June 23, 1998
BusinessWeek Online

UNOCAL'S CLAIM: ECONOMIC TIES DO TAME TYRANTS

The U.S. government's policy of slapping economic sanctions on hostile nations amounts to "shooting yourself in the foot" when it comes to America's ability to exert influence around the world, Unocal CEO Roger Beach said on June 22.

Speaking at a luncheon sponsored by the Asia Society in New York, Beach instead encouraged economic engagement with nations acting contrary to U.S. wishes. He urged business leaders to support legislation by Senator Richard Lugar (R-Ind.) and Representative Lee Hamilton (D-Ind.) that would limit the use of U.S. economic sanctions, which currently affect 70 foreign countries.

"The continued use of unilateral sanctions will create increasingly serious competitive problems for U.S. businesses, while jeopardizing America's leadership role in the global economy," Beach said. "Business must actively promote economic engagement as an alternative to sanctions."

Unocal, which is the largest U.S. company to have invested in Burma, has reason to be concerned about sanctions. It has been prevented from expanding its investments there by U.S. economic sanctions enacted last year against that Southeast Asian nation. However, the sanctions allow Unocal a "grandfather clause" to continue exsiting operations--a stake in a $1.2 billion gas pipeline consortium headed by France's Total.

Activists including democracy leader Aung San Suu Kyi, who won a 1990 national election that was annulled by Burma's military junta, have urged foreign companies to pull out of Burma and wait until Suu Kyi's legitimately elected party is allowed to take power.

In an interview with Business Week on Mar. 6, Suu Kyi said U.S. companies such as Unocal serve to support the dictatorial regime in Rangoon and keep it in power, rather than helping the people of Burma.

But Beach adamantly disagrees. "It's not true. She doesn't understand. She doesn't want to understand," he said. Beach's reasoning: Unocal's policy of "economic engagement" will ultimately help create a middle class that will demand more democratic freedoms and foster democratic change.

"But it's not going to happen overnight. It's going to take 25 years," Beach said, making a comparison with the recent change of government in Indonesia. Unocal's role in fostering democratic change in Burma, Beach said, will be to "hire people, train them, support education....and ultimately we build a more prosperous nation."

Unocal has also been affected by sanctions in attempting to build a pipeline through Afghanistan. Beach said that the economic sanctions recently imposed against Pakistan, another country through which the same pipeline must pass in order to reach central Asian republics, will force the postponement of the Afghan project by several years. "This is a project that is economically sound but politically impossible," said Beach.

By Sheri Prasso in New York

Sheridan Prasso | June 23, 1998 | Unocal's Claim: Economic Ties Do Tame Tyrants