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FINANCE: Darfur Groups Ask U.S. Funds to Drop Chinese Oil Majors

Abid Aslam

WASHINGTON, Sep 5 2007 (IPS) - Activists have launched a bid to shame some of the world’s largest mutual fund companies into dumping Chinese oil majors they accuse of complicity in what the U.S. government calls genocide in western Sudan’s Darfur region.

“The American people do not want to invest in genocide,” Zahara Heckscher, divestment campaign manager at the Save Darfur Coalition, said Wednesday as coalition members said they would target five investment firms with a mix of negative advertising, protest, and investor pressure.

Activists want U.S.-based Franklin Templeton Investments, JPMorgan Chase, Capital Group’s American Funds, Fidelity Investments, and Vanguard Group to sell their shares in PetroChina and the firm from which it was spun off, the China National Petroleum Corporation (CNPC).

The activists said they hope that, in turn, the Chinese would use their weight as the largest buyers of Sudanese oil to press for peace in Darfur. Alternatively, the firms could withdraw from the country, adding to its isolation and increasing the economic pressure on the government in Khartoum in a process reminiscent of the divestment movement that once rose to confront apartheid South Africa.

In an echo of that earlier campaign, activists said they have persuaded 20 U.S. states to adopt divestment policies mandating multi-billion-dollar public pension funds to shed holdings tainted by Darfur. More than 50 public and private universities also have enacted similar measures, they said.

Oil provides up to 90 percent of Sudan’s export earnings. Activists say up to 70 percent of this revenue is spent on the military.

“Sudan’s government is susceptible to economic pressure,” said Adam Sterling, director of the Sudan Divestment Task Force. “Yet, it has faced little such pressure over Darfur.”

U.S. firms are prohibited from investing directly in Sudan under economic sanctions imposed by Washington in 1997. They may, however, invest in foreign companies that do business in Sudan. Darfur activists said there are 500 such companies worldwide.

Since July, however, the European Parliament has encouraged European firms to divest.

The U.S. mutual fund companies targeted Wednesday likely hold a combined total of around five billion dollars in PetroChina stock, Sterling told IPS. The Chinese oil major has a market capitalisation in excess of 230 billion dollars.

For their part, the mutual fund companies said they were wrongly targeted.

“The conditions in the Darfur region of Sudan are deplorable and we support efforts toward positive change there,” Franklin Templeton spokeswoman Lisa Gallegos said in an e-mail. “In our experience investing in emerging markets, we have seen that fostering economic and business development through investment in troubled regions can often help in achieving reform.”

At Vanguard, spokeswoman Rebecca Cohen said the firm’s individual and institutional customers retain the ability to opt out of investments they consider ethically offensive.

Three Vanguard funds hold stock in PetroChina, CNPC or both, Cohen told IPS. Two of these are index funds and, by definition, are required to track the movement of specific financial markets: one tracks emerging market stocks and the other, a cross-section of non-U.S. securities.

The third investment pool, Vanguard’s energy fund, is actively managed by outside asset manager Wellington Management with a singular view to maximise investors’ returns.

Vanguard offers so-called socially responsible investors – those seeking ethical constraints, not just maximum earnings – a mutual fund made up of securities issued by companies that meet a raft of social and environmental criteria, Cohen said.

At Fidelity, spokeswoman Anne Crowley said two mutual funds the company offers U.S. investors hold a combined total of 65 million dollars in PetroChina shares, a sliver of Fidelity’s 1.3 trillion dollars in total assets under management.

The legally discrete, Bermuda-based Fidelity International in fact accounts for most of the PetroChina holdings that activists attribute to U.S.-based Fidelity, Crowley said. The namesake firms share minority control.

Fidelity has no socially responsible investment funds for its clients but it offers ethical options from other mutual fund companies, Crowley added.

Capital Group and JPMorgan Chase were unavailable for comment Wednesday.

Rebels in Darfur took up arms against the Sudanese government in early 2003, after years of tribal conflict over scarce resources in the arid region. They accused the government in Khartoum of neglect and of arming and training militias, known as Janjaweed, to loot and burn local villages. Complicating the conflict, Darfur is thought to sit atop mineral and oil deposits.

Khartoum has admitted arming some militias to fight the rebels but has denied any links to the Janjaweed, which it has called outlaws.

The fighting has killed 200,000-400,000 people, according to various international estimates. Some 2.5 million-3.5 million more have been forced from their homes and livelihoods. Russian and Chinese arms have surfaced in the conflict despite a U.N. arms embargo.

The U.S. Congress has called the situation genocide. The European Parliament has described it as tantamount to genocide. U.N. member states have decried killings, rape, and torture as crimes against humanity and referred alleged perpetrators to the International Criminal Court but Khartoum has refused to hand over its nationals to stand trial abroad.

Sudanese officials have countered U.S. claims of genocide by saying that Washington presented a false dossier on weapons of mass destruction in Iraq and now had turned to presenting a dossier against Sudan, another Arab state with oil.

The United Nations continues to assemble a peacekeeping force to supplement a beleaguered African Union contingent spread thinly over difficult terrain roughly the size of France.