US prepares to act against Sudan sanction-busters

KHARTOUM, Feb 7 (Reuters) – The U.S. Treasury is preparing to launch a string of civil actions against companies it says have breached sanctions imposed on Sudan for abusing human rights and supporting terrorism, a senior official told Reuters on Thursday.

Agents had built up a “queue” of enforcement actions against violators that will be rolled out in as early as a month’s time, said Adam Szubin, Director of the Treasury’s Office of Foreign Assets Control (OFAC).

OFAC, he added, was stepping up its enforcement of U.S. sanctions against Sudan following a strengthening of Washington’s stance against atrocities in Darfur last year.

“Sudan is at the top of our list, among our most serious concerns. We are investigating a number of significant Sudanese violations,” Szubin told Reuters.

Szubin said he could not name the companies involved but added that U.S. sanctions on Sudan affected both U.S. companies and foreign companies operating from inside the United States.

U.S. President George W. Bush tightened sanctions against Sudan in May, accusing the Khartoum government of obstructing U.N. efforts to bring peace to Sudan’s western Darfur region.

Washington accuses Khartoum of carrying out genocide in Darfur, where almost five years of conflict have claimed an estimated 200,000 lives and driven 2.5 million from their homes. Khartoum rejects the term “genocide” and European governments are reluctant to use it.

In Oc4ober, President Bush signed in regulations that significantly increased the penalties for companies and individuals that violated U.S. sanctions.

Violating companies now face fines of up to $250,000 a breach or a charge of twice the offending transaction — a penalty that in some cases could run into millions, said Szubin.

OFAC was waiting for the publication of official guidelines for the new penalties before pushing through the enforcement actions, he added, “in the next month or two”.

The recent increase in penalties for sanctions violators had strengthened OFAC’s hand, he added.

“What we were seeing in a few cases would be a company that facilitated, let’s say, a handful of petroleum sales for Sudan out of the United States … and then was caught.”

Before the penalty increase, the company would have only had to pay up to $50,000 for each illegal sale — a charge that many organisations could write off.

“We’re now able to say, if your transactions totalled $40 million, and those were violative transactions, you could be facing a maximum penalty of $80 million. And that is no longer something that people will shrug off.”

Sudan gives militia leader government post

KHARTOUM, Jan 20 (Reuters) – Sudan has appointed Musa Hilal, a man Washington accuses of coordinating Darfur’s marauding militias, to a central government position, a move condemned by international human rights campaigners.

Minister of Federal Affairs Abdel Basit Sabderat confirmed Hilal had been picked as his new adviser. The presidency had earlier denied the appointment.

“Yes he is appointed … adviser to the minister,” Sabderat told Reuters, but gave no further details. Hilal is the leader of the Mahamied clan, part of the powerful Arab Rizeigat tribe in Darfur.

Hilal told Reuters he would be based in Khartoum, but said the post could require travel to outlying regions. The ministry coordinates regional administrations with central government.

Washington says Hilal is the coordinator of the Janjaweed militias accused of war crimes in Darfur. He denies atrocities and says he mobilised his tribesmen to defend their lands after a government call to “popular defence”.

Human Rights Watch urged U.N. Secretary-General Ban Ki-Moon to press Sudan’s President Omar Hassan al-Bashir to revoke the appointment and to investigate Hilal for crimes in Darfur.

“Musa Hilal is the poster child for Janjaweed atrocities in Darfur,” Richard Dicker, International Justice Programme director at Human Rights Watch, said in a statement.

“Rewarding him with a special government post is a slap in the face to Darfur victims and to the U.N. Security Council,” he added, noting that Hilal was subject to a U.N. travel ban for his role in Darfur.

THREAT TO PEACE TALKS

Gamal Nkrumah, Africa expert at Egypt’s al-Ahram weekly newspaper, said Hilal’s appointment threatened to undermine upcoming peace talks between the government and Darfur rebels, and strain Khartoum’s already troubled international relations.

“It was a surprise decision and a very unpleasant surprise,” he said. “It’s very negative and it just shows the complete intransigence on the government’s part,” he said, adding the move would also alienate Darfur’s rebels.

Rights groups say they have interviewed witnesses putting Hilal at the scene of atrocities during the five-year Darfur conflict, a charge he denies.

Some analysts suspect Hilal could be charged by the International Criminal Court, which has already issued arrest warrants for junior minister Ahmed Haroun and an allied tribal leader in Darfur, Ali Koshayb, for war crimes in Darfur.

Sudanese columnist Mekki al-Maghrabi said Hilal’s appointment was worth the political risk for the ruling National Congress Party, even if he might be tried by the world court. As a tribal elder, Hilal had the kind of clout that was needed to speak to affected tribes in Darfur and resolve the conflict.

