SURVIVORS' RIGHTS INTERNATIONAL | Sudan Alert WSJ: ...Debate

WASHINGTON — A congressional campaign to punish companies doing business with Sudan is forcing a debate over whether human rights should take precedence over the importance of keeping U.S. capital markets open to foreigners.

The controversy, sparked by concern over reports of government persecution of Sudan's Christians and enslavement of people from the country's southern zone, is seen by combatants as a test case for an issue that wasn't on the radar until this past decade. Before then, foreign access to U.S. capital markets was limited mostly to major companies from rich nations; today, the U.S. competes with other global money centers for world-wide underwriting business.

At issue is a pair of provisions in the House-passed version of the Sudan Peace Act that would bar companies "engaged in the development of oil or gas in Sudan from raising capital in the U.S." or trading their securities in any U.S. market. The version passed by the Senate doesn't include those provisions.

Pushing the tough House language — whose proponents say the restriction would be unprecedented — is a diverse coalition that includes the Congressional Black Caucus, the AFL-CIO and the Center for Religious Freedom.

Wall Street interests are working to defeat the provisions, with public backing from Federal Reserve Chairman Alan Greenspan and the Bush administration. Prompted by a question at a Senate hearing, Mr. Greenspan said such a ban could be "downright harmful" to the U.S. economy by pushing "a considerable amount of financing" out of the U.S. to London, Frankfurt and Tokyo.

The White House is hoping the Senate prevails in its conference committee with the House, but it isn't confident. "We think we can kill this, but passions over Sudan are running very high right now," said a senior administration official. "This is a real hot potato."

If the House version is enacted, the bill immediately would cause two major oil companies that do business in Sudan, China's PetroChina Co. and Canada's Talisman Energy Inc., to be delisted by the New York Stock Exchange. Federal law already prohibits U.S. companies from doing business with Sudan.

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A Troubled State
Population (2000 estimate): 35.1 million

GDP per capita (1999 estimate): $940

Religion: 70% Sunni Muslim, 25% indigenous beliefs, 5% Christian

Political situation: A 1989 military coup overthrew Sudan's democratically elected government and brought to power current president Omar Hassan Al-Bashir. His government has suspended the 1985 constitution, abrogated press freedom and disbanded all political parties and trade unions. A civil war between rebels in the south and the government has lasted for 18 years. Discrimination and violence against religious minorities persist. Some children from Christian and other non-Muslim families, captured and sold into slavery, have been converted forcibly to Islam. Source: State Department, Central Intelligence Agency

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Wall Street fears similar sanctions could spread to foreign companies active in places such as Cuba or Iran. Indeed, Sen. Jesse Helms (R., N.C.) recently proposed legislation that would block China's government-owned companies from tapping U.S. bond and stock markets. William Reinsch, head of the U.S. National Foreign Trade Council, which represents about 500 U.S. exporters, said the threat of the legislation led Russia's largest oil company, OAO Lukoil, to list on the London Stock Exchange rather than the New York Stock Exchange.

The Securities Industry Association, the umbrella Wall Street trade group, is leading the campaign against the House provisions. Joining in are the NYSE and Goldman Sachs Group Inc., which was lead underwriter for PetroChina's initial public offering of stock in the U.S.

But many of those promoting the financial sanctions see them as an important test of U.S. resolve to protect human rights in Sudan. On Capitol Hill, the Congressional Black Caucus has told Senate Majority Leader Thomas Daschle (D., S.D.) that imposing financial penalties is the least Congress can do to help relieve the suffering in Sudan. Several other weighty lobbying operations, including the American Israel Public Affairs Committee, have joined the effort.

Sudan's long-running civil war has killed an estimated two million people through fighting and starvation. But it is the ethnic and religious aspects of the struggle that have galvanized a broad coalition of forces thousands of miles away in the U.S. Evangelical churches in the South, African-American groups in the Bronx and a growing number of lawmakers in Washington are among those mobilizing against what is described as a campaign by Sudan's Muslim government in Khartoum to enslave, uproot and often kill Christian and animist Sudanese in the south. Southern Sudan is mostly Christian or animist, while the northern part of Sudan is predominantly Muslim.

The fight over the bill's final form will come to a head next month when lawmakers from the House and Senate try to hammer out a compromise measure. The Senate bill, favored by domestic and foreign securities-industry groups, authorizes additional money for humanitarian help to groups in Sudan. Even though the House version passed by a vote of 422-2, lobbyists on both sides believe the Senate is unlikely to agree to the sanction language.

At the White House, officials say their challenge will be to eliminate the capital-markets provisions while making it clear they take the Sudan cause seriously. But there is already a whiff of defeatism, with one official acknowledging that "we are not going to be able to please everyone, or perhaps anyone, when it comes to Sudan."

Aware of how explosive the Sudan issue has become domestically, the administration is loath to get caught in the crossfire. The State Department is expected next month to announce a high-profile envoy to Sudan to push for a peace settlement. The administration also is preparing an aid program for southern Sudan that is larger and better-organized than one now in effect.

The Securities and Exchange Commission has become another battleground. In May, acting SEC Chairwoman Laura Unger issued guidance to companies — notably foreign companies whose stocks trade in the U.S. — that they need to consider disclosing to shareholders if they do business in the Sudan and other nations identified as "rogue states" by the U.S. The SEC said there could be material risks for such companies, particularly since human-rights groups have been able to temporarily drive down the value of shares in such companies by waging public-relations campaigns.

"Without question, there are growing material risks involved for investors holding the securities of certain foreign entities doing business in U.S.-sanctioned countries," said Roger Robinson, a former Reagan national-security aide who is chairman of Washington's William J. Casey Institute. Mr. Robinson is an ardent advocate of the House provision on Sudan. His nonpartisan organization is named for a former head of the Central Intelligence Agency and focuses on international and security issues.

Business interests, including the National Foreign Trade Council, have pressured new SEC Chairman Harvey Pitt to back down from that guidance. But in a recent meeting with Rep. Frank Wolf (R.,Va.), a strong supporter of the Sudan bill, Mr. Pitt gave indications he will support the disclosure requirement, people familiar with their talks said.

Ms. Unger's guidance letter "should not be read, and wasn't intended, to change existing law," said Mr. Pitt, who declined to comment on his meeting with Mr. Wolf.

Write to Neil King Jr. at neil.king@wsj.com and Michael Schroeder at mike.schroeder@wsj.com

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