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Tuesday, September 14, 2004

Darfur, Southern Sudan, and the Moral Imperative of (Equity) Divestment: 

Which companies and nations are propping up the Khartoum regime?

Eric Reeves
September 13, 2004

The National Islamic Front regime in Khartoum seized power by military coup in
1989, deposing an elected government in order to abort the most promising peace
process since Sudan's independence in 1956. Since the 1989 coup, the regime
has ruled by means of tyranny, a ruthlessly efficient network of security
services, and a brutal domestic policy that includes serial genocide. This
illegitimate cabal of genocidaires, largely unchanged since 1989, could not survive long
without the economic and personal financial benefits that derive directly from
foreign investment.

Consequently, as genocide continues to unfold in Darfur, and a final peace
agreement between Khartoum and southern Sudan remains in diplomatic limbo, a number
of observers have begun to argue that there can be no moral justification for
holding equity investments in the many European and Asian companies that are now
propping up the Khartoum regime by means of large commercial investments and
capital projects.

Perhaps surprisingly to many Americans, a number of these European and Asian
companies list their shares on the New York Stock Exchange and are held in many
mutual funds and pension funds. Others list on the London Stock Exchange or
exchanges in other countries. Still others seek to enter the US bond market (debt
market) in order to raise American capital to support their enterprises in
Khartoum and northern Sudan.

How many companies are investing in Sudan in ways that provide the NIF regime
with essential commercial and economic support? The list includes a good many
more companies than those that have chosen to invest in the oil development
sector recently highlighted by US Secretary of State Colin Powell. But all of
these companies have chosen to accept payment in the form of Khartoum's
petrodollars---revenues raised from oil development projects located almost exclusively in
southern Sudan, though presently used for purposes that in no way contribute to
southern development.

Indeed, Khartoum's extensive military purchases, especially over the last half
dozen years, have been made possible by virtue of realized and anticipated oil
revenues. These purchases include many of the helicopter gunships that have
been deployed to such deadly effect against civilians in both southern Sudan and
Darfur. A measure of the profligacy of Khartoum's military purchases can be
seen in the recent completion of a deal with Russia for 10 MiG-29s---one of the
most advanced fighter aircraft in the world.

A PRELIMINARY ROSTER OF COMPANIES SUPPORTING
KHARTOUM

Good examples of especially culpable commercial presence in northern Sudan
include Germany's Siemens AG (listed on the New York Stock Exchange), presently
building outside Khartoum the world's largest diesel-powered electrical generating
plan; Switzerland's ABB Ltd (also listed on the New York Stock Exchange), now
engaged in a huge project to upgrade the electrical grid for Khartoum and the
surrounding urban areas, as well as in automation work for the major oil
production consortium in Sudan, the Greater Nile Petroleum Operating Company; France's
Alcatel, a telecommunications giant, is yet another company that both lists on
the New York Stock Exchange and offers commercial telecommunications support
that benefits Khartoum, and the immediate environs of Khartoum; nothing benefits
the rest of Africa's largest country.

A successful divestment campaign against these companies, and their ethically
myopic investments, would bring real, unsustainable economic pressure to bear on
Khartoum. For its single goal would be to force a commitment by such companies
to suspend all commercial activities pending the end of genocidal destruction
in Darfur and completion of a final peace agreement with the people of the
south.

There are other divestment targets as well, and bipartisan legislation recently
introduced in the House of Representative (sponsored by Congressmen Franks,
Lantos, Payne, Pitts, Tancredo) would legally require disclosure of "the identity
of all entities that are engaged in commercial activity in Sudan" (Section 5
[a] of H.R. 5061, "To provide assistance for the current crisis in the Darfur
region of Sudan and to facilitate a comprehensive peace in Sudan"; see below).

But some of these companies are especially conspicuous in their activities even
now. Russia's Tatneft is an important participant in Sudan's oil sector (and
also lists on the New York Stock Exchange). China's contrived corporate entity
"PetroChina" is essentially a capital market surrogate for China National
Petroleum Corporation (CNPC), the dominant and most ruthless international player in
Sudan's oil sector. After Goldman Sachs failed in 2000 to secure a $10 billion
Initial Public Offering for CNPC, the Wall Street firm created a so-called
financial "cut-out," which became the new entity "PetroChina": it is PetroChina,
wholly controlled and 90%-owned by CNPC, that lists on the New York Stock
Exchange.

THE LOGIC OF A DIVESTMENT CAMPAIGN: IF WORLD LEADERS
WON'T ACT, ORDINARY CITIZENS MUST

Why a divestment campaign? Why a relentless effort to ensure that hundreds of
billions of dollars of stock (equity), held in various US pension funds,
endowments, and mutual funds, are sold? There are two answers.

