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  The recent Dubai Ports World debacle was a slap in the face for Dubai, which behaved with exemplary propriety and dignity throughout. Indeed, if the government-owned company hadn't agreed to sell-on the management of six U.S. ports to sanctioned buyers, the US. President, who initially championed the takeover, could have been faced with a major political crisis.

  There is no doubt that America's rejection of a Dubai-owned company to manage its ports was based on sheer ignorance and bigotry since US intelligence agencies were said to have heartily backed the deal and it was blessed by the Committee for Foreign Investment in the United States.

  Furthermore, if Dubai Ports World was such a security risk then why is it entrusted with the US fleet overseas?

  Ordinary American people only had to hear the word 'Arab' to freak out with knee jerk emotionalism over 9-11.

  American newspapers couldn't wait to get in on the act with columnists reminding their readers that some of the funds used by the 9-11 hijackers at one time passed through UAE banks, conveniently forgetting that the country is an epicenter for regional banking.

  Some critics blasted the deal under the pretext that Dubai Ports World is government-owned ignoring the fact that several US ports are managed by companies owned by the government of Singapore.

  Politicians eager to exploit their rivals gleefully jumped on the deal as a way to erode George Bush's personal credibility and to capitalize on the popular anti-Arab mood.

  Republican Senator Lindsey Graham told Fox News "this is no time to outsource major port security to a foreign-based company," and that "most Americans are scratching their heads wondering, 'Why this company, from this region, now?"

  The furore may have died down now but scars still remain and it's foreseeable that there may be more such contretemps between Dubai and the US authorities in the future. 

  Editorial Director of the Middle East Economic Digest told the Associated Press: "It's a sobering moment. People are going to have to be much more careful. There is a fear they (members of Congress) may move on to other targets in the Arab world. If it happened once it can happen again." It already might be.

  According to a report in the Washington Post dated March 7 "another Dubai acquisition is drawing Bush administration scrutiny because of the national security risks – this time of plants in Georgia and Connecticut that make precision components used in engines for military aircraft and tanks."

  The article points out that due to the burgeoning US trade deficit foreign capital is needed more than ever, yet, foreign money from places like Dubai "trigger visceral reactions among Americans seared by memories of the September 11 attacks."

  The usual suspects in the US Congress have also expressed concern over Dubai International Capital's purchase of a private British aerospace manufacturer Doncasters Group Limited, which works on top secret US weapons programs.  This new outcry has led to the takeover coming under scrutiny by the Bush administration, which is due to present a report before US lawmakers.

  A Power and Interest News Report dated April 19 comments thus: "While Dubai has ostensibly looked past the criticisms raised in the failed ports deal, a similar outcome in the current matter could well scare away foreign investors, Arabs, and otherwise, and signal that the United States is not necessarily open for business".

  For its part Dubai has been muted with its reaction, although the UAE economy minister Sheikh Lubna Al-Qassimi told the Financial Times "There are other countries that are competing for our money" warning the US would be less attractive in terms of investments if politics were allowed to interfere.

  In March, talks on a Free Trade Agreement between the UAE and the US were postponed with both sides refusing to comment as to whether the postponement was due to the Dubai Ports World affair.

  However, the Governor of the UAE Central Bank Sultan bin Nasser Al-Suweidi was more forthcoming, saying the move by US lawmakers to block the takeover could impact the free trade pact. "It is something that doesn't reflect well," he said.

  Some members of Congress are using security concerns to erect barriers to free trade and propose a halt to negotiations with the UAE.  A voice of reason was Rob Portman, a US Trade Representative, who said "the opportunity to promote economic freedom in the UAE through free markets and free trade should not be sacrificed in the current debate on the port deal".

  Nevertheless, US spokespersons say that they want the UAE-US Free Trade Agreement to be finalized before the year end.

  In the meantime, Arab banks have indicated their displeasure with US attitudes to Dubai by seeking to replace Dollar reserves with Euros.

  The UAE Central Bank announced that it was considering thus converting 10 per cent of its reserves. "They (US administration) are contravening their own principles," said Al Suweidi, warning, "investors are going to take this into consideration and will look at investment opportunities through new binoculars".

  Similarly outraged was Hamad Saud Al-Sayyari the Governor of the Saudi Arabian Monetary Authority. "Is it protectionism or discrimination?" he asked of the Dubai Ports fiasco. "Is it okay for US companies to buy everywhere but it is not okay for other companies to buy in the US?

  The Commercial Bank of Syria has already has already exchanged Dollar devise for Euros after calls from the White House urging US banks to quit operations as correspondent banks for Syrian financial institutions using money-launder concerns as a pretext.

  Interestingly Russia and Sweden, for their own reasons, have swapped Dollar reserves for Euros, which caused a weakening in the greenback.

  At the same time, Iran, which is coming under increasing pressure from the US over its alleged nuclear ambitions, is set to open a regional oil bourse that will trade in Euros and threaten the hegemony of the petrodollar.

