American Committee On Africa 198 Broadway, New York, N.Y. 10038 1(212) 962-1210 I Cable AMCOMMAF

Some Notes on U.S. participation in the supply of to .

Prepared for the International Seminar on an Oil Embargo against South Africa. Holland, March 14-16, 1980.

Jennifer Davis American Cmittee on Africa

Executive Director: George M. Houser/Associate Director: Paul Irish/Research Director: Jennifer Davis/Literature: Richard Knight OW, Page 1

As the excellent presentations prepared by Martin Bailey and the members of the Sanctions Working Group, Bailey, Rivers, Tanzer, and Turner give a ccmprehensive view of: a. South African energy and oil needs b. The sources of oil flows to South Africa> I will not attempt to duplicate that material, but present the brief facts below within the overall context of their papers.

It should be noted that US-SA oil links function at two important and distinct levels 1. US oil companies, , ( and of California) and play a central role in importing, refining and distributing crude oil and specialized pet roleum products. 2. US corporations such as the Fluor corporation, Badger and Raytheon, Babcock & Wilcox and Honeywell which have enabled South Africa to develop a "natural oil" substitut,. via the construction of major oil-from- plants. So far these have been state-sponsored projects. It can be assumed that unless checked, this will be an expanding area of co-operation. Fluor and its sub con~ctors have already played a vital role in the construction of the small I, and much larger SASOL II, currently beginning to come on stream. (see SW, and Bailey). It seems certain that this corporation will also be the key contractor in the planned construction of the expanded plant aimed at doubling projected SASOL II output,a4 known variously as SASOL II extension and SASOL III.

In addition recent press reports indicate that private South African interests now plan the construction of a 4th oil-from-coal plant. The SA sponsors include General Mining, a major Afrikaans controlled mining house-and plans announced refer to the use of a direct liquifaction process. In addition, & Chenical Industries, a giant South African company with ownership divided between, inter alia, Oppenheimer's Anglo-American corporation and Britain's ICI has a 3 year plan to turn out equal to some 12 per cent of the country's total road fuel needs.

US oil investments in South Africa form a very significant fraction of overall US direct investment. In addition, it appears certain that much of the short-term financing for the construction of SASOL II was provided viatssistance of Fluor; one prcminent US business journalist recently quoting an "off the record" figure of 60% ( see below, reference to Ex-IM applications).

US-SA Oil investments in context of Domestic & Foreign Investment in South Africa. a. Total Value of all Fixed Investments: Reserve Bank estimate of "Fixed Capital Stock at Replacement Value" ( in dollars) page 2

1970 $34 billion 1977 $122 billion

This total investment value was held in approximately the following ratio: Government Parastatals Private 1977 46% 10% 44% b. All Foreign-Held Investments Within Above Totals: 1977 Total Foreign Investment ( inc. loans) $ 26 billion This means 21% of South Africa's total investment. value is held by foreign persons and ccnpanies.

Share of foreign holdings in direct investment: $ 10.5 billion

Share of foreign holdings in non-direct investment: $15 billion c. North American Part in Total Foreign Investment: 1977- North American direct investments: $ 2.5 billion North American non-direct investments: $ 3.5 billion North American share of total South African investment value = 5%. North American share of total foreign-held direct investment= = 24% North American share of total foreign-held non-direct investment= = 23% d. US Oil Company Investment US oil corporation direct investments in South Africa comprise the largest involvement of US corporations in the South African economy as well as representing in the case of both Mobil and Caltex the largest individual US corporate holdings in the Republic. Total investment is estimated at between $750 million and $1 billion.

Mobil and Caltex These two corporations control nearly 40% of the South African market, and 42% of South Africa's oil refining capacity. Both supply fuel to the police and military, and both have indicated that under SA legislation, they have no option but to continue doing so while their subsidiaries remain in South Africa. Neither company, when pressed has been willing to give any details of government contracts, defending their position by reference to SA legislation dealing both generally with official secrets and particularly with oil.

Both companies are also, incidentally, signatories of the US sponsored code oE conduct known as the Sullivan Principles, and have used this to argue their "positive and progressive" role in South Africa. In neither ccmpany are black wlorkers unionized, and indeed, because of the capital intensive nature of the refinery operation, the relatively high skill nature of jobs available, the companies have used relatively few black orkers-progress, recently reported tends to involve hiring black guards, truck drivers and clerical assistants rather than chemists, engineers and refinery operators. Page 3

In addition, where the corporations have hired non-white labor, they have historically tended to accept the labor skill divisions propagated by the state, thus hiring so-called "coloured" workers, who are not subject to influx control and migratory labor regulations rather than African workers.

