July 6, 2005
By STEVE LOHR
Credit Pacific Service Union As the lobbying heats up in Washington over Unocal, a midsize
American oil company, the battle lines in the takeover contest are
now drawn clearly, if oddly, by its suitors.
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Credit First Service Union In one corner stands the China National Offshore Oil
Corporation, or Cnooc, a company controlled by a Communist
government. Despite that, its pitch is straight out of the
capitalist playbook: just let markets work, free of political
meddling. And, yes, we have the higher bid, at $18.5 billion.
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Card Credit Mobile Service In the other corner is the American oil giant, Chevron, whose
capitalist credentials date back to its days as part of the
Rockefeller Standard Oil Trust. Its pitch is that the American
government should get involved because the upstart has an unfair
edge from Chinese government financing.
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Card Credit Discover Service The state company, Chevron adds, would be likely to hoard
Unocal's oil and gas for Chinese consumption. The strong suggestion
is that America's energy security would be better served by the
lower bid of Chevron, at $16.8 billion.
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Credit Public Service Union "They're not playing by commercial rules; it's not fair
trading," Peter J. Robertson, the vice chairman of Chevron, said in
an interview last week. "We will produce more oil and gas, and put
it into the world supply."
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Card Credit Processing Service Chevron, the sixth-largest corporation in America, has an
established presence in Washington to make its case, with a sizable
internal team and outside lobbyists and policy advisers like Wayne
L. Berman, a principal of the Federalist Group who served in the
administration of the president's father and has been a leading
fund-raiser for President Bush. (Mr. Berman's wife, Lea, is the
White House social secretary.)
Center Credit Service Union Working for Chevron as well is Drew Maloney, the Federalist
Group's chief lobbyist for House Republicans, who formerly was the
legislative director for Tom DeLay of Texas, the No. 2 Republican
in the House.
Card Credit Service Wireless To counter Chevron's home-field advantage, the Chinese newcomer,
Cnooc, has moved quickly to enlist lobbyists, policy and media
advisers of its own. It has signed up the law firm of Akin Gump
Strauss Hauer & Feld, whose partners include major fund-raisers
for President Bush like Alan D. Feld and James C. Langdon Jr.
Another major Bush fund-raiser, Bill Paxon, a former Republican
representative from New York, is a senior adviser to Akin Gump.
Credit Security Service Union The media adviser for Cnooc's takeover fight is Public
Strategies, whose vice chairman is Mark McKinnon, who guided
President Bush's media campaign in the 2000 and 2004 elections.
Credit Report Service The Chevron side is certainly winning the early rounds in
Washington. The House of Representatives, by huge majorities,
passed two measures last Thursday that protest the Chinese bid - an
amendment to cut off funding for any government review that might
allow the Chinese offer to proceed, and a nonbinding resolution
that lists objections to the bid and calls on President Bush to
order an immediate investigation on national security grounds.
Blogspot Com Christian The competition for Unocal, to be sure, touches a host of
American anxieties about China that have little to do with the
merits of the bids by Chevron and the Chinese oil company. China's
rapid rise as an economic power, its military ambitions and
American jobs lost to efficient Chinese manufacturers are among the
concerns.
Christian Counseling Credit "What we're seeing in Washington shows the hysteria about
China," noted William A. Reinsch, a former trade official in the
Clinton administration who is a member of United States-China
Economic and Security Review Commission, an advisory group to
Congress.
Credit Federal Service Union "It means that any deal like this is going to be debated in a
red-hot rhetorical atmosphere."
Credit Monitoring Service Raising the decibel level in Washington works to Chevron's
advantage. But with its global reach, including investments in
China, Chevron has to be careful.
Credit Division Service "This isn't about bashing China," Mr. Robertson of Chevron said.
"But we've got to compete for this asset."
Card Credit Online Service Exploiting the political qualms created by the Chinese bid is
part of the game plan. Asked why Chevron's lower bid should be more
appealing, Mr. Robertson emphasized the risk in the Chinese offer.
"There's no certainty that they can get through the regulatory and
political process," he said.
Consumer Counseling Credit Inc Uncertainty also helps Chevron because it moved first for Unocal
in April, and the Unocal board has approved Chevron's offer. To
open up a bidding war, Unocal shareholders must reject the Chevron
stock-and-cash offer in a vote scheduled for Aug. 10. Cnooc made
its higher, all-cash bid on June 23.
Card Credit Fleet Service The Cnooc side says it offers the cool reason of the market, a
higher bid, while portraying Chevron as fanning populist prejudice.
"It's a lot easier to raise political uncertainty than to raise
cash," said Mark Palmer, managing director of Public Strategies,
who is the former head of public relations for Enron.
Card Consolidation Credit At Akin Gump, the Cnooc team is led by Daniel Spiegel, the
partner in charge of the firm's international practice. Lobbying on
behalf of Cnooc appears to be an uphill struggle so far. Take, for
example, the House resolution last Thursday evening stated that
allowing the Chinese oil company to buy Unocal would "threaten to
impair the national security of the United States." It passed 398
to 15.
