Activists say Sudan divestment campaign working

By Jeremy Pelofsky

WASHINGTON (Reuters) - The campaign to persuade U.S. companies and investors to halt the flow of dollars to war-torn Sudan through China and other countries is making significant progress, activists say.

U.S. sanctions on Sudan, where conflict in the Darfur region has been branded "genocide" by President George W. Bush, already limit most transactions, though humanitarian aid and agricultural assistance have been allowed.

But U.S. institutional investors, mutual funds, and Warren Buffett's Berkshire Hathaway have billions of dollars invested in companies that operate in -- or have ties to -- Sudan, particularly the oil business.

Activists have lobbied for investors to dump shares and bonds in PetroChina Co. Ltd., whose parent company China National Petroleum Corp. is helping Sudan tap its oil reserves, as well as India's Oil and Natural Gas Corp. Ltd. and Malaysia's Petronas

"The burgeoning Sudan divestment movement has already facilitated a response from companies operating in Sudan, institutional investors and mutual fund managers," said Adam Sterling, director of the Sudan Divestment Task Force.

He cited 19 U.S. states, nine cities including Los Angeles, and 54 universities that are beginning to divest from Sudan. Sterling also noted major companies, such as Britain's Rolls-Royce, have withdrawn.

Some $3.5 billion of foreign direct investment flowed into Sudan last year, a jump of 53 percent over 2005.

However, after the first quarter of 2006 when almost $1.6 billion entered, investment dropped to below $700 million in each of the next three quarters, according to International Monetary Fund figures.

International experts estimate some 200,000 people have been killed in Darfur and another 2.5 million have been driven from their homes since violence erupted in 2003, prompting Bush to label it "genocide," a term other countries have avoided.

KHARTOUM REJECTS ACCUSATIONS

Khartoum has rejected the accusations, but recently agreed to a 26,000-strong U.N.-African Union peacekeeping force.

Sudan's ambassador to the United States John Ukec Lueth argued in May that sanctions barring U.S. companies hurt the country's poor and were arbitrary, citing the continued ability of Coca-Cola to do business there.

Under pressure from activists, some institutional investors and mutual funds have already cut their stakes in PetroChina, including those run by Fidelity National Financial Inc., according to securities filings.

China needs energy resources and has resisted forcing Sudan to accept peacekeepers. But as Beijing prepares to host the 2008 Olympics and pressure from Western powers mounted, it pressed Khartoum to accept the force.

While Berkshire shareholders rejected a proposal to divest its $3.3 billion PetroChina stake, the company sparked speculation that it could be bowing to pressure when it sold 17 million shares in July. It still holds a 10.96 percent stake.