Selling Unocal To China: Insane

Unocal announced yesterday that it has received a waiver from Chevron allowing it to discuss with the Chinese the prospect of selling a pivotal US energy asset to an unfriendly Communist country:

Unocal intends promptly to commence such discussions with CNOOC Limited. There can be no assurance that any agreement with CNOOC Limited will be reached. In connection with entering into the Chevron merger agreement, the Unocal board of directors recommended the transaction to Unocal stockholders. That recommendation remains in effect.

It's hard to imagine an acquisition of greater strategic value to the Chinese than Unocal. If an oil war (hot or cold) with the US emerges in coming years as many dread they will, it will be about delivery routes and supply. Keep a map of the world in your mind as you consider that Unocal international operations have nearly 12 billion barrels of reserves in country's like:

• Thailand, where Unocal operates 100 oil platforms
  
• Indonesia, including 90% ownership of fields around the Makassar Straits, which most oil to China would have to pass through
• Vietnam, critical also to sea lanes
  
• Myanmar and the Yadana pipeline to Thailand
• Azerbaijan, which is a bit too far west but still could figure into China's strategic interests in Central Asia.
• Congo, which would go nicely with China's rabble-rousing in Zimbabwe

And then there's the US operations. Frank Gaffney mentioned on Hugh's show yesterday that Unocal has rare earth mineral resources that are virtually irreplaceable and of significant commercial and military importance.

There are so many reasons why it's in China's military interest to buy Unocal, and sea lanes has got to be at the top of the list. From Dawn's Early Light:

Vietnam is in a strategic geographic position with important oil shipping lanes nearby. Rather than attempting to, as they say, reinvent the wheel, I would like to refer you to Tom Collins' excellent work (he has a history inside the oil industry) and unique perspective on the visit over at QuillNews.

"But the energy realities of the region remain. Oil and energy security will be on the agenda when Khai visits with President Bush today. However, now instead of competing over oil discoveries and drilling rights nearby, China and its East Asian neighbors are forced to rely on oil and gas shipped from the Middle East. Pressure on security of the sea lanes remains paramount to every state in the region where no one trusts anybody else. China’s military build up, partly in its blue water navy to project military power at sea, continues and is causing nerves to twitch in the region. Now, instead of working to deal with the riches of oil at home, Vietnam and the US find themselves again talking about oil – this time keeping sea lanes for oil transportation open.

The Commerce Department exists to approve deals like this in order to balance our trade deficit. They've got to think outside that box on this one!

See also:
Beijing Trying To Buy Unocal