Editor's Note: Last week the U.S. Treasury Department’s Office of Foreign Asset Controls, or OFAC, lifted many previous restrictions under the Sudan Sanctions Regulations, or SSR, that were hindering the development of South Sudan. To understand the profound implications this shift in policy will have for both Sudan and South Sudan, lawyer and rights activist James Bair provides a legal overview of the sanctions lifted, and how these changes translate to realities on the ground.
International sanctions against Sudan have always been a patchwork. The United Nations permits investment in the North, forbids the sale of weapons in Darfur, but does not restrict the sales of guns and planes that kill civilians elsewhere in the country or across the border in South Sudan. The EU has no independent weapons ban, but freezes assets of targeted individuals—with the exception of assets needed for basic expenses such as food, mortgage payments, or legal bills.
The U.S. has maintained much more restrictive Sudan Sanctions Regulations, or SSR, but maintaining them has become morally and legally complicated since South Sudan’s independence. In April, the Treasury Department’s Office of Foreign Asset Controls, or OFAC, exempted the new nation from most of the SSR, but still forbade U.S. investment in the South’s oil industry if it “would benefit the Government of Sudan or relate to the petroleum industry in Sudan.” Since the North controls the pipelines that transport the South’s oil, this left most of the restrictions intact.
After months of rumors, on December 8th OFAC reversed this position by lifting vast swaths of the SSR. Previously, America’s policy had been to not place sanctions on the South, unless the lack of sanctions would benefit the North. It has now shifted to keep sanctions on the North, unless they would hinder growth in the South. This subtle change will have profound implications for both nations.
Goods of Sudanese Origin
In addition to relaxing the visa regime, OFAC lifted restrictions on goods that have been “transshipped to or from the Republic of South Sudan.” The transshipment restriction is designed to prevent incidental benefits—taxes, fuel sales, etc.—from accruing to the North when two other nations use it as a conduit to move their goods. Lifting this ban recognizes that Port Sudan, northeast of Khartoum, remains the best way to get things in or out of either country. The new rules now permit American citizens and businesses (referred to as U.S. Persons) to buy and sell in the South even if Northern ports, roads and banks are needed to complete the transaction. This loosening is designed to benefit South Sudan—goods that transit the North via other neighboring countries such as Egypt are still off limits for U.S. persons.
Some U.S. persons, particularly banks, have been reluctant to deal with either North or South Sudan, even when permitted by law. For example, although Abyei is not covered by the SSR, a company wishing to send goods or money to that region often had to use a Sudanese bank to wire money or pay suppliers. Therefore, the financial piece of such a transaction was illegal, even though the end result— providing aid to Abyei—was not. Most of these restrictions have been lifted, and “all financial transactions normally incident to” getting goods into or out of South Sudan are now permitted.
By far the biggest change made by the OAFC deals with oil. The new regulations authorize “all activities and transactions relating to the petroleum and petrochemical industries in the Republic of South Sudan.” Anything necessary to get the oil out of the ground and on to market is now permitted, including “payment to the Government of Sudan… of pipeline, port, and other fees.” The only remaining ban is on refining Southern oil in the North, since this would provide a sizeable— and avoidable—benefit to Khartoum.
Any benefit to Bashir is troubling, but these changes do not have to mean that profits will trump principles. At a recent industry conference, the French oil company Total revived a longstanding proposal to build an alternative pipeline from South Sudan through Uganda and Kenya. Experts say this could take years to develop, and surveys warn that production from Southern oil fields might decline sharply in the next five years. The U.S. argues that U.S. companies could provide know-how and technology that could extend the life of the wells making a Kenyan pipeline a profitable investment. Since the South’s Dar Blend crude is similar to that found in the U.S., American expertise could help South Sudan build its own refineries.
With the two Sudans on the brink of war, this is a delicate time to relax sanctions. In the past I have advocated for tightening them, but with EU and UN loopholes, doing so now could starve the South while having only minimal impact on the North. The U.S., which is hosting a South Sudanese development conference today and tomorrow in Washington, has seen little international support for sticks, and seems to be shifting to carrots. Allowing U.S. investment in South Sudan offers a chance for development in the new nation, but also risks increased exploitation. As U.S. companies enter South Sudan, both corporations and South Sudan’s government must focus on transparency and accountability in the development process.
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.