Tag Archives: Economic Security Policy

Terror-free investment gathers steam

Poll Shows Overwhelming Support for Terror-Free Investing Programs,

Public Demanding Leadership to Combat Terror-Supporting Regimes

Terror-Free Investment Movement Gathers Steam:
‘Every Investment Dollar Should be Part of the Solution’

Washington, D.C. – Highlighting the rapidly growing national movement to ratchet up economic pressure on Iran, Syria, Sudan and other countries supporting terrorism, Missouri Treasurer Sarah Steelman today urged other states, the federal government and individual investors to follow her lead by supporting terror-free investing.

“I was shocked to learn that a portion of our state pension funds supported corporations that were invested in Iran and other countries that work with terrorists,” Ms. Steelman said.   “We can invest our money just as easily, and even more successfully, without helping prop up these kinds of regimes – and that’s exactly what we’ve done in Missouri.   We can’t do it alone, though, and it’s gratifying to see other states following our lead.”

Citing results of a new national poll showing 77% of Americans backing terror-free investment, Ms. Steelman added, “This is a powerful idea. Popular support for this idea is enormous – once the public finds out the truth about where their funds are being invested.   Informed investors and the people across this country want action to isolate companies that are helping our enemies, directly or indirectly.”

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Treasurer Steelman was joined Tuesday at the National Press Club by: Debra Burlingame, a prominent spokesperson for 9/11 families whose brother, Charles “Chic” Burlingame, was the pilot of the hijacked plane that was flown into the Pentagon five years ago; by Frank Gaffney, president and CEO of the Center for Security Policy and sponsor of the DivestTerror.org initiative; and by Larry Moscow, senior vice president at Luntz, Maslansky Strategic Research.

Ms. Burlingame and Mr. Gaffney elaborated on the importance of the terror-free investment movement – at the state level, with initiatives in Ohio, California, Georgia and other states, and at the federal level, with bills introduced in the House of Representatives by Reps. Tom Lantos (D-CA) and Ileana Ros-Lehtinen (R-FL).

“The Divest Terror Initiative train is leaving the station, and we’re here to encourage every elected leader in Washington and in all 50 states to get on board,” Mr. Gaffney said. “For too long, too many Americans have felt powerless in the face of terrorists determined to hurt us.   Terror-free investing is something that can unite our country, a way for millions of Americans to have a say in how to enhance our security by telling corporations that partner with terrorist-sponsoring nations that they can do business with our enemies or with us, but not both.”

“On the morning of 9/11 – and since that day – Americans have been asking ‘What can we do to stop the scourge of terrorism?”   Here is something they can do, and now we know that they want to do it,” Debra Burlingame observed.

Ms. Burlingame added, “Where is Wall Street?   It was the financial district that was targeted when those planes hit.   Our enemies understand how to use economics to hurt us.   We have to use this tool against them.”

Larry Moscow presented the details of the just-completed national poll, which underscores the broad base of support among Americans to use terror-free investing to help fight terrorism. “The survey revealed an unmistakably strong attitude on this subject.   Some of the key findings include the fact that 84% of Americans strongly agree – with only 4% disagreeing –   that investors have a fundamental right to know if their investment dollars are going to support companies that do business in terror supporting countries,” Moscow said.

“More than 80% say that if they learned that a company in which they have invested was found to be doing business in a place like Iran, Syria or Sudan, they would either sell that investment or demand the company cease doing business with the terror supporting nation,” Mr. Moscow continued.   “And 79% of Americans say they feel so strongly about this issue that they want those companies completely out of their investment portfolios, even if it meant a slightly lower rate of return.   That is a powerful statement.”

Mr. Gaffney, whose organization’s DivestTerror.org initiative is supporting terror-free investing awareness efforts at the state and federal levels, concluded the press conference by pointing out that roughly 50% of the world’s capital is invested in American capital markets or owned by American investors.

“The American investing public can play a potentially decisive role in this War for the Free World,” Gaffney argued.   “By deciding to have their money invested terror-free, we can take billions of dollars away from the regimes that enable the people trying to kill us – possibly changing not only the behavior of such regimes, but the governments themselves, as was the case when a similar effort was mounted against apartheid South Africa.

The DivestTerror.org campaign encouraged American investors to take the “Terror-Free Investment Pledge” which was unveiled at the press conference.

Terror-Free Investment Pledge

As a matter of principle:

I have a right to know exactly where my investments are going.

I have a right to be informed if companies I have invested in are doing business with foreign regimes that support terrorism.

I have a right to choose to invest in companies that further the interests of security and safety worldwide and to interact with countries, companies, and people who do not associate with terrorist organizations or their sponsors.

I have a right to insist that my money NOT go toward supporting terrorist activities, directly or indirectly, or the countries that sponsor them.

As a concerned investor, I pledge to pull all of my investments from companies that do business with terrorist-sponsoring countries, and I will only invest in certified “terror-free” funds and companies in the future.

I sign this pledge as an investor who wants to be clear about where I stand on this issue and to encourage others to stand with me.   And I sign my name to this pledge because I believe that genuine accountability, transparency and commitment to promoting – not undermining – our security should be the responsibility of publicly traded companies, as well as nations.

Genocide’s lobbyist








William Reinsch, former Clinton Administration official, now a defender of murderous regimes.
Last Friday, U.S. District Judge Matthew Kennelly issued an opinion that has been widely but incorrectly perceived as a body-blow to the growing national effort to ensure that public pension funds are not unwittingly supporting state-sponsors of terror like the genocidal regime of Sudan.   The misunderstanding is largely a product of the spinning of the ruling by a man who can be counted on to side with the enemies of freedom: the National Foreign Trade Council’s top Washington lobbyist and former Clinton Commerce Department official William Reinsch.


On 23 February, Reuter’s breathlessly reported what amounted to Reinsch’s line:   “An Illinois law barring state-backed investments in non-U.S. companies doing business in Sudan to protest genocide in the Darfur region was declared unconstitutional by a federal judge on Friday.” It went on to note that “The ruling by [Judge Kennelly] could impact similar laws enacted in the past year in at least eight other U.S. states and proposals being considered by several other state legislatures.”


