Putting China on the Spot for Sudan
Trillium Asset Management Corporation (“Trillium”) will be working with two nonprofit organizations this fall to keep up the economic pressure on the Government of Sudan (GoS).
The “selective divestment” model – developed by the Sudan Divestment Task Force adopted by Trillium – focuses on companies in strategic sectors, whose tax payments or royalties provide major revenue for the GoS. The sectors include oil and gas, electric power, or telecommunications. The model involves engagement with companies before determining whether to divest, depending on whether the investor believes that on balance, the economic and social benefit they provide to all Sudan’s citizens outweighs the pernicious uses to which the government may put their taxes.
To date, direct governmental sanctions and diplomatic pressure have failed to result in real security for Darfur. Many observers believe nothing will change until China is forced to abandon its role as the Sudanese government’s enabler. Two Chinese companies, Sinopec and CNPC play a major role in Sudan’s oil industry (CNPC is 100% owned by the Chinese government and is the controlling shareholder in PetroChina, which does business in Sudan). China also furnishes arms to the GoS.
Shareholder activists are using two strategies to bring corporate pressure on China.
The first is to encourage the largest investors in Chinese oil companies (and the two other dominant foreign oil companies, Petronas of Malaysia and ONGC of India) to review their relationships with these companies as direct investors or through other financial transactions. We are encouraging them to engage with these companies (as well as any others in critical sectors that they have relationships with) and urge them to thoroughly respond to situation in Darfur. In short, we’re asking them to do as we are.
We’re also asking corporate sponsors of the Beijing Olympics to pressure the Chinese government to exert its influence on Sudan, lest the 2008 games go down in history as the “genocide Olympics” the way that the 1936 games are remembered as a showcase for Nazi Germany. Staff from the non-profit Dream for Darfur have met with Chinese government officials twice this summer, who shrugged off any responsibility for Darfur. “We presume that’s what the Chinese officials will tell Olympic sponsors as well,” said Ellen Freudenheim, the campaign’s corporate sponsor outreach coordinator. “But there are actions that the Chinese government could, indeed must, take – and we hope corporate sponsors, instead of being pacified, will push for concrete steps leading toward peace.” Dream for Darfur is asking corporate sponsors to put pressure on the Chinese government and the International Olympics committee.
In May, Berkshire Hathaway‘s annual meeting turned into a forum for debate on whether the firm should divest from PetroChina. Chairman Warren Buffett argued that divestment would do no good because “subsidiaries have no ability to control the policies of their parent… Are Freddie Mac and Fannie Mae responsible for the activities of the U.S. government?” Surely not. But would the U.S. government pay attention if foreign investors started giving Fannie and Freddie a hard time? I think so – maybe even the current administration. In any event, three months later, Berkshire sold off nearly 17 million shares in PetroChina. Buffett insisted it was just for the money, and perhaps it was. But days later, the UN passed a Chinese-brokered resolution authorizing a UN force of 26,000 to police Darfur. It’s enough to give you hope – which Darfurians need, because the implementation of that resolution is already going badly awry.