Posted on 03/10/2006 9:18:02 AM PST by Dark Skies
DUBAI, United Arab Emirates - Gulf investors, feeling scorched by what they see as an anti-Arab backlash in the U.S. Congress, will likely be wary of high-profile investments in the United States after the ports controversy with a Dubai company.
Analysts said Friday, however, that with Gulf nations awash in cash from oil profits, the United States remains a tempting market to invest. So instead of retreating, over the longer term, Arab investors and governments may campaign to shore up their image among Americans to ensure their money is welcome.
President Bush said Friday he was worried over the message the fallout of the ports controversy will send to the Arab world. On Thursday, Dubai-based DP World announced that it would give up management of six U.S. ports after an outcry in Congress over security.
In Dubai and elsewhere in the Gulf, the controversy was largely seen as reflecting an anti-Arab bias. DP World's concession was likely to solidify that belief.
"It's a sobering moment," said Eddie O'Sullivan, Dubai-based editorial director of the Middle East Economic Digest. "People are going to have to be much more careful. There's a fear they (members of Congress) may move on to other targets in the Arab world. If it happened once it can happen again."
Investors and businesses in UAE, Kuwait, Qatar and Saudi Arabia reviewing portfolios for U.S. holdings that could spark a similar uproar in Congress, O'Sullivan said.
"I'm sure they will be reviewing their portfolios. Most of them are in dollar-denominated assets. They'll want to see how vulnerable it is to the U.S. Congress," O'Sullivan said. "It'll be more difficult to finalize an investment proposal that involves an American bank or an American asset."
A short-term backlash could follow: Perhaps a government-owned company will favor European or Asian suppliers over American ones in the future.
Few observers believe it will torpedo recent orders by two UAE airlines of Boeing passenger jets. But Chicago-based Boeing Co. may have to look outside the Gulf for future deals, said Youssef M. Ibrahim, managing director of Dubai-based risk consultancy Strategic Energy Investment Group.
"The next deal they will do with Airbus," the European aircraft consortium, Ibrahim said. "Dubai's ability to react is constrained. You can't punish America much if you are so small."
Last year, Dubai companies invested $5.5 billion in the West, much of that in the United States. In the next five years, the six Gulf countries will have a half-trillion dollars in assets to invest.
They may be more disposed to look to Europe or Asia for investment now - but in the end, the amount of cash is so huge that only U.S. assets can soak it up, O'Sullivan said.
"The United States represents 50 percent of the world's economic market, 50 percent of the world's consumption and 50 percent of the assets in which you can put money," Ibrahim said. "At the end of the day, there aren't too many places where you can invest that kind of cash overflow."
The Emirates is unlikely to retaliate strongly for the slight, for instance by blocking the U.S. Navy and Air Force access to critical bases here, a prospect that has worried top U.S. military leaders.
Governments of other cash-rich Gulf countries like Kuwait, Qatar and Saudi Arabia will be loath to ruffle relations with the United States, analysts said.
Shehab Gergash, chief executive of Al-Daman, a Dubai-based investment bank, said he had seen no drop in investor interest in American products or securities.
"Time will tell whether it has any effect" on Arab investment in the States or Arab purchases of U.S. goods, Gergash said.
Many here blame the controversy on American politicians for playing to a deepening anti-Arab bias in the United States. Dubai-based Gulf News said U.S. Democrats were trying to "score political points" against the Bush administration on national security by ignoring the facts of the case.
"It is deemed better to jump on the bandwagon of anti-Arab, anti-Middle East, anti-Muslim tirade that has been popular since the 9/11 attacks," the paper's editorial page said Friday.
Ibrahim said the UAE may move to boost its image among Americans who fear closer ties with the Middle East. It may embark on opinion-shaping ventures that mimic Israel's deft public relations maneuvers: hosting visits by members of Congress, business leaders and chiefs of unions like the Teamsters, which opposed the deal, Ibrahim said.