Reinsch himself was quoted as saying that “the ruling means pension funds won’t have to sell assets’ in order to comply with Illinois’ law.”   If he were right, international companies including, according to evidence in the judge’s official ruling, some represented by the National Foreign Trade Council would be able to continue do business with and in Sudan, and thereby enable its malevolent behavior.


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Fortunately, Reinsch’s spin notwithstanding, the judge did not find that it was   unconstitutional for Illinois or other states to require their public pension funds to divest the stocks of companies that partner with terror-sponsoring regimes.   Rather, he judged two, relatively minor features of the Illinois legislation to be incompatible with the Constitution.  The first deals with certain prohibitions on the deposit of state funds in banks that have clients that have ties to Sudan.   The second concerned the statute’s overreaching when it required divestment on the part of small municipal and employee pension funds which have no state money in them.


The true character of the federal court ruling is captured by the Illinois law’s chief sponsor, State Senator Jacqueline Y. Collins (D-Chicago), who issued a press release yesterday in which she “applauded the recent court decision that affirmed Illinois’ right to divest from Sudan.”  



The Court confirmed the State’s right to disassociate from the reign of genocide and terrorism that has been killing and maiming thousands of our sisters and brothers in Sudan. And for that, we’re very pleased.


The Court has confirmed that State divestment from Sudan is not pre-empted by the federal government’s authority to conduct foreign affairs.  The Court has confirmed that corporations are not irreparably harmed’ by divestment, and have no grounds to enjoin State divestment.   The Court has confirmed that nothing prevents other States from following our lead.


Hundreds of pension funds across the state have been divesting from Sudan in good faith.   Taking into account the guidance that we’ve received from the Court, we will move quickly to promote the State goal of disassociating from genocide and terrorism.  (Emphasis added throughout.)


The Center for Security Policy commends Sen. Collins for her leadership in using Terror-Free Investing as a tool to counteract the Khartoum regime’s genocide, slave-trading, proliferation of weapons of mass destruction and sponsorship of terror.   If, as seems likely, she and her colleagues in the Illinois legislature move swiftly to enact amendments that will correct the relatively minor technical faults found by Judge Kennelly with this legislation, the Land of Lincoln will continue to provide an example to the Nation and contribute in strategically vital ways to its war against terrorists and those who enable them.  


It can only be hoped that William Reinsch and the multinational corporate interests he represents will forego further efforts that have the effect of helping our enemies in this War for the Free World.

With us, or else

Raise your hand if you are an Iranian Islamofascist and you want to thank Western oil companies for helping fund terror.

The outcome of the present, global conflict may ultimately turn on the implementation of a policy it took President Bush just seven words to declare on November 6, 2001:   "You’re either with us or against us."  

For too long, it has been possible for far too many around the world to have it both ways. This must stop.

In particular, the time has come to make it clear to those who are helping our enemies that they are not with us – and that there are real costs associated with being against us.  

Fair-Weather Friends

Every one of us can contribute to this effort by making an example of a company that is contemplating doing a lot more business with Islamofascist Iran, at the very moment that it is aggressively pursuing (with help from North Korea) nuclear arms and the ever-longer-range ballistic missiles with which to deliver them.   Presumably these are the means by which Iranian President Mahmoud Ahmadinejad intends to realize his oft-stated goals of wiping Israel "off the map" and bringing about "a world without America."

A company that is at the moment a prime candidate for such treatment is Royal Dutch Shell.   According to the Conflict Security Advisory Group (CSAG) – an independent market research firm whose Global Security Risk Monitor online database is the industry standard for assessing publicly traded companies that do business with terrorist-sponsoring regimes – this Anglo-Dutch corporation has done billions of dollars of dollars over the years with the Islamic Republic of Iran.   It even has four offices in Tehran.  

Last week, however, Shell Chief Executive Jeroen van der Veer told participants in a conference call that his firm and a Spanish oil company, Repsol, have entered into a preliminary understanding to help the Iranian regime develop part of its vast South Pars natural gas reserve.   Press reports indicate that Tehran believes the deal is worth $10 billion.

To be sure, that $10 billion will translate into profits for Shell and its partner.   It will, though, also afford the Islamofascists in Iran revenue streams that will enable them to support more terrorists, to kill more Americans and Iraqis, to destabilize the region and to prepare genocidal attacks on this country as well as our ally, Israel .

Making such a huge, further investment in Iran would, in short, be a very unfriendly act.  And Shell must understand that it will be regarded, and treated, as such.

Getting Shell’s Attention

For one thing, the Bush Administration should interpose the strongest possible objections to putatively allied governments in London and The Hague that export guarantees and insuranceunderwrite such an investment.   for this deal would seriously complicate bilateral and trilateral relations.   For another, the Treasury Department should make life miserable for any banks that might contemplate helping

The real power to punish Royal Dutch Shell for being against us in this War for the Free World, however, should lie with American investors and consumers.   The Roosevelt Anti-Terror Multi-Cap Fund (RATF) is the first mutual fund in the nation to be certified by the Conflict Securities Advisory Group as "terror-free."   It holds in portfolio neither Shell nor any other publicly traded companies doing business in Iran , Sudan , Syria or North Korea .   Nationwide Financial, E-Trade, Ameritrade and Schwab have begun offering RATF as an option on their investment  platforms.

In addition, Sarah Steelman, the Treasurer of Missouri , has taken the first public fund terror-free – and achieved a higher return in so doing.   Her state’s 529 college savings plan will shortly offer such an option as well, one which will be available to investors from all over the country.   If you don’t want to enrich those who are trying to kill us, insist that your money – be it in public pension funds, 401k plans, mutual funds, life insurance portfolios, etc. – is invested terror-free.

Whether you are an investor or not, you have another option:   Show Shell how you feel about its dealings with our Iranian enemies by filling up your car at the pumps of one of its American competitors – who, by law, are not permitted to do business with terrorist-sponsoring states.  

