Oil Embargo against Apartheid South Africa on richardknight.com

The United Nation General Assembly adopted a voluntary international oil embargo against South Africa on November 20, 1987 with 130 countries voting in favor, 4 against 12 abstaining. Countries voting against the embargo were the Federal Republic of Germany, France, the United Kingdom and the United States. An Intergovernmental Group to Monitor the Supply and Shipping of Oil and Petroleum Products to South Africa was established within the UN.

Despite efforts by African countries, it was never possible to get the Security Council to adopt a mandatory oil embargo under Chapter VII of the UN Charter. The international support for such an embargo was demonstrated on March 8, 1988 when a resolution on a mandatory oil embargo against South Africa was blocked in the Security Council by the veto of the United States and the United Kingdom. At this time even France, which had previously vetoed such an embargo, abstained.

The voluntary oil embargo still had significant impact. South African President P.W. Botha was quoted in the Windhoek Advertiser on April 25, 1986 as follows:

“Between 1973 and 1984 the Republic of South Africa had to pay R22 billion more than it would have normally spent. There were times when it was reported to me that we had enough oil for only a week. Just think what we could have done if we had that R22 billion today… what could have been done in other areas? But we had to spend it because we couldn't bring our motor cars and our diesel locomotives to a standstill as our economic life would have collapsed. We paid a price, which we are still suffering from today. ”

In the early 1970s Iran was the major supplier of crude oil to South Africa. However, after the fall of the Shah in 1978 Iran cut off South Africa.

The success of the embargo was largely the result of the work of many non-governmental organizations. The Shipping Research Bureau in Holland did extensive work in tracking oil shipments. There was a strong international Shell Boycott Campaign. In the U.S. much of the focus was on Mobil Corp.

Mobil withdrew from South Africa in 1989 following the adoption of the Rangel Amendment to the Budget Reconciliation Act of 1987 that ended the ability of U.S. companies to write off their South African taxes against their U.S. taxes. Mobil's announcement of its withdrawal came shortly after I gave the following testimony at the United Nations.

Richard Knight, March 2001

Testimony of

Richard Knight

American Committee on Africa

Hearings on the Oil Embargo Against South Africa

United Nations Headquarters 12-13 April 1989

Mr. Chairman, I want to thank the Intergovernmental Group for the opportunity to testify today. The American Committee on Africa has long supported oil sanctions against South Africa and we have worked for the withdrawal of U.S. petroleum companies from South Africa.

On the federal level, we have worked hard for the passage of legislation that would end U.S. involvement in South Africa, especially in strategic areas such as the oil industry. We have also worked to pressure U.S. companies directly by various actions such as the passage of divestment legislation at the state and municipal level, by supporting the efforts of religious and student groups and by our involvement in the Shell Boycott Campaign and the Mobil Out of South Africa Coalition.

Unfortunately, the Reagan Administration did not support oil sanctions. As part of its policy of “constructive engagement” the Reagan Administration demonstrated its lack of support for oil sanctions against South Africa by its refusal to cooperate with the Intergovernmental Group to Monitor the Supply and Shipping of Oil and Petroleum Products to South Africa. In this regard, I would urge the Intergovernmental Group to find an appropriate way to approach the new administration to test its willingness to cooperate with the international community.

On the federal level, the Comprehensive Anti-Apartheid Act of 1986, passed over the veto of President Reagan, prohibits the direct sale of petroleum products from the U.S. to South Africa. Section 321 states “No crude oil or refined petroleum product which is subjected to the jurisdiction of the United States may be exported to South Africa.” However, U.S. companies have been able to get around this provision of U.S. law because it only covers crude oil and petroleum products that originate in the U.S. or are re-exported through the U.S. Current U.S. law does not prohibit foreign subsidiaries of U.S. companies from supplying oil to South Africa.

In 1987, the U.S. Congress passed the Budget Reconciliation Act, which included an amendment by Rep. Charles Rangel ending the ability of U.S. firms to claim tax credits in the U.S. for taxes paid in South Africa. This effective increased the tax rate for U.S. corporations operating in South Africa from about 57.5% to 72%. This measure especially hurt U.S. petroleum companies who are the largest U.S. taxpayers in South Africa.

