China and Unocal: National Security IS the Issue

I am wondering just why it is that we are still discussing this ludicrous idea of selling a United States-owned oil company to a state-owned Chinese interest. For those who refuse to see this as primarily a national security issue and not an economic issue, I share some thoughts on the proposed China-Unocal deal.

The Washington Post reported in detail on the shift in China’s oil policy since the 2003 Iraq War. As author Peter S. Goodman notes:

Through cultivation of Saddam Hussein’s government, China sought to develop some of Iraq’s more promising reserves. Beijing advocated lifting the United Nations sanctions that prevented investment in Iraq’s oil patch and limited sales of its production.

Then the United States went to war in Iraq in 2003, wiping out China’s stakes. The war and its aftermath have reshaped China’s basic conception of the geopolitics of oil and added urgency to its mission to lessen dependence on Middle East supplies. It has reinforced China’s fears that it is locked in a zero-sum contest for energy with the world’s lone superpower, prompting Beijing to intensify its search for new sources, international relations and energy experts say.

And, while the state-owned China National Offshore Oil Corporation (CNOOC) emphasizes that their interest in purchasing Unocal is purely commercial, President Bush’s decision to go to war with Iraq is arguably a key reason for China’s need to put such effort into buying more and more foreign oil and gas resources. So, I’m offering up a gimme for the loony left: should they choose to protest the attempt at a Chinese interest to purchase an American oil company, they can blame yet something else on President Bush.

China’s insatiable thirst for petroleum is no secret, and it goes without saying that domination of America and her interests in subtle — and not-so-subtle — ways is certiainly in their game plan. Now, China seems to be using our own free market system against us, in apparent retaliation for their lost opportunities in Saddam’s Iraq.

As her economic engine fires full-steam (producing untold tons of “greenhouse gases,” of course), China’s domestic oil reserves have become insufficient. Though self-sufficiency has been the Communist Party rule in the past, strategies have clearly changed. China now ranks as the world’s #2 oil importer, not far behind the U.S. As noted in TWP:

China National Petroleum Corp. led the way. Since 2003, the company has signed 20 contracts to explore or purchase production facilities in 12 countries, including Peru, Tunisia, Azerbaijan and Mauritania. In 2004, the company’s production of natural gas at overseas facilities nearly doubled from the previous year. Its overseas oil production climbed by a fifth.

I hasten to add, however, that Hate-America-First leftist elitists should have a bit of trouble cozying up to the Chinese in this bash Bush game. First: big oil is evil, so even bigger China-state-owned oil is… eviler. There’s no win there. Besides: the Chinese should be converting to solar and wind power anyway, should stop burning fossil fuels and making all those nasty “greenhouse gases.”

Even more sublime, however, is the irony regarding international human rights abuses (a favorite issue of liberal elitists everywhere). China regularly deals with international pariahs such as Sudan, Iran, and Burma — countries with horrendous human rights records that are off limits to most Western oil companies due to international sanctions. This chilling quote closes the TWP article:

“No matter if it’s rogue’s oil or a friend’s oil, we don’t care,” said an energy adviser to the central government who spoke on the condition he not be identified, citing the threat of government disciplinary action. “Human rights? We don’t care. We care about oil. Whether Iran would have nuclear weapons or not is not our business. America cares, but Iran is not our neighbor. Anyone who helps China with energy is a friend.”

That last sentence drips with insincerity. As more Western nations take harder stands against the rogue states with which China still deals, then China’s “friendship” may prove all the less valuable generally. In fact, China’s human rights record itself isn’t so pretty. It sure would be nice to take a stand against China on this important principle, wouldn’t it.

If only China hadn’t such a darn big and important economy. From a pure economic standpoint and in view of free markets, it could be argued that a laissez-faire attitude is best. In a post at libertarian blog James Landrith is…Taking The Gloves Off, writer Ivan Eland decries the hawkish attitude of many conservatives in and out of government who are against the China-Unocal deal. At first, his economic argument is compelling:

In fact, Unocal’s total petroleum production is equivalent to only a small portion of U.S. consumption. The Chinese government wants Unocal’s oil fields, which are mainly in Asia (70 percent) and the Caspian Sea, to provide energy security for an accelerating economy. (Ironically, if the governments of Asia and the Caspian Sea had originally blocked Unocal’s investments in their countries for “national security” reasons, Unocal might not be as seemingly important to the U.S. government now.) The global oil market makes the Chinese governmental pursuit of energy security unnecessary, and the United States shouldn’t fall into the same quixotic quest.

Even if China decided that all of Unocal’s production would be exported back to China, this decision would reduce Chinese purchases from other world producers and thus free up oil to sell to Unocal’s former buyers. Thus, the world oil market would again reorder with no effect on price.

Eland focuses on world oil markets and price, totally dismissing the national security concerns as “bogus.” But I don’t buy it, and neither do several influential senators and congressmen in Washington. If China is not our open enemy, then neither is she our ally. Given her oil predicament, China is clearly posturing aggressively but on the economic defensive. China is arguably a developing nation; ergo, China needs the United States and the West more than we need China. Their lust for foreign oil has not been without a few significant glitches, besides Iraq. In one case, Russian oil firm Yukos, which was to supply China with a considerable amount of Siberian oil, essentially crumbled as its founder was arrested on tax charges a few years ago. Now it seems that Japan has gained the upper hand in negotiations for Siberian oil.

Between the Iraqi and Russian setbacks, China appears to be crafting new plans of world oil domination out of fear, and aimed squarely at the heart of America. If the Chinese can skew world markets by deflating their currency and dumping cheap goods, why wouldn’t they connive to control their life blood oil all the harder?

We certainly can deal with the Chinese as trading partners, and should to our mutual benefit — if, for example, the trade deficit were not so utterly lobsided in their favor, as pointed out at Vultures Row. But to let their foot in the door to an industry that is central to not only our economy, but our whole industrial-military infrastructure — and right in the thick of the Global War on Terrorism — would be beyond foolish.

Blind Mind’s Eye is spot-on in deconstructing the libertarian/pure-capitalist laissez-faire view, as presented by a recent James K. Glassman article on the topic. In response to Glassman’s acquiescence to the Unocal purchase by CNOOC, BME notes soberly:

The Chinese government is a very aggressive and nationalistic entity, much more so than any major government in power today. A lot of this is naturally a way to redirect anger and frustration among the people toward external enemies rather than the obvious enemy, the government, but the bellicose behavior of the Chinese government cannot be ignored. The Congress is absolutely justified in intervening for the same reason it would have been justified in intervening if the Soviet Union had tried to buy out IBM, Lockheed Martin or Boeing during the 1970s or 1980s. The fundamental nature of the Chinese government is an aggressive, imperialistic totalitarianism and allowing a major American oil company to become part of their economic portfolio is dangerous, very dangerous.

Normally I respect Glassman on matters economic. But this time, feel that he is completely wrong, and BME is completely right. The sale of Unocal to CNOOC simply cannot come to pass, no matter how much the Chinese say that their aims are “purely commercial.” With our Global War on Terror and its numerous fronts foreign and domestic, we cannot gamble our future on a few empty promises from a China that would as soon pay us today for the very weapons — military or economic — that it would wield against us tomorrow.

Originally posted at TMH’s Bacon Bits.