Interestingly, Shell’s CEO is already nervous about his company’s ties to Tehran.   As he told reporters last week:   "I would like to emphasize that we have here quite a dilemma. This is Iran . They are the Number Two in oil and gas reserves in the world. But we have all the short-term political concerns."

The Bottom Line

By making an object lesson of Shell, we can help resolve its management’s "dilemma."   If it actually starts to be painful to be "against us," we can ensure that more of those who wish to do business with America – and who typically take for granted our protection of their freedoms – line up "with us," instead of with our enemies.   Without help from our friends, maybe those enemies’ regimes will change their behavior, or even fall from power.   It is certainly worth a try.

In recent weeks, Senators John McCain and Joe Lieberman, former Governor Mitt Romney, former House Speaker Newt Gingrich, former Senator Rick Santorum and former Israeli Prime Minister Benjamin Netanyahu have embraced the idea of terror-free investing.   Let’s show Shell and other, foreign-owned companies that partner with our foes – like France’s Total, China’s Sinopec, Russia’s Gazprom and Italy’s ENI – that Americans take seriously the imperative of countering Iran ‘s nuclear ambitions and support for international terror.   They had better be with us, or else.

Critical mass for Divest Terror program

As European-led negotiations aimed at convincing Islamofascist Iran to abandon its nuclear designs continue to falter – increasing the likelihood that Iranian President Mahmoud Ahmadinejad will acquire the capability to follow through on his threats to "wipe Israel off the map" and bring about "a world without America" – progress on another front leaves reason for hope that Tehran’s designs may yet be defeated.

In her column in today’s Jerusalem Post, CSP Senior Fellow for Middle Eastern Affairs Caroline B. Glick reports that the international campaign to divest from companies doing business with the Mullahocracy – potentially costing the regime hundreds of billions of dollars – is gaining powerful allies.  During the Herzliya Conference held January 24-27 in Israel, former U.S. House of Representatives Speaker Newt Gingrich, former Massachusetts governor Mitt Romney and Senator John McCain all went on record in support of pension fund divestment. 

Further promising news in the divestment campaign appeared earlier this week in the form of talks between former Israeli Prime Minister Benjamin Netanyahu and the state treasurers of Massachusetts, Rhode Island, Vermont, Maine and Connecticut to explore the divestment of those states’ public pension funds from companies that do business with Tehran.  As Ms. Glick observes, Iran stands to lose $71 billion from these five states alone.

Thankfully, a model already exists for these states to follow in the form of the one adopted by the Missouri Investment Trust (MIT) last June, which expunged from its portfolio companies that did business with any state-sponsor of terror.  Importantly, this first-in-the-nation step to deny those regimes the vital resources, technology and cash to support their terrorist proxies has actually led to stronger returns for MIT’s investors.

While these recent events underscore the tremendous and still-growing influence of the DivestTerror.org campaign launched by the Center for Security Policy more than two years ago, much remains to be accomplished – starting with divestment by the many-billion dollar Federal Thrift Savings Plan for which all executive branch, congressional and other federal government employees are eligible.  It is now unmistakably clear:  It is no more practical than it is moral to continue to finance both sides of this War for the Free World.

Memo to the President

Mr. President:

By now you have been getting lots of free advice about what to say – and what not to say – in your remarks Wednesday about a new strategy for Iraq.  Some of it, like Jim Baker’s recommendations that would have translated into our defeat, you have wisely rejected.  You have evidently decided to accept others reflecting your laudable determination to prevail, including staff shake-ups and surging of forces. 

The leaks depicting your decisions to date seem, however, to reflect the same miasma that has afflicted many of your critics – namely, the perception that strategic adjustments are in order only vis a vis Iraq.  A variation on the theme is the mistaken belief that we can make changes in policy or strategy towards Iraq without acknowledging, let alone reckoning with, the fact that it is but one front in a far wider war.

Key Recommendations

In case the free advice you have taken aboard to date hasn’t addressed these points directly, I would respectfully suggest that you factor into your thinking the following suggestions:

  • First, at this moment of critical redefinition, you have to root your strategy for Iraq in the context of the larger, truly titanic and global conflict being waged against us by a totalitarian ideology.  In the interest of clarity and a new sense of direction, you must give new names to the war and to the enemy we confront.  It is no longer enough to describe the former as "the war on terror" and the latter as "terrorists."

Today, we are engaged in " the War for the Free World," a formulation that makes clear that nothing less than the future of freedom and Western civilization is at stake.  And our principal enemies at the moment are adherents to " Islamofascism," a term you have used twice before.  Most Muslims want no more than the rest of us to live under the sort of repressive theocracy such ideologues seek.  But unless the Islamists are stopped, most immediately – but not exclusively – in Iraq, we will surely confront their violent bids for power elsewhere, including here.

To be sure, you have made such points from time to time in the past.  But it has never been more important to underscore this central reality behind the changes you will be announcing Wednesday.  Not least, by so doing, you can make clear why it is impossible simply to acquiesce in the face of congressional criticism and negative polls to alternative strategies that will result in a terrible loss for the Free World in Iraq – and further embolden its enemies and their enablers.

  • As you know, chief among these foes at the moment is Iran.  Again, the problem is not confined to Iraq, although Tehran is certainly making every effort to ensure freedom’s defeat there.  The Iranian mullahocracy is also actively engaged in international terrorism, destabilizing Lebanon, explicitly threatening Israel and the United States and amassing the nuclear weapons and ballistic missiles needed to carry out such threats.

Consequently, your new strategy must make clear that it is being designed to counter Islamofascist Iran both in terms of its subversion in Iraq and with a view to working with the Iranian people to bring down a government that they hate as much as we do.  Toward that end, in your speech Wednesday, you should call attention to three further initiatives:

  • Millions of Americans can help the war effort by investing terror-free – that is, by ensuring that their money is not invested in companies that do business with Iran and other terrorist-sponsoring regimes.  Call for the Nation’s public pension funds, mutual funds and other institutional and private investors to deny resources to our enemies and, thereby, to reduce fiduciary risks associated with such investments.
  • On Sunday, General Motors unveiled a new hybrid electric vehicle called the Chevrolet Volt which could allow many drivers to avoid using gasoline at all.  The widespread application of this "E-flex" technology – essentially an electric vehicle which uses its gas-powered internal combustion engine only to recharge its batteries – could dramatically reduce our "addiction to oil" evident in the U.S. transportation sector’s dependence on foreign sources of petroleum.  By so doing, we can further cut into the wealth our enemies use to threaten us.

