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Oil industry snared in China’s corruption crackdown

Officials from CNPC and PetroChina are under investigation for serious discipline violations

After the blockbuster corruption and abuse of power trial of former Chongqing governor Bo Xilai came to an end last week, China’s president Xi Jinping wasted no time turning the focus of his anti-graft crackdown onto his next target: the oil sector. Some in China have dubbed it the “petro-purge”.

On 26 August, the Chinese government said that Wang Yongchun, a vice president at China National Petroleum Corporation (CNPC), China’s largest oil producer and largest state-owned enterprise, had been put under investigation for disciplinary breaches, without going into further detail. Wang was in charge of managing the Daqing oilfield, China’s largest, and played a key role in building CNPC’s business in Sudan.

That was just the start. PetroChina, the publically-listed arm of CNPC, suspended trading of its shares on 27 August before announcing that three senior executives at the company were under investigation for alleged “serious discipline violations”, a euphemism often used for corruption.

The executives included PetroChina’s chief geologist Wang Daofu, vice president Ran Xinquan and CNPC vice president and secretary to the board of directors Li Hualin. All three left the company for “personal reasons,” PetroChina said in a statement.

Then on 1 September, Chinese state media reported that Jiang Jiemin, head of the State-owned Assets Supervision and Administration Commission (SASAC), a government body that oversees China’s hundreds of state companies, was also under investigation for “severe disciplinary violations”. Jiang was chairman of CNPC and PetroChina until March this year.

State news outlet China Daily reported a source close to the company as saying that the investigation into Jian was focused alleged graft during his time as head of CNPC. The investigation is related to the contracting of oilfields to foreign and private companies that may have been headed by CNPC officials. “Some officials at CNPC also were heads of some related private companies, which provided room for corruption,” reported China Daily.

The spotlight has been on Jiang for the past year. Chinese media reported last year that he had been questioned about payments allegedly made by CNPC to the families of two women who were injured in a car crash that killed the son of then-president Hu Jintao’s chief of staff Ling Jihua. Jiang was, nevertheless, promoted from the head of CNPC to SASAC, but the fact that he was not also made SASAC’s party secretary, as is common, led many analysts to question his future.

The investigation of Jiang Jiemen has set off fevered speculation that investigators are working their way up to Zhou Yongkang, a powerful figure in China’s state-controlled oil industry and former member of the Politburo Standing Committee, the country’s top decision-making body. 

Zhou, who was labeled “China’s Dick Cheney” in a 2011 Forbes profile, has held a number of senior positions including head of CNPC, party secretary for Sichuan province and minister of public security. His power reached its apogee when he became a standing committee, a position he left in November 2012 when Xi Jinping was chosen as president. A US diplomatic cable released by Wikileaks  claimed that it was “well known” that “Zhou Yongkang and associates controlled the oil interests.”

If the Chinese government decides to move ahead, Zhou would be the first former or sitting standing committee member t be investigated for corruption.

Xi has vowed to go after “flies and tigers”, low level and senior government officials, in his anti-corruption drive to prove he is serious about routing out graft. Xi has said that public anger over China’s endemic corruption is one of the most serious threats to the Party’s grip on power.

The anti-corruption drive is also likely aimed at reigning in China’s powerful state-owned oil companies and sidelining a faction of the communist party opposed to Xi’s reform efforts. Xi is expected to announce a series of major economic reform measures at a party meeting in November.

Where the crackdown leaves CNPC and its subsidiary PetroChina is unclear. PetroChina has said the affair will not affect its day-to-day operations, but the company’s senior leadership has been thrown into disarray and the investigation is likely to occupy much of the company’s time and resources in the coming months.

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