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The leader of the New Democratic Party and official opposition Thomas Mulcair says the Conservative government is unlikely to approve the takeover of Calgary-based oil producer Nexen by China's state-run CNOOC.
"I would be [surprised if the Conservatives approve the takeover] because it would be a loss of sovereignty," he tells BNN. "Once it owns in Canada and is operating here it has the same rights as a Canadian company to, for example, bid on and buy on all future all leases in a province like Alberta…it puts us on a very slippery slope for a loss of control of a our raw natural resources -- something we've always fought for in Canada."
CNOOC launched its proposed $15.1-billion US takeover of Nexen over the summer and once again put Ottawa in the spotlight regarding foreign takeovers of Canadian companies. Under current rules Ottawa must assess the deal to see whether it passes the "net benefit" test. As part of the test, lawmakers must weigh whether the deal will increase economic activity in Canada, employ Canadians and foster innovation, among other factors.
Critics have called on the government to clarify the rules and make it easier for both Canadian companies and foreign acquirers to determine what will be considered of "net benefit" to Canada.
Mulcair once again took the Conservative government to task for failing to clarify the rules and add to the politics surrounding a foreign acquisition.
"The problem with Canada right now…is purchasers simply don't know what they are dealing with, the government seems free to make it up as they go along," he says. "They themselves promised to Canadians two years ago to clarify the rules…and they still haven't done that."
Mulcair also believes foreign acquisitions by state-run companies, particularly if the state is a communist one such as China, should be treated differently than other foreign acquisitions.
"There's a big difference between having a state enterprise from a communist country buying a natural resource rather than having participation by a Norwegian [company] like Statoil or a French company like Total where there might be government participation," he says. "There's no difference between the government of China and CNOOC -- it's one in the same."
Ottawa is expected to make a decision on the takeover by December 10, after delaying an announcement.
Investors are anxiously awaiting a decision, particularly after Ottawa took the market by surprise last month when it announced it was blocking Malaysian state-owned Petronas' $5.1-billion takeover of Progress Energy -- a deal that many investors expected to go through.
The decision over the Nexen deal comes as Ottawa is attempting to increase trade with China, the world's second largest economy. A number of Canada's business leaders are worried what kind of message Ottawa would send to Beijing if it blocks the takeover.
"If you think about the process that's being followed, it's a market, there is a price that's being paid [and] I don't think it’s a strategic asset that's going to change the outcome of the country," Dominic Barton, global managing director of McKinsey & Company, recently told BNN. "I just don't see what the risk is and I think it's a signal of having a deeper relationship [with China]."
Jim Prentice, senior executive vice-president and vice chairman at CIBC and former Industry Canada Minister, said blocking the deal might throw a wrench in Ottawa's push to open traded between the two countries.
"We are right in the middle of a strategic partnership with China…it would be a very bad time to turn around in the middle of the road on that," he told BNN. "This transaction needs to continually be viewed through that perspective. It would be a very bad time for us to be turning around in terms of our partnership with China."
He says Canada – the oil sands in particular – need foreign capital to develop its resources. In a recent report, CIBC analysts estimate that projects being planned in the oil sands will need as much as $200 billion in capital to go ahead. Other reports have put that number as high as $600 billion.
"Canadian capital markets and debt markets over the next 10 years couldn't fund that with exclusively Canadian capital," Prentice said. "At this point in our history, some of that capital is going to be from Asia and from China."