US Coast Guard warned on Dubai ports deal

US Coast Guard warned on Dubai ports deal
By Stephanie Kirchgaessner in Washington
Published: February 28 2006 00:19 | Last updated: February 28 2006 00:19. Copyright by the Financial Times

The US Coast Guard warned before Dubai Ports World was given clearance to take over five US port terminals that “intelligence gaps” about the company made it impossible to assess whether the deal posed any threats to national security, according to a document released by the Senate on Monday.

The revelation raises new questions about why the Bush administration did not pursue an intensive, formal investigation before the transaction was approved.

A little-known statute requires all acquisitions of US assets by a foreign company to be investigated for 45 days if the group is state-controlled and the transaction “could affect” national security.

A Coast Guard official on Monday assured lawmakers at a Senate hearing that the concerns, raised in an undated Coast Guard memo, had been addressed by DP World by the time the committee that vets foreign takeovers of foreign transactions, or Cfius, approved the deal.

The assertion was challenged by Republican Senator Susan Collins and later by Senator Chuck Schumer of New York, who said the memo vindicated lawmakers’ opposition to the deal. “We need to know why Homeland Security objected and then backed off their objection, given this devastating report,” Mr Schumer said.

The memo said intelligence gaps included questions about the “security environment” at all of DP World’s terminal operations, and the backgrounds of all DP World personnel.

Most Republican lawmakers’ concerns about deal were assuaged - temporarily at least - over the weekend, after DP World offered to voluntarily submit its bid to further scrutiny.

But news that the Coast Guard had reservations about its ability to review the deal on available intelligence underscores the precarious position President George W Bush faces following his staunch defence of the deal last week. Under current law, Mr Bush will have the final say on whether the DP World transaction should go forward after the 45 day investigation is completed.