* Ralls has no plan yet to divest interests
* U.S. Treasury says order is specific to Ralls deal
* But move echoes obstacles faced by other Chinese investors
WASHINGTON, Sept 28 (Reuters) - President Barack Obama
blocked on Friday a privately owned Chinese company from
building wind turbines close to a Navy military site in Oregon
due to national security concerns, and the company said it would
challenge the action in court.
The rare presidential order to divest interests in the wind
farms comes as Obama campaigns for a second term against
Republican Mitt Romney, who has accused him of being soft on
China.
Ralls Corp, which had been installing wind turbine
generators made in China by Sany Group, has four wind farm
projects that are within or in the vicinity of restricted air
space at a naval weapons systems training facility, according to
the Obama administration.
"There is credible evidence that leads me to believe" that
Ralls Corp, Sany Group and the two Sany Group executives who own
Ralls "might take action that threatens to impair the national
security of the United States," Obama said in issuing his
decision.
Ralls Corp had filed a lawsuit against the Committee on
Foreign Investment in the United States (CFIUS) for ordering it
to stop all construction and operations at its projects while
the government panel completed its investigation and finalized
its recommendation to Obama.
After the decision was announced on Friday, the company said
it was confident that the courts would vindicate Ralls Corp's
rights under the law and the Constitution.
Sany Group is the parent company of Shanghai-listed Sany
Heavy Industry Co., China's largest construction
equipment maker and the seventh biggest in the world.
Another group company, Sany Heavy Equipment International
Holdings, is listed in Hong Kong. The U.S. court
documents name only Sany Group, not the listed companies.
Sany's chairman and controlling shareholder, Liang Wengen,
is China's fifth richest man, according to the latest ranking by
Hurun Report, down from number one in 2011.
SECURITY CONCERNS
Although CFIUS reviews dozens of foreign investment deals
for potential national security concerns every year, the
president is rarely called upon to issue a formal order as
companies usually abandon their deals or divest assets when the
panel takes issue with their transaction.
The last time a president formally blocked a deal on
national security grounds was in 1990 when then President George
H.W. Bush stopped a Chinese aero-technology company from
acquiring a U.S. manufacturing firm.
"This is a big deal because it is the first time since 1990
that the president of the United States has either blocked a
transaction from occurring or divested a transaction that has
occurred," said Clay Lowery, a former assistant secretary at
Treasury who oversaw the CFIUS process and now is with Rock
Creek Global Advisors.
Ralls Corp had hired the George W. Bush administration's top
lawyer Paul Clement to help represent the company as well as a
former U.S. assistant attorney general, Viet Dinh, who helped
the Republican administration develop the Patriot Act. But that
appeared to do little to convince the current administration to
allow the company to resume operations.
The presidential order gives the Chinese company 90 days to
divest all its interests in the projects. However, sources close
to Ralls Corp said the company was still evaluating the order
and had no immediate plan to unwind its activities.
Only one of the four wind farms was in restricted airspace
and CFIUS never came up with a plan that would require the
company to only divest interests in that particular project, the
sources said.
In addition, the sources said there are other wind farms in
the same area also operated by foreigners: one Danish company
and another German.
NOT A PRECEDENT
Obama's decision comes as two other Chinese companies are
vying for CFIUS approval.
China's state-owned oil company CNOOC Ltd is
trying to buy Canada's Nexen in a $15.1 billion deal,
and auto parts company Wanxiang Group Corp wants to take over
U.S. battery maker A123 Systems Inc.
Though Nexen is based in Canada, the CNOOC takeover is still
subject to CFIUS approval because Nexen has extensive business
in the United States.
The Treasury Department stressed that Obama's decision was
not a precedent for other investments from China or any other
country. Acting Commerce Secretary Rebecca Blank said the United
States generally welcomed investment from China, but not in
every case.
"Particularly when you're talking about China, but there's
other countries where this is true too, one has to be worried
about national security concerns," Blank said in remarks at the
Council on Foreign Relations earlier on Friday.
China's Minister of Commerce said this week that the
country's state-owned companies act in the same way as privately
owned firms.
Neither Sany Group's headquarters nor the Ministry of
Commerce could be reached for comment on Saturday.
The decision to block Ralls Corp and Sany echoes some of the
difficulties China's largest telecom equipment manufacturer,
Huawei Technologies Co, has faced in its efforts to
crack the U.S. market.
CFIUS has blocked three deals by Huawei in recent years.
Last year Huawei dropped plans to buy assets from 3Leaf Systems,
a computer services company, after problems with CFIUS.
Like Sany, Huawei is privately owned, but CFIUS expressed
concerns about informal links between Huawei's founder and CEO,
Ren Zhengfei, and the Chinese military. Ren retired from the
military in 1984, and Huawei says he has not maintained ties.
Less high-profile Chinese deals in the U.S. are often
approved.
"There have been many Chinese investments in the U.S. that
have gone through without trouble," said Benjamin Powell, a
former general counsel to the director of national intelligence
who is now a partner at Wilmer Hale.
