ArTunet
11 August 2008
Waleed Ahmed
From the International records, the U.S. is a big sanctioner and has been imposing hard sanctions on Sudan and other countries. As the Sudan is the concern of this article, U.S. has been imposing political and economical sanctions since the year 1997. In a matter of fact, since 1993, concern for Sudan’s Islamist links with international terrorist organizations led the U.S. government to designate Sudan as a state sponsor of terrorism. As such, Sudan was subject to restrictions on foreign assistance, a ban on defense exports and sales, a Congressional notification requirement for certain exports of dual use items, directed votes on international financial institution assistance, restrictions on debt reduction, and miscellaneous other restrictions.
The Sanctions on Sudan
In November 1997 during Bill Clinton administration, the US Congress passed into law a bill that placed economic sanctions on the country of Sudan. The United States decided to punish the Sudanese government, which the State Department declared is a "sponsor of terrorism and a relentless oppressor of its minority Christian population." The original bill was meant to terminate all commercial activities between the two countries.
The U.S. has issued new sanctions on Sudan in 2006 over the conflict in Darfur, which President George W. Bush has called genocide. The Bush administration's sanctions aim to squeeze the country's economy by freezing Sudanese companies out of American financial institutions and curtailing their dollar transactions. Mr Bush has indicated that more Sudanese companies and individuals involved in the violence in Darfur would be barred from trading or banking with the US., and he would push for a new UN Security Council resolution to put more pressure on President Omar al-Bashir. Mr Bush wants Sudan to allow more UN peacekeepers into Darfur and to stop backing violence in the region.
These designations sought to increase the political pressure on Khartoum, and supplement sanctions that the United States has maintained on Sudan since 1997. With United States leadership, the United Nations Security Council adopted resolution 1672 (2006) which requires states to apply targeted sanctions in the form of a travel ban and asset freeze on four specific individuals they see responsible for impeding the peace process and committing heinous crimes against the people of Darfur.
In May 2007, the U.S. has imposed new economic sanctions on a total of seven individuals and more than 160 companies owned or controlled by the Government of Sudan . They think that the individuals have widespread involvement in Darfur, and have been linked to violence, atrocities, and human rights abuses in the region. Among other things, the sanctions are intended to increase pressure on all parties to end the violence in Darfur. More than 100 companies operated in Sudan have already been blacklisted by the U.S. Treasury Department, among them Sudan's biggest oil producer, the Greater Nile Petroleum Operating Co. The company, which pumps about 300,000 barrels a day, is a joint venture of the Sudanese government and state oil companies from China, India and Malaysia. The companies named by the Treasury Department included a sugar producer, an automobile company and a vegetable oil producer. The administration also singled out two senior officials - Ahmad Haroun, state minister for humanitarian affairs, and Awad ibn Auf, the country's director of military intelligence - and Khalil Ibrahim, leader of a rebel group called the Justice and Equality Movement.
The latest figures show that the U.S Treasury's foreign assets office issued 100 licenses to companies exporting agricultural commodities, medicines and medical equipment to Iran and Sudan from September to December 2007. Over the same period, 10 licenses were refused. Another U.S. brand with a big presence in Sudan is Western Union, the world's largest provider of payment transfers. Its black-and-yellow signs are visible in shopping malls and on roads throughout Khartoum. The company, which has 17 agents in Sudan, said it complied with U.S. government guidance on regulations for operating in Sudan and had implemented its own regulations as well. "Funds cannot be sent to or received by any persons, agents, private enterprises, charitable organizations or other establishments linked directly or indirectly in any connection whatsoever to any governmental authorities of Sudan," said Kristin Kelly, media relations manager for Western Union in Sudan, in an e-mailed response to Reuters.
U.S. authorities have defended the new measures, saying they not only broaden the target list but also provide better methods to track down embargo evaders. U.S. officials also dispute the idea that they are leery of disrupting Chinese relations over Darfur. "We can very definitely say that the issue of Sudan is on the United States-China bilateral agenda," U.S. Deputy Secretary of State John Negroponte indicated.
The Bush administration would seek United Nations resolution to impose an arms embargo against Sudan and would bar the Sudanese government from conducting any military flights in Darfur. But in aiming at Sudan's economy, Washington seems to be toeing a sensitive line. It wants to increase the pressure on the Sudanese government without alienating China, a top American trading partner. It is also apparently unwilling to consider outright oil sanctions against Sudan at a time when global energy prices are high.