For the promise of approaches like "E-flex" to be realized, though, America is going to have to have a reliable and large-scale source of lithium-ion batteries such vehicles require.  Mr. President, make addressing this requirement a key part of a new, bipartisan energy security component to your new strategy.

  • Finally, you need to make clear the importance of America’s freedom of action to defending this country.  Under your leadership, we have enlisted dozens of countries in a U.S.-led Proliferation Security Initiative (PSI).  It facilitates joint action to detect and defeat the spread of weapons of mass destruction. 

Unfortunately, the new Democratic leadership of the House of Representatives has included language in its so-called "9/11 implementation legislation" (scheduled for floor action [today]) a sense of the Congress resolution that PSI should be subjected to the approval of the UN Security Council.  This would have the effect of giving Russia and China a chance to veto, or otherwise adulterate, this important program – possibly denying us counter-proliferation tools more needed today than ever before.  Draw the line on this sort of woolly-headed thinking now.

The Bottom Line

In short, Mr. President, your speech tomorrow must show the American people and their elected representatives that you are squarely addressing the challenge of our time – of which Iraq is but one part – in a comprehensive, multifaceted and determined way.  Your intention to win must be forcefully communicated, not just because it is preferable to losing, but because the alternative to victory in this War for the Free World is unacceptable.

Shareholder democracy goes to war

Today’s Wall Street Journal marks an important breakthrough on the financial front in the War for the Free World, a heretofore largely neglected but potentially decisive battlefield for Americans and other freedom-loving peoples.   The Journal‘s op.ed. pages feature an extraordinary essay by Sarah Steelman, the State Treasurer of Missouri, which calls national and international attention to the newest instrument for defeating state-sponsors of terrorism: Terror-free investing. 

The contribution such an investment strategy could make was underscored in a study published by the Center for Security Policy in August 2004. The Terror Investments of the Fifty States documented that, as of that time, eighty-seven of the Nation’s most prominent public pension funds (representing police officers, firefighters, military personnel, teachers, government employees, etc.) had roughly $188 billion invested in some 400 companies that partnered with terrorist-sponsoring regimes.   (Of course, the total investment by the capital markets in such companies would be vastly larger.)   Treasurer Steelman makes clear – just as the Center’s report did in 2004 — that it is our choice whether our public monies should be invested in these companies and that is incumbent on all Americans to use their shareholder "vote" to tell companies that partner with terrorist-sponsoring states: "Not with our money."

Of that $188 billion investment, the Center’s study suggested that some $73 billion was actually finding its way into the hands of the Sudanese, Libyan, North Korean, Iranian and Syrian governments.   At least some of these funds and the revenues they generate are presumably being put to use by our enemies for the financing of terrorism, the acquisition of weapons of mass destruction and the threat and/or practice of genocide.

Treasurer Steelman’s op.ed. recounts the pioneering work being performed by her Missouri Investment Trust (MIT) – "the first public agency in America to implement a terror-free investment fund."   By so doing, she has established that investors can "vote with their feet," declining to put their pension funds, mutual funds or other personal savings at the disposal of those who do business with our enemies.

Importantly, Ms. Steelman’s experience with MIT makes it clear that one need not sacrifice return on investment in order to do the right thing. The Missouri Investment Trust actually performed better as a terror-free fund than it would have by partnering with the terrorists’ favorite companies.   In addition, as she notes, there is less risk exposure for fiduciaries associated with investing terror-free since, by so doing, institutional and private investors are able to avoid what the Securities and Exchange Commission calls "global security risk" – the material risk that arises from doing business with the world’s most reprehensible regimes.

Today’s Divest Terror breakthrough extends far beyond the precedent-setting Missouri Investment Trust.   As Ms. Steelman notes, there are now or will shortly be options for terror-free investing through a variety of other venues including: the Roosevelt Anti-Terror Multi-Cap Fund (RATF), the first mutual fund in the Nation to be certified as terror-free, now available via Missouri’s 529 college savings fund that will be open to all Americans;; and the availability of that fund’s offerings (and surely, in the future, others) to the thousands of corporate clients of Nationwide Financial’s 401(k) vehicle.   This certified "terror-free" mutual fund is also reportedly available for direct investment through E-Trade, Ameritrade, Schwab and many other investment firms.  

Thanks to Sarah Steelman’s courage and leadership, the opportunity to privatize an important part of the War for the Free World is at hand.   It behooves every American investor to take advantage of this chance to do his or her part for the war effort in ways that can make a material difference.   As Treasurer Steelman put it:   "By choosing to invest terror-free, we can help cut-off financing for terror-sponsoring governments, help our soldiers, make our investments less risky and make a difference in the contemporary fight for liberty.   That’s democracy."

Divest North Korea

Decision Brief                            No. 06-D 54                                          2006-10-23


(Washington, D.C.): North Korean dictator Kim Jong-Il has reportedly told Chinese interlocutors that he is “sorry” about testing a nuclear weapon and that he is willing to resume his country’s participation in the so-called Six-Party Talks. It is predictable that diplomats in this country and elsewhere will seek to parlay this “breakthrough” into new negotiations. If past practice is any guide, however, these talks will translate into additional strategic, financial and political concessions for the North, even as it continues to build its nuclear weapon stockpile and perfect its long-range ballistic missile programs – the very actions such concessions are meant to foreclose.


Rather than fall for this gambit yet again, the United States needs to adopt a wholly different strategy – one that is aimed at bringing down Kim’s regime, not propping it up . Only by so doing, is there a chance of avoiding the cataclysm that will result as the despot of Pyongyang aggressively brandishes, and perhaps uses, his weapons of mass destruction and/or makes them available to willing buyers.