“The transfer of a tribal leader to a political post is a good step which will open the door to more settlements (of disputes),” Maghrabi said.

International experts estimate some 200,000 have died in Darfur from hunger, disease and violence. About two-thirds of Darfur’s population relies on the world’s largest humanitarian operation for food, shelter or medical care.

Mostly non-Arab rebels took up arms in early 2003 accusing central government of neglect. Khartoum mobilised mostly Arab tribes to quell the revolt.

Bush signs into law Sudan divestment measure

CRAWFORD, Texas, Dec 31 (Reuters) – U.S. President George W. Bush on Monday signed into a law a measure aimed at allowing states, local governments, mutual funds and pension funds to divest from Sudan businesses, particularly its oil sectors.

Some 20 U.S. states have initiated divestment efforts because of the conflict in Sudan’s Darfur region, which has taken some 200,000 lives and displaced some 2.5 million since rebels took up arms against the government in 2003.

But the effort in Illinois was challenged in court so the new law seeks to provide a legal framework for divestment from companies involved in Sudan’s oil industry, mineral extraction, power production and the production of military equipment.

Bush has called the deaths in the Darfur conflict genocide, a charge the Sudanese government has rejected.

“My administration will continue its efforts to bring about significant improvements in the conditions in Sudan through sanctions against the government of Sudan and high-level diplomatic engagement and by supporting the deployment of peacekeepers in Darfur,” Bush said in a statement.

But at the same time, he argued some provisions of the new law could interfere with his ability to conduct foreign policy and therefore he would “construe and enforce this legislation in a manner that does not conflict with that authority.”

White House spokesman Scott Stanzel said the administration would review divestment policies adopted by states and local governments to ensure they are consistent with the president’s foreign policy and take action if necessary.

But Stanzel stressed that Bush signed the measure because “the president broadly agrees with the aim of the sponsors, that doing business with Sudan should be discouraged.”

STEP IN THE RIGHT DIRECTION

The chief sponsor of the new law, Sen. Chris Dodd, a Connecticut Democrat and long-shot 2008 presidential hopeful, said the divestment is a vital step in the right direction.

“As we enter the new year, I urge states and local governments, as well as private investors, to take action, exercise your rights under this law and stop the genocide in Darfur,” Dodd said.

The new law also requires the State and Treasury Departments to report to Congress on the effectiveness of sanctions on Sudan. Contractors doing business with the U.S. government will have to certify they are not involved in those areas as well.

Bush signed the law at his Texas ranch where he was spending a weeklong holiday.

The Save Darfur Coalition and other advocacy groups hailed the signing and urged Bush to ensure the law is enforced.

“The people of Darfur cannot afford an empty ‘law on the books,’ which is why the president must vigorously enforce this critical legislation,’ the groups said in a joint statement.

The coalition says the Sudanese government uses up to 70 percent of its oil revenues, generated mainly through foreign direct investment, to give arms and supplies to the Janjaweed militia accused of the killings in Darfur.

Activists have pressed investors to divest their holdings in companies such as Malaysia’s state-owned Petronas, India’s Oil and Natural Gas Corp Ltd, and PetroChina Co Ltd, whose parent company, China National Petroleum Corp, is helping Sudan drill for oil.

Sanctions bite

Economist Intelligence Unit

In May 2007, when the US tightened its economic sanctions on Sudan in response to the ongoing humanitarian crisis in Darfur, few observers thought the move would have much effect. Years of US sanctions—originally imposed during the previous north-south civil war—meant that bilateral trade and investment were already almost non-existent. Six months on, the Sudanese economy is still booming—in the capital, Khartoum, at least. Nevertheless, the effects of the stepped-up sanctions are starting to show.

The US “upgrade” of its existing measures had two main aspects. First, sanctions were imposed on around 30 local companies (in addition to the 100 already proscribed) and three individuals, resulting in the freezing of a number of foreign bank accounts. Second, existing constraints on trade with Sudan by US firms and individuals were tightened. The first move has had a mixed effect on the named companies—although arguably these exclude the actors of the most economic importance, such as foreign-backed firms trading in oil and key raw materials, notably gum arabic. Sanctions were imposed on five local petroleum sector firms (including the Advanced Petroleum Company and the Hi-Tech Group, in which a brother of the president, Omar al-Bashir, plays a senior role), with little appreciable impact. Similarly, Sudatel, the majority state-owned fixed-line telecommunications operator, which was also proscribed by the US, has continued to dominate the Khartoum Stock Exchange and expand its regional operations into West Africa.

