Working Paper 266September 2011

The Sudan Sanctions Tangle after Southern Independence

Abstract

South Sudan is the world’s newest nation, in part thanks to pressure from U.S. economic sanctions. The challenge now is how to adapt U.S. policy so that it supports development in the new nation, while also encouraging peace in Darfur, democracy in the north, and respect for human rights throughout. This paper traces the evolution of U.S. policy towards Sudan and recommends changes to ensure that South Sudan is protected from the impact of economic sanctions, while still keeping the pressure on Khartoum. South Sudan was exempted from most U.S. sanctions years ago, but two remain that need to be addressed: limitations on U.S. contributions for debt relief in Sudan; and restrictions on U.S. participation in the petroleum sector.

www.cgdev.org

Kimberly Ann Elliottassisted by Jeremy Bennett

The Sudan Sanctions Tangle after Southern Independence

Kimberly Ann ElliottSenior Fellow

Center for Global Development

assisted by Jeremy Bennett

CGD is grateful for contributions from the Canadian International Development Agency in support of this work.

Kimberly Ann Elliott. 2011. “The Sudan Sanctions Tangle after Southern Independence.” CGD Working Paper 266. Washington, D.C.: Center for Global Development.http://www.cgdev.org/content/publications/detail/1425421

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The Sudan Sanctions Tangle after Southern Independence

South Sudan is the world’s newest nation and some of the credit for that outcome goes

to pressure from the United States, including via economic sanctions. The joy of the

independence celebrations in Juba still lingers, but the challenge of building a country in

South Sudan quickly returned to the fore. The question for U.S. policy how to adapt the

sanctions regime so that it supports development in the new nation, while still

promoting peace in Darfur, democracy in Sudan, and respect for human rights

throughout. This essay traces the evolution of American policy towards Sudan, focusing

on the growing tangle of overlapping objectives, congressional legislation, and executive

orders imposing sanctions against the country. A key goal now is to ensure that this

tangle of sanctions does not ensnare the new government in South Sudan, while also

adjusting them as necessary to prod the government in Khartoum to cooperate on other

important U.S. objectives.

Since the sanctions in place against Sudan are comprehensive, U.S. leverage over the

regime now lies in lifting them, which is envisioned as a step-by-step process in the

Obama administration’s road map for Sudan. The history of sanctions, however,

suggests that this may be more difficult than it seems in theory.1 This essay briefly

summarizes the history of the Sudan sanctions and demonstrates how complicated they

have become. It then explores how to ensure they are flexible enough to achieve U.S.

goals in both Sudan and South Sudan. Two annexes summarize, respectively, key events

in U.S. policy and the legal bases for, and conditions for lifting, sanctions against Sudan.

The Evolution of Sanctions against Sudan

The Sudan sanctions saga began in 1988 when nonhumanitarian aid was suspended

under a Foreign Assistance Act amendment restricting funds for governments in arrears

on their debt. That aid was cut off entirely in 1990 following a military coup in

Khartoum. While these early sanctions were relatively automatic decisions driven by

congressional restrictions on foreign aid spending, the expansion and tightening of

sanctions over the years was often driven by advocacy groups concerned about human

rights, religious repression, and the conflict in Darfur, rather than by strategic foreign

1 This paper draws on the author’s extensive work on economic sanctions in the twentieth century, most

recently published in Hufbauer, Schott, Elliott, and Oegg (2007).

2

policy concerns. The history of sanctions against South Africa, Cuba, Vietnam and others

suggests that such sanctions can be difficult to lift in the absence of complete

capitulation by the target government. Even in South Africa, it took years for the

sanctions against the apartheid regime to be unwound after it was gone.2

The bottom line in Sudan is that various new sanctions, or new conditions for lifting old

ones, were layered over one another via a mix of executive orders and congressional

actions. Following the cut-off in aid, the State Department designated Sudan as a state

sponsor of terrorism in 1993, which added restrictions on dual-use exports and arms

and munitions sales and added conditions for restoring aid. In 1996, in response to

pressure from Congress, President William Jefferson Clinton issues a broad executive

order under the International Emergency Economic Powers Act banning trade and

financial transactions with Sudan because of terrorism, threats to regional stability, and

human rights concerns, including slavery and suppression of religious freedom.

