Foreign investment panel is split on Nippon’s bid for US Steel

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The US Treasury has told Nippon Steel that the panel vetting its proposed acquisition of US Steel has not reached consensus on how to mitigate security risks, raising the odds that President Joe Biden will block the $15bn deal.

Treasury, which chairs the Committee on Foreign Investment in the US, wrote to Nippon Steel and US Steel on Saturday to explain that the nine agencies on the Cfius panel were struggling to reach agreement ahead of a December 23 deadline to send a recommendation to Biden, according to several sources familiar with the talks.

The Financial Times reported earlier this week that at least three Cfius agencies — the Treasury, Pentagon and state department — had concluded that the acquisition of the iconic American steelmaker posed no security risks. The main opposition inside Cfius to the transaction is being led by Katherine Tai, the US trade representative.

Biden and President-elect Donald Trump have both voiced opposition to the deal. Biden came out publicly against the deal earlier this year, which critics said amounted to politicising the Cfius process.

Cfius has drafted a mitigation agreement that outlines how Nippon Steel could alleviate the concerns raised by some of the government agencies. But the people said USTR showed no sign of reversing its opposition.

If Cfius reached unanimous agreement, Biden would have to find another justification to derail the transaction if he wanted to block it. If the panel remains split, however, Biden would be required to make the decision.

One person very close to the process said Biden was determined to block the deal. He said some of the government agencies pushing to approve the deal were also increasingly resigned that they would lose the Cfius battle.

Asked if Biden would block the deal, he said: “Not whether but when”.

The situation has soured US relations with Japan, its most important ally in Asia. Japanese officials point out that Washington wants Tokyo to work together to counter China but says Japan is a security risk.

Several senior US officials told the FT that Biden’s opposition was political. Biden, and later Kamala Harris, and Trump all used their opposition to try to win union votes in Pennsylvania, where US Steel is headquartered.

Japanese prime minister Shigeru Ishiba asked Biden to back the deal when they met at the G20 in Lima, Peru, according to one person familiar with the conversation.

Takahiro Mori, Nippon’s vice-president and lead negotiator, visited Washington this week to lobby for the deal. Four people familiar with his visit said Mori held phone calls with Treasury secretary Janet Yellen and commerce secretary Gina Raimondo on Friday to discuss the situation.

Treasury and commerce both declined to comment. Nippon Steel also declined to comment.

Deputy cabinet secretaries from the Cfius agencies met last week to try to reach a consensus but were unsuccessful. Several people said they would hold another meeting this coming week in a final effort to reach agreement, but they said there was no sign that Tai would change her mind. USTR did not respond to a request for comment.

It remains unclear whether Raimondo supports the mitigation agreement. Several people said commerce appeared to be sitting on the fence. The commerce department declined to comment.

“The Nippon case reveals a flaw in the Cfius process, where a member like USTR, that does not have national security pedigrees nor represents any specific risk arising from this transaction, is able to make a huge geostrategic mis-step,” said one former Biden administration Cfius official.

“Tai is playing a game that exposes the Cfius process to becoming a permanent tool of politicians, unreasonably expands the scope of what is considered national security, and will force the US to put in writing that Japan is a national security threat, which is simply untrue and detrimental to American security,” the former official added.