China Tries To Make Exxon A Pawn

By INVESTORS BUSINESS DAILY
July 21, 2008

Energy: Big Oil is easy to kick around -- just ask any Democrat in Congress. But China's threats to Exxon Mobil are in another league. Its bid to use Exxon Mobil as a wedge against its rival Vietnam is a case in point.

What China's doing in the South China Sea these days is not trade, but blackmail to assert regional dominance. On Sunday, the South China Morning Post reported Chinese officials are threatening to exclude Exxon Mobil from doing business in China if it doesn't pull out of an exploration deal with Vietnam's state oil company, PetroVietnam.

The region in question is clearly Vietnam's (see map). Exxon Mobil has been doing its homework on this area ever since the U.S. trade embargo was lifted in 1994. But China claims Vietnam's central and southern offshore coastal waters, where the exploration is occurring, is its territory. Though its claim wouldn't hold up in an international court, China seems to believe Vietnam is a wayward stepchild and, thus, China doesn't need to recognize its sovereignty.

Exxon Mobil, as a result, might have to drop the project, leaving Vietnam with no technology to extract its badly needed coastal oil.

BP bailed out on a similar project a year ago after Chinese threats. The result? Less oil on the market and higher prices.

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