Hearing topic: “America’s Sudan Policy: A New Direction?” (March 28, 2001)
House Committee on International Relations, Subcommittee on Africa and Subcommittee on International Operations and Human Rights
Testimony by:
Eric Reeves, Professor of English Language and Literature
Smith College, Northampton, MA 01063
My name is Eric Reeves; I am presently in my third year of full-time work as a Sudan researcher, analyst, and advocate, having taken extended leave without pay from my academic position at Smith College.
I come before this committee profoundly humbled by the enormity of the human suffering and destruction to which I must attempt to bear witness. And I come before you intensely dismayed at the present role of oil development in sustaining—and extending—the suffering and destruction that define Sudan’s catastrophic civil war. I believe that the highest priority of American policy in seeking to end this war must be to fashion the means by which oil development is halted pending the negotiation of a just peace.
For the most obvious consequence of present oil development in Sudan is that all Sudanese revenues from the various projects and concession sales go directly to the brutal Khartoum regime of the National Islamic Front. These revenues, presently accruing at a rate of $500 million per year, are unfettered by any credible mechanism insuring equitable distribution or productive use. On the contrary, the Khartoum regime has spoken openly of using oil revenues to build a domestic armaments industry, and of using oil revenues to extend the fighting indefinitely. The doubling of acknowledged military expenditures over the last two years suggests that on this issue we may take Khartoum at its word.
Moreover, the presence of Western and Asian oil companies in Sudan provides the regime with a veneer of international respectability, one which has been used expertly and with highly unfortunate consequences for the tenuous peace process. Insulated economically and diplomatically by oil development, Khartoum has steadfastly refused to negotiate in good faith with opposition parties, most particularly on the key issues of southern self-determination and the relation of state and religion. Believing that oil revenues will allow for a final military solution to the “southern problem,” and that corporate interests in oil profits will prevent serious international pressures from being brought to bear, Khartoum feels that time is on its side and that it need not negotiate seriously.
A telling example of the regime’s attitudes is reflected in a statement made a year ago by Abdelbagi Kabir, deputy director of Sudan’s peace and humanitarian affairs department. Commenting on the impending (and in the event damning) Canadian report on the presence in Sudan of Canada’s Talisman Energy, Mr. Kabir said:
“The investment by Talisman and other [oil companies] shows there [is] no truth to the idea that Sudan [is] a deeply divided state with fundamental internal problems. We think this foreign investment could only be evidence of tranquillity and a prosperous atmosphere.” [Reuters newswire, Jan 13, 2000]
This stands in stark contrast to one of the central findings of the Canadian report:
“It is difficult to imagine a cease-fire [in Sudan] while oil extraction continues, and almost impossible to do so if revenues keep flowing to the [oil consortium partners] and the Government of Sudan as currently arranged.”
[Report of the Harker Assessment Mission, January 2000 (Ottawa), Page 16]
And yet Canada has failed to restrain Talisman’s activities in Sudan, and thus ironically confirms Mr. Kabir’s disingenuous optimism.
Just as significant as the role of oil revenues in sustaining Sudan’s civil war are the direct and savagely brutal consequences of oil development in the south. Report after report has confirmed that the oil companies extracting and exploring for oil in southern Sudan enjoy a physical security that has consistently taken the form of massive scorched-earth warfare, directed against the indigenous populations.
Amnesty International, the UN Special Rapporteurs for Sudan, Human Rights Watch, the Canadian assessment report, and most recently the British humanitarian organization Christian Aid—all have revealed the same obscenely destructive consequences of “security” for oil development: villages and foodstocks burned, strafed and bombed; men killed, sometimes in mass executions; women are murdered, raped, abducted; children enslaved; young and old mutilated and tortured. The purpose is to wreak a destruction so complete as to make return to the oil regions pointless and terrifyingly dangerous.
These are not surmises; these are not a few anecdotes; these are the conclusions deriving from massive documentation, first-hand reporting and interviewing, aerial surveillance, and overwhelming photographic evidence from the ground.
What must concern American policy-makers and legislators are not simply these terrible realities, but the fact that the governments whose multinational oil companies are operating in Sudan have yet to accept responsibility for the consequences of such corporate presence. Canada has allowed Talisman Energy to operate without restraint. Sweden has yet to discipline Lundin Oil. Petronas, the state-owned oil company of Malaysia, has been actively supported in Sudan by a propaganda celebration orchestrated in Kuala Lumpur. And China National Petroleum Corporation, the most active participant in Sudan’s oil development projects, is vigorously supported by the People’s Republic of China, which indeed owns China National Petroleum.
