March 10, 2006

Goodbye Dubai

It looks as though DPW has given the President an "out" on this one. He won't have to follow through on his veto threat and - in an election year - Congressional Republicans can now claim "independence" from the White House, having asserted their will against a deal that was politically unpopular with their constituents. Effectively, the UAE company is pulling out from any involvement in U.S. ports. But wait. This seems a little too easy. Would DPW really just up and walk away from this investment?

Rich Galen has a theory that makes a heck of a lot of sense:

Yesterday the company issued a press release in which it said (according to an AP piece by Dave Espo and Andrew Taylor): "DP World will transfer fully the U.S. operations Â… to a United States entity."

Let us assume that the folks in Dubai didn't sit around drafting this language during morning coffee, waiting for the latest price of oil futures on the New York Mercantile Exchange.

Let us assume, rather, that hundreds of thousands (perhaps millions) of dollars worth of lawyers, lobbyists, former Senators and their former staffers, PR types, and the head guys from Dubai thought very, very carefully about this language.

Do you see the word "sell" in there?

Why use the term "transfer" instead of "sell," unless the drafters were being paid by the letter?

And to whom will they "sell" these assets? If there were an American firm interested in operating these terminals why didn't they join Dubai and Singapore in the bidding contest which had been going on since late September 2005?

Here's where Galen is going with all this: he believes that, at the end of the day, there will be a "U.S. entity" running the ports in question but that entity will be a new U.S. subsidiary of DPW that "would only be connected to Dubai via a checking account into which the profits would be put."

Although Rep. Peter King insists that such an entity have "no links to DP World", there are plenty of high-powered lawyers who can craft something that the deal's opponents could probably live with. So everybody wins, eh?

Not exactly. While DPW will be seen as the loser in this situation, the reality is that from an investment point of view what they would have is comparable to what they were going to have.

No, there are only two losers in the situation. The first is the relationship between the U.S. and the UAE. Hopefully, in the long run, this relationship won't be so adversely affected that we can still count on assistance from Dubai and other Arab States in the GWOT.

The other loser? As Galen observes, it's the Democrats "who are now left to sift through the wreckage of their glee to see if even a minor political point remains to be scored."

Posted by: Gary at 07:24 AM | No Comments | Add Comment
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