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Author
Asian focus
Bill Sharp

Sunday, August 14, 2005





An indecent proposal

China's failed effort to purchase Unocal
was an attempt to reduce American
influence in Asia and increase its own

If the China National Offshore Oil Corp. had not withdrawn its offer for United Oil of California (Unocal), Washington should have blocked the deal.

China's long-term strategic goal is to be the dominant power in Asia. To do so, it must reduce the influence of America in Asia, secure ocean passageways for the transport of oil, and guarantee its access to natural resources. These goals often overlap.

Chinese diplomacy has been very busy and successful in recent months settling old disputes. Witness the newly found friendship between Indonesia and China, Chinese maneuvering to close U.S. bases in Central Asia and the resolution of long-standing border issues with India. In all cases, the countries involved had improving relations with America, possessed oil and/or other natural resources, or were geographically situated to disrupt oil transportation from the Middle East or Southeast Asia to Chinese ports.

The Japanese-American relationship is very close and becoming closer in its security aspects. The recent government-condoned anti-Japanese demonstrations in China were ostensibly in protest of Japan's failure to again apologize for its criminal behavior during World War II, but in reality, the Chinese were protesting Japan's bid for a permanent seat on the Security Council of the United Nations, a bid backed by the United States. Given this U.S. support, plus Japan so closely following the U.S. lead in its post-World War II foreign policy, and being the strongest advocate of the U.S. defense posture in Asia, the protest was indirectly anti-American. Muddying the image of Japan will ultimately help to reduce both Japanese and American influence in Asia.

With oil, natural gas and fishing resources estimated at $1 trillion dollars, China claims virtually all of the South Sea as its own despite protest from countries in the area. In 1974, China militarily seized the oil and natural gas-rich Paracel Islands from the then Republic of South Vietnam. A study conducted by the Chinese Ministry of Geology and Mineral Resources estimated that Spratly Islands' oil deposits and natural gas reserves at 17.7 billion tons. Kuwait's reserves stand at 13 billion tons. China claims ownership of the 100-plus islands in the group as does Taiwan and Vietnam. Brunei, Malaysia and the Philippines each claim at least a few of the islands.

Periodic military clashes have taken place between China and other claimants. In 1995, despite Philippine diplomatic protests, China militarily took control of Mischief Reef in the Spratly Islands, which is within the 200-mile Philippine exclusive economic zone, and then fortified it.

Both island groups occupy strategic positions astride the main sea lanes leading north, from the eastern end of the Malacca Straits to Chinese ports. One half of all supertanker tonnage passes through the Spratly Islands each year. If China wishes, it can use its naval forces to block the transport of Middle Eastern or Southeast Asian oil to Japanese and Korean ports. The Chinese government is also reported to have leased a naval base on an approach to the Malacca Straits from Myanmar (Burma).

Unocal represents U.S. influence in Asia through its investments in Thailand, Myanmar, Indonesia, Vietnam and the Philippines. Generally, it has been a good corporate citizen and large employer. The totality of its investments have a profound political, economic, and military effect on the Southeast Asian countries and people where it does business. Would China play the same role?

The Chinese were interested only in Unocal's Asian operations, even offering to sell its American-based assets if the deal went through. Many of Unocal's Asian oil and natural gas contracts are in locations of similar waterborne strategic value, for example, the Yadana gas fields off of the Myanmar coast in the Andaman Sea and control of 6,000 square miles of water off the southern coast of Vietnam.

Supplanting Unocal as a leading partner in the building of the 748-mile natural gas pipeline from Turkmenistan through Afghanistan to Pakistan would give China great advantages and influence in an area of growing importance to the United States.

Given China's trove of dollar- denominated foreign reserves, there will be future offers to buy U.S. corporations and assets throughout the world. Each offer must be closely reviewed for its security and economic implications, not simply a fast buck.


Bill Sharp is an adjunct professor of East Asian International Relations at Hawaii Pacific University and a former adjunct instructor of Asian history at Chaminade University.



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