Texas Oil Working in Sudan

Companies with international subsidiaries still doing business there

Recently, Gov. Rick Perry signed the Stop the Darfur Genocide Act, which requires the Texas Employees Retirement System and the Teacher Retirement System to divest from all foreign companies doing business in Sudan. State Comptroller Susan Combs is required to create a list of "scrutinized companies" to be banned from pension investments. A nonprofit group, the Sudan Divestment Task Force, which focuses "its efforts on the most egregiously offending companies in Sudan," has created a "highest offender" list to help states and other entities seeking to divest. The assumption is that this list will guide Texas' divestments.

The interesting question, however, is whether the comptroller will only look at the task force's "highest offender" list or whether she will also consider Texas companies with international subsidiaries working in Sudan.

Weatherford, an oil-services company based in Houston, has a subsidiary, Weatherford Oil Tool Middle East, with an office in Khartoum, which rents drilling gear and other oil-production equipment. The firm is separate from the Houston operations and therefore is working within the letter of the law -- the federal sanctions only prohibit U.S. companies from doing business with Sudan; by creating a foreign subsidiary, Weatherford uses a loophole in the law to be in compliance.

At least one other oil company with offices in Texas, Schlumberger Ltd., also has subsidiaries working in Sudan. Schlumberger is not on the Sudan Divestment Task Force's "highest offender" list. Therefore, the retirement systems will not "have to divest their considerable holdings in that company," said Rodney Ellis, D-Houston, sponsor of the divestment legislation in the Senate. However, concern about the genocide -- and pressure from stockholders -- recently led another Houston-based oil and gas-products company, Baker Hughes Inc., to close its subsidiary in Sudan. Weatherford in Sudan didn't respond to an e-mailed request for comment.

Since 1997, the U.S. government has precluded companies from doing business with the government of Sudan because of its atrocious record of human-rights violations -- including the genocide in the Darfur region -- and its support of terrorist groups.

*Oops! The following correction ran in our August 10, 2007 issue: Aug. 3 News story "Texas Oil Working in Sudan" mistakenly refers to Schlumberger Limited as an oil company. It's actually an oil-services company. We regret the error.

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