  Mid-East banks with branches in the US are particularly vulnerable to the political climate. Currently, the Arab Bank, whose head office is in Jordan, is one of three banks being sued by families of American victims of suicide bombers, killed while on vacation in Israel. The Arab Bank, say the litigants, has channeled money to Hamas, an accusation that led to the bank's closure of Hamas accounts.

  At the time of writing, the only bank willing to accept donations for the Hamas-led Palestinian National Authority is an Egyptian bank – Misr International Bank, which goes to prove just how much influence the US has on regional banking practices.

  Post 9-11 Arab-owned deposits in the US were at risk when the families of 600 victims of the attacks took out a lawsuit against members of the Saudi royal family for US$1 trillion, as well as against seven Arab banks, Islamic charities and government companies.

  Many banks in the region are nervous about direct investment in the US, especially those that are wholly or in part owned by countries in the Bush administration's line of fire, fearing that US assets could be frozen or even confiscated in the event of conflict.

  This fear is real. In March 2003, the US government seized Iraqi assets and vested billions of Iraq's money in the US Treasury. Another US$ 3.7 billion was frozen by US allies.

  With oil prices over the US$ 70 dollar per barrel benchmark, the region is awash with oil revenues which need a fertile home. Traditionally this has been the US, which held up to 50 per cent of all Arab investment, but given the current hostile climate towards Arabs, the question many are asking is this: which countries are viable alternatives?

  According to the Russian-Arab Business Council, Saudi Arabia withdrew US$ 200 billion from the US in 2004, the UAE US$ 2 billion and Qatar US$ 2.7 billion. Most of this has been placed in European banks. The problem is that Europe is politically affiliated with the US, often acting in tandem with America during a crisis.

  Japan and Switzerland are perceived as safe havens but Japan's financial system is loaded with red tape and interest rates negligible, while Switzerland places security of deposits over investor gains.

  There is a belief that Asia is about to receive a hefty flow of funds from the Middle East, which some analysts put at several billion dollars. India, China, Singapore and Malaysia, in particular, are positioning for what they hope will be a deluge.

  According to an article titled "Kicking the Oil Habit" in the Global Finance magazine, Arab investment abroad is being made "in the United States, Europe and Asia and include US Treasuries as well as real estate in Paris, London and New York.

  The article quotes Arif Naqvi, the Executive Vice Chairman and CEO of Dubai-based Abraaj Capital as saying, "The paradigm is shifting and an opportunity is being created in emerging markets." Naqvi suggests that Arab investors, who formerly invested in petrodollars or T-Bills, have a new found confidence in their own region.

  "I don't think it’s a temporary phenomenon," he says. "There is a lot of liquidity that is driven in part by high oil prices and the strong performance of stock markets (despite the recent market blip), but it is also driven by the fact that Arab investors have begun to realize it is easier to invest closer to home."

  It is also true to say that Arab countries often offer attractive returns on investments and, sometimes rock hard guarantees that aren't available in the West.

  Sadly, the low level of intra-Arab investment is partly due to the lack of trust between various Arab countries and the way that laws, rules and regulations that govern finance are often changed at the drop of a hat. Saudi Arabia is at present the largest Arab recipient of foreign investment.

  An article by the former editor of Al-Ahram Weekly titled "An Absence of Will" suggests Arabs "should look to our neighbors north of the Mediterranean. They have much to teach us: they have after all, made the transition from erstwhile enemies that fought two world wars to an unprecedented degree of economic cooperation. Within half a century those countries mended their fences, launched a common market and a common currency and began to expand their scope of cooperation to the realms of foreign policy and security."

  In an ideal world, the bulk of Arab money should stay firmly at home. This would not only benefit the region financially but would also alleviate ideological concerns. For instance, Saudi Arabia alone has more than US$ 1 trillion invested in the US; a country that uses its wealth on weapons with which to invade and occupy Muslim nations and which supports Israeli aggression and expansion to the detriment of the Palestinians.

  On an individual level, the Arab love affair with the US has certainly waned. The Wall Street Journal tells us that far fewer Arabs travel to the US on holiday preferring "the resort hotels, theme parks and shopping malls of Dubai".  Moreover, well known clinics such as the Mayo Clinic and the Cleveland Clinic have seen a drop in Arab patients of between 20 – 30 per cent since 9-11. US universities and colleges have also witnessed a sharp decline in Arab students, representing a loss of US$ 43 million annually.

  As long as Americans look upon the tragic events of September 11 as the benchmark against which all Middle East states and their peoples should be judged in perpetuity, then Arab investors will continue seeking friendlier markets. American paranoia and xenophobia should be tempered if the American dream is to stay intact.

  If the withdrawal of Arab funds in the US becomes a flood instead of a trickle and more and more countries move from Dollars to Euros, then the much admired US economic bubble could be in for a massive and unprecedented burst.