The Significance of the UNOCAL Affair

Hint: it's not about economics. It's about economic warfare:

Who for a moment could believe that our good friend China (good enough to have high trade status with, anyway) would be rejected a month after it made gestures toward wooing an American oil company? Its bid was in fact much higher than that of the already entrenched Chevron. Hasn't it enough on its hands with Kim Jong Il next door, and his sunglasses? Or, to be frank, China's got cheap (read: slave) labor and friendly banks -- so friendly that it needn't worry about market pressures. Why not get in on it?

Reflect on what particularly China is known for. Communism, which these days is more benign to those who know the least about it; human rights violations; copyright infringement; arms build-up. It's difficult to fear an ideology you don't understand, shed tears for someone you don't know (particularly since forced abortion, to some, would mean killing something non-human), and get mad about stolen movies which seemed exorbitantly priced to begin with -- but the arms build-up should give you a moment of pause to calculate just how big an army the Chinese have.

The China National Offshore Oil Company is a 70% state-owned facility (and 30% state-employee owned). Nevermind the access that China would have to an already scarce natural resource, consider that any profits skimmed would be absorbed by a brutal regime with a proven record of threatening U.S. allies in the Pacific. More than before, dollars would pay for Chinese arms, often purchased illegally. After all, why is China running training exercises simulating an invasion of Taiwan? That little island is wondering the same thing you are, and so is Japan and South Korea.

Certainly, the PRC makes plenty of money off the United States, but since when have T-shirts been the strategic economic resource that determined the direction of global trade policy? The U.S.'s only domestic source of rare-earth minerals is UNOCAL-owned, and that company's oil is a precious commodity. Even if China wasn't planning on using UNOCAL's rare-earth minerals (it already has access to plenty elsewhere), its command of an important resource would be congestive.