Washington opposition forces Chinese to withdraw oil offer

The Guardian ^ | 03AUG05 | David Teather

[familyop]

The Chinese energy firm Cnooc yesterday abandoned its $18.5bn (£10.5bn) bid for US oil and gas firm Unocal, citing "unprecedented political opposition" from Washington.

The bid by Cnooc, which is 71% owned by the Chinese government, sparked a furious outcry in Washington where politicians denounced the offer as a threat to national security.

Some of the more fiery rhetoric characterised the bid as the beginning of a frantic grab by the Chinese for control of the world's energy supplies. California congressman Richard Pombo warned that the deal could have "disastrous consequences for our economic and national security".

Cnooc's decision to pull out means Unocal is likely to accept the lower $17.5bn offer from rival American energy firm, Chevron.

Cnooc left little doubt that its bid had been skewered by politics. Cnooc said it had considered raising its offer further but decided it was not worth it.

"The unprecedented political opposition that followed the announcement of our proposed transaction ... was regrettable and unjustified," it said.

"This political environment has made it very difficult for us to accurately assess our chance of success, creating a level of uncertainty that presents an unacceptable risk to our ability to secure this transaction." The Chinese firm said its objectives had been "purely commercial" and that it would have been prepared to address "any legitimate concerns" held by US officials.

The withdrawal could have broad implications for future trade relations between the US and China, which even before the bid were becoming increasingly strained.

Last week, a House and Senate panel threw another obstacle in Cnooc's path when it called for a 120-day study by government departments to assess the impact on the US of China's growing thirst for energy.

The study would need to be completed before the government's official security review process, the committee on foreign investments in the US, could examine the Cnooc bid.

With Unocal already leaning toward the Chevron bid, the additional delay and uncertainty proved to be decisive. Unocal shareholders are due to vote on the Chevron offer on August 10. A spokesman for Unocal said the company remained convinced that it had accepted the superior offer.

Edmund Harriss, fund manager at Guinness Atkinson, said: "The political reaction has scared off the Unocal board, its shareholders and Cnooc itself. I don't think anybody really anticipated what a maelstrom they were entering into."

Unocal was prized because of its oil and natural gas supplies in Asia and the Gulf of Mexico. Chevron agreed a deal to buy the business in April for $62 a share, but six weeks later Cnooc tried to break the takeover up with an all cash offer of $67 a share.

Washington has become increasingly anxious about the growing economic and military might of China. Emotions are running high as the American market is flooded with cheap Chinese goods and the US manufacturing industry is struggling to compete.

[mcg1969]

Boo hoo!

[vbmoneyspender]

It certainly didn't help matters that the owner of Cnooc (i.e. the Chinese gov't) had a Commie general running around saying that he was prepared to nuke the U.S. if the U.S. helped Taiwan defend itself from a Chicom invasion.