Divestment efforts seek to pressure Khartoum government

By Laura Smitherman, The Baltimore Sun

May 21, 2005 — As a young staffer on Capitol Hill in the 1970s, Barbara Lee worked on anti-apartheid legislation aimed at pushing U.S. companies to leave South Africa. Now a member of Congress, Lee is helping to craft another divestment campaign, this one designed to end mass killings in Sudan.

A newly arrived refugee woman from the Sudan region of Darfur crosses into Chad in the direction of the improvised Tine refugee camp. (AFP).

“Anyone who understands that genocide is morally wrong and reprehensible cannot help but get involved,” said Lee, a Northern California Democrat. She has called on the California Public Employees’ Retirement System, the largest state pension fund with $180 billion in assets, to rid itself of “blood money” invested in companies that do business in the war-torn African nation.

A strengthening movement to bring economic pressure to bear in Sudan got a lift this week when Illinois became the first state to pass a bill aimed at forcing public pension funds to shed investments in companies with business ties in the African nation. The state General Assembly passed the legislation Tuesday, sending it to Gov. Rod R. Blagojevich, a Democrat, whose office is reviewing it.

Several states, including California and Maryland, have considered similar legislation. Meanwhile, college campuses – a crucible of earlier economic protest movements – have organized to demand that their universities scour their portfolios of investments in companies that do business in Sudan.

Sudan is one of the poorest countries in the world. It is dependent on oil and drought-ravaged agriculture. About 130 multinational companies have business ties there, according to Conflict Securities Advisory Group, a private research firm in Washington. Most are based overseas because for the past eight years, U.S. corporations have been restricted by U.S. sanctions. Fewer than half have offices or factories in Sudan.

Critics dismiss divestment as an emotional response that could further destabilize the region and ultimately hurt oppressed populations by worsening their economic woes and depriving them of Western influences.

Moral imperative

To others, the Sudan push is a moral imperative, reminiscent of the divestiture that prodded South Africa to end its long policy of discrimination against blacks.

Since conflict broke out in western Sudan two years ago, tens of thousands of people have been killed and millions displaced. Arab militias, called janjaweed, have targeted black African villagers in the Darfur region in scorched-earth fashion. The Sudanese government in Khartoum, which armed the militias to quash a rebellion, has been accused of perpetrating genocide.

Advocates of divestment argue that the Khartoum government is propped up by companies doing business in Sudan. Money inevitably flows to the power centers, they say, and pressuring companies to leave the country might persuade the government to help bring peace to Darfur.

“A ruthless police state is made more secure economically by virtue of these investments,” said Eric Reeves, a Smith College professor who has taken leave to do research on Sudan. “I don’t think the issue is ambiguous. Let’s imagine a Swiss company in 1944 trading gas to Germany.”

Earlier divestment drives have traced a similar course through college campuses and state capitols, though few have matched the scope of the corporate exodus from South Africa, where hundreds of U.S. companies did business.

The Sudan issue hasn’t generated nonbinding shareholder resolutions of the kind that helped propel South Africa divestiture.

Myanmar also target

Activists have also taken aim at companies in Myanmar, formerly Burma, where the military junta has been criticized for human rights abuses. PepsiCo Inc. severed ties with a bottling plant there in the mid-1990s, and apparel makers such as Eddie Bauer Inc. also pulled out, but the oil company Unocal Corp. has resisted the pressure.

Another movement is trying to single out companies that supply weapons to Israel as a show of support for Palestinian statehood.

Often, the issues aren’t as clear.

In Sudan, some early backers of divestment caution that doing so could jeopardize a fragile peace accord that Khartoum reached this year with rebels in southern Sudan, where millions have died in a civil war.

And investment managers say they are conflicted over whether they should play a role.

In the Sudan campaign, Lee, whose district includes Oakland and Berkeley, is joined by activists such as radio talk-show host Joe Madison, known as “the Black Eagle.” Madison was arrested decades ago at a protest on the steps of the South African Embassy in Washington and again last year at the Sudanese Embassy down the street.

Religious groups are also involved, including the American Jewish Committee and Christian Solidarity International.

Sudan’s designation as a state sponsor of terrorism has also spurred interest in divestment.

And Ben Cohen of Ben & Jerry’s ice cream is lending a hand.

Among the companies doing business in Sudan are Schlumberger Ltd., an oilfield-services company based in New York and Paris that has about 150 Sudanese employees, and the French company Alcatel, which is upgrading a telecommunications system in Sudan.

Siemens AG, a German company, has up to $20 million in contracts in Sudan to build a power plant and for other infrastructure projects.

Spokeswoman Paula Davis said that the company has “a policy of constructive engagement” with Sudan and that its projects are “key components to improving living conditions.”

