OTTAWA - As a former deputy minister at Industry Canada, there was no one in government who knew the Investment Canada Act more intimately than Paul Boothe.
The top-tier bureaucrat, who has since migrated to academia, was instrumental in guiding a relatively young Conservative government when it surprisingly blocked the sale of domestic space technology, including the Radarsat-2 satellite, to an American firm in 2008.
After recently poring over the pros and cons of the $15.1-billion energy deal between Chinese-controlled CNOOC and Calgary's Nexen, Boothe can't see any good reason for turning down the deal.
He's also well aware the answer may not be Yes.
Despite attempts over the years to make approvals of foreign investment as clinical as possible, the CNOOC-Nexen decision comes down to pure politics.
If Prime Minister Stephen Harper selected legacy items to be hallmarks of his first seven years in office, diversifying Canada's trade and investment away from the United States towards the burgeoning economies of Asia and securing the prosperity of our resource economy would be near the top of the list.
But the CNOOC-Nexen proposal is making him confront a deeply embedded Conservative queasiness about state involvement in business, and a long-standing mistrust of China.
Even though CNOOC — controlled by the state-owned China National Offshore Oil Corporation — may pass the net-benefits test, it may not pass the smell test.
"People are afraid of the unknown," said Conservative MP Merv Tweed of Brandon, Man., — one of many politicians who's been lobbied in CNOOC's highly orchestrated campaign.
The CNOOC offer is a neat fit for so much of the Conservative rhetoric these days. It's the natural manifestation of Harper's aggressive campaign to court Asia, bring foreign investment to Canada, and have global recognition of the value of the oil sands.
But the NDP opposition is against the deal. Public opinion is not on side. The business community is split.
And the Conservative caucus has a history of being leery of China, with Harper ignoring the rising power for his first few years in office. His first visit to the country was in 2009, five years after the previous official trip by a Canadian prime minister.
Conservative MPs have been targeted by anti-CNOOC letter-writing campaigns. And they say they're hearing about it on doorsteps in their ridings.
"On paper it looks like a good exchange that will bring wealth and growth to this area," said one Conservative MP whose views echoed those of many Conservatives who spoke with The Canadian Press.
"However, the other side of the coin is the fact that it is a state-run enterprise, a government-owned company," the MP said, speaking frankly in return for anonymity. "That's what's causing the apprehension."
That such simple observations must be cloaked in anonymity shows just how politically sensitive the CNOOC deal has become for Conservatives.
So Harper's looming decision is not merely one of looking at the economic benefits, or deciding how to handle state-owned enterprises. It also has to pre-empt a public backlash.
The complexity of that task was made clear late Friday when the government announced a second extension to Dec. 10 for reviewing the deal.
CNOOC has taken great pains to make sure its case looks air-tight. The company has laid out an offer, both publicly and in private discussions with regulators, that caters directly to the Investment Canada Act. It has committed to keeping management in Canada, listing on the Toronto Stock Exchange, maintaining Nexen's corporate social responsibility program, sticking with its capital investment plan and making Calgary the head office of its North American interests.
That was widely viewed as just the company's opening offer, and ongoing negotiations with Ottawa will no doubt see it pressured for more.
"When you look at what they've said about their plans in terms of investment, in terms of employment, in terms of governance, in terms of social things like corporate responsibility — all of those things are consistent with the criteria in the Investment Canada Act," said Boothe, who cautions that he does not know what is happening behind closed doors and bases his analysis on information in the public realm.
There's no doubt, however, the deal is forcing Harper and a very tight group of confidantes to address some larger, uncomfortable issues.
"There are some bigger questions: About should we have state-owned enterprises investing in Canada? How much from a certain country? How much from China?" Boothe says.
"In my view, those are discussions about the rules themselves rather than discussions about the application of the current rules for this particular deal."
But in seeking to show the public that he is taking those questions into consideration, Harper has muddied the waters.
After shocking markets by announcing late on a Friday night that discussions for a Malaysia-owned takeover of Calgary-based Progress Energy Resources Corp., were on the rocks, Harper said a few days later that he was going to revise the rules for dealing with foreign takeovers involving state-owned enterprises.
Now it is unclear whether those larger questions and the change in the policy framework will be dealt with separately but concurrently to the CNOOC decision, whether the new rules will apply only to future deals, or whether the CNOOC conditions provide the model for deals to come.
The uncertainty is not helping Canada's reputation as a stable place to invest. Official Ottawa was already under scrutiny for chasing away BHP Billiton from Potash Corp., of Saskatchewan.
The overt politics of the CNOOC bid are more cause for malaise.
"It doesn't make any sense," one New York-based investment banker said, speaking on background because he was not authorized to give interviews.
He wondered why Harper would be loudly touting a new foreign-investment protection pact with China last week, while at the same time so obviously hesitating about accepting $15 billion in Chinese investment in a sector that is thirsty for financing.
"You're giving the Chinese more rights to invest, and then you're taking (away) those rights."
To many Conservatives, however, it actually makes a lot of sense to ponder this decision carefully and make sure Ottawa sets the right precedent for the list of takeovers by state-owned enterprises yet to come.
"I believe what the prime minister is attempting to do is come up with a review process that is predictable, that neither rubber-stamps deals nor rejects them outright. This is considered a test-run for that," said the caucus insider.
While many market players and business experts, including Boothe, shudder at the thought of a government changing the rules in the middle of the game, the Conservatives don't see it that way at all, added the anonymous government MP.
Rather, they see it the other way around: Patterns of foreign investment are changing in the middle of Canada's contemplations, and Ottawa needs to be flexible to keep up.
"With the rise of Asia, this is only going to grow," said the MP. "We recognize the game is changing and we need to make sure our rules are made in the country's best interest."