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Petrochina To Affect WTO

A recent report indicates China relies on Khartoum for about 10 percent of its massive oil needs.
by Jacob Russell
UPI Correspondent
Washington (UPI) Nov 08, 2006
Recent divestment strategies against PetroChina, the energy-thirsty Asian giant's biggest oil producer, for trading with Sudan will not affect talks with the World Trade Organization, experts say. "The United States and European Union wouldn't be so tolerant to China if they had real evidence to prove that China is doing something wrong," Xinquan Tu, a researcher from the China WTO Studies Center told United Press International.

PetroChina is currently the most profitable company in Asia as part of the China National Petroleum Corp. A major factor towards its success has been its collaboration with Sinopec as a duopoly on China's oil, along with its public offerings on the New York Mercantile Exchange.

But the company is mired in controversy as a result of its involvement with Sudan, whose government has a tainted human rights record. While PetroChina officials have assured investors the firm does not deal directly with Sudan, the firm is an arm of the CNPC, which does.

CNPC has invested more than $1 billion in a joint venture with the Sudanese government to boost the restive East African country's oil production. It owns the most shares of Sudan's largest national oil consortia -- amounting to more than half of Sudan's oil exports in 2005.

As 70 to 80 percent of Sudan's oil revenues go toward its military, observers note the country's oil trade directly fuels what the Bush administration has called genocide in Darfur.

"Oil revenue, military equipment and political cover. It's a complete package," Adam Sterling, executive director of the Sudan Divestment Task Force, said.

As a result, a divestment movement started on several U.S. university campuses that has swept to city and state levels has gained momentum. The two largest, California Public Employees' Retirement System and California State Teacher Retirement System, recently decided to prohibit investment of funds from nine companies identified as having business in Sudan in protest.

China, for its part, needs large amounts of oil from other countries since its reserves are diminishing, according to Tu, which demands maintaining business relations with Sudan. A recent report indicates China relies on Khartoum for about 10 percent of its massive oil needs.

Because of China's non-intervention foreign policy, some observers say Beijing pays less attention to other countries' political systems.

"You choose your own system, your own political democracy," Tu said. "We don't care about that, we just want to do business with you."

But critics counter politics and China's business go hand-in-hand, making Sudanese oil and egregious human rights violations in Darfur impossible to separate. "They need to look closely at the situation in Darfur and how their involvement with Sudan affects that," Sterling said, noting evidence that China's relationship with Sudan extends beyond fossil fuels.

China has also sold arms to Sudan in exchange for oil. They include tanks, artillery, helicopters and fighter aircraft, as well as antipersonnel mines. Some of the helicopter gunships used in civilian attacks are Chinese-made, according to one former minister in the Sudan government, and have frequently been based at airstrips maintained by the oil companies.

Beijing is also alleged to have helped Sudan in the construction of factories that manufacture weapons.

As China continues to evolve into a superpower, observers say concerns are mounting that the United States will interfere with its affairs. Sudan is seen as something of a test case.

"I think many Americans are not satisfied with China's stance," Tu said. "China is afraid that if China wants to intervene with other countries' domestic affairs, the United States also has a right to intervene in China's affairs. And that the Chinese government doesn't want."

China, however, has terminated commercial relationships with Iran, Iraq and North Korea when companies realized the political risks involved, losing heavy investments and potential profits, Tu said. The same will happen with PetroChina, he added, making divestment strategies largely ineffective.

"Though there are many risks, we just need (oil)," he said.

Still, Sterling remains optimistic that divestment strategies would be effective.

"Divestment is a larger part of the shareholder engagement with companies in Sudan and there is public exposure with PetroChina," he said. "Engagement should have some teeth to it. If PetroChina fails to respond, which they have to at this point, divestment should be considered."

Source: United Press International

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