We propose several measures that would significantly strengthen current U.S. legislation. First, it should be made illegal for a foreign subsidiary of a U.S. company to engage in the shipment of crude oil and petroleum products to South Africa. Second, South Africa and its agents should be banned from using oil trading and transshipping facilities in the United States and such off shore oil transshipment facilities in the Louisiana Offshore Oil Port and in the U.S. Virgin Islands. As the law now stands, oil may be exported to South Africa from Louisiana Offshore Oil Port or the U.S. Virgin Islands if it has not entered the U.S. customs area and is not deemed U.S. oil.

In 1988, a new sanctions bill passed the House of Representatives but failed to pass the Senate and become law. This bill would have plugged the holes in the current U.S. oil sanctions. Three important aspects of the bill concern us here:

1) All U.S. companies, including U.S. petroleum companies, would have had to disinvest from South Africa. Mobil reportedly threatened to sue the U.S. government for $500 million if the bill passed.

2) It would have prohibited “directly or through an affiliate” the transport to South Africa of a commercial quantity of crude oil or refined petroleum products. Further, this ban on the shipping of oil to South Africa would have extended to “transport on a vessel of United States registry and transport on a vessel owned, directly or indirectly, by a United States person.” This would have greatly strengthened U.S. oil sanctions against South Africa. We have reason to believe that some of the ships and companies involved in shipping oil to South Africa are beneficially owned by U.S. persons, though the ships are registered in “flag of convenience” countries.

3) The U.S. Secretary of the Interior would have been prohibited from issuing new mineral leases to the U.S. subsidiary of any company with investment in South Africa or which exports crude oil or refined petroleum products to South Africa. This measure was seen as primarily affecting British Petroleum, Shell, and Total. The UK government responded strongly to these proposed measures and threatened to retaliate against U.S. companies operating in the UK, especially the North Sea.

A new bill has been introduced in the current session of the U.S. Congress with similar prohibitions. We hope these measures will be adopted.

U.S. Companies and South Africa Crude Imports

U.S. petroleum companies have claimed that they are not responsible for the importation of crude oil to South Africa. For example, in its 1988 proxy statement Mobil stated:

“Mobil and its foreign affiliates do not supply crude oil to South Africa. The business of refining and marketing Mobil products within South Africa is conducted by Mobil’s locally incorporated subsidiaries, primarily Mobil Oil Southern Africa. The South African government arranges supply of crude oil and feed stocks to local companies, and much of South Africa’s product supply is derived from plants producing fuels from South African coal.”

The implication in Mobil’s statement that foreign transnational oil companies are not involved in the actual import of crude oil to South Africa is open to question. It is a matter of public record that Caltex has in the past been involved in supplying oil to South Africa. Some information was obtained on Caltex’s role in the 1970s as a result of dispute over taxes with the South African government. In reporting on this case, the Financial Mail of November 22, 1974 reported:

“Caltex SA carries on business in the Republic as an importer, manufacturer and distributor of petroleum products. It and two other companies, Caltex UK and the UK based Caltex Services, are all wholly-owned subsidiaries of the US corporation and associated in a world-wide group for conducting business internationally.

“What happened was that Caltex SA obtained supplies of crude oil, primarily from Caltex Services...

“The procedure was for Caltex SA to inform the British company about a year in advance of its requirements, and at the same time indicate the desired date of delivery. Caltex UK would then purchase supplies and arrange for them to be loaded, usually at ports in the Persian Gulf.”

While much has apparently changed in the supply of crude to South Africa since the mid-1970s, there are indications that Caltex, at least, is still involved. The South African magazine Management reported in 1984 that “When Caltex began operations in South Africa in 1911 it was an importer and marketer of the finished product. When it built a refinery in 1965 it imported crude oil and refined it. It is still doing so.” In the same article Dennis Fletcher, chairman and managing director of Caltex’s South African subsidiary commented “In 1973, we were unable to buy Saudi Arabian crude and we switched our supply to Iranian sources. When the Shah fell in 1978 Iranian supplies dried up and we had to look elsewhere. It is to our credit, not only the oil industry but the South African Government, that there was never one shipment of oil, so to speak, missed... Although we are effectively prevented from buying oil openly, we still get exactly what we want.”

It is important that we “pierce the corporate veil” as we pursue the supply of oil to South Africa. Certainly the oil companies know more than they admit about the supply of crude to South Africa. Mobil, Caltex, Shell and British Petroleum are major players in the world oil market, which they monitor very closely. In order to refine the crude in South Africa, the companies most know a lot about the particular properties of the crude, that would give the companies a fairly good idea of where the crude originated.

