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US Lawmakers Aim to Block Chinese Takeover of US Energy Firm
By Patrick Goodenough
CNSNews.com International Editor
July 1, 2005
(CNSNews.com) -- The House of Representatives voted Thursday to block a Chinese company's attempt to buy America's ninth-largest oil and gas firm. The vote came hours after China's energy-hungry communist government decried "political interference" in what it called a purely commercial matter.
By a 328-91 vote, lawmakers backed an amendment that bars a Treasury Department committee on foreign investment from spending federal funds to investigate and approve the bid by CNOOC Ltd. to buy California-based Unocal Corp. for $18.5 billion in cash.
A separate measure, introduced by California Republican Richard Pombo and due for a vote on Friday, seeks to declare that the proposed acquisition could "threaten to impair" U.S. national security.
The resolution also calls on the president immediately to initiate a thorough review, should Unocal accept the CNOOC offer.
Earlier, 41 Republican and Democrat lawmakers voiced concerns in a letter to Treasury Secretary John Snow that a CNOOC takeover could compromise national security.
Snow said in a television interview Tuesday that "the national security interest of the United States will always be protected, I can assure you of that."
Hong Kong-based CNOOC says it wants Unocal for its mostly Southeast Asian-based reserves, 60 percent of which are gas.
"It is important to know that 70 percent of Unocal's current reserves are located in Asia, and that is one of the reasons this transaction makes sound business sense for our company," the official Xinhua news agency quoted CNOOC CEO Fu Chengyu as saying.
Although CNOOC is 71 percent owned by a Chinese government-controlled company, China National Offshore Oil Corp., CNOOC denies that the Chinese government or its money would be involved in the deal in any way.
CNOOC said it would finance the purchase through large loans from its parent company, from a Chinese state-owned bank, and from its financial advisers.
CNOOC's unsolicited offer came at a time Unocal was already considering an offer by Chevron Corp. to buy it for $16.6 billion in cash and stock. Unocal's board earlier recommended accepting the Chevron proposal, and stockholders are expected to vote on it next month.
On Thursday, Beijing's foreign ministry spokesman Liu Jianchao said the CNOOC offer should not be viewed from a political or strategic perspective, but be seen as a normal business matter.
"This issue is a commercial transaction between two companies, and a normal exchange between China and the United States," Xinhua quoted Liu as telling a press briefing. "It should stay free of political interference."
Unocal's international projects include operations in Indonesia, Thailand, Burma and Bangladesh, as well as exploration projects in Vietnam.
China has in recent years been strengthening its economic and political links with Southeast Asia, a region where the United States has important strategic and economic interests.
'Projecting Chinese power'
China's state-run People's Daily said in an editorial this week that the "fuss" over the CNOOC offer was tied up with the broader issue of "how America views a rising China."
The bid "has been painted with a thick layer of politics," it complained.
Warning of "hidden motives," the People's Daily said some critics had used phrases like "energy war."
"As China rises, more and more companies like CNOOC have acquired the strength to go global," it said. "Washington will inevitably run into [a] predicament whether it responds with the old trick of 'containment plus contact,' or adopts a strategy of seeking maximum gains while [remaining] on active guard."
Earlier this year, China's Lenovo Group bought IBM's personal computer business but the Unocal deal, if it materializes, would be China's largest acquisition abroad.
According to Irwin Stelzer, director of economic policy studies at the Hudson Institute, China's attempted acquisition spree is "part of an aggressive policy of projecting Chinese power around the world."
"CNOOC is 70 percent state-owned, expected to act in support of the regime's geopolitical objectives," he wrote this week. "That makes a mockery of the Chinese authorities' warning to the American government not to politicize the CNOOC takeover bid."
Stelzer said the Chinese takeover drive echoed a Japanese initiative during the 1980s, but that there were significant differences.
"Japan was not a rival for influence in Asia or in the world; China is. Japan was not a big competitor for scarce resources such as oil; China is," he said.
"Japanese companies were privately owned; China's acquirers are state-run entities. Japan is a democratic country and, by and large, an American ally; China most definitely is not."
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