‘Rules-Based’ Trade

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This was bound to happen. Sens. Kent Conrad of North Dakota and Jim Bunning of Kentucky have asked the Commerce Department and the US Trade Representative to investigate whether China National Offshore Oil Corp. Ltd.’s bid for Unocal violated WTO rules because the partly state-owned firm is receiving below-market financing from state-owned banks.

(CNOOC Ltd. is a subsidiary of CNOOC, created largely for legal purposes, and is placing the actual bid.)

Of this $16 billion CNOOC Ltd’ will secure from outside sources, $13 billion will be provided by entities owned by the Chinese government. As much as $7 billion of the funding will be in the form of no-interest or low-interest loans from its state-owned parent company and the remaining $6 billion provided by state-owned banks that often do not seek repayment.

“Without this subsidy, it is clear that CNOOC’s bid would be uncompetitive and not worthy of consideration by Unocal’s shareholders,” the senators wrote.

The financing arrangement proposed by CNOOC also appears to violate commitments that China made when entering the WTO, they said, noting that China assured the organization that its state-owned banks had been commercialized and would only lend to state-owned enterprises on market terms.

Boo hoo. Poor little Chevron, alone and undefended in the wilderness, helpless and unable to call upon any of the resources of the US government. Those evil, inscrutible, heathen Chinee, refusing to play by “the rules.”

4:37 pm on July 12, 2005