Economy — 06 July 2006

In the aftermath of the Dubai ports controversy, more has been affected than the collapse of the deal. The deal has had a great impact on perceptions of America in the Arab world, and it will potentially have a great impact on international financial markets and political and economic interaction between the west and the Islamic world, especially the Gulf. Now that the dust has settled, we can examine some of the effects of these events, while considering the changing circumstances in the Islamic world.

The controversy that erupted this February unravelled a deal that, by the standards of the American globalised economy, should have been a routine affair. The whole controversy was merely the by-product of a deal made in London, a classic outcome of the borderless world of international capitalism. Dubai Ports World is a ports management and shipping company that is owned by the ruling family of Dubai, currently headed by Sheikh Mohammed bin Rashid Al Maktoum. The company represents part of Dubai’s strategy to develop as an economic powerhouse in the tourism and shipping fields. In September 2005, DP World began takeover talks with British shipping company P&O and subsequently won a bidding war with Singaporean rival PSA International when P&O shareholders voted in favour of its £3.9bn ($6.8bn) offer.

American objections stemmed from the fact that P&O owned management contracts for over twenty US seaports, including Baltimore, Miami, New Jersey, New Orleans, New York, and Philadelphia. DP World managed to get US government approval for the transfer of leases so that the deal was able to proceed. However a Florida-based firm which had dealings with P&O objected to becoming a partner to DP World and approached members of Congress requesting they block the deal.

They received strong support from New York Senator Chuck Schumer, who announced his opposition to the deal in a press conference. Other senior Democrats were eager to step into the fray and voice their opposition. It was an opportunity too good for them to miss: chances to out-flank Bush on security have been rare, the chance to cash in on anti-Arab xenophobia too precious. They condemned what they claimed was a negligent and complacent attitude on the part of the Bush administration, placing control of the ports in the hands of a country which once had diplomatic relations with the Taliban.

What compounded the controversy however was that senior Republicans joined in the condemnation, such as Dennis Hastert and Bill Frist, who are normally among the Bush administration’s most dependable supporters. This led to a raft of bills being proposed in the Senate aimed at blocking the deal, with some senators even proposing laws that would block any foreign ownership of “critical infrastructure”.

Republican legislators had similar motivations to the Democrats in voicing their opposition so vocally. President Bush is suffering historically low approval ratings, and with mid-term elections approaching this autumn, Republican congressmen have been keen to prove their independence from the Administration to protect their seats. The ports issue therefore gave them the chance to maintain credibility on security issues, while disassociating themselves from the White House.

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