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SUDAN: Investing in Atrocity: The Cost of Doing Business with Khartoum

by By Joanne Mariner FindLaw's Writ
May 25th, 2005

Over the past year, the continuing devastation in Darfur, western Sudan, has slipped in and out of the news, and on and off the agenda of world leaders. The crimes of the Khartoum government and its allied Janjaweed militias have been condemned in the press, in the corridors of the United Nations, and in the U.S. capitol.

But at the U.N. Security Council, which has the power to impose meaningful sanctions against Khartoum, strong words have not been matched by decisive action. Although the council has passed four resolutions on Sudan in less than a year, none has touched the country's business interests. The multinational oil companies that help Khartoum reap over a billion dollars in annual oil revenues continue to operate without hindrance.

Still, Sudanese officials attentive to the bottom line may yet have reason to worry. In an effort that hearkens back to the fight against apartheid in South Africa, lawmakers in Illinois and other states are taking steps to exert financial pressure on Sudan. Last week, the Illinois state assembly passed legislation to bar the state from investing in companies that do business with Khartoum.

If the governor signs the new law, Illinois will become the first state in the country to divest from Sudan. And its example may well be followed in states like Massachusetts, Maryland, New Jersey, and Texas, which have lately been considering similar measures.

U.S. Investment in Companies that Do Business in Sudan

According to the website DivestSudan.org, which defines business ties broadly, U.S. state and local pension funds alone have more than $91 billion in investments in companies doing business with Sudan. The companies at issue are foreign ventures, since under U.S. federal law American companies are already barred from direct economic involvement in Sudan.

Besides oil companies, the list of firms linked to Sudan is dominated by agricultural and engineering concerns. Names like PetroChina and Tafneft (a Russian enterprise) suggest why the U.N. Security Council, where China and Russia exercise veto power, is so reluctant to impose economic sanctions against Khartoum.

Illinois, according to two state legislators who sponsored the divestment legislation, currently has some $1 billion in investments in companies with business ties to Sudan. Under the new draft law, which had unanimous support in the Illinois Senate and passed by a wide margin in the House, the state will be barred from depositing funds or contracting with financial institutions that work in Sudan. State retirement systems and pension funds will also be prohibited from investing in any company that does business there.

Complementing state government efforts in Illinois and elsewhere are student-led divestment campaigns on campuses across the country. At Stanford, Yale, Williams, Duke, and the University of Pennsylvania, among others, groups of students have been pressing their schools' endowments to cut ties with companies that do business in Sudan.

Harvard University has led the way in the academic divestment drive. Last month, its $23 billion endowment decided to cut all of its shares in PetroChina, a subsidiary of the Chinese Natural Petroleum Company with major operations in Sudan. "Oil is a critical source of revenue and an asset of paramount strategic importance to the Sudanese government and PetroChina is a leading partner of the Sudanese government," the university explained in a statement.

The South African Precedent

Proponents of divestment, who recall apartheid-era efforts to pull funding from companies doing business in South Africa, are convinced that economic pressure of this sort is an effective tool. In the 1970s and 1980s, they note, the withdrawal of financial support from companies working in South Africa went from being a radical idea to a widely accepted goal. By 1994, when democracy was finally established in South Africa, more than 100 states, counties and cities in the United States had adopted partial or full divestment policies.

In the 1990s, similarly, a campaign by conservative Christians to divest from oil companies operating in Southern Sudan led three major oil companies to quit Sudan. It is likely that the financial pressure represented by the companies' exodus was instrumental in creating conditions for the peace agreement later negotiated between the Sudanese government and southern rebels.

So hats off to the lawmakers in Illinois. Not only are they sending a strong message to Khartoum, they are keeping state monies free of the taint of Sudanese repression. And it is somehow fitting that the financial power of state pension funds should be harnessed to help the hundreds of thousands of Africans in Darfur who, without international help, may never reach old age themselves.





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