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Use Oil Investment as a Lever in Sudan

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Eric Reeves, a professor on leave from Smith College in Northampton, Mass., is completing a book on Sudan

Sudan is suddenly, if belatedly, at the center of U.S. foreign policy concerns in Africa. Secretary of State Colin Powell has said of Sudan that “there is perhaps no greater tragedy on the face of the Earth today.” Ending the civil war there was a central topic of his trip to Africa.

Sudan’s civil war has cost more than 2 million lives and displaced at least 4 million. More than 3 million people face starvation this summer. Gross human rights violations define the northern Khartoum regime’s conduct of the war. What has become increasingly clear is that this terrible war has been exacerbated by irresponsible oil development in the south.

Report after report from human rights organizations has established the complicity of Canadian, European and Asian oil companies. Their extraction and exploration efforts are made possible only by the Khartoum regime’s scorched-earth warfare against the people of the south. These companies have operated with impunity. But sanctions directed against the U.S. stock exchange listings of these companies would go a long way toward turning them from Khartoum’s willing accomplices into agents for peace.

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For now, the oil companies are untroubled by their role in the brutal destruction and displacement of civilians in the oil regions or by the fact that Khartoum is the sole beneficiary of all Sudanese revenue from oil pumped out of southern fields. Nor are they bothered by Khartoum’s declared intention to use oil revenue to purchase more lethal weaponry and create a domestic armaments industry.

Because of this destructive and obdurate corporate behavior, international pressure should be focused on ways to halt further oil development and exploitation. The oil companies that have been lured by hydrocarbon riches to look away from Sudan’s agony must be held accountable for their role in sustaining this conflict.

This was precisely the intention of the U.S. House of Representatives in passing the Sudan Peace Act last October. Although the bill died with the last Congress, it has been reintroduced in both houses. The bill proposed strengthening U.S. sanctions against Sudan not by focusing on trade and commerce (banned by existing U.S. sanctions) but by denying capital market access to foreign oil companies operating in Sudan. These sanctions would prevent culpable foreign companies from being listed on U.S. stock exchanges. Such sanctions have numerous advantages over U.S. trade sanctions, which often are ineffective or create widespread “collateral” damage in both the targeted country and our own.

Capital market sanctions would focus on shares traded in the U.S. by foreign companies whose overseas activities directly sustain a genocidal regime and a brutal civil war. The Western and Asian oil companies providing the Khartoum regime with hundreds of millions of dollars in annual revenue--and operating only because Khartoum’s war against civilians in the oil regions has created a cordon sanitaire-- should be the first targets.

Three oil companies are on U.S. exchanges and should be “delisted” as soon as possible: Talisman Energy of Canada, PetroChina (which is owned by the government) and Lundin Oil of Sweden.

If they were denied permission to trade in U.S. capital markets, tremendous pressure could be brought to bear on the Khartoum regime. Without these vital partners, Khartoum would find it increasingly difficult to continue oil extraction and development.

Its oil partners, in turn, would be forced to work vigorously for peace or make a painful choice: abandon their (potentially) lucrative investment in Sudan or see their share price plummet with removal from U.S. capital markets.

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Capital market sanctions should not be casually or broadly imposed. Capital markets are one of our nation’s great strengths, and that strength derives from their transparency, predictability and extraordinary size. Capital market sanctions are a weapon of last resort.

Yet we hardly begin to slide down some “slippery slope” if we declare that, in cases of economic behavior sustaining genocidal destruction, U.S. capital markets will be off limits.

Since “genocidal” is precisely how Congress has described Khartoum’s conduct in southern Sudan, the House and Senate should send to President Bush a provision for this extremely potent sanctions tool.

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