Two Hurdles


To be sure, there are two major impediments to such a U.S. policy. The first is Communist China ‘s determination to perpetuate this danger, rather than reverse it . It should be clear by now that Beijing will not be a helpmate to the cause of freedom, no matter how often Secretary of State Condoleezza Rice and others contend it is.


The second – and possibly more tractable – one is posed by our nominal ally, South Korea . Seoul is guided by its left-wing, appeasement-minded president, Roh Moo Hyun, and the vested interests of roughly ten publicly traded South Korean firms led by Hyundai. The latter are determined to extend the misery Kim has inflicted on his people by simultaneously exploiting them for what amounts to slave labor, while enriching the North Korean despot. This is the effect of a variety of the North’s “Social Overhead Capital” (SOC) projects underwritten by the South.


The leading edge of these projects is an industrial park at Kaesong and a major tourist resort at Mt. Kumgang . Editorializing on the odious nature of these ventures last Thursday, the Wall Street Journal observed:


“The Kaesong industrial park and Mt. Kumgang resort are the centerpieces of the South’s misbegotten ‘Sunshine Policy’ of engagement with the North. They are also money machines for Kim Jong-Il, contributing to the record $1 billion North-South trade last year….Now that U.S.-led financial sanctions have reduced the North’s cash-flow from counterfeiting and drug-smuggling, money from the two sites is even more critical to the survival of Kim’s regime.”


Enter Hyundai


The Journal noted that the South Koreans responded to the unanimous UN Security Council resolution imposing additional sanctions on North Korea by immediately announcing that the two sites would be exempt from their strictures.


The reason is not hard to fathom: According to a website maintained by one of Hyundai’s subsidiaries [http://www.hyundai-asan.com], South Korea expects to invest nearly $15 billion in these SOC projects in the North, including: the construction of new power utilities ($2.3 billion); the development of telecommunications networks ($6 billion); the establishment and maintenance of railroads ($4.7 billion); supplying water to Mt. Kumgang ($770 million); and creation of a new dam on the Imjin River ($660 million). All other things being equal, the hope is to grow the number of North Korean laborers slaving away for roughly $1.10 per day from 8,200 to 730,000 by 2012.


Hyundai’s role in all of this is a central one. According to the Hyundai Asan website, in 2000 Hyundai obtained “exclusive business rights” for all such SOC projects. These rights are “for a period of 30 years” and extend to “the concrete development, construction, blue-print, maintenance and management regarding infrastructure projects and core industries projects and related trade and others that are being financed single-handedly by Hyundai in North Korean territory or financed by a third-party nation, group, specific fund or international organization.” (Emphasis added.)


This sweetheart deal was reaffirmed in March 2003. The North Korean news agency reported at that time that “all business rights regarding the Mt. Kumgang tourism business, Kaesong Industrial complex and other SOC projects have been handed over to Hyundai.”


The generous terms of this arrangement seem unlikely to have been a coincidence. In February 2003, the Washington Post reported that South Korean auditors had discovered that Hyundai Asan had arranged a $186 million loan from a government-owned bank in Seoul immediately before the “Sunshine Summit” in June 2000 – giving rise to the widespread belief that the money was used to lubricate that meeting and the very favorable deal Hyundai received shortly thereafter.


Rewarding Hyundai?


Astonishingly, even as Hyundai is working at cross-purposes with U.S. vital interests – including in Iran and Sudan , several of the company’s subsidiaries were as of 2005 suppliers to the Pentagon. Another DoD vendor is Samsung, which is also doing business with Kim Jong-Il. The Defense Department’s reliance on such double-dealing vendors should be ended at once and the extent of the practice with respect to other companies that partner with terrorist-sponsoring regimes should be the subject of urgent congressional hearings.


At the same time, American citizens should immediately review their portfolios, including their pension funds (both public ones such as the Federal Thrift Savings Plan and private ones like mutual funds). Hyundai, Samsung and others companies helping our enemies should be forced to chose: Do business with American investors or do business with our enemies.


The Bottom Line


The time has come to privatize management of the North Korean crisis. Rather than rely on the Communist Chinese – the putative “honest-broker” in the Six-Party Talks – or our deeply conflicted allies in South Korea voluntarily to bring an end to the danger we face from Pyongyang , we must call on the American people to create incentives for ending this danger by divesting North Korea.

7-Eleven cuts off Chavez; it’s about time

Were it not for his vitriolic speech at the United Nations earlier this month, the problem of Venezuelan dictator Hugo Chavez might have passed unnoticed in Washington. The fifth anniversary of the 9/11 attacks, leaks about the war in Iraq, and hurried attempts by Congress to wind up business prior to campaign season had all but obscured the troubling developments in our hemisphere – and our government’s seeming inability to cope with them.

The good news is that the convenience store chain 7-Eleven yesterday announced they were no longer going to support Chavez’s virulent anti-American agenda, by ceasing to sell oil-products at its 2,100 stations from Venezuela’s state-owned company Citgo. This sets the stage for a vigorous effort on the part of the U.S. government to attend to the metastasizing problem of Venezuelan regime’s agenda in the Western hemisphere and beyond.

The Danger Posed by Chavez

Unfortunately, neither the White House nor Congress has offered a strategy to deal with the rising threat to the stability of the Western Hemisphere and to the security of some of our most important energy supplies. That threat, posed by the Venezuelan regime and the Cuban security services that prop it up, has included:

 

  • the dismantling of democratic institutions in Venezuela and the construction of a dictatorship built around the cult of personality of Chavez;

     

  • the overthrow of the democratically elected president of Bolivia and his successor, and their replacement with the Caracas-backed head of the coca growers’ union;

     

  • other subversion in the region that has caused Mexico and Peru to all but break relations with Venezuela;

     

  • open use of oil as a weapon against the United States and its allies;

     

  • systematic alliance-building with all the countries on the State Department’s list of state-sponsors of terrorism, including Iran and North Korea;

     

  • new militarization that includes building factories to manufacture Russian-designed assault rifles, destined to arm pro-Chavez mobs at home and violent groups in other parts of Latin America; and

     

  • an unprecedented buildup of military aircraft supplied by the Russian Sukhoi warplane manufacturer and the French-German-Spanish-Russian EADS aerospace giant.

