Enter the dragon.(EDITORIAL)

The US Energy Bill, the continuing saga of which has been reported in the pages of this magazine, has been amended again. This time, however, it is not the prospect of drilling for oil and gas in Alaska or liability provisions for MTBE producers which are the contentious topic, but the proposed $18.5bn takeover of Unocal by Chinese energy giant CNOOC. The new rider on the Bill will increase the time period of the regulatory process necessary by giving the departments of defence, homeland security and energy 90 days to evaluate the bid, before a final evaluation by the Committee on Foreign Investments in the US, and could extend the regulatory process to up to nine months.

Ostensibly, the opposition to the bid is based on complaints that it is partially (between 15-30%, depending on who you talk to) financed by soft loans from the Chinese government, and therefore unfairly subsidised. However, if the bid had come from Elf, Eni or BP it would not have generated so much consternation, and it is hard not conclude that this is as much about concerns about China among neo-conservative strategists in the White House as it is about free and fair trade. Nevertheless, on the face of it, it is hard to see what threat to the US economy or national security could be posed by Chinese acquisition of Unocal. Oil is much the same the world over, and even if China diverted all of Unocal's output for its own domestic use, that would still leave millions of barrels in the market that China had not therefore imported from other sources, available at the same market price and ready to be purchased by the US. Nor could China use oil as a weapon against the US, since it is just as dependant on oil imports, but--unlike the US--it lacks the navy to enforce a blockade or the power projection capability to seize production areas.

In fact, only around 30% of Unocal's assets are in the US, and most of its reserves are in Asia. CNOOC has said it will divest itself of any US assets if the US so wishes, and even if all of Unocal's Asian oil was sent to the US the US ...