Security Fears Raised In Canada On Chinese Oil Acquisition

Insight: Security Fears Dogged Canada Debate On China Energy Bid -- Reuters

(Reuters) - In September, two months after China's state-owned CNOOC Ltd made an unexpected $15.1 billion bid for Canadian energy company Nexen Inc, Canada's spy agency told ministers that takeovers by Chinese companies may threaten national security.

The rare warning from the Canadian Security Intelligence Service (CSIS), which was disclosed to Reuters by intelligence sources, did not stop the takeover. That was approved by Canadian authorities earlier this month.

But the intervention and an influential U.S. lawmaker's warning in October that Canadian companies should be careful about doing business with Chinese telecom equipment companies Huawei Technologies Co and ZTE Corp made the approval process for the deal more difficult than initially expected.

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My Comment: A disclaimer .... I am a Canadian citizen and I have assisted Chinese companies in acquiring companies in Eastern Europe (i.e. one of my day jobs) in the past.

Nexen is not a big player in the Canadian oil scene .... and this was an excellent deal to shareholders who saw a significant return on their investment. Having said that .... it was a Chinese state company that took over this oil company, and China (to put it bluntly) is not a 'friend' to Canada. They have conducted numerous cyber attacks against Canadian government sites .... one can only speculate on how extensive their espionage efforts are ... and their lousy human rights record has raised many a concern in Canada. Not surprisingly .... this deal has resulted in changes to Canada`s rules and regulations on foreign takeovers of Canadian business interests. In short .... to address these security concerns there is now going to be no future Nexen deals for China in Canada.

As to what is my own personal opinion on these developments .... I have been telling my Chinese associates for years that this was going to ultimately happen .... but they never listened. Fortunately .... I know that they are listening now because what happened in Canada will probably snowball into other countries (Australia, South American countries, some African nations) to do the same. But will they ultimately change their behavior .... probably not.