First, it is immoral to own shares in companies that now willingly engage in
commerce with a regime that is guilty of ongoing genocide. Such investment is no
different in character from investment in German industry during World War II
and the Holocaust. However high the threshold might be for divestment---what
will inevitably be labeled the "politicization of investment
decisions"---genocide must surely cross it.

Secondly, there are precious few ways in which to bring meaningful pressure to
bear on this brutal and intransigent regime. The UN Security Council gives no
sign of imposing sanctions on Khartoum, and China has already made explicit
threats to use its veto to ensure that no effective sanctions are contained in any
resolution. China will have ample diplomatic support from Russia, Pakistan,
Algeria, and perhaps others. The Arab League and the Organization of Islamic
Conference have also made clear their opposition to any UN pressures on Khartoum.
The US, despite Secretary of State Powell's genocide determination last week,
is already in the process of weakening a new Security Council resolution,
according to Powell's chief deputy, Richard Armitage (Agence France-Presse, September
13, 2004).

For despite a number of references by Powell during his September 9, 2004
Senate testimony to unspecified "measures" against Khartoum's "petroleum sector," he
did nothing to suggest how these measures might actually be effected.
Similarly, the European Union has spoken of sanctions, including an "oil embargo," but
with no clear indication of how the latter could be enforced. And indeed, with
Sudanese crude refined mainly domestically and in East Asia, and completely
without "Sudanese identity" once refined, it is not at all clear what
intelligibility the notion of an "oil embargo" has. Moreover, the dominant players in
Sudan's oil development and production are the state-owned oil companies of China,
Malaysia, and India, with a growing Russian presence. These countries are among
the least likely to participate in an "oil embargo."

In China's case, we may be certain that there is no willingness to have any
international pressure brought to bear on what Powell referred to as Sudan's
"petroleum sector." China is now a net importer of oil, and petroleum consumption
grows by over 10 percent per year (and China's economy is especially sensitive
to oil "price shock"); Sudan is China's premier off-shore source of oil. There
are simply no human rights concerns---even massive genocidal destruction---that
will lead the Chinese regime to accept an embargo or any other threat to its
production and development activities in Sudan.

But even Europe, despite apparently tough talk in some quarters, is still far
from prepared to jeopardize its own economic interests. Germany is a case in
point. German Development Minister Heidemarie Wieczorek-Zeul is reported today
(September 13, 2004) as saying she "favours tough sanctions against Sudan." ---

"The German minister said that contradictory promises from the Sudanese
leadership had not help improve security in Sudan's troubled Darfur region where Arab
militias are accused of carrying out a campaign of genocide.
Wieczorek-Zeul recommended an arms and oil embargo along with the freezing of
Sudan's assets." (Deutsche Welle, September 13, 2004)

But notably, Wieczorek-Zeul says nothing about the German commercial presence
in Khartoum, of the sort emblematized by giant Siemens AG: it is this presence
that does so much to sustain the National Islamic Front and convince the regime
that ultimately petrodollars speak louder than the cries of death and suffering
in Darfur.

Moreover, there is again no discussion of how an oil embargo could be mounted,
or what the point of a fig-leaf "arms embargo" is so long as Russia and China,
as well as Ukraine, Bulgaria, Yemen, and a number of other countries are more
than prepared to supply Khartoum all the weapons it can purchase with its
exclusive control over Sudan's oil revenues (exceeding $1 million per day).

Jan Pronk of the Netherlands, Kofi Annan's special representative to Sudan,
suggests in a different fashion just how far Europe is from responding
meaningfully, and with a unified voice, to Darfur's crisis. Pronk accurately declares of
the Khartoum regime:

"'I see a government here that just doesn't seem to be interested in its own
people,' Mr Pronk says in his hotel room in Khartoum." (Radio Netherlands,
September 13, 2004)

Even so, Pronk goes on to say that the failure of his report to generate any UN
momentum for sanctions against Khartoum is of no real concern (of course this
professed lack of concern works to support the political position of Kofi Annan,
who is unable to guide the UN Security Council toward meaningful action):

"'I'm not a great proponent of sanctions because I invariably see them as a
sign of weakness. Sanctions are punitive measures, and you only punish people if
their behaviour can no longer be influenced.' In addition, China and Russia are
likely to block any UN resolution authorising the dispatch of international
peacekeepers to Darfur against the will of the Sudanese government. It's another
reason why Mr Pronk feels that alternative avenues should be explored to up the
pressure on Khartoum." (Radio Netherlands, September 13, 2004)

