Buffett's Role in Sudan Questioned

Warren Buffett was confronted over the week-end by a Sudanese refugee and by Karuk native Americans during the annual general meeting of his business empire. The reason? Buffett continues to make money from his investments in Sudan, despite the ongoing humanitarian crisis, particularly his investments in PetroChina (which is currently hawking its Corporate Social Responsibility Report on its website). According to James Miller, from the Sudanese Divestment Taskforce, CNPC is:

"....by far the most irresponsible and abusive oil investor in Sudan. At least 70% of the funds they provide to Sudan get funnelled into the Sudanese military."

Buffett's other investments have come under scrutiny in recent weeks. A recent LA Times report exposed the true nature of much of his investments through Berkshire Hathaway. Despite pledging $31 billion of his fortune to the Gates Foundation, which was established to fight disease, poverty and illiteracy, Buffett has been caught up in some dubious investments. According to the report:

About $56.4 billion, or 87% of Berkshire's stock holdings, is invested in companies criticized by the research groups for profiting from environmental irresponsibility, human rights violations and other activities that undermine the foundation's good works or its goals of improving the lot of humankind.

The report adds that:

The holdings of Berkshire Hathaway, totaling more than $4.6 billion in eight companies, came in dead last by a wide margin in a ranking of oil and gas holdings among the 100 largest investors in the United States. The ranking was based on social, environmental and governance performance ratings developed by the investment bank Goldman Sachs Group Inc. and a related ownership analysis by Cary Krosinsky of CapitalBridge, a capital markets intelligence firm.

So just what does Buffett's Berkshire Hathaway invest in? Well, they also own shares in the notorious, union busting Wal-Mart (parent company of Asda in the UK). Berkshire currently owns shares worth $921 million in Wal-Mart Stores Inc, despite its well documented human rights abuses.

Furthermore, despite the stated goals of the Gates Foundation, Berkshire also holds:

$64 million in pharmaceutical companies, for example, whose pricing policies have tended to keep antiretroviral drugs out of reach for HIV/AIDS patients in developing nations.

And here is what the Gates Foundation has to say on Global Health:

Millions of people—most of them children—die each year in developing countries from diseases that are preventable and treatable. Moreover, tragically little research is done to prevent or cure some of the world’s biggest killers, such as malaria and tuberculosis.

The foundation is guided by the belief that all lives, no matter where they are lived, have equal value. The mission of our Global Health program is to encourage the development of lifesaving medical advances and to help ensure they reach the people who are disproportionately affected. We focus our funding in two main areas:

• Access to existing vaccines, drugs, and other tools to fight diseases common in developing countries
• Research to develop health solutions that are effective, affordable, and practical.

Berkshire's investment also include tobacco firm Altria (the parent company of Philip Morris - the passive smoking deniers), despite the fact that the Gates Foundation avoids investments in the tobacco industry due to the health implications. Perhaps someone should tell Mr Buffett of the true goals of the Gates Foundation.

During the AGM, Berkshire shareholders were addressed by a woman from the Karuk Indian reservation who explained the how her community has been destroyed by hydroelectric dams operated by PacifiCorp (yet another Berkshire subsidiary). The dams have seriously undermined the community's salmon fishing livelihood. Confronting Buffett she said:

"My people are a river people. Our entire culture, religion and subsistence is centred around the river.

Buffett, I know you care very much about humanity. There are things you can do to help us."

Buffett's response?

"The world runs on electricity and it wants more electricity. We are a public utility responsive to public policy."

Hardly in keeping with social responsibility.

It is time that Buffett put his money where his mouth is. He talks the talk, espousing his support for causes such as the Gates Foundation, yet his investments give lie to his great claim for being a supporter of ethical causes. How can anyone claim to share the same ideals of the Gates Foundation, yet support the oil industry, Wal-Mart, Coca-Cola, pharmaceuticals and PetroChina? It couldn't possible be because there is money to be made, could it?

Further reading: The full LA Time report - Berkshire wealth clashes with Gates mission in Sudan

Coke Continues to Profit in Sudan

While people around the world gather to call for action in Sudan, it is worth remembering that some companies continue to do business there. Coca Cola continues to operate in Sudan, despite sanctions, thanks to the exemption on gum arabic. Furthermore, as Killer Coke has noted:

Warren Buffett who left Coca-Cola's board in 2006, but remains the company's largest shareholder with 8.3% of common shares outstanding worth about $10 billion, is also a major investor in the PetroChina Oil Company which gets oil from Sudan and is targeted by the Sudan divestment community. "Oil has turned it [Sudan] into one of the fastest-growing economies in Africa - if not the world - emboldening the nation's already belligerent government and giving it the wherewithal to resist the Western demands to end the conflict in Darfur.

In fact, Berkshire Hathaway, of which Buffet is CEO, is the largest foreign shareholder of PetroChina owning 1.3% of shares. Buffet continues to resist calls to divest in PetroChina. He claimed that:

"I can be a direct descendant of William Jennings Bryan, but I will not be changing the Chinese government's policy… I doubt I could change the policies of the Douglas County [ Nebraska] Board."

However, CFO Asia (a leading magazine for CFO's in Asia) contradicts this assessment. It claims that:

"If Buffett were to sell for any reason, PetroChina's stock would almost certainly tank - and the company's reputation would sink along with it…PetroChina already had a foretaste of this in August [2003] when its stock price fell 2.1 percent in one day. Buffett disclosed to US regulators that he had sold US$5 million worth of PetroChina's American Depositary Shares in the second quarter of 2003. Flustered investors rushed to the exits. Was Buffett's confidence in PetroChina wavering? The markets were reassured when it was revealed that Buffett's ADS sales were made before he accumulated the 2.3 billion in H-shares he bought in Hong Kong."

There is clear evidence that were Mr Buffet to re-assess his investments in PetroChina, there would be a knock-on effect to China's attitude towards the humanitarian disaster. The Chinese government is already becoming sensitive to international pressure on Sudan and if Buffet was to divest, PetroChina would have to rethink its opertions in the region. However, it would appear that as long as Coca Cola and PetroChina continue to bring in the money, Buffet will continue to overlook the humanitarian disaster in Darfur. After all, business is business.

For more information: PetroChina, CNPC, and Sudan: Perpetuating Genocide - a report by the Sudan Divestment Task Force.