Not satisfied, and with strong backing from human rights and evangelical Christian

groups, Congress passed additional legislation affecting Sudan, including laws to address

human trafficking and violations of religious freedom around the world. The legislation

was generic but could have been used to impose sanctions against Sudan if similar

measures were not already in place under other legal provisions. In 2002, 2004, and

2006, Congress also passed Sudan-specific legislation aimed at first encouraging and

then supporting implementation of the peace agreement signed in 2005, as well as

addressing the conflict in Darfur. These acts added conditions for lifting sanctions, while

providing exceptions for assistance to support the peace process and capacity-building

and to promote development in southern Sudan. In annual appropriations bills,

Congress also specifically prohibited most economic and military aid to Sudan and

restricted its eligibility for debt relief, until the president certifies that a democratically-

elected government is in place and that Sudan is cooperating with conflict resolution

and humanitarian relief in Darfur. Annex 1 provides a timeline of key events related to

sanctions against Sudan, while updated case studies from the Hufbauer, Schott, Elliott,

and Oegg (2007) sanctions analysis provide additional detail.3

Today, sanctions are nominally comprehensive, but with a number of specific

exemptions. They prohibit private trade and financial transactions with Sudan, block the

assets of designated government officials, and limit nonhumanitarian economic aid.

Despite the sanctions, the United States is a leading donor country in Sudan with billions

of dollars in contributions for humanitarian, peacekeeping, and reconstruction

assistance since 2005, when the peace agreement between the north and south was

2 For full case histories, see Hufbauer et al. op cit.

3 Forthcoming on the Peterson Institute for International Economics website, www.piie.com.

3

signed.4 In addition, the regional government and designated areas of southern Sudan

were exempted from most sanctions after 2005. The key exception is the oil sector,

where U.S. persons are still prohibited from any transaction that would benefit the

regime in Khartoum.5

Annex 2 underscores the legal maze of actions that will have to be negotiated if a

decision is made to normalize relations with Sudan. Secretary of State Hillary Clinton

indicated after the relatively peaceful referendum on southern Sudanese independence

in January 2011 that the United States was considering removing Sudan from the list of

state sponsors of terrorism, but that prospect receded when violence broke out in

regions along the new border, including the oil-rich area around Abyei. The terrorism

sanctions are now entangled with these other issues and apparently will not be

removed until there is progress, despite the State Department’s positive conclusion

regarding Sudanese cooperation:

The Sudanese government continued to pursue counterterrorism operations

directly involving threats to U.S. interests and personnel in Sudan. Sudanese

officials have indicated that they view their continued cooperation with the U.S.

government as important and recognize the potential benefits of U.S. training

and information-sharing…. [T]he bilateral counterterrorism relationship remains

solid… 6

In terms of other U.S. objectives, the sanctions also appear to have played some role in

the decision by the government in Khartoum to allow the referendum on southern

Sudanese independence to go forward in January 2011, and to accept the results, at

least so far. As noted, however, the threat of renewed violence remains until all the

issues related to southern independence are resolved. And, with respect to the situation

in Darfur and the restoration of democracy in the north, the assessment of the results of

U.S. policy is less positive. Sudan held its first multiparty elections in 24 years in April

2010, but several opposition parties boycotted them and they were judged by outside

observers to be neither free nor fair. And the situation in Darfur remains unsettled, at

best. As in many other sanctions cases, there are multiple goals and varying degrees of

movement toward them, but continued violence makes it politically perilous for the

administration to use both carrots and sticks and to reward positive moves.

4 http://www.state.gov/r/pa/ei/bgn/5424.htm.

5 The U.S. Treasury’s Office of Foreign Assets Control released an interpretation of the sanctions regulations

confirming that sanctions on U.S. participation in the oil sector would remain in place after southern

independence; see http://www.treasury.gov/resource-

center/sanctions/Programs/Documents/sudan_secede_guide.pdf .

6 http://www.state.gov/s/ct/rls/crt/2009/140889.htm

4

Potential Complications of the Sudan Sanctions Tangle

How, if at all, does South Sudan’s independence change the situation and how can

sanctions be used most effectively going forward? The most important thing is to ensure

that sanctions do not inhibit American support for the new government in southern

Sudan, that punishing Khartoum is not at the expense of this fragile new state. As noted,

southern Sudan was exempted from most sanctions affecting aid, trade, and other

finance some years ago. The sanctions most likely to raise problems for the United

States in engaging and supporting the new government in the south are the

congressionally-imposed restrictions on eligibility for debt restructuring and those

related to the petroleum industry.

According to one insider account, the government in Khartoum tentatively agreed to

assume all of Sudan’s foreign debt, as long as it is able to reach agreement with

creditors within two years on eligibility for debt relief.7 If that does not happen, the two

parties would have to negotiate an apportionment of the debt and that becomes more

likely if Congress continues to block U.S. participation in a debt relief deal. Official

creditors generally act jointly in debt relief negotiations, meaning that non-participation

by the United States could block any agreement, which, in turn, could lead to South

Sudan having to assume some of the debt. Analysis of the debt situation by CGD Fellow

Ben Leo suggests that the southern share would not be large under most scenarios, but

prolonged negotiations could increase the uncertainty and perceived risk involved in

investing in South Sudan.8

With respect to oil, U.S. persons continue to be prohibited from participating in

anything to do with that sector if the government of Sudan would benefit. And it is

almost inevitable that the government in the north would benefit, at least in the short

run, since the only way currently to export oil from South Sudan is via pipelines that

goes through the north to Port Sudan. Even if Sudan and South Sudan reach an

agreement on dividing oil revenues that allows South Sudan to keep all the revenues

generated by oil produced in its territory, it will still have to pay transit fees to Sudan.

