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TVInews - 108 To Be or Not to Be is the Question for Unocal and Greenspan. Like the Bank of America Deal, the CNOOC's -- One Dollar to 8 Yuans ratio offer for Unocal -- is a deal for both U.S.A. and China












































































26 week 2005 / Greenspan Opposes Sanctions on China, especially if CNOOC Ltd., a major government-controlled Chinese oil company could buy troubled California oil company, UNOCAL






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Thanks to the dollars it gains from its huge trade surplus with the U.S., China already has massive investments here, mostly in Treasury securities.
Now, if the sale of the troubled California based oil company Unocal, of El Segundo goes through for $18.5-billion, the sale might make China finally happy buying a piece of America. It would be China's largest acquisition of a business that makes business sense, trading Yuans for Dollars -- 8 to 1, and prove to the world that the Yuen does not have to "float" to buy things from America.
While supporting the premise that revaluing the yuan would be good for China and the global economy, Greenspan testified that he was "aware of no credible evidence" that revaluing the Chinese currency "would significantly increase manufacturing activity and jobs" in the U.S.
The American financial advisors for CNOOC, out to make a Yuan or two out of the deal include: U.S. investment firms Goldman, Sachs & Co. and J.P. Morgan Securities.
People close to the issue complain that, "Countries such as China want to have all the benefits of engaging in international trade, using their 8 to 1 under-valued currency". "Unless they get off the dollars standard, they cannot be allowed to continue to cheat on our financial system with no penalties by buying out our companies assets with their 8 to 1 currency ratio. We are allowing them to steal our motion picture and recording copyrights, and technology, like our off-shore drilling techniques for pennies."
Talk like this, is forcing U.S. policymakers
to manufacture up -- two sensitive issues:
01. America's dependence on imported oil and
02. its future relations with China, a rising economic and military power.
CNOOC Ltd.'s unsolicited $18.5-billion bid for El Segundo-based Unocal has sparked a vigorous debate among policymakers and analysts about American access to energy supplies in an increasingly interdependent global economy.
Just the other day, 41 members of Congress from both parties sent a letter to Treasury Secretary John W. Snow, who heads the interagency Committee on Foreign Investment in the United States, urging him to immediately initiate a thorough review of a possible deal.
Among their concerns was whether CNOOC was using Chinese government funds to make the purchase and whether China would be acquiring sensitive technology.
Just as the "word" technology was mentioned, the money game issue was brought in. The round table panel was told of the reasons why the Bank of America Corp. was allowed to buy a 9% stake in the China Construction Bank, for $2.5 billion,. By the end of 2006, said a person close to the deal, the BofA will be allowed to do business directly with Chinese households, under the terms of China's ascension to the World Trade Organization.
China Construction Bank, one of the "big four" Chinese state-owned banks, plans to sell shares to the public this year. Bank of America would be able to boost its stake to almost 20% -- the maximum allowed for a foreign investment in a Chinese bank -- over the next five-and-a-half years. The Charlotte, N.C.-based institution also would have one seat on China Construction Bank's board.
Many of the goods sold in the U.S. with a "Made in China" label are merely assembled in China from parts made elsewhere in Asia. If the yuan -- and therefore Chinese labor -- were more expensive, those goods would be assembled elsewhere in Asia, at no net benefit to the U.S., Greenspan said.
Likewise, he said, U.S.'s proposed tariffs on Chinese goods "would significantly lower U.S. imports from China but would comparably raise U.S. imports from other low-cost sources of supply in Asia and perhaps Latin America as well. Few, if any, American jobs would be protected."
Greenspan credited the relatively free flow of goods and services across national borders with enabling the global prosperity of the last six decades.
"A return to protectionism would threaten the continuation of much of the extraordinary growth in living standards worldwide, but especially in the United States, that is due importantly to the post-World War II opening of global markets," he said.
For lawmakers worried about U.S. job losses, Greenspan recommended that they bolster job retraining programs and improve education in middle and high schools.
In regards to trade and Yuan's most U.S. congressmen are usually not in the mood for Greenspan's economics lessons.
If China were to purchase Unocal -- it would work out like the BofA deal.
It was pointed out by Greenspan, that a 1988 law required a committee led by the Treasury secretary to review the $18.5-billion purchase by CNOOC Ltd., an arm of state-owned China National Offshore Oil Corp., for the reason the foreign entity might have national security implications. The China offer tops Chevron's, raises concerns about the potential for foreign ownership of a U.S. energy company.
Of course the landmark offer to buy UNOCAL, might help congress dibby up some cash or political awards to Chevron, if their bid was serious enough, said people close to the transaction. The sale really sets the stage for an intense political debate over the future of U.S. energy, security and trade policies, and of course the timing for wall street to ride the wave of oil stock prices.
"That's not much of a premium over what Chevron's offering," said Gene Gillespie, an analyst with investment firm Howard Weil Inc. "I don't think this is attractive to the Unocal shareholders," he said, partly because a portion of the Chevron deal would be tax-free to Unocal's investors.
The unsolicited offer by CNOOC Ltd., an arm of state-owned China National Offshore Oil Corp., was the most dramatic example yet of China's growing influence in global markets and would be China's largest foreign acquisition by far.
The proposed buyout could raise hackles in the United States, which is heavily dependent on foreign oil. China's fast-growing economy is consuming ever-larger amounts of crude, which is helping to drive the price to record heights on world markets, and CNOOC wants to add Unocal's assets to its energy reserves.
Fu Chengyu, a graduate of the University of Southern California, USC, and CNOOC's chairman and chief executive, said his company's $67-a-share cash bid "is a good offer for Unocal" and "it is good for America."
In a telephone interview from Beijing, Fu noted that CNOOC's proposal to Unocal included several pledges to assuage U.S. concerns, such as keeping most of Unocal's 6,600 workers and selling its U.S.-produced oil and gas within the United States.
If people "have a better understanding" of CNOOC, "I think there will be less concern both politically and maybe economically," said Fu, who earned a master's degree in petroleum engineering from USC and once worked for Phillips Petroleum Co., now part of ConocoPhillips.
