[Senate Hearing 110-933]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-933
 
 COMBATING GENOCIDE IN DARFUR: THE ROLE OF DIVESTMENT AND OTHER POLICY 
                                 TOOLS 

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

  THE ROLE OF DIVESTMENT AND OTHER POLICY TOOLS TO COMBAT GENOCIDE IN 
                                 DARFUR


                               __________

                       WEDNESDAY, OCTOBER 3, 2007

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



      Available at: http: //www.access.gpo.gov /congress /senate /
                            senate05sh.html

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

50-359 PDF                       WASHINGTON : 2009 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 
















            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

               CHRISTOPHER J. DODD, Connecticut, Chairman
TIM JOHNSON, South Dakota            RICHARD C. SHELBY, Alabama
JACK REED, Rhode Island              ROBERT F. BENNETT, Utah
CHARLES E. SCHUMER, New York         WAYNE ALLARD, Colorado
EVAN BAYH, Indiana                   MICHAEL B. ENZI, Wyoming
THOMAS R. CARPER, Delaware           CHUCK HAGEL, Nebraska
ROBERT MENENDEZ, New Jersey          JIM BUNNING, Kentucky
DANIEL K. AKAKA, Hawaii              MIKE CRAPO, Idaho
SHERROD BROWN, Ohio                  JOHN E. SUNUNU, New Hampshire
ROBERT P. CASEY, Pennsylvania        ELIZABETH DOLE, North Carolina
JON TESTER, Montana                  MEL MARTINEZ, Florida

                      Shawn Maher, Staff Director
        William D. Duhnke, Republican Staff Director and Counsel
         Janice M. O'Connell, Senior Professional Staff Member
              Neal J. Orringer, Professional Staff Member
               Colin McGinnis, Professional Staff Member
       Skip Fischer, Republican Senior Professional Staff Member
                    Mark Osterle, Republican Counsel
   Joseph R. Kolinski, Chief Clerk and Computer Systems Administrator
                          Jim Crowell, Editor
















                            C O N T E N T S

                              ----------                              

                       WEDNESDAY, OCTOBER 3, 2007

                                                                   Page

Opening statement of Senator Menendez............................     1

Opening statements, comments, or prepared statements of:
    Senator Shelby...............................................     2
    Senator Reed.................................................     3
        Prepared statement.......................................    46
    Senator Casey................................................     4
    Senator Martinez.............................................     4
    Senator Bunning..............................................     5
    Senator Brown
        Prepared statement.......................................    46

                               WITNESSES

Richard J. Durbin, U.S. Senator from the State of Illinois.......     5
    Prepared statement...........................................    47
Sam Brownback, U.S. Senator from the State of Kansas.............     7
    Prepared statement...........................................    49
Jendayi E. Frazer, Assistant Secretary for African Affairs, 
  Department of State............................................    10
    Prepared statement...........................................    51
Elizabeth L. Dibble, Principal Deputy Assistant Secretary for 
  International Finance and Development, Department of State.....    13
    Prepared statement...........................................    58
Adam J. Szubin, Director, Office of Foreign Assets Control, 
  Department of the Treasury.....................................    15
    Prepared statement...........................................    62
Frank Caprio, General Treasurer, State of Rhode Island...........    31
    Prepared statement...........................................    71
Bennett Freeman, Senior Vice President for Social Research and 
  Policy, Calvert Group..........................................    33
    Prepared statement...........................................    77
John Prendergast, Co-Chair, ENOUGH Project.......................    34
    Prepared statement...........................................    83
William A. Reinsch, President, National Foreign Trade Council....    36
    Prepared statement...........................................    90
Adam Sterling, Director, Sudan Divestment Task Force.............    39
    Prepared statement...........................................    94


 COMBATING GENOCIDE IN DARFUR: THE ROLE OF DIVESTMENT AND OTHER POLICY 
                                 TOOLS

                              ----------                              


                       WEDNESDAY, OCTOBER 3, 2007

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 9:37 a.m., in room SD-538, Dirksen 
Senate Office Building, Senator Robert Menendez, presiding.

          OPENING STATEMENT OF SENATOR ROBERT MENENDEZ

    Senator Menendez. This hearing of the Banking Committee 
will come to order. Let me start off by thanking Chairman Dodd 
and the Ranking Member for calling this important meeting.
    Last July, Chairman Dodd asked the Senate Majority Leader 
to expedite Senate consideration of H.R. 180, the Darfur 
Accountability and Divestment Act, which had just passed the 
House by a vote of 418-1. The Majority Leader agreed to do so, 
but apparently objection was raised on the Republican side of 
the aisle, so the bill remains before the Banking Committee.
    It is my understanding that the Ranking Member has 
expressed to the Chairman some interest in the legislation and 
requested that the Committee conduct a hearing on the matter, 
so we are appropriately here today.
    Senator Dodd asked that I chair the full Committee hearing 
this morning, and I am more than happy to do so. I believe that 
the Chairman hopes to mark up the Sudan legislation later this 
month and looks forward to working with Senator Shelby and 
other Members of the Committee to reach agreement on a 
bipartisan bill to recommend to the full Senate.
    Let me formally begin this hearing entitled ``Combating 
Genocide in Darfur: The Role of Divestment and Other Policy 
Tools'' with some opening remarks. We have a very full agenda 
and witness panels, so I will keep my opening statement brief 
and ask that it be considered fully in the record.
    In 1948, the United Nations adopted the Convention on the 
Prevention and Punishment of Genocide. In 1948, the world said, 
``Never again.'' Never again will we allow genocide to happen.
    In 1994, after the genocide in Rwanda, the world said, 
``Never again'' again.
    In 1994, after the genocide in the Balkans, the world said, 
``Never again'' again.
    In 2004, during the genocide in Darfur, the United States 
said, ``Never again.'' Yet those words mean nothing unless we 
take real action to stop genocide.
    We are here today to discuss a bill which would take real 
action by taking real money out of the hands of a genocidal 
regime, and I personally am here to say that I do not believe 
we should delay even one more minute. If you were in the camps 
in Darfur, would you be content with the counsels of patience 
and delay? If you were in your home living in fear, would you 
be content with the counsels of patience and delay? If you had 
seen your entire family slaughtered and were hoping to escape 
the same fate, would you be content with the counsels of 
patience and delay? And, frankly, I believe that any more delay 
continues to put more and more people's lives at risk with each 
passing day.
    In 2006, we were told that it is not time for new 
sanctions. Early this spring, we were told that it was not time 
for new sanctions. Now we are being told once again that now is 
not the time for tightening the economic noose. I personally 
could not disagree more. I believe now is the time.
    I am confident that one tool, the Darfur Accountability and 
Divestment Act, introduced by Senator Durbin and joined here by 
Senator Brownback, who both have been incredibly powerful 
voices on this issue, will force the Khartoum government to 
negotiate and put an end to chaos and genocide in Darfur.
    And, finally, I would like to point to the fact that there 
is ample precedent for this tool. Many States, cities, 
universities, and private pensions have taken the initiative 
and have enacted or are working toward Sudan disinvestment. 
Over 2 years ago, I sent a letter to all New Jersey Democratic 
State legislators encouraging them to approve this divestment, 
and I am proud to report that my own State of New Jersey became 
the second State to enact this policy.
    Since then, New Jersey has identified over $1.4 billion in 
funds to divest, and of that, $300 million has already been 
divested. There are currently commitments and discussions for 
divesting up to another $500 million. That is just one of the 
many success stories gaining momentum across the country.
    So I hope that we can reach the bipartisan agreement that 
would be so crucial to sending a powerful message to the 
Khartoum government.
    With that, I am happy to recognize the distinguished 
Ranking Member of the full Committee, Senator Shelby.

             STATEMENT OF SENATOR RICHARD C. SHELBY

    Senator Shelby. Thank you, Mr. Chairman.
    Over the past 20 years, we have taken a series of 
incremental steps with regard to Sudan in an effort to deal 
with the Government of Sudan's repeated violations of 
international norms. These measures have included restrictions 
or prohibitions on foreign aid included in annual 
appropriations bills as well as congressional action on the 
Sudan Peace Act of 2002, the Comprehensive Peace in Sudan Act 
of 2004, and the Darfur Peace and Accountability Act of 2006.
    Now, today we are considering requiring corporate 
divestment from a desperately poor country ruled by a despotic 
regime. This is not a step that we should take lightly, but it 
is a step that we should take, and it must receive serious 
consideration by this Committee today.
    I commend the Chairman for scheduling this hearing and 
assembling the panels that will appear before us today. I also 
want to join the Chairman in welcoming our colleagues, Senators 
Durbin and Brownback here, who have more than a passing 
interest in this legislation and have pushed it forward. They 
were pushing it hard in July. I was the one that asked for the 
regular order. We are here today. Let's get this legislation 
moving.
    Thank you.
    Senator Menendez. Thank you, Senator.
    Senator Reed.

                 STATEMENT OF SENATOR JACK REED

    Senator Reed. Thank you very much, Mr. Chairman and Senator 
Shelby. This is a critical issue with respect to our response 
to the genocide in Darfur, and I want to commend particularly 
Senator Durbin and Senator Brownback for their leadership on 
the issue, which stretches over many years. Before this was a 
front-page issue, this was an issue of concern and of 
conscience to both these gentlemen. Thank you.
    I also want to recognize later in the panel our General 
Treasurer from Rhode Island, Frank Caprio, who has taken the 
leadership in Rhode Island of divesting State fund. I thank him 
for his appearance here today and for his leadership in Rhode 
Island.
    I would like my full statement made part of the record, if 
possible.
    Senator Menendez. Without objection.
    Senator Reed. And just let me make a point. One of the ways 
that we can bring pressure to bear on corporations is through 
the proxy process where shareholders can come forward, demand 
in the annual meetings that these resolutions be considered, 
that their companies that they hold shares in are responsible 
for the investments.
    The SEC at this moment is at a very critical juncture with 
its proposed rule on shareholder access to proxy statements. 
And some of the pending proposals and the rules suggested by 
the SEC could seriously undermine the ability of investors to 
ask companies to take actions on matters like Darfur. So I 
would suggest--and I know that Chairman Cox is working toward 
addressing some of these issues--that in a separate effort that 
if we inspire the SEC to take appropriate action so that 
individual shareholders can gain access to the proxies, can 
make these issues part of their deliberations, I think that 
will complement the legislation proposed by Senator Durbin and 
Senator Brownback.
    Thank you very much, Mr. Chairman.
    Senator Menendez. Thank you.
    Senator Casey.

              STATEMENT OF SENATOR ROBERT P. CASEY

    Senator Casey. Mr. Chairman, thank you for being in charge 
of this hearing. I want to thank Senator Dodd for his 
leadership in making sure we got this hearing scheduled.
    I want to reiterate much of what has been said. I first of 
all want to commend our two colleagues who are here, Senator 
Durbin and Senator Brownback, for your leadership on this issue 
going back years now. We are grateful for that. And I think 
what brings both of you to this issue and what brings so many 
people in this room together today is that so many people here 
for many years have been summoned by your conscience to be here 
and to work so hard on this issue. And I am grateful for the 
opportunity to work with many in the Congress, but especially 
Senator Durbin working on his bill, Senate bill 831.
    I think it is critically important that we move forward, 
not have any more delay, as Senator Menendez said, and not more 
talk and more discussion. We need to move this legislation to 
give the Federal Government and to give the world a directive 
that we are going to use divestment as a tool, as it has been 
used in many other instances, at long last to use this tool to 
move an agenda forward.
    I was struck by--we saw the story on Monday in a lot of 
places, but there was an AP story in the Washington Post about 
the ten peacekeepers who were slaughtered in Darfur. But I just 
circled something that we have seen over and over again, but 
just this one line from the Washington Post, and I quote--and 
this is from Monday, October 1st: ``Violence and disease have 
left as many as 450,000 dead and displaced 2.5 million.''
    Now, we have heard these numbers over and over and over 
again, and I will tell you, anyone who comes to that table 
today and says, well, we have got to slow down, we have got to 
be patient here, we have to have another round of discussions, 
we have got to move slowly--anyone who counsels that today has 
a very high burden of proof today. And I hope that those who 
counsel that will bear in mind the human tragedy that this is.
    So I think that many of you have worked on this long before 
I got to the Senate, but I am happy to join this effort. And I 
am grateful for the opportunity to be here today.
    Thank you, Mr. Chairman.
    Senator Menendez. Thank you, Senator.
    Senator Martinez.

               STATEMENT OF SENATOR MEL MARTINEZ

    Senator Martinez. Thank you, Mr. Chairman. I want to add my 
words of thanks to our colleagues that are here this morning on 
this very important issue.
    I became aware of the dire situation in Darfur while I had 
the opportunity to work in the Sub-Saharan Africa Subcommittee 
of Foreign Relations with Senator Feingold, and obviously this 
is an issue that touches all of us deeply.
    I think that the approach that is being suggested here 
today is appropriate and is timely. I believe that the United 
States continues and ought to continue to be a moral force in 
the world, and it is not only about profits, it is also about 
people. And so I do believe that it is very appropriate that in 
this instance we move aggressively toward creating a financial 
disincentive for people to do business with those who abuse 
people in such a terrible way.
    So I look forward to the testimony from the witnesses, Mr. 
Chairman and thank you for holding this timely hearing.
    Senator Menendez. Senator Bunning.

                STATEMENT OF SENATOR JIM BUNNING

    Senator Bunning. Thank you, Mr. Chairman. Thank you for 
scheduling the hearing on this very important topic.
    Earlier this year, there was an effort in the Senate to 
move a bill dealing with investments in the Sudan. I thought 
that was inappropriate because this Committee had not even had 
one hearing on the subject.
    I agree with everyone in this room that States and local 
governments should be able to spend their money however they 
see fit. That includes not spending money with certain 
companies. Certainly, individuals have that same right as well. 
What I do not agree with is the idea that each State or city 
should have its own foreign policy.
    The Framers of our Constitution wisely gave control over 
foreign policy to the Federal Government, not to each State. We 
must speak with one voice, not 50 or 100 voices, when dealing 
with other nations. Legislation to change that balance is not 
only a bad idea, but I believe it is unconstitutional.
    If States or individuals think our policy toward Sudan is 
not strong enough, there is a proper way to go about making a 
change. Just like we have done with other countries, Congress 
can pass a sanctions law prohibiting some kinds of dealings or 
all dealings with the Sudan. That is the right approach, not 
letting each city or State set its own foreign policy.
    I look forward to hearing from our witnesses about this 
topic. I especially want to hear why they believe current 
sanctions law is not adequate and what, if anything, stands in 
the way of States, cities, or individuals spending their funds 
however they see fit.
    Thank you again, Mr. Chairman.
    Senator Menendez. Thank you, Senator.
    With that let me turn to our two colleagues, Senator Durbin 
and Senator Brownback, who have been incredibly powerful voices 
on behalf of having action taken to end the genocide in Darfur. 
Senator Durbin.

