Sanctioning the CPA: A Policy Conundrum for the U.S.
Over the past twelve years, the U.S. has put forth a confusing array of legislation to impose economic sanctions on Sudan. Horrified initially by the Sudan government’s early support for international terrorism and, later, its behavior in Darfur, yet aiming to support the signed peace agreements, US policymakers have enacted a disconnected series of measures on Sudan. In some areas, the US has meant to isolate and punish the regime, yet elsewhere, the US has expressed explicit support and engagement. In a newly-issued report, U.S. Sanctions on Sudan: Intended and Unintended Consequences, we argue that the adverse effects of economic sanctions outweigh any benefits they have brought.
Here is a snapshot of how US economic policy towards Sudan is structured:
“¢ Isolation of the North under the sanctions regime;
“¢ Support for economic development and democratic governance in the semi-autonomous South;
“¢ Selective exclusion of the minority and marginalized populations of the North from the sanctions regime; and
“¢ Support for the full implementation of the CPA which requires both a spirit of cooperation and cohabitation between the North and the South, and constitutionally legislates areas of power-, wealth- and security-sharing between the North and South.
This amounts to an extremely ambitious attempt to selectively hurt some people in Sudan while helping others, based on their geographic residence. In reality it is beyond the power of sanctions to operate to hurt some areas of the country while leaving other areas unaffected, and even benefitting from other aspects of US development assistance. It is an attempt that has had very limited success, and instead threatens to undermine the peace agreement and the US’s influence in the country.
The evidence of success of the sanctions policy on the North is scant. In spite of the US sanctions on the North, Sudan’s GDP has grown – exhibiting one of the strongest growth rates on the African continent over the past many years. This growth has occurred with US businesses left out of the market, instead allowing Sudan’s more authoritarian partners to reap the profits – in some cases stepping right in to the gaps left by departing western companies. The exclusion of US businesses also has meant that there is a dearth of Western influence on the ground in the North – influence which could have positively impacted the modernization and democratization of the country and promoted the type of influence and engagement among the population that could press for greater engagement with the West.
We conclude that the American policy of isolation via sanctions has isolated the influence of the US, it has not isolated Sudan.
As a general observation, unilateral sanctions are generally understood to have little effect on the countries upon which they are imposed. A single country barring investment rarely produces sufficient economic pressure on a regime that would ensure marked behavioral change in lieu of violent intervention. Sudan illustrates this general rule. Many US policymakers understand that their sanctions may have little practical impact in terms of isolating the regime, and instead have generally applied them as an act of moral condemnation, especially against Khartoum’s complicity in the crisis in Darfur. The decision to use sanctions appears largely to be an emotional response to a human rights disaster and humanitarian crisis – it implies that the Sudan government’s role demands punitive measures but the crisis as a whole is not worthy of a US military intervention. It is the policymakers’ response to the felt need to do something!
Notwithstanding the moral outrage felt by the American public, it has not yet been explained that the “hurt” of the sanctions has been felt not by the ruling party, but rather by the ordinary population in both North and South Sudan. Voices arguing to this effect have been shunned from speaking out in public, lest they be seen as NCP sympathizers or even (absurdly) apologists for genocide in Darfur.
Special Envoy General Scott Gration recently aired his critical view on the sanctions in public, to near boos, when he expressed a concern that they were inflicting harm in areas not intended to be harmed. The empirical reality, irrespective of any moral sentiments, is that economic sanctions have not had the desired outcome. Instead, they have had unintended consequences opposite to the aims of those who demanded and designed them. Those they were intended to help have been hurt, and those whom they were supposed to hurt have been managed to evade the pain.
In South Sudan, the irony of the US policy conundrum is center stage. When Congress passed the Darfur Peace and Accountability Act in 2006, it exempted South Sudan, along with Darfur, the Transition Areas of Abyei, Blue Nile and South Kordofan and IDP camps surrounding Khartoum from the US sanctions. The victims of Sudan’s wars were not supposed to be victimized again.
