An interesting side product of globalization is how China bashing has become a staple of domestic politics in nations around the world, from America to Zambia, from Sydney to Tokyo. Best practices also propagate with remarkable speed and efficiency.
It may not be a coincidence that, just as the United States finally gets the memo that the Chinese currency is no longer significantly undervalued, the commentariat turns on a dime (or jiao, if you prefer) to announce that the real problem is the market-distorting, security-undermining shadow of China’s state-owned enterprises (SOEs) over the world economy.
This is certainly true, to a certain extent. On the infinitely long list of legitimate China gripes, the antics of inefficient, credit-hogging, deep-pocketed SOEs is near the top. But a good case can also be made that China bashing is, above all, good politics.
President Barack Obama might have legitimate concerns that a wind farm located near a super-secret US navy basis might be a locus of espionage, thereby compelling him to evoke a little-used presidential power to force Ralls Corp – a Delaware corporation co-owned by one of China’s richest people – to divest its interest in response to a ruling by the Committee on Foreign Investment in the United States or CFIUS. 
However, judging by an aggrieved lawsuit filed by Ralls, President Obama seemed to have short-circuited the CFIUS process (which usually involves a certain amount of back and forth on “mitigation”, ie joint discussion of the possibility of allaying US security concerns) before dropping the hammer. 
Beating up on the Oregon windfarm also gives Obama some maneuvering room on the next hot button China issue, the acquisition of oil sands company Nexen by the China National Offshore Oil Corp, or CNOOC.
In 2005, CNOOC’s purchase of Unocal fell apart thanks to a political uproar in Washington and the congressional demand to steer the transaction to CFIUS for review on the unprecedented and dubious pretext that foreign ownership of Unocal’s energy reserves, 70% of which were outside the United States, was a “national security” issue.
Since then, CNOOC has sidestepped the “predatory red capitalist” issue by limiting itself to less than 100% stakes in US and Canadian companies.
Now, with energy companies hurting for capital, CNOOC has returned to the mergers and acquisition hunt with an offer to purchase 100% of Nexen, a Canadian company with an important but not dominant position in Canada’s titanic oil sand reserves, for US$15.1 billion in cash, as well as assuming C$3 billion in Nexen debt (the US and Canadian dollars are practically at parity).
Perhaps 10% of Nexen’s assets are in the United States, particularly some difficult-to-exploit offshore reserves in the Gulf of Mexico that the US Department of the Interior licensed royalty-free in order to encourage development. Reliably China-bashing Democratic congresspeople Charles Schumer and Edward Markey have tried to make political hay out of the Gulf properties by calling on Treasury Secretary Timothy Geithner to subject the Nexen transaction to the CFIUS process to forestall a “massive transfer of wealth” to China.
On national security and economic merits, this argument is balderdash, as Forbes’ energy columnist Christopher Helman impatiently pointed out in a piece titled “Another Economically Illiterate Politician Seeks to Block CNOOC-Nexen Deal”. 
But politics is politics, China-bashing is good politics, and liberal Democrats Markey and Schumer were seconded in their opposition by hard-right Republican senators John Cornyn, James Inhofe, Richard Shelby, and John Hoeven. 
However, US developments are merely preliminary sparring. The main event is in Canada, where Stephen Harper’s Conservative government has to shepherd the Nexen transaction though its own version of CFIUS, an internal review within the next month or so as to whether the deal delivers an amorphously defined “net benefit” under the Investment Canada Act.
Certainly, Nexen’s stockholders and the Canadian business community are convinced of the deal’s net benefits.
CNOOC and Nexen had a previous history of cooperation on oil sands investment, Nexen needed cash it was unable to get elsewhere (Nexen had been on the block for some time but no other serious bidders emerged to take on the sizable equity plus debt package), and 99% of Nexen’s shareholders approved the generous purchase terms, a marked contrast to the rancorous competition between Chevron and CNOOC that characterized the Unocal deal.
