Chevron told the Financial Times today they wanted to keep Unocal intact, dismissing notions of splitting Unocal up and giving up the Asian assets to China. This means that the battle rages on as Chevron tries to get the Unocal deal done before state-owned Chinese National Offshore Oil Company (CNOOC) get their fingers in too deep.
Back in the spring Chevron made of $16 billion in cash and stocks for the California based oil company known for its orange 76 logo. The deal looked to be moving nicely and then CNOOC slipped in an unsolicited offer of a cool $18 billion in cash.
This game is going to be a real lesson corporate finesse and governmental zeal as many companies weigh in asking the government to basically stay out of the deal. CNOOC has certainly said as much.
The Chinese Foreign Ministry issued a sharp statement on Tuesday,”We demand that the U.S. Congress correct its mistaken ways of politicizing economic and trade issues and stop interfering in the normal commercial exchanges between enterprises of the two countries.”
The Chinese government does have legitimate interest in adding to its own oil reserves. Right now, China imports a tremendous amount of oil from the Middle East, certainly more than the U.S. The Middle East is traditionally politically unstable may or may not be amenable to China, depending on who’s in power in which country. This is a real problem for the Chinese.
According to some critics though, this isn’t the only “primary issue” that needs to be deal with. The Chinese government continues to make aggressive overtures toward U.S. businesses and in so doing critics say, they undermine the basic premise of a free market system.
Dr. Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland and a former director of the Office of Economics at the U.S. International Trade Commission said in a statement Tuesday, “I guess that means the Chinese government does not monitor and regulate foreign investment, license capital flows, peg its currency, or place limits on imports or exports?”
He went on to say China is getting much of it’s funding for this operation from it’s own subsidiary companies and must keep the yuan pegged so low or it will severely disrupt their economy. The problem is keeping the yuan pegged so low is wrecking the U.S. economy.
He maintains Congress must intervene in this process and it is their constitutional duty to do so. The president has his area and Congress has theirs.
“The U.S. Constitution assigns responsibility for foreign commerce to the Congress, just as it assigns responsibility for other aspects of foreign policy to the President. I guess the Chinese government is directing the Congress to ignore its constitutional responsibilities or amend our constitutional system but not to be like its own. It just wants a U.S. government passive to Chinese designs.”
It’s also been suggested that some U.S. companies, like Chevron are worried about this deal and even that Chevron may back off because CNOOC is Chevron’s primary business partner in certain Chinese ventures. Many other U.S. companies are watching this deal very intently, wondering not just the U.S. government will do but also how the Chinese government will act toward U.S. corporations if Washington attempts to slow or nix this deal.
John Stith is a staff writer for Murdok covering technology and business.
