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Last Updated: Thursday, 9 March 2006, 23:20 GMT
Q&A: US row over Dubai Ports
George W Bush watches reconstruction work being done in New Orleans
Mr Bush has given unqualified support to the deal
The 3.9bn ($6.8bn) sale of UK-based ports and shipping group P&O to Dubai Ports World (DPW) has raised security fears in the US.

In an effort to defuse the controversy surrounding the deal, DPW has now offered to "transfer" its US interests to a "United States entity".

The White House believes that offer should be enough to ease concerns of politicians trying to block United Arab Emirates-based DPW taking control over management at six key US ports.

Why is there such opposition to DPW taking control of the six ports?

Lawmakers say they are concerned about the security implications of the deal - which is unpopular with the public.

"We want to make sure that the security of our ports is in America's hands," Jerry Lewis, a California Republican, has said.

Opinion polls have shown an overwhelming majority of Americans think the White House is wrong to back the deal.

With an election due in November and the popularity of both the president and Congress low, some Republicans apparently fear that Democrats could use the deal against them.

Where does it leave DPW and, indeed, P&O?

P&O will be glad that the furore over the ports - at Baltimore, Miami, Newark, New Orleans, New York City and Philadelphia - is no longer their worry, but the concern of DPW.

The Peninsular and Oriental Steam Navigation Company has now been formally bought by the Dubai firm, which thus owns the assets of the UK-headquartered company, including the US ports.

P&O has been delisted from the London Stock Exchange and shareholders are set to be paid their portions of the 3.9bn ($6.8bn) deal.

For DPW, the White House is confident the transfer of its US operations should make the uproar surrounding the deal go away.

And according to reports, DPW also came under pressure from the government in Dubai to resolve the issue to protect the country's close ties with the US.

But DPW is no doubt somewhat bewildered by the vehemence of the opposition to its deal.

It says the deal covers terminals in 18 nations, and the US operations only represent a small part.

Furthermore, there is a precedent for a US-Dubai ports link-up.

DPW was formed in September when the Dubai Ports Authority joined with DPI Terminals.

In January 2005, DPI bought CSX World Terminals, an international port business of the CSX Corporation in the US.

What happens now?

DPW is widely expected to sell off its entire US operation - with critics of the deal demanding they be sold to a firm with no links to either DPW or the United Arab Emirates.

In 2005 P&O handled a total of 15 million 20ft containers worldwide, of which 2.4 million were handled in North America.

A large proportion of these were handled in Vancouver, Canada, which is not subject to US political decision-making.

Map of ports at issue in the DP World row

The US ports of Miami and New Orleans largely handled "bulk" items and not the containers. Bulk traffic produces less profit than container traffic, as competition is more intense.

DPW has worldwide rights and concessions to handle up to 33 million containers. So it could conceivably dispose of the US operations while still retaining a healthy operation in other parts of the globe.

One expert says: "These US figures are not really significant in the bigger picture. They could shed the US operations and still have lucrative trade around the world, including in the growing economies of China and India."

However, prospective buyers for DPW's US business will also be closely vetted by US politicians.

For example, the world's biggest independent port operator is Hutchison Port Holdings - a subsidiary of Hutchison Whampoa, whose interests include mobile phones.

Yet it is a Hong Kong-based firm, and no doubt many US politicians would baulk at the prospect of a Chinese firm - from a Communist state too - getting its hands on the ports.




SEE ALSO:
Congress sets up fight with Bush
09 Mar 06 |  Americas
Court of Appeal backs P&O's sale
06 Mar 06 |  Business
High Court clears P&O's takeover
02 Mar 06 |  Business
US Coast Guard warned about ports
28 Feb 06 |  Americas
Review agreed in P&O takeover bid
27 Feb 06 |  Americas
Arab firm to delay US ports deal
24 Feb 06 |  Americas


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