STATEMENT OF RICHARD J. DURBIN, U.S. SENATOR FROM THE STATE OF 
                            ILLINOIS

    Senator Durbin. Thank you very much, Mr. Chairman, and to 
Members of the Committee, this is a hearing that we have been 
waiting for, and I am so glad that you are doing it today. I 
thank you so much for taking the time to gather this morning. 
And I especially thank my colleague, Senator Brownback. We are 
often faulted in Washington for being too partisan. I am happy 
to report that from the beginning Senator Brownback and I have 
worked together on this, as so many in Congress have worked to 
deal with this.
    I have my disagreements with the Bush administration. I 
think that is a matter of record. But I have said before and I 
will say again, this President's courage in declaring a 
genocide in Darfur is exemplary. Too often in the recent past 
there has been a reluctance and reticence to speak truth to 
power about issues like genocide. I am happy that President 
Bush spoke out when he did. I am glad that his statements about 
that genocide were echoed by his Secretary of State Colin 
Powell and then later Condoleezza Rice. I have spoken to him 
personally about this. He has given speeches at the Holocaust 
Museum just a few months ago. I believe that he is sincere in 
believing we face an extraordinary, historic challenge. The 
civilized countries of the world cannot ignore the reality of 
the genocide in Darfur. And if we cannot ignore that reality, 
we must do something about it.
    I do not think we should believe that the killing and 
suffering have ended in Darfur. The genocide continues. I do 
not think we should believe that sending 20,000 or 25,000 
peacekeeping forces from the United Nations will bring peace 
and stability to this region. That force is very small in 
comparison to a region as large as the State of Texas.
    Senator Casey made reference earlier to a news item this 
week which is troubling. The African Union force is a volunteer 
force that is working hard in the area, but it is really 
challenged by the size of the area and the nature of the enemy. 
Just this last week, Senegalese troops were attacked and ten 
were killed, and now there is a serious question as to whether 
Senegal will continue to contribute forces to this peacekeeping 
force. That is how tenuous this commitment is from those 
currently serving in Darfur. We should never believe that this 
issue has been resolved because of the action of the Security 
Council.
    And, third, we have to do what is necessary to put pressure 
on the government in Khartoum. Time and again--time and again--
this government has come forward and said, ``We are going to 
change this situation. We are going to put an end to it.'' And 
they have failed utterly to do so. We have to accept our own 
personal responsibility here. And the question is: What is our 
responsibility?
    In this era of asymmetric challenges to great powers, we 
have to look to the tools that are available to put pressure 
for change. What Senator Brownback and I bring to you is one 
tool that could be used--a tool that will combine a lot of 
different elements and putting pressure on Sudan to make a 
change and, more importantly, pressure on Sudan to engage in a 
peace conference that will bring ultimate peace to this region.
    I do not believe the presence of peacekeeping troops will 
be an easy task so long as the militias run roughshod over 
these poor people. If we can force the government of Khartoum 
to move toward a real peace conference and real accommodation, 
then we might find real peace for these poor people who have 
suffered for so long.
    I will just say in brief summary here, this bill has a 
number of elements that I hope you will consider:
    Requiring the administration to create a list of companies 
supporting the Sudanese regime. I tried to do this in the 
supplemental. Unfortunately, the administration did not 
respond, did not create the list that we asked for:
    Requiring companies supporting the regime to report to the 
SEC so that the SEC can publish the identities of these 
organizations.
    Requiring the administration to report on the impact thus 
far of current economic sanctions.
    Prohibit the Federal Government contracting with companies 
who support the regime.
    Authorize State and local contract prohibitions for 
companies supporting the regime.
    Authorize State and local governments to divest from 
companies supporting the regime.
    Provide investor safe harbors.
    Authorize additional funding for the Office of Foreign 
Assets Control within the Treasury Department.
    Study how the Federal employees' Thrift Savings Plan could 
create a Terror-Free Investment Fund which would bar Sudan-
supporting companies.
    And finally, increase civil and criminal penalties for 
sanctions violators.
    All of these things would put teeth in this effort. I have 
tried, as some of you have tried, to reach out to different 
groups in my home State urging them to divest. Interesting 
response. Two major universities, the University of Illinois 
and Northwestern, said, ``We will do it. We are going to divest 
from any holdings that relate to companies like PetroChina, the 
largest oil company in the Sudan.'' I was very heartened by 
that.
    Another university, which I will not name, said they were 
not going to divest, and I asked the president why, and he 
said, ``It is not our policy to get involved in this kind of a 
fight.'' I asked him a couple simple questions: ``Do you 
believe there is a genocide in Sudan?'' He said, ``I really 
don't know.'' And I said, ``As the president of a university, 
you should. The President of the United States believes there 
is, and I believe there is, and many people do.''
    Second, ``If there is a genocide, what is your 
responsibility? What is your moral responsibility?'' He said, 
``I can't answer that question.''
    I was really disappointed by that reply. Perhaps there are 
others who want to take some refuge in ignorance or avoidance. 
We cannot afford to. The President of the United States has 
spoken out that this is a genocide in our time. Now it is our 
time to act.
    Thank you, Mr. Chairman.
    Senator Menendez. Thank you.
    Senator Brownback.

  STATEMENT OF SAM BROWNBACK, U.S. SENATOR FROM THE STATE OF 
                             KANSAS

    Senator Brownback. Thank you very much, Mr. Chairman and 
colleagues. I appreciate your interest and willingness to take 
this issue up. Senator Shelby and I have spoken several times 
about it, and I appreciate his interest in and support for it.
    I have been to Darfur. I have been to Sudan. Once you are 
there and you see the people suffering, it is just really hard 
to say, well, I do not think maybe we ought to do this because 
it might conflict with something else. When you see it, then it 
is one of those things where you say, ``I have got to do 
something.'' We have got to do whatever we can, given the 
status that we have in the world. This is the most powerful 
Nation in the history of mankind. And you have people who have 
been run out of their villages by militias sponsored by the 
government put in harm's way, dying in hundreds of thousands, 
and at the same time we will probably see the Sudanese economy 
grow by 13 percent this year. That is the level that is 
projected for what the Sudanese economy will do this year, 
growing by 13 percent. That is primarily due to investment by 
Chinese and Malaysian resource companies, primarily oil 
companies, some of which we are investing in.
    We have said often, ``Never again,'' and we have taken up 
the pledge of ``Not on our watch.'' We also need to take up the 
pledge ``Not on our dime,'' and that is what we are asking for 
with this campaign and this effort.
    I have to say, I am particularly heartened by young people 
across America who have constantly been coming to my office 
saying, you know, we want to see this end, we want to do 
something about it. And a group of them camped out at my home 
in Topeka, led by Matthew Vines and other students from Wichita 
East High School, and pressed the Kansas Legislature until they 
enacted a divestiture campaign on the Sudan from the Kansas 
State pension funds. And I said, ``God bless them for doing 
that.'' This is a group of high school students that see it and 
say this is terrible and it should not take place and we should 
not be allowing it to happen and we should divest from it.
    The key here for this Committee to consider--and I think 
Senator Shelby has rightfully pointed out, in the regular order 
of things--is that we need to act as a Congress to allow this 
to take place. And that is the key point. Senator Durbin, who 
has been excellent on this, has been dogged and determined on 
this, and I applaud his efforts. Now some of these divestiture 
bills are being struck down by State and Federal courts saying 
that this steps into the purview of the Congress.
    The Congress by this act can explicitly say that the States 
can do this, and that is one of the key provisions of this 
bill. One of the key ways the Federal Government can help is to 
explicitly provide the authorization for States and local 
governments to divest from Sudan. Doing so would address an 
objection that has attenuated the success of targeted 
divestment movements. And so in that sense, then, I would hope 
it would get to other issues raised by my colleagues that we do 
not want to have 50 or 100 different foreign policies. No, this 
is one that is set by the U.S. Congress. It is authorized by 
the U.S. Congress. Now the States can move forward with it. And 
I think that is a good, regular-order way to move forward with 
this. It is a way to get our citizenry involved in a key issue 
of our time. And I would also hope it would do something that 
Senator Reid commented about, that it would cause individuals 
then to start to look at their own investments and things that 
companies are doing, companies that they are investing in, and 
saying, again, ``Not on my dime.'' We are going to try to do it 
as a Federal Government, which we have done through sanctions. 
We are going to try to do it through the States, through these 
targeted divestitures that the Congress would have to allow to 
take place. And we are going to press it as individuals and 
with individual companies so that we are not allowing a 
genocide to take place on our time, on our dime. And I think 
that should be a simple, strong message.
    We are seeing some early results of this in a positive 
fashion. We have seen companies from the U.K. to Germany to 
India that have suspended or significantly altered their 
operations in the Sudan. I think there is good reason to 
believe that the Government of Sudan has noticed and is nervous 
somewhat about this. They are not going to say that, but the 
more we can tighten this, the less they are going to be able to 
grow that economy, the less money they are going to have to 
conduct this second genocide.
    Now, I want to remind my colleagues, this is the second 
genocide by this government that was started by Osama bin 
Laden. This government was started and put into power by Osama 
bin Laden. They have done a genocide in the South where 2 
million people were killed over a long period of time. This 
government was actively involved in the Sudan Peace Agreement 
that was negotiated by one of our former colleagues, Senator 
Danforth. There is now peace in the South. People are starting 
to rebuild, albeit slowly. Now you are seeing this take place 
in the west. This is the second genocide. These guys have had 
plenty of warning.
    We need to act to be able to allow this to take place by 
State and local units of government, and hopefully this will 
also push into the private sector.
    With that, I would just urge my colleagues to act to allow 
this to take place.
    Senator Menendez. Well, thank you both. I just have one 
quick question. What would you say to the Members of the 
Committee on the importance of getting a markup before the 
meeting in Tripoli?
    Senator Durbin. I would say, Mr. Chairman, that this could 
be an excellent opportunity for real peace to come to the 
region, as Senator Brownback said, when Senator Danforth led 
that effort for peace in the South; and the sooner we move on 
this, even if it is not fully implemented, the stronger the 
message to Khartoum that we mean business and that we want to 
see them resolve their own internal difficulties. I do not 
believe there is anything else that we could do as a Congress 
more important.
    Senator Menendez. Senator Shelby.
    Senator Shelby. Senator Durbin, you are the deputy 
Democratic leader, the Whip. If we push this bill out of the 
Committee, which we will, I believe, soon--as soon as Senator 
Dodd will arrange it--you could get time on the floor, I am 
sure.
    Senator Durbin. I am going to do my very best. I have a 
friend named Harry Reid that I will talk to personally about 
this.
    Senator Shelby. We should do it.
    Senator Durbin. He shares our feelings about this issue.
    Senator Shelby. Thank you.
    Senator Menendez. Thank you both for your testimony. We 
appreciate your leadership as well.
    Let me call up our second panel: Jendayi Frazer, who is the 
Assistant Secretary of State for African Affairs. As Assistant 
Secretary of State for African Affairs, Dr. Frazer plays a key 
role in shaping President Bush's foreign policy toward the 
Sudan. We welcome the Secretary.
    Elizabeth Dibble, who is the Principal Deputy Assistant 
Secretary for International Finance and Development. Serving in 
that position, Ms. Dibble oversees the State Department office 
tasked with protecting U.S. investment abroad, promoting 
market-based investment standards, and encouraging other 
countries to adopt policies that create sound investment 
regimes.
    And Adam Szubin, who is the Director of the Office of 
Foreign Assets Control in the Department of the Treasury. In 
that position, Mr. Szubin administers America's sanctions 
policy to advance our Nation's foreign policy and national 
security objectives. These include programs targeting state 
sponsors of terrorism, international narcotics traffickers, 
states active in the proliferation of weapons of mass 
destruction, and select foreign countries.
    We welcome you all to the Committee. Your full statements 
will be included in the record. We ask you to summarize them in 
the context of about 5 minutes or so, and we will start with 
Secretary Frazer.

STATEMENT OF JENDAYI E. FRAZER, ASSISTANT SECRETARY FOR AFRICAN 
                  AFFAIRS, DEPARTMENT OF STATE

    Ms. Frazer. Thank you, Mr. Chairman, Ranking Member Shelby, 
Members of the Committee. Thank you for the opportunity to 
testify on the administration's Sudan policy and specifically 
our efforts to peacefully end the tragic humanitarian situation 
in Darfur. Sudan is a top priority for the administration. We 
appreciate the generous support of Congress as we work to 
resolve the situation in Darfur which, among many things, has 
helped us sustain the African Union peacekeepers in Darfur and 
most recently achieve United Nations Security Council 
Resolution 1769 authorizing the deployment of 26,000 AU/UN 
peacekeepers. But, as demonstrated by the tragic events of 
September 29th with the attack on a camp of the AU Mission in 
Sudan--AMIS--that resulted in the death of at least 10 AU 
peacekeepers, there is still a long way to go to achieve peace 
in Darfur. I look forward to our continued close relationship 
with Congress as we work together to bring peace to the region.
    Mr. Chairman, we are at a critical point in our efforts in 
Sudan. The large, robust peacekeeping force for Darfur that we 
have all worked for over the last few years is finally on the 
verge of deployment. Its first elements are slated to go in 
before the end of this year. The renewed talks that aim to 
achieve a lasting political solution in Darfur are expected to 
begin on October 27th in Libya. This progress, while long in 
coming, is due in large part to increased international 
pressure on Sudan, led by the United States.
    At the U.N. General Assembly last week, President Bush 
stated that ``America has responded [to the suffering in 
Darfur] with tough sanctions against those responsible for the 
violence.'' The new sanctions he imposed on May 29th targeted 
30 Sudanese Government-owned or -controlled companies and three 
individuals, including two government officials and one rebel 
leader. These new sanctions, and stepped-up enforcement of 
existing sanctions on Sudan, are working. To move forward from 
here, we are working closely with the United Nations and the AU 
to implement the agreements, even as we continue to closely 
monitor the actions of all parties.
    We fully appreciate the efforts of American citizens and 
the Congress to seek additional ways to increase pressure on 
Khartoum. We are confident that our May 29th sanctions have and 
are working to provide the necessary pressure. However, we are 
at a critical moment, and it is important to avoid any actions, 
including legislative measures, that might set back the 
progress we have made thus far.
    In considering our position, we also have to bear in mind 
that the Government of Sudan has accepted UNAMID and the need 
to negotiate a peace deal. At the moment, the main issue is 
whether rebel factions will be an obstacle to a peaceful 
negotiated settlement.
    We are also concerned that some initiatives to increase 
economic pressure on Sudan will damage our relationship with 
our European partners rather than increase pressure in Khartoum 
and may further complicate efforts to carry out our substantial 
assistance programs. A welcome and useful initiative at this 
juncture would be for Congress and other concerned groups to 
issue statements calling for the rapid deployment of the UN/AU 
hybrid force and calling on all parties to participate in the 
political process.
    That said, we must be prepared and the administration is 
willing to impose additional sanctions if the Government of 
Sudan places roadblocks to the deployment of UNAMID or starts a 
new military offensive carrying out attacks against innocent 
civilians.
    Today, I will review the present situation in Darfur, our 
efforts to achieve full implementation of the Comprehensive 
Peace Agreement, which ended more than 21 years of warfare 
between North and South, and what further steps are needed to 
realize our goals. Efforts to end the violence in Darfur and 
implement the CPA must go hand in hand, and we are willing to 
exercise pressure to achieve success on both fronts. At the 
same time, we must also be wary of initiatives that advance 
peace in one part of the country at the expense of another.
    Let me first turn to Darfur. The situation on the ground is 
chaotic. Tribal conflict, survival-motivated violence, 
government-backed Janjaweed attacks, clashes between rebel and 
government forces, and rebel attacks on AMIS continue. Since 
the beginning of 2007, nearly 248,000 people have been newly 
displaced from the fighting. This is in addition to the over 2 
million people currently living in camps or settlements for the 
displaced and the over 235,000 refugees in neighboring Chad. On 
September 29th and 30th, the 7,000-strong African Union Mission 
in Sudan suffered its greatest loss since its initial 
deployment in 2004. Armed men from rebel factions viciously 
attacked the African Union base camp in Haskanita, killing 10 
peacekeepers, looting supplies and vehicles, and destroying the 
buildings. The 150 or so primarily Nigerian peacekeepers fought 
back, repulsing the first wave of attackers, but in the end 
were overpowered and forced to evacuate in the early morning 
hours. We honor the service of those peacekeepers that lost 
their lives, and our hearts go out to their families.
    The tragedy of this attack highlights the urgency to deploy 
the UN's heavy support package and the UN/AU hybrid 
peacekeeping mission--UNAMID--to Darfur as soon as possible. 
The United States has been leading this effort. We have been 
working with the United Nations to recruit the necessary troop 
contributors, and with a few exceptions, the U.N. has received 
an abundance of offers. We are also expanding seven of the 
African Union's base camps to hold two additional battalions 
that will serve as protection for the UN's heavy support 
package units. Among other units, the heavy support package 
includes engineers from China that will help prepare the 
infrastructure for larger deployments of peacekeepers early 
next year. We are also providing training and equipment to 
African battalions that will deploy as part of the U.N. 
mission.
    Again, the Sudanese Government has publicly accepted U.N. 
Security Council Resolution 1769 and has pledged cooperation 
with its deployment. We will hold them to this pledge. The key 
leaders of UNAMID are already on the ground. The UN/AU Joint 
Special Representative Adada and UN/AU Force Commander Agwai 
are already in place. We have warned the Government of Sudan 
that we are watching closely and that we will insist on nothing 
less than full cooperation, from flight and customs clearances 
for U.N. equipment, to the rapid provision of entry visas for 
deploying personnel.
    The heart of the solution in Darfur is an inclusive 
political agreement, and the United States is sustaining its 
efforts to achieve that end. There can be no military solution. 
I was present in Abuja, Nigeria, when the Government of Sudan 
and Minni Minawi, leader of the Sudan Liberation Movement, 
signed the Darfur Peace Agreement on May 5, 2006. The DPA is a 
fair agreement which addresses the core grievances of the 
people of Darfur. Unfortunately, at the eleventh hour, some 
parties became intransigent and refused to sign. We have all 
learned from that process.
    The United Nations and African Union are providing renewed 
leadership, and their efforts are making headway. The new talks 
are scheduled to begin on October 27th in Libya. The U.N. and 
AU have incorporated the regional countries into the process 
and are formulating a mechanism to fully include civil society, 
tribal leaders, and representatives of the internally displaced 
persons camp.
    Senator Menendez. Madam Secretary, if I could get you to 
sum up for us.
    Ms. Frazer. Yes, certainly. The first order of business in 
Libya should be to strengthen the cease-fire monitoring 
mechanism.
    But at the moment, the splintered rebel factions are 
creating obstacles to a peaceful negotiated settlement. Several 
of the rebel factions have refused to attend peace conferences, 
citing untenable conditions, and others are wary of the 
process. And we are working with other international partners 
to press all of the rebels to attend the talks.
    We have reached a sensitive time in our diplomatic 
engagement to achieve a successful political process in Libya. 
We are prepared to apply sanctions to any party that obstructs 
the peace process. But right now we are trying to work with the 
government that has accepted UNAMID, that has accepted to go to 
the peace talks, and we are trying to keep the international 
coalition that includes the U.S., the Europeans, the African 
countries, the Arab countries, and, most importantly, the 
United Nations and the African Union on board with our effort.
    We are concerned about Darfur, but we also have to be 
concerned about making sure that the Comprehensive Peace 
Agreement is also fully implemented, and we must ensure that 
our efforts today will reinforce CPA implementation.
    While much has been accomplished during the nearly 3 years 
since its signing, the progress of the CPA has faltered in 
areas related to the North-South border, Abyei, oil revenue 
sharing, and the redeployment of forces. We will continue to 
lead efforts to address these challenges. Deputy Secretary 
Negroponte met with the Sudan contact group on Friday, 
September 21st, to refocus international attention on the CPA, 
and we are in constant discussion with the government of 
Southern Sudan, and now Special Envoy Natsios is on the ground 
today in Southern Sudan pressing for full implementation of the 
CPA. We will continue to work with the Intergovernmental 
Authority on Development, the Sudan contact group, as well as 
the new Special Representative for Sudan, Mr. Qazi, to try to 
bring renewed focus to implementation of the CPA.
    The United States, in conclusion, has and will continue to 
lead the world in responding to the situation in Sudan. We have 
provided over $4 billion in assistance to Sudan since 2005. 
While we are successfully increasing pressure on the Government 
of Sudan, we must also recognize that these efforts and any 
future efforts may impact the Government of Southern Sudan, as 
their delegation told us this week. As part of the CPA, the 
Government of Southern Sudan receives tens of millions of 
dollars in oil revenue each month from the central government 
in Khartoum. This influx of resources is unprecedented in a 
post-conflict situation and has allowed the Government of 
Southern Sudan to participate with the international community 
in the development and reconstruction of Southern Sudan.
    We share the commitment of Congress and the American people 
who are working to see an end to the suffering of the Darfur 
people. We, together with Congress' ongoing support, will 
continue to exert all our efforts until the crisis in Darfur is 
ended and all the people of Sudan can live in peace.
    Thank you, Mr. Chairman. I am pleased to answer questions.
    Senator Menendez. Thank you. Again, your full statements 
will be entered into the record, and I would ask you to 
summarize them in the context of 5 minutes.
    Secretary Dibble.

