Bush signs into law Sudan divestment measure

CRAWFORD, Texas (Reuters) - President George W. Bush on Monday signed into a law a measure aimed at allowing states, local governments, mutual funds and pension funds to divest from Sudan businesses, particularly its oil sectors.

Some 20 U.S. states have initiated divestment efforts because of the conflict in Sudan's Darfur region, which has taken some 200,000 lives and displaced some 2.5 million since rebels took up arms against the government in 2003.

But the effort in Illinois was challenged in court so the new law seeks to provide a legal framework for divestment from companies involved in Sudan's oil industry, mineral extraction, power production, and the production of military equipment.

Bush has called the deaths in the Darfur conflict genocide, a charge the Sudanese government has rejected.

"My administration will continue its efforts to bring about significant improvements in the conditions in Sudan through sanctions against the government of Sudan and high-level diplomatic engagement and by supporting the deployment of peacekeepers in Darfur," Bush said in a statement.

But at the same time, he argued some provisions of the new law could interfere with his ability to conduct foreign policy and therefore he would "construe and enforce this legislation in a manner that does not conflict with that authority."

When pressed, the White House was not immediately able to point to which provisions were problematic.

"To the extent that actions taken interfere with the federal government's foreign policy aims, it would be our view that those would be unconstitutional," said White House spokesman Scott Stanzel.

That position drew a strong rebuke from the spokeswoman for the chief sponsor of the new law, Sen. Chris Dodd, a Connecticut Democrat and a long-shot 2008 presidential hopeful.

"Up to this point, this administration's Sudan policy has been sorely lacking," said Dodd spokeswoman Jamie Radice. "An attempt by the president to step away from the letter and spirit of this law would amount to an acquiescence in genocide."

The new law also requires the State and Treasury Departments to report to Congress on the effectiveness of sanctions on Sudan. Contractors doing business with the U.S. government will have to certify that they are not involved in those areas as well.

Bush signed the law at his Texas ranch where he was spending a weeklong holiday.

The Save Darfur Coalition says the Sudanese government uses up to 70 percent of its oil revenues, generated mainly through foreign direct investment, to give arms and supplies to the Janjaweed militia accused of the killings in Darfur.

Activists have pressed investors to divest their holdings in companies such as Malaysia's state-owned Petronas, India's Oil and Natural Gas Corp Ltd, and PetroChina Co Ltd, whose parent company, China National Petroleum Corp, is helping Sudan drill for oil.

(Editing by Doina Chiacu)