11.28.2017 0

Committee on Foreign Investment: Failure at the highest level on Uranium One and elsewhere

By Printus LeBlanc

A little known federal governmental body has been making the news a lot lately. The Committee on Foreign Investment in the United States (CFIUS) will be the talk of D.C. after the Uranium One informant soon finishes his testimony. Doing a little research on the committee, it quickly becomes apparent CFIUS is a more significant problem than people realize.

According to the Treasury Department, “CFIUS is an inter-agency committee authorized to review transactions that could result in control of a U.S. business by a foreign person (“covered transactions”), in order to determine the effect of such transactions on the national security of the United States.  CFIUS operates pursuant to section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment and National Security Act of 2007 (FINSA) (section 721) and as implemented by Executive Order 11858, as amended, and regulations at 31 C.F.R. Part 800.”

In laymen’s terms, it means the federal government can review the proposed purchase of any company in the U.S. if the new owner is foreign and it is believed the company plays a role in U.S. national security.

The committee is comprised of several principals from various government agencies. The members of the committee include:

  1. Department of the Treasury (chair)
  2. Department of Justice
  3. Department of Homeland Security
  4. Department of Commerce
  5. Department of Defense
  6. Department of State
  7. Department of Energy
  8. Office of the U.S. Trade Representative
  9. Office of Science & Technology Policy

Other offices can be included, such as the Director of National Intelligence, when the situation warrants.

The committee has had some severe lapses in judgment that scream for Congressional action.

Magnequench

In 1995 a subsidiary of General Motors was put up for sale. The company, Magnequench made magnets out of rare earth elements. The car manufacturer used the magnets in airbags and sensors. The company would be bought by a consortium consisting of two Chinese state-owned metals firms, San Huan New Material and China National Nonferrous Metals Import and Export Company (CNNMIEC).

This drew the attention of Committee because Magnequench also had another client, Uncle Sam. Rare earth magnets are essential to almost every weapon, communication, and flight system the U.S. currently fields. The Congressional Research Service states the magnets are used in:

  • fin actuators in missile guidance and control systems, controlling the direction of the missile;
  • disk drive motors installed in aircraft, tanks, missile systems, and command and control centers;
  • lasers for enemy mine detection, interrogators, underwater mines, and countermeasures;
  • satellite communications, radar, and sonar on submarines and surface ships; and
  • optical equipment and speakers.

Simply put, the U.S. military runs on two commodities; gas and rare earth elements. When the Committee, under the Bill Clinton administration, looked at the sale of the company holding the patents of the magnets to a communist regime and military competitor, it still allowed the deal to go forward.

The sale happened despite the former Chairman of the Central Military Commission in China, Deng Xiaoping, expressing his country’s desire to corner the market in rare earth elements three years before the sale in 1992. Deng stated, “The Middle East has its oil, China has rare earth…it is of extremely important strategic significance; we must be sure to handle the rare earth issue properly and make the fullest use of our country’s advantage in rare earth resources.”

Following the sale, China duplicated the production line in China and proceeded to flood the market, driving any and all competitors out of business. Now, the U.S. military is wholly dependent on battle with systems stamped “made in China,” thanks to the Committee. Is there any wonder how China was able to steal U.S. designs for weapons systems?

Uranium One

Uranium One is the current scandal involving the Committee. Uranium One is a uranium mining company with operations around the world, headquartered in Toronto, Ontario, Canada. The company runs two mines in Wyoming accounting for “20 percent of the currently licensed uranium in-situ recovery production capacity in the U.S.,” according to the Nuclear Regulatory Commission.

In mid-2010, Uranium One announced it reached a deal that would result in JSC Atomredmetzoloto, or ARMZ acquiring a majority share in Uranium One. ARMZ is a subsidiary of Rosatom, the Russian state-owned regulatory body of the Russian nuclear industry. Due to the sensitive nature of uranium, its potential application in fostering nuclear weapons, the agreement would need the approval of the Committee, which Secretary of State Hillary Clinton sat on.

Shortly after the deal was announced, former President Clinton gave a speech to Renaissance Capital, a Kremlin-tied bank, for $500,000, one of the most substantial fees he ever earned. The bank was also pushing the stock of Uranium One calling it, “the best play in the uranium markets.”

Before the deal was even announced, there was an FBI investigation into an American subsidiary of Rosatom, Tenam USA. The FBI had an informant inside, detailing multiple felonies, including extortion, fraud, and money-laundering. The crimes would make critical players in the U.S. nuclear industry susceptible to blackmail by Moscow.

With felonies being investigated and an apparent conflict of interest with one of the Committee members, the sale was approved. By 2013, Rosatom had full ownership of Uranium One and 20 percent of U.S. uranium supplies, which the U.S. already has to import.

Recently it was discovered, despite the Obama administration’s promise the uranium would not be exported, the deadly mineral was exported to Canada and then on to Europe and Asia.

Port Canaveral

In the previous two examples, CFIUS investigated and approved deals despite glaring national security risks. In the Port Canaveral example, Treasury Secretary Jack Lew couldn’t even be bothered to investigate.

In 2014, the U.S. awarded Gulftainer a 35-year lease to operate the cargo terminal at Port Canaveral, Florida. The problem is Gulftainer is a UAE-based company with ties to very shady people, and the port is literally “inside the wire.” The port sits between two Air Force bases, next to a Navy nuclear submarine base, and NASA’s Kennedy Space Center, all points of extreme importance to national security.

Gulftainer is a subsidiary of the Crescent group, a multinational headquartered out of the United Arab Emirates. The Chairman of Crescent group is a man by the name of Hamid Jafar. His brother is the person of interest. His brother and business partner is Dr. Jafar Dhia Jafar, an Iraqi nuclear physicist, the former Vice Chairman of the Iraq Atomic Energy Commission, and widely known as the father of Iraq’s nuclear program.

The Crescent Group also signed a joint venture with Russian Technologies (Rostec). Rostec is the parent company of Rosoboronexport, the exporter of the Club-K container cruise missile launch system. The Club-K is designed to look like an ordinary shipping container, except it has four cruise missiles inside. Russia has already sold the system to Iran, and Iran has practiced launching missiles from cargo ships. Robert Hewson of Jane’s Defense Weekly stated, “At a stroke, the Club-K gives a long-range precision strike capability to ordinary vehicles that can be moved to almost any place on earth without attracting attention,” when discussing the system.

Gulftainer also has ties to Iran. The company is a majority stakeholder and business partner in Gulf Stevedoing and Contracting Company (GSCCO), the cofounders of that company, Kuwait and Gulf Link Transport Company (KGL), have been investigated for money laundering to Iran.

Maybe nothing is wrong with this transaction, but the company seems to be at the center of an awful lot of nefarious actions, and the idea that Jack Lew didn’t even conduct a National Security Threat Analysis of Gulftainer screams “look over here.”

CFIUS handed over the nation’s manufacturing capability to China, gave part of the country’s uranium supply to Russia, and opened the door for hostile actors to come in the front door. Clearly the system is broken. Congress needs to launch an investigation into CFIUS and understand its weaknesses while putting additional safeguards in place to stop future damaging transitions.

Printus LeBlanc is a contributing editor at Americans for Limited Government.

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