In contrast, the sanctions on the Al-Sunut Development Company—a joint venture between Dal Group (one of Sudan’s largest holding companies), the national government, the Khartoum state government and the National Social Insurance Fund—has caused plans for the expansion of the flagship Al-Mogran property development (a massive US$4bn real estate project located near the confluence of the Blue and White Niles in Khartoum) to grind to a halt, pending a review. Although some of the companies that have bought plots have begun to build, the second-phase development of a 1,420-acre residential district has been put on hold, as local banks have asked Al-Sunut to close its accounts—at least under that name.

Dollar deficit

Beyond the named companies, the tightening of existing sanctions has had a more pervasive effect, complicating Sudan’s access to international financial markets. Almost all of the country’s export revenue comes from crude oil, priced in US dollars, and through much of 2007 the Sudanese currency was also effectively pegged to the dollar. In late September the central bank decided to convert all of its foreign reserves into euros and other denominations, and this operation is now almost complete (except for a few working balances). The central bank has also advised the government to limit its dollar transactions. However, this has not had much effect on the use of dollars in the economy, which remains widespread.

Most of the liabilities of local commercial banks are in dollars, and must be converted by going through another currency, which leads to higher transaction costs. As the US has continued to seek to eliminate loopholes, the banking sector as a whole is having increasing difficulty managing US dollar transactions. Formerly, much of this market went to a French bank, BNP Paribas, but that institution has now closed its accounts and is moving out. Even the banks from Arab countries which initially sought to take its place, such as Dubai Islamic Bank, Byblos Bank of Lebanon and Bahrain’s ABC Islamic Bank, are said to be showing increasing caution.

Foreign fears

As well as the response to existing US sanctions, some foreign firms are moving out of the country because of concerns about an ongoing popular divestment campaign and the possibility that other countries might also impose new restrictions. Although UN sanctions remain unlikely Sudanese officials are nervous about the mood in Europe, and the UK in particular. Two major UK-based firms, Hilton Hotels and Rolls-Royce, announced that they were withdrawing from Sudan in 2007, as did Siemens of Germany. French firms such as Total, which has exploration rights to Block B in Southern Sudan, and Schlumberger, an oil services company, are also being targeted by the divestment campaign. More seriously, in mid-November the trade ministry of Japan—which bought more than half of Sudan’s oil by value in 2006—was said to be studying the possible effects of an end to Sudanese oil imports owing to public pressure over human-rights issues.

There is no imminent danger of foreign investment in Sudan drying up—interest from the Gulf Arab countries, in particular, is rising rapidly. China and India, as well as expanding their involvement in the oil sector, are becoming involved in a number of infrastructural projects as Asian firms build roads, dams and power stations funded by loans from their respective governments. American sanctions and divestment campaigns driven by Western non-governmental organisations are a boon to these firms, which face much less competition for business. By the same token, however, they put a further indirect burden on Sudan, limiting the country’s scope to negotiate favourable deals.

Sudatel shrugs off US sanctions to expand in Africa

DAKAR, Nov 16 (Reuters) – U.S. sanctions on Sudan’s telecoms company Sudatel are having no effect at all as it pursues an expansion into Africa by seeking stakes in Nigerian and Congolese operators, its Chief Executive said on Friday.

Sudatel, which is 26-percent state-owned, featured on a list of 31 Sudanese companies barred in May from doing business with American firms, as Washington ratcheted up pressure on Khartoum to halt violence in its Western Darfur region.

Sudatel CEO Emad Ahmed, visiting Senegal to hand over a $200 million cheque for a new telecoms licence, said the sanctions were not inhibiting its growth into West Africa, where it started mobile phone operations in Mauritania earlier this year.

“We are now in discussions with the government of Nigeria: we have already been discussing with an existing operator to acquire part of it,” Ahmed told Reuters, adding the company was also in talks to join an existing operator in Congo.

“In Niger, there is a (mobile phone) tender which is already launched. We are going to participate in that tender.”

Ahmed said Sudatel was focusing on West Africa, which has one of the continent’s fastest growing telecoms markets, and regarded southern African markets as more saturated. Analysts expect the number of subscribers in West Africa to double by 2011 to more than 100 million.

Sudatel, which is listed in Bahrain and Abu Dhabi, has in recent months paid $100 million to start mobile phone services in Mauritania before winning the licence for fixed-line and mobile services in Senegal, seeing off competition from Celtel, a subsidiary of Kuwait’s Zain .

Sudatel expects to start services in Senegal in six months and have coverage of all of Senegal’s main towns within three years. It expects to spend $500 million on rolling out its network over at least five years.

“By the end of the year, we hope to be in Mauritania, Senegal, Nigeria and one other West African country,” Chief Commercial Officer Ihab Osman told reporters.