CNOOC also provided explicit assurances that Nexen’s Canadian footprint would not shrink, per Canada’s The Star:
CNOOC has moved carefully to court Canadian approval of its takeover bid. It has pledged to retain all Nexen employees and establish Calgary as headquarters for $8 billion of the Chinese firm’s other assets in the Americas. The company also promises to seek a listing on the Toronto Stock Exchange and maintain Nexen’s social responsibility efforts globally. 
CNOOC drew a lesson from the disapproval by the Canadian government on “net benefit” grounds of BHP Billiton’s bid to buy Potash Corporation in 2010. The deal was apparently torpedoed by the provincial business and political interests in Saskatchewan and Alberta that form Harper’s political base after it transpired that BHP intended to move corporate operations out of country.
The prospect that Nexen will herald a flow of foreign capital into the Canadian resource sector has sparked undisguised enthusiasm in the Canadian business community, and well-bred drooling by the M&A set. Despite CNOOC’s efforts, however, the deal is not popular with the Canadian public, as it feeds into a growing interest in resource-nationalism issues and anxiety about China.
A survey conducted in September found opposition to the deal by over two-thirds of those polled – 12% more than the previous month. Opposition was across the board:
When asked whether the federal government should approve the deal, 69% said the deal should be rejected while 8% believed it should be approved. Opposition to the deal was uniform across most subgroups. There were few regional or partisan differences. In fact, respondents who said they voted Conservative in 2011 were almost as likely to say the deal should be rejected as those who voted Liberal or NDP (Conservative 68%, NDP 72%, Liberal 73%). 
The opposition NDP, while courageously declining to take a stand on the transaction, noted that public opinion is “crystallizing” against the deal, and urged public consultations. 
A liberal case against the Nexen deal was laid out by Globe and Mail national affairs columnist Jeffrey Simpson in a commentary titled “What if Nexen coveted CNOOC?” Mr Simpson seized upon the issue of reciprocity, declaring:
China plays by one set of rules, Canada and other open economies by another. Their state-owned companies can buy here and elsewhere, while our private companies can’t buy there in sectors the state considers vital to its future …
… This double standard is worth remembering in connection with the Chinese National Offshore Oil Corp’s proposed takeover of Calgary-based energy company Nexen Inc. If an American company, say, had bid for Nexen, that bid might be good or bad for the company and Canada’s energy industry; but a Canadian company could do likewise in the United States if the terms of the purchase were right for both parties. But there’s no price a Canadian company could pay for a state-owned Chinese company, because the state deems them vital to the country’s future and thus off limits for purchase …
In unwelcome news for Simpson, by the way, the countries that Canada is trying to lure into its oil sector – outfits like Saudi Arabia and Kuwait – all have unpurchasable national oil companies. And those regimes in Iraq and Libya created with the generous support of Canadian lives and munitions all have national oil companies as well.
“Reciprocity” on a less exalted level has also emerged as a buzzword for the Harper administration, which seems to be looking for some conspicuous win in China for Canadian business to prove it fully exploited the power of the “net benefit” process to stick it to the red mandarins in Beijing.
Unfortunately, Canadian investment activity in China is extremely sparse, and it is possible that Harper will have to make do with the obtaining the long-delayed approval of Scotiabank’s acquisition of Guangzhou Bank for $726 million – about one-twentieth of the Nexen deal – as his trophy. 
However, the Nexen issue also plays into a broader debate as to whether Canada will define itself as a managed-investment destination, doling out access to its resources on a “national interest”, ie “net benefit” basis, as opposed to the “level playing field”, ie “money talks and b – sh – t walks” language of unfettered global capitalism.
In an interesting perspective on Simpson’s whinging on reciprocity, the debate seems to be moving in terms of making Canada more like China, instead of the other way around:
“Some Chinese investment in the oil sands would be in our country’s interest,” said Mr Edwards, a leading industry figure with ties to Prime Minister Stephen Harper. “We want to make sure we have access to capital but, as a country, we want to ensure a strong Canadian presence in the oil sands.” Mr Harper said that the government will set out guidelines for foreign acquisitions by state-owned enterprises when it announces its decision on the proposed Nexen takeover.