These words have a specious plausibility, but mask a blunt truth: Pronk and
Annan have no ideas about how to "influence" Khartoum's behavior in any way
commensurate with the urgency of genocidal destruction in Darfur. It is now almost
two and a half months since Kofi Annan signed a "Joint Communiqué" in Khartoum
(July 3, 2004), in which Khartoum committed to "immediately start to disarm the
Janjaweed" and to "ensure that no militias are present in all areas surrounding
Internally Displaced Camps." Despite these and other security-related
commitments, nothing has improved in the security situation in Darfur, the essential
issue for terrified and displaced civilians, and for any possible political
settlement. Pronk speaks of "alternative avenues [that] should be explored to up
the pressure on Khartoum"---but of course he does nothing to spell out these
"alternative avenues," and the genocide continues.

(Perhaps it is worth recalling that the Dutch corporation Trafigura Beheer BV
participated from the beginning in the sale and promotion of oil from Sudan's
major producing consortium in southern Sudan, the Greater Nile Petroleum
Operating Company [see "The Netherlands to Ship Genocidal Oil" by this writer in Trouw,
(The Netherlands), September 4, 1999; English translation available upon
request].)

Khartoum may not be happy with current world attention, but has yet to hear a
clearly articulated threat---one that will change its behavior fundamentally.
The regime seems to be banking on an eventual drifting of international
attention, both away from the catastrophe in Darfur (which will become simply a chronic
"humanitarian problem"), and from the unfinished business necessary to finalize
a north-south peace agreement, including a comprehensive cease-fire with robust
peacekeeping. In order to disabuse Khartoum of this notion, international
pressure on the regime clearly must include both near- and long-term economic
pressure and punishment, and a vigorous divestment campaign offers one means of
achieving this.

DIVESMENT STATISTICS AND MECHANICS

US public pension plans alone own over $91 billion dollars of equity (shares)
in companies like Siemens AG, Alcatel SA, ABB Ltd, Tatneft, PetroChina and a
number of others. These pension plans include, for example, California Public
Employees Retirement System, California Public Employees Retirement System,
Colorado Public Employees Retirement Association, District of Columbia Retirement
Board (DCRB), Florida State Board of Administration (FSBA), Maryland State
Retirement & Pension Systems, State of Hawaii Employees' Retirement System, Illinois
State Teachers' Retirement System (ISTRS), Pennsylvania State Employees
Retirement System, The Retirement Systems of Alabama (RSA), New York State Common
Retirement Fund, Vermont Municipal Employees' Retirement System, State of
Connecticut Trust Funds (SCTF), Ohio Police & Fire Pension Fund (OPFPF), State of
Wisconsin Investment Board (SWIB)---and many, many more.

Private US pension plans own many additional tens of billions of dollars of
equity in companies that now work to support a regime engaged in genocide. And
private US mutual funds have even greater equity exposure to these companies.
Finally, college and university endowment investments will in most cases have
substantial shareholdings, directly or through mutual funds, in a number of these
companies.

While it is not presently possible to know with full accuracy which pension
funds and mutual funds own which shares, and in which of these companies, it is
certainly the right of every pension investor and mutual fund investor to make
inquiries today. Much of the information is available in on-line prospectuses,
and in other public sources.

Those with discretion over their investments (e.g., a choice of pension plans,
a choice of mutual fund investments) should make clear a blunt demand: "divest,
at a minimum, from all shares of Siemens AG, Alcatel SA, ABB Ltd, Tatneft, and
PetroChina---or I will invest my money in a fund that does not hold shares that
are ultimately a form of complicity in genocide." Strong concern should be
registered over the possibility that other foreign equities might reflect
investments in Sudan

Here it should be borne in mind that because of comprehensive US sanctions
against Khartoum, imposed in 1997, no American companies operate in Sudan.

For those in public pensions plans, and no option for alternative retirement
investment, the message to pension managers should be clear and forceful: "I am
extremely unhappy that my hard-earned dollars are being used to purchase shares
in companies operating in Sudan and propping up a genocidal regime. I will
register this unhappiness with public officials in this state (or organizational
body), and with the news media, and with all who are in a position to force
reconsideration of this investment."

College and university students have a particular opportunity: to force
institutional endowments to divest from all holdings (including through mutual funds)
of Siemens AG, Alcatel SA, ABB Ltd, Tatneft, and PetroChina. During the
apartheid era in South Africa, college and university students were an immensely
powerful force in breaking down this hateful system of racial discrimination.
Students now have an even more urgent task: to ensure that endowment monies are not
invested in companies complicit in genocide---the deliberate,
ethnically/racially-driven destruction of the African populations of Darfur.