‘Very concerned’

“Obviously, we are very concerned about the situation there and watching it closely,” she said.

Canada’s Talisman Energy Inc. sold its oil and pipeline interests in Sudan in 2003 after years of protests from human-rights groups that said revenue from the project helped finance the country’s civil war.

U.S. household-name products still make their way into Sudan indirectly. Gillette Co. said a small amount of its personal-care products is sold in Sudan through independent distributors, and Goodyear Tire & Rubber Co. said its farm tires are sold there.

“If you were to buy a tire from us, you could sell it to anyone you want,” Goodyear spokesman Keith Price said. “We don’t have any ability to control third parties.”

Companies say their business in Sudan is legal and can bring democratic ideals and jobs to a country where both are acutely needed.

“Divestment doesn’t lead to any happier circumstances for the Sudanese,” said William Reinsch, president of the National Foreign Trade Council, which represents hundreds of companies and promotes trade. “It makes people here feel better, but I don’t think it does any good.”

Institutional investors such as pension funds and universities often resist the pressure to divest, saying their primary focus is to maximize investment returns. They also argue that they have no way of independently verifying the research from Conflict Securities, a for-profit company that sells its list of companies in Sudan for $7,500.

“It puts us on a slippery slope because there are a lot of causes out there, and there are probably lots of reasons to divest, but that starts to narrow your universe of investments,” said Brad Pacheco, a spokesman for the California pension fund. “And we don’t have the resources to be CIA agents and discover whether a company is enabling genocide.”

Nonetheless, the Sudan divestment push is making inroads.

Harvard University, which was slow to rid itself of investments in companies doing business in South Africa, has led the way in the academic world with regard to Sudan. Its $23 billion endowment agreed last month to sell its stake in PetroChina, a Chinese oil and gas company with operations in Sudan.

Student-led divestment campaigns have begun on campuses including Duke University in North Carolina and the University of Pennsylvania.

Legislators in a number of states, with South Africa legislation that was passed in more than 20 states as a blueprint, are considering Sudan bills. California’s General Assembly passed a resolution urging that state’s pension funds to use their influence as shareholders to lobby companies to avoid activities in Sudan that promote human-rights abuses.

Maryland legislation

In Maryland, Del. Salima S. Marriott introduced legislation during the recent General Assembly session to block investment of state funds in companies doing business in Sudan. The bill never got a committee vote. The Baltimore Democrat has vowed to reintroduce the bill next year.

“We probably don’t have many legislators who were there during the South Africa divestiture, so it’s going to require a lot of education,” she said.

The Maryland State Retirement and Pension System has investments totaling $496 million in 26 companies doing business in Sudan, according to an analysis by Conflict Securities that broadly defines business ties. The pension system administers retirement and disability benefits for more than 250,000 state employees, teachers, police officers and legislators.

The state agency “doesn’t have a definitive policy on the Sudan,” said Joseph M. Coale, spokesman for the state pension system. “It has been discussed in the legislature, and as our governance policies are developed, I’m sure this is an issue that will get the board’s attention.”

The pressure for divestment in Sudan has been spurred by a campaign to persuade investment managers to sell investments in companies with ties to sponsors of terrorism. Sudan is on the State Department’s list of countries that have repeatedly provided support for acts of international terrorism.

‘Axis of evil’

The list also includes North Korea and Iran – which, along with Iraq, President Bush described in 2002 as an “axis of evil” – and Syria and Libya.

Spearheading the Sudan divestment campaign is Frank J. Gaffney Jr., head of the Center for Security Policy, a conservative think tank. He was a defense official in the administration of President Ronald Reagan, whose veto of legislation calling for sanctions against South Africa was overridden by Congress. Gaffney said he got involved in the Sudan divestment drive to protect the United States.

Gaffney has close ties to Conflict Securities and has been accused of helping the firm capitalize on terrorism fears.

Gaffney and Adam M. Pener of the advisory group dismiss those accusations and say they share a goal of full disclosure of what companies are doing in so-called rogue nations.

“I can’t tell you how much of the revenue generated from business in those countries has passed through the governments to terrorists, but I can tell you some of it did, and even if it was a little bit, I think Maryland pensioners would want to know,” Gaffney said. “Once they’re aware of this, you’ll see more people for divestment.”

Progress noted

Activists say they have made as much progress in eight months on the Sudan divestment effort as the South Africa campaign made in years.

“When South Africa first started, it didn’t explode onto the scene,” said Madison, the radio personality. “People didn’t even know how to pronounce ‘apartheid.’ People had no idea who Nelson Mandela was. It just took persistent protesting and organizing, and that’s what it will take for Sudan.”