Ex-chief of CIA opposes sale of oil firm to China
By Steve Lohr The New York Times
FRIDAY, JULY 15, 2005
WASHINGTON A former CIA director has testified that China National
Offshore Oil Corp.'s bid for Unocal should be seen as part of that government's
strategy for energy security in competition with the United States and that the
American government should consider preventing such a deal.
"This is a national security issue," R. James Woolsey, CIA director in
the Clinton administration, said Wednesday at a hearing of the House Armed
Services Committee. "China is pursuing a national strategy of domination of the
energy markets and strategic dominance of the western Pacific."
Testimony before the committee came as Unocal's directors were preparing
to meet on Thursday in El Segundo, California, to review the $18.5 billion bid
from China National Offshore Oil, or Cnooc, executives involved in the
negotiations said.
Unocal's board was to look at several new provisions Cnooc offered as it
sought to persuade directors to accept its bid. Cnooc is racing an Aug. 10
deadline, when Unocal shareholders get to vote on a $16.8 billion offer made by
Chevron in April. Cnooc, which has been in talks with Unocal since June 22, has
added several concessions and safeguards to its offer, seeking to ease worries
that the deal could be stalled or blocked by the U.S. government.
These include a commitment to divest certain assets if needed to secure
government approval, an escrow account of $2.5 billion to protect Unocal if
Cnooc were to break any part of its deal and a separate $500 million break-up
fee. Cnooc may still hold another card. The company's board has authorized its
management to increase the bid if necessary, the executives said.
But in Washington on Wednesday, a prominent congressman said he might
introduce legislation to block Cnooc from buying Unocal, even if a deal were
approved by shareholders and by the government panel that reviews corporate
takeovers by foreign enterprises.
"I think it would be a mistake to let a Cnooc deal go through," said
Representative Duncan Hunter, Republican of California, chairman of the Armed
Services Committee. "I want to keep all options open."
Congress has the power to regulate commerce with foreign nations, under
the Constitution, Article I, Section 8. Yet it is uncertain that legislation to
thwart a single takeover - the step Hunter mentioned - would go very far.
But Hunter's comment, and other comments at the congressional hearing,
point to the depth of political opposition that Cnooc faces in its bid for
Unocal. The more political uncertainty that surrounds the Cnooc bid, the
greater the financial risk for Unocal shareholders.
Three of the four witnesses at the hearing made the argument that Cnooc's
attempt to buy Unocal, a midsize U.S. oil company, should be regarded as a
matter of national security.
Their case, in summary, is that Cnooc is an arm of the Chinese
government, which is engaged in a strategic campaign to control oil assets
worldwide, and that its energy strategy helps feed China's military ambitions.
Aiding these Chinese aims, they said, may also strengthen the hand of a
centralized Communist government often criticized for its human rights record.
The government-owned Cnooc, Woolsey said, was "an organ, effectively, of the
world's largest Communist dictatorship." Allowing Cnooc to buy Unocal, he
added, "should be beyond the pale, given the nature of the Chinese government."
The witnesses making the national security argument had intelligence and
military backgrounds. Jerry Taylor, an energy economist from the Cato
Institute, a libertarian free-market policy group, presented a very different
view of the Cnooc bid.
The fear that Cnooc may be a step in a Chinese mercantilist strategy of
buying and hoarding energy assets to obtain an "oil weapon," Taylor said, was
"very ill-founded." Oil, he noted, is a widely traded global commodity. Owning
petroleum in the ground gives a country no real security from sudden spikes in
oil and gas prices.
In the late 1970s, Taylor said, Britain was self-sufficient in oil
because of its North Sea fields. Japan, by contrast, was entirely dependent on
imported oil. Britain paid as much for its oil as Japan did.
"Because you have a world market for oil, it did not matter that Britain
had reached the holy land of oil self-sufficiency," Taylor said.
But the witnesses concerned about national security pointed to statements
by Chinese government officials emphasizing the importance of owning oil and
gas reserves to enhance China's energy security.
"The Chinese don't care what the price is; they want access to the oil,"
said C. Richard D'Amato, chairman of an advisory panel to Congress on economic
and security matters. D'Amato and other witnesses called for legislative change
to broaden the mandate for the Committee on Foreign Investment in the United
States, or Cfius, a multiagency government group that reviews takeovers by
foreign companies for national security concerns. The witnesses said national
security reviews must include economic security, including oil supplies, and
that Congress must over see the committee's deliberations.
The investment committee reviews, said Frank Gaffney Jr., a former senior
Defense Department official in the Reagan administration, should be "a far more
rigorous, transparent and national-security-minded process for evaluating
Chinese investments like Cnooc's proposed purchase of Unocal."
Andrew Ross Sorkin and Jad Mouawad contributed reporting for this article
from New York.
[Non-text portions of this message have been removed]
***************************************************************************
Berdikusi dg Santun & Elegan, dg Semangat Persahabatan. Menuju Indonesia yg
Lebih Baik, in Commonality & Shared Destiny. http://www.ppi-india.org
***************************************************************************
__________________________________________________________________________
Mohon Perhatian:
1. Harap tdk. memposting/reply yg menyinggung SARA (kecuali sbg otokritik)
2. Pesan yg akan direply harap dihapus, kecuali yg akan dikomentari.
3. Lihat arsip sebelumnya, http://dear.to/ppi
4. Satu email perhari: [EMAIL PROTECTED]
5. No-email/web only: [EMAIL PROTECTED]
6. kembali menerima email: [EMAIL PROTECTED]
Yahoo! Groups Links
<*> To visit your group on the web, go to:
http://groups.yahoo.com/group/ppiindia/
<*> To unsubscribe from this group, send an email to:
[EMAIL PROTECTED]
<*> Your use of Yahoo! Groups is subject to:
http://docs.yahoo.com/info/terms/
