President George W. Bush's administration is under intense political pressure to block the bid by China National Offshore Oil Corp. (CNOOC) for Unocal on national security grounds. But it risks an almighty row with China should it intervene in what Beijing insists is a run-of-the-mill transaction that should be decided by Unocal's shareholders alone. The scale of CNOOC's task was underlined late Thursday when the House of Representatives voted 398-15 for a non-binding resolution that calls for the US government to block the Unocal bid. "If we allow this takeover, we're supplying China with the technological expertise it needs to become a major player in international energy," said Peter Morici, professor of business at the University of Maryland. "Coupled with their military buildup and authoritarian systems, China becomes a threat. There's enough to block it on national security grounds," he said. CNOOC on June 23 kicked up a political stink in Washington by trumping an already agreed offer for Unocal tabled by US oil major Chevron. Its bid of 18.5 billion dollars is worth 1.5 billion dollars more than the Chevron offer, so on straight financial terms is good enough to warrant a vote by Unocal shareholders that is scheduled for August 10. But in political terms, US legislators are aghast at the prospect of a communist-owned entity grabbing a slice of the sensitive US energy industry. House of Representatives Democratic leader Nancy Pelosi said that if the CNOOC bid succeeds, China would gain access to "cavitation" technology to dig far deeper underground than it can now. "That same technology can be used by the Chinese to do nuclear tests underground and to mask them so we would not ever be able to detect them," she argued. Battle has been joined in the US Treasury's Committee on Foreign Investments in the United States (CFIUS), which since 1988 has only barred one transaction out of the 1,500-odd it has examined. That was a year after the 1989 Tiananmen Square massacre when a Chinese company was blocked from taking over a US firm. The committee will only step in if Unocal accepts the CNOOC bid, which so far the California company's board has resisted in preference to Chevron's cheaper offer. Should it decide to intervene, the committee would have 45 days to conduct its probe and submit a recommendation to the president, who would have 15 days to act. That would pose an exquisite dilemma to Bush. Should he placate Congress and US industry by blocking CNOOC, in the process teaching Beijing a lesson that its currency policies and runaway export growth will no longer be tolerated? Or should he stay on-side with one of the most important trading partners of the United States, a country where cheap goods and Treasury bond purchases have kept inflation down and growth up? CNOOC says that Unocal accounts for only one percent of US oil and gas production, that most of that production is in Asia, and that in any case it will continue to sell the oil in the United States. "Despite the heated rhetoric, we firmly believe that the CFIUS process will be fair, thorough and not influenced by either emotion or politics," it said Friday after submitting an explanation of its bid to the committee. But US critics suspect that Unocal will prove the thin end of the wedge as China seeks to extend its commercial might into a host of sectors in the United States and elsewhere. "People are not just worried about the yuan but about China's broader geopolitical agenda. This takeover of Unocal brings everything to the fore," Morici said. Others, however, see China as a scapegoat for much of the structural problems ailing the US economy including the long-term decline of industry and chronic balance-of-payments problems. They argue that for CNOOC's bid to be derailed by political interference would be the height of hypocrisy from a country that preaches free trade to all and sundry. "It would be completely uncalled for. There are no real national security implications," commented Daniel Griswold of the Cato Institute's Center for Trade Policy Studies. "UNOCAL's energy assets are a couple of drops in the bucket of global energy. It would send a terrible signal at a time when we should be welcoming foreign investment in the US energy sector," he said. PIN/AFP