The Foreign Investment Council is divided over Nippon’s bid for US Steel

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The US Treasury Department has told Nippon Steel that the panel reviewing its proposed acquisition of US Steel failed to reach consensus on how to mitigate security risks, raising the possibility that President Joe Biden will block the trade. deal worth 15 billion USD.

The Treasury Department, which chairs the Committee on Foreign Investment in the United States, wrote to Nippon Steel and American Steel on Saturday to explain that the nine agencies on the Cfius board are having difficulty reaching an agreement before the Dec. 23 deadline to submit a proposal to Biden, according to several sources familiar with the negotiations .

Financial Times report this week that at least three Cfius agencies – the Treasury Department, the Pentagon and the state department – have concluded that the acquisition of the iconic US steelmaker does not pose a security risk. The main opposition within Cfius to the transaction is being led by Katherine Tai, the US trade representative.

Biden and president-elect Donald Trump both spoke out against the deal. Biden publicly opposed the deal this year, which critics said was intended to politicize the Cfius process.

Cfius drafted a mitigation agreement setting out how Nippon Steel may alleviate the concerns of some government agencies. But the people said the US trade representative’s office showed no signs of reversing its opposition.

If Cfius reaches a unanimous deal, Biden will have to find another reason to derail the transaction if he wants to block it. However, if the council remains divided, Biden will have to make a decision.

A person familiar with the process said Biden was determined to block the deal. He said some government agencies trying to pass the deal were also increasingly resigned that they would lose the Cfius battle.

When asked if Biden would block the deal, this person said: “It’s not a matter of when.”

This situation has worsened America’s relationship with Japan, America’s most important ally in Asia. Japanese officials pointed out that Washington wants Tokyo to cooperate against China but believes that Japan is a security risk.

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

According to a person familiar with the conversation, Japanese Prime Minister Shigeru Ishiba asked Biden to support the deal when they meet at the G20 in Lima, Peru.

Takahiro Mori, Nippon Steel’s vice president and chief negotiator, visited Washington this week to lobby for the deal. Four people familiar with his visit said Mori had a phone call with Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo on Friday to discuss the situation.

Treasury, the commerce department and Nippon Steel declined to comment.

Deputy cabinet secretaries of the Cfius agency met last week to try to reach a consensus but were unsuccessful. Some said they would hold another meeting this week in a last-ditch effort to reach an agreement, but they said there was no indication Tai would change his mind. The Office of the US Trade Representative did not respond to a request for comment.

It remains unclear whether Raimondo supports the mitigation agreement. Some said the commerce department appeared to be sitting on the fence.

“The Nippon case shows a flaw in the Cfius process, in that a member like USTR, has neither a national security tradition nor represents any particular risk,” said one former official. arising from this transaction, a major geostrategic misstep could be made.” Cfius official in Biden administration.

“Tai is playing a game that will make the Cfius process a permanent tool of politicians, absurdly expanding the scope of what is considered national security and will force the US to put in writing that Japan is a national security threat, this is simply untrue. and is detrimental to US security,” the former official added.