Secretive US panel could block China's Unocal bid

[HenryTo]

The stakes continue to get higher. Could this potential further strain U.S.-China relations? Obviously, Chevron cannot afford to go into a bidding war with the Chinese government. Best case scenario now is for Chevron to sweeten its offer and for Unocal to accept that offer. We will see.
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Saturday June 25, 6:31 AM
Secretive US panel could block China's Unocal bid
WASHINGTON, June 24 (Reuters) - If Unocal Corp. accepts an $18.5 billion takeover by China's CNOOC Ltd. the deal's fate may hinge on how a secretive U.S. review panel defines "national security," experts said on Friday.
"The primary question for this transaction is whether they consider energy security to be a national-security issue," said Michael Wessel, a Democrat and a member of the U.S.-China Economic and Security Review Commission.

Wessel said the Bush administration, so far, had restricted the definition of national security.

State-owned CNOOC's unsolicited bid trumped a roughly $16.4 billion offer from Chevron Corp. and coincides with record oil prices, unease over China's $160 billion trade surplus with the United States and concerns about its growing military might.

The 12-member Committee on Foreign Investment in the United States, or CFIUS, is chaired by the Treasury secretary and brings together top White House aides, the secretaries of State, Homeland Security, Defense, Commerce and Justice and the U.S. Trade Representative.

Under a 1988 law, the president may deny a foreign acquisition of a U.S. corporation only if a CFIUS review establishes two things:

-- credible evidence that the foreign entity seeking control might threaten national security and;

-- relevant laws do not provide adequate authority to protect national security.

In 2003, a CFIUS review led to the collapse of a bid by Hong Kong-based Hutchison Whampoa> to buy then-bankrupt telecommunications company Global Crossing.

But China's Lenovo Group Ltd. was approved to buy IBM's personal computer business this year despite objections from some China critics and a CFIUS review.

Since taking shape 17 years ago, CFIUS has reviewed 1,560 cases, only 25 of which involved expanded 45-day investigations. A CFIUS review normally takes 30 days.

Unocal, the ninth largest U.S. oil and gas production company, has extensive holdings in Asia. If CNOOC succeeds, it would mark the largest overseas purchase by a Chinese firm.

Voicing concern over China's mounting clout, the chairman of the House Small Business Committee, Rep. Donald Manzullo, an Illinois Republican, said Thursday:

"We must reform the CFIUS process to consider economic security as part of national security," Manzullo said.

The law creating CFIUS does not define national security. CFIUS reviews typically have focused on whether proprietary U.S. technology with strategic uses is available elswhere.

Wessel said any CFIUS review would have to look at whether any Unocal oil-drilling and oil-prospecting technologies could help China test nuclear weapons or mask such tests.

But CNOOC's bid raises a potential new concern -- that it could help China corner oil supplies, threatening U.S. security by jeopardizing its energy resources and economy.

The prospective CFIUS review would be the first to focus on a natural resource company, according to William Reinsch, a Commerce Department undersecretary under President Bill Clinton. "In that sense, it's groundbreaking," he said.

Reinsch, president of the National Foreign Trade Council, a private business group, said a key issue likely would be the productive capability that China may be "locking up for 10, 15, 20 years from now," not just current supplies.

Still, not all analysts perceived a security threat.

James Lewis, a technology transfer expert at the Center for Strategic and International Studies, said CFIUS should not have any concerns about a Unocal purchase.

"From a security perspective, it's as much of a threat as when the Japanese purchased (New York's) Rockefeller Center," he said by email.

[nodoodahs]

Of course it's a "security threat" for China to buy Unocal.



Part of our original reason for going to war with Afghanistan (remember that one?) was the negotiations for the pipeline were falling through. Washington felt that "regime change" i.e. illegal war was necessary to secure rights for a U.S. company to provide pipeline construction and management. That company? Unocal.

It makes perfect sense from China's strategic perspective for China to purchase Unocal, not only from the collateralization of dollars angle, but also based on where Unocal's reserves are located, and the history of Unocal's plans in the mideast region.

Afghanistan has only limited oil or gas reserves, but it straddles the most direct route for exporting oil and natural gas out of Turkmenistan, where the gas reserves alone are estimated at over 100 trillion cubic feet, or the fourth largest proven natural gas reserves in the world.

The best thing for my investment in CVX is for either (1) China to overpay for Unocal or (2) for the "secretive U.S. panel" to bar the purchase by China and CVX to get Unocal with their current bid. Of course the U.S. will look like hypocrites because we recently got onto Russia for their saying "nyet" to U.S. investments of Russian oil companies - but the world already knows that the U.S. is hypocritical in foreign policy so there's no real damage there.



The best thing for the world is for China to be allowed to purchase Unocal. It would defuse the situation somewhat and help destabilize the U.S. empire ...

http://news.bbc.co.uk/1/hi/business/1984459.stm
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2001/09/26/MN70983.DTL
http://www.lewrockwell.com/orig/sardi7.html
http://www.antiwar.com/justin/pf/p-j072902.html
http://www.antiwar.com/spectator2/spec615.html
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