Image: AP/Wide World Photos
The mutual fund names are innocuous enough: Fidelity Overseas, Prudential Series-Value Portfolio, Oppenheimer Main Street Growth & Income, to name a few. But the names conceal a brutal reality: Americans who have invested their nest eggs in these funds are fueling one of the world’s bloodiest ongoing wars.
Since 1999, when international corporations began extracting Sudan’s vast oil reserves, firms traded on the NASDAQ and the New York Stock Exchange have been a primary source of revenue for the Sudanese government, whose military has been accused of bombing civilians, burning villages, and condoning a thriving trade in human slaves. With scant disclosure required from the companies or the mutual funds that hold them, many American investors have been left in the dark.
But a growing number of church and human-rights groups are fighting to change that. They have launched one of the largest divestment campaigns since apartheid ended in South Africa, and have already persuaded a number of billion-dollar investors to take their money elsewhere.
“The non-governmental community has become considerably more sophisticated,” says Adam M. Pener, a senior analyst at the William J. Casey Institute of the Center for Security Policy, who has helped to organize the campaign. “They’re persuaded that if they go after the funding sources of wrong-doers, significant leverage can be applied.”
Divestment advocates scored their biggest success so far last week, when the House of Representatives passed a bill that would prevent firms investing in Sudanese oil development from raising money in US capital markets or trading on the New York Stock Exchange or NASDAQ. In the coming months, the political focus will switch to the Senate, where passage of capital market sanctions is considered more difficult. The bill has support from an unusual combination of support from both Christian conservatives and liberal groups like the Congressional Black Caucus.
Eighteen years of civil war have left two million people dead in Africa’s largest country, most of them civilians. Another 4.4 million have fled their homes to escape fighting between Christian and animist rebels and the Islamic government.
For the government in Khartoum, oil has been a cash cow, yielding $500 million last year alone. The military has used that money to double its spending on the war, acquiring a whole new raft of new deadly weapons, from German helicopter gunships to retrofitted Polish tanks. The increased revenues have also been used to increase the pay of soldiers and hired militias, according to a recent report by Christian Aid, a British humanitarian group.
Southern rebels, in turn, have attacked the oil pumps and pipelines in an attempt to choke off the regime’s lifeline, prompting a brutal government military campaign to clear residents and rebels from the Upper Nile. Humanitarian groups have documented high-altitude bombings of schools, markets, hospitals and even United Nation relief missions. As Amnesty International reported in April, “In order to secure oil fields, the government has engaged in a deliberate scorched-earth policy, leading to a massive displacement of civilians in Sudan.”
The oil companies have been at least indirectly involved. Recent reports suggest that the military has used oil-company built landing strips and all-weather roads to stage its attacks on civilians.
Among the primary targets of the divestment campaign — whose supporters include the U.S. Committee on Refugees — has been Talisman Energy, which holds a 25-percent stake in Sudan’s largest oil development. Sudanese oil helped the company’s net profits per share nearly quadruple between 1999 and 2000. But during the same period, more than half a dozen pension funds across the country sold millions of Talisman shares after coming under activist pressure. The stock, which enjoyed some rebound after a recent spike in oil prices, has been falling steadily since the House passed capital market sanctions.
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The China National Petroleum Corp., a 40-percent partner in the same large project, has also come under fire. Last year, when Goldman Sachs attempted to raise as much as $10 billion in an initial public offering for Petrochina, a subsidiary of the firm, activists launched a letter-writing campaign targeted at institutional investors. The AFL-CIO lobbied against the IPO as well, citing human rights abuses by the Chinese company in Sudan and Tibet. At the time a political analyst for Prudential Securities told Business Week, ”I’ve been handicapping investment risk in Washington for 20 years, and I’ve never seen a deal with this level of political risk.”
In the end, the nation’s 150 top public pension funds stayed away from the IPO, and the offering raised only $2.89 billion, much of that from the British oil firm BP Amoco.
Now activists have turned their attention to private American investment firms with a stake in Sudanese oil — chiefly Fidelity Investments, the world’s largest mutual fund company. After activists deluged the company with protest letters last fall, Fidelity sold 38 percent of its Talisman stock. In recent months, however, that trend has reversed, with Fidelity buying back nearly as much stock. The company remains Talisman’s largest American institutional investor, owning 3.4 percent of the outstanding shares, at a value of about $191 million.
To date, Fidelity has not admitted responding to any divestment pressures, saying only that its “responsibility is to weigh the impact of these issues on behalf of our fund shareholders.” Merrill Lynch, Wellington Management, Dreyfus, Prudential, and Oppenheimer Funds also have significant holdings in Talisman and PetroChina.
Several other companies with holdings in Sudan have felt the heat from divestiture activists. Sweden’s Lundin Oil announced in May that it had signed a deal for a new oil development in partnership with the Sudanese government. But like Talisman, Lundin has watched its share price drop as human rights groups have gone public with their protest, and in March, one of Sweden’s top banks announced that it was selling all its Lundin shares because of the company’s involvement in Sudan.
Protesters have also targeted BP Amoco’s British headquarters for its roughly $800-million stake in PetroChina. BP maintains, like Talisman and Lundin, that it is not responsible for any human rights abuses in Sudan. Last month, 36 organizations from nine European nations upped the pressure, calling on international oil firms to “immediately suspend their operations until a just and lasting peace has been agreed in the Sudan and until the victims of forced displacements have safely returned to their places of origin.”
Back in the United States, the US Commission on International Religious Freedom, an agency established by Congress, has made similar recommendations, calling Sudan “the world’s most violent abuser of the right to freedom of religion and belief.”
In the activists’ view, all this renewed attention bodes well for a movement aimed at shutting off the civil war’s financial lifeline. “The end goal,” says Eric Reeves, a professor at Smith College who is coordinating the divestment campaign, “is to make participation in Sudan so painful that Khartoum will have to get the message.”
