Chinese National Offshore Oil Company (CNOOC), has dropped its $18.5 bn bid to acquire Unocal, which will now in all likelihood become the property of Chevron. It seems too that several thousand jobs will be sacrificed in order to help raise the cash for the deal, jobs that would have been preserved had CNOOC’s bid been successful. China was going to put up nearly 75% of the purchase price, through both a direct subsidy and a guaranteed loan, thus obviating the need for layoffs.
In throwing in the towel, CNOOC cited “unreasonable” political opposition in the US, and especially, in the congress, which had actively intervened against the proposed sale.
Well, now our congressmen can lay claim to the prescient ability to destroy American jobs not only by ratifying bad agreements like CAFTA, but by helping to jettison good ones, like the CNOOC-Unocal deal.
Oh well. No wonder Mark Twain called the US Congress “America’s only native criminal class”…
Yes, Congress made an issue of “national security”, but Unocal is something like the 43rd largest oil company, and plays only a minor role in direct US energy needs. China in fact may retaliate by imposing tighter controls on US firms buying Chinese companies. There are already restrictions in place for most if not all of the PRC’s energy and defense sector. Telecommunications may follow
It was always a bit dicey for CNOOC. It was competing with a company 20 times its size. Unlike Chinese firms like Haier and Lenover, who shared the costs of *their* bids for overseas companies with private equity groups, CNOOC decided to go it alone. And it was negotiating in the touchy area of US national security concerns. The upcoming Washington visit of Chinese president Hu Jintao in September probably also played a role. Beijing certainly did not want heightened tensions to continue over something that, thanks to the rider in the energy bill, would not be concluded even under the best of circumstances for many months. This entire episode really exposes the hypocrisy of American capitalism, and shows how in many respects, American leadership in the global economy is really geared more toward the banana republics of the 1950s, than toward the new globalized world of today.
China National Offshore Oil Corporation’s (CNOOC) offered to buy Unocal for an incredible $18.5 billion. American oil company Chevron was the next highest bidder at $17 billion. Even though Unocal declined the higher bid for Chevron’s, this offer by the Chinese will not be the last. The increasing demand for oil in China will be a large problem for the U.S. in the near future. Many American’s were against selling Unocal’s large oil reserves to a foreign country. Oil prices will soon soar over a hundred dollars when China’s oil demand surpasses America’s. We will need all of the oil we can get.