Stateline Story

Violence in Sudan Pushes States to Act

Sudan's bloody crackdown on African tribesmen in the Darfur region has inspired six states to enact laws they hope will stem the attacks by cutting off financial backing for the Sudanese government.

And lawmakers in at least 15 more states plan to propose similar bills when their legislatures convene in January.

The states plan to divest, or sell off, any public pension investments in companies that do business with the Sudanese government. In 2004, the United States first said the Sudanese government and Arab militias it supported were guilty of genocide.

California, Connecticut, Illinois, Maine, New Jersey and Oregon join at least 31 universities, five cities and U.S. Sen. Sam Brownback (R-Kan.), who has called on the nation's governors to enact Sudan divestment legislation and who announced Nov. 29 that he would divest hundreds of thousands of dollars of his own stock in corporations with significant dealings in Sudan.

But the movement could halt pending the outcome of a case challenging Illinois' law. The lawsuit filed in federal court in August argues that the state cannot pre-empt the federal government where it has already acted (the U.S. government initiated trade sanctions against Sudan in 1997)and says the law infringes on the federal government's right to set foreign policy and regulate international commerce.

"We don't support what the Sudanese government is doing and we favor strong U.S. action, but we think any action should be at the federal level," said Bill Reinsch, the president of the National Foreign Trade Council (NFTC), a Washington, D.C.-based organization that represents more than 300 multinational companies. The NFTC filed the lawsuit along with eight Illinois pension funds and private investors.

The NFTC also challenged the legality of a 1996 Massachusetts law that ordered state entities to boycott products from companies that did business with the military junta that runs Burma. The U.S. Supreme Court struck down that law in 2000 because it pre-empted federal law.

Sen. Jacqueline Collins (D) of Chicago, who proposed the bill that led to Illinois' first-in-the-nation law, called the bill a "moral imperative" and said the Legislature has the power to place restrictions on the state's pension funds "It's no different than if we ask them to divest from tobacco. We have that authority because they're agents of the state," she said.

More than 200,000 civilians, most of them black Africans, have died in Sudan because of malnutrition, disease and attacks by government-backed Arab militias since civil war broke out in 2003, according to Amnesty International. Some human rights groups put that number at more than 400,000.

Inspired by the movement 25 years ago to divest from companies with business in apartheid-era South Africa, the Sudan divestment movement started in April 2005 when Harvard University sold off $4.4 million of investments in PetroChina, an energy company with close ties to the Sudanese government. Others - including universities, cities, public pensions and state legislatures - who felt the federal government's sanctions didn't go far enough soon followed suit.

California was the latest to pass a divestiture law. But while California's law, which passed in September, targets only the worst-offending companies, Illinois' law bans state investment in companies with even the smallest of ties to Sudan.

New Jersey, with a sweeping law similar to that in Illinois, is the first state to complete its divestment - two years ahead of schedule. It sold $2.16 billion of investments from 17 companies, according to Adam Sterling, the executive director of the Sudan Divestment Task Force , an organization that advocates divestment and researches corporations' ties to Sudan. Oregon has already divested from four companies and is considering more.

Legislators in Colorado, Hawaii, Indiana, Maryland, Massachusetts, Michigan, Nebraska, New York, North Carolina, Oklahoma, Rhode Island, Texas, Virginia, Washington and Wisconsin are expected to propose bills in the next legislative session, Sterling said.

His group is promoting the California model, which focuses on about two dozen companies that operate outside the fighting regions and have a major business relationship with the Sudanese government. The list includes PetroChina; India's Oil and Natural Gas Company; China's Sinopec Corp.; Malaysia's Petronas Capital Limited; and France's Schlumberger. All of these companies are in the oil and gas industry.

But the shadow of the Illinois lawsuit hangs over the current and future laws. In October a federal judge denied the state's motion to dismiss, and oral arguments are set for Jan. 3.

Congress passed a bill in September to ban Sudanese oil tankers, as well as cargo ships that supply Sudan's army, from entering U.S. ports. But a provision to protect states with divestment laws from lawsuits was stripped from the bill amidst heavy lobbying by groups such as the NFTC.

Even if Sudanese divestment is ruled legal, some state pension fund managers will still protest. An analysis conducted for The Charleston Gazette found that West Virginia's pension portfolios had stocks in companies with ties to governments on the U.S. State Department's list of state sponsors of terrorism, including Sudan. At the state Investment Management Board's next meeting, the board reaffirmed its policy to not divest from companies doing business with terror-linked governments, and one board member told the newspaper the board's legal obligation was to make the most money possible.

Still, Sterling said, the movement has already had an effect. Some companies on the Sudan Divestment Task Force's list of offenders have taken steps to get off the list. Italian aerospace company Finnmechanica recently did so by proving it had implemented safeguards to ensure its radar systems were used only for civilian purposes, Sterling said.

The slate of bills has also caught Sudan's attention. In March the country took out an eight-page ad in The New York Times encouraging companies to invest, and earlier that month the Sudanese ambassador to the United States posted an open letter on the embassy's web site on the negative impact of divestment on the Sudanese population.

" If your goal is to send a message of disapproval, divestment is not the correct tactic," then-Ambassador Khidir Haroun Ahmed wrote. "If your goal is to promote peace, unity and development in Sudan, engagement is the correct course."