 STATEMENT OF ELIZABETH L. DIBBLE, PRINCIPAL DEPUTY ASSISTANT 
SECRETARY FOR INTERNATIONAL FINANCE AND DEVELOPMENT, DEPARTMENT 
                            OF STATE

    Ms. Dibble. Mr. Chairman, Ranking Member Shelby, and 
Members of the Committee, thank you for the opportunity to 
appear before you today to discuss some aspects of possible 
sanctions measures concerning Sudan.
    Sanctions seek to change behavior. To be effective, they 
must be carefully calibrated and coordinated. Naturally, timing 
and messaging are essential components of this process. The 
administration and Congress together need to maintain a unified 
message on Sudan policy to maximize U.S. influence on the peace 
process. This is particularly true since the administration and 
Congress fully share the same objectives in Sudan--in 
particular, our common desire to end the violence in Darfur.
    But sanctions are only one part of the approach which also 
has to rely upon multilateral diplomacy and eventually changed 
behavior by the Khartoum regime itself. We have to ensure that 
our desire to send a strong message via sanctions does not 
counteract or even overwhelm progress on the political fronts.
    We have serious concerns about attempts to apply new 
sanctions on the Government of Sudan now at this moment. It 
would send the wrong message to the regime at a time when it is 
actually being helpful with peace talks and with the African 
Union/UN peacekeeping force. It would also send the wrong 
message to rebel movements, one of which just attacked an 
African Union peacekeeping base and killed 10 Nigerian 
peacekeepers. The rebels need to join the peace process rather 
than targeting international forces.
    Our most recent action on Sudan sanctions got the attention 
of Government of Sudan officials without undermining our 
multinational coalition on Sudan, and it was this increased 
pressure that helped bring us to where we are today.
    Required divestment will be seen by our allies as a U.S. 
Government action targeting their companies and could affect 
our ability to obtain cooperation on mutual action with respect 
to Sudan. Some of these key allies will be providing troops and 
equipment for the African Union/UN hybrid peacekeeping force.
    We need to look carefully at each of the Sudan bills and 
consider all aspects of their likely impacts, including on 
Southern Sudan and on multinational coalitions. We need a 
multinational coalition that includes the Chinese, the Arab 
world, the Europeans, and the African Union to build peace in 
Sudan.
    We recognize that individuals and particular funds may want 
to divest certain holdings for a variety of reasons. In fact, 
we do not take a position on private independent action by 
individual investors based on private sector research and 
analysis.
    However, the administration is opposed to affirmative 
Federal legislation that explicitly authorizes divestment 
campaigns at the State and local level. Sanctions policy needs 
to respond quickly to rapidly evolving events. Having one 
unified foreign policy gives us the flexibility to do this. 
State and local divestment efforts risk creating the appearance 
of a multiplicity of foreign policies, undercutting our policy 
flexibility and the clarity of the messages we send foreign 
governments. They also undermine the President's constitutional 
responsibilities to conduct foreign affairs for the Nation.
    The Sudan bills under consideration all seek ways to use 
U.S. economic leverage to have an indirect impact on Sudan's 
leaders by pressuring foreign companies that do business in 
Sudan. The primary approach in certain bills would have the 
U.S. Government create a black list. This is the most troubling 
approach. The administration has consistently opposed all 
requirements that the President or Treasury or any other U.S. 
Government entity affirmatively prepare a black list 
periodically of companies doing business in Sudan. Such a list 
would target our allies, impairing multilateral efforts to aid 
the peace process.
    Another concept in play is a new SEC disclosure process. A 
third concept is an as-of-yet-unarticulated U.S. Government 
contracting certification procedure and procurement ban on 
prospective contractors who cannot certify that they either 
have no specific business activities in Sudan or, if they do, 
that they meet certain humanitarian criteria. These latter two 
proposals also pose some concerns, but we remain open to 
exploring them further as alternatives.
    In summary, sanctions are an important policy tool, but 
they need to be managed with maximum flexibility. Timing is 
everything, and we believe it is imperative to preserve the 
President's flexibility to decide when and how to calibrate the 
application of sanctions to they can work to the maximum 
advantage.
    We look forward to our continued dialog with the Congress 
to ensure that sanctions are applied at the appropriate time 
and in ways that do not undermine the multilateral efforts 
which are essential to achieve our policy objectives for Sudan, 
including ending the violence in Darfur.
    Thank you very much.
    Senator Menendez. Thank you, Madam Secretary.
    Director Szubin.

