US port sale 'was truly flawed'

WASHINGTON - The US Coast Guard said questions about foreign influence, employees and operations made it impossible to assess the threat posed by a state-owned Dubai company's purchase of a firm that manages some terminal operations at six US seaports.

"There are many intelligence gaps concerning the potential" for assets owned by DP World or London-based Peninsular & Oriental Steam Navigation Co "to support terrorist operations", says a December intelligence assessment by the Coast Guard that was released at a hearing yesterday of the Senate Homeland Security and Governmental Affairs Committee.

The document wasn't given to a Bush Administration panel assessing the national security risks of the acquisition but its concerns "were addressed and resolved", said Clay Lowery, an assistant secretary at the Treasury Department.

Committee chairwoman Susan Collins was sceptical.

"This report suggests there were significant and troubling intelligence gaps," the Maine Republican told Lowery and Admiral Thomas Gilmour of the Coast Guard. "I don't see how you were able to close those gaps so quickly."

The administration panel approved the deal on January 23.

Gilmour said he'd have to discuss classified information to respond, and the committee went into closed session where he and other administration witnesses could more fully describe why they thought the DP deal didn't pose a threat.

After the 85-minute classified briefing, Collins said she was "more convinced than ever that the process" for reviewing the deal "was truly flawed".

Joseph Lieberman of Connecticut, the panel's senior Democrat, said that Administration officials in the closed briefing portrayed the Coast Guard document as an "early reaction to this deal".

"There were too many questions we asked that are not yet answered," Lieberman said.

DP World on Monday bowed to demands from US lawmakers for a 45-day review of its deal to take over port facilities at US cities including Miami, Baltimore, Philadelphia, New Orleans, New York and Newark, New Jersey. The container terminals are among the 29 DP World is acquiring as part of its purchase of P&O.

The acquisition has drawn criticism from US lawmakers amid concern that giving control of some port facilities to DP World will threaten national security. Dubai is one of seven sheikdoms that make up the United Arab Emirates, where two of the hijackers involved in the September 11, 2001, attacks came from. Bush has defended the sale, saying the UAE has been a vital ally in the war against terrorism.

US senators introduced legislation yesterday designed to ensure the review goes forward and that they have a role in deciding whether the deal should be approved.

DP World said it would ask a panel of Administration officials known as the Committee on Foreign Investment in the United States to re-examine the deal. The sale originally was approved by the committee after a 30-day examination in which representatives of Cabinet agencies and departments, including Homeland Security, concluded the deal satisfied US requirements.

The company also agreed to "separate" the US ports from the rest of the purchase, allowing P&O's North America-based executives to run the port operations. The review will begin tomorrow, the day DP World formally takes control of P&O, said the company's chief executive, Mohammed Sharaf.

Senator Carl Levin, a Michigan Democrat, challenged these assurances at yesterday's hearing.

"If this closing takes place, Dubai owns these facilities" and Bush would have to go to court to undo the deal, Levin said.

- BLOOMBERG