Feb. 22 (Bloomberg) -- President George W. Bush didn't know of the sale of six major U.S. port facilities to a Dubai company until after the deal was agreed to and federal approval was granted, his spokesman said. Treasury Secretary John Snow said he learned of it only in ``the last few days.''

Bush was made aware of the $6.8 billion sale of London-based Peninsular & Oriental Steam Navigation Co. to DP World, a state- owned business in the United Arab Emirates, in ``the last several days,'' White House spokesman Scott McClellan said. By that time, congressional opposition already was bubbling up.

``This didn't rise to the presidential level,'' McClellan said at the White House.

The president checked with his Cabinet secretaries to see if there were concerns and there were none, McClellan said. Bush yesterday defended the deal in the face of opposition from Democrats and Republicans and threatened to exercise his first veto on any legislation that would block the transfer.

Two of the president's key congressional allies, Senate Majority Leader Bill Frist and House Speaker Dennis Hastert, announced their opposition to the sale because of concerns that port security might be jeopardized. Frist vowed to push through legislation blocking it unless the administration reconsiders. Republican Governors George Pataki in New York and Bob Ehrlich in Maryland also expressed reservations. Congressional Democrats also are calling for the deal to be reviewed.

`Entirely Preventable'

The rare intra-party battle creates a political liability for Bush and an opportunity for Democrats that was ``entirely preventable,'' Republican political consultant Rich Galen said.

The controversy is ``another example of the White House not having the capacity to see over the horizon when it comes to the public-affairs piece of what they are doing,'' Galen said. ``Too few senators and congressmen knew anything about this program, and so they are upset about not being informed.''

Lawmakers learned last week that a panel of Bush's senior economic and national security advisers approved the deal. The panel, known as the Committee on Foreign Investment in the United States, routinely examines the sale of U.S.-based assets for potential security risks.

Snow, whose department chairs the panel, told reporters in Torrington, Connecticut that the transaction ``came to my attention over the course of the last few days, three or four days.''

`Should Have Consulted'

DP World would gain control of most operations at ports in New York, New Jersey, Philadelphia, Miami, Baltimore and New Orleans through the acquisition of P&O. The company plans to close the purchase by March 2, which would give lawmakers little time after they come back from a recess next week to block it.

McClellan today acknowledged that the administration erred in not informing lawmakers about details of the transaction.

``This is one where we probably should have consulted with, or briefed Congress on sooner,'' McClellan said.

The Treasury's assistant secretary for international affairs, Clay Lowery, said department officials intended to brief members of Congress on the transaction last week, only to have the companies announce the approval first. ``We probably should have gotten up there further in advance than we did,'' Lowery said.

The president ``hasn't had a conversation'' with Frist, McClellan said. To quell the political firestorm, the White House plans to brief lawmakers today and tomorrow, he said, without providing specifics.

``This is a principled decision,'' McClellan said. ``We shouldn't be holding a Middle Eastern company to a different standard than a British company.''

Rice Speaks Out

Secretary of State Condoleezza Rice, on the eve of a visit to the United Arab Emirates, echoed this thought.

``We shouldn't want to turn down a deal of this kind just because it happens to originate in the Middle East,'' Rice told reporters in Riyadh. She described the UAE as a ``stalwart partner'' in the war on terrorism and said the deal would serve U.S. commercial and security interests.

Republican Senator John Warner of Virginia said the armed services panel he chairs will hold a public briefing tomorrow with representatives from the departments and agencies involved in the approval ``to allow the relevant facts to be put on the record for the availability of all members'' of Congress. The Senate Banking and Commerce committees each scheduled a hearing March 2.

Warner, in a statement, cited the ``key role'' the United Arab Emirates has played in the war on terror and ``the importance of making fair and objective decisions in working with our allies.''

Democrats Offer Legislation

Democrats such as Senators Hillary Clinton of New York and Robert Menendez of New Jersey have proposed legislation to bar the acquisition. Senate Minority Leader Harry Reid said Frist must let the Senate act as soon as it returns next week.

``It is already clear this deal should not go forward, and I hope he will permit the Senate to act expeditiously,'' Reid, a Nevada Democrat, said yesterday.

