A partially state-owned Chinese company's attempt to take over California-based Unocal is a threat to US security and would give China political leverage in areas where the oil company has resources, members of the US Congress said on Wednesday.
"The simple fact is that energy is a strategic commodity," said House Armed Services Committee Chairman Duncan Hunter, a Republican.
He said Unocal's holdings, which include drilling rights and exploratory capabilities in Asia and elsewhere, "represent strategic assets that affect US national security."
China National Offshore Oil Corp (CNOOC) had offered US$18.2 billion for Unocal, about US$2 billion more than a proposal already on the table from Chevron Corp.
But CNOOC's board has given its managers approval to increase its bid for Unocal, and agreed to pay Unocal shareholders up to US$2.5 billion if it signs a takeover agreement, but a deal isn't completed, news reports said yesterday.
The Unocal board, which was to meet yesterday, said however that it will recommend that shareholders accept the Chevron bid.
A CNOOC spokesman said he couldn't confirm the reports by the South China Morning Post, the Financial Times and the Asian Wall Street Journal.
The Armed Services Committee hearing into the Unocal deal, meanwhile, turned into a broad attack on China. Lawmakers and witnesses dismissed CNOOC claims that its pursuit of Unocal was simply a commercial business deal and not fueled by a broader government strategy to gain control of more global oil and natural-gas assets.
To accept that it's simply a commercial deal "is extraordinarily naive," former CIA director James Woolsey told the panel.
He said CNOOC, a subsidiary of the Hong Kong-based Chinese National Offshore Oil Corp, is 70 percent owned by Beijing, and its top executive was appointed by the Chinese Communist Party.
The House recently passed a resolution urging Bush to give any CNOOC purchase of Unocal a close review, including requirements of divestitures or other action to reduce national security risks.
"There are both political and military consequences to be considered," suggested Democratic Representative Ike Skelton, the top Democrat on the Armed Services Committee. He noted that Unocal has significant natural-gas holdings in Indonesia, an area that supplies fuel to Taiwan. The company is also part of an oil pipeline consortium in central Asia that transports oil from the Caspian region.
"China's purchase of Unocal would dramatically increase its leverage over these countries and therefore its leverage over US interests in those regions," Hunter said.
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