Norway Remains Complicit in Burma Abuses

In a troubling setback for both socially responsible investing and corporate accountability, the Norwegian Ministry of Finance defied its Council on Ethics and announced it will retain holdings in PetroChina, despite the unacceptable risk of ongoing and likely human rights abuses connected with the onshore Shwe Gas and Burma-China Crude Oil pipelines currently under construction in Burma. The Norwegian Council on Ethics (“Council”) found that PetroChina and its parent, the Chinese National Petroleum Corporation (CNPC) operate as “one single unit”, and thus, CNPC’s complicity in abuses, as operator of the pipelines runs to PetroChina.

The Norwegian Ministry of Finance rejected its Council’s recommendation leading to strong criticism from human rights groups, who claim that Norway remains complicit in abuses in Burma through its investments in international companies invested in the country’s petroleum sector. The Ministry’s decision follows a December 2010 report by EarthRights International exposing Norway’s US$3.7 billion investments in 15 oil companies linked to human rights abuses in the country’s problematic oil and gas sector, including US$457 million invested in companies linked to the controversial Shwe Natural Gas and Burma-China Crude Oil pipelines, including PetroChina.

In the landmark finding, the Council recommended the Norwegian government divest US$90 million of PetroChina shares held in the Norwegian Government Pension Fund – Global (GPFG). The Council found that:

[H]uman rights violations associated with the construction of the pipelines can be expected to resemble those which took place before and during the construction of the Yadana-pipeline in 1995-1998, where Total was the operator. In parallel with the increased militarisation of the area, there were numerous reports on extensive violations committed against the local population, including accusations of forced labour, the forced relocation of villages, torture, killings and rape. The violations were perpetrated by the Burmese military in connection with the clearing of the pipeline’s corridor and the construction of the pipeline. Similar abuses have been reported in association with the construction of other pipelines and infrastructure projects.

Abuses Associated with the Pipelines

Construction of the pipelines began in 2010 and has already lead to widespread human rights abuses including land confiscation, harassment and arrests of local people opposed to the project, cases of forced labor, and arbitrary detention and torture at the hands state security forces. Some of the abuse began even before construction commenced.

In 2009, an Arakan youth was arrest, tortured, and sentenced to six months imprisonment for organizing awareness raising workshops about the project.  He told EarthRights International: “[Military intelligence] blindfolded me for four days. For four days I couldn’t see anything. I was beaten nonstop, always being questioned, nonstop for four days.”

In Arakan and Shan States, and Magway, and Mandalay Divisions local farmers have lost land often with no or inadequate compensation, severely impacting their livelihoods. Many farmers have no land title, and to secure compensation for confiscated land are forced to pay bribes to township Peace and Development Councils and township land departments equaling as much as 30 percent to 50 percent of the compensation amount to secure land title. In other cases, well-connected entities have confiscated land with no compensation only to later sell at high prices to the investing companies.

In November 2011, in Sittwe, capital of Arakan (Rakhine) State, around 10 community activists were arrested for planning protests against the pipelines project as part of a growing campaign calling for a fairer distribution of the project benefits. The campaign, dubbed, “24-hour Electricity in Arakan” is demanding a share of the energy, which is currently destined for export to China and for cement and other industrial projects inside Burma that will not benefit local people.  Millions of people living in Arakan State have no electricity, while those that do, have access for only a few hours a day at unaffordable prices.

Meanwhile, surveying and construction is ongoing in areas of northern Shan State where the Burma Army is attacking armed ethic groups.  Between Namtu and NamKham, just south of the Chinese border, fighting is ongoing, and pipe-laying appears to be on hold until the area is secured.  Fighting has displaced over 30,000 people from Shan and Kachin States, many of who are living in deteriorating conditions in IDP camps inside Burma with little access to humanitarian assistance as the winter approaches.

Local people have little information about the project, cannot refuse to give up their land, and have no ability to participate in decisions around the projects. To date, no environmental, social, or human rights assessments have been disclosed, and the all payments by the companies and revenues received by the Burmese state remain hidden. 

A Call to Action

EarthRights International has been calling for the Norwegian Council on Ethics and the Ministry of Finance to take action against international companies operating in Burma in violation of Norway’s Ethical Guidelines for a number of years. Despite changes that may be underway in Burma, Norway has a responsibility to enforce its own Guidelines and take action if there is an unacceptable risk of ongoing or likely human rights abuses connected to companies held by the GPFG.

Norway’s GPFG also holds shares in Daweoo International, Korean Gas Corporation (KOGAS), GAIL (India), and POSCO (Korea), all involved in the offshore Shwe natural gas project as well as the onshore gas pipeline. CNPC holds 51 percent of both the onshore Shwe pipeline ad Burma-China Crude Oil pipeline.

Norway’s investments in companies in Burma’s oil and gas sector increased in 2010 and as of December 31, 2010, had US$693 million invested in seven companies involved in the Burma-China pipelines, and nearly US$5 billion invested in 15 oil companies operated in Burma.  The Norgis Bank is expected to release its 2011 GPFG holdings in early 2012

Action by the Council could be to recommend the Norwegian Ministry of Finance exclude these companies from its Fund, or to recommend the Norges Bank begin active engagement with the companies.

EarthRights International hopes public action on this issue in Norway will encourage other investors to similarly scrutinize their holdings in the oil and gas sector in Burma and ultimately lead to more responsible business practices in the extractive industries in Burma and elsewhere.

Background on the Norwegian Council on Ethics, the Ethical Guidelines, and the Government Pension Fund – Global

Norway holds its vast oil wealth in the Government Pension Fund – Global (GPFG), one of the two largest sovereign wealth funds in the world, exceeding US$500 billion and occupying one percent of global equity markets.  The Government of Norway created the Council on Ethics to evaluate the holdings of the GPFG and determine whether or not investment in specified companies is inconsistent with strict Ethical Guidelines that restrict the kinds of companies the Norgis Bank, which invests on behalf of the Ministry of Finance, can invest in.  The Council on Ethics can recommend that a firm be “excluded” from the Fund’s investment universe if it concludes that the firm violates the Ethical Guidelines.  These recommendations, which are backed up by rigorous factual research and reasoning, are made public but are not binding on the Ministry of Finance, which makes the ultimate decision on divestment.

• The Norwegian Council on Ethics Recommendation – PetroChina (May 26, 2010)
• The Norwegian Ministry of Finance Announcement – PetroChina (Dec. 6, 2011)
• Guidelines for the observation and exclusion of companies from the Government Pension Fund Global’s investment universe
• The Norwegian Government Pension Fund – Global (Holdings as of Dec. 31, 2010)

Recommended Reading

This year, two in-depth reports from the gas and oil project areas have documented project impacts on local communities: The Burma-China Pipelines: Human Rights Violations, Applicable Law, and Revenue Secrecy, by EarthRights International (also available in Korean and Burmese), and the Shwe Gas Movement's Sold Out: Launch of China pipeline project unleashes abuses across Burma (also in Burmese).

In addition, one year ago, EarthRights International published Broken Ethics: The Norwegian Government’s Investments in Oil and Gas Companies Operating in Burma (Myanmar).