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Buffett should follow Fidelity on PetroChina

Buffett should follow Fidelity on PetroChina
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First Published: Sat, May 19 2007. 12 52 AM IST
Updated: Sat, May 19 2007. 12 52 AM IST
The folks at Fidelity Investments shouldn’t expect VIP seating at the 2008 Beijing Olympics. The Boston-based firm slashed its stake in PetroChina Co. amid pressure to sell shares of companies doing business in Sudan, which has been accused of supporting genocide in Darfur.
Officials at China’s biggest oil producer say it’s no big deal, but who’s buying that? Fidelity is only the world’s largest mutual fund operation. Bravo to Fidelity. It didn’t cite the 2008 games specifically, yet with activists working to make the phrase “Genocide Olympics” part of investors’ lexicon, China should expect more protest sales of its assets.
The Olympics are supposed to be China’s coming out party. Asia’s fastest-growing economy is sparing no expense to make sure the games are the grandest ever. The slogan for the event, “One World, One Dream”, is meant to convey China’s pivotal—and growing—role in the global community.
Instead, China may face a public relations nightmare over its support of Sudan’s pariah regime. If China doesn’t tame the growing outcry, it could be hosting the most controversial Olympics since Moscow in 1980 or maybe even Berlin in 1936.
Sound like an exaggeration? At the moment, perhaps it does, yet this issue is growing legs, and fast. There’s even a role in it for film director Steven Spielberg, driving home the point that the public eye is turning towards China’s role in the humanitarian crisis in Darfur.
Investors could play a key role, too: Getting China to push Sudan to end the bloodshed. Fidelity’s recent move to trim by at least 38 % its stake in PetroChina, which has been developing oil fields in Sudan since 1996, is a case in point.
Warren Buffett should follow Fidelity’s lead and instruct his Berkshire Hathaway Inc. to sell its stake in PetroChina. To many, Buffett is an investment god. If he wanted out of Sudan, he could convince shareholders. It would also be nice to see Fidelity go even further to divest itself of PetroChina.
Much of the world is scared of crossing China. Look at how Google Inc., Yahoo! Inc., Microsoft Corp., Cisco Systems Inc. and others have tripped over each other helping the Communist Party censor the Internet. Governments such as the US will go to war supposedly to bring democracy to the Middle East, while essentially selling out democratic Taiwan. Here, China’s philosophy of non-interference in the affairs of trading partners won’t cut it. Its ties with Sudan are cracking Beijing’s criticism armour, especially ahead of the Olympics.
Sudan’s protector
President Hu Jintao disputes the notion that China is in any way shielding Sudanese President Umar al-Bashir from international pressure. According to the UN, the bloodshed has caused the deaths of more than two lakh people and displaced more than 20 lakh. Human rights activists say Sudan uses much of its oil proceeds to buy weapons and aircraft, which then wind up in the hands of militia forces committing the atrocities. China is also a major arms supplier to Sudan.
This isn’t a moral dilemma, like whether to invest in tobacco companies. Genocide is genocide and investors should think long and hard before profiting from it. As long as Sudan has China to protect it from global meddling, boost its economy and supply arms, al-Bashir’s regime has a free hand.
It’s important for investors and business executives to join politicians and celebrities in shaming Chinese officials. As more state-run companies see their stocks and bonds paying a price for Sudan, China will become more likely to respond.
By the end of 2006, Chinese investment in Africa stood at $11.7 billion (Rs53,820 crore then), most of it going to oil producers Angola, Nigeria and Sudan through state-owned companies. China last year agreed to double aid to Africa by 2009, set up a $5 billion investment fund and provide $3 billion of loans over the next three years.
China needs all the resources it can get to fuel its 11% growth. For Africa, the investments are a godsend and an opportunity to shore up neglected economies.
To get those resources, though, China has gotten in bed with some of Africa’s most unsavoury regimes, such as Sudan’s and Zimbabwe’s. African oil is very valuable to China, yet Africa’s people often pay for it.
China’s see-no-evil-hear-no-evil approach to trade is finally raising eyebrows. Hollywood deserves considerable credit, starting with actress Mia Farrow. Her Wall Street Journal op-ed in March prompted Spielberg, one of the Beijing Olympics’ artistic advisers, to urge President Hu to change course on Darfur.
The Washington-based Sudan Divestment Task Force and other campaigners are making strides swaying universities, investment firms and state pensions to pull money out of companies profiting in Sudan. Last September, California governor Arnold Schwarzenegger signed a bill banning the state’s public pension funds from investing in such companies. On 9 May, 108 US lawmakers annoyed China by signing a letter warning of “disaster” for the Olympics.
Such campaigns are paying some dividends. China recently appointed Liu Guijin as a special envoy to the Darfur region. It’s also sending almost 300 engineers to boost peace-keeping efforts. The steps show China realizes it has a serious image problem on its hands.
Pressure will only increase if China doesn’t use its clout as a permanent member of the UN Security Council to influence Sudan. If China doesn’t, its pride in the Olympics will be used as a weapon against it.
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First Published: Sat, May 19 2007. 12 52 AM IST
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