Shares of these companies are also owned within the TIAA-CREF retirement funds
(TIAA-CREF is the retirement investment vehicle for American higher education
and is the largest private pension plan in the world). College and university
faculty and administrators should vigorously lobby the management of TIAA-CREF
to divest all shares of these companies, from all funds (for example,
TIAA-CREF's "Global Equities Fund" has shares in ABB Ltd, in Siemens AG [over 2 million
shares], and in Alcatel SA [over 3.5 million shares]).

DIVESTMENT GOALS

Again, the central purpose of the divestment campaign must be to force these
complicit companies to suspend all business and commercial activities in Khartoum
until the genocide in Darfur ends and a final peace agreement with the people
of southern Sudan is signed and implemented. If the UN, the US, and the
European Union are unwilling or unable to bring serious pressure to bear on the
Khartoum regime, then it is time to "take foreign policy private."

At the same time, it is important to support new bipartisan Sudan legislation
in the US Congress (HR 5061, "To provide assistance for the current crisis in
the Darfur region of Sudan and to facilitate a comprehensive peace in Sudan").
The bill has both a provision for capital market sanctions against these
companies (legally denying them the right to list on the New York Stock Exchange or
any other US exchange), and rigorous disclosure obligations, requiring a Treasury
Department determination of not only "the identify of all entities that are
engaged in commercial activity in Sudan," but also the "nature and extent of that
commercial activity," and "the identity of all agencies of the Sudanese
Government with which any such entity is doing business" (Section 5 [a]).

This legislation provides the perfect legislative tool for a broad divestment
campaign and should be supported vigorously. Congressmen and Senators should be
urged to enact HR 5061 as soon as possible.

URGENCY

The Abuja (Nigeria) peace negotiations have stalemated, with Khartoum holding
out for disarmament and "cantonment" of the insurgency groups. The Sudan
Liberation Movement and the Justice and Equality Movement, for obvious reasons,
refuse to countenance disarmament and geographical confinement prior to a political
settlement, or at the very least deployment of a very large international
peacekeeping force with a robust mandate. To do otherwise is simply to make
themselves defenseless targets of extermination attacks by the Janjaweed and Khartoum's
regular military forces.

Certainly genocidal violence and displacement continue, and have recently
accelerated. Oxfam reports today (September 13, 2004) that very recent violence in
South Darfur has led to tens of thousands of newly displaced persons:

"In recent days Greda camp has been overwhelmed by fresh arrivals fleeing
renewed violence. On August 26 [2004] the camp housed approximately 10,000 displaced
people, by September 7 the camp had boomed to over 40,000 people. People are
still arriving every day at the camp. 'Literally tens of thousands of people have
poured into the camp in recent days and the flow still hasn't stopped. A
quadrupling of numbers puts a massive strain on resources and infrastructure.'"
(Oxfam Press release, September 13, 2004)

And this is just one camp.

According to numerous UN reports and reports from humanitarian organizations on
the ground, displaced women and girls continue to be raped in brutal,
systematic patterns in and around the camps. Men cannot venture from the camps without
the risk of beatings or execution by the Janjaweed.

Cholera and dysentery outbreaks continue to loom threateningly over these
massively overcrowded camps, with explosive mortality a clear possibility. Clean
water and adequate sanitary conditions are nowhere near adequate in many camps;
some camps have no humanitarian presence whatsoever. Diarrhea, malaria,
Hepatitis E, and growing malnutrition are taking ever greater numbers. The UN's World
Food Program was able to reach fewer than 1 million people in August; the
target figure for September (another very rainy month) is 2 million---and this still
understates global need in Darfur. Several rich European nations, including
France and Italy, along with Japan and oil-rich Arab countries, have done
pitifully little by way of responding to critically urgent funding needs for
humanitarian assistance in Darfur.

Agricultural production has come to a halt, food reserves have been destroyed
or exhausted, and the killing season has begun in earnest. And still Khartoum
shows no signs of responding to any of the purported "pressure" by the
international community. In particular, the regime adamantly continues to deny an
appropriate mandate to the small African Union force desperately in need of massive
augmentation. Such an expanded force, with a robust peacekeeping mandate,
holds out the only near-term prospect for improved security in Darfur.

The time has come for ordinary citizens to make it impossible for this
intransigently genocidal regime to enjoy the economic benefits of European and Asian
commercial and economic support. Divestment from the equity (shares) of the most
culpably guilty of these transnational companies is a moral imperative.

Eric Reeves
Smith College
Northampton, MA 01063

ereeves@smith.edu

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