As the Dow Jones bottomed out below the 10,000 mark, Chinese oil
giant Sinopec slipped on its initial public stock offer during trading
on the New York Stock Exchange, just as news broke that the second
largest Chinese state oil company had also signed an exclusive deal to
drill oil in Iraq.
According to a Dow Jones report yesterday, Shengli Petroleum Corp, a
unit of Sinopec, has been granted a contract from Iraq to drill 24 oil
wells. Sinopec officials stated the contract wouldn’t become effective
until it is approved by the United Nations, which has imposed sanctions
on Iraq for its invasion of Kuwait 10 years ago.
The news that Sinopec was in business with Iraq broke just after
Sinopec subsidiary, Zhongyuan Petroleum Corp., had previously come under
fire for business ties in war-torn Sudan. According to Sinopec
officials, Zhongyuan invested $30 million in the Sudan 6 oilfield,
conducting surveys and drilling four wells. In July, Sinopec elected to
sell all Zhongyuan’s investments in Sudan to the largest Chinese oil
company PetroChina in order to clear the way for its stock offering in
the United States.
Sudan’s support for terrorism and a 12-year-old war that has consumed
nearly 2 million lives, led the U.S. government to impose sanctions on
the Khartoum regime. However, the sale of Zhongyuan by Sinopec did not
deflect protests from American-based human rights groups petitioning the
Security and Exchange Commission to delay the Sinopec offering.
“Given the significance of Sudan to many Americans, including
American investors, this connection is of considerable material
importance in understanding the risks associated with purchase of
Sinopec shares,” wrote Dr. Charles Jacobs, president of the American
Anti-Slavery Organization, in a protest letter to the Security and
“In such a context it is imperative that the SEC delay trading of
Sinopec, and provide investors a disclosure addendum, outlining
precisely the nature of Sinopec’s Sudan connections,” said Jacobs.
“Investors have a right to know the sort of risk posed by a company with
connections to Sudan. The SEC has a responsibility to insure that this
knowledge is fully available.”
The Sinopec offering, underwritten by Morgan Stanley Dean Witter,
occurred just as U.S. stocks were bloodied in early trade losses, with
the blue-chip Dow industrials index plummeting more than 420 points in
the morning, putting it below 10,000.
Morgan Stanley officials were contacted and a spokesman asserted that
Sinopec had completely divested itself of its Sudanese holdings. The
spokesman also expressed confidence in the Chinese oil stock, but
refused to issue any comment for the record.
“Scandalously, the SEC has allowed this trading to start without
insisting that Morgan Stanley, underwriters for the Sinopec IPO, reveal
fully the nature of these Sudan connections,” said human rights activist
“The effect is to expose American investors to the potent risks
attending any investment, in any oil company, with connections to
Sudan. In this case, the SEC has simply ignored or abandoned one of its
central functions: to insure that there is full disclosure of all
material risks inherent in a pending capital market listing.”
Although the Sinopec stock offering fell below expectations, the
three largest publicly traded oil companies, Exxon Mobil Corp, BP Amoco
Plc and Royal Dutch/Shell Group plan to invest a combined $1.83 billion
in the Chinese state-owned oil company. With the backing of Exxon, BP
Amoco and other U.S. oil firms, Sinopec remains optimistic about meeting
its goal of raising $35 billion inside the American financial market.
“Sinopec shouldn’t do too badly,” said Frederick Tsang, research
director at China Everbright Securities in a Reuters business report.
“A lot of institutional investors are committed to the stock and even
if it doesn’t do well in the first few days that wouldn’t be
catastrophic,” said Tsang.
Yet, the oil industry does not spend all of its recent profits buying
Chinese state-owned oil company stock. According to Citizens for
Responsive Politics, a non-profit Washington watchdog group, the U.S.
oil industry made over $100 million in political contributions during
the last decade.
More recently, Texas-based Exxon, backer of yesterday’s Sinopec
offering, has made several large donations to George W. Bush. According
to records compiled by the Federal Election Commission, Exxon Mobil
Corp. donated over $1.5 million dollars directly to the Republican
presidential candidate. At the same time, Exxon donated $99,000 to
Democrat candidate Vice President Al Gore.
The Exxon connection to Sinopec appears to be a perfect opportunity
for Gore to press allegations that big oil companies control
Republicans. For example, Federal Election Commission records also show
that Exxon spent over $5.6 million dollars lobbying Congress in 1998
However, the Clinton-Gore administration also has troubling ties to
Sinopec and Exxon through its Washington, D.C.-based lobbying firm
Cassidy Associates. While Cassidy Associates controls the millions of
dollars spent each year by Exxon to lobby Capitol Hill, the small firm
has also made hundreds of thousands of dollars in political donations to
both parties. According to Federal Election Commission records, Cassidy
Associates made a total of over 2,500 political contributions between
1991 and 1998, nearly one donation every two days.
Moreover, Cassidy Associates worked closely with former Commerce
Secretary Ron Brown and convicted Chinagate fundraiser John Huang.
Cassidy Associates sent Democrat donor Maeley Tom to Indonesia on an
August 1994 Ron Brown trade mission to Jakarta, Indonesia. The same
mission included convicted Democrat fundraisers Charlie Trie, Pauline
Kanchanalak and Nora Lum. Cassidy Associates’ Maeley Tom, according to
the Cox report, helped Huang stay in touch with his boss, Indonesian
billionaire Moctar Riady.
According to the Cox report, “Huang maintained contact with
representatives of the Lippo Group while he was at the Department of
Commerce during the 18 months that he was at Commerce. Huang called
Lippo Bank 232 times, in addition to 29 calls or faxes to Lippo
Headquarters in Indonesia. Huang also contacted Lippo consultant Maeley
Tom on 61 occasions during the same period.”
In addition, John Huang was given information that the Clinton/Gore
administration ignored corruption inside an Indonesian energy deal
struck with Exxon. According to a Commerce Department briefing document
found inside the files of John Huang, the CIA told Huang about
corruption involving Indonesian dictator Suharto inside an Exxon Corp.
$3.5 billion Natuna Sea Gas project.
According to the document, the CIA told Huang that Suharto “first
family involvement” in the Exxon project was “probably pervasive — they
are involved in almost all major sectors.”
The document was obtained from the Clinton-Gore administration using
the Freedom of Information Act. Immediately after meeting with the CIA,
Huang reportedly called the Lippo group.
Huang pleaded guilty in 1999 to federal charges of making illegal
political contributions to the Clinton-Gore campaign. Huang took the
Fifth Amendment more than 2,000 times when asked under oath if he had
ties to Chinese intelligence.