STATEMENT OF ADAM J. SZUBIN, DIRECTOR, OFFICE OF FOREIGN ASSETS 
              CONTROL, DEPARTMENT OF THE TREASURY

    Mr. Szubin. Thank you, Mr. Chairman, Ranking Member Shelby, 
and Members of the Committee. Thank you for your continued and 
intent focus on the suffering and crisis in Darfur and for the 
opportunity to speak to you today about the tools we can bring 
to bear on this difficult problem.
    I know that this is an issue of vital and deep 
immunoglobulin to the Members of this Committee, to Congress, 
of course, to the administration, and to the American people as 
a whole. I believe, in fact, that it is a testament to the 
character of this country that so many people in every part of 
this Nation feel the suffering of the victims and refugees of 
Darfur as their own and are seeking desperately to help.
    From my first days in this position, I was tasked to 
develop and apply additional sanctions measures to help 
alleviate the crisis in Darfur. The President and Secretary 
Paulson made clear that we should spare no effort and draw on 
all of our authorities and resources. Our objective has been to 
encourage a negotiated resolution to this crisis by making 
clear to the Government of Sudan and other responsible parties 
that defiance of the international community will come at a 
heavy cost.
    Economic pressure has played a role in encouraging a 
resolution to this difficult and complex situation. As you 
know, the United States has had broad economic sanctions 
directed at Sudan since 1997 based on the Government of Sudan's 
support for international terrorism and human rights 
violations. In 2006, we acted with the U.N. to impose targeted 
economic sanctions against culpable individuals responsible for 
violence and undermining stability in Darfur.
    This past April, on Holocaust Memorial Day, President Bush 
issued a clear warning to the Sudanese Government: either they 
would live up to their prior commitments and allow the 
deployment of a joint UN/African Union peacekeeping force or 
the United States would impose further economic sanctions on 
the Sudanese Government and seek a U.N. Security Council 
resolution to do likewise.
    When President Bashir did not follow through, President 
Bush did. On May 29th, Treasury announced a range of new 
sanctions. We designated two senior Sudanese Government 
officials that had acted as liaisons between the government and 
the Janjaweed militias, including their chief of military 
intelligence and their minister for humanitarian affairs. We 
also targeted Azza Air Transport Company, which had been 
conveying artillery, small arms, and ammunition from Khartoum 
to Darfur. The government has not been the only culpable party, 
of course, and we also designated Khalil Ibrahim, the leader of 
a rebel group responsible for violence in Darfur.
    On that same day, we designated 30 additional companies 
owned or controlled by the Government of Sudan, thereby 
disrupting their access to the U.S. economy and the U.S. 
dollar. These companies included five petrochemical companies, 
Sudan's major telecommunications company, and a company that 
had supplied armored vehicles to the Sudanese Government for 
use in military operations in Darfur. In addition to these 
actions, we significantly stepped up our efforts to enforce 
sanctions on Sudan sanctions, making this enforcement a top 
priority within OFAC, my office. We are now aggressively 
pursuing a number of violators to ensure that compliance with 
these sanctions is as strong as the sanctions provisions 
themselves.
    Congress and this Committee have played an instrumental 
role in facilitating these actions. Indeed, just yesterday 
morning, Congress passed a bill, sponsored by Chairman Dodd, 
which provides for significantly increased civil penalties for 
those who violate IEEPA--the core statute under which we impose 
sanctions against Sudan, as well as terrorist financiers, WMD 
proliferators, Iran, Burma, and other sanctions targets. 
Without question, this bill will make our sanctions more 
effective, and I would like to thank this Committee, as well as 
others in the House and Senate, including Senators Durbin and 
Brownback, for their strong and swift support in passing this 
bill.
    Two months after the sanctions I just described, with the 
leadership of the United States, the U.N. Security Council 
adopted an important resolution which my colleagues from the 
State Department have already described. Thus far, there have 
been positive indicators. As Assistant Secretary Frazer will 
describe in more detail, the Sudanese Government publicly 
announced its acceptance of a hybrid peacekeeping force, which 
is unprecedented. And later this month, she and my colleague, 
Assistant Secretary Dibble, described the peace conference that 
will be held in Tripoli, Libya, which will hopefully bring all 
of the parties of this conflict together and move them in the 
direction of settlement.
    While there have been positive recent developments, the 
diplomatic road ahead will no doubt require patient and 
difficult work. For our part, we stand ready to provide 
whatever support is needed to pressure those who would stand in 
the way of peace.
    I know that this Committee has been watching these issues 
very closely and is considering additional Sudan-related 
measures. I look forward to answering your questions both with 
respect to the actions we have taken to date and additional 
policy proposals, and I look forward to continuing to work 
together with you to address these critically important issues.
    Thank you.
    Senator Menendez. Thank you, Director.
    We will start a round of questioning of about 5 minutes 
apiece, and then we will see if there is need for a second 
round. I will start off myself.
    Mr. Szubin, in May, the Committee marked up and approved S. 
1612, the International Emergency Economic Powers Enhancement 
Act, which vastly increases penalties on companies that violate 
U.S. sanctions law. The Senate approved the bill unanimously in 
June. The House passed it yesterday. The President, I 
understand, is going to sign it rather swiftly.
    Now, your Department strongly endorsed that bill, did it 
not?
    Mr. Szubin. Yes, sir.
    Senator Menendez. And from what I understand, you all 
believe that it should be enacted without delay. Is that the 
case?
    Mr. Szubin. Yes, sir.
    Senator Menendez. Secretary Frazer, the State Department 
also supported that bill, did it not?
    Ms. Frazer. Yes.
    Senator Menendez. And, in fact, not only did you support 
it, but in view of the fact that the administration wants it 
enacted into law, that is going to take place even though the 
talks in Libya are about to happen. Yet you come before the 
Committee and you collectively cite that you oppose this 
legislation because, I think, Secretary Dibble, you mentioned 
timing and messaging.
    What is the difference? You have a sanctions regime that 
you are all enthusiastically pursuing before the peace 
conference in Tripoli, and yet you are back-pedaling on this 
effort, particularly as it relates to Sudan.
    Mr. Szubin. If I could, Senator, the key legislation which 
the Congress just passed yesterday would enable us to crack 
down more firmly on those who violate our sanctions, our 
existing sanctions on Sudan, as well as our other sanctions 
programs, such as those I mentioned--Iran, Burma, terrorist 
financing, WMD proliferation, and narcotics trafficking. It is 
an authority that we have desperately needed for years, 
frankly. Our sanctions penalties were out of date such that if 
somebody issued a series of transactions, exported goods, or 
facilitated financial flows to Sudan that were prohibited, they 
might get away with a slap on the wrist. And we cannot have our 
sanctions be viewed as--a penalty would just be a cost of doing 
business.
    So we asked and we were very grateful to Congress for 
supporting that, but I do not view this measure as coming in 
any way into conflict with the ongoing diplomatic processes 
which are going on, as you mentioned, in Libya. What these will 
do is allow us to enforce meaningful penalties on those who are 
violating----
    Senator Menendez. I fully understand that, but the point is 
you want that enforcement because you want to send a very clear 
message that sanctions can work and have a consequence. Is that 
not the case?
    Mr. Szubin. Absolutely.
    Senator Menendez. Then that is my point. Sanctions can work 
and they have a consequence. But here, as it relates to Darfur, 
the State Department seems to mean in its testimony to be 
overly optimistic and overly sensitive to upsetting the Bashir 
government.
    Isn't it not true, Madam Secretary, Secretary Frazer, that 
Bashir has time and time again told the international community 
that he would do X, only to back-pedal and not make that 
happen?
    Ms. Frazer. Yes. Sanctions----
    Senator Menendez. Yes. But the point is then, if the answer 
to that is yes, then it seems to me that you would want to have 
all the leverage possible at the end of the day to have him 
understand that we are serious about the consequences--it does 
not mean you have to invoke them, but you have a tool in your 
arsenal, an arrow in your quiver to be able to use. And I do 
not understand exactly--what I have not heard from any of you, 
really, outside of the generic context of timing and messaging, 
you know, the focus of this legislation you really have not 
attacked in terms of its specifics.
    You know, there are four distinct sectors of the Sudanese 
economy that are linked to supporting policies which have 
contributed to Darfur policy: oil, mineral extraction, power 
production, defense. This is not a blanket divestiture measure.
    Furthermore, the legislation specifically carves out 
business investments in the South where we are hopeful for 
progress.
    Thirdly, the legislation before the Committee is 
specifically written to expire when the requirements for all 
corresponding Federal sanctions are satisfied.
    And, fourthly, in addition to helping apply pressure to the 
Sudan, the legislation is meant to ensure that socially 
conscious investors have the right--the right--to refrain from 
investing in business operations that contribute to genocide.
    I cannot quite understand how the State Department comes 
before this Committee and says this is inappropriate.
    Ms. Frazer. Perhaps I can answer some of what you have 
asked. I think it is important to be very clear that the 
sanctions that were imposed on May 29th are having effect, and 
the enforcement of those sanctions from 1997 has increased and 
is having an effect, specifically the sanctions that Adam 
Szubin, I must say, has been really very effectively applying, 
and which the IEEPA legislation will give him even more ability 
to tighten the rope around this Government, is the reason why 
the Government of Sudan has accepted UNAMID today. They are 
effectively shutting down the banking system in Khartoum today. 
We have the necessary pressure based on the sanctions that we 
imposed on May 29th.
    And so what I would say is, in terms of the specific 
legislation, my concern about it is, frankly, the additional 
work that it is putting on OFAC when we need OFAC to be looking 
after identifiers of Government of Sudan officials to further 
tighten the impact on that government instead of going through 
a list of companies, you know, trying to find a list of 
companies which have a diffuse impact. What we need is the 
targeted impact that he is already applying due to the May 29th 
sanctions, which are having an effect.
    The second point I would make in terms of the issue of 
timing is that indeed we do have to keep this coalition. If the 
Government of Sudan starts backtracking, which is the way it 
does--I mean, there is absolutely no doubt about it. This is a 
government that makes an agreement and then tactically starts 
to put road blocks in the way. If they start that process, then 
we have the sanctions necessary, and we may come back to you. 
In fact, this legislation could be fine-tuned so that we could 
put the necessary pressure.
    I think it is important to say, however, that right now the 
ball is in the UN's court. The issue of getting those 
peacekeepers on the ground is really one that we have to put 
the pressure on the U.N. and keep our dialog with the U.N. That 
is where the obstacle is, as well as on the peace process. The 
ball is in the rebels' court on the peace process. And so we 
need to be clear about when we use the sanctions, it is to 
impact this government for its negative behavior. But at this 
moment in time, the ball is not in the Government of Sudan's 
court.
    I am sure that they will backtrack, so I think that we have 
to be at the ready with new sanctions. But we also have 
effective sanctions right now that are putting the necessary 
squeeze on this government.
    Senator Menendez. Well, I appreciate your answer. The 
legislation actually calls for additional assistance to OFAC to 
be able to meet its challenge. And, second, it seems to me that 
whatever refinement you want to suggest, you suggest to the 
authors and to the Committee, because it is my sense that this 
will move forward.
    The distinguished Ranking Member, Senator Shelby.
    Senator Shelby. Thank you.
    Do any of you have an estimate of the amount of revenue and 
the percentage of GDP that the Sudanese Government derives from 
foreign investment and trade? Do you, Mr. Szubin?
    Mr. Szubin. I do not.
    Ms. Dibble. No.
    Senator Shelby. Could you furnish that for the record? 
Isn't that important? You need to know what they are doing and 
how important this is to their GDP if it is going to work.
    Do you have any idea as to the extent that the Sudanese 
Government is dependent on funds like that for the financing of 
its actions in Darfur? In other words, is there a connection 
between financing their actions and something we can do about 
it by sanctions?
    Mr. Szubin. I do not have----
    Senator Shelby. Do you need what I am asking you?
    Mr. Szubin. Of course, Senator, and I do not have the 
figures with me today.
    Senator Shelby. Could you furnish that for the record?
    Mr. Szubin. Yes. It is unquestionably true that foreign 
investment, particularly in Sudan's petrochemical sector, is 
the major source of funds for their government, and it allows 
them----
    Senator Shelby. It is a great percentage of their GDP, is 
it not?
    Mr. Szubin. Yes, sir, it is.
    Senator Shelby. And you are really talking about oil and 
petro dollars, are you not?
    Mr. Szubin. Yes, and that is one of----
    Senator Shelby. Oil and gas.
    Mr. Szubin. Exactly. That is one of the reasons we have 
focused on that sector so intently with our sanctions. So just 
to give you an example, not only have we recently in May named 
five of their state-owned petrochemical firms, but in the past, 
we have gone after conglomerates that the Government of Sudan 
controls but that are co-owned by Chinese, by the Malaysians, 
by the Indians, to target all of the major Sudanese petro firms 
and say, ``You are not going to do any business with the United 
States, and we are going to try to disrupt your business that 
you are doing anywhere in the world.''
    Senator Shelby. Is there evidence regarding the conduct of 
U.S. and foreign companies operating in the Sudan? In other 
words, that the companies targeted for divestment at the State 
and local levels are actually altering their behavior? Is there 
anything going on there? Do you measure that in any way?
    Mr. Szubin. With respect to the impact of State divestment?
    Senator Shelby. Yes.
    Mr. Szubin. I am not aware of that.
    Senator Shelby. You do not have any----
    Mr. Szubin. I do not have that evidence, no.
    Senator Shelby. Secretary Dibble, China's role is very 
central to all of this, as some of us see it. How has China 
reacted to the targeting of PetroChina and its parent company, 
China National Petroleum Company, by the divestment campaign? 
Have they changed their behavior in any way, or does oil trump 
everything, oil and gas? Have you seen any indication that 
Pakistan, India, Malaysia, or any Federal Government country is 
incorporated concern for human rights into its foreign 
investment policy?
    Ms. Dibble. I am not aware of any specific reaction from 
the Chinese on this particular issue. I do know that this has--
our efforts and our sanctions--and I am talking more broadly 
than just the Sudan sanctions, but our sanctions across the 
board have gotten the attention of foreign governments. And as 
Assistant Secretary Frazer said, you know, we need some of 
these very governments to help us in the coalition.
    So I think they have taken notice of this. I am afraid I 
cannot quantify what that reaction might be. But I think they 
have taken notice.
    Senator Shelby. A lot of you here at the table, you are 
experts on the situation in Sudan because of your 
professionalism. Could you tell us what form you believe any 
potential legislation should take? In other words, I believe we 
are going to pass a strong bipartisan piece of legislation 
coming right out of this Committee, and it has got to be 
meaningful. If it is not meaningful, it is useless; it is 
worthless. It is just a statement with no teeth, and we do not 
want that.
    What do you want? Is the administration out of sync with 
the Congress on this?
    Mr. Szubin. I do not think so at all. I think, in fact, in 
my conversations with your staffs and others on this Committee, 
we have exactly the same objectives here, which is, How do we 
get down this very difficult road of a negotiated peace 
agreement and ensure that we do not see people veering off the 
road, as they have in the past? And how do we make sure that 
people see the costs and the very significant costs of 
misbehavior? So in terms of being in sync, very much so, 
Senator.
    In terms of what additional legislation would be needed, 
whenever we have been asked in the past, we said we need 
stronger penalties. We need to make sure our sanctions are 
enforced and----
    Senator Shelby. It has got to have teeth, has it not?
    Mr. Szubin. It has to have teeth, and Congress responded 
very swiftly, and I just want to thank you all again for the 
support with respect to that, because we asked and you 
delivered as quickly as could have been expected.
    When it comes to applying additional proposals on top of 
that, my colleagues from the State Department, of course, 
talked about the timing and the very delicate process that is 
coming right now. And what we are hearing from the government, 
at least what we are hearing right now, is exactly what----
    Senator Shelby. Explain what you mean by ``delicate.'' I 
mean, people are dying every day.
    Mr. Szubin. That aspect----
    Senator Shelby. People are looking the other way. So what 
is delicate about doing something about this or trying to do 
something about it?
    Mr. Szubin. This is something where my colleagues will be 
able to speak more articulately than I, but just to give one 
example, the U.N. Security Council Resolution 1769, which just 
passed late this summer, was a 15-0 vote, if I am not mistaken. 
In other words, we had consensus, including from the Chinese, 
that we need to deploy peacekeepers, that the situation in 
Darfur requires a serious response. And that is a remarkable 
accomplishment thanks to the diplomats sitting at this table 
and others in our Government.
    Senator Shelby. You do not believe that China has any 
interest in sanctions against their own China Petroleum 
Company, do you?
    Mr. Szubin. I am sure they do not. And these kinds of 
targets, state-owned companies, present a particularly 
difficult challenge when it comes to economic pressure. If you 
take the Malaysian company, Petronas, which is operating there, 
they are, frankly, not subject to economic pressure. They are 
not traded on any exchange in the world, certainly not on any 
U.S. exchange, and U.S. investors are not holding their stock. 
And so there is a limit to how much pressure we can apply 
financially to address that situation. I think ultimately it 
comes down to what can we do diplomatically to convince them to 
either change their ways or use their influence and their 
leverage within the Sudanese economy for good and to be 
pressuring the government that we all need to see a change in 
behavior, we all need to see peace in Darfur.
    Senator Shelby. Well, whatever we have been doing is not 
working, is it?
    Mr. Szubin. Well, I think the recent months----
    Senator Shelby. The slaughter is still going on.
    Mr. Szubin. The situation there has gone on longer than it 
ought to have and longer than any of us would have liked to 
see. The developments over the last few months, which Assistant 
Secretary Frazer will speak to, are among the more positive 
that we have seen recently, and the government seems to be 
saying what we would like it to. It is a question now of 
follow-through. I would turn it over to Assistant Secretary 
Frazer.
    Ms. Frazer. Yes, Senator Shelby, I will speak to 
specifically the delicacy of this moment in time. I think it is 
on two levels: one, what is going on in Sudan itself; and, 
second, in terms of the international coalition, which has been 
extremely difficult to build.
    In the Government of Sudan, it is a very divided 
government. The pragmatists right now are in the ascendance. 
They have convinced those who would pursue an end to this 
through military means that, in fact, allowing the peacekeepers 
to come in is the right way, going to the negotiating table is 
the way to end this crisis in Darfur, as well as to end their 
isolation internationally, at least their isolation in the 
Western world, because they are not exactly isolated 
internationally--which comes to my second point, which is the 
international coalition. The most important thing that we could 
do today is to get other countries on board with further 
sanctions, to put multilateral sanctions, because as long as 
the United States has unilateral sanctions--in fact, we are 
shutting down their access to the dollar economy, they are just 
moving it to euros now. You know, they just find banking 
outlets in the Middle East.
    And so we have got to get other governments on board with 
us, and if we are seeing, as when the Government of Sudan has 
accepted UNAMID and has accepted to go to the peace table to 
negotiate peace, if we are seeing this, now imposing yet 
another set of sanctions when we have very effective ones in 
place at this moment in time, we probably will lose that 
international coalition. Or the coalition, which is not very 
firm anyway, we have to keep it on board. And so that is what 
we mean by the delicacy of the moment.
    But as I said, I think that we have to be ready because we 
do know the character of this government, which backtracks 
constantly.
    Senator Shelby. This government is the problem, is it not? 
They aid and abet the militia. They aid and abet everything. I 
wish you well.
    Thank you for letting me go over on my time.
    Senator Casey [presiding]. Thank you, Senator Shelby.
    Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Secretary Frazer, do you feel that the recent attack on the 
peacekeepers force was either condoned or encouraged by 
elements within the government in Khartoum?
    Ms. Frazer. I do not think it was condoned and I do not 
think it was encouraged, but it is an interactive process. And 
I think that there is no justification for the attacks. And one 
explanation--we are still trying to gather information on what 
happened and why. But one explanation is that these were break-
off rebel groups who were seeking supplies, equipment, and so 
they attacked the AMIS to get those supplies and equipment.
    Another is that when the rebels attacked the government 
police and killed some 51 police in Kurdufan, the government 
responded militarily, and that this was then a counterattack 
with the rebels believing that AMIS was not--took the side of 
the government. And so it is the dynamic. And so whereas, I do 
not think the Government of Sudan aided or abetted or 
encouraged this attack, I do think that the Government of 
Sudan's action is part of the context, the reason for this type 
of back-and-forth between the rebels and their attack on AMIS. 
It is not excusable.
    Senator Reed. So your at least working conclusion is that 
the Khartoum government will cooperate with the deployment of 
the peacekeeping force.
    Ms. Frazer. My experience is that we will have to continue 
to put pressure on this government at every moment in time to 
make sure that they cooperate, because it is a divided 
government. There are those who support UNAMID fully, and then 
there are those who absolutely oppose it. And it is a 
tactically oriented government, and so we have to continue to 
keep the pressure on the government. That is my experience.
    Senator Reed. Well, I think we all sort of share your 
conclusion. I think the debate here is what kind of pressure 
from what direction, et cetera, because frankly I think the 
heart of the proposal of Senators Durbin and Brownback and 
others is that this is more pressure continuously applied, and, 
in fact, it is the type of pressure that might get their 
attention since it is not the carefully calibrated pressure 
that the administration is applying. It is much more blunt. And 
with all due respect, the ``delicacy'' and the ``regime in 
Khartoum'' are words I do not assume to hear in the same 
paragraph. But I know what you are saying, you know, that this 
is a pretty difficult situation to manage.
    Director Szubin, the sanctions that are in place today 
would prevent these companies and individuals from doing 
business with American companies, and likewise American 
companies doing business with these individuals and companies. 
Is that a fair summary?
    Mr. Szubin. Yes, Senator.
    Senator Reed. Would it prevent American companies from 
investing in these companies?
    Mr. Szubin. Yes, Senator.
    Senator Reed. So a pension fund in Rhode Island or Illinois 
now under this could not invest in these companies directly or 
indirectly. Is that true?
    Mr. Szubin. Right.
    Senator Reed. Is that clear to--do you think that is clear 
to the public out there that this is the case?
    Mr. Szubin. I think it is, and we engage in a great deal of 
outreach to try to educate the public, both the normal sectors 
that we deal with, whether it is the trade community or the 
financial community, as well as others with respect to what are 
the contours of our sanctions and what are the prohibitions. 
But not only can no U.S. person conduct any business or invest 
with the companies that we have named; they cannot conduct any 
business with any Government of Sudan-owned or -controlled 
company, and any assets of those companies have to be frozen if 
they come into the possession of a U.S. person, which would 
include a U.S. person overseas. If there is a U.S. bank in 
Europe or in the Far East that comes into the possession of a 
wire transfer that is going to one of these companies or coming 
from one of these companies, that money needs to be blocked and 
frozen.
    Senator Reed. So effectively you have a list of these 
companies. Some of the discussion today is that we do not want 
a list published of these companies as the legislation would, 
but there is a list of these companies, correct?
    Mr. Szubin. Correct. If I could, there are, I think, two 
different lists that have been discussed. We maintain a list of 
Government of Sudan-owned companies where we are targeting at 
Sudan itself. There has been discussion of and I think some of 
the legislation would call for creating a list of non-Sudanese 
companies, third-country companies in Europe or elsewhere that 
are doing business in Sudan--what some people would call a 
``secondary sanction''--and that list currently does not exist. 
At least under the Government letterhead it does not exist. I 
know there are many private nongovernmental groups that look to 
lists like that, that have developed lists like that, and that 
are using them.
    Senator Reed. Well, as I think you suggested in one of your 
previous responses, most of these Sudanese companies are not 
listed on any stock market, that there is no ability to invest 
in that. That is correct, isn't it?
    Mr. Szubin. By and large, the large petrochemical companies 
that we are talking about are not listed, certainly not in the 
United States.
    Senator Reed. Well, let me ask it another way. That is, are 
there any companies--this goes to sort of, I think--maybe we 
already have this policy in place. Are there any companies that 
are publicly traded that you have listed or put on a sanctions 
list?
    Mr. Szubin. I am trying to think, and I do not want to 
answer incorrectly. I do not know of any of these Government of 
Sudan-owned companies, and here we are primarily talking about 
companies that are operating in Sudan, in Khartoum or in the 
oil fields, that are traded on--certainly not on a U.S. 
exchange. They would be prohibited from doing that. But I do 
not know of others that are traded on, say, a European 
exchange.
    Senator Reed. It seems to me that, you know, this is a 
question of how much is enough in some respects, which, 
clearly, you and your colleagues are trying to put pressure on 
the regime. But it would seem to me that--and I do not know the 
direction of investment flows, but whatever inhibitions that 
are felt by these companies are more than made up with by 
foreign investors, private companies coming in and putting 
money into the oil fields. And at the heart of what I think our 
colleagues are trying to get at is trying to cutoff that flow 
of funds, too, which would send a very strong signal to the 
Government of Sudan. But thank you for your efforts.
    Thank you, Mr. Chairman.
    Senator Casey. Senator Bunning.
    Senator Bunning. Thank you. I look at the questions that I 
have, and at least four of them have already been asked.
    Why would it be counterproductive to allow States and local 
governments to make their own laws on businesses dealing with 
other countries? Any of the above.
    Ms. Dibble. Senator, we are not opposed to private 
divestment actions. As some of your colleagues have noted, 
there is divestment taking place in various States, and they 
are looking at this. We have never said we have opposed that. 
What we are opposed to is legislation that affirmatively 
authorizes State and local government divestment because of the 
concern that it creates a multiplicity of State and local 
government foreign policies that could potentially impact on 
the President's ability to direct the foreign policy of----
    Senator Bunning. But as long as there is an overriding 
sanction by the Federal Government, don't the State and local 
governments have to comply?
    Ms. Dibble. Yes, they would.
    Senator Bunning. Yes.
    Ms. Dibble. Yes, they would.
    Senator Bunning. Well, is there anything to prevent State 
and local governments from going more stringent than the 
Federal Government?
    Ms. Dibble. No, and I think in some cases--if I understand 
the question, Senator, in some cases they are doing that now.
    Senator Bunning. Given the problems that the Securities and 
Exchange Commission had assembling a list of companies doing 
business in terrorist countries, could the Government make a 
more accurate list of companies doing business in Sudan?
    Mr. Szubin. Well, I will try to answer that. As I mentioned 
a few moments ago, these lists----
    Senator Bunning. The private----
    Mr. Szubin. The private lists are out there, and I believe 
the Sudan Divestment Task Force will be testifying on the 
subsequent panel. They issue a list that I think is updated 
quarterly with respect to the activities of foreign companies 
that are investing in Sudan in particular sectors and that have 
not complied with a whole set of criteria with respect to their 
business and their humanitarian profile.
    When it comes to the Government going in and trying to 
reinvent that wheel, issue a list of their own, you sort of get 
into the question of what are the additional benefits of having 
a Government list and what costs would come with it. And the 
costs include the foreign policy concerns of the U.S. beginning 
to blacklist, if you would, European or Asian companies and 
exactly those governments whose support we are going to need to 
keep the pressure on in Khartoum. The costs would also come in 
the form of just the very serious logistics costs that the 
Government would bear, logistical hurdles that we would bear in 
trying to put out this kind of list, because the kinds of 
information that we draw on in analyzing flows or trade flows 
into Sudan are, for the most part, classified. So, of course, 
we are not going to be able to put out information that is 
derived from classified information.
    When we are looking to the public information, which the 
private sector has access to, we would need to limit ourselves 
to that which we think is solidly sourced and corroborated and 
reliable before we could, of course, put a Government seal on 
it and say here is our list.
    So I think at the end of the day, you would see a much 
shorter list if it came out from the U.S. Government than those 
which are already in circulation.
    Senator Bunning. Secretary Frazer, I have got to ask you, 
why is it difficult to get other governments to act in 
conjunction with the United States if they actually know what 
is going on in Sudan?
    Ms. Frazer. Senator, unfortunately, many governments do not 
know what is going on in Sudan.
    Senator Bunning. Well, I mean, we do.
    Ms. Frazer. We do.
    Senator Bunning. And certainly is our credibility that 
bad--are you as an entity in the State Department so bad at 
explaining to other governments the horrific goings-on in Sudan 
right now?
    Ms. Frazer. No. But Secretary Rice has certainly done a lot 
to build the coalition that led to the 15-0 Security Council 
resolution that authorized the peacekeeping force. But the 
Government of Sudan goes to the Middle East, claims its 
sovereignty, and says to the other countries in the Middle East 
that they should not have international peacekeepers on their 
territory. They raise issues of----
    Senator Bunning. But, then, what action should the U.S. 
Government take toward those other countries, if anything?
    Ms. Frazer. Well, we certainly take action to convince them 
and we have been successful in building that coalition to 
convince them to stay with us, and that is what we are trying 
to maintain. But there are many issues in the world that we 
need these governments' engagement on. Sudan is one of the 
issues. And so we have to continue with multilateral diplomacy. 
And as I said, the Secretary has done an effective job of 
getting Egypt, Saudi Arabia, Libya, South Africa, and many 
other countries on board with our approach.
    Senator Bunning. One last question, and I am sorry this is 
just a little over my time. There are an awful lot of American 
people that know what is going on in Sudan. What can the 
average American do to help, in sanctions, in--in other words, 
you cannot volunteer to go to Sudan as a peacekeeper--or can 
you? Or what can we as the average Americans do?
    Ms. Frazer. Well, I think the average American, I mean, the 
young people on our college campuses are being very effective 
in keeping this issue at the forefront.
    Senator Bunning. Up.
    Ms. Frazer. Absolutely. And from our perspective, helping 
us to get the resources, you know, with the Congress so that we 
can be effective in putting peacekeepers in there, building the 
camps that are going to be necessary for where those 
peacekeepers are going to live, providing humanitarian 
assistance that is necessary.
    As I said, we provided about $4 billion over the last 2 
years to help on the humanitarian situation, the peacekeeping 
front and the peace process. And so I think that the American 
public needs to remain engaged the way that they are and keep 
pressure on us, including the debate that is going on right 
here today at this Committee. I think that this is effective. 
It to me is the best of America. We need to look at what are 
the various tools that we can use to end this genocide in 
Sudan. And so this is one of a number.
    What I am saying is that I think that the sanctions from 
May 29th have been absolutely effective in changing this 
government's behavior, and the government is where we need it 
right now. We need to keep the coalition together. But I think 
that the debate that is going on here is a healthy one and an 
important one, and it is for your deliberation, of course, on 
what steps further to take. But, that is, the reflection of 
America is right here, I think, in this room today. So those 
young people should continue their activism.
    Senator Bunning. Thank you very much, Mr. Chairman.
    Senator Casey. Thank you, Senator Bunning.
    I wanted to pick up, Madam Secretary, where you left off. 
First of all, I want to thank you and your colleagues for being 
here today and for your public service. Public service is 
usually difficult. The kind that you are doing is particularly 
difficult. And we do not want to be too combative here, but I 
said earlier today that you had a high burden of proof in terms 
of making your case, and I think that is still the case.
    I wanted to highlight just some excerpts of your testimony 
and then also talk about the legislation and have you react to 
that.
    Secretary Frazer, when you were testifying, you highlighted 
a number of things. I think you outlined the challenge we have 
in a very full and significant way. But I was struck by a 
couple of statements that you made that really, I think, caused 
me to question why we are having--why there is such a 
disconnect here in terms of our position in the Congress, or 
most of the Congress, and the administration's position.
    On page 2 of your testimony, you talked about, and I am 
quoting, ``A welcome and useful initiative at this juncture 
would be for Congress and other concerned groups to issue 
statements''--to issue statements--``calling for the rapid 
deployment of the UN/AU hybrid force and calling on all parties 
to participate in the . . . process.'' So you called for a 
statement there.
    On the next page, page 3, you highlight, aptly, the chaotic 
nature of what has been happening on the ground, citing the 
killing of the 10 peacekeepers.
    On page 4, in the first full paragraph, the middle of the 
page, ``we''--meaning the Federal Government, the U.S. 
government--``insist on nothing less than full cooperation.''
    And finally, on page 6, you mention that the Federal 
Government, the U.S. Government has provided over $4 billion in 
assets to Sudan since 2005.
    Secretary Dibble, in your testimony, in the first 
paragraph, ``Sanctions seek to change behavior,'' which you 
mentioned. You talk on page 2 about increased pressure that has 
helped to bring us where we are today.
    My point in all of this is that there is some common ground 
here in the sense that we all agree that sanctions and economic 
pressure and other kinds of pressure do work, and you are 
seeing some results from that, and we appreciate that. We 
appreciate the difficult situation the administration is in and 
the work that the administration has done to date.
    But I have to tell you, when you juxtapose those statements 
and that, I think, agreement between the debate we are having 
today, you juxtapose that next to the basic provisions of the 
Senate--at least the Senate bill that I have cosponsored, 
Senator Durbin's legislation--and I will just highlight a 
couple of provisions that were in his testimony and ask you to 
comment.
    One of the elements of this legislation is to first require 
the administration to create a list of companies supporting the 
Sudanese regime. I cannot understand why that is a big problem. 
Also, requiring those companies to report to the SEC. Third on 
his list, requiring the administration to report on the impact 
thus far of current economic sanctions. Just asking for the 
administration to report on the impact.
    Further down in his list, authorize State and local 
governments to divest from companies supporting the regime. I 
realize that is controversial. I will get back to that in a 
moment.
    Further down the page, increasing civil and criminal 
penalties for sanction violators.
    Another provision, studying how the Federal employees' 
Thrift Savings Plan can create a terror-free investment fund.
    And, finally, with respect to Director Szubin, authorize 
additional funding for the Office of Foreign Assets Control 
within the Treasury Department. Now, I have to say I am sure 
you are not against that provision.
    [Laughter.]
    Even as we debate.
    But my point is that a lot of what is in this legislation 
is, I think--I should say contains requirements that the 
Federal Government does every day of the week, requiring 
something to be studied, requiring a list, monitoring how a 
particular entity is performing. In this instance, you have 
sanctions in place, and you have a call for requiring a list of 
companies. And on top of all that, when it comes to the local 
and State government impact--I was a State treasurer. We have 
the State treasurer of Rhode Island here. We know that when you 
walk in the door and say, you know, we might have to remove or 
limit our investments in your company, companies respond. We 
know that. It is human nature.
    But for the life of me, I cannot understand why there is 
such a full-court press against this legislation when you go 
through the elements of what we are talking about. And I will 
stop talking in a moment, and I think this required a statement 
and not a series of questions. But when you consider the 
frustration, as you have highlighted, the intensity for real 
concrete action here, demonstrable progress here that so many 
people feel in our country, and you also consider the fact that 
what you are saying to State governments, local governments, 
pension funds, citizens across America, that you have a tool--
you are putting a tool on the table, you who are in State and 
local government and otherwise, and we know that tool probably 
will work, but we do not want you to use that tool, and we are 
going to prevent you from exercising that option, I just think 
it is the wrong policy.
    And you talk about having several or many, a multiplicity 
of foreign policies here. One of the best ways to sing from the 
same songbook, one of the best ways to unify our efforts is to 
make sure that the Federal Government gives State and local 
governments the authority to do what we know can have an 
impact.
    So it is a long, long statement and a long question, but I 
would like you to take a moment, as best you can, to rebut some 
of the elements of this bill in addition--or apart from just 
the State and local government divestment issue. Secretary 
Frazer?
    Ms. Frazer. I would just say--I think that this is really 
best handled by my colleagues, but I would just say I support 
reporting on the impact of current sanctions that is in the 
bill now, because I think that report would tell you how 
effective we have been, particularly--the enforcement has gone 
up significantly, but particularly since May 29th, and how 
those sanctions are choking this government. So I support that 
part of the bill.
    Senator Casey. So we have got agreement on that. We have 
got agreement on that he needs more money for his office.
    [Laughter.]
    And we agree that economic sanctions and pressure work, so 
we are making progress.
    Ms. Dibble. I think there is a lot more common ground, 
Senator, than perhaps appears. I think we are all working 
toward the same goal, and the goal is to keep the pressure on 
the Government of Sudan and to keep the international coalition 
together. Where we perhaps differ is exactly, you know, how to 
get there.
    I think some of the elements of this legislation--and we 
have talked a bit about the divestment portion of it. I am sure 
Adam Szubin is not going to turn down any additional OFAC 
funding. We do have--the legislation that was passed yesterday 
puts additional teeth into our existing sanctions.
    I think the point is we want to be able to continue to 
ratchet up and to have the flexibility to apply pressure where 
we see it is needed at a particular time. I think the evidence 
since May, when the new sanctions were announced, we have 
gotten the attention of the Government of Sudan. So I think our 
existing sanctions are working. I realize there is frustration, 
and there is frustration on our part as well, that the 
situation in Darfur is continuing. But we do feel that we are 
moving in the right direction, perhaps not as fast as either 
you or we would like to move. But we feel we do have the tools 
we need right now to continue to maintain that pressure.
    Senator Casey. I have to move on, and Senator Brown has 
been patiently waiting. Senator Brown.
    Senator Brown. Thank you, Mr. Chairman. I just have one 
question of Secretary Frazer.
    I know of your position. I have read of it. I am sorry I 
got here late, and I am chairing for Senator Casey in a moment, 
too. But I know that you think this resolution gets in the way 
of your diplomatic efforts. What kind of tangible benchmarks of 
progress can we expect as a result of the conference in Tripoli 
this month? What should we be looking for so that we can 
believe that your position is correct?
    Ms. Frazer. Well, frankly, I think that we can look at 
benchmarks for the conference in Tripoli, but I think that the 
more important benchmarks are on UNAMID's deployment. And I say 
that because it is by getting a peace force on the ground that 
you can create--you can end this chaotic environment, which 
then puts more pressure on all parties to effectively 
negotiate.
    And so I would suggest that the benchmarks be UNAMID, but 
if we were going to talk about benchmarks being the Tripoli 
talks, obviously it is going to be very difficult, because as I 
said, the key block right now is the rebel groups and their 
fragmentation. And so trying to get the rebels to the table I 
think is critically important. But that is not going to give 
you, I think, a benchmark for judging the Government of Sudan's 
behavior. They can sit back and say that they are fully on 
board with a peace agreement because the rebels themselves are 
not coming to the table. If you want something to judge the 
Government of Sudan's behavior, again, it is UNAMID. That is 
what matters. Is the government going to allow us, you know, to 
get the visas necessary? Will the government allow the 
equipment to come in? Will the government put up road blocks 
for who the peacekeepers will be? Will they start saying this 
country is not acceptable, that country is acceptable?
    So I would focus on those benchmarks more so than the 
negotiations because it is the rebels that are the primary 
problem at this point in time. The government can sit back.
    Senator Brown. Thank you.
    Thank you, Mr. Chairman.
    Senator Casey. I think at this moment we will change to the 
third panel, and Senator Brown will take over at this point.
    Thank you.
    Senator Brown [presiding]. Thank you all for joining us. I 
will introduce each of the--well, I will introduce four of you, 
and my friend, the senior Senator from Rhode Island, will 
introduce Mr. Caprio, whom he specifically requested to 
introduce. And I will remind each of you that your statements 
are in the record if you would like to not exactly read your 
statement. It is up to you what you want to do, but we do ask 
that you keep it under 5 minutes as we proceed.
    Bennett Freeman is the Senior Vice President for Social 
Research and Policy for Calvert Investment. He combines his 
policy experience as a former Deputy Assistant Secretary of 
State for Democracy, Human Rights, and Labor with an extensive 
knowledge of socially conscious financial planning to help 
administer private asset funds and avoid investments in assets 
connected with ongoing violence in Darfur. He was with the 
Clinton administration, I believe.
    John Prendergast--there are few Darfur experts more 
familiar with events on the ground, and he is Co-Chair of the 
ENOUGH Project. A frequent traveler to the region, Mr. 
Prendergast has widely published on the Darfur conflict, has 
led efforts by the International Crisis Group to put forward 
definitive assessments and recommendations to addressing the 
ongoing crisis there. He is currently Co-Chair of the ENOUGH 
Project at the Center for American Progress. Welcome, Mr. 
Prendergast.
    As President of the National Foreign Trade Council, Mr. 
William Reinsch works to represent the interests of the 
council's more than 300 member companies. He oversees the 
NFTC's work in favor of open markets in support of the Export-
Import Bank, the Overseas Private Investment Corporation, and 
many other overseas trade and tax issues of concern to U.S. 
businesses. During the Clinton administration, he served as the 
Under Secretary of Commerce for Export Administration. He is 
also an alumnus of the Senate Banking Committee staff. Nice to 
see you, Mr. Reinsch.
    Adam Sterling serves as Director of the Sudan Divestment 
Task Force, a project of the Genocide Intervention Network, 
which works to organize nationwide grass-roots campaigns aimed 
at implemented targeted Sudan divestment campaigns at the 
local, State, and national level. Mr. Sterling has received a 
number of humanitarian awards, also serves as an adviser on 
Sudan engagement issues to a number of State pension funds.
    I thank all of you for your commitment and your very hard 
work on this very, very, very important social justice issue.
    Senator Reed.
    Senator Reed. Well, thank you very much, Senator Brown. I 
am privileged to introduce General Treasurer Frank Caprio for 
the State of Rhode Island. Treasurer Caprio is the eldest child 
of Joyce and Judge Frank Caprio. His father is more famous, in 
fact, than the Treasurer because he is not only a municipal 
judge, but he has his television program in Rhode Island. So 
tell Judge Caprio we said hello.
    His brother, David Caprio, is a State representative, so 
this is a family that is committed to public service in the 
State of Rhode Island and has been for several generations, and 
we treasure their commitment.
    Frank is just 41, but has accomplished a great deal 
already. After Harvard University where he was captain of the 
baseball team and an All Ivy defensive halfback, he went to 
Suffolk Law School and got his law degree, served in the Rhode 
Island House of Representatives for two terms, then the Rhode 
Island Senate. Throughout his career, he has been committed to 
advancing the opportunities for Rhode Island citizens, and now 
as the General Treasurer, he has been a leader in the effort to 
take effective action against the regime in Sudan and to do his 
bit to end the genocide there.
    I have valued his friendship and support for many, many 
years, and it is a pleasure, General Treasurer, to have you 
here today. Thank you, Frank.
    Senator Brown. Mr. Caprio, would you begin? Thank you.

