The Royal Bank of Scotland was warned today that its assets could be supporting the Burmese junta. A letter from Burma Campaign UK, PLATFORM and BankTrack warns that through its stake in Bank of China, RBS capital could be invested into and RBS profits could derive from Burmese oil and gas.

The RBS controls 8.25% of Bank of China, key backer of Chinese oil companies propping up the military regime in Burma. Petrochina and Sinopec have been criticised heavily for co-operating closely with the Burmese military rulers.  Both named Bank of China as their principal banker and continue to borrow and repay loans of hundreds of millions of dollars. 

Bank of China arranged a $1.1 billion loan to Sinopec in 2005, which is being paid back until Nov 2010. This November, Bank of China plans to underwrite further $2.7 billion of bonds to Sinopec.

Only this September, Sinopec began drilling an onshore well in a joint venture with the Burmese regime’s Myanmar Oil & Gas Enterprise. The launch ceremony on September 26 coincided with the first day of the dictatorship’s brutal crackdown on civilian dissent and was attended by military officials and Sinopec executives.

In August 2007, the Burmese military confirmed the sale of natural gas from the Shwe gas fields to Petrochina. Earlier in 2007, Sinopec signed a US$ 1 billion contract for the  construction of an Arakan-Yunnan oil pipeline. Sinopec and Petrochina run many exploration, extraction and pipeline projects, many operated jointly with the Burmese regime.

Oil & gas ventures in Burma have been repeatedly condemned by human rights organisations as propping up the regime. Sales of natural gas, such as those to Petrochina, account for the single largest source of revenue to the military government.

RBS is not a silent partner in the relationship. The bank controls 8.25% of the Bank of China and owns around 4.5% outright, making it the most significant private shareholder. RBS has publicised its “close co-operation” and “strategic partnership” with Bank of China, covering corporate governance and risk management. Through its stake, RBS CEO Fred Goodwin is a director on Bank of China’s board.

Bank of China made $5.5 billion of profit in 2006 , of which a substantial proportion was passed on to RBS. As Sinopec and Petrochina repay their loans, RBS could be banking profits derived from Burmese crude. Through Bank of China loans, RBS is enabling the Chinese oil companies to expand their operations.

In their letter, Burma Campaign UK, BankTrack and PLATFORM are warning RBS that it risks supporting or profiting from the Burmese dictatorship, unless it takes public steps to immediately change the Bank of China’s lending practices or sells its stake.

Mark Farmaner of Burma Campaign UK said “Support for oil & gas drilling in Burma is support for the regime. RBS must ensure that Bank of China provides no financial services that underwrite the junta.”

Johan Frijns of BankTrack said “Banks must recognise the responsibilities that derive from their loans and investments. RBS must ensure its loans stop supporting human rights abuses and climate change.”

Mika Minio of PLATFORM said “RBS’s holdings are fuelling repression by financing fossil fuels in Burma. Whether it’s human rights or climate change, the bank is in denial over the impacts of its core business. RBS must stop dodging responsibility and do the right thing – stop financing destructive fossil fuels.”