7 Specifically, CGD Research Fellow Ben Leo, who has been advising the African Union’s High Level

Implementation Panel on Sudan, reports that Sudan would assume all international obligations if It reaches

the decision point for the Highly Indebted Poor Countries debt relief program within two years. Leo

discusses the tentative deal here:

http://blogs.cgdev.org/global_prosperity_wonkcast/2011/07/12/prospects-for-south-sudan-the-

world%E2%80%99s-newest-nation-ben-leo/

8 For a full discussion of the issues around debt relief after southern secession, see Ben Leo, Sudan Debt

Dynamics: Status Quo, Southern Secession, Debt Division, and Oil—A Financial Framework for the Future.

CGD Working Paper 233. Washington: Center for Global Development, December 2010.

5

Since the U.S. petroleum industry has been barred from operating in Sudan for some

time, the direct impact of this sanction on the new state may not be large. It will,

however, prevent U.S. public and private sector investment in an industry that is vital

for southern export and government revenue.

Conclusions and Recommendations

Even as the new citizens of South Sudan were celebrating independence, concerns were

rising over renewed violence in areas along the new border. Until the violence ends,

both between north and south and in Darfur, at least some U.S. sanctions will remain in

place. Sanctions can be most helpful, however, if they do not entangle South Sudan and

if the president has the flexibility to respond when Sudan makes progress, as envisioned

in the road map. This is particularly important since U.S. sanctions against Sudan are

comprehensive and the leverage now lies in lifting them. If the sanctions cannot be

lifted because of domestic political opposition, the Khartoum regime has no incentive to

cooperate.

As summarized in Annex 2, many of the sanctions against Sudan were either imposed

under presidential authority, and can be lifted by him, or they include waivers allowing

the executive branch to lift them under certain conditions. Providing debt relief or other

non-humanitarian aid, or U.S. government support for trade and investment, however,

would require Congress to lift the restrictions it has imposed and then to appropriate

funds. Short of that, the president cannot waive the sanctions until he can certify that a

democratically-elected government is in office in Sudan, which currently is not possible.

With respect to commercial trade and private financial flows, those sanctions are

imposed by executive order and could be lifted at the president’s discretion, though it

could be politically difficult to do so and risks Congress passing legislation to restore

sanctions if key leaders are not supportive.

U.S. policy effectiveness in both Sudan and South Sudan could be improved if the

administration and Congress work together. Two steps in particular would be helpful:

Clarify in the next foreign aid appropriation bill that debt relief can be

considered as supporting the peace process, if the president concludes that it

would be useful in resolving the remaining issues around South Sudan’s

independence.

If likely to contribute to South Sudan’s development, remove the restrictions on

U.S. firms participating in the oil sector in South Sudan and authorize transit

payments to Sudan related to exports of South Sudan’s oil. This would allow U.S.

companies to bring their technology to the oil sector in South Sudan and could

be conditioned on South Sudan joining and complying with the provisions of the

Extractive Industries Transparency Initiative.

6

Economic sanctions have not achieved all that the United States wanted in Sudan, but

they have contributed positively to Sudanese cooperation in some areas, most notably

permitting the oil-rich southern states to secede and create an independent state. The

question now is whether the legal flexibility and political space exists to allow the

Obama administration to use sanctions as a bargaining tool, or whether the desire for

punishment will override all other considerations.

7

Annex 1 Timeline of Key Sanctions Events (adapted and updated from

Hufbauer et al.)

1983: Civil war breaks out between government forces, insurgents of Sudan People's

Liberation Army (SPLA), which is composed mostly of non-Muslims from southern part

of country that oppose government efforts to impose Islamic law (sharia) over whole

country. (National Journal, 10 December 1988, 3130; Congressional Quarterly Weekly,

13 May 1989, 1132–35)

December 1988: US economic, military aid disbursements to Sudan (except for food aid)

are frozen because of Sudan's failure for over a year to make $12 million in payments on

its debt to US. (Congressional Quarterly Weekly, 13 May 1989, 1135)

March 1989: After US administration requests $52 million for Sudan for FY 1990,

Congress passes nonbinding resolution, offered by Congressman Gary L. Ackerman (D-

NY), Sen. Edward M. Kennedy (D-MA), calling on President George H.W. Bush to

reconsider extending nonhumanitarian aid to Sudan unless government makes progress

in delivering food aid to refugees, negotiating end to civil war. Resolution is later

attached as amendment to foreign assistance appropriation bill. (Congressional

Quarterly Weekly, 13 May 1989, 1133)

