Economic imperialists undermine free market principles

PUBLISHED : Monday, 18 July, 2005, 12:00am
UPDATED : Monday, 18 July, 2005, 12:00am

As CNOOC's US$18.5 billion bid for the US-owned oil company Unocal reaches a crucial stage, the political odds are stacking up against what should have been a normal business deal.

US congressional opposition to the bid, organised and fanned by the highly paid lobbyists of rival bidder Chevron, is escalating into a storm of anti-China fervour.

CNOOC's bid looks increasingly fragile, no matter whether it further raises the purchasing price or offers more financial incentives to Unocal shareholders.

CNOOC has become a pawn in the hands of some US congressmen and politicians seeking to heighten fears of a China threat. Washington politics have replaced free market principles as the key factor driving the debate over CNOOC's bid.

This is a pity. If CNOOC's bid fails because of the political factors, the ramifications will be far reaching.

This would be a hard blow to the internationalisation efforts by the mainland's best-run companies seeking business opportunities in the US and other western nations. Home appliances giant Haier's quest to take over Maytag is also in doubt.

This will most likely drive the Chinese government and mainland oil companies to turn to Russia, Iran and Central Asian republics for oil deals.

Furthermore, the Chinese government is also likely to follow the United States lead and erect more regulatory hurdles for US oil companies seeking to expand in the mainland's huge energy market.

As many analysts have pointed out, this current round of anti-China fervour is perhaps going too far. Chevron Corp, the rival bidder for Unocal, is seen as the main instigator.

The Washington Post reported on Saturday that Chevron has engaged lobbying staff including such Washington heavyweights as Wayne Berman, a top fund-raiser for President George W. Bush, and former commerce secretary Mickey Kantor.

It said Chevron began to lobby US congressmen even before CNOOC announced its bid last month, playing on some lawmakers' national security and trade fears, long-standing human rights concerns and the long-time friendliness towards the oil industry of certain lawmakers.

It seems Chevron's massive lobbying efforts are yielding impressive results. The irony will not be lost on many mainland oil executives and government officials that Chevron has extensive business interests and is pumping 18,000 barrels of oil a day on the mainland.

Peter Robertson, Chevron's vice-chairman and the fiercest critic of the CNOOC bid, gave a keynote speech at a petroleum conference in Beijing last October; hailing China's emerging role in the global oil industry and urging its oil companies to invest abroad.

'China is already moving in a positive direction by investing in energy ventures abroad and participating in international joint ventures.

'This rapid buildup in activity has been very impressive to your global competitors, and we look forward to participating with Chinese oil and gas companies in some of these international ventures,' he said in the speech which was posted on Chevron's own website.

To put it more bluntly, Chevron's tactics represent one raw form of economic imperialism at work - meaning that we play the game in whatever form we want, and

you will have to play along or get out.

Judging the deal from a purely business perspective, the all-cash bid by CNOOC is superior to Chevron's cash and stock bid. If CNOOC fails in the end, nobody is a clear winner, not even Chevron, which is likely to antagonise mainland officials and oil companies.

Perhaps it is time President Bush called President Hu Jintao to talk some politics.