The first-graders were in the middle of an English lesson outside their Catholic school in central Sudan on Feb. 8. Two aircraft swooped in and dropped shrapnel-laden bombs, killing a teacher and 14 children, and wounding 17.
Their plight is a familiar one in Africa's largest country. Civilians bear the brunt of a brutal war between Sudan's Islamic fundamentalist government and rebels in the largely Christian and animist south. But these warplanes were financed in part by a new international joint oil venture that is channeling large sums into the Sudanese treasury - and may end up tilting one of the world's deadliest wars toward the regime in Khartoum.
Now a coalition of religious and human-rights groups in the United States is targeting the money trail in an effort to stop what they believe is a war of genocide in the North African nation.
It is part of an emerging new strategy to focus on Wall Street as a way to curb religious persecution and other human rights abuses around the world. The approach holds immediate implications for US foreign policy and economic interests. It is winning allies in Congress and the national-security community concerned about the rising risks of global "bad actors" tapping US financial markets. As foreign presence on Wall Street has soared in the past five years, so have the dangers of Americans unwittingly funding entities that directly or indirectly sponsor terrorism, technology-theft, arms smuggling, money laundering, hostile militaries, or flagrant rights abuses.
In the case of Sudan, a South Africa-style divestment campaign has already achieved successes in getting large pension funds to withdraw holdings from a partner in the oil venture.
Now the religious and human-rights groups are exploring a new kind of sanctions - which focus not just on stock portfolios but capital markets. In particular, they want to keep China's national oil company - one of the largest partners in the Sudan oil venture - from a listing on the New York Stock Exchange. The initial public offering (IPO) would be one of the largest in NYSE history.
"We started realizing that more money is being funneled to rogue regimes now through capital markets than through multinational banks," says Nina Shea, director of Freedom House's Center for Religious Freedom. In Sudan's case, "the regime was becoming more intractable about peace talks and was rehabilitating itself abroad ... because it had money."
The oil venture itself is a partnership between the state oil companies of China, Malaysia, and Sudan, and a Canadian firm called Talisman Energy. The massive project began pumping its first crude from beneath the Sudanese sands last August.
As it has, the US and Canadian governments have been under growing pressure to cut off or discourage investment in the project. The Clinton administration has long been concerned about Sudan's alleged involvement in terrorism, and last fall the State Department designated Sudan and China among five countries of "particular concern" because of religious persecution. Sudan is already under stiff US sanctions.
But last month, President Clinton added limited sanctions on the joint oil venture itself, Greater Nile Petroleum Operating Company (GNPC), and Sudan's state oil company. The sanctions prevent US firms from doing business with the entities. The administration stopped short, however, of imposing sanctions on China or Talisman Energy, the Canadian partner.
While Washington did urge Ottawa to impose sanctions, its posture toward Beijing is more sensitive. US-China relations may be the most delicate in years due to Beijing's provocative statements on Taiwan. The administration faces difficulties in Congress on Taiwan and on Mr. Clinton's proposal to grant China permanent normal trade status. Clinton wants to get China into the World Trade Organization and open the doors for US business.
As a result, both the Treasury and the White House have brushed off appeals from the religious/human-rights coalition for action against others in the venture.
For its part, Canada commissioned a study on the effects of the oil project on escalation of the war. The Harker report confirmed a definite link and found that Talisman's airstrip was being used for military purposes by the Sudan government. But Ottawa rejected the idea of sanctions. In fact, Canada recently reestablished ties with Sudan. The government argues that it would rather try to effect change on the inside than pull out of the project altogether.
"We're putting a person into Khartoum ... to get information on the ground..." says Lois Wilson, a Canadian senator and special envoy to Sudan peace negotiations. "We have to do what we can to stop the oil revenues, but if Canada weren't there [in the oil project], France would be."
Indeed, Sudan's foreign minister reacted to the growing pressure this week by claiming that several oil companies would be ready to replace Talisman Energy should the Canadian firm pull out.
