June 30, 2005

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Not for all the oil in China

Hemlock gets to the heart of the CNOOC/Unocal takeover:

CNOOC wants to buy Unocal, and the Beijing-owned parent has obtained low-cost financing, courtesy of the Chinese taxpayer, to trump rival bidder Chevron. That’s not an even fight. But who’s subsidizing whom? Who wins and who loses?

From Chevron’s point of view, it’s not fair. But assuming CNOOC’s bid passes muster with regulatory and legal authorities, that’s too bad. Chevron has ‘lost’ one potential opportunity but still has its money and the possibilities it offers. Unocal’s owners are clear winners, getting a juicy price for their asset. We CNOOC owners gain an overpriced acquisition at subsidized financing costs – let’s say it nets out. So does that leave the Chinese taxpayer as the main possible loser? Or are the sneaky commie hordes the ultimate winners?

Is Beijing being clever in spending public money on securing long-term, overseas sources of essential commodities – copper in Chile, coal in Australia, oil in especially odious bits of Africa and so on? Does it contribute to long-term national security or simply the leaders’ sense of autarkic, centrally planned well-being? Wouldn’t it make more sense to invest the funds in the domestic economy today, in order to create the wealth to buy raw materials at their global market prices in decades ahead? Like countries not run by paranoid cliques do.

So, I am stuck with this conundrum – will ultimate control by a paranoid clique make CNOOC a more or less profitable investment in the long run? Paranoid cliques make bad decisions. But bad decisions have unintended beneficiaries.

Other Reading

Lots of other commentary on the attempted takeover, the geopolitics and what it all means...

* How would you spend $700 billion?
* Paul Denlinger says the CNOOC bid challenges the lack of a coherent China policy, which is what my discussion with Pundita on the same topic concluded.
* China Hand thinks the real story behind the bid is Wall St.'s hopes for a China-driven M&A binge.
* Todd Crowell discusses China's next long march.
* Jack Risko proclaims China ain't Japan and sorts the facts from the hype.
* Krugman on the Chinese challenge.
* Imagethief tells everyone to get over CNOOC's bid and includes a helpful "yellow peril" scorecard, with a few solutions to American worries about shadowy Chinese bureaucrats controlling the US economy.
* China Hand notes this is America's chance to turn China away from dealing with rogue states in its quest for energy security...something for the anti-China crowd to keep in mind.
* Alex Tabarrok fisks Krugman's China article and rightly calls him a liberal demagogue. Brad DeLong has a kinder take on Krugman's article.
* Crooked Timber highlights the issue of free trade versus national defense. It comes down to whether you prefer to trust or suspect.
* Alex Tabarrok points to a couple of sensible thoughts on the CNOOC bid for Unocal.
* CNOOC's Unocal bid is becoming a PR and lobbying slugfest.
* For an in-depth look at the real game in the takeover, check Quillnews's take on the 3-D chess for oil.
* Winston Marshall.
* Bill Rice is asking readers for there responses to some important questions raised by the CNOOC-Unocal deal.

posted by Simon on 06.30.05 at 02:48 PM in the


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cnooc roundup
Excerpt: Simon World offers a great roundup of blog opinion on CNOOC's bid for Unocal. The top-spot goes to this item from Hemlock.:From Chevron’s point of view, it’s not fair. But assuming CNOOC’s bid passes muster with regulatory and legal authorities,
Weblog: asiapundit
Tracked: June 30, 2005 10:26 PM


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