USING CHINESE TECHNOLOGY

Sudatel had no intention of busting the U.S. sanctions and had notified its suppliers — including Ericsson , Nokia , Alcatel , Siemens and Huawei [HWT.UL] — that they must not introduce any U.S. components into Sudan, Ahmed said.

“The sanctions do not affect Sudatel at all. We are still dealing with the main builders of telecommunications … except American companies,” Ahmed said.

“The technology is available everywhere: it is available in Europe, it is available in the Far East and China, especially in China.”

Sudatel’s international growth is being fuelled by a robust domestic economy.

Despite U.S. trade sanctions since 1997, Sudan’s economy has enjoyed real growth rates averaging 7 percent over the last 10 years, and hopes to pick up speed in 2007.

Since selling its Sudanese GSM mobile phone business to Kuwait’s Zain two years ago, Ahmed said Sudatel had already attracted 3 million subscribers to its new third-generation CDMA mobile phone network.

New U.S. sanctions regulations open up south Sudan

CAIRO, Nov 6 (Reuters) – New regulations governing U.S. sanctions against Sudan mean U.S. businesses can now operate more easily in the semi-autonomous south, which is struggling to develop after decades of war with Khartoum, analysts said.

An Oct. 31 notice from the U.S. Office of Foreign Assets Control (OFAC) has cleared up confusion arising from a sanctions order issued last year. The new notice said most activities and money transactions, other than in the oil industry, are allowed in the south.

A White House order last year added to U.S. sanctions which date back to 1997, but it also exempted the southern region, run by a semi-autonomous government of former rebels.

The new sanctions were meant to put pressure on the Khartoum government for its handling of the crisis in the Darfur region of western Sudan but the United States did not want to penalise southerners who played no part in the Darfur conflict.

Until now U.S. organisations have still had to go through long procedures with OFAC to get around the 1997 order.

A U.S. diplomat who asked not to be named said regulations issued last month were made to clarify the south’s status after the 2006 order.

“To get an exemption from the comprehensive sanctions imposed in November 1997 was virtually impossible,” added Sudan specialist Eric Reeves, who has been trying to set up schools in the south despite “extremely onerous” regulations.

“In some fundamental sense only now have sanctions really been lifted on the south,” Reeves added.

A U.S. consultancy group said it had been unable to complete the process of handing over electronic equipment to emerging government institutions because of the regulations.

“In fact we never managed to get a licence, despite trying, and so we have retained ownership of equipment and ‘lent’ it to the ministries,” a member of the organisation said in an e-mail.

Supplying government with vehicles and other equipment should now be easier as long as they do not go through northern Sudan, he said.

“It should have been clear from day one that the south would be exempted from the sanctions,” said Sudan expert John Prendergast, currently with the Enough Project.

He said the period of confusion arose from what he called U.S. government ineptness.

Some Sudanese media reported the move as lifting sanctions on the south. “There was massive confusion … business like clarity and they hate bureaucracy,” Reeves said.

“The GOSS (south Sudan government) has been lobbying the U.S. to clarify the south’s status for some time,” Prendergast said, adding that private U.S. involvement in the south will be significant for the region’s development.

Banks operating in the south Sudan capital Juba have been operating different practices. Some have had money from the United States sent via East Africa to avoid what one bank manager called the headache of direct transfers to the south.

Southern Finance Minister Kuol Athian told Reuters last month that he had recently visited the United States to push for easier U.S. investment in the south.

He also said that since his trip dollar restrictions had been lifted, facilitating business.

Prepared Remarks of Office of Foreign Assets Control Director

Prepared Remarks of Office of Foreign Assets Control Director Adam J. Szubin on the Treasury Department’s Role in Addressing the Situation in Darfur Before the Senate Committee on Banking, Housing and Urban Affairs

Washington, DC — Chairman Dodd, Ranking Member Shelby and Members of the Committee, thank you for the opportunity to speak to you today about the Treasury Department’s role in addressing the situation in Darfur and the Sudanese Government’s support for terrorism, as well as its views regarding the various Sudan-related pieces of legislation that are pending in the Congress. I welcome the Committee’s interest in these matters, and want to take this opportunity to thank the Committee for its continued support of Treasury and OFAC and its mission over the years, in particular as we have pursued sanctions against governments like Sudan.

We share an acute concern about the devastating suffering in Darfur, and an understanding that economic pressure can play an important role in bringing about a political resolution to this complex situation. Secretary Paulson has made it clear that we should spare no effort in using all tools at the Treasury Department’s disposal to advance this goal. For OFAC, and for myself in particular, imposing smart and effective pressure on Sudan has been a foremost priority.

Treasury Department Actions against Sudan

The Scope of Sanctions

The United States has levied economic sanctions against Sudan since 1997. At that time, the Government of Sudan’s support for international terrorism and widespread human rights violations led President Clinton to impose comprehensive trade sanctions against Sudan, and block all property of the Government of Sudan in the United States or within the control of U.S. persons anywhere in the world.