28 February 1990: US Agency for International Development announces that

nonhumanitarian aid can no longer be disbursed to Sudan because of amendment to

Foreign Assistance Appropriations Act of 1989 (in each annual appropriations since

1986) barring aid to countries in which democratically elected government has been

deposed in military coup, as happened in Sudan in June 1989 when Omar Hassan

Ahmed Bashir overthrew the civilian government of Prime Minister Mahdi. (New York

Times, 16 July 1989, 4; Congressional Quarterly Weekly, 13 May 1989, 1135;

Washington Post, 24 May 1990, A48)

25 April 1991: Because of insufficient protection of workers’ rights, President Bush

suspends GSP benefits for Sudan. (CRS1992, 94)

18 August 1993: The US places Sudan on the State Department list of countries

designated as supporters of international terrorism, which prohibits provision of

nonhumanitarian economic aid (already blocked), restricts dual-use exports and arms

sales, and requires US representatives at international organizations to vote against

loans to Sudan. (International Trade Reporter, 25 August 1993, 1419)

1994-96: Sudan turns over the international terrorist known as Carlos the Jackal to

France; a year later, Sudanese Islamic fundamentalists are implicated in an assassination

attempt against Egyptian President Hosni Mubarak. A year after that, U.S. withdraws

diplomats citing security concerns. (COMPASS Newswire, 11 November 1994;

8

Washington Post, 2 July 1995, A27; Washington Post, 24 November 1996, A32; New

York Times, 15 February 1996, A6)

24 April 1996: President Clinton signs the Anti-Terrorism and Effective Death Penalty

Act, which bans Americans from engaging in any financial transactions with

governments on the US list of terrorism sponsors, including Sudan. The sanctions

provision is added in reaction to Louis Farrakhan’s travels to Libya to meet with

Muammar Gadhafi to discuss ways in which Libya could support Farrakhan’s Nation of

Islam activities. (Time, 5 February 1996, 14; International Herald Tribune, 25–26 January

1997, Washington Post, 23 January 1997, A1; US Information Service,8 June 1996)

Mid 1996: Sudan expels Osama bin Laden, responding to pressure from the US and

Saudi Arabia. (New York Times, 11 July 1996, 6)

August 1996: Regulations implementing the US Anti-Terrorism Act authorize financial

transactions with the Governments of Syria and Sudan, except for transfers from those

governments in the form of donations, and transfers when a US person believes the

transaction will be used to support terrorist acts in the United States. The

administration writes the regulations so as to avoid what it interprets as unintentional

sanctions on Syria and Sudan, the only countries on the terrorism list not already subject

to comprehensive US sanctions. (US Information Service Washington File, 15 May 1997;

Washington Post, 23 January 1997, A1)

11 June 1997: The Freedom from Religious Persecution Act, HR 1685, sponsored by Rep.

Frank Wolf (R-VA), is introduced in the Congress calling for sanctions against countries

where religious persecution is found to exist. The bill singles out Sudan and calls for

immediate and comprehensive sanctions on the country. Senator Arlen Specter (R-PA)

introduces parallel legislation in the Senate. (Journal of Commerce, 11 June 1997, 2A;

143 Congressional Record, H 5129; Wall Street Journal, 7 July 1997, A20)

11 July 1997: The House of Representative passes, 377-33, HR 748, a bill to reverse the

administration interpretation of section 321 of the Antiterrorism Act of 1996 that

allowed most financial transactions to continue with Sudan and Syria. (Journal of

Commerce, 11 July 1997, 3A; HR 2431)

4 November 1997: President William Jefferson Clinton, seeking to stave off harsher and

less flexible congressional action, imposes broad sanctions against Sudan by executive

order. The action blocks all Sudanese government assets in the United States and bars

all trade as well as a wide range of financial transactions with Sudan. (New York Times, 5

November 1997, A7; US Information Service, 4 November 1997)

7 August 1998:US embassies in Nairobi, Kenya, and Dar es Salaam, Tanzania, are

bombed; 263 people including 11 Americans are killed. Osama bin Laden, a Saudi

9

Arabian terrorist, is believed to be behind the attacks. (US Information Service, 9 August

1998; Financial Times, 25 August 1998, 12)

20 August 1998:In response to the embassy bombings, the US bombs a pharmaceutical

factory in Sudan believed to be linked to bin Laden and producing chemical weapons, as

well as three training bases in Afghanistan used by bin Laden’s terrorist network. (US

Information Service, 25 August 1998; Financial Times, 25 August 1998, 12)

Late September 1998: Two Sudanese diplomats reportedly hold private discussions with

State Department officials and are told that Sudan must stop supporting terrorism, halt

production of chemical weapons, and end the war in the south to normalize relations

with the US. Meanwhile, Sudanese Foreign Minister Mustafa Osman Ismail declares that

the Sudanese do not want confrontation with the US and are prepared for a

“constructive dialogue” with the US on issues of conflict. (Washington Post, 30 October

1998, A35)

23 March 1999: An official with the US Agency for International Development tells

Congress that the US has given more than $130 million in humanitarian aid to Sudan so

far in 1999, bringing the total amount disbursed since 1989 to $750 million. (US

Information Service, 23 March 1999)

28 April 1999: President Clinton announces general policy of exempting exports of

agricultural goods, medicine and medical equipment from unilateral sanctions, including

existing sanctions cases. No US financing will be allowed for the sales, but Sudan could

now buy U.S. food, subject to licensing conditions to be established by U.S. Treasury.

