When it comes to being in the China hot seat, US treasury secretary John Snow is an old hand. He has been pressuring China for the past few years to revalue its currency, while trying to head off protectionist actions against Chinese goods by the US Congress. Now he has another red-hot issue to contend with: the $18.5 billion bid by Chinese oil company CNOOC to acquire California-based Unocal, the ninth-largest US oil company, which has a majority of its oil and gas reserves in Asia.
The cash bid, largely backed by loans from CNOOCs state-owned parent, represents a premium of about 10% to US oil company Chevrons $16.4 billion cash-and-stock offer.
Snow is chairman of the Committee on Foreign Investments in the United States, or CFIUS, which is being urged by many lawmakers to scrutinize the CNOOC bid to make sure that it doesnt threaten national security. Congressional critics argue that energy is a strategic resource and that Unocals seismic technology could be easily converted to military purposes.
Meanwhile, CFIUS also is charged with maintaining the credibility of the US open-investment policy and preserving the confidence of foreign investors in the US. The committee also seeks to assure that US investors abroad are not subject to retaliatory discrimination.
Earlier this year, CFIUS approved the purchase by Chinas Lenovo Group of IBMs personal-computer business, despite Congressional concerns that China one day could corner the PC market. As Global Finance went to press, Snow said it was too early to start a review of CNOOCs bid for Unocal, but the White House promised an appropriate national and economic security review if the Chinese firm is the winning bidder.
For its part, China says the offer should be considered as a normal business deal without political interference.