Financial Times

Mass casualties in port deal fiasco
By Jim Lobe
Washington - The recent collapse of the deal to sell operations in six major US ports to a Dubai-owned company following a strident Congressional campaign against it threatens so many different important interests that it is difficult to make a full accounting.

President Bush's fast-waning political authority is the biggest casualty in what has been termed as "a debacle of the first order". But the US "war on terror" may also have suffered a major blow from what is widely perceived as a gratuitous slap in the face given to the United Arab Emirates (UAE), a generous host to scores of US warships - within a stone's throw of Iran - as well as a major oil and gas exporter, and chronic consumer of billions of dollars of advanced US-made weaponry.

"To win the war on terror, we have to strengthen our relationships with moderate Arab countries," he said. But those are hardly the only potential casualties of the ports affair.

Some analysts suggest that the deal's collapse will contribute mightily to a growing popular revolt both here and abroad against economic globalisation and may even tip the balance in favour of economic nationalists against internationalists and "free traders", who find themselves on the defensive in many Western countries.

Bush's political standing, according to opinion polls, has now taken yet another major blow, following last fall's fiascos over Hurricane Katrina, the aborted nomination of his personal attorney to the Supreme Court, and the continuing flow of bad news from Iraq.

Democrats were more than eager to attack the administration's approval of the deal on national security grounds. But the speed with which the vast majority of Republican lawmakers deserted the president confirmed that the White House's ability to enforce party discipline is no more.

Bush's swift surrender after the House vote and the fact that his chief political adviser, Karl Rove, was reportedly tasked with informing Dubai Ports World of the bad news underlined the frailty of his political authority.

That he was so badly beaten on a policy on which he had taken an unequivocal position raises major problems for foreign leaders who until now have generally ignored Congress, confident that its Republican leadership would push through whatever the White House desired.

Foreign leaders may have to reassess Washington's power relationships, however, national security policy-makers are worried that their job of maintaining strong ties with strategic allies like the UAE, as well as winning "hearts and minds" in the Islamic and Arab worlds, has been made more difficult.

That concern translates into the economic sphere. Policy-makers have expressed growing concern about the broader impact of the deal's collapse on inflows of foreign capital that keeps the US economy afloat.

That the deal's collapse came only six months after the cancellation of a multi-billion-dollar bid by a Chinese oil company for the California-based Unocal has compounded the concerns of both US businesses and the United States Treasury that they will find it increasingly difficult to attract the investment they need to keep interest rates low and corporate profits healthy.

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