 STATEMENT OF FRANK CAPRIO, GENERAL TREASURER, STATE OF RHODE 
                             ISLAND

    Mr. Caprio. Thank you, Senator Brown. And, Senator Reed, 
thank you for that kind introduction. And also, thank you for 
the invitation to appear here today.
    As stressed by Senator Durbin and Senator Brownback, this 
issue's time has come. The American people, as we know, are 
fair and caring people, and they have led the way on ending 
this genocide. The American people know that the children in 
Darfur, their stomachs are full of fear, but their hearts are 
full of hope--hope about the issue that we are talking about 
today.
    As an elected official and as an institutional investor of 
an $8 billion pension fund, I fully recognize my obligations 
and responsibilities. The management and protection of the 
funds under my fiduciary responsibility is clear. I am an 
investor, not a regulator, and as such, I hold the right to 
direct the fund in as accountable a manner as possible.
    I testify before you today not to challenge the Federal 
Government's exclusive right to conduct the foreign policy of 
our Nation, but to make the case that not only is the movement 
of State divestment in concert with our Nation's policy on 
Darfur, but it is well within the rights of States with 
fiduciary responsibilities to their citizens. Let me elaborate 
on the latter point.
    State pension funds, as some of the largest, singularly 
controlled pools of assets in our country today, have at their 
service the brightest minds of our financial sectors. We 
consider market trends history, the climate on Wall Street, and 
countless other variables, but, most importantly, we consider 
risk as we devise our strategy for our investments. That 
strategy is altered as climates change or trends develop. 
Therefore, as prudent investors, we must be able to adjust 
accordingly.
    The growing divestment movement, now including over 20 
States and a multitude of cities and universities, has been 
cited by several companies as the reason for their decreases in 
their companies' value and, increasingly, as the reason for 
their withdrawal from the Sudan.
    From a humanitarian perspective, the situation in Darfur is 
no secret, and we have heard recently, with the panel before 
us, what actions the Federal Government has taken and 
recommends.
    Targeted divestment not only furthers the objectives of our 
Nation's foreign policy, but virtually eliminates the States' 
risks. This approach is directly in keeping with current 
foreign policy on this issue.
    For example, included in our recently passed legislation in 
Rhode Island is the statement that no company will be targeted 
that has been explicitly exempted from the U.S. sanctions by 
the Treasury Department. Additionally, targeted divestment 
includes a provision that the bill will sunset when either 
Congress declares the genocide to be over, or when the State 
Department removes sanctions on the Sudanese Government.
    Furthermore, the targeted model protects the States' 
financial interests by providing an opt-out clause in which 
States possess the right to cease divestment if it has proven 
to result in a negative impact on their investment returns.
    This legislation in Rhode Island was unanimously passed and 
immediately signed by our Governor. At its very basis, 
divestment from Sudan represents a choice by the State to 
invest its money in concert with the values of its citizens. 
Accordingly, States possess both the right and the capacity to 
invest based on social, humanitarian, and financial values, as 
long as those decisions are consistent with prudent investment 
standards.
    The targeted approach to divestment followed successfully 
in Rhode Island and other States addresses these concerns while 
upholding rigorous financial standards. When intelligent policy 
is found that addresses a humanitarian crisis while mitigating 
financial risks, I feel action must be taken. Targeted 
divestment is such a policy, and I am proud to support it.
    On the grounds that I am confident that States have not 
only the fiduciary right but also the responsibility to divest, 
Federal legislation will end this ambiguity and galvanize the 
States' right to act on their own as well as in humanity's best 
interest.
    In summary, this action ensures that we will not allow 
genocide to occur on our watch, nor will we allow genocide to 
occur on our dollar.
    Senator Brown and Senator Reed, thank you.
    Senator Brown. Thank you, Mr. Caprio.
    There will be a vote around, we think, 11:30, 11:35, 11:40. 
We will--oh, they have moved it to 11:55. OK, good. We will not 
be interrupted at least for the opening statements.
    Mr. Freeman.

