Harvard announces decision to divest from PetroChina stock

The Harvard Corporation on Monday (April 4) announced its decision to have Harvard Management Company divest its holdings of stock in PetroChina Company Limited.

“This decision reflects deep concerns about the grievous crisis that persists in the Darfur region of Sudan and about the extensive role of PetroChina’s closely affiliated parent company, China National Petroleum Corporation, as a leading partner of the Sudanese government in the production of oil in Sudan,” said the University’s Corporation Committee on Shareholder Responsibility (CCSR) in a statement endorsed by the Corporation. “Oil is a critical source of revenue and an asset of paramount strategic importance to the Sudanese government, which has been found to be complicit in what the U.S. Congress and U.S. State Department have termed ‘genocide’ in Darfur and what a United Nations commission of inquiry recently characterized as ‘crimes against humanity and war crimes . . . [that] may be no less serious and heinous than genocide.’”

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Read the full CCSR statement

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The Corporation’s decision, on the recommendation of the CCSR, was made in light of advice from the University’s Advisory Committee on Shareholder Responsibility (ACSR), which comprises four faculty members, four students, and four alumni. At the request of President Lawrence H. Summers, the CCSR had asked the ACSR to study the issue, after concerns had been expressed by members of the Harvard community about PetroChina and the situation in Darfur. A subcommittee of the ACSR, after hearing from representatives of the group urging divestment from companies doing business with Sudan and otherwise inquiring into the circumstances, prepared a report recommending divestment from PetroChina. The full ACSR endorsed the subcommittee recommendation and forwarded the report to the CCSR, which in turn brought forward the recommendation to the Corporation.

“I want to thank the ACSR for its thoughtful consideration of these issues,” said Summers. “Divestment is not a step that Harvard takes lightly, but I believe there is a compelling case for action in these special circumstances, in light of the terrible situation still unfolding in Darfur and the leading role played by PetroChina’s parent company in the Sudanese oil industry, which is so important to the Sudanese regime.”

While affirming the strong institutional presumption against divesting stock for reasons unrelated to investment purposes, the Corporation accepted the recommendation that the extraordinary combination of circumstances presented in the case of PetroChina warrants the rare step of divestment. Among the particular circumstances cited in the ACSR report, and quoted in the CCSR statement, are these:

The declarations by the United States Congress and the U.S. secretary of state describing the situation in Darfur as involving a “genocide” in which the Sudanese government is complicit;

• the judgment of a United Nations commission of inquiry that the government of Sudan shares responsibility for “widespread and systematic acts” in Darfur amounting to “crimes against humanity and war crimes . . . [that] may be no less serious and heinous than genocide”;
• the apparent persistence of the crisis in Darfur notwithstanding the recently negotiated peace agreement intended to end the north-south civil war in Sudan, and several rounds of negotiations focused on Darfur;
• the salient importance of oil to the Sudanese government as a strategic asset and source of revenue available to fund military and other operations;the reports that oil-related activities themselves have exacerbated the humanitarian crisis in Sudan; 
• the magnitude and scope of active involvement by PetroChina’s parent company, China National Petroleum Corporation (CNPC), in Sudanese oil production activities (especially in the joint venture known as the Greater Nile Petroleum Operating Company, or GNPOC), the importance of its Sudanese activities in its overall range of foreign oil activities, and CNPC’s status as a direct joint venture partner of Sudapet, owned by the Sudanese government;
• the express inclusion of the GNPOC joint venture on the list of entities with which persons in the United States are prohibited from doing business under U.S. sanctions law;
• CNPC’s 90 percent ownership of PetroChina, and the lack of realistic opportunity for an owner of a small fraction of PetroChina’s publicly traded shares to exercise “voice” in a way that could be expected to exert significant influence on the conduct of CNPC, which is wholly owned by the Chinese government;
• the fact that PetroChina’s board of directors is dominated by CNPC’s senior management;
• the recent reports that PetroChina itself may soon become the direct owner of international oil assets (including Sudanese assets) now owned by CNPC, or that CNPC and PetroChina may form a joint venture through which they would jointly own such assets, as a result of a contemplated corporate restructuring.