"They should've invited these people here and shown them around, so they had friends who would defend them instead of attacking them without knowing anything about Dubai," Ibrahim said.
Our "friends" and "allies" have been telling us to "F" ourselves for decades.
As to blowback? Two words: Pearl Harbor. Any economic blowback will be cast, in my eyes, as similar to Pearl Harbor (in an economic sense). You can bet that millions of Americans in flyover country will have a similar reaction. Middle Eastern oil states would rue the day they set this in motion.
why do they insist on wanting to buy critical infrastructure and defense related companies? why can't they buy hotels, casinos, or any of a thousand other things in the US.
Excellent point.
I am shocked that the UAE and the adminstration and the investments bankers and all parties involved didn't conclude that this deal, however fine it may have been operationally and financially, might have a huge PR problem.
When the fox tries to buy access to the henhouse, the chickens get nervous.
Maybe they -- like me -- intially had some questions about the potential PR problem when the deal was first announced, but had those concerns alleviated when "the PR problem" didn't materialize.
Most people seem to forget that this deal was first announced in public more than two months before the PR nightmare materialized here in ths U.S. When the DPW acquisition of P&O Ports was announced in late November of 2005 and there was no adverse reaction to it from elected officials and other interested parties in the U.S. in December, January, and during the first two weeks of February, there was no reason for anyone to suspect that it would suddenly become a major problem in mid-February.
The biggest mistake the UAE and Bush administration made in this debacle was that they grossly underestimated the abject ignorance and stupidity of people of Chuck Schumer, Peter King, Robert Menendez, and a whole host of people in the media with big mouths and small minds.
Most people seem to forget that this deal was first announced in public more than two months before the PR nightmare materialized here in ths U.S. When the DPW acquisition of P&O Ports was announced in late November of 2005 and there was no adverse reaction to it from elected officials and other interested parties in the U.S. in December, January, and during the first two weeks of February, there was no reason for anyone to suspect that it would suddenly become a major problem in mid-February.
Apparently it took the public time to wake up to the transaction. I follow the news very carefully right here on FR and elsewhere, and I didn't notice it in December. A google search shows the first link regarding this deal was February 8th of 2006
And regarding the PR issue, the deal had an odour. With the right sales job, it mightn't have been a problem.
The idiot democrats simply stepped into a vacuum created by the deal planners when they (and all officials who successively put their stamp of approval on it) failed to visualize how the deal might look from a distance.
Ultimately, it isn't the deal itself that is so troubling as it is the stupidity of all parties surrounding it.
I wonder what percentage hit to GDP would cause these isolationists to start worrying?
The job of the Arab behind the counter of the local gas station is "crucial to security" then too.
If I were Dubai, I'd buy the Airbus out of pure spite
But, these were the same possibilities we were warning about. The trade talks DID get postponed, you know that, right?
Loading and unloading sealed containers, and disposing of them according to instructions by U.S. Customs. Also, reapiring and storing empty containers. MUCH less involved in security than the ship bringing the stuff into the harbor.
Hiring personnel? Within the constraints of Longshoremen contracts, to do stevedore services. If you're going to ban that trivial of an operation, then we should ban civilians within sight of any port.
I agree with you on the economy part - but a lot of stink is being made about the Chinese port terminal operations now too - this is just the beginning. Seriously, it could lead to "ZERO foreign" ownership of quite a bit before it ends.
Yep, along with Sukhoi or MIG figher planes.
Gas stations?
I doubt it, this issue is over and they will move on. The Commies won't be kicked out.
Wait a second! Our country tells them they can't buys American assets, and then if they don't, we are going to claim that is some kind of SNEAK ATTACK on us?! What are you smoking?
I know you are probably joshing but for those that don't know otherwise...deal makers don't make emotional decisions.
I don't share your optimism: http://www.freerepublic.com/focus/f-news/1594128/posts
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