Partnering to End the Crisis in Darfur:
An Argument for Targeted Divestment

While divestment was an appropriate and effective strategy in isolating South Africa's apartheid regime, questions have arisen as to whether this strategy can work as well in pressuring the government of Sudan to end the violence in Darfur. Some doubt the potential economic impact of divestment and maintain that greater emphasis should be given to political and diplomatic solutions.

Calvert supports the targeted divestment approach as a timely and essential complement to the diplomatic pressures being brought to bear on Sudan. We believe that the divestment campaign can be successful, as it focuses sharply on those companies whose presence in Sudan contributes revenues and capabilities that help the Khartoum regime fund the atrocities in Darfur. The discussion below addresses the reasons for targeted divestment; it is based in part on the Sudan Divestment Task Force (SDTF) March 2006 report, Arguments for the Efficacy of Targeted Divestment from Sudan1.

The Khartoum regime has been responsive to economic pressure.

According to the SDTF, Sudan's economy grew by 12 percent from 2005 to 2006. Much of this growth was a result of increased foreign direct investment in oil, energy, and other extractive sectors. However, the nation's per capita income was only $640 in 2005. A former Sudanese finance minister reports that instead of aiding the impoverished Sudanese people, the government spends over 70 percent of its oil profits on the military.2

But why not urge our government to use diplomacy in order to pressure Sudan? Of course that approach must be taken -- and it is. Political pressure and economic pressure are not mutually exclusive. The Khartoum regime has key international allies, including Russia, China, India, and Malaysia. Both Russia and China sell arms to Sudan and have considerable commercial investments in the country. Although diplomatic leverage is somewhat limited, the international community has nevertheless acted through the UN Security Council to approve deployment of a peacekeeping force -- even though the Sudanese government continues to block it.

However, because it relies heavily upon foreign direct investment, the Sudanese government has responded to economic pressure. When the Canadian oil company Talisman withdrew from Sudan in 2002 in the face of divestment pressure, other oil companies followed. Soon thereafter, the Khartoum regime entered into negotiations that finally ended the country's 21-year civil war. The home countries of companies that continue to do business with the Khartoum regime also experience the effects of divestment. Since some of these companies are state-owned, even Indian and Malaysian oil companies have been affected by the divestment movement, to the point where they have had difficulty acquiring capital that otherwise might be available.

In 2006, the Sudanese Embassy in the United States spoke out against divestment. A subsequent public relations campaign included a 6-page ad in the New York Times promoting Sudan as "a peaceful country" warranting business. These and similar activities indicate that the Sudanese government takes divestment very seriously.

Unfortunately, the Khartoum regime has failed to abide by the Darfur Peace Agreement and refused to allow UN troops into Darfur -- even as the violence and the humanitarian crisis intensify. For these reasons, it is essential not only to intensify diplomatic efforts, but also to bring pressure to bear on the Sudanese government through other means -- especially targeted divestment.

Targeted divestment does not penalize those who do need support.

Of course, companies make products beyond those that support warfare. Pharmaceuticals, food, and other products are desperately needed by Sudanese. Therefore, Calvert is engaging in targeted divestment, a process that first establishes which goods and services benefit the Sudanese people and which have the greatest impact on the government's behavior. Decisions to invest or divest follow. For example, companies associated with agriculture, consumer goods, and education are usually exempt under targeted divestment criteria, while oil companies that profit the government directly are most likely to be divestment candidates. As demonstrated by our work with Cummins (CMI), a company in which we invest, Calvert is careful to contact and verify involvement or lack thereof on the part of companies in our funds.

According to the SDTF, "divestment is still likely to disproportionately affect the government of Sudan since Khartoum allocates little government revenue towards social spending." Instead, most development programs are financed largely through international assistance. Therefore, targeted divestment is unlikely to harm those in need, as goods and services will continue flowing through and to the traditional sources that provide aid in Sudan. An example of a company that continues to conduct limited operations in Sudan but is not subject to targeted divestment is 3M (MMM), which sells its Scotchshield Safety and Security Window Film to help protect the vehicles of UN aid workers in Sudan.

Divestment and recent Darfur developments

In January 2005, the Khartoum regime signed the North-South Comprehensive Peace Agreement (CPA), which ended over 20 years of conflict between the country's Islamic northern region and the southern part of Sudan. However, this agreement did not include Darfur, and the SDTF points out that "implementation of the CPA will provide no economic benefit to Darfur's devastated population or infrastructure." There is also evidence that Khartoum is not living up to the CPA. US Government policy has eased most investment restrictions related to South Sudan, while maintaining a ban on oil investment in the entire country. Targeted divestment promotes strict criteria for oil companies throughout Sudan, but otherwise relaxes standards for most other kinds of investment in South Sudan.

Recently, on January 4, 2007, following dialogues with SDTF and a number of investors, the Swiss engineering firm ABB Ltd. suspended its operations in Sudan, with the exception of those consistent with the UN Global Compact. Prior to this action, ABB had been involved in the building of Sudan's Merowe Dam and had provided support to oil consortiums operating in the country. ABB's suspension of operations shows that the targeted divestment movement can influence companies to halt activities that support the goals of the Khartoum regime. Calvert hopes to see more of these successes.

As of December 31st, 2006, Cummins (CMI) represented 0.42% of Calvert Social Investment Fund (CSIF) Balanced Portfolio, 0.47% of CVS Calvert Social Balanced Portfolio, 0.99% of CSIF Enhanced Equity Portfolio, 0.07% of Calvert Social Index Fund, 0.26% of Calvert World Values International Equity Fund, and 0.33% of CVS Calvert Social International Equity Portfolio; 3M (MMM) represented 0.95% of CSIF Balanced Portfolio, 1.00% of CVS Calvert Social Balanced Portfolio, 1.35% of CSIF Enhanced Equity Portfolio, 0.69% of Calvert Social Index Fund, 0.90% of CSIF Equity Portfolio, and 0.94% of CVS Calvert Social Equity Portfolio.

2. Ibid., page 4

Partnering to End the Crisis in Darfur

Publication Date: January 22, 2008

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