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NEWS: Implications of the Nexen takeover for the Canada-India free trade agreement?

What will be the implications of Prime Minister Stephen Harper’s new foreign investment rules – announced at the same time he approved the CNOOC takeover of Nexen last week – on his pledge to have a Canada-India free trade agreement by next year?

The Globe and Mail reports, “Canada’s new position on takeovers by state-owned foreign companies has provoked puzzlement in India’s state-dominated energy sector – and questions about Harper’s sincerity, just a month after he brought Canadian energy industry leaders here to talk up future deals with Indian firms.” The article highlights that the Indian government owns a 69 per cent stake in Oil and Natural Gas Corp., as well as holding shares in other major energy companies.

“In private, senior industry leaders suggested that the Canadian position is hypocritical, given the rhetoric of free trade the government espouses… Mani Shankar Aiyar, a former minister of petroleum and senior figure in the ruling Indian National Congress, (says), ‘It is unfair if countries who insist on free trade start becoming selective about who can buy assets and who can’t be permitted to do so.'” The article notes that India is viewed as a democracy, while China is not.

Closer to the truth perhaps, “There is also a perception in India that the new guidelines may have been produced for domestic Canadian consumption, to soften opposition to the unpopular Nexen deal, but that the government ‘doesn’t really mean it’ when it comes to India – a perception perhaps influenced by the fact that the Indian government itself uses this strategy, assuring its population it takes a particular position while quietly pursuing a markedly different one on the international stage.”

In late-September, the Globe and Mail reported, “A number of Indian companies are in ‘discussions’ to acquire or invest in Alberta’s energy companies. Private and state-owned companies are exploring potential purchases of the Alberta oil-sands properties owned by ConocoPhillips Co. …The energy industry is (also) escalating efforts to send oil tankers to India and China by way of the east coast. It is shorter to reach India’s west coast refining hub via Canada’s east coast than it is to ship oil off the west coast, Laurie Smith, partner at Bennett Jones LLP, said in an interview.”

As for the free trade talks, in early-November the CBC reported Harper was clearly frustrated by the lack of progress on a Canada-India Foreign Investment Promotion and Protection Agreement. At that time, the Globe and Mail reported, “It was just 18 months ago that he promised voters in the Conservative Party’s 2011 campaign platform that he would aim for a Canada-India free-trade deal by 2013…” He repeated that pledge at the World Economic Forum in Davos, Switzerland this past January. It appears that one of the main issues stalling a free trade deal is that, “India is facing domestic calls to rethink investor protection deals that grant foreign companies standing to sue for compensation after a series of controversial cases there…”