Tuesday, July 05, 2005

Does the Left Have a Stake in the CNOOC Bid for Unocal?

I jumped into the Unocal kerfluffle at Brad DeLong’s website last week with the observation:

China is pursuing zero-sum deals for oil, but on the Eurasian continent using pipeline exclusivity on a government-to-government basis. The idea that Beijing is going to extend some giant straw and suck Unocal natural gas from Thailand and oil from the Gulf of Mexico into its gaping maw is simply ridiculous. Does anybody see Chinese tankers chugging from distant Unocal fields to deliver oil to China at twice the transportation costs? Nope, the oil gets sold, enters the international market, and China buys the oil that's right for it on the same international market. Unocal oil looks more like free-market win-win oil. CNOOC's government backing and China's oil needs give a good assurance that the new company will be strongly financed and its operation will actually increase the amount of energy available to the international markets. The CNOOC bid makes sense in the globalized, win-win free market scenario. US opposition only makes sense in the context of the sort of crude economic warfare that economists (and government bureaucrats keen on a healthy international market for our debt) are supposed to avoid.

Now CNOOC’s prexy Fu Chengyu does his best to make me look like a Communist agent.

From Don Lee via the July 4 LA Times Chinese CEO Defends Oil Bid as U.S.-Style:

Unocal, though, is a small player in oil; the company's assets are predominantly natural gas, mostly in Asia. Overall, Unocal's U.S. production accounts for less than 1% of total American consumption of oil and gas. At any rate, Fu reiterated a pledge to continue delivering Unocal oil to the U.S. and other countries that get it now. While it's true that China needs oil, Fu said, in today's world, where crude is traded freely, economics and local rules dictate where oil is shipped."The Unocal assets in the world cannot be delivered to China, because most will be supplied to the local market," said Fu. "You have to look at the economics…. Shipping oil from far distances will cost more than from short distances."He added that most of Unocal's assets were natural gas properties, which are locked up in long-term contracts with countries such as Thailand and Bangladesh. Even if the countries where those assets are located would grant permission, analysts say it wouldn't be easy to build pipelines to reroute supplies to China.

Yes, that is the common-sense situation, which I’ve also laid out in a couple recent posts. There is no legitimate national or economic security argument that justifies opposition to the CNOOC bid.

So I don’t intend to blog on the merits of CNOOC/Unocal any more.

The politics, of course, are another matter.

China produces an interesting reaction that cuts across the usual left-right divide.

You have left of center types like me and white-shoe business Republicans in panda-hugger mode.

And you have fire-eating lefties and anti-Chicom deadenders from the far right joining to excoriate the Beijing regime and call for resolute opposition to the economic machinations of our strategic competitor in the East.

The Blue Team (rightwing) attitude, rooted in American exceptionalism, aggressive anti-Communism, and a faith in the efficacy of zero-sum confrontation with totalitarian regimes, is pretty straightforward.

The leftwing response is more…well, I don’t know if “nuanced” is the right word.

Much of the opposition stems from a visceral distaste for the CCP regime and awareness of the human rights horrors it has perpetrated over the last eighty years, culminating in the Tian An Men incident.

But some of it looks like a calculated attempt to stake out some defendable political turf for the left on national security and foreign affairs.

Americans are becoming increasingly aware that the U.S.A. is an empire, with burdens and opportunities well beyond those of ordinary nation-states. And Americans recognize that the right wing has an ideology matching this power—kick-ass unilateralism in the service of U.S. hegemony.

The Democrats and, especially the left, are having a hard time coming up with an electable package that combines traditional—and admirable—concern with human rights and social justice with a strategy that defines and manages American power in a crowd-pleasingly pro-active and hairy-chested way.

Confronting China offers a solution.

On the economic front, U.S. power is reforged as a weapon of American economic nationalism, substituting stand-up-for-the-American-working-stiff protectionism for that lockstep global coordination of US military operations and corporate interests I call “Halliburtanization”.

On the foreign affairs side, we would nobly oppose an oppressive, quasi-imperial regional power that subjugates millions of people and huge chunks of territory that would prefer to be independent. That’s an improvement on our current policy of picking small, relatively helpless countries that are struggling to emerge from economic and political colonialism and dictatorship, but have the misfortune of possessing territory or resources that the U.S. takes a fatal interest in.

Getting tough on China, in summary, provides an opportunity for the left to engage in politically correct but manly chest-thumping.

I usually agree with Steve Gilliard’s take on things, but in his underinformed and bombastic post on Unocal, he seems to veer into “righteous leftwing meathead” territory:

Yes, let's have China own an American oil company. Why not let them invest in Sun,. Microsoft and Boeing as well. Maybe they want shares in Colt and Rathyeon as well? Maybe station PLA troops to protect their interests, starting with Wal-Mart.

Hell no.

The PLA is a major investor in Chinese businesses. Letting them buy Unocal is not like letting the Japanese buy Rockefeller Center. It's a national security issue.

I am not immune to the attraction of the America-first school of economic nationalism. The Chinese manage international trade as a tool of national policy, and we should probably do the same.

However, unless rescuing the hard-working hydrocarbons of the world from enslavement by CNOOC—so they can gratefully adorn the freedom-loving balance sheet of Chevron—can be spun as a triumph of hard-nosed yet principled liberal realpolitik, I really don’t see the point of encouraging left-of-center atavism on the Unocal issue.

1 comment:

IJ said...

A government has the right not to sell assets it considers strategic in the global free market.

This has been happening for some time with oil and gas. It is often the case with military equipment. Also there was an example in the early 1970's, when the US decided that its store of gold had strategic value; one result of the decision was that the world's monetary system became 'floating' (not 'fixed' to gold) and therefore much looser.

Some countries have since tried to reintroduce a little monetary discipline. China have pegged to the dollar, and many countries in the EU have adopted the euro. There is however much opposition to monetary discipline.

Floating exchange rates, fixed rates, or something else?