CNOOC-Nexen Deal: Chinese Company Heavily Invested In Iran, Calls Itself 'Strategic Weapon'

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In this August 24, 2011 photo, CNOOC Ltd. Chairman Wang Yilin attends a company announcement in Hong Kong. Yilin recently said CNOOC's offshore oil rigs are a
In this August 24, 2011 photo, CNOOC Ltd. Chairman Wang Yilin attends a company announcement in Hong Kong. Yilin recently said CNOOC's offshore oil rigs are a "strategic weapon." (THE CANADIAN PRESS/AP, Kin Cheung)

A majority of Canadians are already opposed to the takeover of Alberta’s Nexen by the Chinese state-owned oil company CNOOC, and the latest news on that front is not likely to make many people change their mind.

A report Monday in the Financial Times highlighted a seemingly overlooked fact about CNOOC: That the company is working on a natural gas project in Iran, with whom Canada recently broke diplomatic relations, and that it sees at least some of its operations as being a “strategic weapon.”

CNOOC signed a $16-billion (U.S.) agreement with the state-owned National Iranian Oil Company in 2008 to develop the North Pars offshore natural gas field in Iran, one of the largest such fields in the world.

That move appeared to be political, coming “immediately after the U.S. agreed to sell arms to Taiwan,” FT reported.

That got the attention of NBC News' Rachel Maddow.

“So we agreed to sell arms to Taiwan. We did something that annoyed China, and China responded by saying, ‘Fine, we’ll have our giant state-owned oil company hook Iran up. How do you like us now?” Maddow quipped on her show Monday night.

That analysis may be open to debate. The U.S. announced a massive arms sale to Iran in October, 2008, weeks before the CNOOC deal with China was made public. However, the company had signed a memorandum of understanding on the North Pars oil field in 2006.

But recent comments by CNOOC’s chairman, Wang Yilin, would back up the suggestion that China uses its state-owned oil company to further geopolitical goals.

Wang told CNOOC employees earlier this year that "large-scale deep-water rigs are our mobile national territory and a strategic weapon," according to the Wall Street Journal.

“China is weaponizing its oil industry; at least that’s how they talk about it,” Maddow said.

Maddow was primarily concerned with another aspect of the CNOOC controversy — that U.S. presidential candidate Mitt Romney has invested in the company.

“Go ahead and invest my Mitt Romney bucks in the Chinese oil company that calls itself a weapon and does business with Iran just to spite us,” Maddow said, mocking Romney.

She also pointed out that, in 2005, CNOOC withdrew its bid to buy California-based oil company Unocal because of opposition in Washington; many policymakers believed the deal would pose a national security risk to the U.S. The deal likely would have been rejected by the Committee on Foreign Investment in the United States (CFIUS).

That bodes ill for CNOOC’s bid for Nexen, especially given that CFIUS has some jurisdiction over the proposed takeover, because Nexen operates deep-water drilling wells in U.S. territorial waters in the Gulf of Mexico, Maddow said.

The Nexen takeover is “probably not going to be OK with the United States,” she asserted.

The Canadian Security and Intelligence Service has also indicated it may have national security concerns about the CNOOC-Nexen deal. In a report tabled in Parliament last week, the agency said some state-owned companies and private firms “with close ties to their home governments have pursued opaque agendas or received clandestine intelligence support for their pursuits here."

Added the report: "CSIS expects that national security concerns related to foreign investment in Canada will continue to materialize, owing to the increasingly prominent role that (state-owned enterprises) are playing in the economic strategies of some foreign governments."

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