Fidelity Investments has sold off more than 90 percent of its
holdings in Chinese state-owned oil giant PetroChina, Fidelity
announced May 16. Although the company declined to explain the
sale, it almost certainly is related to pressure from human rights
and religious activists.

Activists argue that, as the primary oil field operator in Sudan,
PetroChina is propping up the Khartoum regime responsible for the
genocide in Darfur, so putting pressure on PetroChina is viewed as
a way to pressure the Sudanese government indirectly. Fidelity's
move marks an important strategic turning point in the battle
between human rights groups and China over the Darfur region, and
sets the stage for a far more powerful strategic thrust that will
emerge during the summer -- one in which Darfur activists move from
a financial divestment campaign to one focused on the 2008 Olympic
Games.

Activists have long sought effective pressure points on China, and
the Olympics look to be the answer. More specifically, activists
are eyeing the list of Western corporate sponsors that are
investing tens of millions of dollars in the Olympics and in
companion marketing campaigns designed to run before and during the
Olympics.

Olympic sponsorship in 2008 means more than in most past years. For
Beijing, giants such as Kodak, Coca-Cola, McDonald's and General
Electric are not simply the means to put on a good show; they are
integral to its efforts to radically change international
perceptions of China and establish its new place in the world.
Beijing can control most of the variables that come its way -- the
protesters, media investigations into corruption and other
potential public relations problems that usually come with hosting
the Olympics. And, with the sites chosen and no backup available,
it can largely ignore the International Olympic Committee. What
Beijing cannot control, however, are the decisions of the games'
sponsors and the pressures placed upon these companies in the West.

Through the Olympic sponsors, activists have determined that the
year leading up to the Olympics offers a unique opportunity to use
market mechanisms to change Beijing's policies. The first Western
movement to begin to capitalize on this vulnerability is the Save
Darfur Coalition, which turned Sudan into a pariah state with which
no Western company will do business only to have its efforts
undermined by Chinese state-owned enterprises. Many other issues
could have taken this mantle, but it appears that Darfur-focused
activists have taken the lead on exploiting Olympics-related
vulnerabilities -- and will manage the most effective Western
campaign to change China's policies.

The coming year will determine whether activists can actually make
Beijing blink. Moreover, it will determine how groups active on
issues other than Darfur deal with the likelihood that the more
focused Darfur coalition will overshadow their use of this golden
opportunity.

Olympic Sponsorship

The decision to become an Olympic sponsor is a strategic one for
companies. The price of sponsorship is steep -- estimated at
roughly $55 million -- but that pales in comparison to the broader
investment these companies make. The largest and most familiar
sponsors have attached their most valuable asset, their brands, to
the games, and have built long-term marketing plans in which the
Olympics play an integral part.

With so much invested, Olympic sponsorship has always brought
tension. The 2004 Athens games, which were twice threatened with a
move to an alternate city due to poor organization, created stress
among investors. Sponsors now have established offices in future
Olympic cities, where they work as closely as possible with
municipal authorities to ensure that the logistics and setup are on
track.

In the years since 2001, when the 2008 games were awarded to
Beijing, the games have carried an added political dimension for
sponsors. Beijing recruited sponsors not just as sources of money,
but as partners, and for large multinational corporations trying to
learn how to operate in China the opportunity to work with Beijing
was tempting. Those who signed on as sponsors see the success of
these games not only as an opportunity to build their market share
in the West, but also as a way to increase their presence in China.
Beijing also subtly offered improved market access and other
preferential treatment to companies that threw in behind the 2008
games.

Beijing, in order to assert itself on the international stage, has
spent billions of dollars preparing for the games. It brought in
the best stadium architects to build venues and hired Stephen
Spielberg to choreograph the opening and closing ceremonies. In
addition, the Chinese have razed entire neighborhoods to ease
transportation and shuttered industries to clean Beijing's air. If
it can be bought, Beijing is buying.

The support and presence of high-profile Western companies provided
one thing that Beijing could not buy: legitimacy. The thinking is
that the participation of major corporate icons will give a degree
of continuity with previous Olympics, and that by extension China
will be seen as a modern country rather than a developing one or,
more negatively, as the killer of Tiananmen Square, the violator of
human rights and the repressor of basic freedoms.

Activists who succeed in portraying corporate sponsors of Beijing's
Olympics as supporters of China's behavior would undermine not only
the companies' marketing efforts, but also Beijing's plan to use
the games as a coming-out party

Darfur

The human rights controversy surrounding the civil war in Darfur
has been growing since 1998. Khartoum's operations in Darfur mostly
target Christians, and the issue surfaced from the concerns of
evangelical Christian organizations active in Africa. By 1999,
Darfur had emerged as a mainstream human rights concern, and
organizations such as Amnesty International and Human Rights Watch
joined religious groups in calling for the United States and other
Western governments to impose sanctions on the regime in Sudan.

