So says the Financial Times:
Washington lawmakers who have expressed opposition to China National Offshore Oil Corporation’s $18.5bn bid for Unocal, the California energy company, have received more than $100,000 in campaign contributions from Chevron since 2002, according to publicly available filings.
It has raised questions over whether Chevron is drumming up a campaign of opposition to the deal. A person close to CNOOC charged that Chevron was using its political clout in Washington to try to increase uncertainty over the high CNOOC bid for Unocal.
“Chevron does not want to do the math, that $67 per share is higher than $60 per share. It is cheaper for Chevron to raise political uncertainty than it is for them to raise their bid,” the person said.
That was followed by a similar letter signed by 41 House Republicans and Democrats, of which 22 had received political contributions from Chevron in the past three election cycles. Joe Barton, the powerful Republican chairman of the House energy committee, on Tuesday became the first lawmaker to urge Mr Bush to block the takeover bid rather than simply reviewing its national security implications. Mr Barton was the second largest congressional recipient of oil and gas money in the 2004 elections, taking in more than $224,000. Chevron’s contribution to his campaign was $6,500.
This effectively means that it becomes impossible to know if these reps actually believe the arguments they are giving, or if they are just justifying their donations viz. Chevron. For Chevron, it certainly makes sense to bring political factors in the game (it’s a lot cheaper for them), and it is logical for them to expect this to be payback time for all their donations:
But who will express the legitimate national interests of the USA in this story? Can the congressmen be trusted to do so? Can anyone else?
Personally, I think that the sale should go ahead. The guy with the most money gets the oil, irrespective of the nationality of the oil producer or of the oil company. Chinese ownership of Unocal will not prevent their oil form being sold on the international oil markets, one of the most liquid markets in the world, and it will not make it possible for US oil production or refining capacity to be shipped to China against US’s wishes. It’s just not possible.
But the question should be raised, and the relationship between China and the USA in the energy sector in general and oil in particular should certainly be discussed publicly – and by representatives unbiased by corporate money.
This reminds me of the panic over Japanese purchases — when was that — in the late 70s? We recovered and I think many Japanese rued teh day …
Was it Krugman or someone else that wrote recently that the Chinese were going at it much more smartly than the Japanese – focusing on real industrial assets or valuable brands instead of prestige assets, paying reasonable prices and not over-the-top amounts (which the Japanses could afford thanks to their then ongoing massive real estate bubble).
They ahve the storng motivation that they ahve this huge pile of dollars that could one day be worth much less – they might as well use it to buy real stuff – and possibly (i) learn things and (ii) actually make more money…
I’m glad I’m nto the onyl persno who types dyslexically sometimse.
I’ll toss you a twist; Something I saw on Free Speech TV (a great channel available via satellite) made me think of it.
If we “up” our miliary presence in the Far East, will that force China into an arms race that’ll slow down its economic growth?
Campaign contributions have long since adapted themselves to laws of nature: deceit, mimcry, dissimulation. Pointing out who contributes what to whom is now a futile art.
Perhaps it’s more important to consider China’s national interests. Like the US it will need tens of millions of barrels a day to run, especially in the not so far future.
In the past three year China has seen the occupation of Afghanistan on its Western frontier and the building of the Turkish-Caspian oil pipeline towards the Mediterranean.
This pipeline was built largely with international public funds through the International Finance Corporation and the European Bank of Reconstruction and Development, all under the control of USAid. That means Joe Dollar from Illinois built it, but the profits go to the consortium of Oil Companies that chip in the petty change. Sort of thing that could happen to that Afghan gasline.
Anyway, in 2003 British Gas decides to reconsider their position in the consortium and sell out. Naturally, the Chinese Sinopec and CNOOC want to buy, which meets some very heavy opposition from the American companies, for example ConocoPhillips and, well, Unocal. The Italian ENI crawls under the table and sleeps it out. DutchShell is in a quandry because they already have too many interests in China.
The Chinese are enraged and have the money. (The Russians, too, but they don’t count anymore.) And they, the Chinese, adapt that old Italian adage, “Revenge is best served as a cold plate.”
In the end if Baja California had 10% of the world’s proven oil reserves and a consortium on the other side of the planet were sucking it off on their tax payers’ asses, wouldn’t you pounder your options, short of war?
The Chinese have a pretty large lever here and may be willing to use it. They play hard ball real well with airplane purchases too. I suspect if the Chinese get burned on this deal that Boeing will loose a lot of airplane sales.
We should use this as an opportunity to force the Chinese to turn CNOOC into a real company rather than front company for the government and get a better yuan/dollar balance.
We do have a bit of a checked history here. The last time we played hard ball with oil in the Far East, Japan attacked us.
Chevron announced Wednesday that it had received clearance from the SEC for the issuance of new shares to be used in acquiring Unocal’s stock. Accordingly, Unocal has now set August 10 for a shareholder vote on the Chevron proposal. Prior to the special meeting, Unocal’s board will advise its shareholders regarding the board’s evaluation of the CNOOC proposal.
Since the Chevron deal also received approval from the FTC earlier this month, if the shareholder vote is in favor of the Chevron offer, it would permit the deal to close within a matter of days — should it do so, the CNOOC offer would then be effectively moot. As it stands now, there are no other U.S. regulatory hurdles for the Chevron offer.
In my experience, there is almost certainly going to be a litigation component to the takeover contest, involving multiple lawsuits (filed, threatened or prospective) which at a minimum could invoke these issues, either alone or in combination:
Any competent corporate litigator could probably come up with at least a half-dozen other scenarios, and all of these would go a long way toward destroying a lot of lawyers’ summer vacation plans (though it’s entirely possible that none of the suits would be successful in a meaningful fashion).