Mobil Mobil in South Africa is 100% owned by Mobil Corporation, a US corpxratiort

Mobil began its operations in South Africa in 1897, when a predecessor company, Vacuum Oil Company, established a branch in what was then the British Cape Colony. Today, two Mobil subsidiaries, both incor porated in South Africa, are engaged in refining crude oil, manufacturing and blending lubricants, and marketing petroleum products. Total assets in wholly owned operations amount to about $426 million in 1979, according to the company.

Mobil Oil , with headquarters in , is engaged in marketing a full range of petroleum products including fuels, lubricants, , and spec.il products-also international jet fuels and international bunkers. MOSA owns or supplies approximately 1,350 service stations and in 1977, held an estimated 21% of the inland market for all products. 1976 sales were estimated at $500 million.

Mobil Refining Company Southern Africa owns a 100,000-barrel -a-day refinery at Durban. Mobil also has a 32.9% equity interest in South African , which owns a lube oil refinery at Durban adjacent to MOREF's fuel oil refinery. In addition, Mobil carries on other relatively minor operations in South Africa, such as asphalt manufacturing, road surfacing, and marine and insurance activities.

In 1974, Mobil reported employing 3370 people-1244 "non-white". In May 1978, the company employed 3036 people, 1414 "non-white", including 918 African.

As will be seen from Table A,provided by the company, black workers occupied a miniscule number of skilled jobs.

Caltex Caltex in South Africa is 100 per cent owned by Caltex Petroltum Corporation, an American ccmpany, which in tutn is jointly owned by the Standard Oil Ompany of California (Socal) and Texaco.

Caltex Oil has operated in South Africa since 1911. Caltex activities in South Africa include refining and marketing of a full '6w range of petroleum products. It currently owns and operates a 100,000 barrels 4 d o. .oao 4per day lubricating oil and grease blending plant in Durban. It has a countrywide network of more than 1,000 retail outlets, and services many thousands of commercial and industrial customers.

Caltex has a 23.8% equity share in SAFOR, a 3,000 barrels Page 4 a day lube base oil refinery in Durban, Caltex has no employees at that facility.

As of June 30, 1978, Caltex Employed 2,066 people broken down as follows: 1,207 Whites, 476 Africans, 331 Coloureds' and 52 Asians.

According to the company, 1978 sales were expected to amount to $500 million and at the end of 1978, fixed assets totalled approximately $200 million

According to a June 1978 study on oil prepared for the Special Committee Against Apartheid by Bailey and Rivers, CAtex' investments may in fact total over $330 million, as plans had been announced in May 1977 to expand the Cape Town refinery. THE ROLE OF FLUOR Page 5