The Reactions on the Sanctions
The Sudanese government, before, criticized the draft bill adopted by the US in late 1997 to impose economic restrictions on Sudan. The Sudanese officials indicated to the media in Sudan that the draft bill includes negative signals that are not in the service of the efforts made by the Sudanese government in order to reaching a peaceful settlement that is under negotiations in order to end the rebellion in Southern Sudan.
In regard Darfur, the Sudanese government denies supporting the armed groups claiming that the suffering in Darfur has been exaggerated for political reasons. They criticized the new sanctions as "unfair and untimely" and urged the rest of the world to ignore them. I think it [the US] has revealed its intentions and that it does not want stability," Majdhoub al-Khalifa, an adviser to the Sudanese president, told al-Jazeera television.
U.S. government officials described the sanctions during recent interviews and press briefings as a significant move to raise the pressure on Omar Hassan al-Bashir, Sudan's president, to bring a quick end to the violence in Darfur. It is unclear how much extra leverage the new US sanctions will bring.
The European Union has signaled its willingness to consider new sanctions against Sudan, but China and Russia have been opposed. Without an international consensus on more stringent economic sanctions, the United States has few options.
The People's Republic of China, a veto-wielding permanent member of the U.N. Security Council continues to remain a major stumbling block to U.S. efforts to impose economic and military sanctions on Sudan. "The reasons are obvious," says a Southeast Asian diplomat who closely monitors the politics in the region. "Just as much as the United States and other Western powers protect their own political and military interests worldwide, so does China." With the threat of its veto power, China has expressed strong reservations over recent U.S. and Western attempts to either penalize or impose sanctions against Sudan for various political reasons. The 15-member Security Council, also, has been unable to take any action against Sudan because of opposition from China or Russia -- or both.
Do the Sanctions Work?
Form the point of view of Hufbauer, Schott, and Elliott that to make sanctions effective, you should work with allies; have a very modest goal (i.e. sanctions to overturn a regime will rarely be effective, the impoverishment of the population seems to forestall regime change) but have large effect on the country ‘receiving the sanction; target a country that is much smaller; and the targeted country is actual ‘friends’ with the sanctioner (i.e. sanctions from trade disputes between U.S. and Europe or Japan usually end up in a settlement). Sanctions have been successful between 25-50% of the time. (Hufbauer, Schott, and Elliott (1990 and since updated on IIE website), the Institute for International Economics).
The failure of sanctions can be summarized as follow: “Success is more likely when the threatened measure costs the sender relatively little relative to the gain from modifying the targets behavior, while the damage to the target is large relative to his cost of complying with the sender’s will.”
By the above theory, politicians may have no clear ability to predict the effects of sanctions on the Sudan. Clearly the cost to the U.S. of implementing sanctions is very low. Even an embargo on gum Arabic would be small, when the resulting price increase from non-Sudanese supplies are spread out over the entire U.S. economy, and given the large stockpiles accumulated, the incentives and ease of smuggling and likelihood of innovation for substitutes. On the other hand, there seems to be little willingness of European allies to go along with sanctions, and certainly Sudan’s major trading partners in Africa and the Middle East (not to speak of China and Malaysia) are unlikely to go along with sanctions.
There were no clear “modest” objectives that have been enunciated by U.S. policymakers other than the original goal of the 1997 sanctions, now apparently realized of withdrawal of support for terrorist groups. Achieving a peace in the civil war, hardly seems a “modest” goal. Operation Lifeline already had corridors open for relief to the South.
High-powered sanctions are thus unlikely to have any consequentialist justification in the absence of some compelling modest goal. There are two other concerns, however. First, to the extent that policymakers view the present military regime, and its control over the population of northern Sudan, as a clear and present threat to other interests, then keeping the regime as poor as possible may be warranted, even if the population suffers.
The supposed tradeoff then is not between the U.S. population (hardly hurt by the sanctions) and the Sudanese population (majorly affected), but rather the tradeoff between the Sudanese population and the Eritrean or Ugandan or Southern Sudanese population (now made more tricky by the large presence of southern Sudanese in northern Sudan), and other countries as well. If this were to be the major justification for sanctions, then they should certainly be coordinated with the regimes that border the Sudan. Thus another problem arises; most of these regimes are non-democratic or even non-existent. Second, sanctions need not necessarily has any consequentialist justifiction. There may be a legitimate moral obligation to not conduct trade with entities that violate basic rights and liberties.
