Does business trump human rights in relations with China?

IT WAS shortly before Christmas last year and, in an important international mission for his SNP government, Alex Salmond was addressing the Communist Party Central School in Beijing.

Conscious of the political sensitivities of his hosts but with one eye on public opinion back in Scotland, the First Minister, in a keynote speech, carefully invoked the spirit of Adam Smith to get over his message on human rights and the issue of climate change.

“Climate justice is what is required – linking human rights and development, putting people at the heart of our economic system and allowing all to share the burdens and benefits of climate change and its resolution – and to do so in an equitable and fair way,” Salmond said.

Salmond was on an official visit to China to strengthen business and cultural links. Some fruits of his labour appeared shortly afterwards when the Scottish Government revealed that China’s oil giant, PetroChina, had agreed a 
multi-billion pound contract to refine oil at the Grangemouth refinery on the Firth of Forth.

The announcement chimed with a state visit to Britain by Li Keqiang, the Chinese vice-premier, and according to Scottish finance secretary John Swinney, the deal would secure more than 2,000 jobs at Grangemouth – a coup not only for Scotland but for the SNP, which had made building links with PetroChina and another huge petrochemical conglomerate, Sinopec, one of its key objectives in its official Plan for Engagement with China.

But, while the Scottish Government has been eager to court both companies, there are serious allegations that both have been complicit in human rights abuses and environmental damage in several countries in order to make vast profits.

Indeed, shortly after the 
PetroChina deal was announced, the world’s third largest pension fund, ABP Investments, blacklisted PetroChina for non-compliance with the United Nations’ Global Compact Principles, a code of conduct to prevent firms from engaging in unethical and illegal behaviour.

ABP was followed by Delta Lloyd, another large investment house, and 27 American states, 61 US colleges and universities, members of the European Parliament’s pension fund and PGGM, one of the largest public pension funds in Europe, have also expressed concerns.

The reason was that China has invested heavily in Sudan’s oilfields and its companies operating there are partners of Sudapet, which is owned by Sudan’s government. According to a group called Investors Against Genocide – which campaigns against PetroChina and Sinopec – the Sudanese government used up to 70 percent of its oil revenue to fund attacks in its war-torn Darfur province.

The mass murder that occurred there was labelled genocide by the US Congress in 2004. Fighting over oil has continued this year between Sudan and South Sudan, which seceded from the north as part of a 2005 peace treaty following two decades of civil war in which some 1.5 million people died. Amnesty International and Human Rights Watch (HRW) say oil revenues have funded the Sudanese government’s army, which is responsible for human rights violations.

In 2007, former US president George Bush signed into law the Sudan Accountability and Divestment Act, a move aimed at pressuring Sudan to end the violence. At that time, US President Barack Obama, then a senator, sold about £110,000 in retirement savings because it was linked to another oil company in Sudan. Other investment funds have followed in withdrawing their money.

PetroChina and Sinopec have been at the centre of other business controversies. Ahead of the 2008 Beijing 
Olympics, for example, HRW wrote an open letter to the Chinese president, Hu Jintao, expressing grave concern over the activities of PetroChina/CNPC in Burma, in relation to oil and gas exploitation. Both were sponsors of the games.

Last year, Sinopec made a sizable gas discovery in Burma and according to HRW 
PetroChina has been implicated in its parent company CNPC’s controversial oil and gas pipelines from western Burma to Yunnan.

HRW said: “Both companies face serious human rights risks in operating in Burma’s ethnic areas, where the Burmese army typically provides security for large-scale infrastructure projects. The acquisition of land for development projects is routinely problematic in Burma and often leaves communities dispossessed and without legal recourse, and the army has committed other abuses against local populations while securing pipelines, such as forced labour.

“The gas and oil pipelines to China are passing through an active conflict zone in northern Shan State where the Burmese army has targeted civilians, forced the displacement of thousands, and committed a litany of violent abuses, including torture.

“There are concerns with payments made by the companies to the Burmese government due to a near complete lack of transparency and fiscal accountability.”

PetroChina and Sinopec have also been criticised for investing in Iran and Syria. Sinopec has met further opposition in Canada over its investment in a “Northern Gateway” bitumen pipeline, which would expose the waters of British Columbia’s Pacific coast to potential oil spills.

In Africa, Sinopec was criticised for its activities in Gabon’s Loango National Park in 2006, when it allegedly dynamited wildlife habitat and contaminated rivers.

Both Sinopec and PetroChina deny they have been complicit in human rights abuses. Both failed to respond to requests for comment, but a statement on PetroChina’s website attributed to its chairman Jiang Jiemin says: “Being a listed company on three stock markets at home and abroad, PetroChina strives to bring handsome [sic] returns to its shareholders, and bring mutual growth and benefits to local communities and its employees in the scope of its business. Wherever we operate, we have been enthusiastically involved in public welfare endeavours.

“We have shown great enthusiasm in public welfare work, such as supporting education, alleviating poverty, and building public facilities and infrastructure. More efforts have been made to boost local socio-economic growth.

“In this way, PetroChina aims at becoming a loyal, trustworthy and respected corporate citizen.”

A statement regarding social responsibility on Sinopec’s website states: “We strictly adhere to international and domestic conventions, laws and regulations, respect and safeguard all human rights recognized by international community, consciously resist the disregard or violation of human rights.

“Meanwhile, we actively advocate that our partners, suppliers and contractors should be in compliance with relevant regulations.”

Why the Scottish Government is courting China and its ever-expanding companies is clear. China is the world’s second largest economy and its government and giant state-owned enterprises have significant funds to invest abroad in “friendly” countries.

The Scottish Government’s China Plan dates back to 2008 and a new version is on the way. “We are now consulting extensively with a range of stakeholders – including a recent ministerial meeting with Amnesty International – and this will help inform a new China Plan,” a spokesman said.

Trade is not just one way either. Whisky exports to China increased by 24 per cent to £55 million in 2011. Scottish salmon exports to the Far East were up 900 per cent last year. A few days before the PetroChina/Grangemouth deal was announced, it emerged that Scotland and China had sealed a green energy deal worth £6.4m.

During his trip to China, Salmond met vice minister Chen Jian at the ministry of commerce in Beijing, where it was agreed to establish a forum to facilitate Scottish and Chinese company introductions. The First Minister also announced that Quality Qualifications International will help train the next generation of China’s oil and gas workers.

According to Scottish Development International, an arm of Scottish Enterprise with offices in Beijing, Shanghai and Hong Kong, some 40 Scottish companies have a presence in mainland China, including RBS, Standard Life and Aberdeen Asset Management.

Meanwhile, Scotland has four mainland China inward investors – Lenovo, the Bank of China, the Ningxia Zhongyin Cashmere Company and PetroChina. Links between Scotland and China are growing. Perhaps the biggest symbol of the strengthening relationship was the loaning of two giant pandas to Edinburgh Zoo last year by the Chinese government in a ten-year deal.

But Amnesty International and other human rights organisations argue there should be no dealing with Chinese companies linked to so many alleged human rights violations around the world.

Shabnum Mustapha, director of Amnesty International in Scotland, said: “It seems that economics trump human rights when it comes to Scotland’s growing relationship with the world’s second largest economy.”

• Additional reporting by Calum Mackay