    Washington has wanted to wish away the Venezuela problem, but the actions of the regime are so alarming that the United States dare not risk ignoring the problem any further.

    Important First Steps

    To its credit, the Bush administration has made some efforts concerning the regime in Caracas. They include:

     

  • Ditching the Jimmy Carter approach. The administration finally did away with its Jimmy Carter approach to Venezuela, which was to let Chavez have his way on the grounds that he was democratically elected, even as the U.S. kept an eye on what Chavez was doing.

     

  • Attempt to stop European sale of military planes. In January, the administration invoked a nonproliferation law to stop the European Defense, Aerospace and Space Company (EADS) from selling its C-295 troop transport aircraft to Caracas, citing the planes’ many American-made components. The International Traffic in Arms Regulations (ITAR) allow the president to ban foreign sales of military products and services if he deems it in the national interest. ITAR restrictions cover U.S. technology in defense products manufactured abroad, providing the president power to ban the sale of other countries’ military exports if they contain American-made components. EADS has circumvented the restrictions by seeking non-U.S. replacement parts for the C-295s. Administration action might have killed the deal.

     

  • Ban on sale of U.S. replacement parts and services. As Chavez pushed further away from the United States and toward practically any American adversary, the administration imposed a ban on the sale of military parts and services to Venezuela, effectively grounding the regime’s fleet of aging F-16 fighters and C-130 transports. By that time, however, the regime had decided to buy from EADS and Sukhoi of Russia.

     

  • Military embargo. The administration imposed a military embargo on Venezuela and urged other countries to do the same. Sweden, for example, has followed the U.S. lead, but France, Germany, Spain and Russia (the largest owners of EADS) have not.

     

  • Attempt to deny Venezuela a seat on U.N. Security Council. The administration has worked mightily to deny the regime a rotating seat on the United Nations Security Council. However, the State Department has done a poor job of working with other hemispheric countries to deny Caracas the votes. Latin American and Caribbean governments have complained of U.S. clumsiness, short-sightedness, failure to counter vastly more generous offers from Chavez, and failure to support a realistic alternative candidate.

     

  • Curb the tendency to talk loudly while carrying a big stick. The United States blusters too much, especially at the highest levels, but with Venezuela it has generally pursued the right course. The President and Secretary of State have been correct not to let the dictator bait them and thereby increase his prestige and lower theirs. The White House’s recent dismissal of the Venezuelan dictator as a "gnat" is exactly the right approach.

     

  • Increased intelligence priorities. Over the summer the administration created a "mission manager" in the intelligence community to concentrate on Cuba and Venezuela. This is an important step, signifying a high intelligence priority, as the only other country-specific mission managers are for Iran and North Korea.

    What Needs to be Done

    There is much more to do, most of which can be done easily by White House directive and by Congress saying "no" to bailing out Chavez and his friends. Policy recommendations include:

     

  • Issue a Venezuela finding. The President should issue a finding that the U.S. will not allow forces allied with international terrorism to subvert democracy and prop up dictatorships in the Americas.

     

  • Set up an interagency working group on Venezuela. The group should be modeled loosely on the new interagency working groups on Cuba. The "control room" must be in the White House, not the State Department, chaired personally by the Vice President, with the proper National Security Council staffing, budget and authority to ensure that the president’s policies are faithfully executed. A model is the Reagan-era Working Group on Soviet Active Measures.

     

  • Set up a White House working group on Venezuela. The administration should create an informal, bipartisan White House Working Group on Venezuela, comprised of independent policy experts, NGOs, political strategists, public affairs practitioners, intelligence officers, diplomats and others to meet weekly to discuss Venezuela-related issues and how best to address them. This outside group would be similar to the successful White House Task Force on Central America under the Reagan Administration. In addition to helping build a constituency for action against the Venezuelan regime, it would energize outside individuals and groups, help them network with one another and with U.S. officials under White House auspices, permit them to provide straight outside advice on a Venezuela strategy, and serve as a feedback mechanism for administration policies and statements.

     

  • Systematically collect and exploit intelligence on the Venezuelan regime to educate the public at home and abroad. As the Reagan Administration did about the Soviet military buildup and about Soviet bloc expansion into Central America and the Caribbean, the U.S. must systematically collect intelligence on the Venezuelan regime and its leaders, and use that intelligence for public education and public diplomacy purposes. The U.S. has ample opportunity to collect accurate, reliable intelligence about the regime, its leaders, and their ties to terrorism and organized crime, and provide that information to the public on a regular basis.

     

  • Wage intense but low-level political and psychological warfare against the regime. The President should task the intelligence community to collect and analyze information that can be used to educate and influence the international community about the Caracas regime, and to promote operational objectives inside Venezuela. Those objectives include: divide the regime leadership from its followers, divide regime figures against one another (especially over questions of corruption and nepotism), divide patriotic Venezuelans in the military and security services from the thousands of Cuban intelligence and security personnel in the country, support and unify the internal opposition to the regime, and promote a return to democracy. Given its total failure to promote U.S. interests through public diplomacy, and the incompatibility of the mission with the culture of the foreign service, the State Department is the last place to be in charge of such an operation. The White House should coordinate the campaign across the agencies.

     

  • Create a surrogate radio, TV, and Internet media network for Venezuela. While the regime has not crushed the independent press yet, it has imposed severe restrictions that have alarmed the Inter-American Press Association. The U.S. shouldn’t wait until Chavez silences or co-opts the free Venezuelan media. It must create surrogate radio, TV and Internet outlets immediately, modeled after the successful Radio Free Europe/Radio Liberty system aimed at the Soviet Union, or after Radio Marti set up for Cuba. The Broadcasting Board of Governors (BBG) has been loath to dedicate resources toward Venezuela programming and has devoted an amount so small as to be useless. The president should stop allowing Clinton appointees to run the BBG, and appoint only BBG board members and staff who support special programming for Venezuela.