Acting with Congress, President Bush amended these broad sanctions in 2006 to carve out certain areas from our sanctions, notably Southern Sudan and Darfur, provided that the relevant transactions do not involve Sudan’s petroleum or petrochemical industries or any property or property interest of the Government of Sudan.

In addition to these comprehensive sanctions, the President recently imposed strict economic sanctions against persons responsible for violence or atrocities in Darfur. Issued in accordance with actions taken by the United Nations Security Council, Executive Order 13400 blocked the property of four individuals connected to the conflict in Darfur. It also authorized the Treasury Department to block the property and interests in property of persons determined to: constitute a threat to the peace process in, and stability of, Darfur; be responsible for conduct related to the conflict in Darfur that violates international law; be responsible for heinous conduct with respect to human life or limb related to the conflict in Darfur; have supplied, sold, or transferred arms or any related materiel related to military activities to the warring parties in Darfur; or be responsible for offensive military overflights in and over the Darfur region. Treasury’s authority applies as well to those determined to have materially assisted or supported, or to have acted for or on behalf of, any of the above.

Recent Actions

A primary objective of these sanctions, of course, has been to alter the behavior of those responsible for the terrible suffering in Darfur, first and foremost the Sudanese Government of President Bashir. This past April, on Holocaust Memorial Day, the President issued a clear warning to the Sudanese Government. Either they would live up to their prior commitments and allow the deployment of a joint United Nations-African Union peacekeeping force, or the United States would impose further economic sanctions on the Sudanese Government and seek a United Nations Security Council Resolution to do likewise.

When President Bashir did not follow through, President Bush did. On May 29, Treasury announced the designation of three additional Sudanese individuals and thirty-one additional Sudanese companies subject to the asset freeze strictures of Executive Orders 13067, 13400, and 13412. We imposed sanctions against three individuals and one company because of their role in the ongoing violence in Darfur. We designated Ahmad Muhammed Harun, Sudan’s State Minister for Humanitarian Affairs, and Awad Ibn Auf, Sudan’s head of Military Intelligence and Security, who are among Khartoum’s senior leadership and have acted as liaisons between the Sudanese government and the Government-supported Janjaweed militias. We also designated Khalil Ibrahim, leader of the Justice and Equality Movement (JEM), a rebel group that has been responsible for a number of violent incidents, and the Azza Air Transport company, which had been conveying artillery, small arms, and ammunition to Sudanese government forces and Janjaweed militia in Darfur for their activities in Darfur.

Simultaneously, we targeted 30 additional companies owned or controlled by the Government of Sudan, thereby subjecting them to the asset freeze imposed on the Government by Executive Orders 13067 and 13412. These targeted companies included five petrochemical companies, Sudan’s national telecommunications company, and an entity that has supplied armored vehicles to the Sudanese Government for military operations in Darfur.

In addition to these actions to strengthen our financial measures against Sudan, we have stepped up enforcement of our Sudan sanctions, and have made such enforcement a top priority within OFAC. While I cannot comment on specific open enforcement cases, I can tell you that we are aggressively pursuing a number of violators to expose and penalize those who are violating our sanctions and deter those who might think of doing so.

In this regard, I would like to thank the Chairman and this Committee for its support in passing S. 1612, the International Emergency Economic Powers Enhancement Act, which provides for increased civil penalties for violations of IEEPA – the statute pursuant to which our sanctions against Sudan are imposed. We have sought these increased penalties in no small part because we faced impediments to obtaining meaningful enforcement of our sanctions against Sudan. The passage of this bill will provide a strong tool to make our sanctions effective.

It can be notoriously difficult to measure and attribute the impact of sanctions, when the ultimate objective is a change in regime behavior. It is certainly true that our sanctions were watched very carefully in Khartoum and taken seriously. Immediately after the sanctions were announced, the Sudanese Government took steps to sell off Government assets that we had identified and its Central Bank imposed broad restrictions on the movement of foreign currency. And, most importantly, we believe that the new U.S. sanctions – and the threat of international sanctions along similar lines – played a role in President Bashir’s announcement in early June that Sudan would allow the deployment of a joint African Union-United Nations peacekeeping force in Darfur.

In addition to ensuring that our sanctions have the maximum possible effect on the Government of Sudan (GOS), we are also taking steps to protect the Government of Southern Sudan (GOSS) and humanitarian aid efforts in Darfur and elsewhere. We have prepared regulations that will help clarify the scope of sanctions with respect to South Sudan, Darfur and other exempt areas, and hope that those regulations will spur interest in investment and economic development in the South. And to facilitate the vital assistance activities of our State Department and USAID colleagues and those in the NGO community, we are licensing humanitarian work. Since January, 2006, we have issued approximately 87 licenses and registered approximately 48 NGOs to conduct this critical assistance work.