Executives did not stipulate which companies should be considered off limits to foreign buyers, but such a roster would likely include Canadian Natural, Suncor Energy Inc, and Cenovus Energy Inc, which is the largest producer using in situ – rather than mining – techniques. 
This situation presents an interesting dilemma for Prime Minister Harper, an avowed free trader who is championing Canada’s entry into the Trans Pacific Pact trade regime. But he is probably more concerned about the impact that hostility to Chinese investment will have on his difficult dealings with President Obama.
It could be argued that a major impetus for Harper’s pivot to China was the perceived need for a counterweight to a less than satisfactory relationship with Obama, particularly the US president’s unwillingness to give full-throated support for extending the Keystone pipeline (the primary outlet for Canada’s prodigious oil sands reserves, which now terminates in Oklahoma) to the US Gulf Coast.
There is little question that Harper would prefer to see Mitt Romney in the White House. Aside from ideological leanings, Romney supports Keystone unequivocally, as in: Romney: Keystone pipeline will happen “if I have to build it myself”. 
US environmental groups adopted the Keystone pipeline as a metaphor for mainlining fossil fuels to feed America’s energy addiction while boosting global warming through the emission of greenhouse gases. Environmentalist Bill McKibben reported that influential NASA climatologist James Hansen told him that burning up the hundreds of billions of tons of tar sands in Alberta would be “game over for the planet”. Environmentalists, an important and not particularly happy Obama constituency, embarked on a campaign of civil disobedience that led to a delay in US approval of the pipeline extension.
When Obama announced a delay in the approval process until 2013, Harper decided to create a resource-nationalist rumpus of his own.
Harper also told Harman that Canada has been selling its oil to the United States at a discounted price.
So not only will America be able to buy less Canadian oil even if Keystone is eventually approved, the US will also have to pay more for it because the market for oil sands crude will be more competitive.
“We have taken a significant price hit by virtue of the fact that we are a captive supplier and that just does not make sense in terms of the broader interests of the Canadian economy,” Harper said. “We’re still going to be a major supplier of the United States. It will be a long time, if ever, before the United States isn’t our number one export market, but for us the United States cannot be our only export market. That is not in our interest, either commercially or in terms of pricing.” 
Ironically, Harper sounded just like the lord of another free-market resource barony – President Elbegdorj of Mongolia – who thirsts to create an alternative destination (Russia) to his domineering neighbor ( China) for his mineral riches.
Also, ironically, American environmentalists seem unable to come up with a suitable political riposte to Harper’s proposal to outsource the end of the world to China instead of the United States. Establishing an alternative to US consumption means finding a plausible channel to Asian markets, and that means a) planning a multi-billion dollar pipeline, “Northern Gateway”, from Alberta to the Pacific and b) a bankable buyer’s commitment that will make the pipeline buildable.
Enter, of course, China, which apparently has the main refineries in Asia capable of handling sulfurous oil sand crude. Harper jetted to China in February with the publicly declared mission of luring Chinese investment. The first fruit of Harper’s policy was CNOOC’s announcement that it would abandon its previous program of cautious minority stakes to pursue the 100% acquisition of Nexen.
It is easy to speculate that CNOOC also jollied Harper along on the Northern Gateway pipeline as the cost of obtaining Canadian government support for something as big and potentially provocative as the Nexen purchase. In return, Canada could claim to the United States that the Obama administration’s lack of Keystone enthusiasm was driving Canada, its energy resources, and its pipeline plans into China’s waiting arms.
CNOOC, which despite sneers at its state-owned pedigree runs its business like a business, would probably prefer to sell Nexen crude to the United States via the Keystone pipeline at a healthy profit. With Mexican and Venezuelan output faltering, the United States via Keystone is the logical destination for Canadian oil sands, no matter who owns them.
The Northern Gateway scheme would burden CNOOC’s oil sands business with capital and shipping costs to get the Nexen crude (whose production cost is about double that of conventional Middle Eastern crude) across Canada, across the Pacific, and through its refineries in order to sell it for less or no profit within the price-controlled environment of China.