Still, CNOOC's proposal is likely to incite a "firestorm" in Congress, said Mikkal Herberg, director of the Asian Energy Security program at the National Bureau of Asian Research, a Seattle think tank.
Herberg predicted that the CNOOC bid would "feed the fear that the Chinese are coming, the Chinese are coming," and could further inflame tensions between the two countries over textile trade and currency issues.
One congressman, Rep. Richard W. Pombo (R-Tracy), said he didn't believe it was "in the best interest of the United States to have Unocal owned by the Chinese national government," adding that the deal could have "disastrous consequences for our economic and national security."
Pombo and Rep. Duncan Hunter (R-El Cajon) sent a letter to President Bush last week urging him to look closely at any Chinese bid to acquire U.S. energy assets. Such an attempt "raises many concerns about U.S. jobs, energy production and energy security," their letter said.
C. Richard D'Amato, chairman of the U.S.-China Economic and Security Review Commission, a congressional advisory panel that has been sharply critical of U.S. policy toward China, said his group would also ask President Bush to closely review the CNOOC offer.
"When we're so dependent on foreign suppliers, giving away American sources of petroleum and hydrocarbons doesn't make sense to me," said D'Amato, an attorney and former member of the Maryland state legislature.
White House spokesman Trent Duffy declined to comment Wednesday on CNOOC's offer.
Under U.S. law, the Committee on Foreign Investment in the United States &emdash; an interagency committee headed by Treasury Secretary John W. Snow &emdash; is responsible for reviewing any foreign purchases that could threaten U.S. security.
Herberg, of the National Bureau of Asian Research, said some specific security issues related to a CNOOC-Unocal deal could trigger U.S. concern. Unocal has some "very, very good deep-water exploration skills" developed in projects off Indonesia and Mexico that could have military applications, he said.
Critics are likely to "question letting that technology fall into the hands of the Chinese government," said Herberg, who recently testified on China's energy strategy before the Senate Foreign Relations Committee.
In a conference call with reporters, USC graduate, Fu said the transaction wouldn't have "any negative impact to the national security interests of the United States…. People need to understand this is a purely commercial transaction, driven by market forces and market considerations."
Chinese analysts and those connected with the government said that CNOOC's bid for El Segundo-based Unocal was an independent commercial decision made by the company, not a move directed by Beijing.
"Through an acquisition of another company, CNOOC wants to expand their business in Asia," said Han Wenke, vice director of the energy institute affiliated with the National Development and Reform Commission, a regulatory agency of the Chinese central government.
CNOOC's move also could create crosscurrents for the Bush administration and its commitment to increased trade, free commodities markets and U.S. investment in China.
Indeed, Fu said during the conference call that he believed the transaction would prevail "with the U.S. government being the champion of global free trade … and also with so many American companies making investments and acquisitions in China."
In addition to U.S. government approval, any acquisition also must win the favor of Unocal's stockholders, and some Wall Street analysts said CNOOC's offer didn't pass muster.
"That's not much of a premium over what Chevron's offering," said Gene Gillespie, an analyst with investment firm Howard Weil Inc. "I don't think this is attractive to the Unocal shareholders," he said, partly because a portion of the Chevron deal would be tax-free to Unocal's investors.
Fadel Gheit, senior energy analyst at investment firm Oppenheimer & Co., said Unocal's investors might shoot down the deal.
"They should at least have upped it to $72" a share, said Gheit, who owns stock in both Unocal and Chevron. "This is a waste of everyone's time."
Still, Gheit said, "I would not be surprised if Chevron sweetened the offer one way or another. I think Chevron is committed and interested in Unocal, and it's not going to let the deal collapse."
The risk of U.S. resistance to the deal was not lost on CNOOC, whose shares trade on the New York and Hong Kong stock exchanges.
CNOOC (pronounced see-nook) said the offer was "friendly" and that it hoped to reach a "consensual" deal. The company also said it would continue Unocal's practice of selling all or most of its U.S.-produced oil and natural gas in the United States, which CNOOC said accounted for less than 1% of total U.S. oil and gas consumption.
However, the majority of Unocal's oil and gas is produced overseas and is sold to customers around the world. Indeed, CNOOC and Chevron both prize Unocal because of its substantial oil and gas exploration projects in the Asia Pacific region, including Thailand, Indonesia, Bangladesh and Myanmar.
Chevron, based in San Ramon, Calif., and the second-largest U.S. oil company, behind Exxon Mobil Corp., is offering about $62 a share in cash and Chevron stock -- or about $17 billion -- under a friendly agreement it reached with Unocal in April. That pact received antitrust clearance from the Federal Trade Commission this month.
Despite the lower price, Chevron said its offer was still superior because it "combines compelling value, regulatory certainty and accelerated timing" for Unocal's stockholders, while the "CNOOC proposal must undergo an extensive regulatory process in the United States and elsewhere."
Chevron declined to comment on whether it might sweeten its proposal, as some analysts have predicted in the event CNOOC joined the fray. Unocal said that its directors continued to recommend that its stockholders approve the deal with Chevron, but that they would "evaluate the CNOOC proposal" because of their fiduciary duty to investors.
As part of their agreement, Unocal and Chevron have a "breakup" clause under which another acquirer of Unocal would have to pay $500 million to Chevron. The fee is designed to thwart other suitors.
Before CNOOC's announcement late Wednesday, which had been rumored for days, Unocal's stock rose a penny to $64.86 a share, while Chevron's stock fell 51 cents to $58.27.
• • Unocal, a 115-year-old company that was
founded in California, once was known for its Union 76 gasoline. But it sold its retail and refining operations in 1997 to focus on exploration and production.
Unocal also operates in the Gulf of Mexico and the Caspian Sea area, and about 66% of its sales come from foreign sites. Bolstered by high oil and gas prices, Unocal last year earned a $1.2 billion, a record profit for the company, and had sales of $8.2 billion.
The company's fields are strategically attractive to CNOOC because the Chinese company is aggressively looking for additional reserves. China is now the world's second-largest consumer of oil, after the United States.
Stephen Leeb, president of Leeb Capital Management in New York, which owns some Unocal shares, called CNOOC's offer "gutsy" because the Chinese "realize the political ramifications of making a bid."
"That they would be willing to pay half a billion dollars to Chevron, and to court Senate disapprobation, it shows how desperate China is for oil assets," said Leeb, who also wrote a 2004 book called "The Oil Factor."