Fluor, a US multinational based in Irvine, California, is Fluor applied for the credit on SASOL's behalf in 1975. one of the largest engineering and construction firms in Ex-Im was slow in moving on Fluor's request and it wasn't the world, with revenues of $2.9 billion and earnings of until 1976 that the campaign to eliminate the restrictions $78.4 million in 1978. Among its current or recent pro came to a head. In the final days of the Ford administra jects are the building of a refinery in Saudi Arabia, work tion, 20 US senators, led by John Tower of Texas, gave a on the Alaska pipeline, and construction of an $800 mil letter to the White House asking the President to "funda lion copper mine and processing plant in the Peoples mentally re-examine our policy toward South Africa." The Republic of China. letter also said that restrictions on US ties to South Africa In recent years, Fluor has been heavily involved in the "are contrary to our goal of normalizing relations with other nuclear industry both in the US and abroad. It was also a countries and tend to limit our influence in South Africa." member of a consortium which built a refinery in Sasol It is interesting to note that Tower was supported in his burg, South Africa for the Natref National Petroleum Re 1978 Senate race with a $500 donation by the Fluor Pub finers. Its work for the US government has included con lic Affairs Committee and that Fluor has considerable version of a coal research plant for the Department of interest and influence in Texas due to the presence there the Interior in 1974 and a large-scale oil-from-coal plant of several of its subsidiaries. for the Energy Research and Development Administra Following public disclosure of the pressures (first re tion." ported in Africa News in Feburary, 1976) a counter Fluor was awarded a contract in 1975 for engineering campaign was launched and the Administration decided and construction work on SASOL I1.With the announce against lifting the ban. The Ex-Im Bank, however, ment of the SASOL II Extension, Fluor's contract was decided it would extend the guarantees and circulated a revised to include "management and coordination of the defense of the decision on Capitol Hill. The day after the total project, including a major portion of the engineering, beginning of the Soweto uprising in June, 1976, Ex-Im re design, procurement, construction and a multitude of scinded its decision. other supportive functions." In addition to work on the However, Fluor's involvement in SASOL II was not oil-from-coal facilities themselves, Fluor is also building affected by the failure to abolish Ex-Im limitation. Export a town called Secunda, five miles away from the plant, to credits eventually were obtained in ,4.4 V1 U.S. house SASOL workers. Fluor and Fluor officials also have been active politi Fluor's total contract for both SASOL II and SASOL II cally in other ways which have been of direct or indirect Extension is valued at $4.2 billion. Details have not been benefit to South Africa. J. Robert Fluor, chairman, presi released, nor is it known what percentage of the $4.2 bil dent, and chief executive officer of Fluor, sits on the lion will be Fluor profit. board of the Heritage Foundation, a conservative organi However, Fortune magazine said in February, 1979 zation which has distributed material sympathetic to that "...Seldom will the (Fluor) company take chances of South Africa. Fluor is also a member of the well-funded losing money in an inflationary situation by bidding for Business-Industry Political Action Committee, many of jobs at lump-sum guaranteed prices... As much as half whose contributions have gone to conservative candi the total cost of a typical project will be billed by subcon dates who are sympathetic to South Africa. tractors or suppliers directly to the client. While Fluoir-is making money building SASOL facilities Fluor is working with several other multinational cor in South Africa, it is also trying to parlay its South African porations from West Germany, France and the US in experience into additional business elsewhere in the building the SASOL facilities. US firms known to be sup world, in the form of contracts for plants using the plying equipment or engineering and construction skills SASOL process. In the US, Fluor has already advanced a include Babcock and Wilcox, Badger Corporation (a major step toward this goal in the form of an April, 1979 subsidiary of Raytheon), Chicago Bridge, Honeywell, and announcement by the Department of Energy that it had Goodyear. obtained State Department clearance to offer to buy the A major concern over Fluor's involvement in the SASOL SASOL I data bank from any private corporation that can project is that Fluor operates on a "turn-key" basis: it arrange a deal with SASOL officials. The Department of builds a project and moves out. Then all the owner must Energy doesn't want to buy the data directly because of do is "turn the key" for the new plant to operate. In building the negotiations it would entail with South African the SASOL plants, Fluor is providing the South Africans authorities. The data bank consists of SASOL's improve with engineering and construction technology they do ments on the Fisher-Tropsch coal-to-oil process. not presently possess, but need, in their struggle for One of those who lobbied hard for the favorable deci self-sufficiency. sion was Congressman William Moorhead of Pittsburgh, Once Fluor was involved in SASOL I!, it began lobby whose district includes the headquarters of Allegheny ing to loosen US Export-Import Bank restrictions on ex Ludlum Steel, an active proponent of continued business tending credit to South Africa. The South Africans were • ties with South Africa, and borders on large coal reserves. seeking $225 million in loans and $225 million in loan Coal and oil companies have been interested in oil guarantees from Ex-Im, using jobs for American workers from-coal conversion from many years and SASOL has and large contracts for US firms as incentives. Ex-Im cooperated by testing various types of coal in its plant. strictures prohibited direct loans to the South African government. Page 6

The question is not whether the SASOL process could committee on Economic Stabilization hearing, "I would be used in the US but whether it is worth the cost, both in not characterize [South African technology] as being money terms and in terms of the level of dependence on more advanced than ours. What I would characterize is South Africa that it would entail. Dr. John Deutsch, that because it is in operation, it has the benefit of acting Assistant Secretary of Energy, told a House Sub- practical experience."

(Excerpted from FL[JOR: Building Energy Self-Sufficiency in South Africa The Africa Fund, 19791.

Opposing US Oil collaboration. Although, or perhaps because groups have had experience with trying to organize a boycott of an

Several religious denominations, working with the Interfaith Center on Corporate Responsibility (ICCR) have for several years filed, Ut0.sL resolutions with Texaco, Socal and Mobil urging that at a minimum, the companies pledge to end all sales to the police and military and refrain from expanding their operation in South Africa.