Pending Legislation Concerning Sudan

We appreciate and share the concerns that animate the various pieces of Sudan-related legislation pending before Congress. Let there be no mistake – these concerns are deeply shared by the Treasury Department and the entire Administration.

A Government-Generated List

In imposing economic sanctions or other measures against Sudan – or any other regime – we must always keep in mind the ultimate goals of those sanctions. While the Department shares the Committee’s and the Congress’ goal of increasing pressure on the Sudanese government to end the violence in Darfur, we have several concerns with the various legislative proposals that have been introduced and discussed in the Congress.

Of particular concern are the various proposals that would require either the President or the Secretary of the Treasury to prepare a list of all companies engaged in specified business activities in Sudan. The preparation and publication of such a list raise a series of significant concerns for the Department, and may not add much value, given that non-governmental organizations have produced such lists for purposes of divestment.

A primary concern with the creation of such a list is the impact it is likely to have on our ability to maintain multilateral pressure on the regime in Khartoum. Because of the United States’ broad sanctions against Sudan, no U.S. companies are likely to be included on such a list, as investment by such companies in Sudan is generally prohibited absent a license from OFAC. Consequently, the list would consist of foreign companies whose activities in Sudan are most likely legal in their home countries. Such a list likely will be viewed by our allies as a U.S. Government “blacklist” – not of Sudanese government entities – but of other companies based in their nations, and, therefore, as an unwelcome effort by the United States to expand the scope of our sanctions. As a result, such a list seriously risks alienating the very countries whose assistance we need to maintain and increase international pressure on the Bashir regime. These third countries hold important leverage that may be needed to threaten and ultimately impose additional measures against the Bashir regime, should it fail to follow through on its commitments. The promulgation of what will likely be perceived as a U.S. Government blacklist targeted at the lawful conduct of non-GOS companies based in these allied nations, however, risks shifting the focus of the debate from the Bashir government’s compliance to the propriety of U.S. actions, and thus jeopardizes the international coalition that has helped bring about the recent positive developments in Sudan. Particularly in light of the current track of negotiations, including upcoming peace talks in Libya later this month, we strongly believe that requiring the promulgation of such a list is unwise.

In addition, creation of such a list raises a host of practical concerns. Any such list created by the U.S. Government will necessarily be incomplete. It would not identify those companies whose involvement in Sudan is not sufficiently established or is known only through classified information. The resultant list would be limited to publicly available information. Such a list would attempt to duplicate similar lists already compiled by non-governmental organizations based on public information but it would likely be less inclusive in light of the government’s inability to rely on certain sources of information.

Further, the agency tasked with creating such a list would face difficult issues in determining what type and amount of evidence would suffice to include a company on the list. And, the inclusion or exclusion of certain companies from the list could subject the agency to legal challenges under the Administrative Procedure Act.

Creation of a list would also impose an ongoing, burdensome requirement on the agency tasked with its creation, especially a list that would need to be updated continually or on a regular basis as called for by some legislative proposals. These demands will necessarily divert resources from other important government functions. Indeed, those on my staff who have the most familiarity with Sudan are currently working to target companies and individuals for additional sanctions.

With relevant lists already available from non-governmental sources, all of the above costs would seem to greatly outweigh what incremental benefit a new government-generated list might provide.

Other Policy Proposals

Many legislative proposals would encourage and affirmatively authorize State and local government action. As noted by my State Department colleague, the Administration opposes proposals to authorize divestment by state and local governments, which impair the ability of the president to act on behalf of the nation as a whole and risk creating a multiplicity of foreign policies.

I understand that the Committee is considering alternative proposals to a government-generated list. We look forward to continuing to work with you and your staffs as you consider the costs and benefits of such proposals, and would look forward answering the Committee’s questions regarding these issues.

Conclusion

We all share the same objective when it comes to Darfur: a negotiated settlement that will bring a stable and lasting peace to Darfur. We remain committed to continuing the constructive dialogue we have had with your staffs on these important issues, as we very much want to ensure that the U.S. Government has all appropriate tools at its disposal to address this situation. Thank you again for the opportunity to testify today about this important issue.

Sudan central bank aims for dollar-free system

KHARTOUM, Sept 25 (Reuters) – Sudan’s central bank will stop trading in U.S. dollars and move its reserves into euros and other currencies to minimise the risk of U.S. sanctions against the growing economy, a bank official said.

Hussein Yahya Jangoul, head of financial markets at Sudan’s central bank, told Reuters by the end of the year the Bnk of Sudan hoped to be free of U.S. dollars.

