China's Oil Investment Is Not a Threat

The Chinese purchase of a Canadian oil company is something U.S. officials should welcome, not fear.

This July, China National Offshore Oil Corp. (CNOOC), the state-owned giant that dominates exploration and production off China's coast, announced the $15.1 billion acquisition of Nexen, a Canadian oil company with assets in the United States and around the world.

The announcement made surprisingly few waves in the United States, given that, if successful, this transaction would be the largest foreign acquisition by a Chinese company anywhere in the world. But that may be changing as American lawmakers eager to prove their nationalist bona fides get a closer look.

Chinese investments in North America often come under intense scrutiny. After a roughly 18-month investigation, the U.S. House Intelligence Committee warned in a report this week that the Chinese companies Huawei and ZTE, the world's second- and fourth-largest telecommunications-equipment suppliers, respectively, "could undermine core U.S. national-security interests" and recommended that the Committee on Foreign Investment in the United States (CFIUS) block mergers or acquisitions involving Huawei and ZTE. In late September, based on CFIUS's recommendation, President Barack Obama blocked the sale of four Oregon wind farms to Chinese-owned Ralls Corp. in only the second time a sitting U.S. president has prohibited a foreign transaction. Given that CFIUS is currently assessing the national security risks of CNOOC's proposed acquisition -- a process that should take six weeks -- company executives in Beijing are likely paying rapt attention.

Although Nexen accounts for less than 0.5 percent of oil production in the United States, its announced takeover by CNOOC has sparked some congressional opposition. New York Sen. Charles Schumer has asked CFIUS to withhold approval of the transaction until China provides better access to the Chinese market for American companies. Massachusetts Rep. Edward Markey has requested that CFIUS block the deal unless CNOOC agrees to pay royalties on production from two of Nexen's leases in the Gulf of Mexico. And Oklahoma Sen. James Inhofe said in a statement that he has "serious national security concerns with the Chinese government, acting through one of its corporations, purchasing a company that will give it control over significant U.S. oil and gas resources."

The Nexen acquisition is a friendly one; there are no rival bids, and Nexen's board of directors and the company's shareholders have already approved the deal. Mistrust of Chinese companies is prevalent in Washington, however, and the specter of CNOOC's failed 2005 hostile takeover bid for the U.S. oil firm Unocal (now part of Chevron) still haunts the company and its domestic peers. That's too bad, because a larger Chinese presence in the U.S. oil patch could actually be good for U.S. economic and geopolitical interests. Here are four reasons to welcome CNOOC's proposed takeover of Nexen.

1. It gives the United States leverage over Iran.

As Washington has used tougher sanctions to increase the pressure on Iran to curb its nuclear ambitions, U.S. policymakers have grappled with the question of how to elicit more cooperation from China. The U.S. sanctions regime aims to shrink Iran's oil income, which accounts for about half of the Iranian government's revenue, by prescribing penalties for entities that help Iran produce and sell its oil. Getting China on board is challenging not only because Beijing regards sanctions as an ineffective tool of statecraft but also because China has energy ties to Iran: Chinese companies are the largest foreign players in the Iranian oil fields and the largest buyers of Iranian crude, importing an average of roughly 426,000 barrels a day.

One solution is to roll out the red carpet for China's oil companies. Investing in the United States provides them with an opportunity to diversify their portfolios, grow reserves, and gain expertise in shale gas development. Since 2010, CNOOC and its domestic peer, Sinopec, have spent $5.6 billion buying minority stakes in U.S. shale gas projects. And the more China's oil companies are invested in the United States, the more likely they are to refrain from doing business in Iran. After the Unocal debacle, Chinese oil executives are acutely aware of how getting on the wrong side of politics in Washington can doom a deal. They know that CFIUS will review any proposed acquisition that would result in Chinese control of an energy company in the United States and ask about the acquirer's activities in Iran; winding down any activity there would almost certainly be a precondition for approval. China's oil majors are likely to choose the U.S. market over the Iranian one provided they have the opportunity to do so.

2. It won't help CNOOC in the South China Sea.

After CNOOC announced its plans to buy Nexen, the Wall Street Journal and Reuters published articles asserting that Nexen's operations in the Gulf of Mexico would provide CNOOC with deepwater drilling expertise applicable to disputed areas of the South China Sea. This vast body of water, potentially rich in oil and natural gas, is the subject of overlapping claims to territory and maritime rights by six governments, including China's.

The argument is that CNOOC's deployment of its newly acquired deepwater expertise to these areas could increase instability in the region and might prompt other claimants to further entangle the United States in a territorial dispute; therefore, CNOOC's takeover of Nexen is inimical to American interests. CNOOC itself hasn't helped matters. In May, the company's chairman, Wang Yilin, said large deepwater drilling rigs are "mobile national territory" and a "strategic weapon" for developing China's offshore oil industry.

Nexen, however, does not possess the technical capabilities that CNOOC needs to operate in the deep waters of the South China Sea. The Canadian firm is a newcomer to deepwater exploration and production. It does not own any drilling rigs and relies on outside contractors to perform most of the technical work involved in exploring and developing its acreage in the Gulf of Mexico -- contractors that CNOOC could legally hire anytime it wants. In any case, the geological differences between the Gulf of Mexico and the South China Sea limit the portability of U.S.-gained expertise.