Sudan essentially was a pariah state by the late 1990s, so it was
obvious even at the beginning of the movement that diplomatic
pressure on Sudan would be of limited value. Instead, recognizing
the country's dependence on its southern oil production -- and on
the companies that turn the resource into revenues for the regime
-- activists focused on the corporations. With the flight of most
Western companies in the first half of this decade, Khartoum,
rather than lose its oil revenue, turned to China. Thus, through
PetroChina the Asian giant has managed Sudan's oil operations and
kept the money flowing into Khartoum.

Beyond the funding aspect, however, PetroChina's entry into Sudan
has stood as a major symbol for Western human rights activists, who
have come to view state-owned oil and resources companies as the
most significant barrier to their ability to use market campaign
pressure to change policies in developing countries.

In response to the globalization of corporations' operations and
the rise of the World Trade Organization, human rights groups have
come to rely increasingly on  codes of conduct  and other
marketplace initiatives, such as the Extractive Industry
Transparency Initiative, to hold corporations accountable for their
activities in developing countries. Western companies in particular
are sensitive to allegations that they are complicit in human
rights violations. State-owned enterprises abroad, on the other
hand, are insulated from these pressures, and have begun to thrive
in those places that Western companies dare not operate.

In human rights discussions, this is termed the "parastatal
problem." It is the chief unsolvable barrier to successful efforts
by nongovernmental organizations (NGOs) to use corporations as
instruments of change in developing countries.

'Genocide Olympics'

Bumping up against the parastatal problem, the Save Darfur
Coalition has begun to build toward using Olympic sponsors as
leverage against Beijing. In a Wall Street Journal op-ed article
published in late March, actor and activist Mia Farrow and her
husband called for a boycott of the Beijing Olympics. The threat
will fall on deaf ears, as the vogue of boycotting Olympics --
started by U.S. President Jimmy Carter in 1980 and re-tried in 1984
by the Soviets -- had no diplomatic effect and only made the
boycotters' citizens angry.

The Farrow op-ed, however, contained a more serious threat: As long
as China's state-owned enterprises remain in Sudan, the coalition
aims to attack Olympic sponsors directly and rebrand the 2008 games
as the "Genocide Olympics" (a term first used by Amnesty
International to describe China's internal human rights record and
the human rights implications of its foreign policy). More
sensationally, the coalition threatened to name Stephen Spielberg
the "Leni Riefenstahl of the Beijing games," a reference to the
German filmmaker whose documentary of the 1936 Berlin games
glorified the Nazi regime in the broader context of the Olympics.
Spielberg now publicly calls for China to change its policy toward
Sudan.

The threat to boycott is idle talk, but the threat to change the
perception of the games is not. The Save Darfur Coalition includes
many of the most talented corporate campaign groups in the world,
and the realistic opportunity to change the situation in Darfur is
attractive to Western activists of almost all stripes. In addition,
the public has a high level of awareness of Darfur as a
controversial issue, and most U.S. consumers recognize that China
has a controversial human rights record. Sponsors are likely to be
sensitive to allegations that they are supporting a "Genocide
Olympics" and will take their complaints to Beijing. Given these
factors, then, the campaign has an excellent chance of attaining at
least some degree of success.

That said, defining "success" is a difficult task. China cannot
simply stop the genocide in Darfur with a wave, and it must make a
move that simultaneously satisfies its critics, has a chance of
changing what is happening on the ground in Darfur and results in
China's continued presence in Sudan. (Sudan supplies more than 5
percent of China's oil.) One problem is that China remains one of
the last countries with any leverage against Sudan, so it is
valuable to activists and governments alike as a point of
communication with Khartoum. If pushed too hard, Khartoum could
simply open to another state-owned company immune to Western public
condemnation, kicking China out. Ultimately, China has few options.
It could agree to try to convince Sudan to allow more U.N. and
Africa Union peacekeepers into Darfur, but that would end the
campaign only if the Save Darfur Coalition agreed that such a deal
was sufficient.

In focusing the "Genocide Olympics" campaign squarely on Darfur,
however, human rights groups are using a one-time opportunity to
achieve a relatively modest goal -- and are passing up a unique
moment to effect major change in China.

Falun Gong is another group that appears to recognize the unique
opportunity the Olympics offer. This summer, Falun Gong is planning
a wave of protests and actions that will bring world attention
directly to China's human rights record. Other organizations --
labor, environmental, religious -- also could try to swoop in and
use the Olympic moment.

China might be able to manage activist campaigns effectively and
relatively peacefully. However, should pressure on internal fronts
-- from Falun Gong or other human rights, democracy or
free-expression activists -- get too high for Beijing to handle
temperately, it could consider using Darfur as a public relations
safety valve. Giving in and basically agreeing to work with NGOs on
Darfur would satisfy critics by addressing what is for Beijing a
third-tier issue.



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