STATEMENT OF BENNETT FREEMAN, SENIOR VICE PRESIDENT FOR SOCIAL 
               RESEARCH AND POLICY, CALVERT GROUP

    Mr. Freeman. Thank you, Senator Brown and Senator Reed and 
Members of the Committee, for the chance to testify on behalf 
of the Calvert Group, a leading family of socially responsible 
mutual funds, which strongly supports the targeted divestment 
approach.
    Calvert has always operated on the principle that 
investment can be a positive force in the world. Application of 
our human rights criteria ensure that our socially responsible 
mutual funds have no investments in companies that contribute 
materially to maintaining the Sudanese Government in power. We 
have sharpened our focus on Sudan as the crisis in Darfur has 
continued and the Sudanese Government has resisted deployment, 
until very recently, of the hybrid U.N. peacekeeping force.
    We have also been struck by the growing and potential 
further impact of the Sudan divestment movement, the most 
significant to have emerged since that directed against 
apartheid in South Africa.
    That is why, at the beginning of this year, Calvert formed 
a partnership with the Sudan Divestment Task Force, together 
with the Save Darfur Coalition, to lend analytical and advocacy 
support to these two groups at a time when their work has 
gained even greater momentum and urgency. Calvert fully 
supports the approach of the task force and the coalition to 
engage with companies where possible, and to divest only when 
necessary. Targeted divestment focuses on a narrow group of 
companies, mostly in the oil and infrastructure sectors, that 
contribute disproportionately to the Government of Sudan's 
revenue base and in turn help to facilitate its actions in 
Darfur.
    Let me emphasize that we at Calvert undertook a review of 
the task force's analytical criteria for determining the so-
called highest offenders for targeted divestment, and we found 
that criteria to be realistic, credible, and consistent.
    As we pursue divestment, particular care, of course, must 
be taken to ensure that the legitimate humanitarian needs of 
the Sudanese people are not harmed. Essential goods and 
services must continue to flow through the traditional sources 
that provide aid in Sudan.
    With this appropriately sharp focus, the divestment 
movement has already been making a positive impact both in 
terms of company decisions and the reactions of the Government 
of Sudan. The Canadian oil company Talisman withdrew from Sudan 
in 2002 in the face of divestment pressure; other oil companies 
have followed. The Government of Sudan has indicated time and 
again in advertisements in The New York Times and other 
statements its concern over the growing divestment movement.
    That pressure increased significantly early this year when 
two major multinational corporations--ABB and Siemens--followed 
shortly thereafter by Rolls Royce, indicated their intention to 
cease operations in the Sudan as the direct result of pressure 
from the targeted disadvantage movement.
    We believe at Calvert that major institutional investors 
and asset managers should review their portfolios to determine 
whether they hold any companies on the targeted divestment 
list, and if they do hold such companies, that they should 
probe the specific nature of these companies' operations and 
links to the Government of Sudan. They should then judge 
whether the companies' continued presence exacerbates the 
situation in Darfur or instead can be focused in ways that 
might even help mitigate the humanitarian crisis. If the 
companies' impact cannot be so mitigated, divestment then, in 
our view, may then be appropriate.
    It is important to note that of the 500-plus companies 
operating in Sudan, only 24 are currently targeted for 
engagement and divestment by the Sudan Divestment Task Force 
model. The narrow focus of the targeted divestment movement's 
objectives should allay concerns related to the ability of an 
institutional investment manager to construct a well-
diversified portfolio and thus meet fundamental fiduciary 
responsibility.
    It is worth noting that the targeted approach to divestment 
is uniquely structured to contain clear sunset provisions so 
that when genocide in Darfur ends, so too, does the basis for 
divestment.
    Let me emphasize that the dynamic interplay of divestment 
and engagement we believe can and will continue to achieve 
positive results without compromising the fiduciary 
responsibilities of money managers.
    Calvert is under no illusion that divestment alone can end 
the killing and suffering in Darfur. But as apparent diplomatic 
progress is finally being made toward deployment of that hybrid 
peacekeeping force, now is the time to reinforce--not to 
diminish--the pressure on Khartoum, especially given the 
Sudanese Government's record of backtracking that Secretary 
Frazer acknowledges.
    In conclusion, targeted divestment, in our view, is a well-
crafted, well-timed tool that combines economic with political 
pressure. It enables citizens and governments at the Federal, 
State, and local level, together with corporations and their 
investors, to make a vital and concrete difference. Moreover, 
it is the right of investors to ensure that their investments 
do not support continuing genocide and do support peace and 
security in Sudan.
    Investment decisions matter, and what matters most now is 
bringing the conflict and abuses to an end by using all of the 
tools at our disposal to save the people of Darfur.
    Thank you again for the chance to testify.
    Senator Brown. Thank you, Mr. Freeman.
    Mr. Prendergast.

    STATEMENT OF JOHN PRENDERGAST, CO-CHAIR, ENOUGH PROJECT

    Mr. Prendergast. Thanks, Chairman Brown, for the 
opportunity to figure out or to help figure out what ought to 
be one of the most urgent questions of our time: How do we stop 
the genocide? I would like to enter my written statement in the 
record and divert a bit.
    State and Treasury today argued that more pressure at this 
time will upset the diplomatic process that is ongoing--
``delicate,'' in their word--and, in fact, upset the 
international coalition, meaning China. As a former Government 
official--I also worked with Bennett in the last 
administration--I understand the imperative of carrying the 
water of a certain policy up here to the Hill to testify. But 
this set of testimonies we heard on the previous panel I think 
flies in the face of 18 years of empirical evidence in Sudan 
during the life of this regime, the Bashir regime, which 
demonstrates that the only way to move the Khartoum regime--the 
only way--and to move the rebels, I might add, is there not 
just pressure, because that word has been used and bandied 
about all day today, but escalating pressure. And I think the 
U.S. Congress has to lead that pressure because the executive 
branch is not willing to do so for a host of reasons.
    These executive branch testimonies we heard also ignore the 
fact that China has moved its policy in very constructive ways 
over the last few months, precisely because an international 
pressure campaign has targeted China's complicity in the 
genocide. The worst thing we could do now is to let up, because 
the deadly mistake that has been made for Darfur repeatedly 
during the last 4\1/2\ years is to do precisely as the 
administration proposes now--to reduce pressure, to let up. 
That would ensure the same results we have had over the last 
4\1/2\ years. If Congress backs off now, then we go back to the 
status quo, guaranteed. History will show.
    And I can tell you as a former diplomat also that one of 
the most effective tools that one can have as an executive 
branch diplomat working on a peace process is to have the 
legislative branch behind you threatening and implementing 
serious measures like the one represented in this divestment 
bill. These measures provide leverage for our negotiators in 
Tripoli and our efforts to try to get that hybrid force on the 
ground ASAP. And they concentrate the minds of those at the 
negotiating table and those around the negotiating table like 
those officials coming and visiting from Beijing. It sends the 
message that gone are the days that there will be no 
consequences, as Senator Menenedez was saying in his opening 
remarks, no consequences for committing genocide and crimes 
against humanity. That indeed will have an impact.
    Finally, a 1-minute history lesson. Four times in 18 years, 
we have managed to be able to change the policies of the 
Government of Sudan. Conveniently, a bipartisan lesson, twice 
during the Bush administration, twice during the Clinton 
administration.
    First case, terrorism. As Senator Brownback said at the 
very beginning of his statement, Osama bin Laden lived in 
Sudan. They were a major state sponsor of terror in the 1990's, 
and because of specific multilateral pressures, escalating 
pressures against the Government of Sudan, they ended their 
association with these terrorist groups and cut the ties.
    Second case, slave raiding. We all remember in the 1990's 
the horrific stories of the resumption of the slave trade in 
Sudan. It was because of additional sanctions and additional 
pressures, particularly through the United Nations Security 
Council, that the Sudan Government changed its policies, 
stopped aiding the militias that were attacking those 
communities, and the slave raiding ended.
    The Bush administration cases are just as compelling. Two 
years ago, the Bush administration helped lead an international 
effort to negotiate a deal between the Government of Sudan and 
another set of rebels in Southern Sudan, as you all know, a war 
that led to 2 million deaths. And that was a very interesting 
case because that was part--the pressure was coming primarily 
from Congress. You passed the Sudan Peace Act. You passed some 
of the most specific legislation that said it was very clear 
that if we do not see an end to this war, we are going to get 
on the side of the rebels. That was a dramatic statement, in 
effect, that went right to Khartoum. And they understood it, 
and they made the deal. That is where Congress can really 
provide leverage to a peace process.
    And, finally, the final case, which is the most amazing 
one, and I think that Senator Casey did a great job pointing 
out the inconsistency of the testimonies, is the hybrid itself, 
this AU/UN force that finally the Government of Sudan has 
accepted to go into Sudan, after years of opposing any kind of 
U.N. involvement, was because China began to pressure, 
quietly--they are not going to get on a soapbox and condemn the 
genocide. They are going to work behind the scenes--as they 
did, because of this international campaign, led in part by the 
divestment movement.
    It is stunning that they do not see this as a positive. I 
guess they just have to say these things for diplomatic 
reasons.
    So I would say, I think the lesson is unambiguous, that we 
ramp up pressure now until the objective is met, and the 
objective is not met until the genocide ends.
    Thank you very much.
    Senator Brown. Thank you, Mr. Prendergast.
    Mr. Reinsch.

 STATEMENT OF WILLIAM A. REINSCH, PRESIDENT, NATIONAL FOREIGN 
                         TRADE COUNCIL

    Mr. Reinsch. Thank you, Mr. Chairman. Let me say first it 
is a privilege to appear with John Prendergast. I have followed 
him over the years. I read his stuff, and I think he is one of 
the most thoughtful and well-informed analysts of a very 
difficult problem. That does not mean I agree with him on 
everything, but it is a pleasure and a privilege to be here 
with him.
    I am the President of the National Foreign Trade Council. 
Along with our USA Engage coalition, we support multilateral 
cooperation and economic, humanitarian, and diplomatic 
engagement as the most effective means of advancing U.S. 
foreign policy interests and American values. We also support 
multilateral sanctions, and where I differ with my colleagues 
here is the question of unilateral versus multilateral action.
    There is no question that the situation in Sudan is tragic, 
or that the United States and the international community must 
do much more to help. We are all horrified by the tragedy that 
has unfolded in Darfur that has been well elaborated on by the 
witnesses. And we certainly respect the motivation of those who 
want to do something about it. But the challenge for Congress 
and the administration is to pursue appropriate means that will 
actually effect change.
    We believe unilateral sanctions are rarely effective in 
achieving U.S. foreign policy goals. The Peterson Institute for 
International Economics has concluded that unilateral U.S. 
sanctions in place from 1970 through 2000 were effective only 
19 percent of the time. Sanctions also provide a good excuse 
for the targeted government to blame its failures on outside 
pressures and to rally nationalist support for the regime. 
Additional complications arise when the United States attempts 
to impose sanctions extraterritorially on companies established 
in other countries, particularly our allies. Those countries 
generally oppose such attempts and have enacted blocking 
statutes and other measures to counteract them, as has happened 
in the EU and Canada and Mexico and Norway and elsewhere. It 
also makes their cooperation with us on a multilateral approach 
much less likely.
    Foreign policy measures by States and local governments are 
even less effective and infinitely more problematic. The 
Governor and legislature of Texas, Illinois, or California are 
not the competent bodies to implement U.S. foreign policy, and 
their narrow divestment or procurement sanctions are unlikely 
to change the behavior of the target country. In addition, it 
baffles me why Members of Congress would want to take foreign 
policy out of their hand and out of the President's hands and 
subcontract it to local governments.
    Sanctions by individual States also interfere with the 
President's ability to conduct foreign policy and impose 
enormous compliance difficulties for companies, as each State 
and local law is inevitably different from the others, creating 
as many as 50 different foreign policies, each with different 
rules and different lists of sanctioned companies. State 
measures also impose compliance costs on businesses. A company 
could be on a divestment list in New Jersey but not in 
California, which will put mutual funds in an impossible 
position, being told to divest to comply with legal 
requirements in one State but having a fiduciary duty in other 
States not to do so.
    In addition, there are costs to companies and investors in 
having to monitor, research, and comply with the various laws, 
which may differ from Federal policy, as well as having to pay 
the fees they incur when they sell stocks pursuant to a 
divestment requirement and then buy new ones.
    In Illinois, for example, which is the State we are most 
familiar with since we sued them, the combined lists of so-
called forbidden entities doing business in Sudan named 233 
companies. Had it not been declared unconstitutional, the law 
would have affected 581 vendors of investment products, and a 
screening of Morningstar's database suggested at the time--
which was last year--that over 900 equity mutual funds owned at 
least one forbidden entity.
    Now, I understand that Adam's list is much smaller than 
that, and if the Federal legislation that I assume is going to 
pass sooner or later were confined to Adam's list, I think it 
would address many of these problems. But the bills as drafted 
are not, and I think that is something that the Committee ought 
to consider carefully.
    Neither is divestment free for retirees. In addition to 
transaction costs, divestment increases the risk to 
shareholders by limiting the pool of stocks and funds. One 
consequence of the initial Illinois divestment law, for 
example, was that many of the small, highly regulated pension 
funds likely would have had to move out of international mutual 
funds and into bond funds. At the time that would have cut 
their annual rate of return by almost half.
    Most important, we believe foreign policy sanctions enacted 
by State and local governments are unconstitutional. In 2000, 
in Crosby v. NFTC the Supreme Court struck down Massachusetts' 
Burma sanctions on the ground that they violated the Supremacy 
Clause of the Constitution. Now, I have a wonderful quote, but 
it is in my statement, and I do not have time to read it.
    Let me make a couple brief comments about the pending 
legislation. Most of them are about the House-passed bill, H.R. 
180. The Senate bill, S. 831, I think has similar deficiencies, 
although the bill is not exactly the same.
    First, I want to commend Adam and the Sudan Divestment Task 
Force for their work in crafting principles governing their 
divestment efforts. Their ideas have shaped these pieces of 
legislation for the better. Unfortunately, we continue to have 
problems.
    First, divestment and procurement bans are likely to face 
challenges at the World Trade Organization by our trading 
partners, who will see their extraterritoriality as a violation 
of our trade commitments.
    Second, the bill fails to limit State divestment measures 
and thus gives the States inappropriate leeway that interferes 
with the President's ability to conduct foreign policy. Section 
4(a) of H.R. 180 states that it is U.S. policy to support State 
divestment for entities that appear on ``any list developed by 
the State or local government for the purpose of divestment 
from certain persons.'' That raises exactly the problem that I 
just talked about a few minutes ago.
    Third, there are parts of the bill where further 
clarification is needed. For example, in Section 2, using 
proprietary information to develop a public list poses serious 
transparency issues, as investors and targets of the list may 
not be able to access the data to determine why or how an 
entity was included, or to find out how it might be removed. 
The very idea of a public list is also problematic since it is 
often difficult to distinguish with certainty actual business 
conducted and actual dollars transferred to an investment as 
opposed to press conferences held to brag about a memorandum of 
understanding that, in fact, is never acted upon.
    Finally, and of great importance to us, the authorization 
for States to enact procurement bans in Section 9 of H.R. 180 
directly contradicts the Supreme Court's decision in the Crosby 
case. In that case, the Court made abundantly clear with 
respect to a procurement sanction that the Supremacy Clause 
protects the flexibility required for the Executive to conduct 
a coherent foreign policy. Divergent State policy sanctions 
constrain that, and once again I have a wonderful quote, which 
I will defer to my written statement, Mr. Chairman.
    Beyond these specific concerns, let me close with the 
slippery slope problem. If Congress encourages States to act on 
a particular foreign policy issue through this legislation, it 
will surely tempt them to pass similar divestment and 
procurement legislation affecting other foreign policy issues. 
For example, we have seen this in your own State, Mr. Chairman, 
in Ohio, which I will get to in a minute. The Sudan Divestment 
Task Force has done an admirable job in attempting to establish 
a targeted divestment model. They are making a good-faith 
attempt to target their efforts specifically at Sudan and to 
avoid divestment in other situations. Theirs is not the only 
effort and genocide in Sudan is not the only cause. There are 
other divestment movements gaining momentum in State 
legislatures that would target companies doing business in 
Iran, and other countries, including China. And the advocates 
of each of those causes believe that their cause is as 
important as the cause in Sudan.
    What happened in Ohio, Mr. Chairman, as you probably know, 
is that when your legislature took up this issue, there was an 
amendment in committee to add China to the list--a list that 
included Sudan and Iran. That amendment failed by two votes, 
but I suspect that when the opportunity arises again, it will 
be presented again, and the outcome might be different.
    And this is my final point, Mr. Chairman. If the Committee, 
nonetheless, decides to act favorably on these bills, it would 
be better policy if it included a clear statement of policy in 
the bill which would expressly limit the ability of States to 
impose foreign policy sanctions. Congress should take this 
opportunity to discourage divestment in any circumstances 
except those specifically authorized by the Congress in the 
pending bill or subsequent legislation. By doing so, Congress 
would preserve the primacy of the Federal Government in making 
foreign policy and help ensure uniformity in State and local 
government actions.
    We have had the temerity, Mr. Chairman, to provide some 
language to the Committee staff on that subject, which I hope 
they will consider.
    I do have some other comments about alternatives, but I 
think in the interest of time, I will stop, and thank you very 
much for your generosity.
    Senator Brown. Thank you, Mr. Reinsch.
    Mr. Sterling.