Yet in practice, it is South Sudan that feels most of the impact of US sanctions because of its relationship with the North according to the arrangements in the CPA. The CPA stipulates that the two regions have areas of power-sharing, wealth-sharing and bear an obligation to work together to promote the economic development of all the people of Sudan. Because of how the CPA is written, in almost every case of commercial engagement and investment in South Sudan, companies will face compliance issues with OFAC (the US agency responsible for monitoring the sanctions). Navigating the hoops and ropes of US OFAC policy can be at best a trying situation and at worst, a deterrent to US investment in the South.
In short, one aspect of the US policy on Sudan undermines directly another imperative of US policy on Sudan. It is a peculiar and unfortunate circumstance for the South; and one that destabilizes the relationship with the North, the successful implementation of the CPA and the resolution of US-Sudan relations.
M. Karna L. Cohen is special projects researcher, Executive Research Associates. The report was also sponsored by the National Foreign Trade Council and USA * Engage, which is critical of U.S. sanctions policy.
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An excellent article and and report. The US administration needs to revisit the viability of economic sanctions. It is just confusing dilemma here that the moral drive to condemn the atrocities of a ruling regime could justify re-victimizing those who are actually victims of that regime.
If I may add, also it is not only that the US was isolated as a result, and not the regime in Khartoum, but also other competitors and players, such as China, were able to step in and take the place of the US, meaning more damage was done to the relations and interests of the US in Sudan.
Accordingly, it is is not surprising to see the recent changes US policy and diplomacy and to interpret Senator Kerry comments about the need to work together on issues with the government of Sudan. The question remains on whether these changes will repair the damage on the US and reinstate its role in the area without compromising the basic issues of humanitarian aid for the victims, and the interests of the Sudanese wish to see justice and not a sacrifice of justice for the sake of the US interest and a fragile peace.
Excellent article, Ahmed? It seems rather to just be a set of opinions. Of course, as the authors suggest, there is no need for careful analysis of unilateral sanctions: the outcome of unilateral sanctions is entirely predictable. There is thus no surprise. But on what basis to choose their opinion (self-serving, too, in view of the affiliation of the author) from someone else’s opinion? The authors suggest that moral judgments to not transact with someone are *emotional* (i.e., not rational). But as you well know, Ahmed, many kinds of transactions are prohibited in Islam, and we don’t think of them as being *emotional*. Do the refusals of many Arab States to transact with Israel fall into the same category? My point is not to get sidetracked, simply to illustrate that the author perhaps really should suggest how having Chevron explore for oil in South Sudan would be different that Total. Does she really think so?
Finally, the idea that somehow with a very relaxed sanctions regime (or relaxation of OFAC restrictions) there will be some kind of boom of investment by U.S. firms other than oil firms in South seems, well, hopeful. There may be a travel/lodging company here or there, or maybe a mining company… but the investment for industrializing South Sudan into light textiles will be done by Asian firms, just as in southern Africa.
By the way, to see how sanctions are at work in Sudan observe this photo:
http://www.travelpod.com/travel-photo/bonthorn/1/1213402200/pepsi-truck.jpg/tpod.html
Ana
Actually an excellent article, the consequences of the sanctions regime not only hurt some areas of the country in terms of economic development but also extended to other areas such as education and knowledge. There are many universities in Sudan want to send their student or have a program of exchange with their American counterparts. It is still very difficult for them to have access to American universities.The US has meant to isolate and punish the regime by these measures ,however, the intended consequences have reached other sectors such education and learning.
I believe, it is high time to revisit these sanctions. Sudan is a country with huge potential. It needs the technology and the capital of all nations to share togther these benefits. If the decision to use sanctions was an emotional response to a human rights disaster and humanitarian crisis there is a real hope peace will be realized soon in Darfur and there is genuine efforts to have democratic transformation in the country. All these steps should be encouraged by real change. I guess President Obama will behave differently. Let us hope that the time of sanctions and coercive measures left and a new era of mutual respect have started.
