U.S. Religious Freedom Commission Urges President Bush to Rule on Chinese Sovereign Bond Offerings

(Washington, D.C.): President George W. Bush used the recent annual dinner of the American Jewish Committee on religious freedom to issue a powerful condemnation of global acts of religious persecution, singling out the Chinese government and the odious Khartoum regime as major offenders. Pointing to China, Mr. Bush emphasized his “special concern” over Beijing’s “intensifying attacks on religious freedom.”

The U.S. Commission on International Religious Freedom (USCIRF) deeply shares the President’s concerns about China and Sudan, as evidenced by a letter sent to him in March and released last week. In it, USCIRF Chairman Elliott Abrams urged Mr. Bush to take action against these countries through creative use of U.S. capital markets leverage — specifically, by barring Chinese sovereign bond offerings in the United States. Such a principled stand would communicate effectively to these and other offenders that the U.S. will no longer allow its citizens unwittingly to underwrite religious persecution abroad.

How effective such market awareness can be was evident in a little remarked but precedent-setting event last November: China indefinitely postponed its planned $1-2 billion sovereign bond offering in the U.S. market, due primarily to indications of opposition to the offering from the USCIRF and the powerful, broad-based efforts of non-governmental organizations known as the PetroChina Coalition. While Beijing and its friends tried to attribute the postponement to “unfavorable market conditions” and “no particular need for the funds” at the time, the real story is a testament to the power of the sort of capital markets leverage Mr. Abrams has urged President Bush to apply.

Where Do You Stand?

In his letter dated 9 March (available on the Center’s webpage, at https://www.security-policy.org/papers/2001/LAbrams.pdf), Chairman Abrams put down a marker that religious persecutors must not be allowed to raise funds with impunity from unwitting American investors: “The Commission is considering whether to recommend that you bar [Chinese sovereign bond offerings] until China meets two conditions: (1) it makes substantial improvements in respect for religious freedom, and (2) it provides sufficient assurances to guarantee that the proceeds are never used to support religious persecution.”

A similar request was made last year of Mr. Bush’s predecessor. At that time, President Clinton declined to take action, claiming in a 19 December response that “Barring China’s access to U.S. capital markets…in my judgment will not advance respect for religious freedom in China….”

Enter Sudan

The emergence of Sudan as a front-burner issue in Washington has created growing awareness that capital markets leverage can advance respect for religious freedom — and other human rights and national security interests in certain cases. In particular, those concerned about Khartoum’s atrocious support for genocide, slave-trading, terrorism and proliferation of weapons of mass destruction are focusing on the need to isolate the Sudanese regime and foreign companies providing it with oil-related financial life-support. Among the most prominent of these are: Evangelical leaders such as Chuck Colson and Franklin Graham, top legislators, the Congressional Black Caucus, the NAACP, Episcopal and Catholic bishops, Southern Baptists, Jewish organizations and leaders and non- governmental organizations.

Building on the William J. Casey Institute’s work in the emerging field of capital markets-related transparency and security, champions of effective action against the Khartoum government have begun to demand that access to the U.S. capital markets be denied to foreign firms that operate in Sudan’s energy sector. They point to comments by the Sudanese regime to the effect that oil revenues are enabling its prosecution of the war against Christians and animists in southern Sudan. This despicable practice could be curtailed if notice is served on the foreign companies currently operating in Sudan’s oil fields that trading in their stocks will be suspended in U.S. markets unless they promptly terminate their operations. At a minimum, ending American investors’ unwitting support for the activities of foreign firms active in Sudan would likely catalyze constructive pressure on Khartoum from its overseas energy partners.

Broad-based Support

The ideological breadth and depth of support for such an initiative is evident in two recent columns by polar opposites: the Washington Post’s liberal columnist, Mary McGrory, and National Review’s Washington editor Kate O’Beirne. On 1 March, Ms. McGrory wrote: “The only thing the thugs will understand is financial pressure, say Sudan experts Roger Winter, Eric Reeves and Ted Dagne. They favor capital markets sanctions that will forbid foreign companies dealing in Sudan’s oil trade on Wall Street…such sanctions would be precedent-shattering; they are opposed by high finance.”

Ms. O’Beirne wrote on 5 March, “Over 30 groups were represented in a recent meeting in [Rep.] Wolf’s office, where a plan of action was developed. The groups will ask President Bush to make sure the Sudanese government no longer controls distribution of U.S. aid, to restrict access to U.S. capital markets on the part of companies subsidizing the Khartoum regime, and to appoint a high-profile special envoy to Sudan. The slaughter and enslavement of Christians in Sudan, on a genocidal scale, presents an opportunity to stop an ongoing tragedy. How can President Bush not be moved to act?”

The Bottom Line

Stimulated by growing public interest and advocacy, President Bush’s recent speech signals an important beginning to a long-delayed, high-level commitment with regard to the human tragedy being perpetrated by the brutal Khartoum regime. The Administration would be remiss and misguided, however, were it not to appreciate the utility of exercising U.S. capital markets leverage in these egregious circumstances. As USCIRF Chairman Abrams noted in a Washington Post piece of 4 May: “Clearly, more will be needed, because food aid is only one part of the Sudanese puzzle.” If the administration is, indeed, committed to catalyzing near-term termination of the barbarous activities of the Sudanese government and its benefactors in Beijing, the globally dominant U.S. capital markets offer a uniquely valuable policy tool.