Sales to the Police and Military

Sales of petroleum products to the South African police and military have long been a violation of U.S. law. However, U.S. petroleum companies have been able to avoid this provision law by the same method they have used to avoid the effects of the Comprehensive Anti-Apartheid Act of 1986 — only crude oil or petroleum products that are exported or re-exported from the United States are included in the law. As Mobil explained to its share holders in 1980:

“Mobil takes all steps required by U.S. law to prevent exports from the United States being supplied to the police and military in South Africa. These regulations do not, however, cover any goods originating from other sources and exports from the United States represent a small fraction of the total imports of Mobil’s South African affiliates.”

U.S. oil companies have attempted to hide the activities of their subsidiaries in South Africa behind South African law. They say that they know little about their South African operations. This has particularly been their response when challenged on sales of petroleum products to the South African police and military. For example, Texaco stated in a letter in 1978:

“Caltex Oil S.A. (Pty.) Ltd. is incorporated under the laws of South Africa and subject to the laws and regulations of that nation. Caltex South Africa is required by Government directive to sell petroleum and petroleum products to any credit-worthy citizen or organization, and dissemination of information outside South Africa respecting the sales of petroleum and petroleum products to the military and other customers is restricted by South African law.”

Similarly, Mobil, responded to a shareholder proposal in 1988 that it cease all sales to the South African police and military with the following statement:

“[A]ll of Mobil’s activities are in full compliance with U.S. laws and regulations regarding South Africa, including the Comprehensive Anti-Apartheid Act of 1986 which, among other things, prohibits exports of refined petroleum products to South Africa. In order to continue to do business in South Africa, our subsidiary, Mobil Oil Southern Africa, must comply with South African laws and regulations. Our subsidiary cannot be in compliance with those laws and, at the same time, adhere to the requirements of this stockholder proposal. The effect of this resolution, if adopted, would be to place in very real jeopardy both the employees of our South African affiliate and our ability to continue to do business in South Africa.”

The companies do not deny that they sell to the police and military. Indeed, as recently as 1980, Mobil told its shareholders:

“Mobil’s management in New York believes that its South African subsidiaries’ sales to the police and military are but a small part of its total sales and typical in relative size to its sales to such groups in other countries. Total denial of supplies to the police and military forces of a host country is hardly consistent with an image of responsible citizenship in that country. The great bulk of the work of both police and military forces in every country, including South Africa, is for the benefit of all its inhabitants.”

Parents are Responsible

U.S. companies are responsible for the actions of their subsidiaries — both on the question of actual supply of oil to South Africa and on sales to the police and military. Claims to the contrary are just not supportable either morally or under law. The U.S. parent companies are the beneficial owners. The inability to know the exact consequences of an action does not provide an excuse for or support the “no responsibility” contention. The U.S. oil companies have every reason to assume that their South African subsidiaries are selling to the police and military. They are just as responsible as a person who sells arms to the South Africa police or military.

Petroleum Industry

Nowhere is the strategic nature of U.S. investment in South Africa more clearly shown than in the oil industry. The U.S. companies both refine crude oil and market petroleum products in South Africa.

Petroleum companies dominate U.S. investment in South Africa, representing 16.14% percent of total U.S. assets in South Africa in 1982, the last year for which figures are available. Although since 1982 the Department of Commerce has suppressed the figure for total U.S. petroleum assets in South Africa, the American Committee on Africa estimates it still to be about $1 billion, or about 20% of all U.S. assets in South Africa. [1] While many U.S. companies have been disinvesting from South Africa, U.S. petroleum companies are undertaking significant capital expenditure. In the past two years, more than 40% of capital expenditure by all U.S. companies in South Africa was by the petroleum industry.

In 1985, U.S. petroleum companies had sales of over $2.6 billion in South Africa, or 31.7% of sales of all U.S. subsidiary companies in South Africa. U.S. petroleum companies in South Africa had net income (after taxes) of $76 million in 1985.

Since 1986, the figure for the value of sales and net income of U.S. petroleum companies has been suppressed by the U.S. Department of Commerce to avoid exposure of company specific information. It should be noted that by the end of 1986, both Ashland and Exxon had completed their withdrawal from South Africa, leaving Mobil and Caltex as the only U.S. companies in the petroleum industry still to have subsidiaries in South Africa. The sales of Ashland and Exxon were relatively small, and we estimate that there has been little real change. Exxon had about 100 filling stations or about 2% of the market in 1984.