  STATEMENT OF ADAM STERLING, DIRECTOR, SUDAN DIVESTMENT TASK 
                             FORCE

    Mr. Sterling. Thank you, Mr. Chairman, Senator Reed. It is 
an honor to testify today on behalf of the Sudan Divestment 
Task Force and Genocide Intervention Network in support of H.R. 
180, the Darfur Accountability and Divestment Act. As the 
director of the Sudan Divestment Task Force, the organization 
at the forefront of the Sudan divestment movement, I will be 
addressing the importance of foreign corporate interests, 
specifically oil companies, in Sudan, and how targeted 
divestment has already proven successful in encouraging foreign 
companies to use their enormous leverage to address the crisis 
in Darfur, and how H.R. 180 will encourage and expand these 
efforts.
    Sudan produces over 500,000 barrels of oil per day and has 
at least 6.4 billion barrels in proven reserves. In 2006, oil 
provided the Sudanese Government with over $6 billion in 
revenues and accounted for 90 percent of the country's revenue 
from exports. The extraction of oil requires capital, reserves, 
and technical expertise, and while Khartoum effectively 
controls Sudan's reserves, the government relies on foreign 
companies to translate those reserves into revenue. In fact, 
Sudan's national oil company, Sudapet, maintains no more than 
an 8-percent equity share in any of the country's producing oil 
blocks, yet the government receives a majority of the revenue 
generated from these oil fields.
    Unfortunately, revenue from Sudan's oil has not been used 
for debt relief or development. Instead, Khartoum has allocated 
the majority of its revenue for military expenditures. 
According to a former Sudanese finance minister interviewed by 
the New York Times, over 70 percent of the government's share 
of oil profits is spent on its military.
    The bottom line is that Sudan's oil industry serves as a 
financial lifeline to Khartoum, and the foreign companies that 
support this industry have massive leverage to engage Khartoum 
and contribute to a peaceful and sustainable solution in 
Darfur. Targeted divestment, a policy authorized and encouraged 
by H.R. 180 provides an effective tool to pressure companies to 
use this leverage in an effective, sustainable manner.
    If companies do fail to respond to engagement within a 
given timeframe and divestment does take place, there is 
evidence to show that divestment from this very small set of 
companies will have an extremely minimal impact, if any, on 
investment returns. I point to a historical analysis presented 
to you and performed by the Sudan Divestment Task Force with 
data from Bloomberg that shows that top peer replacements for 
these companies--and we have a selection of the top highest 
offenders in Sudan--have consistently performed better over 
time.
    While targeted divestment significantly minimizes any 
potential harm to investment portfolios, the movement has 
already proven to have a tangible impact on targeted companies. 
La Mancha Resources, a Canadian mining company, and the primary 
foreign player in Sudan's mineral extraction industry, recently 
took extraordinary steps in response to the situation in 
Darfur, even though most of its operations take place on the 
other side of the country. After weeks of engagement with the 
Sudan Divestment Task Force, the company publicly committed to 
refraining from new investment in the country until a 
peacekeeping force consistent with U.N. Security Council 
Resolution 1769 has been deployed with the full compliance and 
cooperation of the Sudanese Government and to increase its 
funding of its humanitarian efforts in Sudan by contributing 
specifically to projects in Darfur. Additionally, the company's 
president recently met with Sudan's Minister of Energy and 
Mining to discuss the situation in Darfur and to encourage the 
government to fully comply with the implementation of the 
Security Council resolution. With their substantial leverage in 
the country, corporations have an extraordinary potential and 
responsibility to contribute to a solution in Darfur. La Mancha 
provides a perfect example to demonstrate the power of targeted 
divestment to generate the pressure necessary for corporations 
to recognize the urgency in Darfur and to act responsible on 
this.
    Since 2005, 20 States and over 50 universities have adopted 
Sudan divestment policies, and something that I think will 
encourage Bill, this movement has rapidly begun to spread 
through Europe and abroad. In fact, in July, the European 
Parliament unanimously adopted a resolution calling on European 
Union members to support targeted Sudan divestment efforts, 
something we are beginning to see them follow up on.
    We appreciate the concerns of the administration regarding 
the implications of H.R. 180 on the Government of South Sudan 
and the implementation of U.N. Security Council resolution. And 
upon close consideration of this bill, Assistant Secretaries 
Frazer and Dibble will see that most, if not all, of their 
concerns have been addressed. H.R. 180 simply ensures that 
States and municipal entities move forward with divestment in a 
unified and targeted fashion that is consistent with and 
complimentary to Federal foreign policy. This includes the same 
carve-outs and protections for South Sudan, as well as 
exemptions for companies authorized by OFAC to operate in 
Sudan. And perhaps most importantly, H.R. 180 ensures that 
divestment policies for State and local entities all expire 
under the same conditions, benchmarked to Federal actions and 
statements.
    In conclusion, I would just like to point out that the 
administration's position has been contradictory on this issue. 
In fact, in February 2007, while speaking at the University of 
Denver and when asked about the growing Sudan divestment 
movement, Secretary Frazer stated that, and I quote, ``I think 
it's a very positive force in our republic and 
internationally.'' And I would just point out that those 
statements were made in the middle of a 60-day cease-fire 
during the Khartoum government and the rebels in Darfur.
    Thank you for the time.
    Senator Brown. Thank you very much, Mr. Sterling.
    Senator Reed will begin the questioning.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    Treasurer Caprio, thank you for your testimony. You are 
looking forward now and planning to move forward on this 
divestiture program, and you are confident that you can make 
wise judgments that will not inhibit and reduce the financial 
benefit to the funds that you are managing, that you can in a 
fiduciary capacity carry this out without doing anything that 
would jeopardize the funds. Is that your position?
    Mr. Caprio. Correct, Senator. We are following the 
scrutinized list procedure, as just elaborated by other 
witnesses. We have a targeted list of companies. We advised all 
our money managers that we do not want any investment in any of 
these companies. We have seen companies such as Rolls Royce PLC 
recently pull out of the Sudan, citing humanitarian concerns. 
Siemens, a multinational giant, has also done likewise.
    So it is actions like what is going on in Rhode Island and 
other States and other institutions that are causing these 
companies that had material operations in the Sudan, that were 
assisting in the government carrying out this genocide, that is 
really bringing about the change that we are calling out for.
    Senator Reed. Well, thank you. Again, I thank all of you 
gentlemen for your testimony.
    Mr. Reinsch, I just want to as sort of a fundamental point, 
if Congress passes legislation that would effectively authorize 
the States to conduct these programs, is that your position? Or 
do you see other challenges?
    Mr. Reinsch. Well, we have gotten different views from 
lawyers as to whether or not congressional action doing that 
would pass constitutional muster. We have not found any lawyers 
that believe that it would survive the Foreign Policy Clause of 
the Constitution. We have gotten different views on whether it 
would--whether Congress can say it is OK to tell the States or 
the city of Takoma Park it is OK to preempt us. I mean, why you 
would want to do that baffles me, but we do have some lawyers 
who say that if you do that, you know, the Court might respect 
it. But I do not think that you can get over the hump of the 
Foreign Policy Clause.
    Senator Reed. Well, I think others would disagree with you, 
but that is why there are lawyers. Thank you.
    Mr. Reinsch. That is exactly what Senator Baucus told me 3 
weeks ago on a different matter. That is why we have lawyers.
    Senator Reed. But I just want it clear that one of the 
impediments in your view right now is the lack of a Federal 
statutory preemption or allowing the preemption by States.
    Mr. Reinsch. It certainly makes things worse. One of the 
things that I commented on was that the risk here is that each 
State may do it differently. And as they do it differently, 
they will have different lists. And from the standpoint of fund 
managers, it puts them in a very difficult position. Federal 
safe harbor, which is in 180 also, sort of helps because, 
otherwise, you are in the awkward position of, you know, Mutual 
Fund X being ordered by the State of California to divest, and 
meanwhile in New Jersey it does not have, you know--has not 
ordered that fund to do the same thing because they do not have 
the same list, and then you have got the potential of 
shareholders in New Jersey suing the fund for having divested 
and lowered their return when, in fact, all this fund is doing 
is complying with California law. So there is an argument for 
uniformity.
    If I may make one more point, though, with respect to the 
comments from the General Treasurer from Rhode Island, a lot of 
this has to do with how States regulate their pension funds, 
and what we learned----
    Senator Reed. We regulate it very well in Rhode Island.
    Mr. Reinsch. Well, I am sure you do, and I am sure Mr. 
Caprio does.
    Senator Reed. Indeed.
    Mr. Reinsch. But what we learned in the case of Illinois 
was that one of the elements of good regulation for prudential 
reasons, not for foreign policy reasons, is that the funds, 
particularly the municipal funds, if there are any, are very 
strictly regulated in where they can invest. And they are often 
precluded from investing in equities directly, and so they buy 
mutual funds.
    Now, what that means is the way the divestment statute 
works is that the pension fund then has to go to mutual funds 
that it has invested in and ask the mutual fund to certify that 
none of the mutual fund's investments are in these companies 
that are on the list.
    In the State of Illinois, where the statute was in effect 
for some months before the judge threw it out, all but two of 
the mutual funds that the States' were eligible to invest in in 
the first place for prudential reasons declined to make that 
certification. Now, in most cases it was not because they could 
not; it was because they would not, because it simply was not 
worthwhile for them to go through the work, and because of the 
way that States statute was constructed, it was a moving 
target.
    What that meant for the pension funds as a practical matter 
was not simply that they had to get out of Siemens, you know, 
or PetroChina. It meant they had to get out of Fidelity Fund. 
And the way they were regulated meant the only thing they could 
get into were bond funds because there were no other mutual 
funds----
    Senator Reed. I do not mean to cut you off. Time is short. 
But I think you have made a pretty good case for at least some 
action at the Federal level, at least in my view.
    A final point, Senator Brown. Mr. Prendergast, you have 
made a very compelling argument that what moves this regime in 
Khartoum is pressure, and there are technical constitutional 
arguments about how we should proceed or should we proceed at 
all. But I would suspect that as we move forward, particularly 
if we can pass legislation here, that will give the 
administration at least the psychological and symbolic clout to 
keep the pressure on. Is that your view, too?
    Mr. Prendergast. Strong view, and I think it is not just 
moving the administration that is crucial. As the Assistant 
Secretaries stated, we need a multilateral pressure. And what 
is fascinating about what divestment does, it gives you a two-
fer. It helps U.S. policy. It gives the U.S. leverage. But it 
also puts additional pressure on China. And as they prepared 
for the Olympics in 2008, as they hire people like Steven 
Spielberg to present a new face to the world, it really matters 
to them that they do not have this noose around their neck 
called Darfur hounding this effort to present this new face.
    So it cannot be overstated that while the U.S. Executive 
branch continues to engage the Chinese quietly and privately, 
to have the legislative branch and the disadvantage movement 
hammering away at what the Chinese are doing is a profoundly 
important consequence to how effective the peace process and 
the effort to deploy the hybrid force will be.
    Senator Reed. Thank you very much.
    Senator Casey. Thank you. We have about 8 minutes before 
the vote, so I will be a little bit late, but I am going to ask 
a question, and then I would like Mr. Prendergast, Mr. 
Sterling, and Mr. Freeman, all three to weigh in. Please try to 
keep it to 2 minutes, if you can. I hate to cut it short like 
this. Mr. Prendergast, really in follow-up, why don't you 
answer first, and then Mr. Sterling and Mr. Freeman.
    On especially your comments about ramping up pressure, in 
recent months there has been a great deal of talk from the 
administration about a Plan B if the Khartoum regime continues 
to stonewall U.N. efforts. Talk to me about what Plan B should 
be, especially in light of the Olympics. Even a paper as 
conservative on China as the Washington Post, their editor 
wrote an op-ed piece yesterday saying we should make the 
Chinese choose between the Olympics and democracy in Burma--an 
extraordinary thing for that paper to say, which has sort of 
been an apologist for Chinese human rights behavior, in my 
view, in the last decade.
    If you would comment rolling China into each of those, into 
that question, if you would, but what you think Plan B should 
look like, Mr. Prendergast, and then Mr. Freeman and Mr. 
Sterling. And sorry to truncate it like that.
    Mr. Prendergast. That is a very good question. I think 
first of all, the administration at this hearing overstated the 
impact of their unilateral sanctions that the President 
authorized a few months ago. We need to be acting 
multilaterally. There needs to be a very clear cost to either 
the government or rebel officials if they obstruct the 
deployment of this hybrid or if they undermine this peace 
process. And anyone who does it ought to be sanctioned, but not 
unilaterally, because the Sudanese Government has basically 
discounted our unilateral actions. But we need to work 
multilaterally with China, France, the U.K., in the United 
Nations Security Council.
    We have four-fifths of the permanent five of the Security 
Council now who are unified in wanting a solution to Darfur. 
That is unprecedented. Russia is selling arms--they will 
acquiesce if four-fifths pressure them to do something. So I do 
not look at them as a strategic partner. But we can work very, 
very closely.
    So Plan B, what gives leverage to the talks and getting 
hybrid out is working through the United Nations Security 
Council with China to push Khartoum to do these things. And the 
most effective way--and I cannot reiterate it enough--is 
through these continuing and ramping-up efforts all over the 
world, but led by the divestment movement in the United States 
against Chinese commercial complicity in the genocide. And this 
bill frees the thousand points of light that care about this 
issue in the United States and around the world, to continue to 
ramp up that economic pressure on China. And it is a 
fundamentally important tool in getting the Chinese to remain 
on board with us going forward to get that hybrid force 
deployed and to get these peace talks concluded in the real 
peace deal.
    Senator Casey. Thank you.
    Mr. Freeman.
    Mr. Freeman. Thank you, Senator. I cannot support more 
strongly the view of my friend and former Clinton 
administration colleague John Prendergast in underscoring the 
critical importance of the pressure that the current divestment 
movement exerts not just on the Government of Sudan directly, 
but indirectly, but ultimately perhaps more powerfully by 
exerting pressure on the Government of China. This is so 
timely, and given the Olympics approaching, this is perhaps the 
most significant leverage that we have.
    I would, though, make a quick broader point, and that is, 
as Chinese oil companies have expanded their presence, not just 
in Sudan but throughout Sub-Saharan Africa, particularly in the 
Gulf of Guinea region, there has been tremendous scrutiny of 
their lack of commitment to clear international human rights 
standards. And we believe at Calvert that while the primary 
focus and benefit, of course, of the current disadvantage 
movement should be to help end the crisis and killing in 
Darfur, that this movement might at the same time make a 
longer-term contribution to helping the Chinese Government and 
oil companies modify their policies and practices in ways that 
would be consistent with international human rights 
responsibilities.
    So it is a two-fer, to pick up John's phrase, in terms of 
the real long-term as well as the short-term benefit here on 
the table.
    Senator Casey. Thank you.
    Mr. Sterling.
    Mr. Sterling. Yes, I agree with the preceding comments and 
would just add that the Plan B sanctions targeted Sudanese 
companies, private Sudanese companies with little to no global 
market exposure. So we would encourage focus on foreign 
companies that are actually bringing revenue into Sudan and do 
have a global market exposure, which is exactly what H.R. 180 
does.
    Senator Casey. Thank you. Thanks to all of you. We all know 
what Secretary Powell said 3 years ago, that only action not 
words can win the race against death in Darfur. We appreciate 
the actions of Mr. Caprio's State, almost two dozen States 
around the country, and the actions they have taken. This 
legislation we will move in this Committee, I hope soon, and 
move it on the floor, and get it enacted into law. And thank 
you very, very, very much for the work you are doing.
    The Committee is adjourned. Thanks.
    [Whereupon, at 11:58 a.m., the hearing was adjourned.]
    [Prepared statements supplied for the record follow:]
                PREPARED STATEMENT OF SENATOR JACK REED
    Good morning. I want to thank Chairman Dodd and Ranking Member 
Shelby for having this important hearing and welcome our witnesses.
    In 1966, after only a decade of peace, civil war began between the 
North and Southern Sudan and continues to this day, making it the 
longest running civil war in Africa. In the past twenty years, more 
than 2 million people have died in Southern Sudan because of the war 
and famine, and millions have been displaced from their homes.
    It is a tragedy that has gone on far too long and it is time for 
the United States and the world to focus on the situation. I believe 
that this nation needs to work with the international community in 
considering all options--diplomatic, economic and even military, to 
stop the violence and suffering in the Sudan.
    Because the United States government has been slow to act, state 
governments have chosen to take matters into their own hands. Nineteen 
states, including my state of Rhode Island, have enacted or proposed 
legislation addressing the divestment of state funds and other 
investment from Sudan. We will shortly hear from Senators Durbin and 
Brownback who have introduced legislation authorizing states to adopt 
such measures prohibiting the investment of state assets in the 
government of Sudan or in any company with a qualifying business 
relationship with the government of Sudan. I am proud to be a cosponsor 
of this legislation and I look forward to working with my colleagues in 
moving this legislation, and other legislation forward.
    Citizens are also taking action. Shareholder resolutions play an 
important role in addressing critical issues for investors. Consider 
the issue of Apartheid in South Africa. Throughout the 80's, 
resolutions were filed with well over 150 companies by investors such 
as TIAA-CREF, the pension funds of the State of New York and City of 
New York, and scores of religious investors. The resolutions and public 
debate, coupled with the divesting of stock by many universities, 
pension funds, foundations and religious groups, built considerable 
pressure on companies, which began to withdraw from South Africa as 
long as Apartheid was in effect. Over 150 U.S. companies pulled up 
stakes and left South Africa; and the companies that stayed began to 
lobby strongly for changes in the system.
    Last year, a shareholder filed a resolution at Berkshire Hathaway 
that would have required the company to divest from PetroChina, one of 
the corporate supporters of the Khartoum regime. As a result, investors 
engaged management of Berkshire Hathaway in an important discussion 
about the merits of Sudan divestment during the company's annual 
meeting in May of 2007. The Sudan divestment resolution filed at 
Berkshire Hathaway helped to highlight the issue by raising investor, 
corporate and public awareness. Though the resolution garnered only 3 
percent support, Berkshire Hathaway over the months started unloading 
the Chinese oil company stock.
    The SEC is at a critical juncture right now with its proposed rule 
on shareholder access to the proxy. Some of the pending proposals in 
the rules proposed by the SEC could seriously undermine the ability of 
investors to ask companies to take action on critical matters. I know 
that Chairman Cox is working towards addressing some of the 
uncertainties with proxy access and I hope that the end result will 
ensure investors access and not diminish them in any way.
    Like the war in Iraq, public opinion is well ahead of Congress 
regarding the crisis in Darfur. We need to catch up. I believe this 
hearing is a critical step in moving forward and I look forward to the 
testimony. Thank you.
                                 ______
                                 
