The Chinese bid for Unocal.

ITEM: St. Louis Post-Dispatch columnist David Nicklaus opined in that paper's July 17 issue: "You know the world is changing when the Chinese .foreign ministry--run, of course, by the Communist Party--starts lecturing the U.S. Congress on the value of free markets. This unsolicited dose of Econ 101 came after a House resolution expressed reservations about a Chinese bid for Unocal, the U.S. oil company." This buyout bid was made by CNOOC, the China National Offshore Oil Corporation.

ITEM: Reuters reported on August 2 that CNOOC abandoned its bid to acquire Unocal. CNOOC's bid "was overshadowed by a fierce backlash in Washington over a Beijing-controlled company attempting to buy American oil assets as crude prices raced to record highs," said Reuters. "'The political reaction has scared off the board of Unocal, the shareholders and CNOOC itself,' said Edmund Harriss, fund manager at Guinness Atkinson, which holds CNOOC shares. 'I don't think anybody really anticipated quite what a maelstrom they were entering into.'"

CORRECTION: The maelstrom should not only have been anticipated, it was deserved--despite media characterizations that CNOOC was simply trying to compete in the marketplace in the face of an obstructionist U.S. Congress. In truth, this was neither a "free market" acquisition effort nor a contest between competing suitors; it was a calculated, subsidized move by a hostile Communist regime to gain a strategic advantage over the United States.

Even Beijing was eventually forced to admit the existence of subsidies in CNOOC's bid, though arguing they weren't as large as some claimed. Prior to the withdrawal of CNOOC's bid, Reuters had noted: "The loans [to CNOOC] include a $4.5 billion loan at a below-market annual rate of 3.5 percent, and a $2.5 billion interest-free loan.... The interest on the $4.5 billion loan would not be payable if CNOOC's credit rating were to drop below investment grade."

One wonders what alleged proponents of free markets would say if the U.S. government tried to buy an American company for strategic reasons. Yet when a Communist dictatorship goes after the 9th-largest American oil firm, in a precedent-setting effort, many refuse to see that as a strategic move.

In 2003, notes the Defense Department, Communist China became the second largest consumer and third largest importer of oil in the world. Now importing 40 percent of its oil needs, China may be importing 80 percent by 2025, says the Pentagon. Beijing is looking to expand energy resources. "It is this demand," comments Rep. Carolyn Kilpatrick (D-Mich.), "that has forced oil prices to soar. To supply its energy needs, China is acquiring oil fields in Kazakhstan and securing strategic energy supplies from Iran to Sudan. CNOOC has invested $699 million for the purchase of a liquefied gas field in Australia, $592 million for oil assets in Indonesia and is now seeking to acquire Unocal."

A commercial venture? James Woolsey, former director of the Central Intelligence Agency, warned the House Armed Services Committee in July: "For anyone who believes that this is purely a commercial undertaking, unrelated to a national strategy of domination of energy markets and the western Pacific, I would suggest that that view is extraordinarily naive."

Strategic trade--including arms acquisitions from foreign nations--is fueling China's drive. The latest Defense Department report on Chinese military power notes that Beijing's buildup has been helped significantly by Russia and Israel, as well as by "munitions and dual-use technologies from France, Germany, Italy, and the United States."