Despite the overwhelming evidence that oil development is the occasion for massive scorched-earth warfare, and that oil revenues are sustaining Sudan’s civil war, the governments of Canada, Sweden, Malaysia, and China have done nothing to take responsibility for these realities.
Troublingly, American capital markets play host to several of these companies, and as a result, American capital is presently sustaining oil development in Sudan. Talisman Energy trades on the New York Stock Exchange, Lundin on the NASDAQ, and a virtually wholly owned and governed capital surrogate of China National petroleum Corp. (PetroChina) trades on the New York Stock Exchange. Indeed, last year’s Initial Public Offering of PetroChina generated almost $300 million for China National Petroleum Corporation, capital now available to expand exploration and oil development efforts in southern Sudan.
I am firmly convinced that these circumstances warrant the strongest possible non-military response by the US Congress, as well as the Executive Branch. Though oil development is a troubling reality in a number of places around the world, nowhere is it as massively destructive and obstructing of peace as in Sudan. And nowhere is corporate complicity in oil-driven destruction as obvious and morally vicious as in Sudan. Given the scale of Sudan’s human catastrophe, I believe the United States should impose capital market sanctions on oil companies presently active in Sudan. I believe that unless Talisman Energy, Lundin Oil, and China National Petroleum Corporation suspend all oil-related activities in Sudan, they should be denied their American exchange listings, pending their withdrawal from Sudan or the negotiation of a just peace. In the particular case of China National Petroleum Corporation, the capital market sanctions should be directed at their surrogate, PetroChina.
Why capital market sanctions? And why for Sudan only? Unlike trade sanctions, capital market sanctions—the denying of access to US capital markets—would be extremely focused, produce none of the collateral damage so often associated with trade sanctions, and generate immediate effects. Indeed, even the credible threat of American capital market sanctions would have devastating and ultimately unsustainable effects on the share price of targeted companies. Talisman Energy and Lundin Oil would face a stark choice: remain in Sudan and see share price plummet as American capital, and capital market trading, were denied them—or suspend operations in Sudan. The former is not a likely choice, and the suspension of activities in Sudan by these two Western corporations would send the clearest possible signal to Khartoum: make peace, or see your prospects for Western technology and technical expertise, Western economic integration, and Western capital access begin to wither.
Capital market sanctions directed at Chinese participation in Sudan’s oil development have the potential to be an even more effective tool for pressuring Khartoum to make peace. For China is unlikely to withdraw from Sudan, its premier off-shore oil source. China has since 1995 been a net importer of oil, with domestic consumption growing at a rate of 10% a year. Moreover, its economy is especially vulnerable to petroleum price shocks like the one we’ve recently seen. They will likely continue to operate in Sudan. But they have immense capital market vulnerability, needing in the near- to mid-term to capitalize over 100 state-owned enterprises if they are to compete domestically under the WTO terms negotiated last year.
If PetroChina, their flagship IPO, is de-listed from the New York Stock Exchange because of its connections to parent China National Petroleum Corporation and Sudan’s oil development projects, they will rightly see their capital market prospects as significantly diminished. There could be no greater incentive for them to pressure Khartoum to make peace, and thereby remove a serious obstacle to greater US capital market access. It is important to remember that no one has invested as much in Sudan as China, in all economic spheres. And no one has more ruthlessly shielded the Khartoum regime from effective UN diplomatic pressures. If Beijing speaks, Khartoum will listen.
Even as I note the potency of American capital market sanctions, I must make clear that I believe they should be deployed only in the most exceptional of circumstances. American capital markets are one of our greatest strengths in the world economy; their size, stability, and transparency are quite simply singular, and their integrity is a matter of great importance. Capital market sanctions are a regime of last resort.
But if there is a compelling case for their deployment, Sudan clearly presents it. 18 years of war marked by genocidal ambitions have left over 2 million dead and more than twice that uprooted and displaced. The regime in Khartoum is bent on using oil revenues to extend this massive catastrophe, and in the process has conducted a savage scorched-earth campaign to provide security for the oil companies generating those revenues. It is morally incumbent upon Americans to deny access to our capital markets, even as such action will almost certainly have the effect of pressuring Khartoum into a more tractable negotiating posture. We have hardly begun to slide down some slippery slope of capital market interference if we declare, in response to the most destructive civil conflict in half a century, that we will not permit American capital to flow to companies sustaining that conflict.
No doubt there are questions about how such sanctions would work, and concerns about precedent. I stand willing to answer all such questions to the best of my ability. But I would submit that Sudan’s agony puts a fundamental question before us: are we willing to take all effective non-military steps to pressure Khartoum to negotiate a just peace? And if not, if American capital is allowed to continue to sustain the oil-driven destruction of Sudan, how can we claim to be free of complicity in that destruction?