3. Nexen's oil will continue to flow to Americans.

Americans worried that CNOOC might ship whatever U.S. oil it pumps on the first slow boat to China can rest assured: All the output from Nexen's U.S. assets will remain in U.S. hands. Under U.S. law, oil companies can only export crude oil with the explicit written permission of the U.S. government, and the government can only give permission if it finds exporting crude oil in the national interest. Consequently, CNOOC will continue to sell Nexen's production to Gulf Coast refineries. The only thing that will change is the name on the barrels.

4. It will signal that the United States is open to investment from Chinese companies.

Chinese executives and officials inside and outside the energy sector took CNOOC's rebuffed 2005 bid as a sign that the United States is hostile to Chinese investment. Many Chinese firms would like to invest in the United States but worry that politics will foil their attempts to enter the U.S. market. If CFIUS approves CNOOC's takeover of Nexen, it will send a strong signal that America is open for business.

Creating a more welcoming investment climate for Chinese firms benefits the United States in at least two ways. First, Chinese companies can provide capital to develop oil and natural gas resources, rebuild infrastructure, and create jobs in the United States. Chinese investments in the United States, which totaled more than $16 billion from 2000 to 2011, support 27,000 U.S. jobs today and could create up to 400,000 U.S. jobs through 2020, according to a study released in late September by the Rhodium Group, a consulting firm.

Second, welcoming Chinese companies to invest in the United States might even persuade China to reciprocate. If CNOOC's proposed acquisition of Nexen gets a green light from CFIUS, it would strengthen the hands of U.S. negotiators pressing China to open wider to U.S. companies. Given the fragile state of the U.S. economy, who could argue with that?

AFP/AFP/Getty Images

Democracy Lab

In Post-Revolution Egypt, Talk Shows Redefine the Political Landscape

In Egypt, the hosts of political talk shows have become the arbiters of public discussion and debate. But do they know how to wield their newfound power?

Most Egyptians had never heard of Innocence of Muslims until talk show host Khaled Abdallah got hold of the film. Few had noticed the incendiary film when it was just another YouTube video. But Abdallah's show, broadcast on a channel run by ultraconservative Salafi Islamists, isn't afraid to tackle hot topics. Once he aired clips from the film on September 8, showing how the movie depicts the Prophet Mohammed in a less than flattering light, Egyptians could no longer ignore it. The next day several hundred thousand of them viewed the trailer on YouTube, and the resulting indignation led straight to the storming of the U.S. Embassy in Cairo on September 11.

For most of Hosni Mubarak's rule, TV journalists danced to the government's tune. But this has changed dramatically in post-revolution Egypt, where talk show moderators -- ranging from the Islamist Abdallah to his secular counterparts -- have become outsized arbiters of public opinion. Few politicians or officials can compete with the prominence of the new talkmasters when it comes to shaping political discourse. At the same time, the new Muslim Brotherhood-dominated government's intolerance of critical talk shows is fuelling fears that the Islamists might re-impose tight control over the media.

Mahmoud Saad, the highest-paid talk show host in Egypt today, offers a good example of the power of these new TV journalists. "Some people prefer to offer an opinion implicitly," he says. "I choose to express my opinions clearly." Saad, a familiar face to Egyptian audiences, defines himself as a "columnist" who happens to work for television. "As far as I'm concerned, I'm not a simple presenter. I'm a journalist and I've been used to expressing my opinions from an early age." He is entirely unapologetic about his ostentatious support for Mohamed Morsy, the Muslim Brotherhood's candidate in the epochal presidential election earlier this year. "I didn't hide it," says Saad. Morsy won the election.

TV has long been the most important media outlet in Egypt, where about one third of the population remains illiterate. But the rise of these popular political TV shows really began only in the last years of the old regime, when Mubarak's government began to loosen up its control of television and other media. Their appearance coincided with the relative opening up of the political landscape, including the appearance of civil society opposition groups (such as Kefaya, the most prominent movement for change and reform). Before the revolution, political talk shows provided a place where touchy topics could be broached without crossing established "red lines," above all direct criticism of the president and his family.

The most popular of these programs, "el Beit Beitak" ("My Home Is Your Home"), which was launched by state television, rapidly became a hit with Egyptian audiences thanks to its high production values and innovative content. It tackled controversial issues without contravening strict taboos, and its presenters pushed the boundaries by lightly criticizing government policies and balancing them with contrasting views. This program attracted a huge audience, boosting the popularity of state TV and quickly becoming the nation's key show.

After the revolution, new talk shows proliferated, sparking off a fierce battle among presenters and channels for the hearts and minds of Egyptians. The new breed of shows provides news as well as offering lively forums for debate. They appeal to audiences by couching their content in an informal, easily accessible style -- though they rarely manage to produce serious investigative reporting or reports from the field.

Tamer Amin, a prominent former presenter on state TV who moved to the private sector after the revolution, believes that good television hosts should aim to "make news, not just deliver it." He says that TV journalists "can propose solutions to current problems, thus urging decision makers to respond."