“The central bank has to respond for the sake of minimising the risk of this embargo so transactions with the outside world should be shifted from U.S. dollars to other currencies,” he said.

“Hopefully that will be by the end of this year,” Jangoul added.

Sudan’s central bank began diversifying its reserves into euros and pounds sterling in 2003, he said, but a majority of the reserves were still in U.S. dollars.

He could not say exactly how much the reserves were, but another official said reserves covered three months of imports.

Jangoul said the Bank of Sudan had issued recommendations to commercial banks, government departments and private businesses to move their transactions abroad and balances to currencies other than U.S. dollars.

He said the dominant currency was likely to emerge as the euro.

Washington imposed sanctions on Sudan in 1997 accusing Khartoum of aiding “terrorism.” Earlier this year it strengthened those sanctions because of ongoing conflict in Sudan’s western region of Darfur.

Sudan is a cash economy because of sanctions, and the embargo means credit cards are not used either. Cash transfers to Sudan are difficult and are often stopped.

“There’s a risk in continuing to use dollars in transactions,” he said.

“The U.S. embargo can stop the transaction at any time since it’s in U.S. dollars and the banks or private sector is going to lose that money,” he added.

He said all banks would be likely to switch away from all dollar transactions.

“The central bank is not going to provide U.S. dollars to commercial banks because the central bank itself has no U.S. dollars.”

Jangoul said that Sudan was going to try to adopt the currency of the country it is trading with, especially in the Gulf and Saudi Arabia, Sudan’s big trading partners.

In Asia, transactions woud be done in euros or pounds sterling while in Europe euros will be used.

Activists say Sudan divestment campaign working

WASHINGTON, Aug 12 (Reuters) – The campaign to persuade U.S. companies and investors to halt the flow of dollars to war-torn Sudan through China and other countries is making significant progress, activists say.

U.S. sanctions on Sudan, where conflict in the Darfur region has been branded “genocide” by President George W. Bush, already limit most transactions, though humanitarian aid and agricultural assistance have been allowed.

But U.S. institutional investors, mutual funds, and Warren Buffett’s Berkshire Hathaway have billions of dollars invested in companies that operate in — or have ties to — Sudan, particularly the oil business.

Activists have lobbied for investors to dump shares and bonds in PetroChina Co. Ltd., whose parent company China National Petroleum Corp. is helping Sudan tap its oil reserves, as well as India’s Oil and Natural Gas Corp. Ltd. and Malaysia’s Petronas.

“The burgeoning Sudan divestment movement has already facilitated a response from companies operating in Sudan, institutional investors and mutual fund managers,” said Adam Sterling, director of the Sudan Divestment Task Force.

He cited 19 U.S. states, nine cities including Los Angeles, and 54 universities that are beginning to divest from Sudan. Sterling also noted major companies, such as Britain’s Rolls-Royce, have withdrawn.

Some $3.5 billion of foreign direct investment flowed into Sudan last year, a jump of 53 percent over 2005.

However, after the first quarter of 2006 when almost $1.6 billion entered, investment dropped to below $700 million in each of the next three quarters, according to International Monetary Fund figures.

International experts estimate some 200,000 people have been killed in Darfur and another 2.5 million have been driven from their homes since violence erupted in 2003, prompting Bush to label it “genocide,” a term other countries have avoided.

KHARTOUM REJECTS ACCUSATIONS

Khartoum has rejected the accusations, but recently agreed to a 26,000-strong U.N.-African Union peacekeeping force.

Sudan’s ambassador to the United States John Ukec Lueth argued in May that sanctions barring U.S. companies hurt the country’s poor and were arbitrary, citing the continued ability of Coca-Cola to do business there.

Under pressure from activists, some institutional investors and mutual funds have already cut their stakes in PetroChina, including those run by Fidelity National Financial Inc., according to securities filings.

China needs energy resources and has resisted forcing Sudan to accept peacekeepers. But as Beijing prepares to host the 2008 Olympics and pressure from Western powers mounted, it pressed Khartoum to accept the force.

While Berkshire shareholders rejected a proposal to divest its $3.3 billion PetroChina stake, the company sparked speculation that it could be bowing to pressure when it sold 17 million shares in July. It still holds a 10.96 percent stake.

Berkshire’s Buffett has argued that selling PetroChina shares would not affect the parent company’s business in Sudan.

One expert said that such cuts were “piecemeal” and instead investors were starting to explore ways to ensure that their money went into funds that were considered “terror free” and did not invest in countries like Sudan and Iran.

“I think people who want to divest (from) Sudan do not want to limit it to companies that meet guidelines A through J, in terms of their specific operations in Sudan,” said Adam Pener, chief operating officer of Conflict Securities Advisory Group.