(US Information Service, 28 April 1999a; 28 April 1999b; Journal of Commerce, 4 May

1999, 8A)

3 May 1999: US Treasury Department unfreezes businessman SalehIdris' $24 million in

American assets. Treasury maintains that to prove Idris has links with terrorist Osama

bin Laden would jeopardize American intelligence agents. Idris was the owner of the

Khartoum pharmaceutical factory bombed by the United States, which maintained the

plant had produced biological weapons for bin Laden. Idris maintained that he had no

links to bin Laden and that the factory had never produced weapons of mass

destruction. (Washington Post, 7 May 1999, A38; International Herald Tribune, 17 May

1999, 8)

Early June 1999: In remarks published in a Lebanese magazine, Sudanese President

Bashir declares the Sudanese government is ready to cooperate with the United States

to make clear it is not supporting terrorism in any way. (Washington Post, 11 June 1999,

A18)

2001: Sudan is placed on the Tier 3 list (sanctionable) under the Trafficking Victims

Protection Act of 2000 for failing to meet minimum human rights standards set out in

10

that legislation. Because Sudan is already subject to broad sanctions, the action is

mostly symbolic. (CRS 2005, 13)

11 September 2001: Al Quaeda uses hijacked airplanes to destroy the two World Trade

Towers in New York City and to hit the Pentagon, killing thousands. A fourth plane

crashes in Pennsylvania, apparently when passengers try to retake cockpit.

28 September 2001: Noting Sudan’s recent cooperation on terrorism, UN Security

Council removes the 1996 air embargo imposed following the attempted assassination

of President Mubarak. This step was facilitated by Sudan’s post-9/11 warming towards

the US, which chose not to veto the resolution. State Department spokesman Richard

Boucher explains that "We have noted that [Sudan] recently apprehended extremists

within that country whose activities may have contributed to international terrorism…

[and that] they have worked with us to eliminate the presence of terrorist groups that

could threaten American interests. They've provided information on the past doings of

terrorist groups in Sudan." Regarding US sanctions, Boucher says Sudan will have to take

additional steps before sanctions can be lifted. (Financial Times, 29 September 2001;

Washington Post, 30 September 2001, A14)

29 May 2002: Washington sends first diplomat to Sudan in six years, naming Jeffrey

Millington to the post of charge d’affaires. (Washington Post, 30 May 2002, A21)

21 October 2002: President George W. Bush signs the Sudan Peace Act, which requires

the Administration to make semi-annual reports to Congress as to whether “the

Government of Sudan and the Sudan People’s Liberation Movement are negotiating in

good faith” and calls for sanctions if the President cannot make this determination,

including instructing US executive directors of international financial institutions to vote

against loans, credits and guarantees for Sudan; to consider downgrading diplomatic

relations; to take all possible steps to deny oil revenues to Sudan; and to seek a UN

Security Council resolution to impose an arms embargo against Sudan. President Bush

certifies that negotiations are continuing in subsequent years.(CRS 2005, 15;

International Trade Reporter 19, no. 41, 17 October 2002; Inside US Trade, 14 June

2002, 8)

Spring 2003: Sudan Liberation Movement (SLM; also known as Sudan Liberation Army,

SLA) and Justice and Equality Movement (JEM) join forces in Darfur and challenge the

Government of Sudan, accusing the Government of systematic discrimination against

African ethnic groups. The Government dismisses the SLM and JEM as terrorist groups,

and begins a scorched earth campaign, encouraging the Janjaweed (Government-

supported Arab militias) to target civilian populations suspected of supporting the SLM

fighters. Tens of thousands will eventually die and roughly 2 million will be displaced

from their homes. (CRS 2005, 2; ICG; State Department Background Note on Sudan,

www.state.gov/r/pa/ei/bgn/5424.htm)

11

18 May 2004: State Department removes Sudan from a list of countries considered

“noncooperative” in the war against terrorism. Spokesman Richard Boucher notes

“Sudan has taken a number of positive steps on cooperation against terrorism over the

past few years…[and] the U.S.-Sudanese bilateral counter terrorism information sharing

has improved remarkably but they remain on the state terrorism list because of the

presence of Hamas and Palestinian Islamic Jihad and some other concerns we have.”