A shareholder resolution introduced jointly at the 1979 Fluor annual meeting by the American Friends Service Committee and the Maryknoll Sisters of St. Dominic stated that "...as investors we believe that the US business investment and strategic contacts in South Africa, including Fluor's, provide significant econcmic support, international credibility and moral legitimacy, to South Africa's apartheid'government" and resolved that Fluor" make no further investments in or contracts with the government of the Republic of South AfricaY

In response, the company cited its signing of the Sullivan Principles. Making clear its intention not to cause any problems with the white government, it added, "Historically, the Company has always abided by the laws, regulations and social customs of the country in which it works, and the management intends for the Company to continue in this manner."

The rerolution obtained only 4.1 percent of the vote. A similar resolution is being introduced at the 1980 stockholder's meeting, but the fact is that shareholder resolutions opposed by management have virtually no chance of being passed, whatever their merits.

Students on campus, and some community and trade union groups have taken a different approach. They have challenged the role of all US corporations including the oil companies, in South Africa.They have called on all such companies to disinvest from South Africa and have begun to mobilize local economic power to put pressure on the companies to meet this demand. Thus students are urging their universities to sell stock in all companies doing business in South Africa, Unions are examining the investments held by their pension funds and making similar demands, some local city governments have agreed not to invest city funds in such corpo rations. Table A - Positions: Distribution of Non-White Manpower Within Salary Groups 1972-1974

Salary Groups Typical Positions 1972 1974 1-2 General depot laborer; messenger; reproducting machine 861 759 operator; fork lift truck operator; cook; gate guard; clerical assistant, clerk I; workshop hand.

3-5 Clerk II, Ill, IV, V; stores assistant; intermediate storekeeper; 163 422 assistant mailing and stationery supervisor; key punch operator, junior computer operator; copy typist, junior steno grapher; telephonist; chauffeur; airport crewman; heavy vehicle driver; security guard; refinery operator I, II; lab oratory technician I.

6-8 Laboratory technician II; senior computer operator; sales 21 55 representative; clerk VI, VII; refinery operator III, IV; senior storekeeper; aircraft refueler; plant supervisor; minor bulk depot and superintendent; supervisor mail and services; draftsman; stillman.

9-12 Junior engineer, engineering assistant, engineer; marketing 1 8 assistant; chemist; assistant accounting section head; field accountant, accounting section head; medium size depot superintendent; shift supervisor; mechanical foreman; district manager; zone foreman.

Totals 1,046 1,244 TABL

STOCKHOLDERS OF TELUOR CORPORATION

The Corporate Data Exchange (New York) has identified approximately 50 percent of the stockholders of the Fluor Corporation between 1975 and 1979. Listed below are the top ten stockholders plus some of the more interesting and significant ones.

TOP TEN STOCKHOLDERS Shares % of Stock Shareholder 921,262 5.76 Manufacturers Hanover Trust Co. + Retirement Plan 801,386 5.009 California Canadian Bank (Trustee of Fluor Employee Trust Fund) 655,000 4.094 Kirby Family Corp. 511,332 3.196 BankAmerica Corp. 393,000 2,456 Prudential Insurance Co. 355,125 2.220 Provident National Bank 279.135 1,745 Sears Savings and Profit-Sharing Fund 273,000 1'.706 Bankers Trust Co. 201,272 1.258 New York City Teachers Retirement System 186,320 1.165 Pittsburg National Bank UNION-REtATED PLANS (Pension plans over whose funds unions have some degree of authority.) Shares % of Stock Shareholder 277,500 1.736 Six different Bell Telephone Pension Plans 104,100 0.651 Union Carbide Pension Plan 42,000 0.263 Chrysler Corp-United Auto Workers Pension Agreement 30,000 0.188 Ford Motor Co. General Retirement Plan 19,000 0.119 NYSA-International Longshoremen's Pension Fund 15,000 0.094 Sheet Metal Workers National Pension Fund 5,000 0.031 Mobil Oil Corp. Retirement Plan 4,700 0.029 General Tire & Rubber Non-contributory Pension Plan PUBLIC PENSION PLANS Shares % of Stock Shareholder 201,272 1.258 New York City Teachers Retirement System 10,000 0.063 Oregon Public Employees Retirement System 2,000 0.013 Utah State Retirement Investment Fund EDUCATIONAL INSTITUTIONS Shares % of Stock Shareholder 4,500 0.028 Boston University 2,000 0.013 Tufts University 500 0.003 Albright College