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Sudan just shrugs off sanctions

The U.S. economic boycott over the violence in Darfur isn't working. Oil wealth is fueling a boom.

August 18, 2007|Edmund Sanders | Times Staff Writer

KHARTOUM, SUDAN — Sinking back in a poolside lounge chair at Khartoum's first five-star hotel, Sitona Abdalla mused recently about whether U.S. sanctions were hurting Sudan.

"I guess they must be," said Abdalla, one of Sudan's new elite, who can afford to bring her nephews to Al Salam Rotana Hotel's $42-a-plate weekend brunch. "But I would have to say," she added, smiling at the children splashing in the pool, "life here is better."

Ten years after the U.S. imposed an economic boycott against what is territorially Africa's largest country, it's hard to see much effect on the streets of Khartoum, the capital. Unlike the case of Iraq, which was crippled by United Nations sanctions in the 1990s, Sudan has blossomed economically since the sanctions were put in place in 1997 because of its alleged support of terrorism and attacks against southern rebels.

President Bush tightened sanctions in May, citing the military regime's failure to resolve the crisis in the violence-plagued western region of Darfur, where an estimated 200,000 people have died, mostly from disease and hunger in the early days of an ethnic conflict. An additional 2.2 million people have been displaced.

But by most measures, Sudan's economy is booming, expected to grow 13% this year, far faster than those of most other African nations. Oil exports are generating more than $4 billion a year, and heavy investment by China and other Asian nations has allowed the country to escape crippling economic pain.

"We are not afraid of sanctions," Interior Minister Zubair Bashir Taha said. "Not at all. We have been able to develop our oil industry, our communications. No country has leapfrogged the way we have."

Surging investment

Foreign investment in Sudan has quadrupled since 1996 to about $2.3 billion last year, according to figures from the Investment Ministry. China, which buys about two-thirds of Sudan's oil, has invested $7 billion, mostly in oil projects, roads, bridges, dams and other infrastructure projects, officials said.

Such growth has transformed Khartoum. Three years ago, the Nile River city resembled Baghdad before the war, with dusty roads, dilapidated government offices and moldy hotels.

Today, giant construction cranes are busy all over town, promising to give Khartoum a skyline. In addition to the $300-a-night Rotana, an egg-shaped hotel is being built near the river with Libyan capital. At the outdoor Ozone cafe, Palm Springs- style water misters cool patrons in Khartoum's 100-degree heat.

"The sanctions haven't made much of a difference," said Safwat Fanous, head of the University of Khartoum's political science department. "The government has learned how to evade them."

In imposing new sanctions against 30 Sudanese companies in May, Bush called upon President Omar Hassan Ahmed Bashir "to end the campaign of violence that continues to target innocent men, women and children" in Darfur. He vowed to tighten enforcement of existing sanctions.

Amid a growing international divestment campaign, some European firms, including Siemens, Rolls-Royce and Land Rover, recently announced they were pulling out of Sudan. But no other countries have yet joined the U.S. boycott.

Sanctions also have been partly undermined by numerous loopholes and exemptions that permit some U.S. companies to continue working with Sudanese partners.

Coca-Cola Co. and PepsiCo Inc. have licenses to sell their syrup to Sudanese factories. Gum arabic, a gooey tree sap used in scores of consumer products as an emulsifier, was left out of sanctions by Congress because Sudan controls most of the worldwide market. Some oil firms and financial institutions are able to operate here by funneling business through foreign-based subsidiaries of U.S. companies.

At least 16 Americans have invested in small to mid-sized business ventures in Khartoum during the last four years, according to the Investment Ministry. Asked how the Americans avoided U.S. sanctions, a Sudanese official said, "We don't ask. That's not our headache."

A rush to fill the gap

For the most part, large U.S. firms have steered clear of Sudan, including Chevron Corp., which helped discover Sudan's oil but left the country before being able to profit from it.

Investors from China, Malaysia and India have rushed to fill the gap, offering financing, technology and construction services.

Sudan's rising oil production lured public and private investors from China, but now the Asian nation is finding Sudan to be a thriving outlet for Chinese goods, from soccer shirts to coffee tables. Economists estimate that for every dollar China pays for Sudanese oil, it earns back 50 cents through sales of products and services.

"Turning to China was the best thing this government ever did," said El Khider Mohammed Nour, who runs an investment consulting firm in Khartoum.

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