The decision by Fidelity Investments to cut its PetroChina holdings by 91%, supposedly in response to pressure from human rights groups, is a brave move. Not least because since Fidelity’s latest regulatory filing on March 31 – which showed its holdings of PetroChina American Depository Receipts had fallen to 420,916 from 4.5 million on December 31 – PetroChina has made one of the largest oil strikes in recent history.
In the March issue of China Economic Review, we ran an article which looked at the possibility of legal action being taken against the likes of PetroChina for its involvement in oil exploration in Sudan. It is claimed that genocidal activities perpetrated by the Sudan government in Darfur have cost 200,000 lives and left 2.5 million people homeless.
Several of those interviewed suggested that pressure groups would have the greatest impact if they focused their efforts on petitioning institutional investors to abandon PetroChina stock.
After all, it was bad PR over human rights that led to the ditching of the company’s first attempt to offer shares in 1999. Of course, the PR pressure was placed on the US parties involved in the deal – notably the New York Stock Exchange, which found its moral integrity brought into question for allowing a company to raise money that could, allegedly, be used to hold up political regimes accused of human rights abuses.
Taking direct action against PetroChina itself would be much more difficult.
In its report on the Fidelity sell-off, Bloomberg noted that PetroChina’s head of investor relations said earlier in May that the company has no energy exploration or production facilities, investments or employees in Sudan.
This is probably true. If the 1999 IPO debacle taught PetroChina anything it was that sensitive overseas operations must be kept well away from the books of the company’s listed subsidiaries. The sizable stake in the Greater Nile Petroleum Operating Company, which controls Sudan’s oil fields, is held by PetroChina’s state-owned parent, China National Petroleum Corp.
Untangling relations between parent and subsidiary would be a long and perhaps never-ending road for even the most driven of human rights lawyers.