The commitment of the Harper administration, on the other hand, to continue with its quixotic Asian scheme as anything more than a bargaining chip in its Keystone negotiations with the United States is open to question.
Will this arranged marriage endure the political stresses of Canadian and North American politics despite the differing agendas of the partners? Certain indicators from the Canadian side are not promising, at least for CNOOC. There are dark murmurings that Harper’s cabinet and the Conservative caucus, usually a tractable bunch, are “divided” on the issue. This probably means the “Snack Pack” is throwing its weight around.
The “Snack Pack” is the nickname given to a group of hard-charging, youthful, and rather chubby politicians who are more American-style movement conservatives than traditional pro-business warhorses, and who rose to prominence in the past 10 years serving as Harper’s political centurions. Their ideology is driven by conservative social, religious, and political values and is reflexively anti-People’s Republic of China.
The most prominent member is Jason Kenney, who is now Minister for Citizenship, Immigration and Multiculturalism. His anti-communism manifests itself through sympathy with refugee Falun Gong practitioners and other dissidents – on September 29, he achieved an-anti PRC omnibus triumph of sorts, posting a picture on his Twitter feed of his attendance at a “Wonderful event w/ Tibetan, Uyghur, N Korean, Falun Gong & Chinese refugees & human-rights activists” – and is the nexus for anti-CNOOC sentiment inside the cabinet.  
The other high-profile Snack Packer is Rob Anders, who holds Harper’s old seat in Alberta and made a name for himself by casting the only vote against making Nelson Mandela an honorary citizen of Canada. He also holds strong anti-PRC sentiments, characterizing the Chinese regime as the worst human rights abuser in the world, comparing the Beijing Olympics to Hitler’s 1936 Berlin Games, and opposing a memorial to Canadian Norman Bethune on the grounds that taxpayer money should not be spent on a man who was a “fan” of “the biggest mass murderer in history”, Mao Zedong. 
As for CNOOC:
“There’s a lot of people, I would say the vast majority of the country, that [sic] are very concerned about making sure there’s conditions [on CNOOC],” said Rob Anders, a Conservative member of Parliament from Alberta, where the oil sands are located. He told reporters on Wednesday that he regarded China as “a non-benevolent actor and a strategic adversary.” 
Both men have strong ties to American conservative social and political movements. Anders did a term at Norman Blackwell’s Leadership Institute, a conservative boot camp that claims Karl Rove and Ralph Reed among its alumni. He achieved notoriety by serving as a paid political heckler in 1994 for arch-conservative (and oil industry advocate and global warming denier) James Inhofe in his campaign to become US senator from Oklahoma. A video of Anders donning a Pinocchio nose to assail Inhofe’s opponent, Democrat Dave McCurdy, lives on at YouTube and in the hearts of his constituency. Anders is also credited with introducing US phonebanking techniques – aka robocalling – to Canadian politics. He recently described his attendance at CPAC, the hardcore US movement conservative convention as “the fix conservative political junkies look for”.  
Jason Kenney attended the Jesuit University of San Francisco in the United States. He responded to the teachings of some intensely conservative faculty members and discovered his political vocation:
Kenney was initially opposed to the life of politics, believing that morality and politics are mutually exclusive. His life was changed when he read the Holy Father’s encyclical, “Evangelicum Vitae”. Seeing that the Holy Father’s notion of politics was a form of charity changed Kenney’s perspective. “I felt compelled to enter politics as a vocation. I was called to politics, not qua politics, but as a form of charity as a promotion of the message of the Gospel of life”. 
He went back to Canada a full-fledged movement conservative in the pro-life/anti-gay rights vein, and served as a youthful advisor to the Christian Coalition of Canada, a clone of Ralph Reed’s political powerhouse in the United States.
Kenney and Anders also shared a stint at the Fraser Institute, a conservative think tank and brain trust for Harper, which is also a recipient of significant largesse from America’s Koch brothers, the free-spending resource barons who have committed themselves to free markets, global warming denialism, and no-Obama (and are alleged to have major involvement both in Canadian oil sands crude production and their refining in the United States. and therefore have a strong interest in getting Keystone built).   
