- The Washington Times - Thursday, June 30, 2005

The Chinese Foreign Ministry yesterday told the U.S. government not to interfere with a Chinese-controlled company’s bid to buy a California energy giant, triggering objections from American officials and lawmakers who oppose the deal.

The China National Offshore Oil Corp. (CNOOC) submitted an $18.5 billion offer last week for Unocal Corp., the ninth-largest oil and gas company in the United States.

Liu Jianchao, a spokesman for the Chinese Foreign Ministry, told state media yesterday that CNOOC’s unsolicited bid represented “normal commercial activity between enterprises,” according to United Press International.

“Economic cooperation between China and the U.S. serves the interests of both sides, and commercial activities should not be interfered in or distributed by political elements,” the spokesman said.

The CNOOC bid has raised concerns in Washington because the Chinese government controls 70 percent of CNOOC. Some U.S. officials have said they are uncomfortable with the notion of one of the nation’s major energy suppliers falling under the company’s control.

If Unocal accepts an offer from CNOOC, the deal would be subject to a review by the Committee on Foreign Investment in the United States (CFIUS).

Treasury Secretary John W. Snow is chairman of the interagency committee, which reviews foreign purchases of American companies to determine if they should be blocked for national security reasons.

“The affairs of the United States government should be left to the United States,” said Patrick A. Mulloy, a member of the United States-China Economic and Security Review Commission, a federal panel that monitors the economic relations between the two countries and has been critical of CNOOC’s offer for Unocal.

“If we have a statute on the books, [is the Chinese Foreign Ministry] telling us not to enforce it?” Mr. Mulloy said.

Rep. Joe L. Barton, Texas Republican and chairman of the House Energy and Commerce Committee, also objected to the Chinese Foreign Ministry spokesman’s comments.

“The Chinese government should divest itself of the shares in CNOOC and conduct free and open elections in China in the next six months — elections where anyone can run and they don’t have to run as a member of the Communist Party. Let’s elect a totally free Chinese government, and let’s have the government divest itself of that stock, and then we’ll talk,” said Mr. Barton, who wrote President Bush last week to express his opposition to CNOOC’s bid.

Another opponent of the CNOOC bid, Rep. Richard W. Pombo, California Republican and chairman of the House Resources Committee, “would take issue with the use of the term ‘interference,’ ” said Brian Kennedy, a committee spokesman.

“An investigation by the Committee on Foreign Investments in the United States is needed here,” he said.

The CNOOC deal is far from done, though, because Unocal’s board so far is supporting an offer from another suitor, Chevron Corp.

Unocal’s shareholders will vote Aug. 10 on Chevron’s bid, valued at about $16.6 billion, even if Unocal’s board subsequently accepts CNOOC’s bid.

Mr. Barton, Mr. Pombo and some of the other Washington lawmakers who have expressed opposition to CNOOC’s Unocal bid have received more than $100,000 in campaign contributions from Chevron since 2002, according to published reports.

Fu Chengyu, CNOOC’s chairman and chief executive, said Friday that the state-run company would put the deal before CFIUS.

“In preparing our bid, CNOOC Ltd. always anticipated that our merger with Unocal would be reviewed by [CFIUS],” Mr. Fu said.

Mr. Snow said on Tuesday that it is premature to review the proposed Unocal-CNOOC merger because the deal has not been completed.

Once a company seeks a review, the interagency committee contacts the parties and makes a determination about whether the sale should proceed, a Treasury Department official said.

A senior Senate aide said Congress may conduct its own review of the national security issues related to the bid.

CFIUS approved the Chinese company Lenovo’s purchase of IBM’s personal-computer unit in March, which was opposed by some U.S. national security officials who said the sale would boost China’s military.

A Pentagon official said the CNOOC bid may be the first step in a concerted Chinese effort to purchase American oil companies.

Bill Gertz contributed to this report.


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