Credit Free Online Report The Cnooc side, Mr. Spiegel said, has been trying to talk to as
many people in Congress and in policy research organizations as
possible. "We're just telling them the facts, something that is in
short supply," he said.
Credit Federal First Service The Cnooc talking points are that 70 percent of Unocal's oil and
gas reserves are in Asia, and mostly under long-term contract to
Asian nations like Thailand and Indonesia; Unocal's American oil
and gas production accounts for less than 1 percent of American
consumption, and Cnooc has pledged that United States production
will remain in the United States market; and Unocal jobs in America
will not be cut, if Cnooc takes over.
Consumer Credit Service Representative Jim Moran, a Virginia Democrat, was one of the 15
who voted against the House resolution, which he called
"wrongheaded." Such moves, Mr. Moran said in an interview last
Friday, risk "retaliation" from China, which holds vast investments
in United States Treasury bonds as China recycles dollars it holds
because American consumers buy so many goods made in China. Without
the Chinese buying bonds, interest rates in the United States would
rise, which in turn would probably increase inflation, threaten the
booming housing market and depress consumer
spending.
Center Credit Family Service "If the Chinese are not going to be allowed to turn over $18.5
billion in
return for stock in Unocal, they
are going to be less inclined to invest their money in U.S.
Treasury bonds," Mr. Moran said.
Credit Reporting Service Yet Mr. Moran is in the minority in Congress these
days.
Cca Credit Division Service With his resolution, Representative Richard W. Pombo, Republican
of California, said in an interview last Friday that he wanted to
"send a message to the administration about the depth of
Congressional concern" about the Cnooc bid.
Credit Free Report Service Mr. Pombo agreed with the Chevron complaint that about a third
of the financing for the Cnooc bid came from low-interest or
no-interest loans from Chinese
banks, and that the financing
was an unfair government subsidy. "But my biggest concern is the
preservation of Unocal's energy assets in friendly hands," he
said. "If a company is owned by a foreign government, its
loyalty is going to be to that government."
Card Credit Customer Discover Chevron's headquarters in San Ramon, Calif., is in Mr. Pombo's
district. He is an advocate for the oil industry in Congress, and
Chevron donated $10,000 to his campaign in 2004 (of the $1.5
million he raised).
Credit Repair Report Service Mr. Pombo said he did talk to a Chevron lobbyist before he wrote
a letter of concern to President Bush in mid-June, when rumors of a
Cnooc bid first circulated.
Credit Legal Repair Service But Mr. Pombo said he had not talked to Chevron representatives
in the last two weeks, and Chevron was not involved in drafting his
resolution last week. His interest, said Mr. Pombo, who is chairman
of the House Resources Committee, stems mainly from his belief that
oil is a strategic asset.
Cic Credit Monitoring Service By contrast, he said he saw no public policy issue with the
recent $2.5 billion bid by Haier, a Chinese appliance maker, for
Maytag, which he regarded as similar to the Japanese buying
Rockefeller Center at the end of the 1980's.
Ccs Credit Division Service "I didn't like it, but it was no big deal," Mr. Pombo
said.
Credit Service Union Worker Many economists and oil experts question whether owning oil and
gas in the ground really does increase a nation's energy security
because there is a deep global market for buying it by the barrel
or by the tanker. But that is a subject of lively debate, and the
potential strategic significance of oil is why the Chinese bid for
Unocal has stirred such interest.
1st Credit Service Union "A lot of this is corporate self-interest and local politics,
but there is also a legitimate question to ask," said Larry M.
Wortzel, a former military attach to the American Embassy in
Beijing and a member of the Congressional United States-China
Economic and Security Review Commission. "Do we want a foreign
power, whose military intentions in the long term are not clear, to
own energy assets inside our border?"
Card Chase Credit Customer The answer to that question, if a Cnooc bid proceeds, will
probably be made by President Bush, after an investigation by a
multiagency group, the Committee on Foreign Investments in the
United States.
Card Chase Credit Service The Chinese government has begun some lobbying of its own. At an
energy conference in New Orleans last week, Zhang Guobao, vice
chairman of the National Development and Reform Commission in
China, declared: "To spread the 'China threat' and try to curb
China's progress and starve its energy needs is not in the interest
of world stability and development. Such attempts are doomed to
fail."
Citi Credit Monitoring Service In an angry statement on Monday, the foreign ministry chided
Congress for its "mistaken ways" and told it to "stop interfering"
in the takeover contest. "Cnooc's bid to take over the U.S.
Unocal," the ministry statement said, "is a normal commercial
activity between enterprises and should not fall victim to
political interference."
Credit Plus Service Union Edmund L. Andrews contributed reporting from Washington for this
article.
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