(NEW YORK) MintPress — It seems that Congressional Democrats and Republicans have finally found something on which they can agree. Both parties are coming out against a bid by Chinese energy giant CNOOC for Canadian oil company Nexen.
CNOOC, owned by the Chinese government and based in Beijing, agreed on July 23 to pay $15.1 billion for Calgary-based Nexen, which operates in the U.S. portion of the Gulf of Mexico. It is CNOOC’s biggest North American deal since it walked away from Unocal under pressure from Congress in 2005.
This time around, Sen. Charles Schumer (D-N.Y.), who is a frequent critic of China’s trade and currency policy, has sent a letter to Treasury Secretary asking the U.S. government to block the Nexen deal.
“I respectfully urge you, in your capacity as chairman of the Committee on Foreign Investment in the United States (CFIUS), to withhold approval of this transaction to ensure U.S. companies reciprocal treatment,” Schumer wrote.
Schumer pointed to the 2012 Strategic and Economic Dialogue in which the U.S. committed to a fair review process by the CFIUS and, in return, China committed to “fair treatment to foreign investors in China.”
“I urge you not to miss this opportunity – the largest foreign acquisition ever by a Chinese company – to hold China to the commitments it has made to provide a level playing field for U.S. companies seeking to access Chinese markets,” Schumer said.
His sentiments were shared by the Democratic leader in the House of Representatives, Nancy Pelosi. “This deal prompts great concern about the Chinese government’s continued attempts to use its state-owned enterprises to acquire global energy resources,” spokesman Drew Hamill said in a statement.
Republican reaction
A similar response came from Sen. David Vitter (R-La.). “I’m concerned because it’s really a trend, particularly in the Gulf of Mexico,” he said. “I do think the far better alternative is for us to play offense, and for us to be developing, taking advantage of these energy resources.”
And Sen. John Hoeven (R-N.D.), whose home state is the country’s second-largest oil producer, told a news conference, “Do we really want to be buying our oil or Canadian oil back from the Chinese? If we don’t take action to develop our resources and work with our closest friends and ally Canada, that’s exactly what’s going to happen.”
Hoeven and other Republicans have unveiled a package of proposals that would allow for more drilling on government-owned land, reduce regulations, streamline drilling permits and approve TransCanada’s Keystone project.
In January, Obama refused to approve the proposed Canada-to-Texas pipeline because he said Congress cut short the environmental review process.
Republicans branded his decision as a job-killer that undermines energy independence. “It is time for President Obama to stop putting politics ahead of struggling families and small businesses and approve the Keystone XL pipeline,” House Speaker John Boehner, the top congressional Republican, said in a statement in February.
2012 elections
CFIUS lawyers have said they believe the deal will not face regulatory obstacles, but it’s not clear whether the transaction could become a political issue in a tight election year.
One of the main driving forces behind the company’s problem with Unocal in 2005 was the fact that it was competing against Chevron, a U.S. oil major with strong allegiances on Capitol Hill.
CNOOC does not have a U.S. rival in the Nexen deal. And in May, it hired Hill & Knowlton Strategies to lobby Congress on issues relating to the environment and natural gas.
It is clearly going to remain a divisive issue. Both sides may want to seize the opportunity to look tough on China, but foreign investment overall helps the economy and investment in the oil and gas sector in particular helps the U.S. become less dependent on oil from overseas.
Then, of course, there’s the fact that the Chinese government holds $1.2 trillion in U.S. treasuries.