(Refiles to delete extraneous word "the" in paragraph 16) By Susan Cornwell WASHINGTON, Oct 31 (Reuters) - The Bush administration is seeking to delay Senate action on a bill authorizing states to divest assets in companies doing business with Sudan, a letter made public on Wednesday said. Sudan has been a focus of grass-roots divestment activism for some time because of the conflict in its Darfur region, which has taken an estimated 200,000 lives since 2003. Twenty states have initiated some form of divestment from companies that do business with, or in Sudan, congressional aides said. But the letter from the State Department to Senate leaders argues that the legislation, which attempted to provide a legal framework for such divestment, interferes with presidential foreign policy. Some state divestment laws have been challenged in the courts. The State Department said the legislation could set a "dangerous precedent" and make it "easier to pass similar legislation in other cases." Activists denounced the State Department letter, saying it was another example of bureaucracy trumping action on Sudan. The Bush administration has focused its Sudan policy on sanctions and support for U.N. efforts to solve the crisis. The Senate Banking Committee on Oct. 17 approved the divestment bill 21-0. Sponsored by Connecticut Democrat Chris Dodd, it would let states and local governments and private asset fund managers, if they choose, adopt measures to divest from companies involved in four key business sectors in Sudan. The act would also prohibit U.S. government contracts with companies involved in the four sectors -- oil, power production, mineral extraction and military equipment. With bipartisan support, the bill had seemed headed for floor action soon. It was unclear what impact the objections from the State Department would have. WEAKENING INVESTOR PROTECTIONS? The legislation would "weaken essential legal protections for investors," argued the Oct. 22 letter from Jeffrey Bergner, assistant secretary for legislative affairs at State. It also said the bill targeted companies of U.S. allies and diplomatic partners, shifting the focus away from the behavior of Sudan. "The administration requests that the Senate defer further consideration of this legislation," the letter said. U.S. companies are generally prohibited from investing in and conducting business in Sudan without a license from the Treasury Department, so any divestment would primarily affect investments in foreign companies. Activists have pressured investors to divest their holdings in companies such as PetroChina Co Ltd <0857.HK>, whose parent company, China National Petroleum Corp, is helping Sudan drill for oil. Malaysia's state-owned Petronas [PETR.UL] and India's ONGC are also targets. A similar bill has passed the House already. Some changes were made in the Senate version at the request of the Treasury Department. "This letter directly repudiates what the president himself has said about urgently protecting the Darfuri people and increasing pressure on all responsible parties. Almost five years into the Darfur tragedy it seems that bureaucratic wrangling has consistently trumped urgent efforts to end the suffering and dying. We must do more now," said Allyn Brooks-LaSure, spokesman for the Save Darfur Coalition. The group says the Sudanese government uses up to 70 percent of its oil revenue, generated mainly through foreign direct investment, to give arms and supplies to the Janjaweed militia accused of the killings in Darfur.