He's as good as his word. As Egyptians anxiously awaited the outcome of the second round of the presidential race, Amir offered ample "guidance" to both candidates and voters. In one of his show's opening monologues, which he uses to comment on the hottest news of the day, Amin, known for his pro-establishment views before the revolution, criticized Ahmed Shafiq, the candidate of the old regime, for making unrealistic campaign promises. "You said that you would restore security within 24 hours if you were elected president," Amin said. "This is easier said than done. I call upon you voters to question candidates who are luring them with unrealistic promises."

The political prominence of talk show hosts ran in parallel with the revolution of January 2011 that led to the downfall of Mubarak's regime. Many moderators pushed the boundaries, some openly supporting the revolution, risking retaliation if the uprising were to fail. But many openly supported the Mubarak regime, and then faced the challenge of finding new places for themselves in the post-revolutionary era. Some subsequently forged careers as figures in the so-called fuloul ("remnants") media camp.

The role of the talk shows has risen as Egyptian national TV channels have grown in importance as sources of news for the public. Before Mubarak's downfall, most Egyptians got their news from regional Arab satellite TV channels, such as Al Jazeera. Now, however, Egyptian audiences want to get their news from their own channels, says Hazem Ghourab, director of Misr 25. His channel, one of the many pro-Islamist media outlets launched after the revolution, represents the views of the Muslim Brothers. According to Ghourab, the channel is funded by a company owned by a number of Muslim Brotherhood members.

Meanwhile, though, still other TV talk shows have become known for sharply criticizing the country's new Islamic leadership, albeit with highly questionable editorial standards. The government has responded, in some cases, by resorting to the same measures practiced in the Mubarak years: muzzling the media, suspending TV programs and channels, and prosecuting journalists. In August, talk show host Tawfik Okasha, a fierce opponent of the Muslim Brotherhood government, was suspended from his job, while his channel (al-Faraeen) was closed on charges that it was inciting viewers to murder President Morsy as well as of supporting a military coup d'état. (Okasha's trial has been adjourned until 7 November.)

While critics of the government's crackdown acknowledge the channel's editorial shortcomings, they point out that the same government demonstrates remarkable tolerance when it comes to the Islamic channels that treat political topics in equally controversial ways. Khaled Abdallah's Al-Nas channel -- which has repeatedly run slanderous campaigns against secular political figures and members of Egypt's Coptic Christan minority -- is a case in point.

In one of his most notorious programs, widely disseminated across the Web, Abdallah threatened to behead a Christian viewer who sent him an email insulting Islam. When I asked him whether his program was guilty of fueling hatred between Muslim and Copts, he responded: "We are merely demonstrating the mistakes committed by Copts. When we commit similar mistakes, we are labeled extremists; but when they do so, their actions are just dismissed as simple mistakes."

Maria, the latest addition to the group of Islamic TV platforms, was launched in July 2012, during the Ramadan holiday. Where the channel's financing comes from remains a mystery; according to its owner, Maria is supported by voluntary contributions from workers. A similar lack of transparency in the ownership of many of the new broadcasting outlets is fueling doubt about their agendas and editorial standards. Some of these media kingdoms are owned by businessmen known for being closely tied to the former regime, such as Hassan Rateb, the owner of Al-Mihwar TV, and Mohammed el-Amin, who owns the Cairo Broadcasting Channel (CBC). The new Islamist rulers of the country also want their share of the media cake, a trend demonstrated by the burgeoning number of pro-Islamic media outlets, which also claim to be funded by businessmen who are entirely independent of the new government.

Maria, uniquely, is run by fully veiled women. The network's director, Abu Islam Ahmed Abdallah, says that the channel's management has set itself the challenge of finding enough veiled women to host its talk shows. According to Hanaa Abdul Wahab, one of the station's newsreaders, the goal is to achieve a sense of normality for women wearing the niqab (full veil), especially in view of the fact that they are not allowed on secular channels (though they are allowed to wear a hijab on state channels.) When asked how audiences would be able to differentiate between one presenter and another, Abdallah responds, "Why do you need to know the difference between the two women?"

Egyptian TV platforms have thus been transformed into a battlefield of rival ideas and agendas. In this environment, assuming neutrality is widely understood to be an act of treason, especially by talk show hosts who identify themselves as servants of a cause and sociopolitical mentors for their audiences.

This particular situation is aptly described by Reem Maged, a talk show host on the private channel ONTV who, along with some of the channel's other presenters, acquired notoriety after openly supporting the revolution from day one. "I have struggled between my professional and human identities," she says. "I would like to go to the streets to report on the daily problems of ordinary people, but I am unable to let go of my talk show program. It is a powerful weapon. I will not renounce it in the service of my cause, especially while others are still using their programs in the service of theirs."

Thus, Egyptian talk shows are playing a pivotal role in introducing a culture of popular debate as well as vulgarizing an information medium that was long restricted to the elite. The lack of professional news programs has transformed the talk shows into a main conduit of popular information. There is no question that the new talk shows will remain an essential daily ritual for Egyptian viewers. The question now is how to reconcile professional standards with politically engaged rhetoric.