     

  • Stop U.S. government subsidy of the Venezuelan regime. The single largest American subsidy of the Chavez regime is the daily hemorrhaging of cash for Venezuelan oil and fuel services. Venezuela’s state-owned oil company, PDVSA, is 100 percent owner of the Tulsa-based CITGO oil company. By purchasing CITGO products, U.S. government agencies are diverting taxpayer dollars to the Chavez regime. Therefore the U.S. should bar any government agency or contractor from purchasing CITGO products effective immediately.

     

  • Prepare pre-emptive and retaliatory economic action in event of oil crisis. The administration should draft emergency plans to seize all of CITGO’s assets and sell them to American oil companies. Because CITGO is not private property but a foreign state-owned enterprise, property rights are not an issue. The plans should include using the proceeds to reimburse American companies cheated and otherwise victimized by the regime, finance efforts to help Venezuelans restore democracy in their country, cover expenses to clean up after Chavez in Venezuela and other countries, and reimburse regime victims. The plans should ensure that the innocent individual American service station franchises would not be adversely affected.

     

  • Show other countries that there is a price to be paid for helping to arm the Venezuelan regime. EADS CASA, the French-German-Spanish-Russian aerospace company, has gone out of its way to ignore repeated U.S. requests not to sell C-295 military aircraft to Caracas. The company has circumvented the U.S. nonproliferation law and willfully broken the U.S. arms embargo against Venezuela. It has also misled Congress about the nature of the Venezuela deal. EADS CASA planned to recoup any losses incurred in its Venezuela sale by getting Congress to buy the C-295 for the new Joint Cargo Aircraft (JCA) program. Therefore, Congress and the Administration must declare that the U.S. will not purchase any EADS CASA aircraft until the Chavez regime is gone. That means removing the EADS CASA C-295 from consideration in the JCA program and removing funding for purchase of the aircraft by the Coast Guard Deepwater program.

     

  • Work with other governments in the region. The U.S. has more potential allies down there than it realizes. Many governments, even those on the Left, are fearful of the Venezuelan regime and what it means for them. The Chavez style of subversive and violent revolution is a threat to the legitimacy of the democratic Left in the region. The Caracas-backed regime in Bolivia overstepped when it confiscated property and breached energy contracts with Argentina, Brazil and Spain – all governed by leftist politicians who are divided between their softness toward anti-U.S. rhetoric and action, and the trampling of their own business interests. As we predicted in our 2005 paper, "What to Do About Venezuela," Latin American leaders are getting sick of Chavez and his antics. It is quite possible for him to self-destruct – but not without American help.

    The Bottom Line

    Undoubtedly, the danger posed by the Venezuelan regime is real and growing. Steps like those described above must be adopted without further delay if the United States is to retain influence in its own backyard.

    • Freedom’s new weapon

    At a moment when things are not going particularly well in the War for the Free World – the global conflict with Islamofascism and its aiders and abetters in which, like it or not, we are currently embroiled – there is a bit of very welcome good news: America is employing at last a powerful new "weapon," one that may help turn the tide.

    Interestingly, this weapon is not being wielded by our men and women in uniform on the far-flung battlefields of this war. Yet, it has the potential not only to help them prevail there, but to avoid the need to use military force on other, present and future fronts in the War for the Free World.

    Precision-Guided Dollars

    Instead, a powerful new "force-multiplier" has begun to be brought to bear by government officials at both the federal and state levels, in corporate board rooms and by individual Americans across this country. In various ways but with a common purpose, we are starting to unleash our financial power to hurt freedom’s enemies and those who are enabling them.

    Consider the following examples of revolutionary developments in this country’s practice of financial warfare in recent months:

    -Nearly two years after the Center for Security Policy first published an analysis showing that roughly 100 U.S. public pension funds had invested some $188 billion in companies doing business with terrorist-sponsoring states, Missouri’s formidable State Treasurer, Sarah Steelman, took the first of such funds – the Missouri Investment Trust (MIT) – "terror-free." She did so by divesting the stocks held in portfolio whose issuing companies are involved with countries like Iran , North Korea , Sudan and Syria .

    Importantly, Treasurer Steelman took this first-in-the-nation step to divest terror after having conducted a rigorous market analysis. It demonstrated conclusively that MIT’s beneficiaries could not only support the war effort by investing terror-free. They could actually make more money in the process. Thanks to her courageous and visionary leadership, a model has been created that should be followed by every public pension fund in the country – starting with the many-billion dollar Federal Thrift Savings Plan for which all executive branch, congressional and other federal government employees are eligible.

    -The first terror-free mutual fund, Abacus Bull Moose Growth Fund, has been established to offer investors a place to put their 401k, IRA and other savings that will not enrich our enemies or expose them to what the Securities and Exchange Commission calls "global security risk" (GSR). GSR is defined as a material risk arising from investments that involve business dealings with terrorist-sponsoring regimes. To date, unlike other material risks, companies have not generally disclosed such dealings – leaving investors unwittingly exposed to the distinct possibility of not only moral hazard from doing business with terrorists that they may find unacceptable, but also the possibility that they could suffer financially if the investment blows up on them, figuratively if not literally.

    -The Abacus Bull Moose Growth fund – which shows a three-year average annual return of some 14.5 percent – uses a product called the Global Security Risk Monitor to do what financial institutions have done for twenty years, going back to the hey-day of the South Africa divestment campaign. Instead of screening for "socially responsible" investing (for example, avoiding investments in companies involved with tobacco, gambling, gun-manufacturing, alcohol, and environmental degradation), however, the Monitor makes a "security responsible" filter possible. The creation of the brilliant former Reagan NSC senior economist Roger Robinson, it offers institutional and private investors alike a way to ensure that their savings are terror-free.

    -One of the world’s largest international investment banks with trillions of dollars under management (which, for its own reasons, wishes at the moment to remain unacknowledged) has recently adopted a global corporate policy aimed at prevent its activities from funding or otherwise enabling the predations of the Free World’s enemies. With a rigorous set of lending and investing procedures in place and aggressively monitored at the highest levels of the corporation, it is setting a gold-standard for good governance and financial responsibility that could – if adopted throughout its industry and others – deny our enemies much of the access to funding they rely upon today and, thereby, transform this war.

