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China Bid for US Oil Company Sparks Political Backlash


China's plan to take over a U.S. oil company poses a threat to U.S. National security. That's the view of some American lawmakers who are conducting a war of words with the Chinese government over the deal.

China's growing energy demands have caused trouble with the U.S. Congress. At issue, an $18.5 billion bid by CNOOC, the Chinese National Offshore Oil Company to take over California-based Unocal, the 9th largest oil producer in the United States.

U.S. lawmakers say the unsolicited bid, $2 billion more than an offer from another U.S. oil company, Chevron, would give China control over a slice of the U.S. energy supply.

Last month, the U.S. House of Representatives approved a resolution urging President George Bush to block the deal. Congressman Joe Barton, head of the Energy and Commerce committee says, given the military threat posed by China, U.S. export laws, he said, "...must ensure that no sensitive technology fall into the hands of the Chinese government."

Senator Charles Schumer called China's trade practices unfair. He said, "Would the Chinese freely allow an American company to take over a Chinese company?"

Chinese Government officials fired back, accusing U.S. lawmakers of political interference in a normal commercial activity.

Chinese Foreign Ministry spokesman, Liu Jianchao says he hopes "that economic interaction and exchange between China and the U.S. can be developed in a healthy way without disturbance."

But a Chinese remark that Congress should change it's, quote, "mistaken ways", caused angry lawmakers to block the funds needed for a federal security review of the CNOOC bid.

Daniel Ikenson, a trade policy analyst at the CATO Institute believes the move could backfire. He says they can play hardball. "China is in a unique position in the sense that their government makes a lot of buying decisions, so as a result, when the U.S. does something to throw a wrench into the business process, China can respond by saying, we're not going to buy those Boeing aircraft, we'll buy Airbus or we're not going to buy U.S. wheat and soy, we'll buy it from Brazil instead. I think they can make the climate much more difficult for U.S. investors in China."

Analysts expect China's buying spree to continue as its economy expands. Last year, China's largest computer company bought IBM's Personal Computer business and last month, a Chinese appliance maker expressed interest in buying U.S. rival, Maytag.

The bid for UNOCAL is the largest and most ambitious acquisition attempt yet by a Chinese Company but some analysts say, like the others, it would have little or no impact on American consumers.

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