Huawei Security Concerns A Wake-Up Call About Nexen Takeover Says NDP

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NEXEN
In this April 25, 2012 photo, Nexen chief executive Kevin Reinhart addresses the company's annual meeting in Calgary, Alberta. Oil and gas producer Nexen Inc. has agreed to be acquired by China National Offshore Oil Company for US$15.1 billion cash. (AP Photo/The Canadian Press, Jeff McIntosh) | AP

OTTAWA - A U.S. congressional panel's scathing criticism of China technology firms should give the Harper government cause to reject the proposed Chinese takeover of Alberta oil company Nexen, the opposition NDP said Tuesday.

Industry Canada could announce as early as this week the result of its review of the $15.1-billion bid by the state-owned China National Offshore Oil Co. for Calgary-based Nexen Inc. (TSX:NXY).

The NDP opposes the CNOOC takeover because it says ceding control of the large Canadian resource company to a state-owned Chinese interest raises national security concerns, among others.

The party's foreign affairs and natural resources critics, Paul Dewar and Peter Julian, pointed to Monday's warning by the U.S. House Intelligence Committee that the States should avoid doing business with Huawei Technologies Ltd. and ZTE Corp.

The committee revived long-standing criticism that the companies are linked to Chinese intelligence, which could use their products for cyber-espionage — a charge both the companies and the Chinese government loudly denied Tuesday.

Dewar said the U.S. warning in the telecom case helps make the case for the Harper government to nix the Nexen energy deal.

"This isn't about selling wheat," Dewar said in an interview Tuesday.

"Look at the two strategic interests we have in our country: natural resources and telecommunications. The two issues we're dealing with right now are both of those," he added.

"Any of these business arrangements should be dealt with, with an abundance of caution."

Julian criticized the government for weighing the Nexen takeover behind closed doors, without adequately explaining how it will balance the "net benefit" of the deal with the national security risks of allowing CNOOC a controlling interest in the oilsands.

Monday's U.S. report came after the matter was considered during months of public hearings by the House committee, Julian noted.

"I think what this is, is a very strong wake-up call to this government to get its act together," said Julian.

"It certainly will have an impact on public opinion."

Prime Minister Stephen Harper indicated last week that his government is grappling with a range of difficult policy questions on whether to approve the Nexen deal.

The government has until this Friday, but could extend the review period another 30 days.

Monday's U.S. report urged companies to avoid doing business with Huawei and ZTE and said regulators should prevent them from buying U.S. companies. It also said government computer systems should not include components from them because they might pose an espionage risk.

The report has implications for Canada because Huawei is partnered with Bell Canada and Telus.

Huawei could also be in the running to help build the government's new secure telecommunications system.

A spokesman for Shared Services Canada said Tuesday night he could not comment "on any particular equipment supplier."

"In order to protect its national security interest, the Government of Canada has in fact invoked the National Security Exception under Canada's domestic and international trade agreements in connection with the procurement of consolidated email, telecommunications and data centre infrastructure, systems and services," spokesman Ted Frances said in an email.

Huawei Canada employs 400 people in Ontario, including 280 people at a facility in Markham, near Toronto.

Ontario Premier Dalton McGuinty said he wasn't concerned by the criticism raised in the U.S., adding that it's up to the federal government to deal with international security questions.

"At some point in time if authorities within the federal government believe that they have real concerns, then I expect that they will raise those with us," McGuinty said Tuesday.

"I have a lot of confidence in our police authorities and a lot of confidence in Canadian authorities generally when it comes to providing us with advice on that front."

China's government rejected the U.S. report as false and an effort to block Chinese companies from the American market.

"The Chinese side expresses its serious concerns and strong opposition," commerce ministry spokesman Shen Danyang said in a statement Tuesday. He called on the United States to "abandon the practice of discrimination against Chinese companies."

Huawei and ZTE, both based in Shenzhen in southern China, near Hong Kong, rejected the accusation and complained that the committee failed to provide evidence to back it up.

The report "employs many rumours and speculations to prove non-existent accusations,'' a Huawei spokesman, Scott Sykes, said in an email.

— with files from The Associated Press

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