In addition to movement conservatism and sentiments against the PRC and in favor of Tibet and Uyghur separatism and Falun Gong, the clownish Anders and the cloistered Kenney share another bizarre link: the two unmarried politicians adopted a lifestyle of chastity until marriage, a lifestyle neither has to date publicly renounced. 
One thing Anders and Kenney do not share in common is a commitment to hard work. Kenney channels his youthful energy into 20-hour per day marathons of events, hearings, and twittering. By cultivating his original conservative supporters in western Canada and using his cabinet responsibilities to reach out beyond the party’s traditional white support to include socially conservative Asian communities in the cities, Kenney is now plausibly considered as a potential successor to Harper.
Anders, on the other hand, holding a safe, ultra-conservative seat, appears to have sunk into sloth and has become famous for his ability to sleep on the job. Aside from embarrassing rhetorical bombthrowing, he apparently does little for his riding and only personal intercession from Harper kept him from facing a challenge from within his own party in 2010.  In addition to a shared distaste for the PRC and CNOOC, both Kenney and Anders would prefer to see Alberta’s oil go to the United States via Keystone.
As for Kenney and Keystone, as he put it in one of his thousands of Tweets:
Keystone pipeline will offset the US imports of Venezuelan oil w/ CDN oil. Why does the left prefer Hugo Chavez’s oil to CDA’s [sic] ethical oil?
“Ethical oil” is, by the way, the wonderful PR handle for Alberta’s planet-destroying goo, in contrast to Venezuela’s depraved socialist glop.
Rob Anders also raised the ethical oil issue in response to a previous Chinese oil sands investment asserting, in the words of the Fort McMurray News, “China Tainting Oil Sands”:
“If you have a country that is an ethical producer of oil but directly implicates another government, not just a company but another government that is very unethical in its extraction, where does that leave us, It raises an interesting question, kind of a hypothetical conundrum,” said Anders.
Anders says, among all foreign operators in the oil patch, China has the worst human-rights reputation. 
As far as I can tell, Anders has not roused himself to issue a formal statement in support of Keystone (though he did update his official website to include a petition opposing the use of parliamentary women’s rest rooms by transgendered men), but I think it is safe to say he is for it, having expressed his gratitude for the “many pledges to buy Canada’s ethical oil via pipeline” he received while attending CPAC.
In the United States, Keystone and Nexen are emerging as shared conservative talking points. Nebraska Senator Lee Terry, a Republican and a major champion of the Keystone pipeline, went the extra mile and unambiguously linked the two issues in an op-ed titled “Oppose CNOOC-Nexen merger, approve Keystone”.
There is a simple way for the United States to maintain control of our energy future and our competitive edge over the Chinese: We can get moving quickly on the Keystone XL pipeline. Approving this pipeline would ensure that North Americans control North American oil. 
In a further indication of the emerging crossborder conservative Nexen/Keystone linkage, the four US Republicans who urged that the insignificant US component of the Nexen deal be reviewed (thereby giving US regulators a chance to throw a spanner into the Canadian works) – Inhofe (Rob Ander’s former employer), Hoeven, Cornyn, and Shelby – are all energy industry stalwarts and diehard Keystone boosters.
Let us recap.
Prime Minister Harper’s political core is conservative movement activism, and is viscerally anti-PRC. His pivot toward China is probably grudging and conditional, impelled by his need for a riposte to the Obama administration’s caution on Keystone. Now that the Nexen deal is arousing across-the-board liberal, conservative, and nationalist opposition across Canada, blocking Nexen has become a battlecry among the pro-Keystone Republicans who are Harper’s natural US allies, and his closest political associates are also going public with their distaste for the transaction. That US and Canadian conservatives have not yet united to try and blow up the deal openly is probably a sign of their deference to Harper.
But they have done enough to create a handy political bolthole for Harper in case he chooses to exit the deal. The question is, will he?
