Citing national security risks, President Obama on Friday blocked a Chinese company from owning four wind farm projects in northern Oregon near a Navy base where the U.S. military flies unmanned drones and electronic-warfare planes on training missions.
It was the first time in 22 years that a U.S. president has blocked such a foreign business deal.
Obama’s decision was likely to be another irritant in the increasingly tense economic relationship between the United States and China. It also comes against an election-year backdrop of intense criticism from Republican presidential nominee Mitt Romney, who accuses Obama of not being tough enough on China.
In his decision, Obama ordered Ralls Corp., which is owned by Chinese nationals, to divest its interest in the wind farms that it purchased earlier this year near the Naval Weapons Systems Training Facility in Boardman, Ore.
The case reached the president’s desk after the Committee on Foreign Investments in the United States, known as CFIUS, determined there was no way to address the national security risks posed by the Chinese company’s purchases.
The administration would not say what risks the wind farm purchases presented. The Treasury Department said CFIUS made its recommendation to Obama after receiving an analysis of the potential threats from the Office of the Director of National Intelligence.
The military has acknowledged that it used the Oregon naval facility to test unmanned drones and the EA-18G Growler. The electronic warfare aircraft accompanies U.S. fighter bombers on missions and protectively jams enemy radar, destroying them with missiles along the way. At the Oregon site, the planes fly as low as 200 feet and at nearly 300 mph.
The last time a president used the law to block a transaction was 1990, when President George H.W. Bush voided the sale of Mamco Manufacturing to a Chinese agency. In 2006, President George W. Bush approved a CFIUS case involving the merger of Alcatel and Lucent Technologies.
The Treasury Department said in a statement that Obama’s decision is specific to this transaction and does not set a precedent for other foreign direct investment in the United States by China or any other country.
China’s trade advantage over the United States has emerged as a key issue in the final weeks of the presidential campaign. Obama, in an interview Wednesday with the Cleveland Plain Dealer, said the United States must push hard against Beijing but “not go out of our way to embarrass” China. “We’re not interested in triggering an all-out trade war that would damage both economies,” he said.
The president has the power to void foreign transactions under the Defense Production Act. It authorizes him to suspend or prohibit certain acquisitions of U.S. businesses if there is credible evidence that the foreign purchaser might take action that threatens to impair national security.
CFIUS is chaired by the Treasury secretary. The secretaries of state, defense, commerce, energy and homeland security are also on the committee. The director of national intelligence is a non-voting member.
Earlier this month, Ralls sued the national security panel, alleging CFIUS exceeded its authority when it ordered the company to cease operations and withdraw from the wind-farm developments it bought. Ralls asked for a restraining order and a preliminary injunction to allow construction at the wind farms to continue. The firm said it would lose the chance for a $25 million investment tax if the farms were not operable by Dec. 31.
In a statement Friday, Tim Kia, a lawyer for Ralls, said the project posed no national security threat and said “the president’s order is without justification, as scores of other wind turbines already operate in the area.”
A second Chinese firm stymied by CFIUS urged U.S. authorities this week to investigate the firm to quell fears of ties to China’s military. Huawei Technologies announced in early September that it would unwind its purchase of U.S.-based computer firm 3Leaf Systems after the deal was rejected by CFIUS.
Huawei, one of the world’s largest producers of computer network switching gear, has repeatedly struggled to convince U.S. authorities that it can be trusted to oversee sensitive technology sometimes used in national security work. In 2008, CFIUS concerns led Huawei and private equity firm Bain Capital to abandon an $2.2 billion deal to buy a firm that produces anti-hacking software for the U.S. military.