How The Unocal Deal Will Be Vetted

The Committee on Foreign Investments in the United States (CFIUS) will take up the proposed acquisition of Unocal if the company's shareholders don't agree to sell to Chevron Corp. on August 10. On the surface, according to a thorough set-up story in WashTimes, it looks like a done deal: the committee has been notified of 1,536 transactions since 1988, and has only once made a recommendation that led to a presidential decree prohibiting the acquisition of an American enterprise.

But the Committee can do much more than simply recommend a no vote. It can prolong, probe and demand changes to the structure of an agreement that can all but cancel it. In an earlier case, the Committee succeeded in getting the Chinese out of a proposed acquisition of Global Crossing, effectively splitting a China-Singapore joint venture.

Still, there's cause for worry. The WashTimes paraphrases one longtime committee-watcher saying:

... the CNOOC deal appears to pose little risk to national security, because the Chinese company would not gain undue influence over the U.S. economy or oil industry and it would be unlikely to gain access to otherwise unavailable technology. But he said the Communist Party's ownership of CNOOC, coupled with the political environment in the U.S., might affect the committee decision.

Wrong on many scores! Unocal holdings throughout Southeast Asia, particularly along the Malacca Straits, and its rare earth metal resources are significant. And in my opinion, any international transfer of US oil assets poses a risk to national security, because the quest for oil will frame international relations, intrigue and conflict in the coming century.