A Dilemma’s Horns

4 July 2005



Chinese Bid for Unocal Hits Congress Roadblock

The American conservative movement may be triumphant in shifting the US Supreme Court hard to the right for the next generation, but to suggest that all is well on the right side of the political spectrum is a bit much. The coalition of libertarians, Wall Street and the Christian taliban shows signs of cracking. Nowhere is it more obvious that over the Chinese National Overseas Oil Company’s bid to buy Unocal. The bid tops any American offer, but the GOP-controlled House of Representatives voted 333-92 last week to prevent it. Security and patriotism are at odds with the free market.

Unocal, which is probably better know as the company with the Union 76 gas stations, has been up for sale for a while, and Chevron bid $16 billion and change to acquire it. Shareholders vote on August 10, and management has already advised them to accept. Since that recommendation, CNOOC bid $18.5 billion for America’s ninth-largest oil refiner, but management has sent a letter since then reiterating its preference for the Chevron bid.

The all-cash CNOOC offer would give shareholders more for their investment, and CNOOC says it will result in fewer job losses than the Chevron offer. Chevron has argued that its offer has already passed muster with the regulators, and the CNOOC offer, if preferred, would start the whole review process over and delay the deal.

Less subtly, Congresswoman Carolyn Kilpatrick, (D-MI), the legislation’s sponsor, said, "This is not the time to now sell our ninth largest oil refinery to a Chinese company." Normally, a Democrat can’t get anything passed in the House, but this time, fewer than 100 Republicans opposed the idea. But Republicans are nationalists as well as free-traders. Congressman Joe Barton (R-TX) is chairman of the House Energy and Commerce Committee, and he has decided hearings are needed after the July 4 holiday. Since the Chinese government owns 70% of the CNOOC, it is a "a front company for the Communist Chinese government."

This isn’t as big an issue as the Supreme Court appointment will be for the right, but there are some harsh words and hard feelings ahead. And those who come off on the wrong end of it may well get “primaried.” That means that even in a very safe Republican seat, no incumbent is safe because the upset faction will put up and fund a challenger in the primary election. Interesting times indeed.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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