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China expands inquiry on graft to oil industry

Chris Buckley
Wednesday, 28 Aug 2013 | 2:36 AM ET
PetroChina workers at the site of an oil well in Xinjiang, China.
Bloomberg | Getty Images
PetroChina workers at the site of an oil well in Xinjiang, China.

The Chinese Communist Party's drive against corruption moved into the powerful and politically delicate oil sector this week, as the authorities announced that four executives of the state-owned China National Petroleum Corporation were under investigation.

On Tuesday, the Assets Supervision and Administration Commission of China said on its Web site that three oil executives — Li Hualin, a deputy general manager of China National Petroleum; Ran Xinquan, a vice president of PetroChina, the company's listed unit; and Wang Daofu, the chief geologist of PetroChina — were "suspected of grave violations of discipline and are currently undergoing investigation," by an anti-corruption agency. PetroChina also announced that the three men were under investigation and had resigned "due to personal reasons."

(Read more: China battles US over dubious title: Biggest oil importer)

A day earlier, authorities revealed an investigation into a deputy general manager of China National Petroleum, Wang Yongchun, for suspected "disciplinary violations," generally considered to be corruption, embezzlement or taking bribes.

Should you invest in Chinese oil and gas?
Simon Powell, head of oil and gas research, Asia at CLSA, talks about Chinese oil and gas companies, PetroChina and Sinopec, following quarterly earnings.

The investigations indicate that the Communist Party's effort to fight corruption extends beyond the government to powerful parts of the state-dominated economy. The party leader, Xi Jinping, came to power in November with promises that he would rein in official corruption and self-enrichment, which has become a major source of public discontent.

On Tuesday, the Communist Party's Politburo, a council of 25 senior leaders, approved a five-year plan to curb corruption, the official news agency, Xinhua, reported. The report did not give details of the plan, but the official summation of the Politburo meeting noted that the party would "sternly investigate and punish violations of party rules and laws by party members and officials," and "give full play to deterrent force."

(Read more: At trial, Chinese prosecutor demands Bo be severely punished)

Looming over this case is the recent trial of Bo Xilai, the former Politburo member, accused of taking bribes, embezzling and abusing his power to protect his wife from murder allegations. The trial of Mr. Bo, spread over five days and reported in unusual detail through a court microblog, highlighted what many citizens see as the brazen greed of China's political elite. A verdict is expected in early September.

"I think there's a dynamic here that suggests this may prove to be a more rigorous crackdown than we've seen for years," said Andrew Wedeman, a professor of political science at Georgia State University in Atlanta who researches corruption in China. "Way too many officials have been wearing Rolex watches and driving Mercedes."

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China's oil sector has long been the domain of powerful party officials, making any investigations politically thorny. For example, Zhou Yongkang, a former general manager of China National Petroleum, later became the head of China's domestic security organization, retiring last year. Such close ties have prompted speculation about whether powerful party figures could be ensnared in the inquiries.

China National Petroleum "is a huge company, China's biggest energy company, but these people being investigated aren't the highest in the company," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University in eastern China. "It's relatively sensitive because ordinary people have so many complaints about the monopoly behavior of C.N.P.C. and other oil companies."

(Read more: Politics of pollution: China's oil giants take a choke-hold on power)

But many observers are skeptical that officials have the will and the power to investigate their colleagues, who can appeal to patrons for protection from inquiries. Typically, corruption inquiries are initially carried out by party agencies, which then decide whether to hand over the matter for criminal investigation.

"It's a challenge, because there's an awful lot of power concentrated in these people's hands," said Professor Wedeman, the expert on corruption in China. "That concentration gives them the power to engage in corruption, and the power to cover it up."

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