When the
Introduction
Unocal. After Congress amended the Energy
Policy Act of 2005 (H.R. 6) in late July--to
China hawks in
require a lengthy review of the proposed
In its 2005 Annual Report to Congress on the
Congress joined
takeover--CNOOC abandoned its $18.5 bil-
Military Power of the People's Republic of China,
forces with the
lion bid for Unocal on August 2.
the Pentagon described U.S.-China relations
Although Congress used national security
as "cooperative, candid, and constructive."
protectionists, a
arguments to justify the close scrutiny of the
The report stated, "The United States wel-
strong (and
proposed CNOOC-Unocal deal, the relatively
comes the rise of a peaceful and prosperous
small size of Unocal convinced most experts
China" but warned that with growing wealth
dangerous)
that the security card was really just a ploy to tilt
the PRC will be able to modernize its military
coalition was
the deal in favor of the other suitor--California-
and could pose a "credible threat" in East
formed.
Asia and beyond.1
based Chevron. Indeed, Chevron is located in
the congressional district represented by the
One growing concern voiced both by the
chairman of the House Committee on
Pentagon report and by Congress is that China's
Resources, Richard W. Pombo, the very person
demand for direct ownership of oil and gas and
responsible for amending H.R. 6 to require that
other "strategic assets" will pose security risks,
the Department of Energy, along with the
particularly if China acquires U.S. energy com-
Departments of Defense and Homeland Secur-
panies. In a congressional hearing on July 13,
ity, conduct a 120-day study on the economic
Frank Gaffney Jr., president of the Center for
and security implications of China's growing
Security Policy, told the House Armed Services
demand for energy. An important provision of
Committee that the sale of Unocal Corp. to
that amendment was that the White House
CNOOC, Ltd. (hereafter CNOOC), a Hong
could not approve the CNOOC offer until 21
Kongbased subsidiary of China National
days after the DOE study was completed. By
Offshore Oil Company, "would have adverse
adding as much as 141 days to the takeover
effects on the economic and national security
process, Congress undermined CNOOC's
interests of the United States." He pointed to
incentive to continue the bidding war with
"the folly of abetting Communist China's effort
Chevron and convinced Unocal's board to
to acquire more of the world's relatively finite
accept Chevron's cash-and-stock offer valued at
energy resources" and warned of "the larger and
$17.7 billion.4
ominous Chinese strategic plan of which this
purchase is emblematic."2
In scrapping its bid, CNOOC management
said that "unprecedented political opposi-
Such fears are evident in the flurry of anti-
tion" made it impossible to successfully com-
China resolutions and bills introduced by
pete with Chevron by "creating a level of
members of Congress around the time of the
uncertainty that presents an unacceptable risk
CNOOC-Unocal bid. On June 30 a nonbind-
to our ability to secure this transaction."5 That
ing House resolution (H.R. 344) recommend-
ing presidential review of the CNOOC deal
complaint reflected an earlier statement by the
passed by a vote of 398 to 15. In a letter to
Chinese foreign ministry: "We demand that
President Bush, House Energy and Commerce
the U.S. Congress correct its mistaken ways of
Committee chairman Joe Barton (R-TX)
politicizing economic and trade issues, and
declared, "We urge you to protect American
stop interfering in the normal commercial
exchanges."6
national security by ensuring that vital U.S.
energy assets are never sold to the Chinese gov-
Although Chevron is the clear winner, con-
ernment."3
gressional interference in what should have
been primarily a market transaction sets a dan-
When the China hawks in Congress
gerous precedent and could jeopardize U.S.-
joined forces with the protectionists, a strong
China relations. The firestorm on Capitol Hill
(and dangerous) coalition was formed to
surrounding the CNOOC bid for Unocal is
effectively end any chance that CNOOC
merely one case in the rising anti-China trend.
would be successful in its bid to acquire
2