July 06, 2005
Wednesday

The story so far: In early April, oil giant Chevron was close to a deal to buy the United States' ninth-largest producer of oil and gas, Unocal, for $16.5 billion. But then a foreign oil company called CNOOC stepped in with an $18.5 billion offer. It seemed that Chevron had simply been outbid.

But there was a catch. CNOOC - the China National Offshore Oil Company - is largely owned by the Chinese government. Congress, or at least the House, went nuts, with solons on both sides of the aisle seeing it as a diabolical plot by Beijing to lock up world energy supplies at U.S. expense. It was, congressional critics direly warned, a direct threat to national security. The House voted 333 to 92 for a provision that would delay and might even block the proposed sale.

This week, China told Congress to butt out. The exact words were "correct its mistaken ways."

The White House has been noncommittal, even blase, about the deal. "When a foreign-government-owned company acquires a U.S. company, it raises some questions," said President Bush's national security adviser, Stephen Hadley.

The Chinese say the planned acquisition is a straightforward business deal, and that appears to be the case. Oil experts, economists and trade experts who have looked at the possible purchase are singularly unalarmed.

CNOOC has promised that Unocal's tiny domestic U.S. production will remain here and that no Unocal employees will be laid off. Unocal has substantial overseas holdings, but they serve local markets and would not be much of a solution to China's energy needs. They would make CNOOC a bigger player in world energy markets.

The Wall Street Journal calls CNOOC "the most Westernized of the country's oil companies" - its CEO is U.S.-educated and "precisely the kind of public-private hybrid we'd expect to see as China continues its transition from communist to capitalist."

And that's precisely the point. Deals like this bind China into free markets and the global economy. U.S. companies are actively buying into Chinese firms, from brewing to banking. It's a natural outgrowth of China's booming economy that its firms would look for investment opportunities here.

By all means, let Treasury and Defense scrutinize the deal for national-security concerns - without Congress trying to dictate the outcome. We suspect it'll find none.

Chevron can look out for itself in the bidding process, and the decision of whether to sell should rest with Unocal's shareholders.

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