The enemy has landed. One of the worst nightmares of 'patriotic Americans' may soon come true. An unsolicited $18.5 billion offer from state-owned Chinese oil firm CNOOC to buy Unocal, America's ninth largest oil firm, has given a nation obsessed with energy security a shock.

US-Sino relations are already tense - and this could be the moment the world realises a rival superpower to America has come of age. Last Thursday as Chinese executives stalked Wall Street to get their bid accepted by Unocal, Congress voted 398-15, backing a resolution that Chinese ownership of Unocal would 'threaten to impair the national security of the United States'. Furthermore, approval by Unocal's board of the bid should result in a 'thorough review' by President Bush.

With the issue setting Beijing against the White House, Unocal's shareholders are caught in the headlights. The question is whether they have the courage to take Chinese cash that values Unocal's shares at $67 - especially as there is an agreed offer from US major Chevron on the table worth $60 per share that comes without political complications.

Chinese officials were last week in New York on a charm offensive downplaying Unocal's strategic importance. By emphasising that it supplies a tiny fraction of America's domestic output, CNOOC argues that Unocal's takeover cannot represent a US security threat. It is Unocal's oil and gas in Asia that the company prizes.

But the deal would also give China a 9 per cent stake in the BP-led consortium building the $6bn Baku-Tiblisi-Ceyan oil pipeline, a project aimed at easing US reliance on the Middle East for oil.

Wall Street oil analysts agree that what makes Unocal a must-have is the technical expertise that will allow CNOOC to compete for giant gas and oil exploration projects. 'Unocal has been portrayed as a state-controlled resource grab, which is silly,' said a CNOOC spokesman. 'In the US just 1 per cent of US domestic consumption is from Unocal. And at least 73 per cent of its assets are in Asia.'

Critics of the Chinese not only cite US national security but argue that the deal acts against basic free-market principles, because $13 billion of the $18.5bn Chinese offer comes in government-backed loans, amounting to state aid. 'Frankly it's not a level playing field,' said one US analyst.

The Chinese state media last Thursday admitted the size of the loans to buy Unocal could put downward pressure on the yuan. This will exacerbate US concern over Chinese imports. Beijing has been under pressure to allow the yuan, pegged near 8.28 to the dollar, to float freely, with the US and others saying the exchange rate is artificially low, giving prolific Chinese exports an unfair advantage.

But there are suggestions from Treasury Secretary John Snow and Federal Reserve Board Chairman Alan Greenspan that Beijing will soon allow the value of the yuan to rise. Although this will prove politically expedient in the light of the Unocal transaction, it will also make US bid targets cheaper for the Chinese. Could Unocal be the start of a further Chinese hoovering up of Uncle Sam's assets?

Whatever the outcome, the world's two superpowers are on collision course over crude oil. Dave Simpson, America's acting deputy secretary of commerce, recently said: 'We appear to be competing more than partnering.' That competition is getting hotter. Only last week, consolidation in the Chinese oil industry saw the creation of its largest private oil enterprise, Great United Petroleum Holding Co, from more than 30 small and medium-sized private oil companies. It also emerged last week that China National Petroleum is poised to bid for Petro-Kazakhstan, the Canadian-based oil producer.

China's spending on oil assets has been accelerating this year. Last January, Canadian Prime Minister Paul Martin visited China to discuss Chinese access to the Alberta tar sands. The summit yielded a crucial production-sharing agreement. In the same month, China National Petroleum Corporation signed a deal with Peru to study exploration deals. In all, it is thought Beijing has signed agreements worth $100bn with Latin America. In February, Venezuala and China signed 19 agreements, including investment in Venezualan oil fields.

During the Nineties, Chinese petroleum consumption increased at a compound annual rate of 6.3 per cent but its oil production only grew at a compound annual rate of 1.7 per cent and since 1996, it has been a net importer of oil.

CNOOC's bid will inevitably face delays, whereas shareholders have the option of taking Chevron's money at a vote on 10 August. But Unocal's share price, which on Friday closed at $6·, implies the market either thinks CNOOC will win or that Chevron will sweeten its offer. CNOOC executives have just six weeks to overturn Unocal's recommendation of Chevron's offer.