Sanctions are public displays of moral opprobium. Here, for moral opprobium to ring true, and be legitimate, the sanctioner must not bear responsibility for the situation, or carry out itself similar kinds of violations. This is the problem then the United States faces because of the war in Iraq, the mistaken unilateral cruise missile bombing of the al-Shifa factory, and pretty much unconditional support for an earlier dictator, Jaafar Nimieri. Until a clear and unequivocal policy of “laundry-airing, fact-finding, apologising and stated intent to restitute those damaged (through reasonable mechanisms)” is put in place, there can be no moral high ground.
In addition, the timing of the imposed sanctions should be right. According to the Associated Press, South Africa's ambassador to the United Nations, Dumisani Kumalo, questioned the timing of the new sanctions on Sudan at a time when the UN, the African Union and Sudan are negotiating access to Darfur for an increased international force.
Sanctions and Business
US sanctions imposed in 1997 mean Sudanese companies cannot use US dollars, and American companies are banned from doing business in Sudan, making international trade more difficult. The sanction, however, did not come to fruition. Though the Sudanese government has no active lobby in USA country, while the bill made its way through committee, several lobbying groups made a sudden appearance and opposed outright passage of the bill. They did not oppose the sanctions as a whole. They took issue on the possible sanction of only one product, gum Arabic.
Despite U.S. trade sanctions in place against the country since 1997, many well-known American products are widely available. Driving through the traffic-choked streets of Khartoum, you could forget that Sudan has endured years of U.S. sanctions. Leaving the airport at Khartoum, one of the first things you see is the ultimate symbol of American capitalism: the classic form of a Coca-Cola bottle printed on multicolored banners, next to a huge billboard for its rival, Pepsi. These products are among prominent U.S. brands that have stayed on shop shelves in Sudan in the face of some of the toughest trade restrictions ever imposed. The enterprise has been matched by a handful of mainstream U.S. companies who have found their own way into both countries' huge markets, while staying within the law.
Coca-Cola and PepsiCo have both secured export licenses from the Office of Foreign Assets Control of the U.S. Treasury, using legislation that allows blacklisted states to buy U.S agricultural commodities, medicines and medical equipment. Coca-Cola said the syrup on which the company's beverages are based qualified as an agricultural product. Pepsi said that its brands were produced in Sudan under "an OFAC license."
Both companies send the syrup to independent companies in Sudan, which then produce the drinks in their own factories, selling them in bottles and cans identical to Coca-Cola and Pepsi containers found elsewhere. A Coca-Cola spokesman, Dana Bolden, said the primary motive for operating in Sudan was "to ensure quality control and protect our trademarks with the independent bottler." Coca-Cola is not permitted to provide the local bottlers with any on-the-ground marketing support and has no investments in those bottlers. It also has no direct dealings with the Sudanese governments. Bolden also said the company was reinvesting all the proceeds from its sales in Sudan into programs that benefit the country. "We have committed more than $5 million over the next three years for programs aimed at building communities in Sudan."
Adam Sterling, director of the Sudan Divestment Task Force, which urges investors to withdraw funds from some businesses in Sudan, said his campaign did not target Coca-Cola or Pepsi because they did not fit with the campaign's main focus: companies involved in oil, power production, mining and military sanctions. "The other reason is that we don't feel that these are companies that are investing in Khartoum at the expense of the people of Sudan," Sterling said.
Both Coca-Cola and Pepsi are looking to emerging markets because growth at home is slowing. "My guess is they believe those emerging markets will aid in their growth down the road," said Gary Bradshaw, a portfolio manager with Hodges Capital Management in Dallas, which owns shares in Coca-Cola and Pepsi. "And those companies don't have anything against the people or anything. They obviously want to grow their business."
Not that the trade is all one way. Check the small print of sanctions legislation and you will find exemptions for some imports into the United States from blacklisted countries, chief among them carpets from gum arabic from Sudan. Gum arabic is, among other things, a main ingredient in paints, adhesives and a couple of well-known soft drinks, including some produced by Coca-Cola and Pepsi.
The effect of Sanctions
The sanctions will do little to stem Sudan's oil exports, which are the main source of the country's wealth and the existing sanctions against Sudan, which date back to 1997, have been unevenly enforced. "Sudan has been quite adept at avoiding sanctions for the past decade, and this is not going to have a lot of bite," said Philippe de Pontet, a political risk analyst at the Eurasia Group in Washington.
In recent years, Sudan has emerged as a small but fast-growing oil producer, first with the help of American and European corporations and more recently with investments from Chinese, Indian and Malaysian companies. Sudan now pumps about 500,000 barrels of oil a day, bringing in enough wealth to set off an economic and real estate boom, the capital. Ann-Louise Colgan, director for policy analysis and communications at Washington-based Africa Action, says that both Russia and China continue to oppose sanctions, for their own economic and political interests. "China is the single largest investor in the oil industry in Sudan, and Russia also has interests in continuing to sell weapons and other military equipment to the Khartoum regime," she added.
