Sudanese Business Leaders Say U.S. Sanctions on Sudan Will Have Little Effect

KHARTOUM, Sudan – Business leaders here are predicting that new U.S. sanctions imposed because of violence in Sudan's Darfur region 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 U.S. sanctions announced last week target 31 Sudanese firms and three individuals, including a rebel leader linked to the bloodshed in the Darfur region. More than 200,000 people have been killed and 2.5 million forced from their homes in Darfur during four years of fighting between Sudanese forces and rebels.

The newly sanctioned companies join 132 other Sudanese firms already banned from doing business with any U.S. company or bank.

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," Hamdi said.

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, Hamdi said.

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.

"Tougher new enforcement techniques," including "forensic accounting" have been used to select the newly targeted companies and to make sure all 163 now on the sanctions list are truly barred from the dollar economy, U.S. embassy spokesman Joel Maybury said.

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 said last week.

Sudanese firms facing U.S. sanctions include most state-owned or state-controlled companies, ranging from oil drilling and transport firms to insurance companies.

The U.S. measures and the violence in Darfur are likely topics of discussion when the Group of Eight industrialized countries meet this week at a summit in Germany.

President Bush has directed American officials to meet with allies to try to draft a new U.N. Security Council resolution that would impose multilateral pressure on Sudan, in addition to the unilateral actions by the U.S.

But China, which holds veto power in the Security Council, has urged negotiations with Sudan rather than sanctions.

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. Sudatel executives could not be reached for comment.

Sudanese businesses have long adjusted to U.S. sanctions, business leaders said.

A prominent Khartoum financier, who asked not be identified because of the sensitivity of the issue, said 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, the financier said.

Analysts like Alex Vines, the head of the Africa program at the British think tank Chatham House, also predicted the U.S. sanctions will have little actual effect on Sudan's economy.

"It's more of a political signal," Vines said.