Sudan still faces US sanctions because it remains on the list of state sponsors of

terrorism, and Secretary of State Powell declares that the US will not normalize relations

with Sudan until the crisis in Darfur is addressed. (CRS 2006, 13; Voice of America press

releases and documents, 18 May 2004)

23 December 2004: President Bush signs the Comprehensive Peace in Sudan Act, which

amends the Sudan Peace Act to allow the President to provide funds “to support the

implementation of a comprehensive peace agreement that applies to all regions of

Sudan, including the Darfur regions” and “to address the humanitarian and human

rights crisis in the Darfur region and eastern Chad.” (CRS 2005, 16; White House press

release, 23 December 2004)

2005: Congress passes the Assistance for International Malaria Control Act and amends

the Foreign Operations, Export Financing, and Related Programs Appropriations Act with

respect to Sudan in an attempt to distinguish between the Government of Sudan, the

people of Sudan, and the areas of the country outside government control. (CRS 2005,

13, 14)

9 January 2005: Government of Sudan and the SPLM (Sudan People’s Liberation

Movement; also known as SPLA) sign the Comprehensive Peace Agreement, which

officially ends a 21 year-old civil war by providing for a ceasefire, the withdrawal of

troops from southern Sudan, and the repatriation and resettlement of refugees. Under

the accord, sharia will apply in the north but not the south. After a six-year interim

period of self-rule, the south will hold a referendum to decide whether to remain part of

Sudan or secede. (State Department Background Note on Sudan,

www.state.gov/r/pa/ei/bgn/5424.htm; Washington Post, 10 January 2005, A9)

13 October 2006: President Bush signs the Darfur Peace and Accountability Act, which

calls on the president to block the property of, and prohibits transactions with

designated individuals and entities associated with Sudan’s government. President Bush

issues Executive Order 13412 to implement the asset blocking provisions of the

legislation. The new legislation also eases sanctions against areas of southern Sudan,

provided that transactions don’t involve the Sudanese government. (Mondaq Business

Briefing, 25 March 2007)

12

June-July 2007: UN Security Council Resolution 1769 authorizes the deployment of a

joint African-Union/United Nations peacekeeping force in Darfur. (The Economist, 14

July 2007; CRS 2011, 14)

July 2008: The International Criminal Court indicts Sudanese President Bashir for war

crimes, crimes against humanity, and genocide; Chief Prosecutor Luis Moreno-Ocampo

asks ICC judges to issue an arrest warrant for Bashir. The charges relate to actions

committed in the Darfur region. This is both the first time the Court has sought action

against a sitting head of state and that it has sought an indictment for the charge of

genocide. (The Economist, 17 July 2008; Financial Times, 15 July 2008; CRS 2011)

October 2009: President Obama unveils a new comprehensive policy towards Sudan

that encompasses possibly lifting sanctions and removing the country from the State

Department’s state sponsor of terrorism list. The policy’s three priorities are:

implementing the Comprehensive Peace Agreement signed in 2005, ending the conflict

in Darfur, and ensuring that Sudan does not become a safe haven for international

terrorists. The policy also specifies that relations will not be normalized unless progress

is made on all the issues. (CRS 2011, 5)

December 2009: A law authorizing referenda on independence for southern Sudan, and

whether residents of Abyei wish to be part of the north or the south, is passed. (Reuters,

31 May 2010; Carnegie Endowment for International Peace, 4 January 2011)

September 2010: Certain restrictions on licensing regulations in the agricultural sector

and restrictions on spare parts for trains are removed. (CRS 2011, 7)

7 February 2011: Following the announcement of the referendum results setting

southern Sudan on a course towards independence in July, Secretary of State Hillary

Clinton congratulates all of Sudan, and indicates the United States will begin the process

of withdrawing Sudan’s state sponsor of terrorism designation.

(http://www.state.gov/r/pa/ei/bgn/5424.htm)

14 June 2011: Responding to the recent outbreak of violence in Abyei and Southern

Kordofan, two border regions between northern and southern Sudan, State Department

spokesman Mark Toner states that “if Sudan chooses to escalate further the situation

and pursue a military solution to the future status of Abyei and Southern Kordofan, the

United States will not move forward on the roadmap to normalization of relations, and

Sudan will face deeper international isolation.” (US State Department Daily Press

Briefing, 14 June 2011)

13

Annex 2 Legal Bases for Sanctions on Sudan: Flows Covered (Reasons)

Economic and development aid

Other Public Finance Private Financing Trade

Foreign Assistance Act of 1961: non-humanitarian economic assistance, as well as military and agricultural aid (debt arrears, support of terrorism). Annual foreign operations appropriations acts: same as above (military coup), plus funds for debt restructuring (military coup, intra-state conflict and human rights); foreign ops funds also specifically denied to Sudan “except as provided through the regular notification procedures of the Committees on Appropriations.” Comprehensive Peace in Sudan Act of 2004, Darfur Peace and Accountability Act of 2006: reiterates restrictions, exempts aid to support peace between North and South or resolve conflict in Darfur (intra-state conflict;

Foreign Assistance Act of 1961: Eximbank (support of terrorism). Annual foreign operations appropriations acts: all public support for trade and investment, multilateral assistance (military coup); foreign ops funds also specifically denied to Sudan “except as provided through the regular notification procedures of the Committees on Appropriations.” Export-Import Bank Act: allows president to deny applications for credit (terrorism). International Financial Institutions Act: US executive directors to use voice and vote to oppose loans from IMF and World Bank (terrorism).

