Reply to BP directors' response to resolution 17

Friday, 30 March 2001

Free Tibet Campaign - International Campaign for Tibet - Milarepa Fund - Students for a Free Tibet - US Tibet Committee - American Anti-Slavery Group

Press Advisory
Reply to BP Directors' Response to Resolution 17

1. The Directors' response evades the serious corporate governance and human rights concerns surrounding PetroChina by attempting to deny, at great length, that BP's position as top foreign investor in PetroChina and top foreign investor in the Chinese petroleum industry carries with it responsibilities. This sort of blanket denial causes human rights organisations to question the depth and sincerity of the corporationÕs commitment to good corporate governance and social responsibility.

2. The Directors' response falsely and misleadingly argues that, "the resolution contains an implied question as to whether we should continue to invest in China". The resolution does not call for BP's withdrawal from China explicitly or implicitly. Many supporters of the resolution, including His Holiness the Dalai Lama, argue that increased trade with China can lead to reforms in China. The resolution does seek to withdraw less than one-fifth of BP's total investment in China as a means of compliance with the company's stated commitments to good corporate governance and human rights.

3. Without influence there should be no involvement. When BP purchased a strategic equity investment in PetroChina last year, management reassured the broad coalition of human rights, national security, religious freedom, labour and environmental advocates that:

"As a strategic investor in PetroChina we will encourage the company to adopt progressive policies which meet international standards. We will encourage them to respect the interests of all citizens in their business activities be they in Tibet Autonomous Region, or any other region ... Without involvement there can be no influence."

On February 7 2001, a BP spokesman was quoted in The Independent "Our investment in PetroChina is a passive one. We have no influence with PetroChina management..."

Human rights organisations that have been conducting a dialogue with BP over this issue have been frustrated by the management's unwillingness or inability to exert influence and have reluctantly concluded that despite some token offers, divestment is the best option.

4. The Directors are simply denying the facts of PetroChina's relationship to China National Petroleum Corporation (CNPC) and the latterÕs involvement in serious human rights abuses in Sudan. CNPC owns 90% of PetroChina and retains control of decision making in the company. A new report by Christian Aid, "The Scorched Earth", clearly shows the connection between the companies and how CNPC has been able to expand its operations in Sudan since its cash-flow problems eased through the creation of PetroChina. PetroChina has paid CNPC at least US$5.5 billion for services within China; services that CNPC made a healthy profit on.

PetroChina "inherited" US$15 billion in corporate debt from its parent CNPC at the moment of financial inception, even as CNPC retains 100% corporate governance of PetroChina. The inherited debt that PetroChina took on from CNPC has freed capital for CNPC. Whether these were through domestic assets or not, the CNPC's cash flow has improved and its operations in Sudan have expanded. As there is no independent monitoring of the "firewall" between CNPC and PetroChina, and the Directors now admit they have no influence on PetroChina management, there is nothing in place to stop CNPC benefiting financially from PetroChina's activities.

For more information contact: Lorne Stockman 020 7833 9958 or mobile 07989 599787