Is the Chinese government’s bid to takeover Unocal a threat to the U.S. economy or national security?

Don’t Panic!... Your war questions answered


For most of the 19th and 20th centuries, China was a wreck. The once great nation that brought the world gunpowder, spaghetti, really long walls, and sauce that somehow manages to be simultaneously sweet and sour, had fallen on hard times. China was an obscenely poor country that was constantly being trampled by foreign invaders. When China finally got the foreigners out in 1949, things actually got worse. The power that replaced them was the dictatorship of Mao Zedong, a man whose savage disregard for life made Hitler seem like a softy.

China’s rapid turnaround began in the 1980s, when Deng Xiaoping turned China into a commie-capitalist hybrid. By the mid-1990s, China had become the world’s leading producer of cheap plastic crap. Today, the country is a lot more than that. Buoyed by cheap labor, undervalued currency, and a government that protects and promotes industry, China is the low, mid and high-tech factory to the world.

China’s ascent has people in the former factory to the world, the United States, starting to feel a bit queasy. America’s manufacturing jobs are now China’s manufacturing jobs. Queasiness turned into dry heaves recently when China’s state-owned China National Offshore Oil Corporation made a bid to buy the California-based oil company Unocal.

A lot of people have reacted to the offer with a feeling of “Oh shit, the Chinese are trying to take over the oil industry, too.” Well, relax. They’re not.

CNOOC’s bid for Unocal doesn’t threaten our energy security or economy any more than Chinese appliance maker Haier’s recent $1.3 billion bid for Maytag threatens America’s clean laundry supply.

China is indeed bidding on Unocal because it wants access to Unocal’s Asian-based oil and gas reserves, but it’s a defensive move, not an aggressive one. China is already the world’s second-biggest fuel importer after the U.S. With some projections showing China’s petroleum use quintupling in the next 15 years, it makes perfect sense for China to want to secure as much oil and gas as possible by buying a company that owns oil and gas reserves near China.

So, let’s just go for the worst case scenario and say that China buys Unocal and commandeers all of Unocal’s oil and gas production for use in China. What would be the effect on the U.S. economy?

Absolutely none. Unocal is America’s ninth-largest oil producer, but it’s responsible for a mere 1 percent of the oil and 1 percent of the gas that Americans consume. Besides, oil as it is bought and sold on world markets today is a fungible commodity. If China takes all of Unocal’s oil, that’s just oil that they’re not buying on the world market.

Owning Unocal gives China approximately zero leverage over the U.S. economy. It’s really as simple as that.

If foreign influence over American energy supplies and prices is your concern, the country you need to be biting your nails about isn’t China, it’s Venezuela. Venezuela’s state-owned oil company owns six American oil refineries and Citgo, the fourth-largest gasoline supplier in the U.S. And Venezuela is run by a man, Hugo Chvez, who every now and then threatens to quit selling oil to the U.S. If a Chavistic whim, or more likely, political or labor unrest in Venezuela kills or reduces Venezuela’s oil exports, Americans will see an almost immediate spike in gasoline prices and the U.S. economy will take a hit.

Our biggest long-term energy worry isn’t what’s happening in other countries, anyway. It’s what’s happening here. Our economy is dependant on foreign sources for more than half our own oil. And, as you’ve no doubt figured out in the past few years, oil is a resource that has a knack for pooling underneath some of the world’s rottenest, most unstable countries.

Congress had the chance to address that problem via the energy bill it just passed, but it did not. It boggles the mind, but the energy bill they passed neither mandates nor encourages car makers to make cars (the place where most of oil goes) more fuel-efficient. The reason is bipartisan and simple. Republicans are beholden to oil companies (Bush and Cheney are, after all, former oil executives) and Democrats don’t want to piss off unionized auto workers who work on SUV assembly lines.

In the meantime, though, the House just passed 333-92 a bill that attempts to block China’s purchase of Unocal. Another nonproblem solved.