, including top Republicans in the House and Senate, would be the first to compromise on the issue after President George W. Bush warned on Tuesday that he would veto any legislative effort to block the deal.

In the meantime, the United Arab Emirates is to launch a lobbying campaign on Capitol Hill amid fears the backlash could undermine discussions about a free trade agreement. Reem al-Hashimy, the UAE’s commercial attaché in Washington who is handling the free trade talks, admitted surprise at some of the allegations against the UAE.

DP World has been buying shares in P&O heavily this week as a show of confidence that the deal will not be derailed despite problems in Washington and the strong likelihood that the deal will face a series of local battles with port authorities. An agreement to complete the transaction is due to be approved by a London court on Monday.

The looming showdown in Washington prompted some business lobbyists to voice support for Mr Bush’s stance on the issue, emphasising that the US’s policy on foreign investments should not be politicised and that Congress’s backlash against the deal was ultimately grounded in prejudice against Arab companies.

The White House admitted to some mis-steps in its handling of the deal but continued to defend it. Several senators have threatened to propose legislation to block the transaction.

Some experts say that, despite the tough rhetoric, the White House might reach a compromise that would allow both sides to claim victory.

“I think the tide is turning on the deal. My sense is that they will be able to figure something out before Wednesday that allows the deal to go forward without legislation that will satisfy Congress,” said David Marchick, an attorney who is an expert on US reviews of foreign deals.

Reporting by Stephanie Kirchgaessner, Holly Yeager and Caroline Daniel in Washington and Robert Wright in London