Ordinary business and diplomatic logic would seem to dictate that the deal go through. And Harper is sufficiently beholden to Canada’s business interests to think twice about denying Canadian plutocrats the lucrative payday that Nexen and subsequent Chinese deals might bring.
Political logic, however, is another matter, given extensive public doubts, the dubious strategic underpinnings for the deal, the probable shortage of Conservative sincerity in wanting to strengthen ties with China …
The determining factor in Harper’s decision whether or not to switch sides and start feeding the anti-CNOOC bonfire may be the prospect of Obama’s re-election in November. If Mitt Romney were poised to win, Keystone is a done deal and the political liabilities of engagement with China will loom the larger as the benefits shrink. If Obama triumphs – a prospect seen as increasingly likely – the Chinese bargaining chip will retain its value.
But there might be one more thing – a gut-level wave of outrage against the deal, regardless of its merits. Perhaps an idea that permanently blocking China from acquiring a major Western oil company, like sustaining the anachronistic arms embargo against the PRC, is an instinctive exercise in China bashing that feels so good on an atavistic level, it just can’t be resisted. The Canadian government will probably make its decision by mid-October.
Peter Lee edits China Matters. He can be reached at: chinamatters (at) prlee. org.
1. Obama blocks Chinese wind farm purchase, USA Today, Sep 29, 2012.
2. Chinese-Owned Company Sues Obama Over Wind Farm Project, Bloomberg Businessweek, Oct 2, 2012.
3. Another Economically Illiterate Politician Seeks To Block Cnooc-Nexen Deal, Forbes, Jul 30, 2012.
4. Four Republican senators raise concerns over Cnooc-Nexen deal, World Oil, Sep 14, 2012.
5. Nexen takeover decision a crossroads for Canada and China, The Star, Sep 29, 2012.
6. Canadians Continue to Oppose Nexen Takeover; Opposition Driven by Strategic Considerations, Abacus Data, Sep 20, 2012.
7. Public opinion ‘crystallizing’ against Nexen deal, NDP says, Globe and Mail, Oct 2, 2012.
8. Scotiabank in China Influences Harper on Nexen, Bloomberg, Sep 6, 2012.
9. Protect Canadian ownership of oil sands firms, executives urged, Globe and Mail, Sep 25, 2012.
10. Romney: Keystone Pipeline will happen “if I have to build it myself”, CBS, Jun 14, 2012.
11. Canadian oil going to Asia, no matter what: Harper, CNews, Apr 2, 2012.
12. Click Here For Jason Kenney’s Twitter.
13. Looming Nexen deal reveals fault lines in Tory camp, Globe and Mail, Sep 14, 2012.
14. Tory MP calls Bethune memorial a ‘bow’ to China, CBC News, Jul 14, 2012.
15. Canada Ruling Conservatives Split Over CNOOC’s Bid for Nexen, CNBC, Sep 26, 2012.
16. When Tory MP Rob Anders Was A Paid Political Heckler, Buckdog, Apr 19, 2008.
17. CPAC 2012, Prince Arthur Herald, Feb 12, 2012. 18. Jason Kenney and Absolute Truths, Religious Right Alert, Jun 5, 2010.
19. Fraser Institute co-founder confirms ‘years and years’ of US oil billionaires’ funding, Vancouver Observer, Apr 26, 2012.
20. The Fraser Institute: 100% political and still a registered charity! Explain, please…, Rabble.ca, Feb 7, 2012.
21. Koch Brothers Dishonest About Keystone XL, Tar Sands Interest, De Smog Blog, Oct 5, 2011.
22. From the vaults: Parliament Hill is alive with celibate cries, Ottawa Citizen, Oct 1, 2012.
23. Why does Tory MP Rob Anders keeps falling asleep on the job?, Globe and Mail, Mar 2, 2012.
24. China tainting oil sands, Fort McMurray Forum, Jan 7, 2012.
25. Oppose CNOOC-Nexen merger, approve Keystone, The Hill, Sep 19, 2012.
This piece first appeared in Asia Times.