The United States maintains stricter sanctions against Sudan than does any other nation. The Treasury Department’s Office of Foreign Assets Control, or OFAC, bars American citizens and businesses (referred to as U.S. Persons) from having any dealings with Sudan’s oil industry without a license. The Sudanese Sanctions Regulations (SSR) attempt to directly target Bashir’s government. For example, the new state of South Sudan will be entirely exempt from sanctions. Support for U.N. missions, as well as the sale of humanitarian medical equipment, is permitted. And Darfur and certain marginalized areas around Khartoum are also exempt. Otherwise, however, U.S. Persons may not sell goods to or import anything from northern Sudan. Nor may they deal in anything that has transited – and thus generated taxes, tolls, or other benefits for – the North. Finally, the SSR forbid U.S. Persons from “facilitating” transactions that would violate sanctions if done by an American.
Yet, as evidence of ethnic cleansing mounts in Southern Kordofan, it is clear that U.S. sanctions alone have failed to halt human rights abuses. When OFAC cut Khartoum’s access to the U.S. financial system, Sudan simply converted its foreign reserves out of dollars. And when Americans were prohibited from dealing with Sudan’s government-owned corporations, Khartoum responded by selling off its stake in those companies. In its most recent report to Congress, OFAC noted that, despite the SSR, Sudan’s economy actually grew by more than 10 percent in both 2006 and 2007.
Congress should strengthen the SSR. It could start by lifting the statutory cap on civil penalties. Maximum fines are currently $250,000 or twice the amount of the infringing transaction, whichever is greater. OFAC also lacks explicit authority to seize cargo or force repayment of ill-gotten profits. When fines are offset by profits from the prohibited sale, sanctions can become part of the cost of doing business. OFAC should be obligated to impose fines that are commensurate with the cost in human life of sanctions violations.
OFAC does not need Congressional approval to give immediate, common sense interpretations to it existing rules. The SSR prohibit “facilitation” of transactions in Sudan, such as providing brokering services. Thus, if a U.S. bank supplies dollars for a deal between a foreign seller and a Sudanese buyer, the bank violates sanctions even if its partners do not. Problems arise where the U.S.-to-Sudan money trail is less clear. For example, the Chinese National Petroleum Company, or CNPC, which owns 48 percent of Sudan’s oil infrastructure, trades freely on the New York Stock Exchange through its parent company, PetroChina. In its most recent SEC filing, PetroChina claims that “CNPC, our controlling shareholder, may choose to undertake, without our involvement, overseas investments and operations in … Sudan (emphasis added)."
This is absurd: Jiang Jiemin, the chairman of PetroChina, also serves as the chairman of CNPC’s Board of Directors. If a U.S. Person invested directly in CNPC’s Sudanese activities, he could go to jail. But because it is impossible to determine whether a dollar invested with CNPC ends up in Abyei, Sudan, or Huabaei province in China, an investment in or loan to the company more generally is permitted. More than 60 percent of Sudan’s oil output is sold to China via CNPC, providing Khartoum with a revenue stream that severely blunts the impact of sanctions. OFAC can and should close this loophole. Black’s Law Dictionary defines “facilitation” as “the act of making it easier for another to commit a crime.” There can be no question that the company’s activities are at least quasi-criminal: Americans could face up to 20 years in prison for the same investment.
President Clinton’s 1997 Executive Order, which established the SSR, prohibits American performance of “any contract, including a financing contract, in support of an industrial, commercial, public utility, or governmental project of Sudan.” Black’s defines “support” as “furnishing funds or means for maintenance . . . to enable to continue; to carry on.” Developing oil fields and refineries is massively capital-intensive. If a U.S. Person would be jailed for providing those funds directly, why should it be allowed to do so indirectly just because the investor failed to follow the money?
Clarifying that such “one step removed” dealings violate the SSR could both curtail the flow of dollars to Khartoum and influence the behavior of foreign companies. Enforcement would be a simple matter of burden-shifting: dealings by Americans with a company that does business in Sudan should be presumed to violate sanctions. Unless the U.S. Person can rebut that presumption by proving that none of its money will enter Sudan through the company’s activities or affiliates, the transaction should be prohibited. OFAC cannot force foreign companies to obey U.S. law, but it can give them a choice: Stop funding flagrant human rights violations, or lose access to the U.S. market.
James Bair is a graduate of Northeastern University School of Law in Boston, MA. He helped establish the Victims Unit at the Extraordinary Chambers in the Courts of Cambodia and has published on the rights of victims under international criminal law.