KEY POINTS:
The Shanghai stock market will later today be the centre of the financial world. History will be made as China's biggest-ever share listing gets under way.
But the flotation of a fraction of the shares in PetroChina - a subsidiary of state-run China National Petroleum (CNP) - to
raise £4.5 billion ($12.3 billion) is just half the story.
Asia's biggest gas and oil company, which already has a listing in Hong Kong and New York, will quickly see its 4 billion shares double in value to 16.70 yuan ($3) each, turning PetroChina - which operates in Sudan and Burma - into the world's second-biggest company by stock market valuation, with a price tag of £200 billion.
Only Exxon Mobil will be bigger. But not for long: Beijing analysts are confident that within months, if not weeks, PetroChina will become number one.
For its front-line adviser, UBS, the float ought to represent a triumph.
It will be the first time a European bank has taken the lead on a major Chinese listing, and the deal will earn the Swiss bank tens of millions of dollars. But as bankers mix with Chinese power-brokers, a growing storm of controversy is taking the gloss off UBS's Chinese coup and threatening to spill over into a worldwide row.
Last week activists, including three Nobel peace prize winners, sent a letter to UBS urging the bank to request that China National Petroleum, PetroChina's parent, suspend its activities in crisis-hit Sudan.
Swiss-based campaigners have sent a similar message.
International concern is focusing on how proceeds from the oil industry are funding militia groups, who have contributed to the deaths of as many as 450,000 people in recent years.
Questions are also being asked about PetroChina's operations in Burma, where it is under fire for investing over £500 million in a pipeline project that will provide the military junta with an income of £75 million each year.
Andreas Missbach, of Swiss campaign group The Berne Declaration, hopes the private banking clients of UBS will be moved to give up their investments with the bank, or raise serious questions about its involvement with firms linked to the Sudanese oil industry.
Campaigners believe it was the Sudan link that prompted Warren Buffett to sell his 11 per cent shareholding in PetroChina last month. Buffett made a cool $3.5 billion by bailing out, but it could have been a lot more - especially if the world's most powerful investor had waited until after this week's float.
And Buffett is by no means the only investor to have pulled out of PetroChina. Fidelity, after pressure from activist groups, also announced in a filing in the US that it had sold 91 per cent of its American depositary receipts in PetroChina in the first quarter of 2007.
UBS said that, as of last year, it no longer worked in Sudan and other repressive regimes. It accused campaigners of getting their facts wrong, saying that although CNP owned 88 per cent of PetroChina and shared key executives, the two firms were totally separate. It said that the proceeds of PetroChina's float would be invested only in China.
It seems a new phase of campaigner activism is making headway. Two weeks ago, European pension funds withdrew almost £110 million in investments from French oil company Total in a matter of days in protest at the company's involvement in Burma. The boycott is being led by pension funds in Denmark, which demanded European Union sanctions on investment into the country.
The Burma campaign is now targeting the insurance and banking industries, which help keep the brutal regime in power. Campaigners will focus on the Swift electronic trading network, which is owned jointly by most of the world's leading banks.
Swift technology enabled the Burmese Government to sidestep US economic sanctions imposed by George Bush, which four years ago banned the repressive regime from trading in dollars. The Burmese authorities decided to adopt euros instead.
The change required a wholesale change in its electronic trading system, which Swift carried out on behalf of the junta.
Activists will also heap more attention on Lloyd's of London for failing to prevent some of its stakeholders sharing the insurance risk on Burma's ports and aircraft. (Lloyd's says it is just a marketplace and, as such, cannot tell its members what countries to trade in.)
"There is a huge debate taking place within Europe's largest institutional investors about whether they should boycott companies with links to Sudan or Burma," says Hugh Wheelan, editor of Responsible Investor magazine.
"If they do, multinationals, particularly oil groups such as PetroChina, Total and Chevron, could potentially have billions of assets pulled from them."
And for a bank like UBS, the damage to its reputation could be just as significant.
- Observer