Mohammed Hassan Babiker
Looking back, it seems to me that the US sanctions had an immediate impact which was positive for the US. They shocked the NIF regime and forced it to rethink. The travel ban and the asset freezes also came as shocks. So there was a short-term psychological impact as the regime got the message that it was a pariah. Over the years this psychological impact wears off and the regime gets used to it. Sanctions might have begun with some effectiveness but that has got less and less as the years go by.
The Bush targeted sanctions especially squeeze on dollar transactions for the oil sector was a shock. Because the US keeps the exact nature of its targeted sanctions a closely guarded secret the leaders of the regime end up sanctioning themselves by deliberately refraining from any action which has even the slightest chance of exposing them to having their money snatched. The sanctions definitely keeps them worried and on their toes.
So the regime reeled from that one for a while. But then they learned that the best way to evade the sanctions is to go back to what they did in the heydeys of fundamentalism and Al-Qaeda which is working with criminal cartels and completely opaque financial systems in Saudi Arabia. The sanctions drive the regime finances into the shadow world of illegal finance. That worries me because even when this regime goes, as sooner or later it will, a big portion of the Sudanese economy will be criminalized.
The only way South Sudan will be free from sanctions and unequal and exploitative relation with Khartoum is (A) build a pipeline from South Sudan to the Indian Oceon at Mombassa and (B) have our own independent central bank.
The big issue today is not sanctions it is the mismanagement of the economy by both the Federal Ministry of Finance and the GoSS. The governments in Khartoum and Juba spent money as though the oil boom would last foreever. The figures announced today tell the story. Total oil revenue for some recent months is:
October $608 million
November $347.79 million
February $46.54 million
March $90 million
(see today’s article in Sudan Tribune, http://www.sudantribune.com/spip.php?article31078)
Sudan’s Dar blend oil needs special refining that is only available in the US and Japan and to a small degree in China. It sells at a whopping discount and when the oil price is low it is practically not worth selling it at all. If Sudanese petroleum had access to US technology it would get a better price for sure. What we really need is decent economic management and a stable global oil price.
The unilateral sanction of US on Sudan is not the reason for lack of development and economic crunch in the South Sudan like the author seems to suggest.It is the NCP’s lack of political will to share oil wealth equally with the Southern government that cause unequal level of development in the country.The NCP is determine to oppress the marginalised Sudanese people whether its trading partner is US,Russia or China.By imposing the unilateral sanction,the US policy makers just avoided being seen by oppressed Sudanese people as partners to NCP in its genocidal mission.The regime itself couldn’t feel the pain as there are many countries willing to buy the oil.If you US want to save the marginalised Sudanese people from this murderous regime,it should do the following:
1.Blockade the port Sudan to prevent the regime from selling oil for weapons.
2.Ask UNSC to take charge of oil revenue and use it for humanitarian activities in Sudan’s war affected areas.
Abdicating to the regime is not the solution as it will continue to implement its impressive policies under the watch of US.
I do agree with you those sanctions against Khartoum regime only hurt the poor and the most vulnerable in Sudan. If the sanctions were directed to affect the the regime elites I don’t think it had done that .They have their own ways to get around them, they reverted to the Far East China and Malaysia , most of the regime elites still come to Europe special United Kingdom for their Holidays and medical treatments, and recently sending some of their cadres to UK for training under their concept ( Tahial) Qualifying , most of them study in the most expensive universities in UK like London School of Economics( LSE), at time when the academic standards of Sudanese universities is been degraded to secondary schools level, they opened more the 26 universities with no enough qualified teaching staff and not enough teaching aids( libraries etc). And that negatively affecting the level of researches and skills which needed to support any future development projects.
The American sanctions are severely hurting the banking system in Sudan, as US Dollars is the main currency for international trade , if you are not allow to deal with American banks that will cost you a lot in terms of opening letters of credit , documentary bills, international letters of guarantees l and international remittances. Last year the American authority fined Lloyds bank £350 millions for allowing companies to deal with Sudan and Iran in breach of the sanctions, since that we find it very difficult to transfer money to Sudan through the main banks in UK, as everyone don’t want to get into troubles with the American authority.
