Dubai Firm Cleared to Buy Military Supplier

By Paul Blustein
Washington Post Staff Writer
Saturday, April 29, 2006

President Bush yesterday approved the takeover by a Dubai company of U.S. plants that make precision-engineered components for the Pentagon -- and this time, the deal stirred little opposition in Congress.

The approval allows Dubai International Capital LLC, which is owned by the Dubai government, to take control of nine plants in the United States, some of which supply the military with parts used in aircraft and tanks. The plants are owned by a British firm, Doncasters Group Ltd., which is being purchased by the Dubai company for $1.2 billion.

The move comes seven weeks after Dubai Ports World, another government-owned company, abandoned plans to take over terminal operations at several U.S. seaports because of an uproar over the security implications of handing such facilities to an Arab-owned concern. Dubai's planned takeover of Doncasters and its U.S. plants came to light during the ports controversy and helped fuel congressional demands for tighter restrictions on foreign investment in U.S. businesses. Dubai is one of seven states that make up the United Arab Emirates.

Lawmakers said the Doncasters deal underwent a lengthier, full investigation by the Committee on Foreign Investment in the United States (CFIUS), a secretive interagency panel charged with screening foreign takeovers for national security problems. The committee, which is chaired by the Treasury Department, includes representatives from the Pentagon, the Homeland Security Department and a number of other agencies.

"This investigation was a significant improvement over what happened before," said Rep. Peter T. King (R-N.Y.), chairman of the House Homeland Security Committee, in a statement.

Sen. Charles E. Schumer (D-N.Y.), who spearheaded opposition to the ports takeover, agreed, saying in a statement: "There are two differences between this deal and the Dubai Ports deal. First, this went through the process in a careful, thoughtful way; and second, this is a product, not a service, and the opportunity to infiltrate and sabotage is both more difficult and more detectable. Unless new information comes out, I will not oppose this deal."

Administration officials contend that the investigation of the ports deal was thorough. But they took care to put the Doncasters transaction through a longer series of formal hurdles, including a full 45-day review that requires submission of findings to the president for a final decision. They also briefed congressional leaders in advance.

As is common in CFIUS reviews of foreign purchases, the committee demanded certain conditions for approval. In a statement, presidential spokesman Scott McClellan said the panel carefully considered the fact that the plants owned by Doncasters are the Pentagon's sole source of supply for turbine-engine blades. "While the Committee did not find credible evidence" to suggest that the new Dubai owners might threaten national security, a subsidiary of the Dubai company "made contractual commitments to DOD to assure reliability of supply," the statement said.

Doncasters has nine plants in the United States, including two each in Connecticut and Alabama and one each in Massachusetts, South Carolina, Georgia, California and Oregon.

At least one lawmaker dissented. Rep. John Barrow, a Democrat whose Georgia district includes one of the plants, issued a statement saying, "Remember, these are the same people who are still arguing that the Dubai ports deal would've actually made us more secure."

Still unclear is the fate of another Dubai takeover that has gone almost unnoticed. In January, a Dubai government-owned firm bought Inchcape Shipping Services, a London-based company that provides ship agency services -- arranging the smooth arrival and departure of vessels -- at 200 ports around the world, including more than two dozen in the United States.

The transaction has aroused little alarm among port security experts, and a spokesman for the Dubai purchaser told The Washington Post last month that the company's U.S. lawyers contacted CFIUS and were informed that approval of the transaction was not required. But yesterday, Tony Fratto, Treasury's assistant secretary of public affairs, said, "Inchcape has been in discussions with CFIUS -- as they have announced they would."

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