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Chinese Attempt to Acquire Unocal Stirs Fears in U.S.; Concerns Raised on Energy Supplies, National Security

Posted on: Thursday, 30 June 2005, 18:01 CDT

WASHINGTON -- The prospect of a Chinese oil company gobbling up an American one has stirred up fears that U.S. energy and national security are at risk.

Two Texas congressmen urged President Bush on Tuesday to oppose CNOOC Ltd.'s $18.5 billion bid for Unocal Corp., arguing that "this transaction poses a clear threat to the energy and national security of the United States."

Two other letters signed by lawmakers have raised similar concerns.

But experts on Asia, energy and national security contend that while the implications of the offer for Unocal deserve serious consideration, they are anything but clear.

CNOOC said when it made the offer for Unocal that it was prepared to negotiate the divestiture of certain Unocal assets that U.S. officials deem too important to national security.

Such assets could include Unocal's stake in the Colonial Pipeline, which delivers fuel from the Gulf Coast to the Northeast, as well as oil terminals it owns that feed into the nation's Strategic Petroleum Reserve, according to a source familiar with talks taking place in New York on Tuesday between the two companies.

The top concern is that CNOOC's bid for Unocal is part of a broader strategy by communist China -- a considerable financial backer of the deal -- to hoard energy supplies before they run out.

"The Chinese government is going after these energy supplies to control them and lock them up," said Richard D'Amato, chairman of the U.S.-China Economic and Security Review Commission.

The other major source of concern for those opposed to CNOOC's bid for Unocal is that the U.S. might unwittingly give away technology or assets that have military value.

In the letter they sent to Bush, Reps. Joe Barton and Ralph Hall alluded to "highly advanced technologies" that Unocal and other energy companies use to drill for oil and natural gas that could also be used for military purposes.

"Given the potential military threat posed by China to our allies in Asia and our security interests, it is of the utmost importance that U.S. export control laws be strictly applied to ensure that no sensitive technology falls into the hands of the Chinese government - - or, through China, other more dangerous regimes around the world ...," they wrote.

Source: Columbian

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