(Recasts, adds U.S. government comment, analyst comment)
By Matt Siegel
SYDNEY, March 18 (Reuters) - Australia plans to extend its scrutiny of overseas investment to include infrastructure sales by state governments, following an outcry over the leasing of a northern port to a Chinese firm said to have close ties to the country's military.
The federal Foreign Investment Review Board will be given oversight of the sale of critical infrastructure assets, Treasurer Scott Morrison said on Friday, with some A$20 billion ($15 billion) of state privatizations currently in the pipeline.
The Landbridge Group, owned by Chinese billionaire Ye Cheng, was chosen by the Northern Territory government last year to operate the strategic commercial and military Port of Darwin in a 99-year deal worth A$506 million. Prime Minister Malcolm Turnbull publicly defended the deal following reports that U.S. President Barack Obama had expressed anger at Turnbull for not having informed him of the deal. is a hub of cooperation between a rotation of U.S. Marines, as well as the terminus for a critical underwater data cable.
"From 31 March this year the Foreign Investment Review Board (FIRB) will formally review critical infrastructure assets sold by state and territory governments," Morrison told reporters in Canberra.
"While governments can and do work with the Commonwealth when selling such assets, the proposed change will formalise the process."
Upcoming major privatizations include the ports of Melbourne and Fremantle and Australian electricity distributor Ausgrid, but the change was unlikely to affect the sale process, said lawyer Simon Haddy, a partner at Herbert Smith Freehills.
Most Australian state governments already regularly consult with FIRB on strategic sales to overseas firms, he said.
"I think it's part of a trend of formalising these processes and broadening the nature of what the Australian national interest is ... with an increasing focus on, particularly those broader issues of national security and the national revenue base," he told Reuters.
Morrison said the changes would not be retroactive.
Although it is officially listed as a private company, Landbridge chairman Ye is a delegate on the advisory body to China's rubber stamp parliament, a high-profile but largely ceremonial position handed out to Communist Party backers.
The Australian Strategic Policy Institute called the Landbridge Group a "front" for China's People's Liberation Army in a paper published last year.
A U.S. embassy spokeswoman said Australia alone was responsible for determining its sovereign criteria for foreign investment.
"As Treasurer Scott Morrison said, it is important that critical infrastructure sales are scrutinized to ensure any potential national security risks can be addressed," the spokeswoman told Reuters under the condition of anonymity.
($1 = 1.3074 Australian dollars)