IEEPA Executive Order 13067: investment in or loans to and most other financial transactions in Sudan; blocks assets of Sudan government and designated individuals and entities (terrorism, human rights, religious freedom, and “efforts to destabilize neighboring governments”). IEEPA EO 13400 implements UN Security Council resolutions calling for blocking of assets of individuals (violence in Darfur). Arms Export Control Act: credits, guarantees, or other financial assistance by US persons related to export of defense articles (terrorism). Comprehensive Peace in Sudan Act 2004, Darfur Peace and Accountability Act of 2006: calls on president to

Executive Order 13067 prohibits exports to or imports from Sudan (terrorism, human rights religious freedom). and “efforts to destabilize neighboring governments”). Executive Order 13412: bars transactions related to oil, gas, and petro-chemical industries in Sudan (as called for in Darfur Peace and Accountability Act of 2006) Arms Export Control Act: arms exports and imports (terrorism, regional stability and conflict). Export Administration Act: requires validated licenses for the export of “goods and technology” that enhance military capabilities (terrorism) Trade Act of 1974: GSP eligibility (worker rights and

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human rights). Sanctions currently waived because in place under other provisions: International Religious Freedom Act: development, security assistance to countries designated as being of particular concern for severe violations of religious freedom, as Sudan has been since 1999. Trafficking Victims Protection Act: non-humanitarian, non-trade related development assistance for countries on Tier III Watch list for trafficking, as Sudan has been.

Arms Export Control Act: credits, guarantees, or other USG financial assistance related to munitions sales (terrorism). Comprehensive Peace in Sudan Act of 2004, Darfur Peace and Accountability Act of 2006: reiterates restrictions on bilateral, multilateral public finance, exempts aid to support peace between North and South or resolve conflict in Darfur (intra-state conflict; human rights). Sanctions currently waived because in place under other provisions: International Religious Freedom Act: executive directors to use voice and vote to oppose publicly-supported bilateral or multilateral financing for Sudan because of severe violations of religious freedom. Trafficking Victims Protection Act: US directors of international financial institutions to oppose IMF

use IEEPA to freeze assets of Sudanese officials, others inhibiting resolution of conflict in South or associated with violence in Darfur (implemented under EO 13412) (intra-state conflict, human rights violations). Sudan Accountability and Divestment Act of 2007: state and local governments authorized to divest assets in companies doing business in Sudan (intra-state conflict, human rights). Anti-Terrorism and Effective Death Penalty Act: financial transactions with designated governments (terrorism). Section 901(j) of the Internal Revenue Code: denies tax credits on foreign earned income (terrorism). Sanctions currently waived because in place under other provisions: International Religious Freedom Act: presidential authority to prohibit US

terrorism). Comprehensive Peace in Sudan Act 2004: requires president to take steps to deny Sudan oil revenues (intra-state conflict, human rights and genocide in Darfur) Sudan Accountability and Divestment Act of 2007: federal government must certify contractors do not do business in Sudan (intra-state conflict, human rights). Sanctions currently waived because in place under other provisions: International Religious Freedom Act: authorization to deny licenses for export of dual-use goods (severe violations of religious freedom). Statutory exemptions: Tariff Suspension and Trade Act of 2000 exempts gum arabic from restrictions under Executive Order 13067.

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and multilateral development bank loans and other non-humanitarian funding.

financial institutions from making loans above a certain amount over a certain time period to governments designated as of particular concern for severe violations of religious freedom. Trafficking Victims Protection Act: authorizes use of IEEPA to deny “significant traffickers” access to transactions in foreign exchange, property, certain kinds of credit transfers, the importing or exporting of currency or securities, and certain other measures against individuals.

Trade Sanctions Reform and Export Enhancement Act of 2000 provides general exceptions for:

Humanitarian assistance

Medical equipment, devices,

Agricultural commodities

Exemptions to Sanctions for South Sudan, Darfur Under Darfur Peace and Accountability Act (2006):

Designated areas of Southern Sudan, Darfur, and certain other specified areas exempted from certain sanctions, but not restrictions on oil industry transactions.

Removes the regional government of Southern Sudan from the definition of the Government of Sudan for purposes of asset blocking orders.

