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The U.S. Treasury Department has told Nippon Steel that the panel reviewing its proposed takeover of US Steel has failed to reach consensus on how to mitigate security risks, raising the likelihood that President Joe Biden will abandon the $15 billion will block deal.
The Treasury Department, which chairs the Committee on Foreign Investment in the U.S., wrote to Nippon Steel and US Steel on Saturday to explain that the nine agencies on the Cfius panel were having difficulty getting the deal done before the Dec. 23 deadline for the Sending a recommendation to Biden to reach an agreement. according to multiple sources familiar with the conversations.
The Financial Times reported earlier this week that at least three Cfius agencies – the Treasury Department, the Pentagon and the State Department – had concluded that the acquisition of the legendary American steelmaker did not pose security risks. The main opposition within Cfius to the transaction is led by Katherine Tai, the US trade representative.
Both Biden and President-elect Donald Trump have spoken out against the deal. Biden publicly spoke out against the deal earlier this year, which critics said amounted to a politicization of the Cfius process.
Cfius has prepared a mitigation agreement that outlines how Nippon Steel could address concerns raised by some government agencies. But people said the USTR had shown no signs of reversing its opposition.
Should Cfius reach a unanimous agreement, Biden would have to find another justification to derail the deal if he wanted to block it. However, if the committee remains divided, Biden would have to make the decision.
A person close to the process said Biden is determined to block the deal. He said some of the government agencies pushing for approval of the deal were increasingly resigned that they were losing the Cfius battle.
Asked whether Biden would block the deal, he said: “Not if, but when.”
The situation has worsened U.S. relations with Japan, its most important ally in Asia. Japanese officials point out that Washington wants Tokyo to cooperate in countering China, but Japan poses a security risk.
Several senior US officials told the FT that Biden’s opposition was political. Biden and later Kamala Harris and Trump all used their opposition to try to win union votes in Pennsylvania, where US Steel is headquartered.
Japanese Prime Minister Shigeru Ishiba asked Biden to support the deal when they met at the G20 summit in Lima, Peru, according to a person familiar with the conversation.
Takahiro Mori, Nippon’s vice president and chief negotiator, visited Washington this week to lobby for the deal. Four people familiar with his visit said Mori called Treasury Secretary Janet Yellen and Commerce Secretary Gina Raimondo on Friday to discuss the situation.
Both the Treasury and Commerce Departments declined to comment. Nippon Steel also declined to comment.
Deputy cabinet secretaries from Cfius agencies met last week to reach consensus but were unsuccessful. Several people said they would hold another meeting next week to reach a final agreement, but they said there was no sign Tai would change her mind. USTR did not respond to a request for comment.
It remains unclear whether Raimondo supports the mitigation agreement. Several people said the deal appeared to be on the rocks. The Commerce Department declined to comment.
“The Nippon case reveals a flaw in the Cfius process where a member like USTR, which has neither national security nor posed a specific risk from this transaction, can make a major geostrategic misstep,” said a former Biden Cfius official -Government.
“Tai is playing a game that will force the Cfius process to become a permanent tool of politicians, unduly expand the scope of what is considered national security and force the US to put in writing that Japan is a threat to represents national security, which is simply “untrue and harmful to American security,” the former official added.
