Norway’s stake in PetroChina causes row

Published on Jan 06 2012 // News Update

Pension fund’s refusal to divest from China National Petroleum Corporation subsidiary despite controversial pipeline in Myanmar causes dismay

Toh Han Shih
Updated on Dec 27, 2011
Analysts and NGOs are dismayed at a refusal by the Government Pension Fund of Norway, Europe’s largest pension fund, to divest from PetroChina, citing a controversial Chinese-built oil and gas pipeline in Myanmar.

“As the second-largest sovereign wealth fund in the world, Norway’s government pension fund is in a powerful position to promote responsible investment in Burma,” according to Shwe Gas Movement, a Myanmese non-governmental organisation. The pension fund manages roughly US$600 billion of assets. “It is shameful that the Norwegian government is endorsing human rights abusers in Burma through the investments of its pension fund,” said the NGO’s Wong Aung.

EarthRights International, an NGO based in the United States and Southeast Asia, described the Norwegian Ministry of Finance’s decision as “a troubling setback for socially responsible investing”.

This month, the finance ministry, which oversees the pension fund, said it would not follow a recommendation by the pension fund’s Council on Ethics to withdraw the fund’s investment in PetroChina, a subsidiary of China National Petroleum Corporation (CNPC), China’s largest state-owned energy company. According to Norges Bank Investment Management, which manages the pension fund on behalf of the finance ministry, as of the end of 2010, the fund owned 0.04 per cent of PetroChina, which is listed in Hong Kong, Shanghai and New York.

The council’s recommendation was based on what it said were the risks of human rights violations arising from CNPC’s construction of a 1,000 kilometre oil and gas pipeline from the Bay of Bengal through Myanmar into southern China. CNPC owns 51 per cent of the US$2.5 billion pipeline project. The Norwegian finance ministry’s reason for not withdrawing from PetroChina is that it is separate from CNPC.

A PetroChina spokesman told the South China Morning Post: “PetroChina does not have any investment in Myanmar. Our parent CNPC has some investments in Myanmar and is involved in the construction of the pipeline.” CNPC did not respond to queries from the Post.

Paul Donowitz, EarthRights campaigns director, said: “As far as I know, this is the first time the Norwegian finance ministry has completely rejected a council recommendation. The Council on Ethics is known as the leading socially responsible investor in the world, so a finding by this body carries great weight with investors, analysts, and the public.”

The Council on Ethics was established by royal decree in 2004 to evaluate whether the pension fund’s investments violated established ethical guidelines.

Based on the council’s recommendations, the finance ministry excludes certain companies from investment by the fund. Currently, 54 companies are excluded from investment, including American firms like Wal-Mart, British firms like BAE Systems, and Singapore Technologies Engineering, according to the council’s 2010 annual report. In 2009, the Norwegian pension fund divested itself of its stake in a Chinese firm, Dongfeng Motor, for supplying trucks to the Myanmese army.

Norway has invested US$3.7 billion in 15 oil companies allegedly linked to human rights abuses in Myanmar’s oil and gas sector, including US$457 million in companies linked to the pipeline including PetroChina, according to an EarthRights report.

“The decision could have more to do with Norway trying to repair its relationship with China after last year’s controversy over the Nobel Peace Prize,” Donowitz said. In May this year, China’s ambassador to Norway, Tang Guoqiang , said the Norwegian government should apologise for awarding the 2010 Nobel Peace Prize to Chinese dissident Liu Xiaobo if Sino-Norwegian ties were to be repaired. Norway used to be the top supplier of salmon to China, but since that episode in late 2010 Norwegian exports of salmon to China have dropped sharply.

“This pipeline has always been very controversial, so I was surprised Norway’s fund is investing in it,” said Sean Turnell, associate professor at Macquarie University, Australia.

Dr Pavin Chachavalpongpun, a researcher at the Institute of Southeast Asian Studies in Singapore, said: “If the Norwegian Ministry of Finance insists on investing in PetroChina, perhaps Norway wants to follow the US in being more relaxed with the Myanmar regime.”

The US has recently been making friendly overtures to the country, which is still under US sanctions. US Secretary of State Hillary Rodham Clinton went to Myanmar this month, a visit analysts saw as an effort to counterbalance China’s huge economic influence on its southern neighbour.

In March 2009, Beijing signed an agreement with the Myanmese government under which CNPC would build the oil and gas pipeline. After completion in 2013, the pipeline will transport 22 million tonnes of crude oil a year to China.

The Council on Ethics’ report to the Norwegian finance ministry said 44 Myanmese army battalions, comprising 13,000 soldiers, were stationed along the pipeline, villages had been forcibly relocated and land confiscated. The pipeline passes through zones of conflict in northern Myanmar; some 30,000 people have been displaced by fighting in northern Shan state alone this year.

The Shwe Gas Movement alleges that the army is forcing civilians there to work as porters in its fight against separatists near the pipeline. “The deployment of government troops to secure foreign investments in ethnic-minority areas has fuelled conflict and sparked resentment against projects in Myanmar.”

hanshih.toh@scmp.com

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