The largest U.S. investors in South Africa are Mobil and Caltex (a joint venture of Chevron and Texaco). These two companies control approximately 40% of the petroleum filling station market. Mobil and Caltex service a combined total of some 2,300 filling stations. About 40% of filling stations in South Africa are company owned, the remainder are privately owned but are franchised from one of the major companies.

Selected Data:

U.S. Petroleum Affiliates in South Africa

__________U.S. $ millions_______ Thousands

Total Net
Year Assets Sales Income Employment

1982 1,373 2,719 84 6.2
1983 D 2,610 125 6.0
1984 D 2,532 94 5.9
1985 D 2,607 76 5.8
1986 D D D 5.3

D = Suppressed

Note: These figures are not adjusted for changes in the exchange rate.

Source: U.S. Department of Commerce

Capital Expenditure

by Majority-Owned

Petroleum Affiliates in South Africa

Year US % of total

$ millions by all U.S. Affiliates

1984 43 15.0
1985 54 26.7
1986 44 33.8
1987 59 47.6
1988 56 40.3

Note: Figures are approximate and based on an annual survey.

Source: U.S. Department of Commerce

South Africa Oil Market

(Approximate figures)

Number of

filling % market
Company stations share

Caltex Petroleum 950 19-20
Mobil 950 19-20
British Petroleum 850 14-16
Shell 800 14-16
Total 550 8-10
Trek 300 4-5
Esso 100 2
Sonarep 100 2
Sasol 5-7

Figures for about 1984. The figures on the number of filling stations does not exactly match the figures cited in the text.

Sonarep is a subsidiary of Mobil.

Esso is the former subsidiary of Exxon.

Trek is 53% owned by a South African company, Sanlam, but British Petroleum and Shell each own 17%.

Source: Financial Mail, March 1985

South African

Assets and Employees

of Selected Companies

dollar millions

Company Assets Employees

Caltex 200-350 2,257
Mobil 400-426 2,793
Shell 450 7,000
British Petroleum NI 4,176
Total 27-30 NI
Trek 70-100 490

Figures are approximate and not strictly parallel.

British Petroleum is the process of selling most of its non-petroleum assets to RTZ. The figure above is only for those subsidiaries that will remain part of BP.

Shell has a large number of non-petroleum operations.

British Petroleum and Shell employee figures contain some duplication as both own 50% of Shell & BP South African Refineries, which has 1,121 employees.

Sources: Company documents, McGregor^'s Who Owns Whom, Investor Responsibility Research Center.

Company Profiles

CALTEX PETROLEUM CORP.

Caltex Petroleum Corp., the U.S. parent of the Caltex group of companies, is 50% owned by Chevron Corp. and 50% owned by Texaco Inc. Caltex Oil (SA) (Pty.) Ltd. is the 100% owned South African subsidiary of Caltex Petroleum Corp.

No current figures are available, but in 1978 Caltex Oil (SA) (Pty.) Ltd. had sales of about $500 million and fixed assets of $200 million. It is believed that both sales and assets have risen considerably since that time.[2] Caltex was reported to service 1,185 service stations, of which some 393 are company owned. In 1980, Caltex Oil (SA) (Pty.) Ltd. had 2,257 employees, or 17% of Caltex employees world-wide.[3] Caltex also operates aviation fueling services at several airports in South Africa.

Caltex in South Africa now uses a computerized central routing system for its rural tank truck fleet, “achieving a mileage reduction of 12 per cent, representing an annual savings of $700,000.” That such a savings could be made indicates the large size of Caltex’s South African operations.

Caltex operates a 100,000 barrel per day refinery. This represented about 6.3% of the Caltex group’s total refining capacity world-wide at the end of 1980. According to The Texaco Star:

“The refinery manufactures a full range of petroleum products — gasolines, diesel fuel, kerosene, jet fuel, liquefied petroleum gas, and fuel oils. Capacity of the refinery is classified information under the Government’s Official Secrets Act.”

In addition, Caltex owns a 1,000 barrel per day lubricating oil and grease blending slant.

Caltex also owns 34% of South African Oil Refinery (Pty.) Ltd. (SAFOR), a 3,000 barrels per day lube base oil refinery. Mobil owns 47% of SAFOR and Total owns 19%.