    -Last, but hardly least, the U.S. government has begun to wield the financial weapon with considerable effect. Thanks to the leadership of senior officials such as Under Secretary of the Treasury Stuart Levey and one of his State Department counterparts, Robert Joseph, American-led initiatives have been launched in the past year to constrict the cash-flows of nations like North Korea and Iran.

    By going after financial institutions that do business with these regimes – for example, in the case of North Korea, the Banco Delta Asia in Macao was sanctioned and effectively electrocuted for laundering Pyongyang’s exceedingly high quality counterfeit U.S. dollars and other abuses – the feds have begun applying a tourniquet to our enemies’ economic life-blood. With advice from Roger Robinson, President Reagan proved that such counter-cash-flow weapons could take down the Soviet Union ; it is high time they be applied systematically to today’s totalitarian threats.

    The Bottom Line

    Amidst the mood of defeatism and highly publicized war reverses, primarily on the political front at home, it is heartening to see public and private sector efforts that are wielding anew what, arguably, continues to be this nation’s most formidable weapon – our financial power. Those leading this effort deserve our profound thanks, and our prayers that their efforts will prove to be but the leading edge of the needed mobilization of this country and its ultimate victory over freedom’s foes.

    America’s new recruits

    Decision Brief                                       No. 06-D 33                     2006-07-03


    (Washington, D.C.): The Fourth of July is, of course, a time to celebrate this great country and all that it stands for – both at home and abroad. Arguably, such collective remembrances and celebrations are more needed than ever in time of war. And that is particularly true at a moment when reverses of one kind or another are shaking some Americans’ confidence in their government and/or its ability to prosecute the war successfully.


    The Hamdan Miscarriage of Justice


    In every reverse, however, lies an opportunity. For example, the Supreme Court’s appalling ruling last week in the case of Osama bin Laden’s trusted driver, Salim Hamdan, affords the President and the Congress a chance not only to provide a legislative mandate for the military tribunals needed to prosecute such terrorists.


    The Court’s skewed interpretation of international law, and then its subordination of the U.S. Constitution to that misreading, also invites farther-reaching corrective action. Five justices held that enemy combatants like al Qaeda’s Hamdan were entitled to the treatment afforded prisoners of war under the Geneva Conventions. In fact, the only provision of those accords that explicitly extends such protections is Protocol I. But President Reagan formally rejected U.S. adherence to that protocol and its equation of terrorists with soldiers like ours, who (with very few and wholly illegal exceptions) abide by the laws of war.


    We now have the opportunity both to affirm the wisdom of the Reagan decision and to discourage the courts – Supreme and others – from the practice of reflexively, and often arbitrarily, subordinating this country’s democratically and constitutionally adopted statutes and executive orders to subjective applications of so-called “customary” international law.


    The Press’ Abuse of its Freedom


    An even more important chance to offset the effects of a grievous blow to the war effort can be found in the aftermath of the treacherous, if not actually treasonous, disclosures last week by the New York Times and Los Angeles Times. These papers revealed that the United States government had been secretly (albeit legally) using an international clearinghouse for banking information to “follow the money” – by monitoring terrorists’ financial transactions.


    In so doing, these irresponsible journalists and editors have compromised yet another of the country’s very perishable and possibly irreplaceable means of monitoring and defeating terrorists, and their potentially murderous plots. It is not as though the U.S. has an excess of such capacities. Given the deplorable state of our human intelligence – the preferred means of penetrating closed and secretive cells and organizations – the loss of any of these perishable technology-based information-collection tools can cause real harm to the cause of freedom.


    Divest Terror!


    Fortunately, on this Fourth of July, we can celebrate the enlistment in the War for the Free World of new recruits with the potential to cut off vastly more money flowing to our enemies than occurs through most bank transactions. On June 21st, the Board of the Missouri Investment Trust (MIT) – a public fund that taxes entertainers and athletes’ income and makes earnings from investments of such monies available to state cultural organizations – voted to make its portfolio “terror-free.”


    As the chairman of the MIT board, Missouri State Treasurer Sarah Steelman, observed: “The people of Missouri do not want their money used to support terrorism. It’s that simple.”


    After the fund announced its action, Ms. Steelman noted that, “Companies who sponsor terrorism or prop up governments of sanctioned nations who threaten our security should never be supported by public dollars. Today, the MIT board made sure that won’t happen with this trust fund.”


    The Treasurer then underscored a point that should be on the mind of every other public pension fund this Fourth of July:



    -“We shouldn’t be putting taxpayer dollars into funds or into companies that are supporting terrorism. There are still American soldiers who are risking their lives on a daily basis to protect us and to try to spread freedom and…we have an obligation to help them, as well. And so if we can cut the money off to terrorists, it’s going to help. I guess I’m idealistic enough to think that if we can do it, then every state can take actions like this and it would have a significant impact on terrorism.”


    The model the Missouri Investment Trust has forged can be readily adopted by others. Under Treasurer Steelman’s leadership, the fund’s board voted last September to adopt an anti-terrorism “screen” for its portfolio and subsequently issued a Request for Proposals for a “large cap” international fund that would provide such a screen. From the four firms that responded (Morgan Stanley, UMB Bank, Julius Baer and State Street Global Advisors), the MIT Board selected State Street and its subcontractor, Conflict Securities Advisory Group – an entity established by former Reagan Administration official and longtime Center for Security Policy associate, Roger Robinson, to evaluate publicly traded companies’ “global security risk,” a term the SEC has adopted to describe financial exposure to terrorist sponsoring states.


    The Bottom Line


    The idea of enlisting in the war effort investors – and, ideally, not just public funds managers, but those responsible for other institutional and private portfolios, as well – is one whose time has come. Should the Missouri Investment Trust example of divesting terror now be widely replicated, the Nation could bring important new leverage to bear on behalf of freedom, and deny funds to its enemies that they will surely otherwise use to try to kill us. That’s really something to celebrate this Fourth of July.