Tuesday, August 02, 2005

CNOOC Drops Unocal Bid

From the Washington Post:
China's CNOOC Ltd. said Tuesday it has withdrawn its $18.5 billion cash offer for Unocal Corp., stating it considered raising its bid, and "would have done so but for the political environment in the U.S."
CNOOC's withdrawal frees the way for Chevron Corp. to clinch its $17.4 billion bid for El Segundo, Calif.-based Unocal.
The NY Times adds:
The monthlong battle for Unocal's assets came to symbolize the growing trade and political tensions between China, the rising power in the East, and the United States, the premier power in the West, but a nation whose economic and political standings are now being challenged.
I would disagree that China is currently in a position to challenge America's standing (although it repeated so often that one might be tempted to believe it) and would point out that America is the premier power in the world, not just the West, but he is correct about the true meaning of the deal-unease about a rising China. It is amazing how easily a country that has the potential to one day rival American power in either the economic or political realm becomes a 'clear and present danger' in the mind of the press, public, and punditry.
It is now quite clear that all of the worry was for naught, but as I blogged more than one month ago there was no reason to worry even if the plan succeeded.

Update: The Economist joins the debate:
The most worrying aspect of the CNOOC episode, however, is what it says about America. The anti-China hysteria in Washington, DC, the cowardly silence of the pro-China business lobby and the blatant disregard for fair play and open markets is deeply disturbing. A second-rank oil firm such as Unocal is not worth such a sacrifice of principles. Blocking CNOOC has not meaningfully increased America's energy security. But it may have damaged American business interests, in China and elsewhere. How could America now credibly complain about, say, French attempts to prevent PepsiCo taking over Danone? Beijing will no doubt use this incident to deflect American pressure to pursue reform in other areas. American politicians, so fond of seizing the moral high ground, have ceded it to, of all people, the Chinese.[...]

But one danger is that, feeling shunned by America and nervous of a similar reaction elsewhere, the Chinese may decide to vigorously pursue less savoury options for getting oil and gas. Unlike America and Europe, China does not preach about human rights and democracy to thuggish dictators. On the contrary, China has happily struck deals with countries, such as Myanmar and Sudan, which face American sanctions or international disapproval. It is also rumoured that China has offered arms and other sensitive defence technology in return for oil and gas rights in certain countries, a trade that may seem even more attractive now that America has blocked open-market purchases.