Caltex is a company where one must work especially hard to “pierce the corporate veil.” Because Caltex is not a publicly traded company, it does not need to issue annual reports and hardly issues any public documents. Its phone number in New York is even unlisted, a highly unusual situation for a multi-billion dollar company. Caltex documents frequently carry the following peculiar paragraph: “Each company affiliated with the Caltex Petroleum Corporation is a separate corporation that manages and controls its own affairs. The use of such terms as ‘Company,’ ‘Caltex,’ ‘organization,’ ‘its,’ ‘our,’ ‘we,’ and ‘us’ when referring to affiliates is only for convenience, and not intended as an accurate description of corporate relationships.” It is not clear why the company feels compelled to put this on various documents, but certainly, at least in the U.S., it is unlikely to provide the company parent company with much legal protection from being held accountable for the actions of its subsidiaries, especially in cases when they are 100% owned. If Caltex Petroleum Corp. or any of its foreign affiliates is involved in supplying oil to South Africa, the parent company is legally responsible.

MOBIL CORPORATION

Mobil is a major participant in the petroleum industry world-wide with 1987 revenues of $56.7 billion, assets of $41 billion and 120,000 employees. With operations in over 100 countries, little can happen in the international oil market without Mobil having some knowledge, if not actual participation in, the process.

In South Africa, Mobil has assets estimated to be between $400-$426 million, about 1% of its world wide assets. Mobil had 2,793 employees in South Africa in 1988, about 2.3% of the world-wide total. [4]

Mobil own description of its South African operations states that it “is engaged in marketing a full range of petroleum products including fuels, lubricants, asphalt and special products.” Mobil Oil Southern Africa owns or supplies some 1,143 service stations in South Africa.

Mobil Refining Company Southern Africa owns a 65,000 barrel per day capacity petroleum refinery. This represents about 3.1% of Mobil’s world wide refining capacity. In addition, Mobil owns 47% of Southern Africa Oil Refinery (Pty.) Ltd.

Mobil also plays a role in South Africa’s Koeberg nuclear power station. In 1981 Mobil signed a 10 year contract to supply lubricating oils and greases to Koeberg. In an advertisement in 1982 Mobil bragged “Escom has selected Mobil as the exclusive supplier of lubricants for these huge machines, as well as all other critically important items of equipment at the Koeberg Power Station.” These kinds of lubricants are specialty items and Mobil plays a large role in both Europe and the U.S. markets.

Mobil has long been a special target of the U.S. anti-apartheid movement, and has played a key role in the activities of companies opposing sanctions and disinvestment. Mobil was one of the leading companies behind the Sullivan Principles, and, after the abandonment of the Principles by the Rev. Sullivan, their rebirth as the “Statement of Principles.” The “Statement of Principles” now operates out of Mobil’s New York office.

After the passage of the Budget Reconciliation Act in 1987 which ended the ability of U.S. companies to write off their South African taxes against their U.S. taxes, Mobil took out advertisements in the U.S. press complaining about the law and South African newspapers for the first time talked about the possibility of Mobil’s disinvestment. “It took away a third of our bottom line profits,” said Bob Angel, chairman of Mobil South Africa. “But that alone won’t make us run.”

However, it does seem that Mobil has considered that it might well have to leave South Africa. “If Shell or BP went,” noted Bob Angel, “we’d all have to go.” And recently, the Interfaith Center on Corporate Responsibility obtained an internal Mobil document which sets out contingency plans for disinvestment.

PARENT COMPANY U.S. SUBSID/AFFIL S.A. SUBSID/AFFIL PRODUCT

CHEVRON CORP. Caltex Petroleum Caltex Oil Petroleum

San Francisco, CA Corp. (South Africa) Products

and Dallas, TX (Pty.) Ltd.

TEXACO INC. Caltex Oil (S.W.A.)

White Plains, NY (Pty.) Ltd.

[Namibia]

South African Lubricant

Oil Refining oils &

Co. (Pty.) greases

Ltd. (34%)

MOBIL CORP. Mobil Oil Mobil Oil Southern Petroleum

New York, NY Corp. Africa (Pty.) Ltd. Products

New York, NY Mobil Oil SWA marketing

(Pty.) Ltd.

[Namibia]

Condor Oil Reprocessing

(Pty.) Ltd. used oil

products

Mobil Oil Petroleum

Refining Co. refining

Southern

Africa (Pt.) Ltd.