              PREPARED STATEMENT OF SENATOR SHERROD BROWN
    Good morning. Thank you all for coming here to participate in this 
important hearing to examine the role of divestment and other tools 
aimed at stopping the genocide in Darfur, Sudan.
    During the past 20 years, Sudan has suffered from a civil war 
resulting in the death or displacement of millions, regional and ethnic 
strife, and, since 2003, in Darfur, 2 million Darfurians have been 
displaced and as many as 450,000 have perished, at the hands of their 
own government. In response to this atrocity, we here in the U.S. have 
taken both economic and political action. We put sanctions in place 
initially in 1997, and then subsequently strengthened them several 
times. We encouraged the UN to implement an arms embargo in Darfur. We 
have worked with the UN and the African Union (AU) to negotiate a peace 
agreement last year. While I applaud these efforts, all of these 
actions have not yielded the desired result--that is, an end to the 
genocide in Darfur.
    Since the peace deal was signed last year, the situation has 
actually gotten worse. Just last weekend, AU peacekeepers were the 
victims of a violent raid by rebel forces, which left at least 10 
peacekeepers dead, several severely injured, and scores still missing. 
News reports indicate that as many as 1,000 soldiers took part in an 
attack on an AU base, and were equipped with armored vehicles and 
advanced weaponry, suggesting they are much more sophisticated than 
anyone ever expected. This violent attack now jeopardizes the 
implementation of the agreement to bring in a larger UN-AU hybrid force 
in the coming months. It is clear that the current strategy is not 
working. ``Only action, not words, can win the race against death in 
Darfur.'' Action. Not words. Secretary Powell uttered that statement 
back in 2004. And here we are in the same situation three years later.
    To that end, I commend the efforts of groups like those here today 
to allow states to have the option of being engaged global actors and 
divest their assets from companies that enable the regime in Khartoum 
to sustain itself. I thank Senators Durbin, Dodd, and Brownback for 
their leadership in addressing these issues in the Senate. And I 
commend and my former colleagues in the House, who overwhelmingly 
passed a bill that: authorizes states to divest from unethical 
companies doing business with Sudan; empowers the American public with 
information on these companies so they can make their own investment 
decisions; and prohibits federal tax dollars from being used to procure 
services from companies that do business in Sudan. This stands as a 
bellwether for how we as Americans take action in a globalized world, 
where companies and economies are closely interconnected. This concept 
of targeted divestment of firms--from any country--that are willing to 
do business with the government of Sudan is quite compelling.
    Right now, around 20 states are pursuing initiatives that would 
divest public pension funds from companies that are willing to work 
with perpetrators of genocide, and I commend them for their initiative. 
I certainly do not believe it is the prerogative of this Congress in 
Washington, D.C. to tell teachers, healthcare workers, and municipal 
employees in places like Parma Heights or Columbus, Ohio, where they 
should be investing their precious retirement funds. I hope my 
colleagues here in the Senate follow the lead of the folks in the House 
and move quickly to allow states to decide for themselves what is in 
their own best interests. Thank you.
                                 ______
                                 
                PREPARED STATEMENT OF RICHARD J. DURBIN
                U.S. Senator From the State of Illinois
                            October 3, 2007
Introduction
    Mr. Chairman, I thank the Banking Committee for holding this 
hearing today on a crisis that has gone on far too long, on a crisis 
that simply must not go on any longer. The people of Sudan have 
suffered drought, famine, genocide, and now utter chaos. The United 
States has talked for years about putting a stop to it. Yet the crisis 
continues. We must act, and we must act now.
    It was over two years ago when President Bush rightly called what 
was happening in Sudan by its proper name: genocide. Yet the United 
States and our allies have not done enough to help stop it, and Sudan 
continues to disintegrate.
The origins of the October peace conference
    At the end of this month, however, there is another chance. We have 
another chance to bring all of the warring factions together to agree 
on a framework for peace in Sudan, a peace that the United Nations 
peacekeeping force can then help secure. The United States should do 
everything we can to see that this peace is agreed to, and then work 
with the global community to ensure that this peace is preserved.
    The latest push for peace gained momentum in late July, when the UN 
Security Council voted to implement a significantly increased United 
Nations/African Union peacekeeping force.
    This peacekeeping force is desperately needed. The United States 
should work with the UN and the global community to make sure it is 
implemented as soon as possible. We in the Senate should do our part by 
ensuring that adequate funds are available to help pay for this 
critical mission.
    But the peacekeepers are only one important step. Sudan first must 
have a peace to keep, and that requires a long term political agreement 
among its many factions. That is why peace negotiations are so 
critical.
    UN Secretary General Ban Ki-moon told me in July what he has often 
said, that ending the violence in Darfur is one of his top priorities. 
In early September his efforts resulted in the announcement of formal 
peace talks to begin later this month between the various factions and 
the Sudanese government.
    These negotiations will be a critical step and deserve our 
strongest support.
Keeping up the pressure by threatening legislation
    What else can we in the Senate do to help? What can we do to 
reinforce to the Sudanese that we are watching very closely and we 
expect all parties to work towards peace? We can prepare legislation 
that would increase economic pressure on the Sudanese, and be prepared 
to pass that legislation at any time that the Sudanese might falter on 
the path to peace.
    That is why today's hearing is so critical. Our colleagues in the 
House have done their part: they passed the Darfur Accountability and 
Divestment Act 418-1 in July. Today the Senate considers its role. 
Today this panel will explore legislative options that promise economic 
penalties against those that do not in good faith pursue peace through 
dialogue. In the next couple of weeks we hope to create the best 
legislation we can and move that bill through committee and onto the 
Senate calendar. The Senate will make it very clear to the Sudanese 
that we are serious and that a bill is ready to pass if they fail.
    What should this bill contain? Concerned members of the House and 
the Senate, as well as the activists who've kept this crisis at the 
forefront of our minds, have suggested several means by which economic 
pressure could be applied, including the following:

      Require the Administration to create a list of companies 
supporting the Sudanese regime.

      Require companies supporting the regime to report to the 
SEC so that the SEC can publish a list of these organizations.

      Require the Administration to report on the impact thus 
far of current economic sanctions.

      Prohibit federal government contracts from being awarded 
to companies supporting the regime.

      Authorize state and local contract prohibitions for 
companies supporting the regime.

      Authorize state and local governments to divest from 
companies supporting the regime.

      Provide investor safe harbors for divestment.

      Authorize additional funding for the Office of Foreign 
Assets Control within the Treasury Department, so that it can do more 
to find and punish sanctions violators.

      Study how the federal employee Thrift Savings Plan could 
create a Terror-Free Investment Fund which would bar Sudan-supporting 
companies.

      And finally, increase civil and criminal penalties for 
sanctions violators, which was a proposal that I included in my Sudan 
Disclosure and Divestment Act and which passed the House yesterday as a 
standalone measure. I'm happy to say that this method of increasing 
economic pressure is already on its way to the President for his 
signature.

    My objective in testifying today is not to advocate for a specific 
set of pressure points, even though I have introduced two bills with 
Senator Brownback and many others that would increase the economic 
pressure on the Sudanese regime. I think we should explore all of these 
suggestions. My objective here is to provide my full support for the 
Committee's plan to create the best legislation we can to put maximum 
pressure on all the factions in Sudan to agree on peace. I look forward 
to working with my colleagues in the Senate--as well as with the House, 
the advocacy groups, and the Administration--to create the best bill 
that we can and one that we can all support.
Conclusion
    Whatever economic pressure we apply, the purpose needs to be clear: 
the U.S. wants to help bring peace to the region. And we need to apply 
this pressure with one voice. This chamber, this Congress, and this 
country will not stand by and watch as chaos and destruction destroy 
the people of the Sudan. There is a very real opportunity for the peace 
talks to progress. We urge the Sudanese Government and all other 
parties to bring a halt to the human suffering and participate fully in 
the upcoming peace talks. And we will be ready to enact tough new laws, 
if necessary, to further isolate the country economically if this 
opportunity comes and goes, with no real change.
    Thank you again for holding this hearing, and I look forward to 
working with the Committee to do our part in bringing peace to the 
people of Sudan.
                                 ______
                                 
                  PREPARED STATEMENT OF SAM BROWNBACK
                 U.S. Senator From the State of Kansas
                            October 3, 2007
    Since 2003, the government of Sudan has waged a genocidal campaign 
against the people of Darfur. This is the government's second genocide 
in the last two decades, and the situation worsens each day with 
innocent men, women, and children being slaughtered by government-
sponsored militia groups. In just four years, over 400,000 Darfurian 
civilians have perished. Moreover, attacks on humanitarian workers in 
Darfur rose 150 percent from June 2006 to June 2007. Dozens of these 
workers were kidnapped, assaulted, and raped; their aid convoys 
ambushed and hijacked. While rebel groups have also been behind many of 
these attacks, the primary instigator and facilitator of this genocide 
is the government of Sudan.
    Over the last four years the unmatched compassion of the American 
people has kept this issue at the forefront of the national conscience. 
The United States has taken the lead internationally in both declaring 
the atrocities in Darfur a genocide and pressuring the government of 
Sudan to end the violence. Earlier this year, President Bush 
implemented additional sanctions as a way of increasing that pressure 
despite slow diplomatic progress. I, and many of my colleagues, 
applauded those sanctions as sending a strong signal that the U.S. will 
pursue even unilateral measures as a way to create pressure to end the 
violence. Of course, we all agree that the best way to confront this 
tragedy is through tough multilateral diplomacy, but we cannot remain 
captive to the slow timetable of the Bashir regime and allied countries 
that prolong the suffering through self-interest and indifference. At 
the same time, the Administration, Congress, and all of us can do more.
    This year the Sudanese economy will likely grow 13%, much of which 
as a result of Chinese, Malaysian, and other foreign corporate 
investment into Sudan's extractive resource and power sectors. Despite 
U.S. sanctions preventing American companies from investing in Sudan 
and punitive measures targeting Sudanese companies, foreign oil 
investment continues. Such investment provides the means for the regime 
to carry out its campaign of terror. In short, continued economic 
growth has allowed the regime to act with impunity in Darfur. We must 
intensify the effort to change the economic calculations of the 
Khartoum regime.
    As the Administration continues the tough work of pushing 
multilateral diplomacy in the United Nations and through the efforts of 
Special Envoy Natsios, the rest of us must not hesitate to adopt 
legitimate measures that could have an impact on shortening the 
genocide and saving lives. One such measure is targeted divestment.
    The principle of divestment is simple--that none of our money and 
the U.S. Government's money should be invested in the culpable foreign 
companies that are helping to fuel the genocide. The essence of this 
approach is that while we have taken the pledge to the people of Darfur 
of ``not on our watch,'' we must also take the pledge of ``not on our 
dime.'' Since the start of a national divestment campaign, States 
across the country have taken action to ensure that their pension fund 
dollars are not invested in such companies. I am proud that the State I 
represent--Kansas--is among the States that have already passed 
legislation to restrict its Sudan investments.
    We are already seeing results. Since the targeted Sudan divestment 
movement began, several companies from the UK to Germany to India have 
suspended or significantly altered their operations in Sudan. And there 
is good reason to believe the Government of Sudan has noticed and is 
nervous. Clearly, by increasing pressure on foreign companies through 
divestment, the United States can start to change the economic 
calculations of the Sudanese regime.
    Now that the American people and their representatives in State 
governments have begun to act, it is time for the United States 
Government to do its part. One of the key ways for the federal 
government to help is to explicitly provide authorization for States 
and local governments to divest from Sudan. Doing so would address an 
objection that has attenuated the success of the targeted divestment 
movement and has seen State divestment statutes stuck down in federal 
courts. Moreover, doing so at the legislative level could help rally 
the countless individuals--both young and old, from all walks of life, 
and from around the world--who have engaged in remarkable acts of 
individual courage in standing up against the genocide in Darfur. As 
with Apartheid in South Africa, my hope is that these will all add to a 
collective force that will finally bring about change in Darfur.
    Earlier this year, I had the opportunity to testify before the 
House Financial Services Committee in support of the Darfur 
Accountability and Divestment Act, one bill among several before this 
committee that have been drafted to allow Congress to grant a 
divestment authorization while still retaining its Constitutional power 
to regulate foreign commerce. While I understand the Executive branch 
objects a priori to the granting of any divestment authority, I urge 
Administration officials reconsider their position. The legislation is 
Constitutional and moral; practical and powerful; limited yet 
effective.
    As members of Congress, we have worked to ensure that the United 
States remains at the forefront of this fight. It is time again for the 
United States to show leadership on Darfur. We have a responsibility to 
ensure that genocide does not continue on our watch or on our dime.
                                 ______
                                 
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