Pennsylvania Republican Curt Weldon, a member of the House Homeland Security Committee, vowed Congress would prevail. ``If the president wants to veto this, go ahead -- we'll override the veto,'' Weldon said in an interview yesterday.

Bush, whose party seeks to retain control of Congress in this year's elections, may suffer politically no matter how the controversy is resolved. If he prevails, he will do so over key lawmakers in his own party who say the deal may undermine the country's readiness to forestall terrorism.

``This is totally inappropriate in the 9/11 world for a company coming out of a country which has had such strong al- Qaeda influence,'' House Homeland Security Committee Chairman Peter King, a New York Republican, said yesterday.

`Hypocrite'

If the deal fails, it could send the wrong signal to U.S. trading partners, even as Treasury officials travel the world trying to convince other nations to open up their capital markets.

Snow said the deal protects U.S. security interests and blocking it would have meant that investments from ``certain parts of the world'' aren't welcome in the U.S.

Cnooc Ltd., China's third-largest oil producer, in August withdrew an offer to buy U.S. oil producer Unocal Corp. for $18.5 billion, citing political opposition from U.S. lawmakers.

If congressional opposition kills the DP World deal, the U.S. ``looks like a hypocrite,'' said Gary Hufbauer, a researcher at the Institute for International Economics in Washington who was the Treasury's deputy assistant secretary for international trade from 1977 to 1979.

``The innuendo is that this Dubai company is a front for al- Qaeda, without any evidence,'' Hufbauer said in an interview. ``It suggests that a foreign company that wants to take over anything that's mildly delicate could be subject to this type of innuendo campaign.''

Precedents

Foreign ownership of port operations isn't unusual. At least five overseas-based companies already have operations on U.S. soil. One is the world's biggest cargo carrier, Maersk Line, based in Copenhagen. It is part of A.P. Moeller Maersk A/S. In addition, Nippon Yusen Kaisha, Japan's biggest shipping company, owns 20 U.S. cargo terminals.

The terminal operators use cranes to lift cargo on and off ships that sail the world laden with consumer goods such as clothing from Asia or beer from Europe. Trucks take the cargo to or from the docks.

DP World has operations in Australia, China, Hong Kong, Romania, Germany, Dominican Republic, Venezuela, Djibouti, India and Saudi Arabia, McClellan said yesterday.

U.S. officials stressed that the terminal operators aren't in charge of port security.

`Nothing Changes'

``Nothing changes with respect to security under the contract,'' Defense Secretary Donald Rumsfeld told a Pentagon news conference yesterday. ``The Coast Guard is in charge of security, not the corporation.''

Commander Jeff Carter, a Coast Guard spokesman, said the port operators must submit security plans for approval by the Guard, which also conducts inspections to make sure the firms follow through.

Jarrod Agen, a Homeland Security Department spokesman, said Customs and Border Protection agents would continue to examine some containers that flow through ports, and Immigration and Customs Enforcement agents would keep tracking tips on illegal aliens and counterfeit goods.

Hastert, of Illinois, and Frist, of Tennessee, said an acquisition involving a state-owned company requires extra scrutiny.

``We must not allow the possibility of compromising our national security due to lack of review or oversight by the federal government,'' Hastert wrote in a letter to Bush yesterday.

Sept. 11 Plotters

Two of the Sept. 11 hijackers were from the United Arab Emirates, and the plotters used the country to help funnel money to the operation.

The companies informed Treasury in November about the pending sale, and the foreign investment committee began an informal review immediately.

The committee is made up of 12 departments and agencies including Defense, Homeland Security, the White House National Security Council, Treasury and the Commerce Department. The Energy and Transportation departments were invited to join this review.

Treasury spokesman Tony Fratto said DP World addressed the security concerns raised by the committee. He declined to say what specific actions the company took to gain approval.

Secretive Process

The process is secretive. The committee doesn't announce when it's conducting a review or publicize its findings. The committee's review of the purchase of International Business Machines Corp.'s personal-computer business by China's Lenovo Group Ltd. was only disclosed by the companies earlier this year.

Weldon said the process leaves him ``shocked for a couple of reasons.''

``I'm shocked by the total lack of transparency and arrogance of the White House not to consult with Congress,'' he said.

To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.net; Jeff Bliss in Washington at jbliss@bloomberg.net

Last Updated: February 22, 2006 19:30 EST