China’s Oil Giant at Center of Corruption Probe

Grins were on the faces of China National Petroleum executives this week as they celebrated a blockbuster 30-year deal for Russian gas. For some, however, those grins could soon turn to grimaces, because the deal comes against a backdrop of a series of high profile corruption investigations by the state, and CNPC has been caught in the dragnet.

May 25, 2014 at 10:04AM

This article was written by Oilprice.com -- the leading provider of energy news in the world. Also check out these recent articles:

Grins were on the faces of China National Petroleum executives this week as they celebrated a blockbuster 30-year deal for Russian gas. It was a good day for CNPC, the state-owned colossus at the center of China's oil and gas webs and one of Eurasia's biggest energy investors.

For some, however, those grins could soon turn to grimaces, because the deal comes against a backdrop of a series of high profile corruption investigations by the state, and CNPC has been caught in the dragnet. A former CNPC chairman is currently under investigation and a top executive of CNPC subsidiary PetroChina has just been arrested.

They are two of the biggest suspects in a spiraling drive against corruption that has become a hallmark of President Xi Jinping's rule.

The crackdown on executives at some of China's largest companies is yet more proof, if anyone needed it, that the Xi administration takes the latest anti-graft drive very seriously indeed.

But behind the arrests and investigations, some China watchers see signs of internal strife at the highest levels of the ruling Communist Party.

The list of energy execs under scrutiny by the national corruption fighting bureau, officially known by the Orwellian title, "Central Discipline Inspection Commission," is getting longer every week. One of the biggest fish was netted in September, when officials announced that CNPC's former chairman Jiang Jiemin was under investigation. Jiang also chaired CNPC's PetroChina subsidiary (ranked 6th on the Fortune Global 500 list), before his March 2013 move to head the state-owned Assets Supervision and Administration Commission.

Other prominent figures swept up by the state include:

Bo Qiliang, PetroChina vice president in charge of CNPC's overseas business, detained on or around May 13;

Zhang Benquan, general manager of CNPC's Iran subsidiary, detained in April;

Yan Cunzhang, general manager of PetroChina's foreign cooperation department, detained in April;

Li Hualin, former CNPC deputy general manager, reportedly a target of a Communist Party corruption probe;

Wang Daofu, former PetroChina chief geologist, under investigation along with Ran Xinquan, former general manager at PetroChina subsidiary Changqing Oilfield Co.;

Sun Weidong, former deputy manager of PetroChina subsidiary Yumen Oilfield Co., under investigation;

Yang Guoling, assistant general manager and senior accountant at Yumen Oilfield Co., indicted for corruption;

Three top executives at CNPC supplier Sichuan Star Cable reportedly disappeared in July 2013 and another either fell or jumped to her death in September.

CNPC-linked companies are not the only energy and resources companies caught up in the crackdown.

The former chairman and another former executive of China Resources Holdings Co. (233rd on the Fortune 500 list), are under investigation, as are several top executives at various geology and fuel companies. Zhu Changlin, head of North China operations at the State Grid (7th on the Fortune list), is under investigation, along with several managers at regional power operators.

Jiang and several others of those named have been linked to Zhou Yongkang, one of China's most powerful men until Xi's advent, which has led some observers to suspect the net is tightening around Zhou, a former CNPC chairman and national security chief, who dropped out of sight last year.

The corruption probes into former CNPC deputy general manager Li Hualin and Ji Wenlin, a former regional vice-governor who reportedly cut deals with CNPC, "are among several believed to be part of an unprecedented probe into Zhou," the South China Morning Post wrote earlier this year.

If – and this is a big if – Zhou is formally charged, he would be one of the most senior Communist Party higher-ups ever prosecuted since the Communists came to power in 1949.

In a related story, the South China Morning Post described how Zhou used the CNPC as a springboard to political power in the 1990s, which eventually saw him appointed to the supreme Politburo Standing Committee. There, he chaired the Political and Legal Affairs Committee (PLAC), which controlled police and security forces and the judiciary until some of its functions were transferred to the new State Security Committee, which was set up by the anti-corruption crusading Xi.

Zhou retired in 2012, but the activities that reportedly amassed billions for him and his family apparently came under scrutiny upon Xi's accession to the presidency in 2013.

Apart from rumors, nothing has been heard of him for months, and his name is taboo in official media, as BBC China editor Carrie Gracie noted on her blog.

Some sources claim he is under house arrest. But no one knows for sure, and those that do aren't talking.

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Written by Ky Krauthamer at Oilprice.com.

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