(Repeats story with no changes)
By Dave Sherwood
SANTIAGO, March 20 (Reuters) - A global battle for lithium has landed in the office of a tiny Chilean regulator, which may decide a winner as it reviews a petition to block Chinese firms from buying a stake in top producer SQM .
The scramble for lithium, used in rechargeable batteries for mobile phones to electric vehicles, is pitting the Chilean government against China and, potentially, the independent regulator against the Latin American country's new business-friendly government.
The National Economic Prosecutor's office, known by its Spanish initials FNE, is set to review the sale by Canada's Nutrien Ltd of a 32 percent stake in Santiago-based SQM for more than $4 billion to Chinese bidder Tianqi Lithium or any state-backed firm. Chile's development agency Corfo said in a complaint on March 9 that the transaction would "gravely distort market competition."
Together, Tianqi and SQM, the world's second biggest lithium producer after U.S.-based Albemarle Corp, would control 70 percent of the global lithium market, the document said.
The agency's petition, filed two days before a new Chilean government was sworn in, has put the spotlight on the FNE, which has an annual budget of $11.5 million and 115 staff.
Last week, a senior government official said it "must closely analyze the consequences," noting that "generally" Chilean policy is not to block transactions because of nationality.
The FNE has until August, with the possibility of further extensions, to determine whether to launch an investigation. While the prosecutor is a political appointee, only a majority vote of the Supreme Court can remove him or her, a safeguard designed to ensure the entity's autonomy.
"The FNE is considered to be a model agency ... and very free of political interference," said lawyer Felipe Cousino, who has represented clients in cases before the agency. Its limited resources have forced it to select those issues with the largest impact on consumers, he added.
The FNE declined to comment.
The FNE has broad scope to investigate a case even if a complaint is not filed.
It has prosecuted Chile's football association over league entry rules and charged Chilean forestry company CMPC with colluding for at least 10 years to inflate toilet paper prices.
Last year, the FNE approved the merger of AT&T Inc and Time Warner Inc with conditions to minimize risks to consumers and competitors.
University of Chile law professor Francisco Aguero, a former director of the university's Center on Regulation and Competition, said any final decisions in the SQM-Tianqi case was unlikely by August.
The term of the current prosecutor, Yale-educated lawyer Felipe Irarrazabal, is set to expire on Aug. 5.
"When the new prosecutor arrives, he's going to hand him a folder. (Irarrazabal) won't have time to reach a preliminary decision to toss the case out before then," Aguero said.
FNE may decline to pursue the case, launch a full investigation, or review it under an expedited procedure.
If it decides to investigate, it can settle with the parties, shelve the case, or bring it before Chile's TDLC antitrust court, a five-member panel of lawyers and economists.
The clock is ticking.
Canadian fertilizer company Nutrien is selling its stake in SQM as part of pledges to regulators who approved this year the merger of Agrium and Potash Corp of Saskatchewan, which created Nutrien. SQM also has significant fertilizer production.
Indian and Chinese regulators have given Nutrien until next March to divest the SQM stake.
Nutrien has said it wants to close the deal by year's end, while lithium prices remain at all-time highs.
It was unclear if Corfo's complaint, if upheld, would block all potential Chinese bidders for the stake. (Reporting by Dave Sherwood; Editing by Amran Abocar and Richard Chang)