Dubai Backs Down, Are You Happy USA?

After weeks of anxiety, a showdown between President Bush and Congress, and politicians pandering to a fearful public, Dubai Ports World (DPW) has decided to abandon its plan to manage operations at six U.S. ports Thursday, and stated that it will transfer them to a United States entity.

Hours earlier, the House Appropriations Committee voted 62-2 to block the port deal -- the same committee that also blocked implementation of a new "open skies" treaty that would allow foreign airlines or investors to own more than 25% of the voting stock of a U.S. airline.

Interestingly enough, on the same day, the U.S. Commerce Department announced yet another record monthly trade deficit for January, putting the U.S. on course to break last year's record deficit of $724 billion.

Some politicians were undoubtedly pleased with the surprising news. Democratic Senator Charles Schumer said, "Those of us who feel strongly about this issue believe that the US part of the British company should have no connection to the United Arab Emirates or DP World." Republican Congressional Rep. Peter King, Chairman of the House Homeland Security Committee also said, "It would have to be an American company with no links to DP World, and that would be a tremendous victory and very gratifying."

Let's go back to June of last year. At that time, China's CNOOC and America's Chevron submitted competing bids to buy California-based Unocal, and its Asian oil reserves. While the all-cash $18.5 billion CNOOC bid was stronger than Chevron's $16 billion cash and stock offer, the Chinese company had to face regulatory hurdles and political resistance from Congress. Politicians protested that it threatened U.S. national security, and even some of them contend that Unocal held critical dual-use technologies, but this was highly doubtful by industry specialists. But with the publicity and the danger of a prolonged delay in the bid, CNOOC abandoned its purchase bid in August of that year. Essentially, it was a dead deal since members of Congress already took steps to delay CNOOC's offer by lengthening the necessary government review to 120 days for any Chinese takeover of a U.S. oil company.

Here's a piece of Chinese wisdom: "Beware of what you seek, for you might get it."

So thank you for succeeding in stymieing the acquisition of Unocal by CNOOC and preventing DB World from managing U.S. port operations. We have proven the fact that we have given another hypocritical example of ourselves. We have been consistently trying to convince other countries to open their oil and gas sectors to investment by US-based firms. How can those countries be expected to open their natural resources to US investment when we are blocking them from investing in ours? Same goes for port operations and management.

But for DB World to transfer its operations to a U.S. entity, which one? Shipping experts have stated that most of the other port terminals are run by foreign-owned companies, so the list is quite short. Strange enough, we are not making a fuss about them. We are only making an issue for Chinese and Middle Eastern companies. This is what we call "discrimination." But even if they are willing to accept more rules and review of their takeover plans, we would still not give them that final "yes" because of where they are located from.

Imagine if China Airlines made a hypothetical bid for bankrupt Delta Airlines, U.S. politicians would even protest that because it threatens "national security." Oh really? (Obviously, foreign airlines cannot even buy a U.S. airline anyway.)

For one columnist, he openly wonders if other foreign companies get the idea that the U.S. does not trust them enough to do business with them, and begin acting the way human beings do when they get poked in the eye, he states we can be looking at "8 percent mortgage rates, 6 percent unemployment, $4 gasoline, a $1.50 euro, and a 9000 Dow." People say we are a economic superpower, but we are also the most debtor nation on this planet.

Do we have the financial will to say "Stuff it!" to the Chinese? They are sitting on over $800 billion in foreign reserves, most of it in U.S. Treasury bonds.

For Dubai, it is one of our few trading partners with whom we run a surplus! Last year, it was about $7 billion. They import American cars, watch American TV shows, and they put their money in American banks. They also have a huge contract with Boeing. So that means...

U.S. - You can take that DB World deal and stuff it!

Dubai (UAE) - Fine! (calls up Boeing)

Boeing - Yes?

Dubai (UAE) - Thanks to your Congress, you just lost billions of sales of potential Boeing jets with GE engines. We are switching to Airbus.

Boeing - No!!!!!

News Links

BBC News - Dubai firm to "transfer" US ports

Breitbart.com - Dubai Firm Backs Out of U.S. Ports Deal

ChinaDaily - US lawmakers meddle in CNOOC's Unocal bid

Washington Post - Foreign Owners Overboard?

News Update - 14/03/2006

DP World has no immediate plans to sell its U.S. subsidiary's interests at Miami's seaport. Even if it plans to sell its Miami operations to quell the congressional furor over an Arab-owned company managing major U.S. ports, "that would probably take a while," wrote Robert Scavone, a vice president for DP World's U.S. subsidiary.

Breitbart.com - DP World: No Plan to Sell Miami Port Ops

The United Arab Emirates, which includes Dubai, has stated that it is looking at moving one-tenth of its dollar reserves into euros, while the governor of the Saudi Arabian central bank condemned the US move as "discrimination." Separately, Syria has responded to US sanctions against two of its banks by confirming plans to use euros instead of dollars for its external transactions. Could this create a momentum against the dollar? UAE only has $23bn in dollar reserves, but it is estimated by the IMF that the Gulf region itself will rack up a current account surplus of $275bn in 2006.

The next move is whether Emirates Airlines will choose to opt for Europe's Airbus A350 in a $7.5bn order for passenger jets instead of Boeing's 787 Dreamliner.

The Independent - Arab central banks move assets out of dollar