Abdul Rahim Hamdi, a former Sudanese finance minister who advises the government on economic matters, noted that only Sudanese oil-drilling companies are on the new sanctions list, not Chinese or other foreign corporations — some of which pay huge royalties to Sudan's government. The Chinese companies are the only big players, but the Americans have carefully avoided targeting them. Besides, after a decade of sanctions, Sudan has few commercial ties to the United States. Nearly three-quarters of Sudan's trade is with Arab and Asian nations.
For now, the only Sudanese company that truly risks being affected by the U.S. measures, Hamdi contends, is Sudatel, Sudan's largest cell phone provider, because it is listed on the stock exchange in the United Arab Emirates and is largely owned by foreign investors.The Sudanese firms know how to avoid dollar transactions by using the euro instead. Sudanese firms operate through foreign holding companies or joint ventures to evade restrictions.
U.S. calls for European allies concerning sanctions against Sudan turned to be unsuccessful. The Germany, as a case, sees business opportunities in Sudan (International Economics, November 26. 2005). The German media is very critical of any wrong doing by the US government, a few US soldiers and many US companies. The German Federal Ministry of Economics and Labor sponsored a "German Pavilion" at a trade fair in the Sudanese capital in February 2005 and did so again in February 2006 due to "the positive feedback from the German participants," according to one chamber of commerce. Neokomplott has exposed another chamber of commerce, which calls the genocide "political disturbances," praises Sudan's dynamic oil industry and the improved business climate and mentions the German government's support of the fair.
The German participants of in the fair included Siemens AG (capital goods), AgfaPhoto GmbH (capital goods, consumer goods), AutoStar Ltd. (authorized Mercedes Benz dealer for Sudan Automobile Industry), DEUDIAM (diamond tools and machines), KWH (plastic pipe equipment), SMF (liquid goods packaging machines), Vietz (pipeline equipment, welding technology), and WIDOS (plastic welding machines, tools). The trade fair in 2006 will not be about medical products. According to Eric Reeves, professor at Smith College and respected Darfur activist, Siemens is "presently building outside Khartoum the world’s largest diesel-powered electrical generating plan." Whereas Germany wants to increase business relations with Sudan, the U.S. calls for multilateral sanctions against the Sudanese government, a strengthening of the arms embargo and accelerated and expanded assistance to the African Union, whose peacekeeping troops patrol Darfur. Europe, despite apparently tough talk in some quarters, is still far from prepared to jeopardize its own economic interests.
Business leaders here are predicting that U.S. sanctions will have little effect on the country's booming oil-driven economy, mostly because the measures avoid targeting key Chinese interests. Last year, Sudan's economy grew by 12 percent, according to the International Monetary Fund. That growth was propelled by the estimated 500,000 barrels of oil produced each day — two-thirds of them bought by China. The largely cash-based economy has reported growth rates, excluding the impact of inflation, averaging 7 percent over the past 10 years and The official growth forecast for 2008 is 8 percent, the same as the previous year.
Conclusion
Form the proceeding information and fact analysis, the .U.S. sanction imposed on Sudan has little effects on the Sudanese economy for the discussed reasons. Sudan does not have large business networks involved in the United States of America, the sanctions have conflicted with large businesses interests in Sudan, including American and Europian companies. China have wide range of current and future businesses interests and would veto the American sanctions to protect their assests. In additions, the Sudanese businesses have long adjusted to U.S. sanctions, and find many ways around to continue with their businesses. Moreover, Sudan econcomically deal with many countries in the golf and Asia regions who do not suffer U.S. sanctions, and they work as economical bridges to Sudan businesses.
U.S. had a chance to move forward with building relation with Sudan when they were involved in the peace process, and to start a move-on policy. Despite U.S involvement in peace process with Sudan in 2005 and witnessing the Comperhensive Peace Agreement, U.S. still accusing Sudan for violating human rights; and imposing economical sanctions on it. The good thing should have been done is to help settle the country and gain new economical foundation and respect. The U.S. sanctions do not really work with Sudan, a country has not much business interests with U.S., and while U.S. do not getting more international support on its sanctions, the government of Sudan has been gaining more support recently, even form its own past-time opposing people and neighbors. Sudan is turning many countries attentions for doing businesses at its soil.