His firm provides research on which U.S. and foreign companies have business activities in countries such as Iran, North Korea, Sudan, and Syria.

U.S. states have billions of dollars to invest, typically from pension funds, and are increasingly paying attention to political dynamics in their decisions.

Some U.S. companies have licenses to serve Sudan, including Coca-Cola which provides its beverage base to a private company, DAL Foods Industries Ltd. The companies with licenses have not drawn fire from activists, who say the Sudanese government receives little revenue from such industries.

“We didn’t find that was an industry benefiting the Sudanese government,” Sterling said, adding that the beverage industry employed a large number of Sudanese.

Darfur scares European investors off Sudan’s oil

KHARTOUM, Aug 3 (Reuters) – Sudan has strong potential for oil exploration and expansion but big European players will be reluctant to invest for fear of pressure from groups advocating divestment because of violence in its Darfur region.

This has left the door open to Chinese firms, less sensitive to shareholder opinion, whose country is hungry for energy.

European caution is unlikely to change given the high profile of the rape and killing in Sudan’s remote west, which international experts estimate has claimed 200,000 lives.

Sudan, emerging from decades of civil war, produces around 500,000 barrels per day of crude, mostly the sweet refinery grade Nile Blend and the more acidic Dar Blend.

Most of the oil lies in the south, scene of a bitter civil conflict for all but 11 years since independence in 1956.

However, as the former foes in Sudan signed a north-south peace deal in January 2005, a conflict was fully under way in the western Darfur region, which Washington branded genocide.

European powers are reluctant to use the term, which Khartoum rejects.

Lack of progress on Darfur and backsliding on the southern deal prompted the United States in May to strengthen sanctions it had placed on Sudan in 1997, which most analysts say have not affected the oil industry, except for banking administration.

Analysts say Sudan has instead looked east to Asia for investment, a policy that is unlikely to change.

“If you look at production, it’s not affected production,” said Christopher Brown, Sudan analyst from Wood Mackenzie.

The only major Western operator in Sudan, France’s Total, has been kept from starting work by a long-dispute on ownership rights to its Block B. A small British firm had been drilling until the government ruled in favour of Total.

“There are no Western operators, other than Total SA, which has not started yet,” Brown said.

DIVESTMENT CAMPAIGN

While the sanctions are not directed against European companies, many fear reprisals from lobby groups that have waged an effective Sudan divestment campaign in the last few years.

“The European players would be worried about reputational risks,” said O.B. Sisay, deputy Africa analyst from Exclusive Analysis.

The Sudan Divestment Taskforce, http://www.sudandivestment.org , has pressed U.S. universities and even large funds and financial institutions to divest from companies with interests in Sudan, in what activists say is the largest movement since the anti-apartheid campaign.

Sisay said the Darfur war activists were influential.

“The pressure groups could create serious risks for the companies…which leaves a lot of space for Chinese companies.”

Top state-owned firm Chinese National Petroleum Corp. (CNPC) has major interests in eight of Sudan’s oil blocks, as well as owning 50 percent of Sudan’s largest refinery and partnering oil pipeline construction.

Malaysia’s state-owned Petronas and India’s ONGC have invested heavily in recent years as Western companies left.

Analysts said there was good growth potential in Sudan’s oil industry, which has remained opaque for years because of its role in the north-south civil war and associated rights abuses.

With the peace deal, new areas for exploration were opening.

Sudan’s oil blocks total an area of around 1 million square km (386,100 sq miles), with only a small area so far drilled.

The full extent of its oil reserves are unclear but BP’s Statistical Review of World Energy in 2007 put Sudan’s proved reserves at 6.4 billion barrels, the fifth largest in Africa.

“As the country becomes explored more there is a huge possibility…and huge potential,” Sisay said.

Wood Mackenzie’s Brown said exploration was relatively cheap in Sudan so even as current oil fields slow down, the country could make new finds to sustain production.

“We expect production to rise to somewhere in the region of 700,000 barrels per day over the next couple of years and then probably decline unless they make new finds,” he said.

“They are exploring at a high rate so they may be able to sustain that.”

But one source close to oil production in Sudan said the government was overpumping its Nile Blend and Dar Blend, to get as much revenue as possible ahead of a southern Sudanese vote on independence in 2011.

“They want to get out as much as possible before the south goes its own way,” the source told Reuters.

Sisay at Exclusive Analysis said a return to war, which some observers say is possible, would be more of a threat to investors than any separation.

But he said Sudanese oil would become more important in global markets, as there is a supply crunch with production problems in Nigeria and the Middle East.

“As China, Brazil and India increase in their demand, Sudanese oil will be key,” he said.