ByLines: Editors Note

China's growing Buyouts
•  Parent company: State-owned China National Offshore Oil Corp.
•  Headquarters: Hong Kong
•  Main business: Offshore oil and natural gas exploration, development, production and sales
•  Major production areas: Bohai Bay, Western South China Sea, Eastern South China Sea, East China Sea and off Australia
•  Reserves: About 2.2 billion barrels of oil equivalent*
•  Daily average net production: 382,513 barrels of oil equivalent*
•  Employees: 2,524*
•  Traded: New York Stock Exchange and the Stock Exchange of Hong Kong
* As of Dec. 31
The Asian nation's appetite for foreign companies, particularly those in the United States, is getting bigger. A sampling:
An investor group led by Haier Group, an appliance manufacturer owned by the Chinese government, has offered to buy the U.S. company for $1.28 billion, Maytag said Monday.
CNOOC, a state-owned Chinese oil company, is reportedly considering bidding for Unocal.
Canadian energy companies
This spring, China National Offshore Oil bought a 17% stake in MEG Energy in Canada, and another state-owned oil firm, Sinopec, acquired a 40% interest in a $4.5-billion oil sands project in Alberta, Canada.
IBM's PC unit
Big Blue announced in December that it was selling its money-losing personal computer division to China's Lenovo Group for $1.25 billion.
RCA brand
Last year, China's TCL Group combined its television and DVD operations with French company Thomson to create the world's leading maker of televisions, built around the RCA brand.
Global Crossing
In 2002, China Netcom Communications Group, bought the Asian subsidiary of the telecom giant for $1 billion.
Source: Times research

More Articles • Converging News 262005 / TeleCom Buy Outs and Asset Seizure Boom

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TVInews - 108 To Be or Not to Be is the Question for Unocal and Greenspan. Like the Bank of America Deal, the CNOOC's -- One Dollar to 8 Yuans ratio offer for Unocal -- is a deal for both U.S.A. and China • / Television International Magazine's Person Of The Week POW 262005 - / NEWS Convergence - 26th Week of 2005 / Feature Story • 1108UnocalChinaGreenspan.htm Smart90, s90tv, lookradio, tvimagazine, dv90, vratv, xingtv, Ddiaries, nbs100, Look Radio, Josie Cory, Television With No Borders

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