Feeling the pinch
Despite Ottawa's reticence to take more concrete steps, the private divestment campaign is leaving its mark on Talisman Energy, which owns 25 percent of the venture. Several major pension funds - including New Jersey and California state funds and the Texas Teachers Retirement Fund - have already pulled money out of the company. Talisman officials said last week the company would have to buy back as much as $247 million worth of its shares in the next year to help shore up the plummeting stock.
The stakes for China are much higher. It owns 40 percent of the Sudan venture. Initially, the China National Petroleum Company planned a $10 billion IPO in the US. In response to the pressure from interest groups, the amount was reduced to $5 billion, and the company formed a subsidiary, PetroChina, which it says would do business only inside China - no funds would go to Sudan. Critics charge, however, that money would still support Chinese repression in Tibet, where oil projects are planned.
PetroChina filed its IPO application with the Securities and Exchange Commission on Tuesday.
"The PetroChina deal is potentially a watershed event," says Roger Robinson, Jr., formerly senior economic adviser to President Reagan and an expert on national security and global finance. "PetroChina is the flagship behind which there are scores of Chinese state-owned enterprises in the queue awaiting entry into the US capital markets should that deal be successfully concluded."
He is skeptical about the "firewall" that supposedly would keep funds from going to the Sudan project: "The People's Republic of China doesn't have the world's finest track record of standing by its agreements and promises."
China's involvement in Sudan goes deeper than the oil wells. Some 10,000 Chinese work in the oil region, where some of the most heavy-handed tactics of the government have been carried out, such as the forced removal of populations, says Eric Reeves of Smith College in Northampton, Mass. Derek Hammond, a South African aid worker, reports evidence of Chinese logistical support for combat efforts of Sudan's armed forces. Human Rights Watch has published evidence of an extensive Beijing-Khartoum arms trade.
The coalition recently sent letters to 200 US pension funds urging them not to invest in PetroChina, should the IPO go through, and have gotten some positive responses, activists say.
Members of Congress concerned about Sudan's actions are taking a closer look at the IPO as well. Two letters to the president are being circulated on the Hill, including a request that he use his broad executive authority to prevent the IPO "until an acceptable use of the proceeds has been assured." Congress has oversight responsibilities over the SEC and the NYSE. The US Commission on International Religious Freedom has set up a task force on global market sanctions.
Blueprint for hitting wallet
Mr. Robinson, chairman of the William J. Casey Institute at the Center for Security Policy, advocates voluntary measures to limit the access of "bad actors" while not impeding the free flow of capital. He proposes strengthening disclosure requirements for foreign entities seeking to raise money in the US. He thinks portfolio managers and prospective buyers of foreign debt or stock should take into account nonfinancial considerations, such as a nation's conduct, when making investments. In extreme cases of national security and human-rights abuses, he could envision temporarily limiting market access.
Foreign activity in US capital markets has skyrocketed to more than $14 trillion, twice the level of 1995, and Robinson says increasing penetration by countries and companies supporting nefarious conduct is a confirmed fact.
"It is only prudent that the US investor community be equipped with the information needed ... to make purchasing decisions that are consistent not only with their financial goals and expectations, but with their most coveted values," he says.
The success of human-rights groups in their campaign against Sudan will likely determine how much the go-after-the-money approach is used in the future. "This is the new cutting-edge, state-of-the-art human rights tool," Ms. Shea says.
Players in Sudan's oil ventures
President Clinton has barred American firms from doing business with the Greater Nile Petroleum Operating Co. (GNPC) and one of its partners. The joint venture is drilling for oil in Sudan, and critics say the revenues that flow to Sudan are helping to finance a human-rights atrocity there. Below are the four partners that make up the oil venture.
China National Petroleum Co.: China's national oil company; 40 percent owner in GNPC. A wholly owned subsidiary, Petro China, is currently seeking to be listed on the New York Stock Exchange.
Talisman Energy Inc.: A firm based in Canada; 25 percent owner in GNPC; only partner already listed on the NYSE.
Petronas: Malaysia's national oil company; 30 percent owner in GNPC.
Sudapet: Sudan's national oil company; 5 percent owner in GNPC. The new US sanctions apply to this partner.
(c) Copyright 2000. The Christian Science Publishing Society