Oil giant Shell ready to quit Zimbabwe

Shell was considering pulling out of Zimbabwe last night amid claims that President Robert Mugabe was reserving the distribution of fuel at petrol pumps for party supporters.

A source at the oil giant told The Observer it was looking at a plan to halt activities in the country, which are overseen in a joint deal with BP. One option being canvassed is for Shell to sell its stake to a third party. Meanwhile both the UN Security Council and the European Union are drafting tougher sanctions aimed at members of the regime and their families, but probably stopping short of wider economic sanctions that some British politicians and Zimbabweans are calling for.

The moves came as the South African president, Thabo Mbeki, flew to Harare for talks with Mugabe and, reportedly, members of a dissident opposition faction which has split from Morgan Tsvangirai's Movement for Democratic Change. Mbeki has called for the formation of a government of national unity in Zimbabwe, following the violence that ensured Mugabe's re-election as president. News agencies reported that Tsvangirai had refused to meet Mbeki during his visit.

Shell and BP supply 74 independent petrol stations in Zimbabwe. Supplies are piped from Mozambique and stored at four oil terminals. Both companies have bitter memories of the hostility they drew during the apartheid era in South Africa and minority rule in Rhodesia.

The political instability since last month's rigged presidential election was one factor under consideration by Shell, the source said. 'We have withdrawn from countries in the past where the situation was delicate,' he said. 'We are actively looking for a new solution.'

In a statement, Shell said: 'We have a shareholding in a small retail joint venture which is operated by BP. We are currently reviewing our position.' BP said it had no plans to withdraw.

Tino Bere, a member of the Zimbabwean Lawyers for Human Rights group, said that fuel imports - controlled by Mugabe loyalists - should be targeted. 'Access to fuel imported by the state is reserved for members of Zanu-PF,' he said. 'The majority of people won't suffer. They can get what they need on the black market.'

A study by London-based Ethical Investment Research Services shows that Britain is the largest foreign investor, with holdings in more than a quarter of the 82 companies that have their parents listed on overseas stock exchanges.'

Shell would become the fourth company to pull out of Zimbabwe in the past fortnight. Tesco announced last week that it would stop sourcing products from Zimbabwe as long as the political crisis persisted. The London mayor, Boris Johnson, promised that Oyster card supplier EDS would not renew its contract with the Munich-based company Giesecke & Devrient, after it emerged that the company provides banknotes to Zimbabwe's central bank. The communications company WPP said it would divest its quarter stake in Y&R advertising agency since it emerged that a senior member of the company's management was advising Mugabe.

Gordon Brown has asked companies doing business in Zimbabwe to 'reconsider' their position. The Foreign Office said this meant that they should look at board members and shareholders of their subsidiaries to see if regime members were directly benefiting.

Labour's Hugh Bayley, who chairs the Africa All Party Parliamentary Group, said: 'The UK smart sanctions have not been smart enough. It is time for Europe to look seriously at wider economic sanctions.'

Kate Hoey, who chairs the parliamentary group on Zimbabwe, suggested the country should be compared with South Africa in the 1980s, and that the full weight of economic sanctions should be considered, including disinvestment.

Several companies were standing by their investments in Zimbabwe yesterday. Barclays said it would continue its operations there after it was accused of providing loans to five of Mugabe's ministers via a subsidiary. Unilever, Standard Chartered Bank, British American Tobacco, and the mining corporations Anglo American and Rio Tinto, all pledged to stay.