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| Dubai Ports and the future of International Finance |
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For its part, the Bush administration was largely unprepared for the scale of opposition to the deal. At first, there was denial that Bush was aware of the details of the deal. Eventually, however, he was forced to try and defend its legitimacy. President Bush stated that, “It would send a terrible signal to friends and allies not to let the deal go through.” The administration thereafter had to scramble hurriedly to persuade senators that the deal did not represent a security risk and that cancelling it would deal a serious blow to America’s prestige as a free-trade champion. Other commentators shared Bush’s concern about the impact of any block on America’s prestige as a champion of free trade, not to mention the implications for foreign investment.
DP World hired a range of lobbyists and publicists to defend its cause and reassure congressmen and the media that it ownership of the ports’ contracts presented no security risks. However, their efforts proved unsuccessful, because on March 9th the House of Representatives voted 62-2 to block the deal, despite President Bush threatening to veto any such legislation. The following day DP World defused the crisis (and saved Bush from vetoing legislation for the first time) by offering to hire a US company as an intermediary in the management of the ports. At the time of going to press however, the company has offered no further details on how it will undertake this process.
The strength of opposition to the deal was of course widely reported in the Arab world and will no doubt add to the belief that America’s fear and disdain for Arabs and Muslims is far more deep-rooted than concerned politicians on both sides would like to admit. The outcome of the controversy will provide further discouragement for Arab and Muslim investors and visitors to the United States, which could have a significant impact on the American economy. However, rather than prompting a withdrawal of Arab investments, these events will only accelerate an ongoing process of disengagement.
In the aftermath of the 9/11 attacks, already negative attitudes towards Arabs worsened considerably, making living or visiting the US a more uncomfortable experience for Arabs and Muslims. Suspicion that Arab governments - especially Saudi Arabia - were involved in the attacks persists until now. Shortly after 9/11, allegations surfaced accusing the wife of Prince Bandar bin Sultan, Saudi ambassador to the United States from 1983-2005, of providing funds to two of the 19 hijackers. In addition, many Islamic charities came under suspicion of providing funds to Al-Qaeda and were subsequently closed down as a result.
This hostile climate culminated in some families of victims of the 9/11 attacks filing a multi-trillion dollar lawsuit against those they saw as responsible for funding Al-Qaeda. The lawsuit named the government of Sudan, members of the Saudi royal family, 7 international banks and 8 Islamic charities. This put Arab investments in the United States at risk of seizure, or at least of being frozen during court proceedings. At the time, Gulf investments in the United States had an estimated value of around $600-800bn.
As soon as the lawsuit was filed, Arab investors concerned at the potential loss of their investments began pulling their funds out of US markets. The main beneficiaries of this pullout have been the financial markets of the Gulf region, as the returning funds have been used to fund a huge number of new projects. In Dubai itself, the massive expansion of infrastructure projects in the leisure industry has been led by the ruling family, but much of the finance involved is a result of the extra funds available in the region for private investment. Major projects are underway across the region, which is awash with funds due to high oil and gas prices.
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