Endowment Tied to Sudan

Harvard has invested millions of dollars in a Chinese oil company whose financial dealings with the Sudanese government, human rights activists say, have funded that regime’s ongoing slaughter of its own people.

Filings by the Harvard Management Company indicate the University owned 72,000 shares of that oil stock, PetroChina, as of June 30 of this year. Jack Meyer, the management company president, would not say on Friday whether Harvard still owned the stock. If Harvard has held those shares, its stake in the company would be worth $3.87 million today.

PetroChina is a spin-off of the China National Petroleum Company, which is involved in a more than $1 billion joint venture with the Sudanese government to boost that country’s oil production. Revenues from the venture are filling the coffers of the Sudanese regime, which the U.S. government says is guilty of genocide against its own people.

Quarterly filings with the U.S. Securities and Exchange Commission (SEC) show the University purchased its first 60,000 shares of PetroChina between July 1 and Sept. 30, 2003. That investment reaped almost immediate rewards for the University as the stock nearly doubled in value over the next three months.

By March 31, 2004, Harvard had increased its holdings in the company to 80,500 shares at a total value of just over $4.1 million. Shares of PetroChina closed at $53.74 on the New York Stock Exchange Friday, up more than 23 percent over the past four months.

“Harvard should dump this blood oil stock yesterday,” John Prendergast, who served as African affairs director at the National Security Council during the Clinton administration, wrote in an e-mail last week.

Meyer said the management company does not comment on individual stock holdings.

OIL PROPS UP REGIME

According to a November 2003 report by Human Rights Watch, China National Petroleum’s investment in Sudan constitutes the company’s largest overseas project to date. The company has helped the Sudanese government build a 1,500 kilometer pipeline as well as a massive oil refinery near the capital city of Khartoum.

“Foreign investment capital in the oil sector is crucial to the regime’s ability to wage war with its own people,” Prendergast said. He added that the joint venture with China National Petroleum “has allowed Sudan to start repaying its debts, earn critical foreign exchange, and fund a massive weapons buying spree.”

Government-backed janjaweed militiamen have destroyed scores of villages in the Darfur region of western Sudan over the past year and a half—leaving more than 50,000 dead.

Human rights activists and international media have said that oil revenues are helping the government pay for weapons for the janjaweed and bombers to conduct air raids on Darfurian civilians.

President Bush and both houses of Congress have declared that the slaughter in Darfur rises to the level of genocide.

Oil revenues also helped fuel the Sudanese government’s 20-year war with predominantly Christian rebels in the southern region of the country. More than two million people perished in that conflict.

HOLES IN THE ‘FIREWALL’

China National Petroleum garnered $2.9 billion in proceeds from the April 2000 initial public offering (IPO) of off-shoot PetroChina.

At that time, PetroChina’s chairman Ma Fucai said that a “firewall” between PetroChina and its parent company would ensure that none of the IPO revenues would go toward funding ventures in Sudan.

But with labor unions and human rights activists protesting the IPO, several major U.S. institutional investors declined to purchase shares.

“We hammered that IPO,” Smith College professor and Sudan activist Eric Reeves said.

“There was no firewall,” Reeves said. He said that PetroChina’s investment banker, Goldman Sachs, filed disclosure papers with the SEC revealing that “a full 10 percent of the IPO proceeds went directly to China National Petroleum Company for use however, wherever they wanted.”

And the parent company retained a 90 percent stake in PetroChina even after the IPO, the Associated Press reported.

Representatives for PetroChina did not answer calls for comment to their offices in Beijing yesterday.

CAMPAIGN ‘TO EXPLODE’

Human rights activists hope that a targeted divestment campaign could cut off Khartoum’s sources of foreign capital and force the Sudanese government to enter peace negotiations.

The U.S. instituted comprehensive economic sanctions against Sudan in 1997. But Rev. Keith Roderick, executive director of the Sudan campaign at Christian Solidarity International, said that the United Nations (UN) will almost certainly not lend its support to an embargo.

As a permanent member of the UN Security Council, China has vowed to veto any attempt to impose economic sanctions on Sudan.

“Short of a blockade of oil shipments from the country or military intervention, which do not appear likely, divestment is one of the few pressure strategies remaining,” Roderick wrote in an e-mail Thursday.

With more than $3 billion in the stock market, as of June 30, 2004, Harvard Management Company holds shares in over a thousand corporations, from Abercrombie & Fitch to Zebra Technologies. The University’s holdings in PetroChina likely represent less than 0.02 percent of the entire endowment.

Activists hope that a move by Harvard to sell its shares of PetroChina could jump-start a broad divestment effort.

Harvard’s stake in PetroChina is “a highly symbolic investment,” Reeves said. He said the University would “send a chill up the spine of all institutional shareholders of PetroChina” if the endowment fund dropped its stake in the company.

“This divestment campaign is going to explode off the blocks,” Reeves said.

MOVEMENT TO DIVEST

Sudan activists can claim a record of success in their past efforts to spur divestment.

Canada’s Talisman Energy came under heavy fire from activists two years ago for its stake in the Greater Nile Oil Project—the same joint venture with the Sudanese government that PetroChina’s parent company has undertaken.

Talisman held a 25 percent stake in the project, while the Chinese firm owns 40 percent of the venture.

In October 2002, Talisman sold its Sudan holdings to an Indian company for $766 million.

And in January of this year, BP Amoco sold its $1.65 billion stake in PetroChina. The move came on the heels of a four-year campaign by black churches and human rights groups in the U.S. to boycott Amoco stations in protest of BP’s links to Sudan—although BP’s decision to drop the shares was likely made due to economic considerations and not humanitarian concerns.

Meyer, who oversees Harvard’s $22.6 billion endowment, said in an interview that the University attempts to consider social issues in its investments.

“Overall, we try in all of our investment decisions to be pretty principled in the companies with which we deal, and I think we’re very successful at that,” Meyer said.

A spokeswoman for University President Lawrence H. Summers said he could not be reached for comment yesterday.

In 1990, the University divested its shares in tobacco companies following objections by students, faculty and alumni. Explaining the divestment in their annual report last year, Harvard’s Corporation Committee on Shareholder Responsibility noted, among other reasons, “the desire not to be associated as a shareholder with companies engaged in significant sales of products that create a substantial and unjustified risk of harm to human health.”

Several activists contacted by The Crimson said PetroChina’s connection to the Sudanese regime warranted divestment under the University’s standards.

“Harvard is confronted with a stark choice,” wrote John Eibner, a London-based human rights activist affiliated with Christian Solidarity International, in an e-mail. “It can stand on the side of the slavers, ethnic cleansers and gang rapists of Sudan. Or it can stand in solidarity with the powerless, impoverished victims at a cost of only 0.02 percent of the total Harvard endowment.”

—Staff writer Daniel J. Hemel can be reached at hemel@fas.harvard.edu.

—Staff writer Zachary M. Seward can be reached at seward@fas.harvard.edu.