The controversy over a Dubai-owned company's purchase of a British ports operations firm that manages several U.S. seaports has highlighted the issue of direct foreign investment in the United States.

Opponents of the practice cite sovereignty and security concerns. This week they were able to alter the ports investment scheme. But as VOA's George Dwyer reports, investment in the U.S. from Arab oil-producing nations takes a wide variety of forms and seems to benefit both sides.

Middle Eastern oil suppliers, flush with cash reserves as energy prices have soared in recent months, are increasingly looking to the United States for investment opportunities to recycle what are known as Petrodollars.

"They are basically looking for as high a return as possible at as low a possible risk," said Monty Graham, a Senior Fellow at the Institute for International Economics in Washington, D.C.  "Foreign direct investment in general brings substantial benefits including sometimes technology transfers, sometimes productivity enhancements, sometimes what we call spillovers which are benefits which eke out into the economy as a whole."

The U.S. government reports that roughly $9 trillion of U.S. financial assets were held by overseas concerns in 2004. Of that, Middle Eastern oil exporting countries held only a small percentage, including about $120 billion in U.S. government securities, plus a variety of corporate acquisitions and some real estate.

Mr. Graham says there is a strong preference, "The preference of the Middle Eastern investors seem to be strongly for real estate investments.  And I would attribute this to two things - that real estate is liquid, it can be sold quite easily, and it offers a reasonable return at quite a low risk."

Mr. Graham says Foreign Direct Investment frequently results in the creation of high-wage U.S. jobs.

But direct foreign investment can also raises national security concerns - as it did in the case of the Dubai ports management deal - when it involves so-called critical infrastructure. And then there is the issue of the growing U.S. trade deficit.

The U.S. reported a $726 billion trade deficit last year, and it is growing. In contrast, Middle Eastern oil exporters are enjoying growing trade surpluses. When countries import more than they export - as the U.S. has been doing - they can become increasingly dependent on foreign capital investment - and that may be cause for concern.

Mr. Graham adds the trade deficit must be raised.

"Because of the trade deficit the U.S. must raise about $800 billion a year in capital inflows from foreigners abroad, investments from the Middle East are not a big portion of this, but we are frankly in a position where every little bit helps and every little bit is necessary," he said.

Still, for all the attention the matter has attracted in recent weeks, Arab petrodollar leverage in the U.S. economy is - for the moment at least - relatively slight. As 2005 began, investors from Arab nations held just $4 billion in direct investment in the United States. By contrast, British investors held $252 billion.