Rattle wrote:

Two things that have been said often apply here. First, Chinese foreign policy consists of one word: oil. Second, its likely that any conflicts with China would be fought out on an economic battlefield.

So what does everything think? Should we be concerned about this?

The problem with the Chinese argument is that there is an asymmetric economic investment risk here. In the event of conflict -- or a poorly brewed pot of tea for the party chairman -- China would be all too likely to nationalize whatever resources it wanted. The complaint already exists that even private enterprise is guided by the government; just add direct policy initiative. China, like Russia, can nationalize foreign investments because they are so obviously growth markets that foreign investors are willing to accept the risk. And CNOOC is already state-run.

The US can not afford to seize investments because of our governance and because our markets are the best in the world because of foreign investor confidence. The US Treasury is considered a risk-less investment and the global markets would completely meltdown if there was ever even a whiff that the US Government was no longer playing by honorable rules. And the US economy is about the least robust economy without the global capital markets.

So if China decided CNOOC should shut down Unocal's operations but preserve the assets, we couldn't do much. And the US couldn't reciprocate by buying PetroChina and doing the same -- PetroChina wouldn't last long as a company with non-government owned assets.

It makes me nervous. Particularly that China is so vehemently attempting to pretend that this isn't a problem, it is just a business transaction. They are spilling their propaganda machine onto the global stage, where they expect everyone to know that what they say is unlikely true but go along with it anyway.

Ever play a strategy game where a player telegraphs their intentions early and there still isn't much you can do about it? It sucks. Like watching our trade deficits and fiscal policy.

RE: CNOOC: Unocal Bid Not About Politics - Yahoo! News