* Schumer says China must agree to resolve complex trade
* Says US approval of bid for Canadian oil firm should have
* Analyst says U.S. small part of deal so has little
By Roberta Rampton
WASHINGTON, July 27 Senator Charles Schumer said
on Friday that the United States should use a bid by China's
state-run CNOOC for Canadian oil company Nexen Inc
as a chance to take China to task for long-standing
trade and investment issues.
Schumer, who has made criticism of China's economic policies
a hallmark of his career, laid out a powerful political warning
that many U.S. lawmakers expect China to open its doors to
reciprocal investments, even as he made it clear that he does
not object to CNOOC's $15.1 billion bid on its merits.
In a letter to Treasury Secretary Timothy Geithner, Schumer
suggested the United States should withhold its blessing for the
deal unless China addresses complex disputes over government
procurement, foreign investment reviews and intellectual
The Obama administration gets to weigh in on the U.S.
portion of the deal because Nexen has about 10 percent of its
assets in the U.S. Gulf of Mexico, and U.S. law requires a
formal national security review when a foreign company buys
energy and other sensitive assets.
"It is rare that we have so much leverage to exert upon
China," said Schumer, the Senate's No. 3 Democrat, who has
argued that China fixes the value of its currency too low,
creating unfair trading conditions.
Schumer, of New York, was among the most vocal critics in
Congress of a proposed 2005 merger between CNOOC and the oil
company Unocal, which was withdrawn under pressure.
His statements have been the strongest criticism thus far of
the CNOOC-Nexen deal, but overall the deal has not yet produced
a reaction in Washington anywhere near the Unocal controversy.
On Friday, a federal court froze assets of traders the U.S.
Securities and Exchange Commission said illegally reaped more
than $13 million in Singapore and Hong Kong accounts trading on
inside information, buying up Nexen shares ahead of CNOOC's
OTTAWA IN DRIVER'S SEAT
The Canadian government will review the bid, and Canadian
Prime Minister Stephen Harper has said there should be no
assumptions about whether it will receive approval.
But Schumer's request to intervene in a deal involving a
Canadian company caught many off-guard.
Canada's Foreign Minister John Baird side-stepped questions
on Friday about Schumer's statements, saying his government
would work to negotiate lower trade barriers in China
"independently" from its decision on the takeover.
"Decisions about the Canadian economy, about our
relationship - our economic relationship with China - will be
made in Ottawa and not in Washington or New York," Baird told
reporters in Ottawa.
The provincial government of Alberta, home to Nexen and its
oil sands operations, is also watching the development closely,
NATIONAL SECURITY REVIEW
CNOOC has already informed the Committee on Foreign
Investment in the United States (CFIUS), chaired by Geithner,
that it will submit a formal filing for review.
That process involves an initial 30-day review, during which
the Director of National Intelligence does a detailed analysis
that goes to key cabinet members, said Benjamin Powell, a
partner at law firm WilmerHale.
Because China's government controls CNOOC, U.S. law requires
an additional 45 days of investigation, said Powell, former
general counsel to the Office of the Director of National
The study focuses on "what you more traditionally consider
as national security concerns" in contrast to Canada's more
broad "net benefit" standard, which examines the economic
impacts of foreign investments, Powell told Reuters.
It's unclear whether the CFIUS review of CNOOC's bid for
Nexen would look at the broad trade issues identified by
Schumer, he said.
"This does not have the hallmarks of something where they're
buying sensitive telecommunications assets, or large portions of
our domestic energy supply," he said.
The committee has the power to ask companies for "mitigation
steps" to address security concerns, such as divestitures or
security control agreements with the U.S. government, Powell
"It's rare that the committee has not been able to resolve
national security concerns," he said, also noting the president
has the ultimate decision on whether to block a takeover of U.S.
If the administration took a hard line against China,
following Schumer's advice, Nexen conceivably could choose to
divest its U.S. assets, a process that could hold up the deal
and annoy U.S. allies, said Michael Levi, an energy policy
analyst with the Council on Foreign Relations.
"It's more likely that Nexen would sell off its U.S. assets
than that China would change its entire foreign investment
policy," Levi said in an interview.
"The United States does not have a lot of leverage here," he
Still, Schumer's criticism is "laudable," Levi said, noting
China does not provide the same kind of access to U.S. companies
that the United States provides to Chinese companies.