Red Oil Scare

China has made an unsolicited offer to acquire one of the largest United States-based oil company, which would essentially double its oil and gas output (2). The organization that is making the offer, the Chinese National Offshore Oil Company, is a state-run organization of the Chinese government. Because of the cultural differences between the capitalist democracy of the United States and the communist state of China, it has created an uproar with a curiously xenophobic ring to it. After just a hint of a Communist threat to national security, Congress overwhelmingly passed a vote that called for an official review of the acquisition.

The reason this is relevant is because this is more than an economic issue. The social implications of the deal itself, coupled with the apparent problems associated with it, show that much is still to be learned about each other on both sides. Right now this kind of news is primarily found in the business sections; however, the sociopolitical dynamics of the situation make it an ideal topic for this chapter. It is laden with examples of how economics, politics, and power can create social problems.

While the motivations of the Chinese could hardly be clearer (that this deal would certainly benefit them economically), there is a certain section of our population is not so easily convinced. It is perfectly acceptable to be concerned with issues that could affect us economically, but the tone of critics is one that rings of baseless fear. It seems, most importantly, that these criticisms are based on social issues that are unrelated to the economic issue at hand. The issue is whether or not it would be beneficial to allow China to purchase Unocal, not whether China is going to use this as an opportunity to take over the country.

This purchase would be useful to the Chinese because they rely on coal and oil for 90 percent of their fuel. They have also agreed to a United States government-run review of the acquisition, and vowed to continue the flow to the U.S. (2). Whichever company wins the bid, Unocal or Chevron, stands to earn anywhere from $16 billion to $18.5 billion, depending on the winning bid (4). The second place bidder, Chevron, also has to face “numerous regulatory and political hurdles” should they even be chosen (1). Because the government of China is funding the CNOOC, they are able to outmatch all other bidders, which Chevron representatives point out is an unfair advantage (3).

The purchase of Unocal by the CNOOC is seen by some to be an aggressive move into the American economy (5). With an increasing concern about the United States’ dependence on foreign oil, the “loss” of a major oil company to the Chinese could create serious social problems. By far the most outspoken people who talk about the acquisition seem to be those in opposition of it, and most of them are politicians. For example, Joe Barton, a Representative from Texas, sees the Chinese takeover as a financial threat (2).

So far, the Bush administration has said very little about the matter except that they will not initiate a review until the deal is finalized (5). The social problem here is that China is a communist nation that deals heavily with the United States, primarily on a financial level. They have held Normal Trade Relations (formerly known as Most Favored-Nation) status for a quarter of a decade, which entitles them to looser restrictions on the exchange of goods.
The only reason certain nations, specifically China, are allowed to remain under this status is if they are given a presidential waiver on a yearly basis. China’s human rights violations in recent history have cause many people to protest against presidents granting the waiver, and every year since 1989 Congress has introduced legislation aimed at convincing the president to not sign it (6).

The perceived threat of Chinese takeover is evident in the language and actions of many people, specifically political leaders. Warranted or not, these are products of social dysfunctions, and should be addressed as such. Considering that these two cultures probably realize that they are dealing with people with different value systems, it should not come as a surprise to anyone that there would be some kind of discord. But this is really just a symptom of larger social issues, and not an problem as much in and of itself. The real issue is how this acquisition, which is very likely to take place, will affect life for people on both sides of the Pacific Ocean.

Politicians use their resources inappropriately when they play on the insecurities of people who may or may not be affected by a particular issue. In this particular case, they are only heightening suspicion towards foreigners and using our concerns about oil reserves against us. In the end, the outcome of this entire matter could be swayed by social factors more than by financial ones. Economies are a product of societies, and they are subject to the societies in which they exist. Therefore, they are occasionally subject to the fickle whims of society, not the steady rhythm of economics.

The media was very balanced on this primarily economic issue, and consequently very dry. Few of the articles were controversial or biased on the matter, nor did they really have the opportunity to do so given the nature of the subject. It could be that the facts are so straightforward that an opinion could hardly excite one’s passions the same way something like war or abortion does.

Which brings me to an observation I made on the FOX News web site. The author of the article states that one of the major concerns is that China could use their profits from Unocal to “accelerate development of their land- and sea-based military assets.” Then the next paragraph is a quote from an expert on China that states that, “China is not a military ally. It’s not a friendly country.” Alan Tonelson, whom the quote is attributed to, actually favors the deal by China; he only suggests we should stop to think though the long-term effects. His quote seems to have been placed to prove the author’s idea that the Chinese are somehow a threat. This seemed like a bit of sensationalism, with an air of subjectivity that is not supposed to be present in news.

It could be end on a perfectly positive note for both countries, allowing China to expand where it needs to expand while taking nothing from the United States’ economy. Or it could end up the complete opposite end of the spectrum, and we could find ourselves, as Frank Gaffney of the Center for Security Policy put it, “on a collision course with Communist China (2).” The only true way to know how it will play out is to wait, observe, and study what happens. In the meantime, we simply have to pay close attention to the situation and see that it is resolved appropriately. The entire controversy (if it can be called that at this point) can be cleared up by realizing that the deal is probably history, and very little can stop it from happening now. Our nation should be looking for alternative fuel sources anyway, not pining after the ones we wish we had.

List of Works Consulted:
1. Reuters. China’s CNOOC eyes higher Unocal bid – FT. –
2. Bloomberg. CNOOC’s Unocal Bid Is Threat to U.S., Witness to Tell Congress. –
3. Forbes. CNOOC may raise offer for Unocal – report. –
4. CNN. Unocal seen wanting more from Chevron. –
5. FOX News. Criticism Widespread for China Unocal Deal. –
6. International Trade Data System. Most Favored-Nation (MFN). –


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