China Co., whose parent has an oilfield stake in Sudan, accused by the U.S. Congress of genocide. Offloading the stake wouldn't "have a beneficial effect on Sudanese behavior," Berkshire said in statement, noting that PetroChina isn't active in the African nation. "Subsidiaries have no ability to control the policies of their parent."
Sudanese government-backed militiamen have attacked villages in Darfur for four years, killing as many as 400,000 people and displacing 2 million. Berkshire's 1.1 percent stake in PetroChina, China's biggest publicly traded oil company, has gained more than fivefold in value since Chief Executive Buffett, 76, disclosed the investment in April 2003. Omaha, Nebraska- based Berkshire stock has gained 49 percent.
"Berkshire agrees that conditions in that country are deplorable and sympathizes with people who want to remedy them," the company said in response to "several communications from the media, shareholders and others" about its PetroChina stake.
Beijing-based PetroChina is now the world's third-largest oil and gas company by market value, lagging behind Exxon Mobil Corp. and Russia's OAO Gazprom. Berkshire is PetroChina's biggest overseas investor.
Buffett over four decades transformed Berkshire from a failing textile manufacturer into a US$165 billion holding company by buying out-of-favor stocks and companies whose business and management he deemed superior. In the process, he became the world's second-richest man, behind Microsoft Corp. Chairman Bill Gates.
"I have to agree with Warren Buffett," Gordon Kwan, Hong Kong-based China oil and gas research director at CLSA Ltd. said in an e-mailed response to questions. "Because China National Petroleum Co. is the parent of PetroChina, that may be why some investors might have been confused."
PetroChina shares fell 0.3 percent to HK$9.45 by 3:05 p.m. in Hong Kong. The stock traded at less than HK$1.70 when Buffett first bought it. Berkshire shares Thursday fell 0.3 percent to US$107,360.
PetroChina's parent, China National Petroleum Corp., owns 41 percent of Khartoum-based Petrodar Operating Co., while Malaysia's state-owned Petroliam Nasional Bhd. owns 40 percent, according to Petrodar's Web site. The venture opened a 1,400- kilometer (870-mile) pipeline last April to carry 200,000 barrels of oil a day from fields in the Melut Basin to Port Sudan on the Red Sea.
Any sale of parent China National Petroleum Corp.'s stake would "almost certainly" go to Sudan's government, leaving it "better off financially, with its oil revenue substantially increased."
Harvard University, the world's wealthiest higher-education institute, earlier this month asked a campus advisory board to examine its indirect investments in PetroChina and another Chinese oil company doing business in Sudan.
The Advisory Committee on Shareholder Responsibility appointed a panel to look at investments in PetroChina and China Petroleum & Chemical Corp., or Sinopec, Harvard spokesman John Longbrake said Feb. 13. In the past two years, Harvard had issued policies to divest the stocks, which it held directly. The school currently holds the shares in exchange-traded index funds.
"We have seen no records, including the various materials we have received from pro-divestment groups, that indicate PetroChina has operations in Sudan," Berkshire said. "Subsidiaries have no ability to control the policies of their parent."
Mao Zefeng, PetroChina's Hong Kong-based spokesman, and Liu Weijiang, head of China National Petroleum's international department in Beijing, weren't available to comment. Most Chinese businesses are shut for the weeklong Lunar New Year holiday.
Critics of Berkshire's stake in PetroChina because of events in Sudan "are wrong in both their analyses of PetroChina's connection to these conditions and their belief that divesting our PetroChina holdings would in any way have a beneficial effect on Sudanese behavior," Berkshire said.
Chinese investment in Sudanese oil production and pipelines, mainly through China National Petroleum, has accelerated the country's crude output to more than 500,000 barrels a day in six years.
China National Petroleum is 100 percent-owned by the Chinese government and its actions may logically be attributed to the authorities in Beijing, Berkshire said. "But the Chinese government's activities can neither be attributed to PetroChina nor the other major Chinese companies the government controls," it said in the Web site posting, dated Feb. 21.
Even if Berkshire opposed an action by PetroChina, the investment firm doesn't believe it should "automatically divest shares of an investee because it disagrees with a specific activity of that investee."
The only feasible divestment plan for China National Petroleum would be to sell its 40 percent stake in the Sudanese venture, "almost certainly at a bargain price and almost certainly to the Sudanese government," Berkshire said.
"Proponents of the Chinese government's divesting should ask the most important question in economics, 'And then what?"' Berkshire said in the commentary.
China National Petroleum pledged US$1 million to Sudan's welfare ministry, China's state-run Xinhua News Agency reported Feb. 1. The company signed an agreement with the African country's energy ministry to spend US$900,000 training Sudanese oil professionals, the news agency said.
China National Petroleum has given more than US$30 million to charity in Sudan since it began operations there in 1995, Xinhua said.
The conflict in Darfur, a region the size of France, began in February 2003 when rebels demanding a greater share of Sudan's political power and oil wealth began attacking the government.
The government responded by supporting militias known as the Janjaweed to target villagers suspected of backing the rebels, according to rights groups such as New York-based Human Rights Watch.