Petroleum Trans- NI

Port International

(Pty.) Ltd.

Southern African Lubricant

Oil Refining Co. oils &

(Pty.) Ltd. (47%) greases

SONAREP (SA) Gas stations

(Pty.) Ltd.

Socony (Pty.) Property

Ltd. holdings

Vialit (Pty.) Bitumen

Ltd. mfg. &

sales

Westchester Insurance

Insurance Co.

(Pty.) Ltd.

The most recent rumor about Mobil considering disinvesting appeared in the Financial Mail of March 29, 1989. The article concerned Mobil’s large donations to an organization called the Coalition on Southern Africa (Cosa), which sought to mobilize the black religious community in the U.S. on policy lines which while opposing apartheid also opposed sanctions. Cosa was conceived by Pagan International, which has worked against the Shell Boycott. According to the Financial Mail:

“Mobil Corp. led a fund-raising drive among other major US firms with SA ties — Control Data, Combustion Engineering, Johnson & Johnson, Pfizer and Caltex, to name a few — which raised US $ 765 000 to get Cosa started.

“Mobil and other companies were willing enough to let a reputable group of black American businessmen carry the ball in SA. In this case the ball was $765 000 which was meant to fund black political organizations in Soweto and other urban centres with an emphasis on finding leaders and groups who could serve as an alternative to the ANC.

“But according to audit documents circulating in Washington last week, there are doubts that any but about 5% of the money can be proven to have been handed over to SA leaders.”

It is impossible to know what the current thinking is on South Africa in the Mobil board room. However, even companies such as Mobil are vulnerable to pressure. Just what it will take for Mobil to disinvest can not be known. However, as its profitability declines and with its social responsibility efforts increasingly tarnished, Mobil may decided that operating in South Africa is not worth the effort. It is to early too claim victory, but we should also realize that we can be victorious.

Other U.S. Collaboration in the Energy Sector

There are a number of other U.S. companies that play a key role in the energy sector in South Africa. I would like to mention a few cases.

Schlumberger Ltd., which has approximately $20 million in annual sales, is involved in petroleum services and the sale of electronic equipment. While the details of Schlumberger’s South African operations are not known, it describes its world-wide oilfield services as assisting “the petroleum industry in discovering and producing oil and gas economically.”

Westinghouse Electric Corp., although it has no subsidiary in South Africa, has contracts in South Africa with Eskom for the Koeberg nuclear power plant.

Joy Technologies Inc. sells and services coal mining equipment, including continuous miners, coal cutters, loaders and shuttle cars in South Africa. Joy Technologies is one of the largest U.S. investors in South Africa with assets of some $73 million and sales of $56 million. Joy Technologies has an 80% market share in mechanized underground coal mining equipment in South Africa. Its single largest customer is Secunda Collieries, owned by SASOL Ltd., which provides the coal used by SASOL Two and SASOL Three coal to oil plants. The close links with SASOL are demonstrated by Joy’s special agreement to provide technology. Secunda Collieries produce some 29 million tons, about 1/4 of all coal produced in South Africa.

The SASOL plants have long had close connections with U.S. corporations. The Fluor Corporation was a major contractor for their initial construction. Fluor U.S. sold its South African subsidiary but refused to disclose to whom it was sold but confirmed that it had a permanent buy back agreement. Its former subsidiary still uses the Fluor name and may well still have close connections and receive technical support from Flour US.

An interesting question was raised following the passage of the Comprehensive Anti-Apartheid Act in 1986. Under Section 314 of the Act, “no department, agency or any other entity of the United States Government may enter into a contract for goods or services from parastatal organizations.” Initially, the U.S. Department of Commerce ruled that SASOL was a parastatal corporation. However, SASOL took the time and effort to persuade U.S. authorities that it was not a parastatal corporation and was thus removed from the list of restricted companies. What then, wonders, is SASOL selling to the United States Government?

With South Africa moving ahead to develop the Mossel Bay gas field, a question has been raised about the role of various U.S. companies in providing technology and other assistance. Both Mobil and Caltex have been mentioned in this regard, although it is not known if any of their technology was finally selected. Fluor’s former South African subsidiary is also involved in Mossel Bay, and again the question must be raised as to any possible link with Fluor US.

