In December 2007, PetroChina was in the spotlight when Congress unanimously passed the Sudan Accountability and Divestment Act. PetroChina will be in the Congressional spotlight again next month, when the Senate considers the nomination of Robert Hormats to be Undersecretary of State for Economic, Energy and Agricultural Affairs. Mr. Hormats played an instrumental role in reassuring the public and the financial markets about PetroChina in preparation for its initial public offering (IPO) in 2000.
Mr. Hormats’ assurances were given amidst serious, public concerns over PetroChina’s parent company, the China National Petroleum Corporation (CNPC), and its extensive dealings with the Government of Sudan, which was under U.S. sanctions and engaged in widespread crimes against humanity and human rights abuses in its war against Sudan’s south. At the time, CNPC promised to maintain an absolute firewall between its Sudanese assets and PetroChina, a subsidiary it created in order to launch an IPO on the New York Stock Exchange. As we noted in our letter to the Senate Foreign Relations Committee today, the “firewall” claim was met with skepticism by many U.S. investors, who pointed out that any revenue generated by PetroChina could be used to fund CNPC’s partnership with the Sudanese government. Mr. Hormats defended CNPC and the merits of PetroChina’s IPO, touting “extensive legal firewalls” and arguing that "this particular transaction should not be affected by concerns about Sudan or other parts of the world."
However, the skeptics’ fears were confirmed, and Hormats’ assurances proved empty. PetroChina’s provision of substantial capital to CNPC, the frequent asset transfers between the companies, and the near complete overlap in company management, have demonstrated that the entities are inextricably linked. Concern over PetroChina/CNPC’s involvement in Sudan remains high because they are the Sudanese government’s largest partners in its oil industry, the revenue of which is funneled overwhelmingly to the military. PetroChina/CNPC are widely identified as the most complicit corporate enabler of ongoing atrocities in Sudan.
For the past several years, Investors Against Genocide and the Genocide Intervention Network have both worked to raise public awareness of the role PetroChina and other companies play in funding atrocities in Sudan. TIAA-CREF, a pension giant, recently adopted strong policies to draw the line at investing in companies that contribute to genocide, naming PetroChina specifically. Every one of the more than sixty colleges and universities and each of the twenty-seven states that have adopted targeted divestment measures has named PetroChina for its connection to ongoing atrocities in Sudan. In addition, a campaign of shareholder proposals to avoid investments in genocide focuses on PetroChina as the leading example of the problem. Millions of customers of mutual fund giants Fidelity and Vanguard recognized PetroChina’s relationship to atrocities in Sudan and voted for those proposals, over the active opposition of the mutual fund companies they had trusted. The Hormats nomination provides another, very public opportunity to address the role PetroChina plays in funding atrocities in Sudan.
The Senate will consider the Hormats nomination after the August recess. When it does, he should be provided ample opportunity to address his role and judgment on PetroChina. Please join us in asking your Senator to ensure that, before confirmation, Mr. Hormats must:
• Confirm that he no longer denies the problem of PetroChina helping to fund atrocities in Sudan
• Make a clear and public statement recognizing that his support of the PetroChina IPO was a mistake
• Make recommendations for financial institutions so that they may avoid the mistakes he facilitated during the IPO of PetroChina and will avoid connecting ordinary American investors to genocide
Addressing these questions in the confirmation hearing will provide an opportunity for Mr. Hormats to either rectify or reinforce his previous, poor judgment on PetroChina. Which path he chooses should speak volumes to the Senate Foreign Relations Committee about his suitability as an Undersecretary of State.
Eric Cohen is the chairperson of Investors Against Genocide, and Sam Bell serves as the executive director of GI-NET.