Yes the American companies and other western companies are denied the chance of investing in Sudan and they left that for the Chinese and others companies from the far east, Sudan as a country also loosing, the best technology for oil explorations is in USA and Europe even for building dams and other infrastructure project it better to have competition from difference international companies and choose the best option than to relay on investors from one countries. They are saying Chinese don’t put preconditions but they actually keep blind eye on all the atrocities committed by the dictatorships and promoting some corrupt practices in those countries. If we look at why the Chinese economic grow rapidly in the last 15 years that mainly due to investments from multi-national and the preferential trade agreement they have with USA and also have full access the European market.
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The Rate of Growth of Sudan economy
It is very misleading to look at the rate of growth for any country from the macroeconomic point of view and to ignore the microeconomic points. Yes in the last 5 years the annual rate of growth for the Sudanese economy is around 10% per year, that mainly due to the discovery of oil which represent around 65% of government revenue, if we look at the rate of growth in the other sectors of the economy it is actually a negative growth, Sudan used to have between 10 to 12% of the world cotton market, now is less that 4% it lost some to it’s share to the newcomers.
The most important question is what affect does the high rate of growth have on the wider population lives, are they better economically or worse, does it improve their standard of living or not.
The answer is clear, the majority of Sudanese people are poor and lack the basic needs to survive, unless you are lucky enough to get a job in one of the oil companies or a new telecommunication companies you will not notice the growth in the economy and that means nothing for you.
According to the recent figures Sudan has the highest rate of internally displaced persons in the world around 5 millions people in a country of a population of 39 millions people, almost 13% of the population is IDPs, just imagine the standard of living of those people.
Sudan will do far better without USA sanctions; they just have to leave no reason for the American or other to impose sanctions on Sudan.
Abdul-Wahab misses the point: reality economics has hit home: it’s not about the mismanagement of oil revenue – Sudan should never have been expected to make with just oil revenue, but like any other country must have access to ‘standard’ international development finance and foreign debt relief: remember the underlying driver of Sudan’s internal conflicts has been relative economic underdevelopment, so it only makes sense that US sanctions should be lifted (and quickly) if we want to see long term stability in Sudan. I’ve always been amazed (nay stunned) that ‘internationals’ based in Sudan (let alone those based in their home-countries) have always shrugged their shoulders and have said “Well, the sanctions don’t seem to have had an impact, you guys (ie Sudan) are doing alright, you’ve got oil revenues”. Amazing. They make it sound (wrongly) as if countries with resource receipts somehow don’t need external financial assistance – despite numerous glaring examples around the world suggesting otherwise. That’s what I mean by ‘reality economics’ hitting home; the tailing off of world oil prices since Q4 ’08 has put paid to that myth that US sanctions have had no effect on Sudan.
The imposition of unilateral sanctions by the U.S. administration against the goverment of the Sudan has proven to be of positive impact for both the country and the goverment. Finding itself isolated by the U.S. and its Western allies, the goverment aimed eastward looking for economical and commercial partners where the ties are mainly based on mutual interests and far from hidden agenda and political intervention. Now, vital economic sectors like oil and energy are dominated by Asian companies mainly from China, they are actively involved in execution of some historical and great projects stand as obvious addresses of the current Sudanese development and progress. Thus, who missed the chance? I think the U.S. did.
To taylor sanctions against Arabic speaking muslims in the North ONLY is ; without doubt ; racist and islamophobic .It is a devious policy designed to disrupt not consolidate national unity. Other Western countries have followed suit ;taking their cue from Washington .Norway now offers scholarships to the South only.
We also remember that promises were made to Sudan before signing the Comprehensive Peace Agreement that the reward would be revisiting the sanctions and rethinking them. More promises were made in 06 before signing the Darfur Peace Agreement .The threat to penalise those who do not sign never materialised. On the contrary the rebels were emboldened by the ICC. They have sanctuary in the West.
Those of us who admire Western democratic values are appalled by the doublethink which has nothing in common with the moral high ground or with the value system ostensibly promoted by the West.
Western policies feed extremism and discredit moderation and moderates.