United States blacklists China's CNOOC, saying it helps China intimidate neighbours

Ruben Fields
January 15, 2021

Xiaomi was one of 11 firms targeted by U.S. officials who said they posed a threat to national security. "BIS is also enhancing controls to prevent United States persons from supporting unauthorized weapons of mass destruction (WMD) programs, including weapons delivery systems and production facilities".

Companies identified as threats are China National Offshore Oil Corp., the nation's main deepwater explorer, and Skyrizon, which develops military equipment. The administration also said it was adding China's state oil company, the China National Offshore Oil Corporation, to a list of companies with which US citizens are banned from doing business.

Prior to the end of the presidential term, Trump's administration has managed to introduce a number of restrictions against Cuba and China.

Xiaomi - which overtook Apple a year ago to become the world's third-largest smartphone manufacturer - was one of nine new firms classified by the Pentagon as "Communist Chinese military companies".

None of the companies involved in Thursday's sanctions immediately commented on the decision.

The United States has long opposed China's extensive territorial claims in the South China Sea, a potentially resource-rich area that is also a strategic trade route.

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"We will continue to act until we see Beijing cease its coercive behavior in the South China Sea". Taiwan, The Philippines, Brunei, Malaysia and Vietnam all have claims.

Why is the South China Sea important?

"The United States stands with Southeast Asian claimant states seeking to defend their sovereign rights and interests, consistent with global law", said US Secretary of State Mike Pompeo.

The US Department of Defense in a statement said it was "determined to highlight and counter the People's Republic of China's military-civil fusion development strategy".

"Technologies for China's offshore drilling are mature knowhows and CNOOC has overall very limited exposure to USA expertise", said Chen Weidong, Beijing-based founder of independent consultancy DFS Energy and previously an offhsore oil veteran.

"CNOOC has repeatedly harassed and threatened offshore oil and gas exploration and extraction in the South China Sea, with the goal of driving up the political risk for interested foreign partners, including Vietnam", the Commerce Department said. What this means for the future of Xiaomi is not immediately clear, as while it's not an outright ban on all trade, it's possible that the company receives a large amount of investment from USA -based companies. They join index stalwarts like China's three biggest telecom firms on the list.

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