ChinaFDI

Financial Times (London, England)

July 1, 2005 Friday
USA Edition 1

SECTION: FRONT PAGE - FIRST SECTION; Pg. 1

LENGTH: 472 words

HEADLINE: Chevron raises stakes in Unocal fight with call for CNOOC bid to go to WTO

BYLINE: By EDWARD ALDEN and SHEILA MCNULTY

DATELINE: HOUSTON and WASHINGTON

BODY:


Chevron yesterday called for China National Offshore Oil Corporation's unsolicited bid for Unocal to be referred to the World Trade Organisation, claiming its Asian rival was attempting to acquire a "critical resource" with "free money".

In an interview with the Financial Times, Peter Robertson, Chevron's vice-chairman, said: "There is something a little wrong with a set of trading rules that allow a government to enter a commercial playing field, in a sense, and to subsidise a bid to pick up these assets.

"If you can get free money, there is no end to this. So it seems like there is sort of a trade rules issue here that somebody needs to deal with."

Chevron claims CNOOC's Dollars 18.5bn bid for Unocal is subsidised by as much as Dollars 10 a Unocal share because of the low- or no- interest finance provided by the Chinese government. Chevron's view, Mr Robertson said, was that if China could buy "a critical resource like energy with free money, then that's not a commercial transaction at all".

CNOOC maintains its offer is purely commercial.

Mr Robertson added: "I think the country - whether it's the US or the UK or any country - ought to take a hard look at that. I think WTO rules are intended to make sure that doesn't happen."

While there is scant prospect of the issue reaching the WTO - the multilateral body has no provisions on cross-border mergers or competition policy, and weak rules on investment - Chevron's comments are likely to raise the temperature in Washington.

Congress and the Bush administration are under pressure to approve legislation that would allow US companies to use domestic anti-subsidy laws against Chinese rivals. Currently those laws - which allow for the imposition of import tariffs - offer no help because China is deemed by the US to be a "non-market economy" in which state support of private companies is ubiquitous.

Mr Robertson acknowledged that Unocal's shareholders would take the best offer but argued that Chevron's lower bid, about Dollars 16.5bn in cash and stock, remained superior overall, because it could be completed sooner with no risk of regulatory delay or security concerns.

Other US companies including ExxonMobil, as well as some pundits and politicians, have objected to suggestions that CNOOC's bid should be blocked, for fear that US interests could face retaliatory action.

But Mr Robertson said: "There is a government issue and a trade issue, and a fair trade issue, and I think Exxon and all the others stand up for fair trade and for free trade. We all do.

"In this case, some people are missing the fairness issue."

He repeated that Chevron saw no reason to raise its offer to match CNOOC's. "We think we offer the best deal to the Unocal shareholders," he said.

Additional reporting by Edward Alden in Washington Unocal alternatives, Page 21 www.ft.com/unocal

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