Conditions Specified by Congress for Lifting Sanctions against Sudan Darfur Peace and Accountability Act (2006): Specifies sanctions under EO 13067, FAA and annual appropriations should be maintained until the President certifies that Sudan is working to:

Implement the Darfur Peace Agreement

Disarm, demobilize, and demilitarize the Janjaweed and all militias allied with the GOS

Adhere to all UN Security Council Resolutions

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Negotiate a peaceful resolution to the crisis in eastern Sudan

Fully cooperate with efforts to disarm, demobilize, and deny safe haven to members of the Lord’s Resistance Army in Sudan, and

Fully implement the Comprehensive Peace Agreement Comprehensive Peace in Sudan Act (2004): specifies that sanctions should remain “until the Government of Sudan agrees to, and takes demonstrable steps to implement, peace agreements for all areas of Sudan, including the Darfur region.” NB: Both acts include national interest waivers, however annual appropriations acts specify that funds provided for foreign operations cannot be resumed until the president certifies that a democratically-elected government is in place in Sudan; funds debt restructuring also tied situation in Darfur.

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Waivers Under General Sanctions Authorities

Foreign Assistance Act of 1961:

Section 620 (a) relating to state sponsors of terrorism:

o Under subsection (c), designations may be rescinded only if the

President submits a report to the Speaker of the House of

Representatives and the Chairman of the Committee on Foreign

Relations of the Senate that—(A) there has been a fundamental change

in the leadership and policies of the government of the country

concerned;(B) that government is not supporting acts of international

terrorism;(C) that government has provided assurances that it will not

support acts of international terrorism in the future; or(2) at least 45

days before the proposed rescission would take effect, a report

justifying the rescission and certifying that—(A) the government

concerned has not provided any support for international terrorism

during the preceding 6-month period; and (B) the government

concerned has provided assurances that it will not support acts of

international terrorism in the future.

o Under subsection (d), the President may waive sanctions if he

determines that national security interests or humanitarian reasons

justify a waiver, except that humanitarian reasons may not be used to

justify a waiver for military, security, and peacekeeping assistance, or

support from the Economic Support Fund, or Export-Import Bank

credits.

Section 620(q) relating to debt arrears-President can waive if in the national

interest.

Other sanctions provisions related to designation as a state sponsor of terrorism:

Export Administration Act of 1979: Secretary of State can lift or waive after the

President notifies Congress.

Arms Export Control Act: Secretary of State can lift or waive after the President

notifies Congress; President can also waive on a transaction-by-transaction

basis. Congress may block by joint resolution; no waiver for restrictions on

Foreign Military Financing Program.

Export-Import Bank Act of 1945: President has the authority to impose and to

lift sanctions against countries determined to not be cooperating with counter-

terrorism efforts.

International Financial Institutions Act Secretary of the Treasury has the

authority to impose if the country is listed under Section 6(j) of the EAA or

Section 620A of the Foreign Assistance Act.

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Consolidated Appropriations Act of 2010 (and previous appropriations)

Reprogramming Notification Requirements for Specific Countries: “None of the

funds appropriated under titles III through VI of this Act shall be obligated or

expended for assistance for Sudan [and other designated countries,] except as

provided through the regular notification procedures of the Committees on

Appropriations.”

Specific Limitation on Assistance to Sudan: Can be lifted if the GOS is making

efforts to resolve conflict, allow humanitarian assistance.

Military coup d etats: Prohibition on assistance for programs in Titles III-VI,

including eligibility debt restructuring, can only be waived if President certifies

democracy is restored.

Trade Act of 1974 (Generalized System of Preferences):

President has the authority to determine eligibility, subject to public petition

process.

References

Hufbauer, Gary Clyde, Jeffrey J. Schott, Kimberly Ann Elliott, and Barbara Oegg. 2007.

Economic Sanctions Reconsidered. Third Edition. Washington: Peterson Institute for

International Economics.

Center for Strategic and International Studies. 2004. To Guarantee the Peace: An Action

Strategy For a Post-Conflict Sudan Supplement I: Addressing U.S. Sanctions Against

Sudan. March.

U.S. Congressional Research Service. 1992. Economic Sanctions Imposed by the United

States against Specific Countries: 1979 through 1992 (revised). Washington, August.

________. 1998. Economic Sanctions to Achieve U.S. Foreign Policy Goals: Discussion

and Guide to Current Law (updated). Washington, June.

________. 2005. Sudan: Economic Sanctions (revised). Washington, October.

________. 2006. Sudan: Humanitarian Crisis, Peace Talks, Terrorism, and U.S. Policy

(revised). Washington, February.

________. 2011. Sudan: The Crisis in Darfur and Status of the North-South Peace

Agreement. Washington, April.

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U.S. Department of the Treasury, Office of Foreign Assets Control. 2008. What You Need

to Know About U.S. Sanctions An Overview of the Sudanese Sanctions regulations.

Washington, July 25.