If Unocal went out of business, would we have cared? If China had spent $10
billion on new tanks, would we be quaking in our boots? (I’m glad they are not
doing this). But if neither happens but instead one Chinese company buys Unocal
and keeps their employees employed, we should be concerned?
Although I didn’t get into this in my original post, it’s also not clear to me what we gain by "owning" Unocal. If the assets of Unocal are in America or an ally then CNOOCs bid gives us greater power over China not less. If the assets are in Asia then in the event of a major conflict we would have to use the military to control the assets whether we own them or not. Steve Carr, also writing in the comments section of Crooked Timber, expresses this point well.
The United States doesn’t own, in any sense, Unocal’s reserves–the vast majority
of which are, by the way, in Asia. So it’s not losing anything, because it
doesn’t have anything. If, in this imaginary future that Krugman is conjuring,
the US wants those reserves, it will have to take them by force–first
nationalizing Unocal (or whatever American company comes along to pick up Unocal
if the CNOOC bid is dropped) and then seizing and
defending the reserves militarily against the Chinese (who, in Krugman’s model,
will presumably be trying to take them). If Unocal is bought by CNOOC, and we want the reserves, we’ll again have to take them
by force from a public company. The second seems mildly more difficult than the
first, but in both cases you’re talking about a massive use of military force to
secure energy resources. If we do end up in that future, I have a hard time
believing that who owns the deed to the natural-gas fields in Indonesia is going
to make much of a difference to anyone.
There is, then, no real downside (in strategic terms) to letting the deal go
through. But there’s a real downside to blocking it: alienating China, making it
clear to them that we perceive them as an enemy, looking like hypocrites in the
eyes of the world, interfering with rights of Unocal shareholders, etc.
Other good comments from Tino at Truck and Barter.