WASHINGTON — Citing national security risks, President Barack Obama on Friday blocked a Chinese company from ownership of four wind-farm projects in northern Oregon near a U.S. Navy base where the military flies unmanned drones and electronic-warfare planes on training missions.
It was the first time in 22 years that a U.S. president blocked such a foreign business deal.
Obama’s decision could be another irritant to the tense economic relationship between the U.S. and China. It also comes against an election-year backdrop of criticism from Republican presidential challenger Mitt Romney, who accuses Obama of not being tough enough with China.
In his decision, Obama ordered Ralls Corp., a company owned by Chinese nationals, to divest its interest in the wind farms 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. Only the president has final authority to prohibit a transaction.
The administration would not say what risks the wind farm purchases presented. The Treasury Department said the committee 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 nearly 300 miles per hour.
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 Committee on Foreign Investments in the United States 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 U.S. by China or any other country.
Chinese trade with the U.S. has emerged as an issue in the final weeks of the presidential campaign. Romney has accused Obama of failing to stand up to China, while the president criticizes the Republican nominee for investing part of his personal fortune in China and sending jobs there while he ran the private equity firm Bain Capital.
Obama has the power to void foreign transactions under the Defense Production Act. It authorizes the president 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.
The Committee on Foreign Investments in the United States 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 also a nonvoting member.
Earlier this month, Ralls sued the national security panel, alleging the committee 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.
A lawyer for Ralls said Friday that 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.”
Ralls dropped its request for a preliminary injunction this week after the committee allowed the firm to resume some pre-construction work.
Ralls’ legal team includes Paul Clement and Viet Dinh, two top law veterans of President George W. Bush’s administration. Both men were key players in Bush’s aggressive national security operation.
Clement, who was solicitor-general and argued administration positions before the Supreme Court, has since opposed the Obama administration’s health-care plan and defended the Defense of Marriage Act before the top court.
Dinh, a former assistant attorney general who was the main architect of the Bush administration’s anti-terror USAPATRIOT Act, has lately served as a director and legal adviser to Rupert Murdoch’s News Corp.
A second Chinese firm stymied by the Committee on Foreign Investments in the United States said at a congressional hearing last week that the company would provide documents requested by members of Congress to show that it didn’t sell its products in the U.S. at a loss. Huawei Technologies Ltd. announced in February 2011 that it would unwind its purchase of U.S.-based computer firm 3Leaf Systems after the deal was rejected by the committee.
Huawei, one of the world’s largest producers of computer network switching gear, has repeatedly struggled to convince U.S. authorities that they can be trusted to oversee sensitive technology sometimes used in national security work.
Information for this article was contributed by Stephen Braun and Ted Bridis of The Associated Press.
Business, Pages 31 on 09/29/2012. Note: A correction has been appended to this story since its original publication.