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Professor Recommends Targeting Sudan Through Economic Means

November 23, 2006 at 5:25 PM EDT

RAY SUAREZ: So far, we’ve talked with former Assistant Secretary of State Susan Rice. She proposed military strikes and a blockade against Sudan. And former Ambassador Morton Abramowitz, who recommended more vigorous diplomacy.

Margaret Warner has tonight’s conversation about a different idea.

MARGARET WARNER: That idea comes from Eric Reeves, a professor of literature at Smith College. He has spent the past seven years working on the Darfur issue, including serving as a consultant to humanitarian organizations working there. He also helped start a college campus-based movement to encourage states, universities and mutual funds to unload investments in companies that do business with Sudan.

And welcome, Professor Reeves. Thanks for being with us.

ERIC REEVES, Smith College: Very good to be with you.

Businesses that work with Khartoum

MARGARET WARNER: You have said that the only way to stop the violence in Darfur is to use economic pressure. How would that work?

ERIC REEVES: Given the international community's failure to secure from Khartoum consent to deploy a U.N. peace support operation, the United States needs to begin to bring serious diplomatic and economic pressure to bear on those countries and companies that continue to do business as usual with the genocidal regime.

The divestment campaign targets those companies that list on the New York Stock Exchange and other U.S. exchanges which provide key commercial and capital investments in the economy of Sudan, supporting the National Islamic Front, National Congress Party regime in Khartoum, and insulating them from the consequences of their massive external debt and their profligate expenditures on military weapons and the prosecution of genocidal war in Darfur.

MARGARET WARNER: Now, are these companies based in Europe, in the Far East, where?

ERIC REEVES: The companies are to be found both in Europe and in Asia. U.S. comprehensive economic trade sanctions prevent any U.S. direct investment, but the companies in Europe include companies, for example, like ABB Limited of Switzerland, Alcatel of France, Siemens of Germany.

The real culprits, though, lie in Asia. And two of the most conspicuous are China National Petroleum Corporation, which trades on the New York Stock Exchange by way of its surrogate, PetroChina, and another Chinese state-owned company, Sinopec.

These are the worst of the worst in the companies that have consistently shown up in the divestments by a number of states, six to date, including California, Illinois, New Jersey, as well as dozens of colleges, universities, municipalities, and I would predict very soon a great deal more institutional shareholders.

Impact of a divestment campaign?

MARGARET WARNER: Now, has there been any reaction yet or any response from the Chinese government, any of the governments involved, where these companies are based?

ERIC REEVES: Not to date. I don't think we've seen the divestment campaign bite deeply enough to have a significant influence on share price. But capital markets, equity markets are like all others. It's a matter of supply and demand.

The supply is constant, the number of shares. If demand drops because of divestment, sooner or later price will drop. And if price drops far enough, this is going to bring very significant pressure to bear on the Chinese in particular, who have more diplomatic leverage with the Khartoum regime than anyone else.

MARGARET WARNER: Now, you have also written about or called for some kind of federal government action to de-list Chinese companies and other companies that do business in Sudan from the New York Stock Exchange. How would that work? I mean, the SEC doesn't have that authority, does it?

ERIC REEVES: It doesn't presently. It would require legislation. Here we might look back to the Sudan Peace Act of 2002. A House version of that bill passed with an amendment that would have denied capital market access to all companies participating in the oil sector in southern Sudan. This was at the time in which primary tension was to the north-south conflict.

The same legislation today would deny access to all U.S. equity markets -- both the capital markets, the stock exchanges, the debt markets -- and this would have an enormously powerful effect.

Relations with China

MARGARET WARNER: Now, the U.S. has grown very dependent, particularly on China, to finance our own growing public debt. I think they hold currently some $260 billion worth of U.S. government treasuries. Do you think it's wise or realistic for the U.S. to start playing that kind of financial market hardball with China, given our dependence on China at the moment?

ERIC REEVES: Well, that's a two-way street. China doesn't hold that debt out of any goodness of their heart towards the United States. It serves their interests and should be seen in the broader context of U.S.-Chinese trade.

In the case of capital market sanctions, they're highly, highly targeted. We would be going after only those companies that continue to support, as I say, by way of doing business as usual with a genocidal regime.

MARGARET WARNER: There's a pro-trade group in Washington that has taken the state of Illinois to court over its divestment law with the pension fund, saying states shouldn't be making foreign policy. And they have had success in other kinds of cases. How much of a problem is that?

ERIC REEVES: Well, it's yet to be determined. The previous success that you allude to did not have to do with investments in equities and stocks.

What we have in the case of Illinois, New Jersey, California, the state of Maine and others is a decision by states that they will not invest in companies that are complicit in genocidal destruction. An example I might use is a hypothetical one from World War II.

Let us imagine a Swiss company was shipping Zyklon B to the Nazis for use in the death camps. Let us suppose we knew that this company also traded on the New York Stock Exchange. Do we really imagine that any state would want to be guilty of investing in that company? Do we really imagine that the board of governors of the New York Stock Exchange would permit that company to trade on the New York Stock Exchange or that the federal government would intervene with actions by the New York Stock Exchange or states?

I think, when we reach the threshold of massive genocidal destruction -- and that's where we are in Darfur -- I think the arguments of that are mounted by trade group you allude to, become mere legal contrivance.

MARGARET WARNER: Professor Eric Reeves of Smith College, thank you so much.

ERIC REEVES: My pleasure to be with you.