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It's hard to say this morning if a controversy over American port operations has ended, or just been deferred. We do know a Persian Gulf company, Dubai Ports World, took a stab at ending it. Lawmakers were on their way to blocking its acquisition of port operations when the company issued a short statement. Many people interpret that statement to mean the Persian Gulf company backed down and would sell its U.S. assets, but the statement doesn't quite say that, as NPR's Adam Davidson reports.
ADAM DAVIDSON, reporting:
Amid the controversy on Capitol Hill yesterday, an important event was nearly lost. Dubai Ports World announced that it's officially the owner of P&O Ports. That means they now the contracts to manage all those terminals in the U.S., and although there were plenty of reports yesterday that Dubai would sell, that's not clear from the statement released. Here's what the company said: DP World will transfer U.S. operations to a United States entity.
Mr. JESSE FRIED (Professor, University of California at Berkeley Law School): It's a model of ambiguity.
DAVIDSON: Jesse Fried teaches at U.C. Berkeley's law school. He says it's crucial to note that Dubai Ports used the word transfer. Chief Operating Officer Ted Bilkey, who issued the statement, never used the word sell or divest.
Jesse Fried.
Mr. FRIED: It looks like they're trying to give themselves maximum wiggle room.
DAVIDSON: He says that it's possible that Dubai Ports has every intention of selling its U.S. assets to some American company. That's what most in Congress want them to do, but the statement is so vague that it's not clear what the intention is.
Mr. FRIED: It could also mean that the company's just planning to set up a subsidiary that it owns 100 percent of, that's a U.S. corporation, and then transfer the operations to that subsidiary.
DAVIDSON: If Dubai Ports does set up a wholly owned U.S. subsidiary, it's unlikely that Congressional critics will be mollified. Now, even if the company is planning to sell off its newly acquired U.S. assets, that's not something that could happen immediately, says Joe Bonney, editor of The Journal of Commerce. Terminal operations are complex legal entities. Each one involves separate long-term leases with port authorities, separate contracts with multiple union locals. Many are joint operations with other companies. There are tens of millions of dollars in cranes and other equipment. Selling a terminal operation can take months, Bonney says. So even if Dubai Ports was ready to sell today, it couldn't, but it is sure to find eager buyers, says Bonney.
Mr. JOE BONNEY (Editor The Journal of Commerce): There's a shortage of container terminal space at U.S. ports and throughout the world.
DAVIDSON: Most U.S. terminals are quite profitable in these days of record high global trade. If Dubai Ports does put its six terminal operations up for sale, it's likely to find eager buyers, says Bonney. That brings up another problem: who can buy the ports? Congress may mandate that only U.S. owned companies are eligible, but only a handful of U.S. companies are big enough to buy Dubai Ports' U.S. assets, Bonney says. All of the biggest companies in the industry are overseas.
Mr. BONNIE: If you limit the number of potential buyers, it obviously would affect the price.
DAVIDSON: In its statement yesterday, Dubai Ports World said it would be willing to transfer its assets, but only if D P World will not suffer an economic loss. It is possible that Dubai Ports will show some flexibility on this issue and sell its U.S. assets at a loss, but that's not likely, says Rach de Yuntzie(ph) of the Eurasia Group.
Mr. Rach de Yuntzie (The Eurasia Group): Losing faith in Arab culture is a big deal.
DAVIDSON: Yuntzie says Amir Mohammad Al-Maktoum, the ruler of Dubai, most likely feels he has suffered painful humiliation at the hands of America, and in full view of his populace.
Mr. Yuntzie: Clearly, he cannot afford looking weak right now.
DAVIDSON: Yuntzie says this is no longer just a business deal, it's become an important geo-political struggle. No matter what happens, Yuntzie says the Amir is unlikely to let this dispute affect Dubai's military alliance with the U.S. But if Congress does force the company to give up its U.S. operations, Yuntzie says the Amir may punish the U.S. commercially. For example, Emirate Airlines is considering a multi-billion dollar purchase of Boeing aircraft. That sale is now more likely to go to Europe's Air Bus, Yuntzie says.
Adam Davidson, NPR News.
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