The U.S. Divestment Movement

Much of the focus of the U.S. anti-apartheid movement has been on efforts to get U.S. companies to withdraw from South Africa. Students, church leaders and union leaders have been in the forefront of this struggle in the U.S. In April the American Committee on Africa hosted a Summit Conference on Apartheid which brought together religious leaders from across the U.S., who pledged their active support for sanctions and disinvestment.

The American Committee on Africa has focused much of its efforts on working with state and municipal officials. We have held three national conferences on public investment and South Africa. The results have been dramatic. In the past few years, 23 states, 19 counties and 79 cities in the U.S. have taken some kind of economic action against apartheid. Generally this has been one of two kinds, divestment of public funds, including pension funds, from equities of companies doing business in South Africa and selective purchase, whereby preference is given in the bidding process for contracts to those who are not doing business in South Africa.

Oil companies have frequently been targets for divestment. The State of Connecticut, one of the first states to pass divestment legislation, specifically focused on those companies in the strategic sectors. The New York City Employee Retirement System (NYCERS) divested itself of both Mobil and Caltex as has the State of New Jersey.

Ashland Oil’s exit from South Africa illustrates the effectiveness of the selective purchase process. Ashland sold all its South African operations in mid-1986. F or a short time, Ashland maintained licensing and distribution agreements, including the $300,00 a year sale of Valvoline products. However, when faced with the possible loss of a $12 million contract with the City of Los Angeles, Ashland quickly terminated its ties to South Africa. “Our relationship with Los Angeles was clearly more important than our small and somewhat limited relationship in South Africa,” said Ashland corporate attorney John Biehl.

More then thirty-five cities and counties currently have some form of selective purchase policies ranging from Metropolitan Dade County, Florida to New Orleans, Louisiana and Oakland, California. Massachusetts Governor Michael Dukakis recently signed an executive order instituting a selective purchase policy for his state. The City of Boston has adopted a policy of not buying from Shell. In New York, an effort is currently underway to significantly strengthen the city’s existing selective purchase policy. This effort is led by Manhattan Borough President David Dinkins and has been widely supported by such city officials as Comptroller Harrison Golden and City Council President Peter Vallone. The New York City Employees Retirement System, which owns stock in Shell, has supported the international efforts to force a general meeting of the company on its South African operations. Public bodies tend to be large consumers, and the use of their purchasing power to pressure U.S. companies is an important development in the anti-apartheid movement.

Conclusion

Despite much rhetoric to the contrary, South Africa is dependent on foreign supplies of crude oil. South Africa does not own any oil tankers and obviously particular companies must be responsible for the transport of oil to South Africa. Foreign companies such as Mobil, Caltex, Shell and British Petroleum own the refineries where the crude oil is refined. South Africa’s synthetic fuels efforts such as SASOL depend on foreign technology. The coal used in the Sasol plants is mined with equipment acquired from a U.S. company. At least 20% of the Mossel Bay project will have to be foreign sourced. This shows the venerability of the apartheid system.

The most effective way to take action would be a comprehensive oil embargo, including a ban on assisting efforts to limit the effectiveness of such an embargo. To be truly effective, such measurers must be multi-lateral, preferable by action under Chapter VII of the United Nations Charter.

In implementing an embargo, states must adopt comprehensive regulations that prohibit the export of crude oil to South Africa and which prohibit subsidiaries and affiliates of companies from being involved in such activity. Further, companies should be prohibited from assisting South Africa’s efforts to evade sanctions.

Notes

1] This estimate, is based primarily on the fact that U.S. petroleum assets tend to range between 17.5% to 23.5% of total assets. This figure is also in line with other information known on the value of assets of U.S. petroleum companies from sources other than the Department of Commerce.

2] It seems reasonable to estimate, based on the South African refining capacity and employees as a percentage of Caltex’s world wide operations, that net sales in South Africa are at least 5% of Caltex’s world-wide sales. Net sales world wide in 1979 was $14.6 billion, in 1980 $22.6 billion. If South African sales were just 5% to total world sales that would give 1979 sales of $730 million and 1980 sales of $1.1 billion. The large increase between 1979 and 1980 is presumably the result of the increase in the price of crude between those two years. This seems in line with figures available on Shell, which has sales in South Africa in 1986 of about R3 billion ($1.5 billion).

3] White employees made up 58.4% of Caltex’s South African workforce.

4] White employees made up 43% of Mobil’s South African workforce.

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